<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1998
REGISTRATION NO. 333-
________________________________________________________________________________
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
TTR INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3577 11-3223672
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1841 BROADWAY
NEW YORK, NEW YORK 10023
(212) 333-3355
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
MARC D. TOKAYER, PRESIDENT
TTR INC.
1841 BROADWAY
NEW YORK, NEW YORK 10023
(212) 333-3355
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS
SENT TO AGENT FOR SERVICE, SHOULD BE SENT TO:
<TABLE>
<S> <C>
SAMUEL F. OTTENSOSER, ESQ. GARY M. EPSTEIN, ESQ.
BAER MARKS & UPHAM LLP GREENBERG TRAURIG, P.A.
805 THIRD AVENUE 1221 BRICKELL AVENUE
NEW YORK, NEW YORK 10022 MIAMI, FLORIDA 33131
(212) 702-5962 (305) 579-0500
FACSIMILE (212) 702-5941 FACSIMILE (305) 579-0717
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
possible after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933 please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value................ 2,875,000 Shares(2) $3.00 $ 8,625,000 $2,544
Underwriter's Warrants........................ 250,000 Warrants $.0001 $ 25 $ .01
Common Stock, $0.001 par value................ 250,000 Shares(3)(7) $3.60 $ 900,000 $ 266
Common Stock, $0.001 par value................ 621,000 Shares(4) $3.00 $ 1,863,000 $ 550
Common Stock, $0.001 par value................ 33,000 Shares(5)(7) $7.80 $ 257,400 $ 76
Common Stock, $0.001 par value................ 339,250 Shares(6)(7) $3.45 $ 1,170,412 $ 345
---------------- -------
$ 12,815,837 $3,781
</TABLE>
(footnotes on next page)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
(footnotes from cover)
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) Includes 375,000 shares of Common Stock subject to an over-allotment option
granted to the Underwriter.
(3) Issuable upon exercise of Underwriter's Warrants.
(4) Consists of shares of Common Stock offered by certain stockholders.
(5) Consists of shares of Common Stock issuable upon exercise of warrants held
by a certain stockholder.
(6) Consists of shares of Common Stock issuable upon exercise of warrants held
by certain stockholders.
(7) Pursuant to Rule 416, this Registration Statement also covers an
indeterminate number of additional shares of Common Stock issuable as a
result of anti-dilution adjustments in accordance with the terms of the
warrants.
<PAGE>
<PAGE>
CROSS-REFERENCES
<TABLE>
<S> <C> <C>
Item 1. Front of Registration Statement and Outside Front Cover of
Prospectus................................................... Front Cover
Item 2. Inside Front and Outside Back Cover Pages of Prospectus........ Front Cover and subsequent pages
Item 3. Summary Information and Risk Factors........................... Prospectus Summary and Risk Factors
Item 4. Use of Proceeds................................................ Use of Proceeds
Item 5. Determination of Offering Price................................ N/A
Item 6. Dilution....................................................... N/A
Item 7. Selling Security Holders....................................... Principal Stockholders; Concurrent
Offering
Item 8. Plan of Distribution........................................... Underwriting
Item 9. Legal Proceedings.............................................. Business -- Legal Proceedings
Item 10. Directors, Executive Officers, Promoters and Control Persons... Management
Item 11. Security Ownership of Beneficial Owners and Management......... Principal Stockholders
Item 12. Description of Securities...................................... Description of Securities
Item 13. Interest of Named Experts and Counsel.......................... N/A
Item 14. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................... Executive Compensation --
Indemnification
Item 15. Organization within Last Five Years............................ Certain Transactions
Item 16. Description of Business........................................ Business
Item 17. Management's Discussion and Analysis or Plan of Operation...... Plan of Operation
Item 18. Description of Property........................................ Business -- Properties
Item 19. Certain Relationships and Related Transactions................. Certain Transactions
Item 20. Market for Common Equity and Related Stockholder Matters....... Price Range of Common Stock
Item 21. Executive Compensation......................................... Executive Compensation
Item 22. Financial Statements........................................... Financial Statements
Item 23. Changes and Disagreements with Accountants on Accounting and
Financial Disclosure......................................... Experts
Part II
Item 24. Indemnification of Directors and Officers...................... Indemnification of Directors and
Officers
Item 25. Other Expenses of Issuance and Distribution.................... Other Expenses of Issuance and
Distribution
Item 26. Recent Sales of Unregistered Securities........................ Recent Sales of Unregistered
Securities
Item 27. Exhibits....................................................... Exhibits
Item 28. Undertakings................................................... Undertakings
</TABLE>
<PAGE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 31, 1998
PROSPECTUS
2,500,000 SHARES
TTR INC.
COMMON STOCK
------------------------
TTR Inc., a Delaware corporation ('TTR' or the 'Company') hereby offers
2,500,000 shares of common stock, $.001 par value per share (the 'Common
Stock').
The Company's Common Stock is listed on the Nasdaq OTC Electronic Bulletin
Board under the trading symbol 'TTRE.' On July 29, 1998, the closing bid price
of the Common Stock on the Nasdaq OTC Bulletin Board was $3 1/8 per share. See
'Price Range of Common Stock.' Application will be made to have the Common Stock
listed on the American Stock Exchange.
------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 7 FOR CERTAIN INFORMATION WHICH SHOULD
BE CAREFULLY CONSIDERED BEFORE PURCHASING SHARES OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN PPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share...................................................... $ $ $
Total(3)....................................................... $ $ $
</TABLE>
(1) Does not include compensation payable to Josephthal & Co. Inc. (the
'Underwriter') in the form of a non-accountable expense allowance and a
financial advisor's fee. See 'Underwriting' for information concerning
indemnification and contribution arrangements with, and other compensation
payable to, the Underwriter.
(2) Before deducting expenses payable by the Company estimated to be
$ , including the Underwriter's non-accountable expense allowance.
(3) The Company and certain stockholders of the Company have granted the
Underwriter an option (the 'Over-Allotment Option') exercisable for a period
of 45 days from the date of this Prospectus to purchase up to 375,000
additional shares of Common Stock upon the same terms and conditions set
forth above, solely to cover over-allotments, if any. If the Over-Allotment
Option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and
$ , respectively. See 'Underwriting.'
------------------------
The shares of Common Stock are offered by the Underwriter, subject to prior
sale, when, as and if delivered to and accepted by the Underwriter, and subject
to approval of certain legal matters by their counsel and to certain other
conditions. The Underwriter reserves the right to withdraw, cancel or modify the
Offering without notice and to reject any order in whole or in part. It is
expected that delivery of the Common Stock offered hereby will be made against
payment therefor at the offices of Josephthal & Co. Inc., New York, New York, on
or about October , 1998.
JOSEPHTHAL & CO. INC.
------------------------
THE DATE OF THIS PROSPECTUS IS OCTOBER , 1998
<PAGE>
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITER AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE 'UNDERWRITING.'
INFORMATION CONTAINED IN THE COMPANY'S WEBSITE SHALL NOT BE DEEMED TO BE A
PART OF THIS PROSPECTUS.
------------------------
The Company has filed applications for trademark registration for
DiscGuard'tm' in Canada and for a Community Trademark. The Company owns the
rights to DiscGuard'tm' in the United States.
2
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements and notes thereto, appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety. Unless otherwise indicated, all share, per share and
financial information set forth herein assumes no exercise of the Over-Allotment
Option or the Underwriter's Warrants. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such differences include, but are not
limited to, those discussed in 'Risk Factors.' As used herein, the term
'Company' includes the operations of TTR Inc. and its Israeli subsidiary TTR
Technologies Ltd. ('TTR Ltd.'), unless the context otherwise requires.
THE COMPANY
TTR Inc. ('TTR' or the 'Company') designs, markets and sells proprietary
software anti-piracy products. The Company's flagship product, DiscGuard'tm',
embeds an indelible and non-reproducible digital signature on CD-ROMs that
prevents unauthorized copies from operating. CD-ROMs are an optical medium used
for storage of software and other electronic content. DiscGuard'tm' protection
is transparent to the end user and is a cost-effective way for a software
publisher to reduce piracy of its products.
The Company believes that DiscGuard'tm' addresses a significant need in a
rapidly growing market. According to InfoTech, Inc., a market research firm
specializing in the optical media industry, worldwide sales of CD-ROMs and DVDs
(Digital Versatile Discs) were estimated to be $44.0 billion in 1997, and are
expected to increase to approximately $76.5 billion in 2000. Losses relating to
the piracy of business software were estimated to be $11.4 billion worldwide in
1997, according to the Software Publishers Association.
TTR's goal is to become the market leader in CD-ROM anti-piracy protection.
The Company is implementing a two part strategy to achieve this objective.
First, the Company intends to ensure that DiscGuard'tm' will be readily
available to software publishers by integrating DiscGuard'tm' into the mastering
equipment of a broad base of CD-ROM replicators, mass producers of CD-ROMs and
DVDs ('Replicators'). At the same time, the Company is marketing DiscGuard'tm'
directly to software publishers, who can then purchase DiscGuard'tm' protection
through a Replicator for a per disc royalty fee.
In October 1997, the Company entered into an exclusive license agreement
with Doug Carson & Associates, Inc. ('DCA') to permit DCA to integrate
DiscGuard'tm' into its mastering interface system ('MIS'), a key component of
the mastering equipment used by Replicators in the production of glass masters
used to mass produce CD-ROMs. The Company believes that DCA's MIS is currently
installed in over 75% of the world's mastering equipment. DCA has agreed to sell
DiscGuard'tm' compatible MIS and to use its best efforts to encourage
Replicators to upgrade their MIS to include DiscGuard'tm' capability.
Nimbus CD International, Inc. ('Nimbus'), a leading Replicator of CD-ROMs,
entered into an agreement with the Company to integrate DiscGuard'tm' into its
MIS and now offers DiscGuard'tm' protection to its large client base of software
publishers throughout North America and Europe. This agreement is exclusive
until mid-September 1998. In addition, the Company recently entered into a
license agreement with SKC Co. Ltd. ('SKC'), the largest South Korean Replicator
and a subsidiary of a major South Korean conglomerate. The Company expects that
SKC will offer DiscGuard'tm' protection to software publishers throughout South
Korea by mid-September 1998, when the Nimbus exclusivity period expires. Subject
to certain conditions, SKC has been granted an exclusive license to produce
DiscGuard'tm' protected CD-ROMs in South Korea through June 1, 1999. The Company
is also currently involved in pilot testing with two additional Replicators and
is actively marketing DiscGuard'tm' to others, often in conjunction with sales
representatives of DCA.
3
<PAGE>
<PAGE>
TTR commenced its marketing efforts in February 1998 and by June 30, 1998,
had licensed DiscGuard'tm' to a number of software publishers that agreed to
protect some or all of their titles distributed on CD-ROMs with DiscGuard'tm'.
While these software publishers market mostly multimedia CD-ROMs, including
games, design and reference software, the Company believes that DiscGuard'tm'
will be beneficial to software publishers seeking to protect a broad range of
products.
The Company recently signed agreements with Eagle International Co. Ltd.
('Eagle'), a Japanese technology distributor, to sell and market DiscGuard'tm'
throughout Japan, and with DM (Digital Media) Tech Co. ('Digital Media'), a
South Korean distributor, to serve as TTR's representative in South Korea. The
Company believes that its relationships with Eagle and Digital Media will
provide it with significant access to the large Asian replicator and software
publisher markets.
The Company sells and markets its products through offices located in
California, New York, London and Israel.
4
<PAGE>
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company............................... 2,500,000 shares
Common Stock outstanding prior to the Offering.................... 3,859,548(1)
Common Stock to be outstanding after the Offering................. 6,409,548(2)(3)
Use of Proceeds................................................... Sales and marketing, research and
development, repayment of indebtedness, and
working capital and general corporate
purposes. See 'Use of Proceeds.'
Risk Factors...................................................... Prospective investors should carefully
consider the matters set forth under the
caption 'Risk Factors.' An investment in the
Common Stock offered hereby involves a high
degree of risk and immediate and substantial
dilution.
OTC Electronic Bulletin Board Symbol(4)........................... TTRE
</TABLE>
- ------------
(1) Reflects (i) the cancellation of 750,000 shares of Common Stock formerly
held in escrow, (ii) the issuance of 125,000 shares of Common Stock to
consultants, and (iii) the exchange of 432,000 shares of Common Stock for
outstanding warrants. See 'Plan of Operation,' and 'Principal Stockholders.'
(2) Excludes (i) 580,000 shares of Common Stock to be reserved for issuance
under the Company's Incentive and Non-Qualified Stock Option Plan (the
'Option Plan') pending stockholder approval of an increase of shares under
the Option Plan (currently 426,100 shares are issuable upon exercise of
outstanding stock options); (ii) 25,000 shares of Common Stock to be
reserved for issuance, pending stockholder approval, upon exercise of stock
options which may be granted to independent members of the Board of
Directors under the Company's Non-Executive Director Stock Option Plan (the
'Directors Plan'); (iii) 250,000 shares of Common Stock reserved for
issuance upon exercise of the Underwriter's Warrants; (iv) 300,473 shares of
Common Stock reserved for issuance upon the exercise of warrants and/or
options issued to consultants, employees and investors; and (v) 339,250
shares of Common Stock issuable upon the exercise of warrants issued in
connection with the 1998 Debt Financing (as defined below). Includes 50,000
shares of Common Stock issued to a consultant. See 'Principal Stockholders.'
(3) Concurrently with this Offering, 621,000 shares of Common Stock, plus an
additional 372,250 shares of Common Stock issuable upon the exercise of
372,250 warrants, have been registered under the Securities Act for resale
on behalf of certain securityholders. The securityholders have agreed not to
sell such securities for a period of nine months after the date of this
Prospectus (six months with respect to 654,000 shares of Common Stock, of
which 33,000 are issuable upon exercise of warrants). The Company will not
receive any proceeds from the sales of shares by such securityholders.
(4) Application will be made for listing the Company's Common Stock following
the Offering on the American Stock Exchange.
5
<PAGE>
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Set forth below is certain summary consolidated financial data for the
periods and as of the dates indicated. This data should be read in conjunction
with the more detailed information and Consolidated Financial Statements
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED FROM INCEPTION
DECEMBER 31, MARCH 31, (JULY 14, 1994)
-------------------------- ------------------------ TO
1996 1997 1997 1998 MARCH 31, 1998
----------- ----------- ----------- --------- -----------------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues....................... $ -- $ -- $ -- $ -- $ --
Total expenses................. 896,779 3,865,736 945,104 844,784 6,409,607
Operating loss................. (896,779) (3,865,736) (945,104) (844,784) (6,409,607)
Net loss............................ (1,121,211) (4,119,612) (1,264,485) (850,964) (7,030,535)
Net loss per share.................. $(0.62) $(1.35) $(0.51) $(0.26)
---------- --------- ---------- --------
---------- --------- ---------- --------
Weighted average shares
outstanding....................... 1,801,366 3,054,519 2,496,476 3,293,481
---------- --------- ---------- --------
---------- --------- ---------- --------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
MARCH 31, 1998
1998 AS ADJUSTED(1)
------------ ---------------
<S> <C> <C>
Balance Sheet Data:
Working capital (deficiency)................................................... $ (274,766)
Total assets................................................................... 691,337
Total liabilities.............................................................. 569,592
Total stockholders' equity..................................................... 121,745
</TABLE>
- ------------
(1) Gives effect to (i) the consummation of the 1998 Debt Financing (as defined
below) of $1,475,000, and (ii) the sale of 2,500,000 shares of Common stock
offered by the Company hereby at the price of $ per share and the
application of the estimated net proceeds therefrom. See 'Capitalization,'
'Plan of Operation -- Liquidity and Capital Resources' and 'Use of
Proceeds.'
6
<PAGE>
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk and should not be purchased by persons who cannot afford the loss of their
entire investment. Prospective investors should carefully consider the following
risk factors, as well as all other information set forth elsewhere in this
Prospectus.
Development Stage Company; Limited Relevant Operating History; Continuing
Losses; Accumulated Deficit; Significant Development Expenses; Uncertainty of
Future Profitability; Explanatory Paragraph in Independent Accountant's Report.
The Company is a development stage company with a limited history of operations.
Before DiscGuard'tm' first became commercially available in February 1998, the
Company was engaged primarily in research and development. Consequently, the
Company has had a limited operating history upon which an evaluation of the
Company's prospects and performance can be made. The Company's prospects must be
considered in light of the risks, expenses, difficulties and delays frequently
encountered in connection with the formation and early phase of operation of a
new business, the development and commercialization of new products based on
innovative technology and the rapid technological change and high level of
competition in the industry in which the Company operates. The Company has had
significant losses, including net losses of approximately $4.1 million and $1.1
million for the years ended December 31, 1997 and 1996, respectively, and a net
loss of approximately $851,000 for the three months ended March 31, 1998. Such
losses are continuing as of the date of this Prospectus. In addition, the
Company has an accumulated deficit of approximately $7.0 million as of March 31,
1998. Because the Company anticipates that it will continue to incur significant
operating costs, both in connection with the development of its proposed product
enhancements and additions and as a result of its increased marketing efforts,
it is likely that significant losses will continue until such time, if ever, as
the Company is able to generate a level of revenue sufficient to offset these
continuing early-phase expenditures. There can be no assurance that the Company
will be able to implement its business strategy successfully, that it will be
able to generate revenues in the future or that it will be able to achieve
profitable operations. The Company's independent accountants have included an
explanatory paragraph in their report on the Company's financial statements
stating that the Company's recurring losses from operations and accumulated
deficit raise substantial doubt about its ability to continue as a going
concern. The Company anticipates, based on its currently proposed plans and
assumptions relating to its operations, that the proceeds of this Offering,
together with projected cash flow from operations, if any, will be sufficient to
satisfy its contemplated cash requirements for at least twenty-four months
following the consummation of this Offering. See 'Plan of Operation,' 'Business'
and Consolidated Financial Statements.
Significant Capital Requirements; Dependence on Offering Proceeds; Need for
Additional Financing. The Company's capital requirements in connection with its
development and marketing activities have been and will continue to be
significant. The Company has been dependent upon the proceeds of sales of its
securities to investors (including the 1998 Debt Financing -- see 'Plan of
Operation -- Prior Financing'), as well as various government grants and loans,
to fund its development and marketing activities and, at March 31, 1998, the
Company had a working capital deficit of approximately $275,000, no revenues
from operations, and monthly expenses approximating $200,000. The Company is not
generating revenues from its operations to fund its activities and is,
therefore, dependent on the proceeds of this Offering to continue the
development of its technology and the marketing of its products. The Company
anticipates, based on its currently proposed plans and assumptions relating to
its operations, that the net proceeds of this Offering, together with projected
cash flow from operations, if any, will be sufficient to satisfy its
contemplated cash requirements for at least twenty-four months following the
consummation of this Offering. In the event that the proceeds of this Offering
and cash flow prove to be insufficient to fund operations (due to a change in
the Company's plans or a change, or an inaccuracy, in its assumptions or as a
result of unanticipated expenses, technical difficulties or otherwise), the
Company would be required to seek additional financing sooner than currently
anticipated. There can be no assurance that additional financing will be
available to the Company on commercially reasonable terms, or at all. The
Company has no current arrangements with respect to, or sources of, additional
financing. The inability to obtain additional financing when needed would have a
material adverse effect on the Company, including, possibly, requiring the
Company to curtail or cease its operations. To the extent that any future
financing involves the sale of the Company's equity
7
<PAGE>
<PAGE>
securities, the holdings of the Company's then existing stockholders could be
substantially diluted. See 'Use of Proceeds' and 'Plan of Operation.'
Limited Marketing Experience and Capabilities; Uncertainty of Market
Acceptance. The Company has only recently commenced significant marketing
activities relating to product commercialization and currently has limited
marketing experience and limited financial, personnel and other resources to
undertake extensive marketing and advertising activities. To date, the Company
has generated no revenues from the sale of its products, which have achieved
only limited market acceptance. Demand for the Company's products and the
Company's proposed products will depend principally upon the demand by software
publishers for protection from unauthorized copying. As is typically the case
with newly-introduced products, the ultimate level of demand for the Company's
products is subject to a high degree of uncertainty. Developing market
acceptance for the Company's existing and proposed products will require
substantial marketing efforts and the expenditure of a significant amount of
funds to inform software publishers of the perceived advantages of the Company's
products. Although the Company intends to use a significant portion of the
proceeds of this Offering in connection with its proposed sales and marketing
activities, there can be no assurance that the Company will be able to penetrate
existing markets on a widespread basis or that the marketing efforts undertaken
by the Company will result in increased demand for, or market acceptance of the
Company's existing and proposed products. There can be no assurance that the
Company will be able to market the Company's products successfully or that its
efforts will result in any significant revenues. See 'Use of Proceeds' and
'Business -- Sales and Marketing.'
Uncertainty of Product and Technology Development; Technological Factors.
The Company has not completed development and testing of a number of its
proposed products, some of which are still in the planning stage or in
relatively early stages of development. The Company's success will depend in
part upon the ability of its proposed products to meet targeted performance and
cost objectives, and will also depend upon their timely introduction into the
marketplace. The Company will be required to commit considerable time, effort
and resources to complete development of its proposed products and product
enhancements. Although the Company anticipates that the development of its
products and technology will be successfully concluded, its product development
efforts are subject to all of the risks inherent in the development of new
products and technology (including unanticipated delays, expenses, and
difficulties, as well as the possible insufficiency of funding or adequate
personnel to complete development). There can be no assurance as to when, or
whether, such product development efforts will be successfully completed. In
addition, there can be no assurance that the Company's products will
satisfactorily perform the functions for which they are designed, that they will
meet applicable price or performance objectives or that unanticipated technical
or other problems will not occur which would result in increased costs or
material delays in their development. The Company will be required to devote a
substantial portion of the proceeds of this Offering and its revenues, if any,
to research and development efforts. Even so, there can be no assurance that
these efforts will be successful. See 'Use of Proceeds' and
'Business -- Research and Development.'
Competition; Technological Obsolescence. The software protection industry
is extremely competitive. The Company's primary competitors include companies
with substantially greater financial, technological, marketing, personnel and
research and development resources than those of the Company. There can be no
assurance that the Company will be able to compete successfully in this market.
In particular, Rainbow Technologies Inc. and Aladdin Knowledge Systems Ltd. each
have an established installed product base in the limited market that exists for
hardware key based software security products and could expand into the
Company's target market of anti-piracy products for software contained on
optical media such as CD-ROMs. Further, there can be no assurance that existing
software companies will not enter the market in the future. Certain companies
such as C-Dilla Limited, Sony DADC Austria AG, MLS LaserLock International Inc.
and Link Data Security claim to provide comprehensive optical media based
anti-piracy protection, two of which have existing relationships with DCA to
make their products available. Many of the Company's competitors have existing
relationships with major software development houses in the United States, some
of which are dominant software producers worldwide, and those existing
relationships may impede the Company's ability to sell its products to those
customers and expand its market share. Furthermore, there can be no assurance
that the Company will be able to continue developing products with innovative
features and functions, or
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that development by others of similar or more effective products will not render
the Company's products or technologies noncompetitive or obsolete. The markets
for the technology and products being developed by the Company are characterized
by rapid change and evolving industry standards, often resulting in product
obsolescence or short product lifecycles. Since the Company's products are new
to the market and sold in competition with the products of companies with
greater financial and other resources, there can be no assurance that a market
for the Company's products will develop. See 'Business -- Competition.'
Risks of Circumvention Technologies. It is conceivable that a way to
circumvent the Company's security techniques by third parties could become
available which would, in all likelihood, result in a substantial decrease in
the demand for the Company's products. Additionally, software publishers could
choose not to use the Company's anti-piracy technology if software publishers
believe that the Company's technology will be unable to deter pirates. Any
reduction in demand for the Company's products would have a material adverse
effect on the Company's business, financial condition and results of operations.
See 'Business -- Research and Development' and ' -- Proprietary Rights.'
Dependence on Key Personnel. The success of the Company will be largely
dependent on the efforts of the members of the senior management of the Company,
including Marc D. Tokayer, Steven L. Barsh, Arik Shavit, and Baruch Sollish,
Ph.D. Although Mr. Tokayer and Mr. Shavit have entered into employment
agreements with the Company which renew automatically on an annual basis and Mr.
Barsh and Dr. Sollish are under contract with the Company for a period of 18
months and 3 years, respectively, such employment agreements are terminable
under certain circumstances. The loss of the services of one or more of such key
personnel would have a material adverse effect on the Company's ability to
maximize its use of its products and technologies or to develop related products
and technologies. The success of the Company also is dependent upon its ability
to hire and retain additional qualified personnel. There can be no assurance
that the Company will be able to hire or retain such necessary personnel.
Although the Company intends to obtain 'key man' life insurance in the principal
amount of $1 million with respect to Dr. Sollish, there can be no assurance that
the loss of his services would not have a material adverse effect on the
Company. See 'Management.'
Product Protection and Infringement. The Company's success is heavily
dependent upon its proprietary technology. The Company has filed for patent
protection for the technology underlying DiscGuard'tm' (the 'Patent Rights') in
the United States, Israel, Germany, France, Great Britain, the Netherlands and
Japan. No assurance can be given that any patent will be issued from the United
States or other patent offices for the Patent Rights, that the Company will
receive any patents in the future based on its continued development of its
proprietary technology, or that the Company's patent protection within and/or
outside of the United States will be sufficient to deter others, legally or
otherwise, from developing or marketing competitive products utilizing
DiscGuard'tm' or similar technologies. The Company also relies on a combination
of contractual rights, trade secrets, copyrights, trademarks, non-disclosure
agreements and technical measures to establish and protect its proprietary
rights. There can be no assurance that the steps taken by the Company to protect
its proprietary rights will be adequate to prevent misappropriation of the
technology or independent development by others of products with features based
upon, or otherwise similar to, those of the Company's products. In addition,
although the Company believes that its technology has been independently
developed and does not infringe on the proprietary rights of others, there can
be no assurance that the Company's technology does not and will not so infringe
or that third parties will not assert infringement claims against the Company in
the future. In the case of infringement, the Company would, under certain
circumstances, be required to modify its products or obtain a license. There can
be no assurance that the Company would be able to do either in a timely manner
or upon acceptable terms and conditions, and any failure to do so could have a
material adverse effect on the Company. In addition, there can be no assurance
that the Company will have the resources to maintain or defend a patent
infringement or other proprietary rights infringement action. See
'Business -- Proprietary Rights.'
Dependence on Single Product Line and Strategic Alliances. The Company
markets one line of products to a limited market of software publishers desiring
to protect their products from unauthorized copying. The Company believes that
future sales growth will be dependent primarily upon expansion of the software
protection market as well as the Company's ability to market its products. There
can be no
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assurance that the Company will successfully market its product or that the
market for software security products will grow. In October 1997, the Company
entered into an agreement with DCA pursuant to which DCA has an exclusive
license to integrate DiscGuard'tm' into its MIS for sale of the MIS to
Replicators. The Company believes that DCA's MIS is currently installed in 75%
of the world's mastering equipment used in the replication process. The
termination of the Company's relationship with DCA could have a material adverse
effect on the Company because it would lose access to a significant portion of
the Replicator market. In addition, there can be no assurance that DCA will be
able to sell, or upgrade, units of its MIS with DiscGuard'tm' or that, if it
does, that its efforts will generate significant revenues for the Company. See
'Business -- DiscGuard'tm' and Proposed Products' and ' -- Sales and Marketing.'
Proposed Expansion; Management of Growth. The management of the anticipated
growth in expenditures from the Company's proposed operations will require
expansion of the Company's management and financial controls, and could place a
significant strain on the Company's resources, including management. While the
Company intends to hire additional appropriate personnel, there can be no
assurance that these or other measures implemented by the Company will
effectively increase the Company's capabilities to manage such growth or to do
so in a timely and cost effective manner. See 'Use of Proceeds.'
Broad Discretion in Application of Proceeds; Substantial Use of Proceeds to
Satisfy Pre-Existing Obligations. Approximately $ of the
estimated net proceeds of this Offering has been allocated to working capital
and general corporate purposes. Accordingly, the Company's management will have
broad discretion as to the application of such proceeds. The Company intends to
use a significant portion of the net proceeds of this Offering to repay
indebtedness and satisfy pre-existing obligations and, therefore, such funds
will be unavailable to fund future growth. See 'Use of Proceeds.'
Trademark Registration. The Company intends to promote DiscGuard'tm',
Remote Activation Center'tm' and other trademarks in connection with its
marketing activities. The Company has applied for the registration of its
trademarks in the United States, Israel, the United Kingdom and elsewhere. There
can be no assurance that prior registrations and/or uses of one or more of such
marks (or a confusingly similar mark) do not exist in one or more of such
countries, in which case the Company might be precluded from registering and/or
using its mark in such country. See 'Business -- Proprietary Rights.'
Immediate Substantial Dilution. Investors purchasing shares of Common Stock
in this Offering will incur an immediate and substantial dilution in net
tangible book value per share. Accordingly, investors will bear a
disproportionate part of the financial risk associated with the Company's
business while effective control will remain with existing stockholders of the
Company.
No Dividends. To date, the Company has not paid any cash dividends. After
the consummation of this Offering, the Company does not intend, for the
foreseeable future, to declare or pay any dividends and intends to retain
earnings, if any, for the future operation and expansion of the Company's
business. The declaration and payment of any cash dividends in the future will
be determined by the Board of Directors of the Company in light of conditions
and circumstances then existing, including the Company's earnings and its
financial conditions and requirements. See 'Dividend Policy.'
OTC Electronic Bulletin Board; Application for Listing on the American
Stock Exchange. The Company's Common Stock is currently traded in the
over-the-counter market under the symbol 'TTRE' and quoted on the OTC Electronic
Bulletin Board, a NASD-sponsored and operated inter-dealer automated quotation
system for equity securities not included in the Nasdaq SmallCap Market or the
Nasdaq National Market, and is also quoted in the NQB Pink Sheets published by
the National Quotation Bureau Incorporated. There can be no assurance that an
active public market for the Company's stock will be maintained or that the
market price of the Company's Common Stock will not decline below its current
price. The Company is applying for listing on the American Stock Exchange;
however, there can be no assurance that such application will be accepted or
that the Company will continue to meet continued listing requirements in the
future if listed on such exchange. See 'Price Range of Common Stock.'
Possible Volatility of Securities Prices. Trading volume and prices for the
Common Stock could be subject to wide fluctuations in response to quarterly
variations in operations, financial results,
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announcements with respect to sales and earnings, technological innovations, new
product developments, the sale or attempted sale of a large amount of securities
in the public market, and other events or factors which cannot be foreseen or
predicted by the Company. In addition, various factors generally affecting the
computer and/or the software industries may have a significant impact on the
market price of the Common Stock, as well as price and volume volatility
affecting small and emerging growth companies, in general, which do not
necessarily relate to the operating performance of such companies. See 'Price
Range of Common Stock.'
Shares Eligible for Future Sale; Effect of Outstanding Warrants and
Options. Sales of substantial amounts of Common Stock, or the perception that
such sales could occur, including sales from the exercise of warrants and
options granted by the Company, could adversely affect prevailing market prices
for the Common Stock and could impair the Company's ability to raise capital
through the future sale of its equity securities. The officers, directors and
certain stockholders of the Company (holding an aggregate of approximately
1,460,000 shares, representing approximately 40% of the issued and outstanding
shares of the Common Stock) have agreed, for a period of nine months (six months
with respect to 654,000 shares of Common Stock, of which 33,000 shares are
issuable upon exercise of warrants) from the effective date of this Registration
Statement, not to sell or otherwise dispose of any securities of the Company
without the prior written consent of the Underwriter. Moreover, the terms upon
which the Company will be able to obtain additional equity capital may be
adversely affected since the holders of outstanding warrants and options can be
expected to exercise them at a time when the Company would, in all likelihood,
be able to obtain any needed capital on terms more favorable to the Company than
those provided in the warrants or options. The Company has granted certain
demand and 'piggy-back' registration rights to the Underwriter with respect to
the securities issuable upon exercise of its warrants. See 'Description of
Securities,' 'Shares Eligible for Future Sale' and 'Underwriting.'
Risks Associated with International Sales. The Company currently markets
its products in Israel, North America, Europe and through distributors in Asia.
The Company will be subject to the risks inherent in international business
activities, including unexpected changes in regulatory requirements and the
burdens of complying with a wide variety of laws and regulations. Moreover, if
for any reason exchange or price controls or other restrictions on the
conversion of foreign currencies were imposed, the Company's business could be
materially adversely affected. In addition, since the Company's financial
statements are stated in dollars and not all the Company's expenses are incurred
in dollars, the Company is exposed to some risk due to fluctuations in currency
exchange rates. The Company does not presently engage in financial hedging
activities as a means of minimizing exchange rate risks. The Company's
operations could be adversely affected if it is unable to guard against currency
fluctuations in the future.
Risks Associated with Operations in Israel. The Company's subsidiary, TTR
Ltd., maintains offices and research and development facilities in Israel and is
directly affected by economic, military and political conditions. For further
information, including risks related to the political and economic situation,
see 'Business -- Conditions in Israel.'
Restrictions on Israeli Government Funding for Research and Development.
TTR Ltd. has been approved for funding from the Office of the Chief Scientist of
the Israeli Ministry of Industry & Trade (the 'Chief Scientist') for certain
research and development outlays of approximately $210,000, of which
approximately $173,000 has been received by the Company through June 30, 1998.
As a condition to its participation in the funding program of the Chief
Scientist, TTR Ltd. may not transfer ownership of the technologies developed
using such funds out of Israel without the consent of the Chief Scientist. TTR
Ltd. is also obligated to pay a specified level of royalties on sales of
products developed using such grants. Moreover, the Chief Scientist grant
programs, as are currently in effect, require the Company to comply with various
conditions in order for TTR Ltd. to continue to be eligible for participation.
The Company anticipates that as long as such grants continue to be available,
TTR Ltd. will likely seek from time to time to utilize such grants. While the
Company believes that TTR Ltd. will continue to participate in these grant
programs, no assurance can be given that this will be the case, or that the
programs, or their conditions of participation, will be maintained in their
current form or at all. See 'Business -- Research and Development.'
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Year 2000 Issues. Certain organizations anticipate that they will
experience operational difficulties at the beginning of the Year 2000 as a
result of computer programs being written using two digits rather than four to
define the applicable year. The Company's plan for Year 2000 calls for
compliance verification with vendors, testing software in the Company's products
for Year 2000 problems and communication with significant suppliers to determine
the readiness of third parties' remediation of their own Year 2000 issues. To
date, the Company has not encountered any material Year 2000 issues concerning
its respective computer programs. The Company has tested DiscGuard'tm' for Year
2000 compliance, and the Company believes that DiscGuard'tm' is Year 2000
compliant. All costs associated with carrying out the Company's plan for the
Year 2000 problem are being expensed as incurred. The costs associated with
preparation for the Year 2000 are not expected to have a material adverse effect
on the Company's business, financial condition and results of operations.
Nevertheless, there is uncertainty concerning the potential costs and effects
associated with any Year 2000 compliance. Any Year 2000 compliance problems of
the Company or its customers or suppliers could have a material adverse effect
on the Company's business, financial condition or results of operations. As part
of the Company's assessment, it is evaluating the level of validation it will
require of third parties, including that of its suppliers, to ensure their Year
2000 readiness. See 'Plan of Operation -- Year 2000.'
Antitakeover Provisions of Delaware Law. Certain provisions of Delaware law
may discourage third party attempts to acquire control of the Company. In
particular, Section 203 of the Delaware General Corporation Law generally
prohibits a publicly held Delaware corporation from engaging in a 'business
combination' with an 'interested stockholder' for a period of three years after
the date of the transaction in which such person became an interested
stockholder, unless certain restrictive requirements are met. The Company has
not opted to include any provisions in its Certificate of Incorporation or
By-laws electing not to be governed by Section 203 of the Delaware General
Corporation Law. The provisions of Section 203 of the Delaware General
Corporation Law may have a depressive effect on the market price of the Common
Stock because they could impede any merger, consolidating takeover or other
business combination involving the Company or discourage a potential acquiror
from making a tender offer or otherwise attempting to obtain control of the
Company. See 'Description of Securities.'
Service of Process and Enforcement of Judgments. Service of process upon
certain directors and officers of the Company may be difficult to obtain within
the United States since some of them, including Mr. Tokayer, Mr. Shavit and Dr.
Sollish, reside in Israel where TTR Ltd.'s offices are located.
The Company has been informed by its Israeli legal counsel that there is
doubt as to the enforceability of civil liabilities under the Securities Act of
1933, as amended (the 'Securities Act'), and the Securities Exchange Act of
1934, as amended (the 'Exchange Act'), in original actions instituted in Israel.
However, subject to certain limitations, Israeli courts may enforce United
States final executory judgments for liquidated amounts in civil matters,
obtained after a trial before a court of competent jurisdiction (according to
the rules of private international law currently prevailing in Israel) which
enforce similar Israeli judgments, provided that (i) due service of process has
been effected, (ii) such judgments or the enforcement thereof are not contrary
to the law, public policy, security or sovereignty of the State of Israel,
(iii) such judgments were not obtained by fraud and do not conflict with any
other valid judgments in the same matter between the same parties, and (iv) an
action between the same parties in the same matter is not pending in any Israeli
court at the time the lawsuit is instituted in the foreign court. All of the
Company's executive officers and Directors have appointed Samuel F. Ottensoser,
Esq. of Baer Marks & Upham LLP as their agent to receive service of process in
any action against them in any Federal or state court of the State of New York.
Foreign judgments enforced by Israeli courts generally will be payable in
Israeli currency. Judgment creditors must bear the risk that they will be
unable to convert their award into foreign currency at favorable exchange rates.
Penny Stock Regulation. Broker-dealer practices in connection with
transactions in 'penny stocks' are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on
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certain national securities exchanges or quoted on the Nasdaq system, provided
that current price and volume information with respect to transactions in such
securities are provided by the exchange or system). The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the risks in the penny stock market.
The broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules generally require that prior to a transaction in a penny
stock the broker-dealer make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
stock that becomes subject to the penny stock rules. See 'Price Range of Common
Stock.'
THE COMPANY
The Company was organized as a Delaware corporation on July 14, 1994. Its
executive offices are located at 1841 Broadway, New York, New York, 10023,
telephone number (212) 333-3355. The Company coordinates its corporate strategy,
sales and marketing activities through its New York office and its research
and development activities through TTR Ltd. located in Israel.
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USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Common
Stock offered hereby, after deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company, are
estimated to be approximately $ ($ if the Underwriter's
Over-Allotment Option is exercised in full). The Company intends to use the net
proceeds during the next 24 months as follows:
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE OF
APPLICATION OF PROCEEDS DOLLAR AMOUNT NET PROCEEDS
- ------------------------------------------------------------------------ ------------- -------------
<S> <C> <C>
Sales and marketing..................................................... $ 45%
Research and development................................................ 20
Repayment of indebtedness............................................... 15
Working capital and general corporate purposes.......................... 20
------------- ---
Total.............................................................. $ 100%
------------- ---
------------- ---
</TABLE>
Sales and Marketing. The Company intends to establish new sales and
marketing programs, and to hire a Vice President of Sales, a Vice President of
Marketing and other personnel. Amounts are also to be allocated to advertising,
public relations, travel and sales support. See 'Business -- Sales and
Marketing' and ' -- Employees.'
Research and Development. The Company intends to continue to develop
DiscGuard'tm' and related products, including the expansion of DiscGuard'tm' to
other operating systems and DVDs. In addition, the Company will use a portion of
the amounts allocated to research and development for salaries and related
expenses to hire additional developers and scientists. See 'Business -- Research
and Development' and ' -- Employees.'
Repayment of Indebtedness. The Company intends to repay the proceeds of the
1998 Debt Financing. The promissory notes issued in connection with the 1998
Debt Financing bear interest at 10% per annum and are repayable at the earlier
of the first anniversary of the issuance of the notes, or 30 days following the
completion of this Offering. See 'Plan of Operation -- Prior Financings.'
Working Capital and General Corporate Purposes. The balance will be used by
the Company for working capital and general corporate purposes. The amounts
allocated to working capital include expenses relating to the intended expansion
of the Company's offices located in New York and London, and expenses relating
to the Company's office located in California. The Company also intends to
purchase computer network equipment for its offices. See
'Business -- Properties.'
If the Underwriter exercises the Over-Allotment Option in full, the Company
will realize additional net proceeds of approximately $ , which will be
added to the Company's working capital.
The Company anticipates, based on its currently proposed plans and
assumptions relating to its operations, that the net proceeds of this Offering,
together with projected cash flow from operations, if any, will be sufficient to
satisfy its contemplated cash requirements for at least 24 months following the
consummation of this Offering. In the event that the Company's plans change or
its assumptions change or prove to be inaccurate or if the net proceeds of this
Offering or the Company's projected cash flow prove to be insufficient to fund
operations (due to unanticipated expenses, production problems, marketing
difficulties or otherwise), the Company may find it necessary or advisable to
reallocate some of the proceeds within the above described categories, or to use
portions of the net proceeds for other purposes or may be required to seek
additional financing sooner than currently anticipated, or curtail operations.
The Company has no current arrangements with respect to, or sources of,
additional financing. There can be no assurance that any such additional
financing will be available to the Company on commercially reasonable terms, or
at all. See 'Risk Factors -- Significant Capital Requirements; Dependence on
Offering Proceeds; Need for Additional Financing' and 'Plan of Operation.'
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Pending utilization of the net proceeds of the Offering, the Company
intends to invest such funds in, among other things, bank certificates of
deposit, interest bearing investments, prime commercial paper, United States
government obligations, or money market funds.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the OTC Electronic Bulletin Board
under the symbol 'TTRE.' The following table sets forth the range of high and
low bid prices for the Common Stock as reported on the OTC Electronic Bulletin
Board by the National Association of Securities Dealers, Inc., Automated
Quotations System for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31, 1997 HIGH LOW
-------- --------
<S> <C> <C>
1st Quarter (commencing February 10, 1997)........................................ $16 2/3 $9 1/4
2nd Quarter....................................................................... $15 7/8 $11
3rd Quarter....................................................................... $13 3/4 $11
4th Quarter....................................................................... $11 15/16 $5 5/8
<CAPTION>
Year Ended December 31, 1998 HIGH LOW
-------- --------
<S> <C> <C>
1st Quarter....................................................................... $6 5/16 $3 9/16
2nd Quarter....................................................................... $5 5/8 $2 1/2
3rd Quarter (through July 30, 1998)............................................... $3 1/4 $2 9/16
</TABLE>
The foregoing represents inter-dealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
On June 30, 1998, there were 78 record holders of the Common Stock of the
Company.
Application will be made to have the Common Stock listed on the American
Stock Exchange. See 'Risk Factors -- OTC Electronic Bulletin Board; Application
for Listing on the American Stock Exchange.'
DIVIDEND POLICY
To date, the Company has not paid any cash dividends on its Common Stock.
The payment of future cash dividends, if any, is within the discretion of the
Board of Directors and will depend upon the Company's earnings, if any, capital
requirements and financial condition and other relevant factors. The Board does
not intend to declare any cash or other dividends in the foreseeable future,
rather it intends to retain future earnings, if any, to provide for the
operation and expansion of the Company's business.
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998, and as adjusted to give effect to (i) the consummation of the
1998 Debt Financing of $1,475,000, and (ii) the sale of 2,500,000 shares of
Common Stock offered by the Company hereby at per share and the application
of the estimated net proceeds therefrom. See 'Use of Proceeds' and 'Plan of
Operation.'
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------------
ACTUAL AS ADJUSTED(1)(2)
----------- -----------------
<S> <C> <C>
Long-term debt, less current portion.................................. $ 11,597 $
-----------
Stockholders' equity
Common Stock, $0.001 par value; 20,000,000 shares authorized;
4,052,548 and 6,409,548 issued and outstanding, including
750,000 and -0- shares placed in escrow, respectively.......... 4,053
Additional paid-in-capital............................................ 8,294,650
Other accumulated comprehensive income................................ 34,977
Deficit accumulated during the development stage...................... (7,030,535)
Less: deferred compensation........................................... (1,181,400)
-----------
Total stockholders' equity.................................. 121,745
-----------
Total capitalization........................................ $ 133,342
-----------
-----------
</TABLE>
- ------------
(1) Reflects (i) the cancellation of 750,000 shares of Common Stock formerly
held in escrow, (ii) the issuance of 125,000 shares of Common Stock to
consultants, and (iii) the exchange of 432,000 shares of Common Stock for
outstanding warrants. See 'Plan of Operation' and 'Principal Stockholders.'
(2) Excludes (i) 580,000 shares of Common Stock to be reserved for issuance
under the Option Plan, pending Stockholder approval of an increase of shares
under the Option Plan (currently 426,100 shares are issuable upon exercise
of outstanding stock options); (ii) 25,000 shares of Common Stock to be
reserved for issuance, pending Stockholder approval, upon exercise of stock
options which may be granted to independent members of the Board of
Directors under the Directors Plan; (iii) 250,000 shares of Common Stock
reserved for issuance upon exercise of the Underwriter's Warrants; (iv)
300,473 shares of Common Stock reserved for issuance upon the exercise of
warrants and/or options issued to consultants, employees and investors; and
(v) 339,250 shares of Common Stock issuable upon the exercise of warrants
issued in connection with the 1998 Debt Financing. Includes 50,000 shares of
Common Stock issued to a consultant. See 'Principal Stockholders.'
(3) Concurrently with this Offering, 621,000 shares of Common Stock, plus an
additional 372,250 shares of Common Stock issuable upon the exercise of
372,250 warrants, have been registered under the Securities Act for resale
on behalf of certain securityholders. The securityholders have agreed not to
sell such securities for a period of nine months after the date of this
Prospectus (six months with respect to 654,000 shares of Common Stock, of
which 33,000 are issuable upon exercise of warrants).
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PLAN OF OPERATION
OVERVIEW
The Company designs, markets and sells proprietary software anti-piracy
products. The Company's flagship product, DiscGuard'tm', embeds an indelible and
non-reproducible digital signature on CD-ROMs that prevents unauthorized copies
from operating. DiscGuard'tm' protection is transparent to the end user and is a
cost-effective way for a software publisher to reduce piracy of its products.
TTR's goal is to become the market leader in CD-ROM anti-piracy protection.
The Company is implementing a two part strategy to achieve this objective.
First, the Company intends to ensure that DiscGuard'tm' will be readily
available to software publishers by integrating DiscGuard'tm' into the mastering
equipment of a broad base of CD-ROM Replicators. At the same time, the Company
is marketing DiscGuard'tm' directly to software publishers, who can then
purchase DiscGuard'tm' protection through a Replicator for a per disc royalty
fee.
In October 1997, the Company entered into an exclusive license agreement
with DCA to permit it to integrate DiscGuard'tm' into its MIS, a key component
of the mastering equipment used by Replicators in the production of glass
masters used to mass produce CD-ROMs. The Company believes that DCA's MIS is
currently installed in over 75% of the world's mastering equipment.
In November 1997, Nimbus, a leading Replicator of CD-ROMs, entered into a
five year agreement with the Company, to integrate DiscGuard'tm' into its MIS.
Nimbus currently offers DiscGuard'tm' protection to its large client base of
software publishers throughout North America and Europe. In July 1998, the
Company entered into a license agreement with SKC, the largest South Korean
Replicator and a subsidiary of a major South Korean conglomerate. The Company
expects that SKC will offer DiscGuard'tm' protection to software publishers
throughout South Korea by mid-September 1998, when the Nimbus exclusivity period
expires.
The Company commenced its marketing efforts in February 1998 and by June
30, 1998, had licensed DiscGuard'tm' to a number of software publishers that
agreed to protect some or all of their titles distributed on CD-ROMs with
DiscGuard'tm'. While these software publishers market mostly multimedia CD-ROMs,
including games, design and reference software, the Company believes that
DiscGuard'tm' will be beneficial to software publishers seeking to protect a
broad range of products.
The Company has recently opened sales offices in California, New York, and
London, to establish a presence, as well as maintain close contact with
customers in these key software development markets. The Company has sought out
distributors to market the Company's products in certain other areas, such as
Asia, where the Company does not otherwise have a sales presence. In June 1998,
the Company entered into a non-exclusive two-year distribution agreement with
Eagle, a leading Japanese technology marketing company, for the distribution of
DiscGuard'tm' in Japan, and also entered into a representation agreement with
Digital Media to market the Company's products in South Korea. Eagle and Digital
Media are marketing DiscGuard'tm' to local Replicators and software publishers.
The Company is actively marketing DiscGuard'tm' to other Replicators and
software publishers. As a first step towards licensing DiscGuard'tm', the
Company encourages potential customers to conduct internal evaluations of the
product as well as pilot tests. In a pilot test, the software publisher will
distribute a number of copies of a CD-ROM software title to evaluate the
effectiveness of DiscGuard'tm'. The Company is currently conducting pilot
testing in various stages with several software publishers and Replicators.
The proceeds of this Offering will be used to increase the size and impact
of the Company's sales and marketing efforts, provide additional resources for
the Company's continuing research and development projects, repay existing
indebtedness and for working capital and general corporate purposes.
To target effectively the large number of Replicators and software
publishers that would benefit from the Company's products, TTR needs to increase
the size of its sales force. The Company intends to add a Vice President of
Marketing and a Vice President of Sales to its ranks as well as additional sales
and marketing representatives, who will provide the Company with greater market
presence.
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The priority of the Company's research and development efforts is to expand
DiscGuard's'tm' capabilities and uses. DiscGuard'tm' is currently available for
the Microsoft Windows'r' family of operating systems (including Windows'r' 98).
TTR's current focus is to complete the development of DiscGuard'tm' for other
operating systems and a version of DiscGuard'tm' to protect electronic content
on DVDs. The Company also has other products in various stages of design and
development. It is continuing to devote significant research and development
resources to completing these projects. TTR intends to hire additional
personnel, including programmers and engineers, in the next twelve months to
assist in these efforts.
To augment the Company's administrative infrastructure to support its
proposed growth, the Company intends to hire a chief financial officer as well
as customer service and support personnel. Additional resources will also be
required to expand and provide adequate computer equipment and support for the
Company's sales offices in California, New York and London.
YEAR 2000 ISSUES
Certain organizations anticipate that they will experience operational
difficulties at the beginning of the Year 2000 as a result of computer programs
being written using two digits rather than four digits to define the applicable
year. The Company's plan for the Year 2000 calls for compliance verification
with vendors, testing software in the Company's products for Year 2000 problems
and communication with significant suppliers to ascertain their readiness for
the Year 2000 problem. The Company has tested DiscGuard'tm' for Year 2000
compliance, and the Company believes that DiscGuard'tm' is Year 2000 compliant.
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates, based on currently proposed plans and assumptions
relating to operations, that the net proceeds of this Offering, together with
projected cash flow from operations, if any, will be sufficient to satisfy the
Company's contemplated cash requirements for at least 24 months following the
closing date of this Offering. In the event that the Company's plans change or
its assumptions change or prove to be inaccurate or if the net proceeds of this
Offering or the Company's projected cash flow prove to be insufficient to fund
operations (due to unanticipated expenses, production problems, marketing
difficulties or otherwise), the Company may find it necessary or advisable to
reallocate some of the Company's planned use of proceeds, or to use portions of
the net proceeds for other purposes or may be required to seek additional
financing sooner than currently anticipated, or curtail operations. See 'Risk
Factors -- Significant Capital Requirements; Dependence on Offering Proceeds;
Need for Additional Financing.'
For the year ended December 31, 1997, and the three months ended March 31,
1998, the Company incurred operating losses of $3,865,736 and $844,784,
respectively, reflecting principally research and development expenses, sales
and marketing expenses, and general and administrative expenses. The Company's
operating expenses reflect the Company's growth and expansion in all operating
areas since its initial public offering in February 1997 (the 'IPO'). The
Company believes that continued expansion of operations is essential to
achieving and maintaining a strong competitive position. See 'Risk
Factors -- Proposed Expansion; Management of Growth' and ' -- Competition;
Technological Obsolescence.'
A substantial portion of the Company's operating expenses are attributable
to non-cash charges associated with the compensation of senior Company personnel
through the issuance of incentive equity stock options. In the first quarter of
1997, the Company recorded deferred compensation of $2,375,343 in connection
with stock options and stock grants issued to certain officers and consultants
of the Company. The amortization of this deferred compensation resulted in
non-cash charges for the year ended December 31, 1997 of $972,567 and for the
three months ended March 31, 1998 of $221,376. For the year ended December 31,
1997, non-cash charges of $282,625 and $50,000 were also charged to sales and
marketing and research and development, respectively, in connection with stock
grants to consultants of the Company. The Company believes that these
compensation levels were necessary to retain the services of qualified
individuals. See Note 13 to Consolidated Financial Statements.
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Cash used in operations for the year ended December 31, 1997 was
$2,735,369, and for the three months ended March 31, 1998 was $444,572. The
amount for the year ended December 31, 1997 included the repayment of accrued
interest in the amount of $305,000, including interest of $71,000 in February
1997, when the Company repaid substantially all of its debt from the proceeds of
the IPO. In addition, the Company pre-paid $120,000 of fees under a consulting
agreement that has a two-year term.
The Company believes that ongoing investment in research and development
activities will be critical to the ability of the Company to generate revenues
and operate profitably. For the year ended December 31, 1997 and the three
months ended March 31, 1998, the Company expended $967,155 and $188,692,
respectively, on its research and development activities. Management anticipates
that the Company will continue to expend significant funds in research and
development activities. See 'Risk Factors -- Limited Marketing Capabilities;
Uncertainty of Market Acceptance' and 'Business -- Research and Development.'
The Company was approved by the Chief Scientist for a grant of $210,000, of
which it has received approximately $173,000 through June 30, 1998. The Company
pays royalties to the Chief Scientist on proceeds from the sale of products
derived from the research and development funded by the grant at the rate of 3%
of the sales revenue for the first three years of such sales, 4% for the
following three years, and 5% thereafter, up to a maximum amount of 100% of the
grant. These funds partially offset research and development costs.
PRIOR FINANCINGS
On February 12, 1997, 920,000 shares of Common Stock were sold to the
public in the IPO, of which 860,000 were sold by the Company and the balance was
sold by certain selling stockholders. The Company received an aggregate of $4.7
million from the IPO. In connection with the IPO, the Company issued to the
underwriter five-year warrants to purchase 80,000 shares, which have been
exchanged for 32,000 shares of Common Stock.
In December 1997, the Company sold, for an aggregate purchase price of
$400,000 to a private investor, 64,000 shares of Common Stock and four-year
warrants to purchase 33,000 shares of Common Stock at an exercise price of $7.80
per share. The investor has agreed not to sell any of the shares of Common Stock
or Common Stock underlying the warrants for six months from the date of this
Prospectus. See 'Concurrent Offering.'
In July 1998, the Company completed a private placement (the '1998 Debt
Financing') of $1,475,000 million in principal amount of 10% promissory notes
(the 'Notes'). The Proceeds were used for working capital and general corporate
purposes and the Company paid commissions of $96,000. The Notes are payable on
the earlier to occur of (i) the first anniversary of the issuance of each of the
Notes, or (ii) 30 days following the completion of this Offering and will be
repaid with the proceeds of this Offering. In connection with the 1998 Debt
Financing, the Company issued warrants to purchase 339,250 shares of Common
Stock at an exercise price equal to 115% of the price per share of Common Stock
in this Offering or 115% of the price per share of the Common Stock on the date
of the issuance of the warrants if no offering is completed by December 31,
1998. The securityholders have agreed not to sell any of the shares of Common
Stock underlying the warrants for a period of nine months from the date of this
Prospectus. See 'Concurrent Offering.'
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BUSINESS
INTRODUCTION
The Company designs, markets and sells proprietary software anti-piracy
products. The Company's flagship product, DiscGuard'tm', embeds an indelible and
non-reproducible digital signature on CD-ROMs that prevents unauthorized copies
from operating. DiscGuard'tm' protection is transparent to the end user and is a
cost-effective way for a software publisher to reduce piracy of its products.
TTR's goal is to become the market leader in CD-ROM anti-piracy protection.
The Company is implementing a two part strategy to achieve this objective.
First, the Company intends to ensure that DiscGuard'tm' will be readily
available to software publishers by integrating DiscGuard'tm' into the mastering
equipment of a broad base of CD-ROM Replicators. At the same time, the Company
is focusing on marketing DiscGuard'tm' directly to software publishers, who can
then purchase DiscGuard'tm' protection through a Replicator for a per disc
royalty fee.
TTR commenced its marketing efforts in February 1998 and by June 30, 1998,
had licensed DiscGuard'tm' to a number of software publishers that agreed to
protect some or all of their titles distributed on CD-ROMs with DiscGuard'tm'.
While these software publishers market mostly multimedia CD-ROMs, including
games, design and reference software, the Company believes that DiscGuard'tm'
will be beneficial to software publishers seeking to protect a broad range of
products.
INDUSTRY BACKGROUND
Losses related to the unauthorized reproduction and use of software and
other electronic content present a continuing concern for software publishers.
Illegal copies of widely recognized software programs can be frequently
purchased in several parts of the world at retail prices that are a fraction of
those prevailing in the United States and Western Europe. The Software
Publisher's Association (the 'SPA') estimated that losses from the piracy of
business software exceeded $11.2 billion worldwide in 1996 and $11.4 billion in
1997. The amount represents nearly one of every two new business software
applications. In the United States alone, total losses from the piracy of
business software exceeded $2.8 billion in 1997. Further, approximately 80%
of business software applications used in Eastern Europe, and approximately 39%
of the business software applications used in Western Europe, were illegally
copied. The Interactive Digital Software Association (the 'IDSA'), the trade
group representing interactive entertainment software publishers, estimates that
worldwide piracy of entertainment software cost U.S. based computer and game
publishers $3.2 billion in 1997.
The increasing use of CD-ROMs and other optical media exacerbates the
consequences of piracy since CD-ROMs are capable of storing significantly more
information than standard diskettes. Popular games, videos, educational
materials, business and other professional applications are routinely
distributed on CD-ROMs. According to Infotech Inc., a market research firm
specializing in the optical media industry, content distributed on CD-ROMs
and DVDs more than doubled between 1996 and 1998, and will exceed $70 billion
by 2000. Such amounts represent estimated sales of approximately 1.2 billion
units in 1998, and 2.4 billion units in 2000. Until recently, CD-ROM based
applications have enjoyed some immunity from unauthorized reproduction due
to the relatively high cost of the copying hardware. However, the wide
availability and increasing affordability of CD recorders have greatly
contributed to the increase in CD-ROM piracy. With a CD recorder, even the
casual user can copy an unprotected application without significant impediment.
Since laws to combat software piracy have not served as an effective
deterrent, software publishers are seeking stronger methods to prevent the
proliferation of unauthorized copies of their proprietary products. There
presently exist three primary strategies for software publishers to protect
content distributed on CD-ROMs: copy protection, restricted usage and audit
trail.
Copy protection prevents the unauthorized reproduction of CD-ROMs. Copy
protection software is designed to detect the difference between a legitimate
copy and an unauthorized copy of the software application, and prevent the
unauthorized copy from operating. The Company believes that copy protection
offers software publishers the most effective solution to protect their products
distributed on CD-ROMs and DVDs, while offering convenience and cost
effectiveness to the software publisher and end user. DiscGuard'tm' competes in
this category.
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Restricted usage, which is the most widely used commercial solution,
prevents the protected application from operating on more than one unit at the
same time, but does not deter unauthorized reproduction. Included within this
category are solutions which utilize a hardware component such as a key or
'dongle.' A 'dongle' is a device that plugs into the computer and acts as a key
to unlock the protected software. 'Dongles' are typically provided directly to
the software vendor and are frequently customized for particular software
applications. The Company believes that the use of 'dongles' presents
significant operating difficulties and inconveniences for legitimate end-users.
'Dongles' are not interchangeable among different applications, but rather a
separate key is required for each application, resulting in a 'daisy chain' of
'dongles' protruding out of the back of the computer. The use of 'dongles' and
other hardware components can, in the Company's view, prove especially
burdensome for CD-ROM based software such as multimedia games and other content.
Such software is not ordinarily installed onto a hard drive, but accessed from
time to time from the CD-ROM. As a result, the 'dongle' is needed each time the
application is to be used.
Audit trail protection does not prevent piracy or unauthorized copying of
CDs and DVDs. Audit trail merely furnishes information identifying illegal use
and perhaps the source of the illegal reproduction.
BUSINESS STRATEGY
The Company's primary objective is to make DiscGuard'tm' the market
standard for CD-ROM anti-piracy protection. The Company is implementing a two
part strategy to achieve this objective. First, the Company intends to ensure
that DiscGuard'tm' will be readily available to software publishers by
integrating DiscGuard'tm' into the mastering equipment of a broad base of
Replicators. At the same time, the Company is marketing DiscGuard'tm' directly
to software publishers, who can then purchase DiscGuard'tm' protection through a
Replicator for a per disc royalty fee. The Company believes that this strategy
enables it to penetrate both the supply and demand sides of the CD-ROM
manufacturing industry. The Company is initially targeting the high volume,
multimedia software market and then intends to expand its marketing efforts to
focus on other segments of the software publishing industry. Toward that end,
the Company is targeting the following principal markets:
Mastering Machines Market: In October 1997, the Company entered into
an exclusive license agreement with DCA to permit it to integrate
DiscGuard'tm' into its MIS, a key component of the mastering equipment used
by Replicators in the production of glass masters used to mass produce
CD-ROMs. The Company believes that DCA's MIS is currently installed in over
75% of the world's mastering equipment. Such relationship facilitates the
commercial adoption of DiscGuard'tm' by making it readily available to
Replicators. See 'DiscGuard'tm' and Proposed Products.'
Replication Services Market: The Company believes that the replication
services market is intensely competitive and that DiscGuard'tm' provides
Replicators with an additional value added product to offer their
customers. In November 1997, Nimbus, a leading Replicator of CD-ROMs,
entered into a five year agreement with the Company, to integrate
DiscGuard'tm' into its MIS. Nimbus currently offers DiscGuard'tm'
protection to its large client base of software publishers throughout North
America and Europe. In July 1998, the Company entered into a license
agreement with SKC, the largest South Korean Replicator and a subsidiary of
a major South Korean conglomerate. The Company expects that SKC will offer
DiscGuard'tm' protection to software publishers throughout South Korea by
mid-September 1998, when the Nimbus exclusivity period expires. The Company
is also currently involved in pilot testing with additional Replicators and
is actively marketing DiscGuard'tm' to others, often in conjunction with
sales representatives of DCA. The Company believes that the availability of
DiscGuard'tm' in Replicators' equipment is a key factor in becoming the
market standard for anti-piracy protection. See ' -- Sales and Marketing.'
Software Publishers Market: The Company believes that piracy is a
critical issue in the software publishing industry and that, as a result,
software publishers are increasingly demanding that copy protection be
available from Replicators. Since DiscGuard'tm' became commercially
available in February 1998, TTR has entered into license agreements with a
number of software publishers to protect some or all of their titles
distributed on CD-ROMs with DiscGuard'tm'. The Company also
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engages in pilot testing of DiscGuard'tm' and is currently in various
stages with several software publishers. In pilot testing, the software
publisher will distribute a number of copies of a CD-ROM software title to
evaluate the effectiveness of DiscGuard'tm'.
The Company believes that it has developed the world's only optical media
simulator which enables the Company to simulate the process of writing to, and
reading from, an optical disc. This permits the Company to save a significant
amount of time and expense. The Company is a member of various industry standard
groups and is seeking ways to leverage its expanding expertise and technology
into other products. See ' -- Research and Development.'
DISCGUARD'tm'
DiscGuard'tm', the Company's only commercially released product, provides a
comprehensive anti-piracy solution for software distributed on CD-ROMs.
DiscGuard'tm' distinguishes between an authentic CD-ROM and an unauthorized copy
and controls the operation of the software on the protected CD-ROM. In
particular, DiscGuard'tm' embeds an indelible and non-reproducible digital
identification code or signature on CD-ROMs that prevents unauthorized copies
from operating.
The software on the CD-ROM protected with DiscGuard'tm' is encrypted using
DiscGuard's'tm' proprietary software residing in a workstation unit provided to
Replicators or a software encryption toolkit provided to software publishers.
When DiscGuard'tm' identifies a CD-ROM as authentic (containing a signature), it
will decrypt the protected software and allow the software application to
operate as intended. The Company currently performs the encryption process,
however, software publishers will have the option to perform the encryption
process at their own site or to permit the encryption to be done at a
Replicator's facility. Currently, a workstation unit is available at the
Company's premises, and an additional unit is installed at Nimbus' premises.
In order to produce DiscGuard'tm' protected CD-ROMs, modifications to the
laser optics system of the CD-ROM mastering equipment is required. In October
1997, the Company entered into an exclusive license agreement with DCA to
integrate DiscGuard into its MIS, a key component of the mastering equipment
used by Replicators in the production of glass masters used to mass produce
CD-ROMs. The Company believes that DCA's MIS is currently installed in over 75%
of the world's mastering equipment. See ' -- Sales and Marketing; Mastering
Equipment Manufacturers.'
The Company believes that the successful integration of DiscGuard'tm' into
DCA's MIS and the installation of the DiscGuard'tm' enhanced MIS onto
Replicators' mastering equipment establish the necessary infrastructure for the
commercial distribution of DiscGuard'tm' to software publishers. See ' -- Sales
and Marketing.'
DiscGuard'tm' is currently available for the Microsoft Windows'r' family of
operating systems (including Windows'r' 98). The Company intends to expand
DiscGuard's'tm' capabilities to include other operating systems, as well as
for the protection of DVDs. Although no assurance can be given, the Company
believes that it will complete such development at such time when DVDs recorders
become widely available. The Company believes that DiscGuard'tm' as expanded for
DVDs will be particularly attractive to the music, recording, video and motion
picture industries. The DVD format is expected by industry experts to be
superior to CD-ROM since the DVD format provides a very accurate playback of
the original digital format recording. Additionally, one DVD can contain the
same amount of data that 7 to 8 CDs currently contain. Industry experts believe
that in the future, one DVD will be able to hold the same amount of data
currently contained on 30 to 40 CDs. Accordingly, the DVD format is especially
attractive to motion picture and video publishers since it can hold a
significant amount of data. Nonetheless, the Company believes that adoption
of the DVD format has been delayed for a number of reasons, including the
current cost of DVD players, the failure to adopt a single format for DVD and
the fear of software and other publishers, especially music and video
publishers, that without appropriate anti-copying protection the anticipated
losses due to software piracy would be significant.
SALES AND MARKETING
The Company's strategy is to make DiscGuard'tm' the market standard for
anti-piracy protection. The Company has allocated a significant portion of the
net proceeds of this Offering to expand the
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Company's sales and marketing efforts. See 'Risk Factors -- Limited Marketing
Capabilities; Uncertainty of Market Acceptance.'
The Company is pursuing a sales and marketing strategy that targets the
following principal markets: (i) mastering equipment manufacturers, (ii)
Replicators, and (iii) software publishers.
MASTERING EQUIPMENT MANUFACTURERS
In order to produce DiscGuard'tm' enhanced CD-ROMs and DVDs, modifications
to the laser optics system of CD-ROM or DVD mastering equipment are required. In
October 1997, the Company entered into an exclusive license agreement with DCA
to permit it to integrate DiscGuard'tm' into its MIS, a key component of the
mastering equipment used by Replicators in the production of glass masters used
to mass produce CD-ROMs and DVDs (the 'DCA License'). Pursuant to the DCA
License, DCA was granted an exclusive, non-transferable, royalty free world-wide
license, through December 31, 1998. If DCA sells or upgrades at least 100 units
of the version of its MIS that supports DiscGuard'tm' prior to December 31,
1998, then the DCA License will be automatically extended until December 31,
1999. Otherwise, the DCA License will become a non-exclusive license. If the
minimum sales/upgrade criteria is met, then TTR and DCA have undertaken to
confer, by September 31, 1999, to establish mutually acceptable minimum unit
sales or upgrade requirements to retain the exclusivity provisions beyond
December 31, 1999. Pursuant to DCA's agreement with the Company, DCA is required
to use its best efforts to sell DiscGuard'tm' enhanced units. In addition, the
Company and DCA have participated in joint sales meetings with DCA's customers.
See 'DiscGuard'tm'.'
REPLICATORS
The Company believes that the replication industry is characterized by thin
margins and intense competition. The Company believes that DiscGuard'tm'
provides added value to Replicators by offering an anti-piracy option. The
Company intends to license DiscGuard'tm' to a significant number of Replicators
so that software publishers will have easy access to DiscGuard'tm'. Many
software publishers have relationships with certain Replicators and if
DiscGuard'tm' is widely distributed among Replicators, then software publishers
can obtain DiscGuard'tm' from their Replicator of choice. Once the Company has
licensed DiscGuard'tm' to a significant number of Replicators, the Company
believes that Replicators that do not offer DiscGuard'tm' will be at a
competitive disadvantage.
DCA's DiscGuard'tm' enhanced MIS was installed in the mastering equipment
at Nimbus pursuant to a Development and OEM Licensing Agreement, dated November
24, 1997, among the Company, DCA and Nimbus. See ' -- DiscGuard'tm'. Nimbus is a
leading CD manufacturer and Replicator that was granted the right to use
DiscGuard'tm' for the purpose of replicating DiscGuard'tm' protected CD-ROMs.
Nimbus has a six-month exclusive license to produce DiscGuard'tm' protected
CD-ROMs through September 16, 1998, and a non-exclusive license thereafter. The
agreement has a five-year term which is automatically renewable for successive
periods of one year each. Under the license agreement with Nimbus, the Company
is to receive a percentage of the proceeds of the premium charged by Nimbus on
any DiscGuard'tm' protected CD-ROM. Until September 16, 1998, DiscGuard'tm'
protected CD-ROMs will be available to software publishers through Nimbus.
In July 1998, the Company and SKC, the leading South Korean Replicator and
a subsidiary of one of South Korea's major conglomerates, entered into a
three-year agreement pursuant to which the Company granted to SKC a
non-transferable license to integrate DiscGuard'tm' into its mastering equipment
and to exclusively distribute DiscGuard'tm' protected CD-ROMs in South Korea
upon expiration of Nimbus' exclusivity period on September 16, 1998. As of June
2, 1999, the exclusive license ends and becomes a non-exclusive license for the
remaining term of the agreement, subject to automatic renewal for additional
one-year periods. In addition, the exclusivity period will end if SKC does not
(i) complete its first-run of DiscGuard'tm' protected CD-ROMs by August 30,
1998, or (ii) complete the production of 200,000 DiscGuard'tm' protected CD-ROMs
by December 31, 1998. SKC will be obligated to pay to the Company a per disc
royalty based on the number of DiscGuard'tm' protected CD-ROMs sold.
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DiscGuard'tm' Replicators are authorized by the Company to replicate
DiscGuard'tm' protected CD-ROMs for software publishers who have obtained
directly from the Company or an authorized distributor, the right to use
DiscGuard'tm'. Only a Replicator who has purchased the DiscGuard'tm' option for
its mastering equipment can offer DiscGuard'tm' protection to its customers.
Licensed Replicators of DiscGuard'tm' will be required to report sales volumes
of DiscGuard'tm' protected CD-ROMs to the Company. In addition, the
DiscGuard'tm' enhanced MIS contains a journaling feature enabling the Company to
audit the Replicator's production of DiscGuard'tm' protected discs to enforce
the accuracy of reports from the Replicators. The Company is negotiating with
other Replicators.
SOFTWARE PUBLISHERS
The Company believes that piracy is a critical issue in the software and
electronic content publishing industry and that, as a result, software
publishers are increasingly demanding copy protection from Replicators. The
Company demonstrates to these software publishers that purchasing protection for
software distributed on CD-ROMs is an investment with a quantifiable and
significant return. Infotech estimates that worldwide sales of software and
other electronic content will increase from $56.2 billion in 1998 to $84.7
billion in the year 2002. The average unit price of software distributed on
optical media during this period is estimated to range from $34 in 1998 to $30
in 2002 (representing a decline in price and a corresponding increase in the
number of discs sold). The Company is able to demonstrate to software publishers
that for a relatively modest investment per disc, DiscGuard'tm' can offer
anti-piracy protection and provide software publishers the opportunity to
realize a greater potential of this increasing market, rather than experience
the loss of sales related to the unauthorized reproduction and piracy of their
products.
Commencing in March 1998, the Company entered into license agreements with
a number of software publishers pursuant to which the Company licensed
DiscGuard'tm' to protect their software applications from unauthorized
replications. The license agreements typically require each software publisher
to pay a license fee for each CD-ROM produced with DiscGuard'tm'.
The Company engages in pilot testing of DiscGuard'tm' and is currently in
various stages with a number of Publishers. In pilot testing, the software
publisher will distribute a number of copies of a CD-ROM software title to
evaluate the effectiveness of DiscGuard'tm'.
DISTRIBUTORS
In June 1998, the Company entered into a non-exclusive two-year
distribution agreement with Eagle for the distribution of DiscGuard'tm' in
Japan. Eagle is a leading technology, sales and marketing company in Japan. The
agreement is automatically renewable for additional one-year periods unless
terminated by either of the parties. Eagle will sell and market the
DiscGuard'tm' technology to software publishers and Replicators in Japan.
Pursuant to the agreement, by December 31, 1998, the parties are to set minimum
sales commitments for the following six-month period, and thereafter commitments
shall be set semi-annually no later than 120 days prior to the commencement of
the next applicable sales period. Should the parties fail to reach agreement as
to such minimum commitments, then the Company is entitled to terminate the
distribution agreement upon sixty days notice. Eagle will pay to the Company a
license fee for each disc sold with DiscGuard'tm' and for equipment sold based
upon the Company's suggested end-user list prices. By September 1, 1998, Eagle
is obligated to purchase from the Company certain equipment for effecting the
distribution of DiscGuard'tm'.
In June 1998, the Company also entered into a representation agreement with
Digital Media to sell and market the Company's products in South Korea. Pursuant
to the agreement, Digital Media is to serve as a non-exclusive agent of the
Company to introduce the Company and its products to potential customers. The
Company will pay to Digital Media a one-time fee for each contract executed by a
new customer, and a commission based upon the amount of revenues from the
license of DiscGuard'tm'. The Company expects to explore the possibility of
establishing additional strategic alliances with appropriate software
distributors.
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SALES AND SUPPORT OFFICES
The Company's strategy is to penetrate the North American and European
markets through direct sales and intends to devote significant efforts in these
areas. The Company's office in New York City serves as its East Coast sales and
support office. The Company maintains an office in California to serve the
strategic West Coast software publishing market and also maintains offices in
Israel and London for access to the European software market. The Company is
considering opening future locations in North America and Europe, as well as
establishing distributor relationships throughout the rest of the world. See
'Risk Factors -- Management of Growth,' ' -- Risks Associated with International
Sales,' 'Use of Proceeds' and ' -- Competition.'
RESEARCH AND DEVELOPMENT
The software industry in general is characterized by rapid product changes
resulting from new technological developments, performance improvements and
lower production costs. The Company's research and development activities to
date have focused on developing products responsive to perceived immediate
market demands. The Company believes that its future growth in the software
anti-piracy industry will depend in large part on its ability to be an innovator
in the development and application of its proprietary technology and know-how.
See 'Risk Factors -- Competition; Technological Obsolescence.'
The Company's research and development department includes 15 software
engineers and scientists, is based in Kfar Saba, Israel and is working on
improvements and enhancements to current products and on developing new products
for the anti-piracy industry. The Company attempts to recruit and hire highly
qualified technical personnel. The Company intends to capitalize on the
highly-skilled pool of computer and engineering professionals in Israel in
pursuing its research and development efforts. Following the completion of this
Offering, the Company intends to expand its research and development department.
See 'Risk Factors -- Proposed Expansion; Management of Growth,' ' -- Customer
Support' and 'Plan of Operation.'
TTR Ltd. was approved by the Chief Scientist for a grant of $210,000, of
which it received approximately $173,000 through June 30, 1998. The Company pays
royalties to the Chief Scientist on proceeds from the sale of products derived
from the research and development funded by the grant at the rate of 3% of the
sales revenue for the first three years of such sales, 4% for the following
three years, and 5% thereafter, up to a maximum of 100% of the grant. The
obligation to pay royalties to the Chief Scientist is limited to the amount of
the grant received and is linked to the exchange rate of the dollar and the
New Israeli Shekel. Additionally, the Chief Scientist places certain legal
restrictions on companies that receive funding relating to the transfer of
know-how and the manufacture of resulting products outside of Israel. The
Company believes that these restrictions and obligations will not have a
material adverse effect on the operations of the Company since the Company does
not presently anticipate manufacturing its products outside of Israel or
transferring ownership of the technology developed by it to third parties. The
restrictions do not apply to the exports from Israel of products developed with
such technologies. See 'Risk Factors -- Restrictions on Government Funding for
Research and Development.'
From the date of inception through March 31, 1998, the Company has expended
approximately $1.8 million on its research and development activities, including
approximately $967,000 for the year ended December 31, 1997, and approximately
$189,000 for the three months ended March 31, 1998. The Company expects the
level of its research and development expense to increase in the future. The
Company has allocated a significant portion of the net proceeds from this
Offering for research and development activities. See 'Use of Proceeds.'
RECORDABLE CDS
Recordable CDs ('CD-Rs') are blank discs on which content may be recorded
by an end-user without the need to use a Replicator. According to Infotech,
CD-R blank media unit sales will increase from 330 million units in 1998 to
more than 500 million units in 2000. DiscGuard'tm' can be used to protect
CD-Rs when the software and other electronic content is placed on the disc
using a DiscGuard'tm' enhanced CD recorder. To the best of the Company's
knowledge, no other company currently offers this capability. See 'Competition.'
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The Company is currently working with a CD recorder manufacturer to develop
DiscGuard'tm' for application to CD recorders to enable software publishers to
produce DiscGuard'tm' protected CD-Rs. Replicators and software publishers will
then be able to purchase DiscGuard'tm' enhanced CD recorders in the same manner
as they currently purchase standard CD recorders.
The Company's strategy is to sell DiscGuard'tm' enhanced CD recorders to
software companies that desire to author, prototype and/or verify software and
content on CD-Rs. The Company believes that companies that produce significant
amounts of their own software generally release early versions of their software
and electronic content (for example alpha and beta versions) on CD-Rs rather
than CD-ROMs, and these companies may seek anti-piracy protection for these
early versions released on the CD-Rs. DiscGuard'tm' offers such companies this
anti-piracy protection and the Company believes that this is a growing and
potentially significant market.
The Company also intends to sell DiscGuard'tm' to Replicators to enable low
to mid-volume production and distribution of DiscGuard'tm' protected CD-Rs. CD
recorders now provide software publishers the ability to record their products
on CD-Rs without using the relatively costly mastering process. Due to the fixed
costs involved in the mastering process, companies with small to medium-sized
production runs pay significantly more per disc for manufacturing costs.
Replicators can now offer to these companies the use of CD recorders to produce
CDs at a relatively modest cost. The Company would be able to offer
DiscGuard'tm' protection to such companies.
TTR REMOTE ACTIVATION CENTER FOR INTERNET (ELECTRONIC) DISTRIBUTION
The Company believes that companies that desire to distribute protected
software electronically need to insure that payment for the downloaded software
is received and that such software is restricted for use at one site per
payment. The Company is attempting to address these concerns with the Remote
Activation Center (the 'RAC') for Internet (Electronic) Distribution. This will
permit companies that sell protected software via electronic distribution,
including over the Internet, the ability to protect their software.
The RAC is based on a triangular communication design linking the
end-user's system, the software distributor's Internet server and the Company's
Internet server. Once the end-user downloads and pays for the protected
software, the distributor's server would activate a utility which automatically
notifies the Company's Internet server. Upon verification of payment, the
Company's server will pass a decryption key to unlock the protected software.
Unlike other remote activation systems, the Company's electronic distribution
product will not require the end-user to enter a key-code in order to activate
the downloaded software. Once the downloaded software is installed onto the
end-user's computer, it will be protected against unauthorized reproduction. The
product will be automatic and transparent to the end-user.
CUSTOMER SUPPORT
The Company believes that highly efficient, responsive and prompt customer
service are essential to the Company's success in building and retaining
customer confidence. Upon completion of this Offering, the Company anticipates
expanding and maintaining an appropriately sized staff of customer service
personnel which will offer direct technical support. On a routine basis, the
support staff will be expected to provide feedback to the Company's research,
development and marketing departments. See 'Risk Factors -- Proposed Expansion;
Management of Growth' and 'Use of Proceeds.'
COMPETITION
The software anti-piracy industry is extremely competitive. The Company
faces competition from companies that are more established, benefit from greater
market recognition and have greater resources, financial and otherwise, than the
Company. See 'Industry Background.'
Certain companies such as C-Dilla Limited, Sony DADC Austria AG, MLS
LaserLock International Inc. and Link Data Security claim to provide
comprehensive optical media based anti-piracy protection, two of which have
existing relationships with DCA to make their products available.
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It is possible that others may enter the market in the future. The Company
believes that DiscGuard'tm' compares favorably with currently available
competitive products because it does not interfere with the operation of the
computer or the protected application. There can, however, be no assurance that
the Company will be able to continue developing products with innovative
features and functions, or that competitive pressures will not result in price
reductions that could materially adversely affect the Company. See 'Risk
Factors -- Competition.'
Many companies in the software protection industry offer the use of a
hardware device such as a dongle or a key which plugs into the back of the
computer as an anti-piracy strategy. This method does not prevent illegal
replication, but prevents the unauthorized use of the software since the
software will only run if the dongle is present. The Company believes that due
to the significant cost and inconvenience relating to the dongle, the dongle is
only used in high-end vertical markets such as expensive scientific and computer
aided design software. Rainbow Technologies Inc. and Aladdin Knowledge Systems
Ltd. are the two largest companies in this area. However, since the Company's
business strategy is to concentrate on gaining market share in the high volume
games and multimedia market, the Company does not consider these companies as
direct competitors. There can be no assurance that these competitors will not be
able to develop anti-piracy technology which operates on the same principles as
DiscGuard'tm'.
PROPRIETARY RIGHTS
The Company currently relies on a combination of trade secret, copyright
and trademark law, as well as non-disclosure agreements and invention-assignment
agreements, to protect the technologies used in its products and other
proprietary information. In addition, the Company has filed patent applications
in the United States, Israel, Germany, France, Great Britain, the Netherlands
and Japan with respect to the technology underlying DiscGuard'tm'. There can be
no assurance that any patent will be issued or that the Company's proprietary
technology will remain a secret or that others will not develop similar
technology and use such technology to compete with the Company. See 'Risk
Factors -- Product Protection and Infringement.'
The Company believes that its software products are proprietary and are
protected by copyright law, non-disclosure and secrecy agreements. The Company
also relies on proprietary know-how and employs various methods, such as proper
labeling of confidential documents and non-disclosure agreements, to protect its
processes, concepts, ideas and documents associated with proprietary products.
However, such methods may not afford complete protection and there can be no
assurance that others will not independently develop such processes, concepts,
ideas and documentation. See 'Risk Factors -- Product Protection and
Infringement.'
The Company believes that product recognition is an important competitive
factor. Accordingly, the Company intends to promote the DiscGuard'tm' and RAC
trademarks in connection with its marketing activities. The Company owns the
rights to the DiscGuard'tm' trademark in the United States and has filed an
application with the Community TradeMark Office for the trademark rights to
DiscGuard'tm'. There can be no assurance that prior registrations and/or uses
of one or more of such marks (or a confusingly similar mark) do not exist in
one or more of these jurisdictions, in which case the Company might thereby be
precluded from registering and/or using such marks in such jurisdiction. The
Company's use and registration rights with respect to any trademark does not
ensure that the Company has superior rights to others that may register or use
identical or similar marks on related goods or services. See 'Risk Factors --
Trademark Registration.'
It is the Company's policy to require its employees, consultants, and other
advisors to execute confidentiality agreements upon the commitment of
employment, consulting or advisory relationships with the Company. These
agreements generally provide that all confidential information developed or made
known to the individual by the Company during the course of the individual's
relationship with the Company is to be kept confidential and not to be disclosed
to third parties except in specific circumstances. In the case of employees and
consultants, the agreements provide that all inventions conceived by the
individual in the course of their employment or consulting relationship by the
Company shall be the exclusive property of the Company. There can be no
assurance, however, that these agreements will provide meaningful protection or
adequate remedies for the Company's trade
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secrets in the event of unauthorized use or disclosure of such information. See
'Risk Factors -- Product Protection and Infringement.'
EMPLOYEES
The Company has 30 employees, including 15 in research and development, 2
in technical support, 6 in sales and marketing and 7 in general and
administrative capacities. Twenty-five of these employees are based outside of
the United States. None of the Company's employees is covered by a collective
bargaining agreement or is represented by a labor union with respect to
employment by the Company. The Company has not experienced any organized work
stoppages and considers its relations with its employees to be good.
The Company's future performance is highly dependent upon the continued
service of members of the Company's senior management and other key research and
development and sales and marketing personnel. The Company believes that its
future success will also depend upon its continuing ability to identify,
attract, train and retain other highly skilled managerial, technical, sales and
marketing personnel. Hiring for such personnel is competitive, and there can be
no assurance that the Company will be able to retain its key employees or
attract, assimilate or retain the qualified personnel necessary for the
development of its business. See 'Risk Factors -- Dependence on Key Personnel.'
PROPERTIES
The Company leases facilities for its research and development activities
in Kfar Saba, Israel pursuant to a lease with a scheduled expiration date of
December 31, 1999, subject to annual renewal through May 2001. The facilities
consist of approximately 4,860 square feet leased at approximately $4,025 per
month. These facilities have been improved to meet the requirements necessary
for the Company's research and development activities.
The Company also leases office space in New York City for its executive
offices pursuant to a lease with a scheduled expiration date of June 30, 2002.
The premises consist of approximately 650 square feet at $1,660 per month. In
addition, the Company leases 300 square feet in California at $2,700 per month.
The Company believes that its facilities are sufficient to meet its current
needs; however, the Company anticipates that it will need additional space, and
it has allocated a portion of the proceeds of this Offering for the purpose of
acquiring additional space to satisfy future requirements. Management believes
that it has sufficient ability to renew its present leases related to these
facilities or obtain suitable replacement facilities. See 'Use of Proceeds.'
LEGAL PROCEEDINGS
The Company is not a party to any material litigation and is not aware of
any threatened litigation.
CONDITIONS IN ISRAEL
The following information is intended to advise prospective investors of
certain conditions in Israel that could affect the Company. See 'Risk
Factors -- Risks Associated with Operations in Israel.'
POLITICAL CONDITIONS
Since the establishment of the State of Israel in 1948, a state of
hostility has existed, varying as to degree, among Israel and various Arab
countries. A peace agreement was signed between Israel and Egypt in 1979 and
limited relations have been established. A peace treaty with the Hashemite
Kingdom of Jordan was signed in 1995 ending the state of war along Israel's
longest border.
Since December 1987, civil unrest has existed in the territories which came
under Israel's control in 1967. In April 1994, negotiations between Israel and
the Palestine Liberation Organization resulted in the signing of an interim
agreement to grant Palestinian Arabs limited autonomy in certain of the
territories administered by Israel. The interim agreement was followed by a
series of agreements and
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understandings expanding the areas subject to autonomous administration. No
prediction can be made as to whether a final resolution of the area's problems
will be achieved, as to the nature of any such resolution or whether the civil
unrest in the administered territories will continue and to what extent an
outbreak of hostilities could have a material adverse affect on Israel's
economic development or on the operations of the Company in the future.
All adult male permanent residents of Israel under the age of 51, unless
exempt, are obligated to perform up to 45 days of military reserve duty
annually. Additionally, all such residents are subject to being called to active
duty at any time under emergency circumstances. Many of the male employees of
the Company, including its executive officers who reside in Israel, are
currently obligated to perform annual reserve duty. While the Company and its
personnel have operated effectively under these requirements, no assessments can
be made as to the full impact on the Company's work force or business if
conditions should change and no prediction can be made as to the effect on the
Company of any expansion or reduction of these obligations.
Certain countries and companies participate in a boycott of companies and
others doing business in Israel, or with Israeli companies. The Company,
however, believes that the boycott will not have a material adverse impact on
the Company's business.
ECONOMIC CONDITIONS
Israel's economy has been subject to numerous de-stabilizing factors,
including a period of rampant inflation in the early to mid-1980s, low foreign
exchange reserves, fluctuations in world commodity prices, military conflicts
and civil unrest. For these and associated reasons, the Israeli Government has
intervened in sectors of the Israeli economy employing among other means fiscal
and monetary policies, import duties, foreign currency restrictions and control
of wages, prices and exchange rates, and has frequently reversed or modified its
policies in all these areas. The New Israeli Shekel ('NIS') is linked to a
weighted basket of major currencies, of which the dollar constitutes 50%.
Periodically, the central Bank of Israel resets the target exchange rate of the
NIS in relation to the currency basket and allows the actual exchange rate to
float within a range of 5% of the target rate.
Israel has recently experienced a wave of immigration from the former
Soviet Union and its satellite countries. Approximately 700,000 new immigrants
have arrived during the period from 1990 through the end of 1997. Although the
immigration from the former Soviet Union may benefit Israel and its economy in
the long term by providing highly educated, cost-competitive labor and by
stimulating economic growth, it has placed a strain on government services and
national resources. The Israeli government has found it necessary to raise
additional revenue and to dedicate substantial funds to support programs,
including housing, education and job training, designed to assist in the
absorption of new immigrants. No prediction can be made as to the policies that
will be adopted in the future or their effect on these and other government
spending programs.
TRADE AGREEMENTS
Israel is a member of the United Nations, the International Monetary Fund,
the International Bank for Reconstruction & Development and the International
Finance Corporation. Israel is also a signatory to the General Agreement on
Tariffs and Trade which provides for reciprocal lowering of trade barriers among
its members.
Israel became associated with the European Union by an agreement concluded
in 1975 which confers certain advantages with respect to Israeli exports to most
of the European countries and obliges Israel to lower its tariffs with respect
to imports from those countries over a number of years.
In 1985, Israel and the United States entered into an agreement to
establish a Free Trade Area, which has eliminated all tariff and certain
non-tariff trade between the two countries.
On January 1, 1993, an agreement between Israel and the European Free Trade
Association, which presently includes Austria, Norway, Finland, Sweden,
Switzerland, Iceland and Liechtenstein, established a free trade zone. Under the
agreement, certain agricultural goods and processed foods are exempt from custom
duties and duties on other goods have been reduced.
In addition, Israel recently entered into trade agreements with India and
China.
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MANAGEMENT
INFORMATION CONCERNING THE COMPANY'S BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
Marc D. Tokayer................. 41 Chairman of the Board, President, Treasurer and Director
Steven L. Barsh................. 33 Chief Executive Officer and Director Nominee
Baruch Sollish.................. 51 Vice President -- Research and Development, Chief Technology Officer,
Secretary and Director
Arik Shavit..................... 48 Vice President and Director
</TABLE>
- ------------
Marc D. Tokayer has been Chairman of the Board of Directors, President and
Treasurer of the Company since he founded the Company in July 1994 and also
served as Chief Executive Officer of the Company until July 6, 1998. From
September 1992 to July 1994, Mr. Tokayer worked as an independent consultant
primarily in the areas of business software applications. From October 1990 to
August 1992, Mr. Tokayer was employed by Yael Ltd., an Israeli software company,
where he managed the development of the Central Inventory Control System.
Steven L. Barsh joined the Company as Chief Executive Officer on July 6,
1998. He has been nominated as a director, which nomination will be voted on by
the stockholders at the Annual Meeting to be held on or about September 10,
1998. From April 1996 to January 1998, Mr. Barsh was a Vice President of MCI
Systemhouse, where he led a commercial software unit that developed and sold
products that enabled organizations to deliver complex software projects more
quickly. From 1987 to April 1996, Mr. Barsh served as President of SECA, Inc., a
software development and consulting company prior to its acquisition by MCI
Systemhouse.
Baruch Sollish, Ph.D. has been a Director of the Company since December
1994 and has served as Vice President -- Research and Development and Secretary
of the Company since September 1996. Dr. Sollish developed the core technology
that makes up the DiscGuard protection process. From June 1987 to December 1994,
Dr. Sollish founded and managed Peletronics Ltd., an Israeli software company,
engaged primarily in the field of smart card security and software design for
personnel administration, municipal tax authorities and billing procedures for
bank clearance centers. Dr. Sollish holds six United States patents in the
fields of electro-optics, ultrasound and electronics and has published and
lectured extensively.
Arik Shavit has been a Director and Vice President of the Company
overseeing business development since September 1996. From August 1994 to
September 1996, Mr. Shavit was a Manager of Business Development, Smart Card
Services at IBM Israel Ltd. From August 1990 to July 1994, Mr. Shavit managed
Silvaco (Israel) Ltd., an Israeli subsidiary of SILVACO International, Inc.
('Silvaco'), a California based software company which develops state-of-the-art
computer aided engineering (CAE) Software Applications and provided development,
marketing and support services. Mr. Shavit also served as Corporate
Vice-President and Director of Silvaco.
The Board is currently comprised of three Directors. In connection with the
Company's Annual Meeting to be held on or about September 10, 1998, upon
approval of the Company's stockholders, the By-laws of the Company will be
amended to allow the Board of Directors to increase the size of the Board. In
addition to the current directors of the Company, Mr. Barsh will be nominated as
a director and following the Annual Meeting, the Board will be expanded to seven
members, of which three will be independent. All directors hold office until the
next annual meeting of stockholders and the election and qualification of their
successors. Directors currently receive no cash compensation for serving on the
Board of Directors. In addition, the Underwriter has the right for a five-year
period to designate an
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observer to the Board who may attend all Board meetings and receive all notices
and other correspondence and communications sent to the Board. Officers are
elected annually by the Board of Directors and serve at the discretion of the
Board.
Pursuant to the Option Plan, the Board appointed a Stock Option Committee
which administers the Option Plan. See 'Executive Compensation Employee Benefit
Plans.'
Upon the election of the new Board of Directors at the Annual Meeting to be
held on or about September 10, 1998, the Board of Directors will establish an
audit committee (the 'Audit Committee'). The Audit Committee will be established
to make recommendations concerning the engagement of independent public
accountants, review with the independent public accountants the plans and
results of the audit engagement, approve professional services provided by the
independent public accountants, review the independence of the independent
public accountants, consider the range of audit and non-audit fees and review
the adequacy of the Company's internal accounting controls.
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned by the Company's
Chairman of the Board and President, and the other two most highly compensated
executive officers of the Company whose total annual salaries and bonuses
exceeded $100,000 for the year ended December 31, 1997 (the 'Named Executive
Officers'):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)
- ----------------------------------------------- ---- --------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Marc D. Tokayer ............................... 1997 $ 73,850 $ 7,647 $26,307(1) --
Chairman and President 1996 $ 66,686 $ 12,876 $19,278 --
1995 $ 74,939 $ -- $15,729 --
Baruch Sollish ................................ 1997 $ 99,931 $ 50,000(2) $24,875(1) --
Vice-President -- Research and Development 1996 $ 69,517 $ -- $14,037 --
1995 $ 50,388 $ -- $ 9,920 --
Arik Shavit ................................... 1997 $ 102,931 $ -- $31,085(1) 217,437(3)
Vice-President 1996 $ 33,441 $ -- $13,457 --
1995 $ -- $ -- $-- --
</TABLE>
- ------------
(1) Includes contributions to insurance premiums, car allowance and car
expenses.
(2) In consideration of Dr. Sollish's waiver of incentive bonus payments due to
him under his employment agreement based on the Company's revenues of
certain products, Dr. Sollish received a one-time bonus payment of $50,000.
See 'Employment Agreements.'
(3) Pursuant to his employment agreement, Mr. Shavit was issued options to
purchase an aggregate of 217,473 shares of Common Stock vesting over four
years and expiring on September 2006. The options are exercisable at $.01
per option. See ' Employment Agreements' and 'Certain Transactions.'
For information concerning the compensation of Steven L. Barsh, Chief
Executive Officer, see 'Employment Agreements.'
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OPTIONS GRANTED DURING YEAR ENDED DECEMBER 31, 1997
OPTION GRANTS IN 1997
The following table sets forth certain information concerning the
individual option grants during the year ended December 31, 1997, to each of the
Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENTAGE OF TOTAL
UNDERLYING OPTIONS GRANTED
OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR PER SHARE DATE
- ------------------------------------------- ---------- ------------------- -------------- ----------
<S> <C> <C> <C> <C>
Arik Shavit................................ 217,473 55.3% $.01 9/8/2006
</TABLE>
AGGREGATED OPTION AND WARRANT EXERCISES IN 1997 AND YEAR END OPTION VALUES
The following table provides certain information regarding stock option
ownership and exercises by the Named Executive Officers, as well as the number
and assumed value of exercisable options held by those persons at December 31,
1997:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1997 AT DECEMBER 31, 1997
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------------ ----------------------------- --------------------------
<S> <C> <C>
Arik Shavit(1).................................. 72,491/144,982 $420,448/$840,896
</TABLE>
- ------------
(1) See 'Employment Agreements' for a discussion of such options.
EMPLOYMENT AGREEMENTS
TTR Ltd. entered into an employment agreement with Marc Tokayer, pursuant
to which Mr. Tokayer is employed as the President and General Manager for a term
of three years commencing in August 1994, which term is automatically renewable
unless one of the parties' decides otherwise. Mr. Tokayer currently receives an
annual salary of $74,232, subject to adjustment pursuant to the employment
agreement. If Mr. Tokayer is terminated without cause, as defined in the
agreement, then he shall be entitled to continue to receive his salary and
benefits for an additional 12 months subject to certain limitations. Mr.
Tokayer's agreement contains standard confidentiality and noncompete provisions
that prohibit him from competing with the Company or soliciting its employees
for one year following the termination of his employment.
On July 6, 1998, pursuant to an employment agreement Steven L. Barsh
commenced employment with the Company as its Chief Executive Officer. The
agreement is for a term of eighteen months and is automatically renewable for
additional periods of one year each, unless terminated in accordance with the
provisions of the agreement. The Company will pay to Mr. Barsh an annual salary
of $210,000 and pursuant to the Option Plan, the Company issued to him 250,000
stock options that will vest equally over a five-year period, and have an
exercise price of $2 15/16 per share. The options are subject to acceleration
upon the Company meeting certain performance objectives which the parties will
agree upon. If the Company terminates Mr. Barsh's employment other than for
cause or Mr. Barsh terminates the agreement for good reason, as defined in the
employment agreement, then Mr. Barsh will receive a lump sum equal to one year's
salary plus benefits for one year. If such termination takes place within the
first year of Mr. Barsh's employment agreement, then Mr. Barsh will receive
an amount equal to six month's salary plus benefits for one year. Mr. Barsh's
agreement contains standard confidentiality and non-compete provisions that
prohibit him from competing with the Company or soliciting its employees for
one year following the termination of his employment with the Company.
TTR Ltd. entered into an employment agreement with Dr. Baruch Sollish,
pursuant to which Dr. Sollish is employed as the Vice President -- Research and
Development for a term of one year commencing in December 1995 and renewable for
additional one year periods. The agreement has been amended to provide for an
additional 3 year term terminating in July 2001. Dr. Sollish currently receives
an annual salary of $109,560. In March 1997, in consideration of Dr. Sollish's
waiver of incentive bonus
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payments due to him under the agreement based on the Company's revenues from
certain products, Dr. Sollish received a one-time bonus payment of $50,000. Dr.
Sollish's agreement contains standard confidentiality and non-compete provisions
that prohibit him from competing with the Company for a period of one year, or
soliciting the Company's employees for a period of six months, following the
termination of his employment with the Company.
TTR Ltd. entered into an employment agreement with Arik Shavit, pursuant to
which Mr. Shavit is employed as the Chief Executive Officer for a term of three
years commencing in September 1996. Mr. Shavit currently receives an annual
salary of $110,628, subject to adjustment pursuant to the employment agreement
Mr. Shavit was issued options to purchase an aggregate of 217,473 shares of
Common Stock. The options are exercisable at $.01 per share until September
2006, subject to a four-year vesting schedule, pursuant to which the first
72,491 options vested in September 1997 and 48,328 will vest in September 1998,
and 48,327 will vest in each of September 1999 and September 2000. See 'Certain
Transactions.' Mr. Shavit's agreement contains standard confidentiality and
non-compete provisions that prohibit him from competing with the Company or
soliciting its employees for one year following the termination of his
employment.
EMPLOYEE BENEFIT PLANS
THE OPTION PLAN
The Option Plan provides for the grant to qualified employees (including
officers, and directors) and advisors of the Company options to purchase shares
of Common Stock. A total of 450,000 shares of Common Stock have been reserved
for issuance upon exercise of stock options granted under the Option Plan
although the shareholders of the Company will vote on the increase in shares of
Common Stock reserved under the Option Plan from 450,000 to 580,000 at the
Annual Meeting to be held on or about September 10, 1998. The Option Plan is
administered by a Stock Option Committee (the 'Committee'). The Committee
consists of the Chairman of the Company; however, the Board intends to expand
the Committee to include three outside Directors (upon the election of the new
Board of Directors at the Company's Annual Meeting). The Committee has complete
discretion to select the optionee and to establish the terms and conditions of
each option, subject to the provisions of the Option Plan. Options granted under
the Option Plan may be non-qualified stock options or 'incentive stock options'
as defined in Section 422 of the Internal Revenue Code ('Incentive Options') but
in any case the exercise price of options granted may not be less than 100% of
the fair market value of the Common Stock as of the date of grant (110% of the
fair market value if the grant is an Incentive Option to an employee who owns
more than 10% of the outstanding Common Stock). Options may not be exercised
more than 10 years after the grant (five years if the grant is an Incentive
Option to any employee who owns more than 10% of the outstanding Common Stock).
Options granted under the Option Plan are not transferable and may be exercised
only by the respective grantees during their lifetimes or by their heirs,
executors or administrators in the event of death. Under the Option Plan, shares
subject to canceled or terminated options are reserved for subsequently granted
options. The number of options outstanding and the exercise price thereof are
subject to adjustment in the case of certain transactions such as mergers,
recapitalizations, stock splits or stock dividends. On July 21, 1998, the
Company had outstanding options to purchase 426,100 shares of the Company's
Common Stock under the Option Plan.
DIRECTORS PLAN
At the Company's Annual Meeting to be held on or about September 10, 1998,
the shareholders will vote on the establishment of an option plan for
independent, non-employee directors of the Company (the 'Directors Plan'). The
Directors Plan will be administered by the entire Board of Directors. 25,000
shares of Common Stock will be reserved under the Directors Plan for issuance
upon the exercise of stock options. Options will be exercisable upon the date of
grant and will expire five years from the date of grant. Upon termination of any
director, the options will expire within 2 months of such termination. The
exercise price of the option will be the fair market value of the Common Stock
on the date of the grant of the option. The number of options and prices at
which they are exercisable
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are subject to adjustment in the case of certain transactions such as mergers,
recapitalizations, stock splits or stock dividends.
Pursuant to the Company's Certificate of Incorporation and By-laws,
officers and directors of the Company shall be indemnified by the Company to the
fullest extent allowed under Delaware law for claims brought against them in
their capacities as officers or directors. Indemnification is not allowed if the
officer or director does not act in good faith and in a manner reasonably
believed to be in the best interests of the Company, or if the officer or
director had no reasonable cause to believe his conduct was lawful. Accordingly,
indemnification may occur for liabilities arising under the Securities Act. The
Company and the Underwriter have agreed to indemnify each other (including
officers and directors) against certain liabilities, including liabilities under
the Securities Act. See 'Underwriting.' Insofar as indemnification for
liabilities arising under the Securities Act may be permitted for directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
34
<PAGE>
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus and as
adjusted to reflect the sale of 2,500,000 shares of Common Stock offered by the
Company hereby, certain information, with respect to the beneficial ownership of
Common Stock by (i) each person known by the Company to be the owner of more
than 5% of the outstanding Common Stock, (ii) each director, (iii) each of the
Named Executive Officers in the Summary Compensation Table, and (iv) all
directors and executive officers as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES
AMOUNT AND OWNED(1)
NATURE OF ----------------------
NAME AND ADDRESS BENEFICIAL BEFORE AFTER
OF BENEFICIAL OWNER OWNERSHIP OFFERING OFFERING
- --------------------------------------------------------------- ---------- -------- --------
<S> <C> <C> <C>
Marc D. Tokayer ............................................... 618,547(2) 16% 9.7%
c/o TTR Ltd.
2 Hanagar Street
Kfar Saba, Israel
Steven L. Barsh ............................................... --(3) * *
c/o TTR
1841 Broadway
New York, NY
Arik Shavit ................................................... 120,729(4) 3.1% 1.9%
c/o TTR Ltd.
2 Hanagar Street
Kfar Saba, Israel
Baruch Sollish ................................................ 100,000 2.5% 1.6%
c/o TTR Ltd.
2 Hanagar Street
Kfar Saba, Israel
All directors and officers as a group (4 persons).............. 839,276 21.7% 13.1%
</TABLE>
- ------------
* Less than 1%
(1) Based on 3,859,548 shares of Common Stock outstanding before the Offering
and 6,409,548 after the Offering. Unless otherwise noted, the Company
believes that all persons named in the table have sole voting and investment
power with respect to all shares of Common Stock beneficially owned by them.
A person is deemed to be a beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof upon the
exercise of warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days from the date hereof have been exercised. Does
not reflect 375,000 shares of Common Stock subject to the Underwriter's
Over-Allotment Option. If such Over-Allotment Option is exercised in full
the Company will sell an additional 187,500 and the Trust, as defined below,
and Dr. Sollish will sell 161,250 and 26,250, respectively, shares of Common
Stock.
(2) Includes 324,274 shares held by the Tokayer Family Trust (the 'Trust'). Mr.
Tokayer's wife is the trustee for the Trust and the income beneficiaries of
the Trust are Mr. Tokayer's children. Mr. Tokayer does not have or share any
voting power or investment power with respect to the securities held by the
Trust, and accordingly, disclaims beneficial ownership of all such
securities.
In June 1998, Mr. Tokayer and the Tokayer Family Trust waived their right to
750,000 shares of Common Stock which had been placed into escrow and which
had been subject to release upon the Company achieving certain revenue or
stock price levels. Such shares of Common Stock have been returned to
treasury and cancelled.
(3) Excludes 250,000 options to purchase Common Stock at $2 15/16 per share. The
options vest equally over a five-year period, subject to acceleration. See
'Executive Compensation -- Employment Agreements.'
(footnotes continued on next page)
35
<PAGE>
<PAGE>
(footnotes continued from previous page)
(4) Represents options to purchase Common Stock at $.01 per share, of which
72,491 vested in September 1997 and 48,328 will vest in September 1998.
Excludes 96,654 options, of which half will vest in September 1999 and
September 2000. See 'Executive Compensation -- Employment Agreements' and
'Certain Transactions.'
------------------------
By virtue of his ownership of Common Stock and position with the Company,
Marc D. Tokayer may be deemed a 'parent' and 'founder' of the Company as such
terms are defined under the Federal securities laws.
CERTAIN TRANSACTIONS
In February 1997, the Company issued to Arik Shavit, a director of the
Company, pursuant to his employment agreement with TTR Ltd. as its Chief
Executive Officer options to purchase up to 217,473 shares of the Company's
Common Stock. The options are exercisable at $.01 per share until September 2006
subject to a four-year vesting schedule. The first 72,491 options vested in
September 1997 and an additional 48,328 will vest in September 1998, and 48,327
will vest in each of 1999 and 2000. See 'Management -- Employment Agreements.'
For information concerning employment and consulting agreements with, and
compensation of, the Company's executive officers and directors, see
'Management' and 'Executive Compensation -- Employment Agreements' and
' -- Employee Benefit Plans.'
In June 1998, Mr. Tokayer and the Tokayer Family Trust waived their right
to 750,000 shares of Common Stock which had been placed into escrow and which
had been subject to release upon the Company achieving certain revenue or stock
price levels. Such shares of Common Stock have been returned to TTR's treasury
and cancelled. See 'Principal Stockholders.'
In July 1998, the Company issued to Steven Barsh, the Company's Chief
Executive Officer, 250,000 options to purchase Common Stock at $2 15/16 per
share. The options vest over a five-year period (subject to acceleration). See
'Executive Compensation -- Employment Agreements.'
The Company believes that the terms of each of the foregoing transactions
and those which will exist after the consummation of the Offering are no less
favorable to the Company than could have been obtained from non-affiliated third
parties, although no independent appraisals were obtained. In the future, all
transactions between the Company and its affiliates must be approved by the
Board of Directors of the Company, including the independent directors. See
'Management.'
36
<PAGE>
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 20,000,000 shares of Common Stock, $.001
par value per share, of which 3,859,548 shares were outstanding and held of
record as of July 28, 1998, by approximately 78 shareholders. Holders of shares
of Common Stock are entitled to one vote for each share held of record on all
matters to be voted on by stockholders. There are no preemptive, subscription,
conversion or redemption rights pertaining to the shares of Common Stock.
Holders of shares of Common Stock are entitled to receive dividends when, as and
if declared by the Board of Directors from funds legally available therefor and
to share ratably in the assets of the Company available upon liquidation,
dissolution or winding up. The holders of shares of Common Stock do not have
cumulative voting rights for the election of directors and, accordingly, the
holders of more than 50% of the shares of Common Stock are able to elect all
directors.
LIMITATIONS UPON TRANSACTIONS WITH 'INTERESTED STOCKHOLDERS'
Section 203 of the Delaware General Corporation Law prohibits a publicly
held Delaware corporation from engaging in a 'business combination' with an
'interested stockholder' for a period of three years after the date of the
transaction in which the person became an interested stockholder unless (i)
prior to the date of the business combination, the transaction is approved by
the board of directors of the corporation, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock, or (iii) on or after such date the business combination is
approved by the board of directors and by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. A 'business combination' includes mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An 'interested
stockholder' is a person who, together with affiliates and associates, owns (or
within three years, did own), 15% or more of the corporation's voting stock. The
restrictions of Section 203 do not apply, among other things, if a corporation,
by action of its stockholders, adopts an amendment to its certificate of
incorporation or By-laws expressly electing not to be governed by Section 203,
provided that, in addition to any other vote required by law, such amendment to
the certificate of incorporation or By-laws must be approved by the affirmative
vote of a majority of the shares entitled to vote. Moreover, an amendment so
adopted is not effective until twelve months after its adoption and does not
apply to any business combination between the corporation and any person who
became an interested stockholder of such corporation on or prior to such
adoption. The Company's Certificate of Incorporation and By-laws do not
currently contain any provisions electing not to be governed by Section 203 of
the Delaware General Corporation Law. The provisions of Section 203 of the
Delaware General Corporation Law may have a depressive effect on the market
price of the Common Stock because they could impede any merger, consolidating
takeover or other business combination involving the Company or discourage a
potential acquiror from making a tender offer or otherwise attempting to obtain
control of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is North American
Transfer Co., 147 W. Merrick Road, Freeport, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 6,409,548 shares of
Common Stock outstanding. After the Offering, an aggregate of 4,416,645 shares
of Common Stock, consisting of the 2,500,000 shares of Common Stock sold in the
Offering and 1,916,645 additional shares of Common Stock will be freely
tradeable without restriction or further registration under the Securities Act.
Certain securityholders have agreed for a period of nine months following
the date of this Offering, not to sell or otherwise dispose of any securities of
the Company (six months with respect to 654,000 shares of Common Stock, of which
33,000 shares are issuable upon exercise of warrants).
37
<PAGE>
<PAGE>
Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect prevailing market prices for the
Common Stock and could impair the Company's ability to raise capital through the
future sale of its equity securities. The number of outstanding shares of Common
Stock available for sale in the public market will be limited by the agreements
not to sell such shares described below.
All officers, directors and stockholders owning beneficially 5% or more of
the Common Stock have agreed not to directly or indirectly sell, grant an option
for the purchase or sale of, transfer, pledge, assign, hypothecate, distribute
or otherwise encumber or dispose of any shares of Common Stock or options,
rights, warrants or other securities convertible into, exchangeable or
exercisable for, or evidencing any right to purchase or subscribe for shares of
Common Stock or any beneficial interest therein for a period of nine months from
the date of this Prospectus.
There are currently outstanding warrants for 422,250 shares held by
non-employee and service providers which are exercisable at any time.
Additionally, there are currently outstanding stock options held by employees
and consultants to purchase an additional 643,573 shares of the Company. The
exercise of such warrants or options could adversely affect prevailing market
prices for the Common Stock and could impair the Company's ability to raise
capital through the future sale of its equity securities.
In general, under Rule 144, as currently in effect, a person, including an
'affiliate' of the Company as defined under the Securities Act, (or persons
whose shares are aggregated), who for at least one year has beneficially owned
restricted securities acquired directly or indirectly from the Company or an
affiliate of the Company in a private transaction, is entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of
1% of the total number of outstanding shares of the same class or the average
weekly trading volume during the four calendar weeks preceding the day notice is
given to the Securities and Exchange Commission with respect to such sale. A
person (or persons whose shares are aggregated) who is not an affiliate and has
not been an affiliate of the Company at any time during the three months
immediately preceding the sale and who has beneficially owned shares of Common
Stock for at least two years is entitled to sell such shares pursuant to
subparagraph (k) of Rule 144 without regard to the volume limitations described
above.
38
<PAGE>
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to Josephthal & Co. Inc. (the 'Underwriter'), and the
Underwriter has agreed to purchase from the Company, all of the Common Stock
being offered hereby.
The Common Stock is being sold on a firm commitment basis. The Underwriting
Agreement provides, however, that the obligations of the Underwriter are subject
to certain conditions precedent.
The Underwriter has advised the Company that it proposes initially to offer
the Common Stock to the public at the public offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less
concessions of not in excess of $ per share of the Common Stock, of which
amount a sum not in excess of $ per share of the Common Stock may in turn be
reallowed by such dealers to other dealers. After the Offering, the public
offering price, the concessions and the reallowances may be changed by the
Underwriter.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriter may be required to make in respect thereof. The Company
has agreed to pay the Underwriter an expense allowance equal to one percent (1%)
of the gross proceeds of the Offering, and a financial advisor's fee equal to
one percent (1%) of the gross proceeds of the Offering.
The Company and certain stockholders consisting of the Trust and Baruch
Sollish have granted to the Underwriter an option exercisable during the 45 day
period after the date of this Prospectus to purchase from the Company, at the
public offering price less underwriting discounts, up to an additional 375,000
shares of Common Stock for the sole purpose of covering over-allotments, if any.
The Underwriter may exercise such options only to cover over-allotments in the
sale of Common Stock that the Underwriter has agreed to purchase.
The Company has agreed that for five years beginning on ,
1998, the Underwriter shall have the right to designate one observer to the
Company's Board of Directors. No individual has been identified to date by the
Underwriter to be so designated.
In connection with the Offering, the Company has agreed to sell to the
Underwriter for nominal consideration, warrants to purchase from the Company
250,000 shares of Common Stock (the 'Underwriter's Warrants'). The Underwriter's
Warrants are initially exercisable at an exercise price of 120% of the public
offering price per share for a period of four years, commencing one year from
the date of this Prospectus. The Underwriter's Warrants contain provisions
providing for adjustment of the exercise price and the number and type of
securities issuable upon exercise of the Underwriter's Warrants upon the
occurrence of certain events. The Underwriter's Warrants grant to the holders
thereof certain demand and 'piggyback' registration rights under the Securities
Act for the securities issuable upon exercise thereof.
The offering price of the Common Stock was based on discussions between the
Underwriter and a committee of the Board of Directors of the Company. The
factors which entered into the determination of the offering price were the
demand for the Common Stock, as well as the market price for such shares, the
level of trading volume in the Common Stock, the general market for software
security companies, and market conditions in general.
The Company, its 5% or greater shareholders and the officers and directors
of the Company have agreed not to offer to sell, transfer, hypothecate or
otherwise encumber any beneficial interest in any shares of Common Stock
owned by them, directly or indirectly without the prior written consent
of the Underwriter for a period of nine months following the date of this
Prospectus.
The Company and the Underwriter also entered into a financial consulting
arrangement for the Underwriter to act as the Company's financial advisor. In
connection with such arrangement, on April 1, 1998, (i) the Company paid to the
Underwriter $50,000, (ii) issued to it 25,000 warrants exercisable for a period
of four years at the market price of the Common Stock as of April 1, 1998; and
(iii) agreed to pay to the Underwriter a fee of 5% of the exercise price of
certain warrants converted into Common Stock. On July 28, 1998, the holders of
1,080,000 warrants exercisable at $7.00 to $11.00 per share exchanged such
warrants for 432,000 shares of Common Stock and pursuant to the terms of the
agreement the Underwriter is entitled to a fee of $394,000 which amount has not
yet been paid.
The Company's Common Stock is traded in the over-the-counter market under
the symbol 'TTRE' and quoted on the OTC Electronic Bulletin Board, a
NASD-sponsored and operated inter-dealer automated quotation system for equity
securities not included in the Nasdaq SmallCap Market or
39
<PAGE>
<PAGE>
the Nasdaq National Market, and is also quoted in the NQB Pink Sheets published
by the National Quotation Bureau Incorporated. There can be no assurance that an
active public market for the Company's stock will continue. In connection with
this Offering, the Company will seek to list its Common Stock on the American
Stock Exchange. There can be no assurance that the market price of the Company's
Common Stock will not decline below its price today. In addition, no prediction
can be made as to the effect, if any, that market sales of Common Stock or the
availability of such shares for sale will have on the market prices prevailing
from time to time. Nevertheless, the possibility that substantial amounts of
shares of Common Stock may be sold in the public market may adversely affect
prevailing market prices for the Common Stock and could impair the Company's
ability to raise capital through the sale of its equity securities.
In connection with the Offering, the Underwriter and selling group members
and their respective affiliates may engage in transactions that stabilize,
maintain or otherwise affect the market price of the Common Stock. Such
transactions may include stabilization transactions effected in accordance with
Rule 104 of Regulation M, pursuant to which such persons may bid for or purchase
Common Stock for the purpose of stabilizing its market price. The Underwriter
also may create a short position for the account of the Underwriter by selling
more Common Stock in connection with the Offering than it is committed to
purchase from the Company, and in such case may purchase Common Stock in the
open market following completion of the Offering to cover all or a portion of
such short position. The Underwriter may also cover all or a portion of such
short position, up to 250,000 shares of Common Stock, by exercising the
Over-Allotment Option. In addition, the Underwriter may impose 'penalty bids'
whereby it may reclaim from others (or dealers participating in the Offering)
for its account the selling concession with respect to Common Stock that is
distributed in the Offering but subsequently purchased for its account in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Common Stock at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph is required, and, if they are undertaken, they may be
discontinued at any time.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement which are filed as exhibits to the Registration
Statement.
CONCURRENT OFFERING
Concurrently with this Offering, 621,000 shares of Common Stock, plus an
additional 372,250 shares of Common Stock issuable upon the exercise of 372,250
warrants, have been registered under the Securities Act for resale on behalf of
certain securityholders. The securityholders have agreed not to sell such
securities for a period of nine months after the date of this Prospectus (six
months with respect to 654,000 shares of Common Stock, of which 33,000 are
issuable upon exercise of warrants).
The Company will not receive any proceeds from the sales of shares by such
securityholders. Sales of the securityholders' shares, or even the potential of
such sales, may have an adverse effect on the market price of the Company's
Common Stock.
LEGAL MATTERS
The legality of the securities offered by this Prospectus will be passed
upon for the Company by Baer Marks & Upham LLP, New York, New York. In addition,
certain other matters in connection with this Offering with respect to Israeli
law will be passed upon for the Company by Aboudi & Brounstein, Tel Aviv,
Israel. Certain legal matters will be passed upon for the Underwriter by
Greenberg Traurig, P.A., Miami, Florida.
EXPERTS
The consolidated financial statements of TTR Inc. for the year ended
December 31, 1997, included in this Prospectus have been included in reliance
upon the report of BDO Almagor & Co., independent certified public accountants,
given upon the authority of said firm as experts in accounting and auditing. The
consolidated financial statements of TTR Inc. for the fiscal year ended December
31, 1996, included
40
<PAGE>
<PAGE>
in the Prospectus have been included in reliance upon the report of Schneider,
Ehrlich & Wengrover LLP, independent auditors, given upon the authority of said
firm as experts in accounting and auditing. The financial statements of TTR
Technologies Ltd. for the fiscal year ended December 31, 1996, included in this
Prospectus in the consolidated financial statements of TTR, Inc. have been
included in reliance upon the report of BDO Almagor & Co., independent certified
public accountants, given upon the authority of said firm as experts in
accounting and auditing.
AUDITOR CHANGE
On June 30, 1998, the Company appointed BDO Almagor & Co. ('Almagor') to
re-issue a report on the Company's consolidated financial statements for the
year ended December 31, 1997, and stockholders will be voting at the Annual
Meeting to be held on or about September 10, 1998 to ratify the Board's
selection of Almagor as the Company's independent accountants for the fiscal
year ending December 31, 1998. On July 3, 1998, Schneider Ehrlich & Wengrover
LLP ('SE&W') resigned as independent auditors of the Company by mutual
agreement.
During the fiscal years ended December 31, 1997 and 1996 and the period
between January 1, 1998, up to and including the day of its resignation, there
were no disagreements between the Company and SE&W on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures which if not resolved to SE&W's satisfaction would have caused them
to make reference in connection with their opinion to the subject matter of the
disagreement. SE&W's report on the financial statements of the Company for such
fiscal years indicated that substantial doubt exists regarding the Company's
ability to continue as a going concern.
The audit of Almagor as the Company's independent accountants did not
result in any changes to such financial statements, and the related audit report
of Almagor also states that substantial doubt exists regarding the Company's
ability to continue as a going concern.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission under the
Securities Act a Registration Statement on Form SB-2 (the 'Registration
Statement'), of which this Prospectus is a part with respect to the shares
offered hereby (via the Electronic Data Gathering Analysis and Retrieval system
('EDGAR')) and may be found on the Securities and Exchange Commission's website
at http://www.sec.gov. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain items of which are contained in exhibits and
schedules as permitted by the rules and regulations of the Securities and
Exchange Commission. Statements made in this Prospectus as to the contents of
any contract, agreement or other document referred to herein are not necessarily
complete. With respect to each contract, agreement or other document filed as an
exhibit to the Registration Statement or in a filing incorporated by reference
herein, reference is made to the exhibit for a more complete description of the
matters involved, and each statement shall be deemed qualified in its entirety
by this reference.
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files certain periodic reports, proxy
statements and other information with the Securities and Exchange Commission.
Reports and other information filed by the Company may be inspected and copied
at the public reference facilities maintained by the Securities and Exchange
Commission at its principal offices located at Judiciary Plaza, 450 Fifth
Avenue, N.W., Room 1024, Washington, D.C. 20549, and at the following regional
offices of the Securities and Exchange commission: Seven World Trade Center,
13th Floor, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60601. Copies of such material may be obtained by mail from
the Public Reference Section of the Securities and Exchange Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Electronic
filings made via EDGAR are publicly available through the Commission's website
referenced above. In addition, material filed by the Company can be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
41
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
--------------
<S> <C>
Report of Independent Public Accountants............................................................ F-2
Independent Auditors' Report........................................................................ F-3
Report of Independent Public Accountants............................................................ F-4
Consolidated Balance Sheets......................................................................... F-5
Consolidated Statements of Operations............................................................... F-6
Consolidated Statements of Comprehensive Loss....................................................... F-7
Consolidated Statement of Stockholders' Equity (Deficit)............................................ F-8
Consolidated Statements of Cash Flows............................................................... F-9 - F-10
Notes to Consolidated Financial Statements.......................................................... F-11 - F-23
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of TTR Inc.
We have audited the accompanying consolidated balance sheet of TTR Inc. (a
development-stage company) and its subsidiary at December 31, 1997 and the
related statements of operations, shareholders' equity and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements, referred to above,
present fairly, in all material respects, the consolidated financial position of
TTR Inc. (a development-stage company) and its subsidiary at December 31, 1997
and the consolidated results of their operations and their cash flows for the
year then ended, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
3 to the consolidated financial statements, the Company has incurred recurring
losses since its inception and has an accumulated deficit at December 31, 1997
of $6,179,571. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans with regard to these
matters are also described in Note 3. The accompanying financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
BDO ALMAGOR & CO.
Certified Public Accountants
Ramat-Gan, Israel,
July 12, 1998
F-2
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of TTR INC.
Kfar Saba, Israel
We have audited the accompanying consolidated balance sheet of TTR Inc. and
its Subsidiary (A Development Stage Company) as of December 31, 1996, and the
related consolidated statements of operations, comprehensive loss, cash flows,
and stockholders' deficit for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the financial statements of TTR
Technologies, Ltd., a wholly owned subsidiary, which statements reflect total
assets of $692,102 as of December 31, 1996, and net losses of $790,536 for the
year then ended. Those statements were audited by other auditors whose reports
have been furnished to us, and our opinion, insofar as it relates to the amounts
included for TTR Technologies Ltd. is based solely on the reports of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of TTR Inc. and its Subsidiary as of
December 31, 1996 and the results of their operations and their cash flows for
the year then ended in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
3 to the consolidated financial statements, the Company has incurred recurring
losses since its inception in 1994, and has an accumulated deficit at December
31, 1996 of $2,059,959. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 3. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
SCHNEIDER EHRLICH & WENGROVER LLP
Woodbury, New York
April 15, 1997
F-3
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
T.T.R. TECHNOLOGIES LTD.
(A Development Stage Company)
We have audited the accompanying balance sheet of T.T.R. Technologies Ltd.
(a development stage company) ('the Company') as of December 31, 1996 and the
related statements of operations, changes in shareholders' deficiency and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards, including those prescribed by the Israeli Auditor's Regulations
(Auditor's Mode of Performance), 1973. Such auditing standards are substantially
identical to generally accepted auditing standards in the United States. Those
standards requires that we plan and perform the audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining on a test basis, evidence supporting the amounts and
disclosure in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the above financial statements present fairly in all
material respects, the financial position of the Company (a development stage
company) as of December 31, 1996 and the results of its operations, changes in
shareholders' deficiency, and cash flows for the year then ended in conformity
with accounting principles generally accepted in Israel and in the United
States. As applicable to these financial statements, such accounting principles
are substantially identical.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and has a net working capital deficiency and shareholders' deficiency that raise
substantial doubt about its ability to continue as a going concern. The
Company's plans are also referred to in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
The financial statements have been translated into dollars for the purpose
of their inclusion in the financial statements of T.T.R. Inc.
BDO ALMAGOR & CO.
Certified Public Accountants
Ramat-Gan, Israel,
April 13, 1997
F-4
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents...................................................... $ 450,040 $ 94,820
Stock subscription receivable.................................................. 100,000 --
Other current assets........................................................... 131,538 142,092
------------ -----------
Total current assets...................................................... 681,578 236,912
Property and equipment -- net....................................................... 416,045 378,805
Due from officer.................................................................... 16,000 16,000
Other assets........................................................................ 75,004 59,620
------------ -----------
Total assets.............................................................. $ 1,188,627 $ 691,337
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current liabilities
Current portion of long-term debt.............................................. $ 5,564 $ 2,387
Accounts payable............................................................... 87,363 349,616
Accrued expenses............................................................... 139,972 159,675
------------ -----------
Total current liabilities................................................. 232,899 511,678
Long-term debt, less current portion................................................ 14,804 11,597
Accrued severance pay............................................................... 31,195 46,317
------------ -----------
Total liabilities......................................................... 278,898 569,592
Common stock issued with guaranteed selling price -- $.001 par value 15,000 shares
issued and outstanding............................................................ 232,500 --
------------ -----------
COMMITMENTS AND CONTINGENCIES
Stockholders' equity
Common stock, $.001 par value; 20,000,000 shares authorized, 4,271,548 and
4,052,548 issued and outstanding, respectively, including 1,000,000 and
750,000 shares, respectively, placed in escrow................................ 4,272 4,053
Common stock subscribed, $.001 par value; 16,000 shares at December 31, 1997... 100,000 --
Additional paid-in capital..................................................... 8,117,275 8,294,650
Other accumulated comprehensive income......................................... 38,029 34,977
Deficit accumulated during the development stage............................... (6,179,571 ) (7,030,535)
Less: deferred compensation.................................................... (1,402,776 ) (1,181,400)
------------ -----------
Total stockholders' equity................................................ 677,229 121,745
------------ -----------
Total liabilities and stockholders' equity................................ $ 1,188,627 $ 691,337
------------ -----------
------------ -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FROM
INCEPTION
YEAR ENDED (JULY 14, 1994) FROM
DECEMBER 31, TO THREE MONTHS ENDED MARCH INCEPTION
-------------------------- DECEMBER 31, 31, (JULY 14, 1994)
1996 1997 1997 -------------------------- TO
----------- ----------- ---------------- 1997 1998 MARCH 31,
----------- ----------- 1998
(UNAUDITED) (UNAUDITED) ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenue.......................... $ -- $ -- $ -- $ -- $ -- $ --
Expenses
Research and development.... 344,305 967,155 1,587,708 270,979 188,692 1,776,400
Sales and marketing......... 169,840 1,421,496 1,855,294 326,438 251,700 2,106,994
General and
administrative............ 382,634 1,477,085 2,121,821 347,687 404,392 2,526,213
----------- ----------- ---------------- ----------- ----------- ---------------
Total expenses......... 896,779 3,865,736 5,564,823 945,104 844,784 6,409,607
----------- ----------- ---------------- ----------- ----------- ---------------
Operating loss................... (896,779) (3,865,736) (5,564,823) (945,104) (844,784) (6,409,607)
----------- ----------- ---------------- ----------- ----------- ---------------
Other (income) expense
Legal settlement............ -- 232,500 232,500 232,500 -- 232,500
Loss on investment.......... -- -- 17,000 -- -- 17,000
Other income................ -- (50,000) (50,000) -- -- (50,000)
Interest income............. -- (42,069) (54,893) (10,182) (144) (55,037)
Interest expense............ 224,432 113,445 470,141 97,063 6,324 476,465
----------- ----------- ---------------- ----------- ----------- ---------------
Total other (income)
expenses............. 224,432 253,876 614,748 319,381 6,180 620,928
----------- ----------- ---------------- ----------- ----------- ---------------
Net loss......................... $(1,121,211) $(4,119,612) $ (6,179,571) $(1,264,485) $(850,964) $(7,030,535)
----------- ----------- ---------------- ----------- ----------- ---------------
----------- ----------- ---------------- ----------- ----------- ---------------
Per share data:
Basic and diluted........... $(0.62) $(1.35) $(0.51) $(0.26)
------- ------ ------ ------
------- ------ ------ ------
Weighted average number of common
shares used in basic and
diluted loss per share......... 1,801,366 3,054,519 2,496,476 3,293,481
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------- ---------------------------
1996 1997 1997 1998
----------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net loss............................................... $(1,121,211) $(4,119,612) $(1,264,485) $(850,964)
Other comprehensive income (loss)
Foreign currency translation adjustment........... 35,044 (19,667) (3,427) (3,052)
----------- ----------- ----------- -----------
Comprehensive loss..................................... $(1,086,167) $(4,139,279) $(1,267,912) $(854,016)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK OTHER ACCUMULATED
COMMON STOCK SUBSCRIBED ADDITIONAL ACCUMULATED DURING
----------------- ----------------- PAID-IN COMPREHENSIVE DEVELOPMENT DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME STAGE COMPENSATION TOTAL
--------- ------ ------- -------- ---------- ------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at July 14, 1994
(date of inception)......... -- $-- -- $ -- $ -- $ -- $ -- $ -- $ --
Issuances of common stock, par
value $.001
Services rendered at $.001
per share............... 1,200,000 1,200 -- -- -- -- -- -- 1,200
Cash at $.0208 per
share................... 1,200,000 1,200 -- -- 23,800 -- -- -- 25,000
Net loss...................... -- -- -- -- -- -- (42,085) -- (42,085)
--------- ------ ------- -------- ---------- ------------- ----------- ------------ ----------
Balances at December 31,
1994........................ 2,400,000 2,400 -- -- 23,800 -- (42,085) -- (15,885)
Common stock contributed...... (561,453) (561) -- -- 561 -- -- -- --
Issuances of common stock, par
value $.001
Services rendered at $.05
per share............... 361,453 361 -- -- 17,712 -- -- -- 18,073
Issuance of common stock
purchase warrants
Services rendered at $.04
per warrant............. -- -- -- -- 600 -- -- -- 600
Foreign currency translation
adjustment.................. 22,652 22,652
Net loss...................... -- -- -- -- -- -- (896,663) -- (896,663)
--------- ------ ------- -------- ---------- ------------- ----------- ------------ ----------
Balances at December 31,
1995........................ 2,200,000 2,200 -- -- 42,673 22,652 (938,748) -- (871,223)
Issuances of common stock, par
value $.001
Cash at $.307 per share... 650,000 650 -- -- 199,350 -- -- -- 200,000
Cash at $.50 per share
(net of stock offering
costs of $11,467)....... 150,000 150 -- -- 63,383 -- -- -- 63,533
Cash at $2.00 per share... 50,000 50 -- -- 99,950 -- -- -- 100,000
Foreign currency translation
adjustment.................. -- -- -- -- -- 35,044 -- -- 35,044
Net loss...................... -- -- -- -- -- -- (1,121,211) -- (1,121,211)
--------- ------ ------- -------- ---------- ------------- ----------- ------------ ----------
Balances at December 31,
1996........................ 3,050,000 3,050 -- -- 405,356 57,696 (2,059,959) -- (1,593,857)
Common stock contributed...... (135,000) (135) -- -- 135 -- -- -- --
Issuances of common stock, par
value $.001
Exercise of options at
$.01 per share.......... 374,548 375 -- -- 3,370 -- -- -- 3,745
Cash at $7.00 per share
(net of stock offering
costs of $1,318,652).... 860,000 860 -- -- 4,700,488 -- -- -- 4,701,348
Services rendered at
$10.00 per share........ 55,000 55 -- -- 549,945 -- -- (500,000) 50,000
Services rendered at
$14.875 per share....... 19,000 19 -- -- 282,606 -- -- -- 282,625
Cash at $6.25 per share... 48,000 48 -- -- 299,952 -- -- -- 300,000
Common stock subscriptions.... -- -- 16,000 100,000 -- -- -- -- 100,000
Sale of Underwriters
warrants.................... -- -- -- -- 80 -- -- -- 80
Stock options and warrants
granted..................... -- -- -- -- 1,875,343 -- -- (1,875,343) --
Amortization of deferred
compensation................ -- -- -- -- -- -- -- 972,567 972,567
Foreign currency translation
adjustment.................. -- -- -- -- -- (19,667) -- -- (19,667)
Net loss...................... -- -- -- -- -- -- (4,119,612) -- (4,119,612)
--------- ------ ------- -------- ---------- ------------- ----------- ------------ ----------
Balances at December 31,
1997........................ 4,271,548 4,272 16,000 100,000 8,117,275 38,029 (6,179,571) (1,402,776) 677,229
Common stock subscriptions
(unaudited)................. 16,000 16 (16,000) (100,000) 99,984 -- -- -- --
Common stock forfeited
(unaudited)................. (250,000) (250) -- -- 250 -- -- -- --
Transfer of temporary equity
to permanent capital
(unaudited)................. 15,000 15 -- -- 77,141 -- -- -- 77,156
Amortization of deferred
compensation (unaudited).... -- -- -- -- -- -- -- 221,376 221,376
Foreign currency translation
adjustment (unaudited)...... -- -- -- -- -- (3,052) -- -- (3,052)
Net loss (unaudited).......... -- -- -- -- -- -- (850,964) -- (850,964)
--------- ------ ------- -------- ---------- ------------- ----------- ------------ ----------
Balances at March 31, 1998
(unaudited)................. 4,052,548 $4,053 -- $ -- $8,294,650 $ 34,977 $(7,030,535) $(1,181,400) $ 121,745
--------- ------ ------- -------- ---------- ------------- ----------- ------------ ----------
--------- ------ ------- -------- ---------- ------------- ----------- ------------ ----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-8
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FROM
INCEPTION
YEAR ENDED (JULY 14, 1994)
DECEMBER 31, TO
-------------------------- DECEMBER 31,
1996 1997 1997
----------- ----------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss....................................................... $(1,121,211) $(4,119,612) $(6,179,571)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization............................. 155,273 184,290 440,331
Translation gain.......................................... (967) -- (1,528)
Amortization of deferred compensation..................... -- 972,567 972,567
Stock and warrants issued for services and legal
settlement.............................................. -- 565,125 583,798
Increase (decrease) in cash attributable to changes in
assets and liabilities
Accounts receivable.................................. 1,310 478 163
Other current assets................................. (105,222) (7,204) (125,918)
Other assets......................................... -- (72,700) (72,700)
Accounts payable..................................... 137,825 (72,401) 105,768
Accrued expenses..................................... 49,001 22,297 123,786
Accrued severance.................................... (4,958) 26,299 44,561
Interest payable..................................... 138,485 (234,508) --
----------- ----------- ---------------
Net cash used by operating activities..................... (750,464) (2,735,369) (4,108,743)
----------- ----------- ---------------
Cash flows from investing activities
Purchases of property and equipment............................ (240,836) (175,507) (611,400)
Increase in organization costs................................. -- -- (7,680)
----------- ----------- ---------------
Net cash used by investing activities..................... (240,836) (175,507) (619,080)
----------- ----------- ---------------
Cash flows from financing activities
Proceeds from issuance of common stock......................... 363,533 5,520,837 5,910,570
Loans to officer............................................... -- 10,000 (16,000)
Stock offering costs........................................... (166,099) (309,565) (475,664)
Deferred financing costs....................................... (89,980) (19,000) (262,411)
Proceeds from short-term borrowings............................ 849,602 200,000 1,049,602
Proceeds from long-term debt................................... 25,096 -- 1,114,137
Repayment of short-term borrowings............................. -- (1,049,602) (1,049,602)
Repayments of long-term debt................................... (14,403) (1,053,455) (1,089,471)
----------- ----------- ---------------
Net cash provided by financing activities................. 967,749 3,299,215 5,181,161
----------- ----------- ---------------
Effect of exchange rate changes on cash............................. (659) (1,955) (3,298)
----------- ----------- ---------------
Increase (decrease) in cash and cash equivalents.................... (24,210) 386,384 450,040
Cash and cash equivalents at beginning of period.................... 87,866 63,656 --
----------- ----------- ---------------
Cash and cash equivalents at end of period.......................... $ 63,656 $ 450,040 $ 450,040
----------- ----------- ---------------
----------- ----------- ---------------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest.................................................. $ 15,788 $ 345,258 $ 379,502
----------- ----------- ---------------
----------- ----------- ---------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-9
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
FROM
INCEPTION
THREE MONTHS ENDED (JULY 14, 1994)
MARCH 31, TO
-------------------------- MARCH 31,
1997 1998 1998
----------- ----------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities
Net loss....................................................... $(1,264,485) $ (850,964) $(7,030,535)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization............................. 100,970 37,795 478,126
Translation gain.......................................... (58,894) -- (1,528)
Amortization of deferred compensation..................... 249,712 221,376 1,193,943
Stock and warrants issued for services and legal
settlement.............................................. 50,000 -- 583,798
Payment of common stock issued with guaranteed selling
price................................................... -- (55,344) (55,344)
Increase (decrease) in cash attributable to changes in
assets and liabilities
Accounts receivable.................................. 72 -- 163
Other current assets................................. 2,090 (12,762) (138,680)
Other assets......................................... (114,000) 15,000 (57,700)
Accounts payable..................................... (101,881) 162,684 268,452
Accrued expenses..................................... 259,326 21,940 145,726
Accrued severance.................................... 16,839 15,703 60,264
Interest payable..................................... (234,508) -- --
----------- ----------- ---------------
Net cash used by operating activities..................... (1,094,759) (444,572) (4,553,315)
----------- ----------- ---------------
Cash flows from investing activities
Purchases of property and equipment............................ (73,550) (6,767) (618,167)
Increase in organization costs................................. -- -- (7,680)
----------- ----------- ---------------
Net cash used by investing activities..................... (73,550) (6,767) (625,847)
----------- ----------- ---------------
Cash flows from financing activities
Proceeds from issuance of common stock......................... 5,220,837 100,000 6,010,570
Loans to officer............................................... -- -- (16,000)
Stock offering costs........................................... (209,565) -- (475,664)
Deferred financing costs....................................... (19,000) -- (262,411)
Proceeds from short-term borrowings............................ 200,000 -- 1,049,602
Proceeds from long-term debt................................... -- -- 1,114,137
Repayment of short-term borrowings............................. (1,049,602) -- (1,049,602)
Repayments of long-term debt................................... (1,046,434) (3,506) (1,092,977)
----------- ----------- ---------------
Net cash provided by financing activities................. 3,096,236 96,494 5,277,655
----------- ----------- ---------------
Effect of exchange rate changes on cash............................. (1,440) (375) (3,673)
----------- ----------- ---------------
Increase (decrease) in cash and cash equivalents.................... 1,926,487 (355,220) 94,820
Cash and cash equivalents at beginning of period.................... 63,656 450,040 --
----------- ----------- ---------------
Cash and cash equivalents at end of period.......................... $ 1,990,143 $ 94,820 $ 94,820
----------- ----------- ---------------
----------- ----------- ---------------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest.................................................. $ 316,116 $ 4,519 $ 384,021
----------- ----------- ---------------
----------- ----------- ---------------
Transfer of common stock issued with guaranteed selling price
to permanent capital......................................... $ 77,156
-----------
-----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-10
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
NOTE 1 -- DESCRIPTION OF BUSINESS
TTR Inc. (the 'Company') was incorporated on July 14, 1994 under the laws
of the State of Delaware. TTR Technologies Ltd., ('TTR Ltd.') was formed under
the laws of the State of Israel on December 5, 1994 as a wholly owned research
and development subsidiary of the Company.
The Company is engaged in the design, development and commercialization of
proprietary software security products.
The Company is considered to be in the development stage and has earned no
revenues to date. Business activities to date have focused on product and
marketing research, product development, and raising capital. The Company's
primary product, DiscGuard'tm', based on its proprietary technology, became
commercially available in the first quarter of 1998.
The Company anticipates that it will continue to incur significant
operating costs and losses in connection with the development of its products
and increased marketing efforts and is subject to other risks affecting the
business of the Company. (See Note 3).
In February 1997 the Company closed on an initial public offering (IPO) in
which it sold 860,000 shares of its Common Stock at a price of $7.00 per share
and realized net proceeds of approximately $4.7 million after stock offering
costs (See Note 13).
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, TTR Ltd. All significant intercompany accounts
and transactions have been eliminated in consolidation.
USE OF ESTIMATES
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities and the reported revenues
and expenses. Actual results could vary from the estimates that were used.
REVENUE RECOGNITION
The American Institute of Certified Public Accountants recently issued
Statement of Position (SOP) 97-2, 'Software Revenue Recognition', which
supersedes SOP 91-1. SOP 97-2 provides guidance in recognizing revenue on
software transactions and is required for transactions entered into after
December 15, 1997.
The Company anticipates revenues from software transactions will be
recognized upon delivery and acceptance to the customer. Revenues from
maintenance and engineering services will be recognized over the term of the
respective contracts.
STOCK BASED COMPENSATION
Compensation expense arising from stock grants, and options and warrants
issued at exercise prices below the quoted market price of the underlying Common
Stock as of the grant date, is recognized over the vesting periods of the
related grants. Such stock-based compensation resulted in an aggregate charge to
operations of approximately $1,305,000, $299,700 and $221,300 for the year ended
December 31, 1997 and for the three months ended March 31, 1997 and 1998,
respectively.
F-11
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
FOREIGN CURRENCY TRANSLATIONS
The financial statements of TTR Ltd. have been translated into U.S. dollars
in accordance with Statement No. 52 of the Financial Accounting Standards Board
(FASB). Assets and liabilities have been translated at year-end (period-end)
exchange rates and statement of operations have been translated at average rates
prevailing during the year. The translation adjustments have been recorded as a
separate component of stockholders' equity (cumulative translation adjustment).
NET LOSS PER SHARE
The Company has adopted Statement of Financial Accounting Standards No.128
(SFAS 128), 'Earnings per Share,' which supersedes APB Opinion No. 15 (APB No.
15), 'Earnings per Share,' and which is effective for all periods ending after
December 15, 1997. SFAS 128 requires dual presentation of basic and diluted
earnings per share (EPS) for complex capital structures on the face of the
Statements of Operations. Basic EPS is computed by dividing net income (loss) by
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution from the exercise or conversion of other
securities into common stock. None of the stock options and warrants issued in
1997 and 1996 has been included in the net loss per share computation for the
years presented, because their inclusion would be anti-dilutive. Shares held in
escrow are not treated as outstanding during any period (See Note 13). Earnings
per share data for 1996 has been restated to conform with the provisions of SFAS
No. 128.
STATEMENT OF CASH FLOWS
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid debt instruments with an original maturity of three months or less
to be cash equivalents.
DEPRECIATION AND AMORTIZATION
Equipment, vehicles and leasehold improvements are stated at cost.
Equipment and vehicles are depreciated over the estimated useful lives of the
related assets, which range from three to seven years. Leasehold improvements
are amortized over the related lease term. Depreciation is computed on the
straight-line method.
RESEARCH AND DEVELOPMENT COSTS
Research and development expenditures are charged to operations as
incurred. Software development costs are required to be capitalized when a
product's technological feasibility has been established by completion of a
working model of the product and ending when a product is available for general
release to customers. To date, completion of a working model of the Company's
products and general release have substantially coincided. As a result, the
Company has not capitalized any software development costs since such costs have
not been significant.
INCOME TAXES
The Company accounts for its income taxes using the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109, 'Accounting
for Income Taxes' (SFAS No. 109), which requires the establishment of a deferred
tax asset or liability for the recognition of future deductible or taxable
amounts and operating loss carryforwards. Deferred tax expense or benefit is
recognized as a result of the changes in the assets and liabilities during the
year. Valuation allowances
F-12
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
are established when necessary, to reduce deferred tax assets, if it is more
likely than not that all or a portion of it will not be realized.
LONG-LIVED ASSETS
In accordance with SFAS No. 121, 'Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of', the Company
records impairment losses on long-lived assets used in operations, including
goodwill and intangible assets, when events and circumstances indicate that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets.
STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, 'Accounting for Stock-based Compensation'. SFAS No. 123 requires that the
Company either recognize in its financial statements costs related to its
employee stock-based compensation plans, such as stock option and stock purchase
plans, using the fair value method, or make pro forma disclosures of such costs
in a footnote to the financial statements. The Company has elected to continue
to use the intrinsic value-based method of APB Opinion No. 25, as allowed under
SFAS No. 123, to account for its employee stock-based compensation plans, and to
include the required pro forma disclosures based on fair value accounting. The
adoption of SFAS No. 123 has not had a material effect on the Company's
financial position or results of operations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS 130, 'Reporting Comprehensive Income,'
which establishes standards for reporting the components of comprehensive
income. The company adopted SFAS 130 on January 1, 1998. The foreign currency
translation adjustment is the Company's only component of comprehensive income.
In June 1997 SFAS 131, 'Disclosures About Segments of an Enterprise and
Related Information,' was issued. SFAS 131 requires disclosure of reportable
operating segments. In February 1998, SFAS 132, 'Employers' Disclosures About
Pensions and Other Post-retirement Plans' was issued. SFAS 132 standardizes
pension disclosures. The Company will adopt SFAS 131 and 132 at year-end 1998.
These statements may affect disclosure and presentation in the financial
statement but will have no impact on the Company's financial position or results
of operations.
INTERIM FINANCIAL STATEMENTS
In the opinion of management of the Company, the unaudited financial
statements as of March 31, 1998, and for the three months ended March 31, 1997
and 1998, have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting only of normal recurring
adjustments necessary for a fair presentation of the results of the interim
periods.
NOTE 3 -- GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
Company has a limited operating history, has sustained losses since its
inception and has an accumulated deficit at December 31, 1997 of $6,179,571. The
Company faces a number of risks and uncertainties regarding its business,
including among other
F-13
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
factors, the demand and market acceptance of its products, dependence on a
single product line, the effects of technological change, and the development of
new products. The Company anticipates that it will continue to incur significant
operating costs and losses in connection with the development of its products
and increased marketing efforts which raises substantial doubt about its ability
to continue as a going concern.
Commencing in October 1997, the Company entered into licensing agreements
with certain suppliers and manufacturers to integrate DiscGuard'tm' technology
into replicating equipment for the production of DiscGuard'tm' enhanced optical
media (see Note 18). DiscGuard'tm' was in the product testing stage up until the
first quarter of 1998 when it became available for commercial use. From March to
June 1998, the Company signed licensing agreements with six software
publishers/distributors to include DiscGuard'tm' in their software products.
There can be no assurance that these agreements will provide sufficient revenues
to generate operating profits and cash flows. The Company is also continuing to
broaden its sales and marketing activities in North America, Europe and Asia to
increase product awareness and expand its sales and customer support
infrastructure.
The Company is continuing to pursue various alternatives for additional
financing, including a recently completed $1,475,000 private placement. The
Company has also received a letter of intent from an underwriter for a secondary
offering of 2,500,000 shares of its Common Stock (See Note 19).
The ability of the Company to continue as a going concern is dependent upon
the success of the Company's products and its access to sufficient funding to
enable it to continue operations. There is no assurance that sufficient revenues
will be generated or that adequate financing will be available to the Company.
Insufficient funds from operations or the inability to obtain adequate financing
would have a material adverse effect on the Company.
NOTE 4 -- OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
Grant receivable -- Chief Scientist(1).................................... $ 39,678
Management income receivable(2)........................................... 50,000
Other..................................................................... 41,860
-----------------
$ 131,538
-----------------
-----------------
</TABLE>
- ------------
(1) In November 1996, TTR Ltd. received an approval from the Office of the Chief
Scientist of the Government of Israel (OCS) according to which the OCS will
fund certain research and development of the Company by way of grants. The
approved grant amounts to a maximum of $210,000.
The Company will be required to pay royalties to the OCS on proceeds from
the sale of products derived from the research and development in which the
OCS has participated by way of its grant. The royalties are computed at the
rate of 3% for the first three years of product sales, 4% for the following
three years, and 5% thereafter up to a maximum of 100% of the grant.
(2) In October 1997, TTR Ltd. entered into a two-year management agreement with
Ultimus LTD, (Ultimus) an Israeli company. Under the agreement, the Company
provided management and administrative services relating to Ultimus'
day-to-day operations and earned fees totaling $50,000. The agreement was
terminated in April 1998. The Company's Vice-President holds approximately
7.5% of the outstanding shares of Ultimus and, together with the Company's
Chairman, served on their Board of Directors.
F-14
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
NOTE 5 -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
Leasehold improvements.................................................... $ 126,906
Office equipment.......................................................... 144,501
Computer equipment........................................................ 219,895
Vehicles.................................................................. 86,732
-----------------
578,034
Less: Accumulated depreciation............................................ 161,989
-----------------
$ 416,045
-----------------
-----------------
</TABLE>
Depreciation expense was $38,669, $88,311, $19,485 and $37,411 for the
years ended December 31, 1996 and 1997 and for the three months ended March 31,
1997 and 1998, respectively.
NOTE 6 -- DUE FROM OFFICER
This amount represents non-interest bearing advances to an officer of the
Company and was repaid in July 1998.
NOTE 7 -- ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
Accrued payroll and payroll taxes......................................... $ 49,750
Other..................................................................... 90,222
-----------------
$ 139,972
-----------------
-----------------
</TABLE>
NOTE 8 -- ACCRUED SEVERANCE PAY
Under Israeli law, TTR Ltd. is required to make severance payments to
dismissed employees (including officers) and to employees leaving employment
under certain other circumstances. This liability is calculated based on the
years of employment for each employee, in accordance with the 'severance pay
laws.' The Company's liabilities for required severance payments are covered by
funding into severance pay funds, insurance policies and by an accrual. At
December 31, 1997, a total of $53,167 was deposited in insurance policies.
NOTE 9 -- SHORT-TERM BORROWINGS
(a) In June 1996, the Company realized net proceeds of $423,552 from a
private placement of 10 units of its securities at a purchase price of $50,000
per unit. Each unit consisted of $50,000 principal amount of 10% promissory
notes and 15,000 shares of Common Stock for a total of 150,000 shares. The
Company has allocated $7,500 per unit to the Common Stock sold in the private
placement, and the balance to promissory note principal. In January 1997,
certain of these investors returned a total of 135,000 shares of Common Stock to
treasury which were subsequently cancelled. The principal and accrued interest
on these notes was repaid in February 1997. The Company paid a placement agent
fees, totaling $55,000 which were amortized over the life of the loan. Certain
of the investors in the private placement have an ownership interest in the
placement agent.
F-15
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
(b) In 1996, the Company borrowed a total of $133,400 in unsecured funds
from a private lender. Interest was calculated at the rate of 22% per annum on
outstanding financings. The principal and accrued interest was repaid in
February 1997.
(c) In December 1996 and January 1997, the Company issued short-term
promissory notes aggregating $450,000. Interest was calculated at the rate of
15% per annum. The notes and accrued interest was repaid in February 1997.
Placement fees of $45,000 were amortized over the life of the loan.
NOTE 10 -- LONG-TERM DEBT
(a) TTR Ltd. has outstanding principal balances in the amount of $20,368.
The loans are denominated in 'New Israeli Shekel' (NIS), bear interest at the
rate of prime (14.90% at December 31, 1997) plus 2.4%-3% per annum and are
secured by substantially all the assets of TTR Ltd. Principal payments are due
in various installments through 2000.
(b) In 1994 and 1995, the Company issued two-year promissory notes
aggregating $1,041,080 in a private placement. Interest accrued at the rate of
10% per annum and was payable at the maturity date. In connection with this
private placement the Company issued warrants to the noteholders to purchase a
total of 174,548 shares of Common Stock for $.01 per share. The warrants were
exercised in February 1997. The Company paid a placement agent fees, totaling
$145,000 which were amortized over the terms of the respective notes. In
February 1997, the entire principal balance plus accrued interest on these notes
was repaid.
The aggregate maturities of long-term debt for the next three years ending
December 31, are as follows: 1998 -- $5,564; 1999 -- $8,753; and 2000 -- $6,051.
NOTE 11 -- INCOME TAXES
At December 31, 1997, the Company had available $1,775,266 of net operating
loss carryforwards for U.S. federal income tax purposes which expire in the
years 2014 through 2018, and $2,912,000 of foreign net operating loss
carryforwards with no expiration date. Due to the uncertainty of their
realization, no income tax benefit has been recorded by the Company for these
net operating loss carryforwards as valuation allowances have been established
for any such benefits. The use of the U.S. federal net operating loss
carryforwards is subject to limitations under section 382 of the Internal
Revenue code pertaining to changes in stock ownership.
Significant components of the Company's deferred tax assets for U.S.
federal and Israel income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
Net operating loss carryforwards.......................................... $ 1,839,669
Stock based compensation.................................................. 17,813
Accrued vacation and severance............................................ 20,000
-----------------
Total deferred tax assets............................................ 1,877,481
Valuation allowance.................................................. (1,877,481)
-----------------
Net deferred tax assets.............................................. $ --
-----------------
-----------------
</TABLE>
Pre-tax losses from foreign (Israeli) operations were $790,536 and
$2,927,080 for the years ended December 31, 1996 and 1997, respectively.
NOTE 12 -- STOCK OPTION PLAN
In July 1996, the Board of Directors adopted the Company's Incentive and
Non-qualified Stock Option Plan (the ' Plan') and has reserved up to 450,000
shares of Common Stock for issuance thereunder . The Plan provides for the
granting of options to officers, directors, employees and advisors
F-16
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
of the Company. The exercise of incentive stock options ('ISOs') issued to
employees who are less than 10% stockholders shall not be less than the fair
market value of the underlying shares on the date of grant or not less than 100%
of the fair market value of the shares in the case of an employee who is a 10%
stockholder. The exercise price of restricted stock options shall not be less
than the par value of the shares to which the option relates. Options are not
exercisable for a period of one year from the date of grant. Thereafter, options
may be exercised as determined by the Board of Directors, with maximum terms of
ten and five years, respectively, for ISOs issued to employees who are less than
10% stockholders and employees who are 10% stockholders. In addition, under the
plan, no individual will be given the opportunity to exercise ISO's valued in
excess of $100,000, in any calendar year, unless and to the extent the options
have first become exercisable in the preceding year. The Plan will terminate in
2006.
A summary of the status of the Plan as of December 31, 1997 and changes
during the year ending on that date is presented below:
<TABLE>
<CAPTION>
RANGE OF
EXERCISE
SHARES PRICES
------- -----------
<S> <C> <C>
Options outstanding, January 1, 1996.......................................... -- $ --
Granted.................................................................. 5,000 6.00
Canceled................................................................. -- --
Exercised................................................................ -- --
------- -----------
Options outstanding, December 31, 1996........................................ 5,000 6.00
Granted.................................................................. 175,600 5.00-13.94
Canceled................................................................. (19,500) 7.00-13.94
Exercised................................................................ -- --
------- -----------
Options outstanding, December 31, 1997........................................ 161,100 $5.00-13.88
------- -----------
------- -----------
Shares of common available for future grant................................... 288,900
-------
-------
</TABLE>
The following table summarizes information about stock options under the
plan outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- ------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
------------------------ ------------------------
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- --------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 5.00 50,000 9.25 $ 5.00 -- --
5.81 12,500 10.00 5.81 -- --
6.00 5,000 8.50 6.00 1,250 $ 6.00
7.00 27,000 9.00 7.00 -- --
10.00 50,000 9.25 10.00 -- --
10.25 1,600 9.75 10.25 -- --
13.88 15,000 9.50 13.88 -- --
------------ ------- ---- ----- ----- ------
$5.00-$13.88 161,100 9.27 $7.86 1,250 $ 6.00
------------ ------- ---- ----- ----- ------
------------ ------- ---- ----- ----- ------
</TABLE>
In 1997, a total of 24,000 stock options granted under the 1996 Plan to
non-employees resulted in a charge to deferred compensation of $53,032, which is
being amortized over the four-year vesting period.
In addition in 1997, the Company issued 10-year options, not pursuant to
the 1996 Plan, to purchase up to 217,473 shares of Common Stock to the Chief
executive Officer of TTR Ltd. The options are exercisable at $.01 per share and
vest over a four-year period and have a remaining life of 8.5 years. At
December 31, 1997 a total of 72,491 options are exercisable (See Note 16d).
F-17
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
The Company has elected to use the intrinsic value-based method of APB
Opinion No. 25 to account for all of its employee stock-based compensation
plans. Accordingly, no compensation cost has been recognized in the accompanying
financial statements for stock options issued to employees where the exercise
price of the option equals or exceeds the fair value of the underlying common
stock as of the grant date.
Weighted-average grant date fair value of options granted in 1996 under the
minimum value method was $1.61 per option and in 1997, under the Black-Scholes
option pricing model, it was $5.82 per option.
The Company has adopted the pro forma disclosure provisions of SFAS No.
123. Had compensation cost for all of the Company's stock-based compensation
grants been determined in a manner consistent with the fair value approach
described in SFAS No. 123, the Company's net loss and net loss per share as
reported would have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Net loss
As reported................................................ $(1,121,211) $(4,119,612)
Proforma................................................... $(1,122,249) $(4,599,940)
Loss per share
As reported................................................ $(.62) $(1.35)
Proforma................................................... $(.62) $(1.51)
</TABLE>
The fair value of each option granted in 1996 is estimated on the date of
grant using the minimum value method with the following weighted average
assumptions: No dividends, an expected life of 4 years, and a risk-free interest
rate of 6.05%. The fair value of each option granted in 1997 is estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions: No dividends, an expected life of 2.5 years,
risk-free interest rate of 6.23% and expected volatility of 46.5%.
NOTE 13 -- CAPITAL TRANSACTIONS
WARRANTS
In 1994 and 1995, the Company granted warrants to consultants to purchase
200,000 shares of Common Stock at $.01 per share. These warrants were exercised
in February 1997.
PRIVATE PLACEMENTS
In April 1996, the Company raised $200,000 in a private placement of
650,000 shares of its Common Stock, and warrants to purchase an additional
1,000,000 shares. The warrants are exercisable for a period of three years
commencing February 1997 at an exercise price of $7.00 per share. The warrants
were subsequently exchanged for additional shares of Common Stock (see Note 19).
INITIAL PUBLIC OFFERING
In February 1997, the Company completed an initial public offering of
860,000 shares of its Common Stock and realized net proceeds of approximately
$4,700,000 after stock offering costs. In connection with this offering, the
Company sold to the underwriter, for $80, five-year warrants to purchase up to
an additional 80,000 shares of the Company's Common Stock at an exercise price
equal to $11.20 per share. The warrants were subsequently exchanged for
additional shares of Common Stock (see note 19). The Company also made an
advance payment of $120,000 to the underwriter for a two-year management and
financial consulting agreement. In connection with the IPO, certain
F-18
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
securityholders have agreed not to sell their shares for up to two years from
the offering date, without the prior written consent of the underwriter.
STOCK GRANTS
In March 1997, the Company issued 5,000 shares of Common Stock to a
consultant and recorded a $50,000 compensation charge.
Additionally, in March 1997, pursuant to a one-year employment agreement
the Company issued 50,000 shares of Common Stock to an employee (See Note 16g).
The Company recorded deferred compensation in the amount of $500,000 relating to
the issuance of the shares, and is amortizing this over the term of the
agreement.
In April 1997, the Company issued 19,000 shares of Common Stock to two
consultants and recorded a $282,625 compensation charge (See Note 16b).
STOCK SUBSCRIPTION
On December 24, 1997, the Company entered into a stock subscription
agreement for the sale of 64,000 shares of Common Stock for an aggregate
purchase price of $400,000. Pursuant to the agreement, 48,000 shares were paid
for and issued on that date and the remaining 16,000 shares were paid for and
issued on February 20, 1998. In connection therewith, the Company also issued
four (4) year warrants to purchase up to an additional 33,000 shares of Common
Stock, at an exercise price of $7.80 per share; provided, that, in lieu of cash
payments for exercising the shares, the warrant holder is entitled to accept a
smaller number of shares of Common Stock based on the spread between the per
share exercise price and the then public market price of a share of the
Company's Common Stock. Under the agreement, the Company is required to register
these shares.
In connection with the above agreement, the Company also granted to the
investor an option to purchase an additional 10,000 shares of Common Stock which
expired on June 30, 1998.
ESCROW SHARES
An aggregate of 1,000,000 shares of the Company's Common Stock, owned
beneficially by its President, had been designated as escrow shares. The escrow
shares were not due to be released until the Company achieved certain revenue or
stock price levels. If the conditions had not been met, such shares would be
cancelled and contributed to the Company's capital.
In February 1998, pursuant to the terms of the escrow agreement 250,000
shares were forfeited and returned to the Company.
In June 1998, the Company's President waived his rights to the remaining
750,000 shares of Common Stock held in escrow. These shares have been returned
to treasury and cancelled.
NOTE 14 -- COMMON STOCK ISSUED WITH GUARANTEED SELLING PRICE
On March 31, 1997, the Company and TTR Ltd. were served with claims by an
individual demanding, among other things, royalties at the rate of 5% of the
proceeds from the sales of products in which the plaintiff claims to have
provided consulting services towards its development.
On May 6, 1997, the Company entered into a settlement agreement whereby the
Company issued the individual 15,000 shares of Common Stock. The Company also
guaranteed during a 180 day period following the registration of these shares, a
$15.50 per share selling price of the stock in the open market. If the share
price was not met, then the Company would remit the difference between $15.50
per share and the actual consideration received. The Company has established a
temporary equity account to record its maximum liability from the guarantee.
Payment of any shortfall would be charged
F-19
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
to this account and any balance remaining at the end of the holding period would
be credited to permanent capital. The Company recorded an expense of $232,500
due to the issuance of these shares.
In January 1998, the individual sold the shares at an aggregate price of
$77,156 and under the terms of the settlement agreement, the Company was
required to remit to him approximately $155,344. On January 19, 1998, the
Company remitted to the individual $55,344 and agreed to remit the balance of
$100,000 by June 15, 1998, together with an additional $5,000 in consideration
of deferring the payment. The deferred amount has been secured by a guarantee
issued by an Israeli Bank.
NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 107, Disclosures About Fair Value of Financial
Instruments, which requires that all entities disclose the fair value of
financial instruments, as defined, for both assets and liabilities recognized
and not recognized in the balance sheet. Substantially all of the Company's
financial instruments, consisting primarily of cash equivalents, current
receivables, accounts payable and notes payable, are carried at, or approximate,
fair value because of their short-term nature or because they carry market rates
of interest.
NOTE 16 -- COMMITMENTS AND CONTINGENCIES
CONSULTING AND EMPLOYMENT AGREEMENTS
a) In August 1994, TTR Ltd. entered into an employment agreement with one
of its officers. The agreement has a three-year term which provides for annual
compensation of $60,000, subject to adjustment. The agreement may terminate with
60 days prior notice. In the event the termination is without cause then the
officer will be entitled to continue to receive his salary for an additional
twelve month period. At the end of the initial three-year term, the agreement
automatically renews for one-year periods. For the year ended December 31, 1997,
the annual salary including bonus amounted to $81,500.
b) In October 1995, the Company entered into a three-year marketing
consulting agreement, pursuant to which the consultant earns a fee of $4,800 per
month. In April 1997, the Company also issued the consultant 15,000 shares of
Common Stock (see note 13).
c) In December 1995, TTR Ltd. entered into an employment agreement with its
director of product research and development. The agreement has a one-year term,
renewable for additional one-year terms. In consideration of eliminating the
provision for royalty payments, the agreement was amended to increase the annual
base compensation to $96,000 plus fringe benefits. The Company has also paid the
employee a one time bonus of $50,000 in 1997.
d) In September 1996, TTR Ltd. entered into a three-year employment
agreement with its Chief Executive Officer. The agreement provides for annual
compensation of approximately $100,000, subject to adjustment and is renewable
for additional one-year periods at the end of the initial term. Within the
initial term the employee may terminate the agreement with 60 days prior notice
and with 90 days notice thereafter.
The employee was also granted options to purchase 217,473 shares of Common
Stock, at an exercise price of $.01 per share. The Company recorded deferred
compensation expense of $1,522,300 and is amortizing this amount over the
vesting period. The options will vest over a four-year period commencing with
the date of grant.
e) In December 1996, TTR Ltd. entered into a two-year consulting agreement.
The agreement provides for monthly fees of $6,100 and is renewable for one
additional year. The agreement may be terminated by either party with 30 days'
prior notice. In 1997, the consultant was also granted 15,000
F-20
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
options under the Company's 1996 Stock Option Plan. The options have an exercise
price equal to the fair market value on the date of grant and will vest over a
four-year period.
f) In February 1997, TTR Ltd. entered into an agreement with the University
of Arizona ('the University'), to become a sponsor of the Optical Data Storage
Center ('ODSC') at the University. In consideration of this sponsorship, TTR
Ltd. would receive voting power in the decision-making body of the ODSC,
proportional to its contribution. TTR Ltd. contributed a total of $25,000 and in
August 1997, terminated the agreement.
g) In March 1997, the Company entered into a one-year employment agreement
with an officer of the Company. The agreement provides for monthly compensation
of $5,000 and is automatically renewable for additional one-year terms. The
agreement may be terminated by either party with 30 or 60 days prior notice
during the first and second anniversary, respectively, and with 90 days notice
thereafter. The Company has also agreed to issue to the employee 50,000 shares
of Common Stock. Pursuant to an escrow agreement, 25,000 shares were released
from escrow on July 31, 1997 and 25,000 on January 31, 1998. The grant of these
shares resulted in a charge to deferred compensation in the amount of $500,000
which is being amortized over one year. The officer was also granted 40,000
qualified and 60,000 nonqualified options under the Company's 1996 Stock Option
Plan at an exercise price of $10.00 and $5.00 per share, respectively. The
options will vest over a four-year period commencing with the date of grant. The
issuance of the nonqualified options resulted in a charge to deferred
compensation in the amount of $300,000. This amount is being amortized over the
vesting period.
OPERATING LEASES
The Company and TTR Ltd. have each entered into lease agreements for office
space expiring through 2002. Future minimum rentals on these leases as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
- ------------------------------------------------------------------------
<S> <C>
1998................................................................. $ 68,549
1999................................................................. 68,549
2000................................................................. 68,549
2001................................................................. 40,785
2002................................................................. 10,263
--------
$256,695
--------
--------
</TABLE>
NOTE 17 -- GEOGRAPHIC DATA
<TABLE>
<CAPTION>
U.S. % OF TOTAL ISRAEL % OF TOTAL
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
For the year ended December 31, 1997:
Revenue................................................ -- -- -- --
Operating loss......................................... (1,495,108) 38.68% (2,370,628) 61.32%
Identifiable assets.................................... 633,285 53.28% 555,342 46.72%
For the year ended December 31, 1996:
Revenue................................................ -- -- -- --
Operating loss......................................... (205,543) 22.92% (691,236) 77.08%
Identifiable assets.................................... 654,250 54.90% 537,438 45.10%
</TABLE>
F-21
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
NOTE 18 -- LICENSING AGREEMENTS
In October 1997, the Company entered into a five-year Development and OEM
Licensing Agreement with Doug Carson & Associates (DCA), a supplier of mastering
interface systems (MIS) that produce CD-ROMs. The Company granted DCA an
exclusive, nontransferable, royalty free, world-wide license to produce and
market DiscGuard'tm' enhanced MIS for CD's through December 31, 1998. In the
event that DCA sells or upgrades at least 100 units of the version of its MIS
that supports DiscGuard'tm', then the exclusivity provision will be extended
through December 31, 1999. After December 31, 1999, the Company and DCA will
negotiate mutually acceptable minimum sales and upgrade levels to retain the
exclusivity provision.
In November 1997, the Company entered into a five-year Development and OEM
License Agreement with Nimbus CD International Inc. (Nimbus), a leading
replicator of CD-ROMs, whereby Nimbus was granted an exclusive license to
produce DiscGuard'tm' enhanced media until September 16, 1998. Under the license
agreement, the Company is entitled to a percentage of the proceeds of the
premium charged by Nimbus for DiscGuard'tm' protected discs.
NOTE 19 -- SUBSEQUENT EVENTS
PROPOSED PUBLIC OFFERING
On April 1, 1998, the Company entered into a letter of intent with an
underwriter for a firm commitment public offering of 2,500,000 shares of the
Company's Common Stock. The offering price will be at or about the market price
of the Common Stock of the Company immediately prior to the effective date of a
Registration Statement. In connection therewith, the Company also entered into a
consulting agreement with the underwriter. The agreement provides for an advance
payment of $50,000, four-year warrants to purchase up to 25,000 shares of the
Company Stock at an exercise price of $5 5/8, and a fee of 5% of the exercise
price of certain outstanding warrants that are converted to Common Stock.
CONSULTING AGREEMENT
On April 1, 1998, the Company retained the services of an individual to
perform consulting services related to the operation and development of the
Company's business under a one-year consulting agreement. The Company has paid a
$10,000 non-refundable retainer. In addition, the agreement provides for the
payment of $250,000 and the issuance of 50,000 unregistered shares of Common
Stock upon the closing of the Company's proposed public offering. The Company
expects to record deferred compensation of $ upon the issuance of these
shares and will amortize this amount over the term of the agreement.
PRIVATE PLACEMENT
In July 1998, the Company completed a private offering of 29.5 Units, each
Unit consisting of $50,000 principal amount of 10% Promissory Notes and Warrants
to purchase 11,500 shares of Common Stock. For financial reporting purposes, the
Company will record a note discount totalling approximately $550,000, to reflect
the value of the Warrants issued. The discount will be amortized on a
straight-line basis over the term of the respective notes. The notes bear
interest at the rate of 10% per annum and become due and payable together with
accrued interest at the earlier of one year or 30 days following the
consummation by the Company of any public or private equity or debt financing
exceeding $1,000,000. The warrants are exercisable for a four-year period at an
exercise price equal to 115% of the public offering price in the proposed
offering.
F-22
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED]
STOCK GRANTS
In June 1998 the Company issued 125,000 shares of Common Stock and 25,000
warrants exercisable at 115% of the proposed public offering price to various
consultants pursuant to one year consulting agreements. The Company will record
a charge to deferred compensation expense of approximately $445,000 as a result
of these issuances.
WARRANT EXCHANGE
In July 1998, the Company issued 432,000 additional shares of Common Stock
in exchange for 1,000,000 and 80,000 outstanding warrants exercisable at $7.00
and $11.20, respectively. (see Note 13).
EMPLOYMENT AGREEMENT
In July, 1998, the Company entered into an eighteen-month employment
agreement with its new Chief Executive Officer. The agreement provides for
annual compensation of $210,000 and is automatically renewable for additional
one-year terms. The Company also granted to the employee 250,000 options under
the Company's 1996 Stock Option Plan. The options have an exercise price equal
to the fair market value on the date of grant and will vest over a five-year
period.
F-23
<PAGE>
<PAGE>
_____________________________ _____________________________
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 7
The Company.................................... 13
Use of Proceeds................................ 14
Price Range of Common Stock.................... 15
Dividend Policy................................ 15
Capitalization................................. 16
Plan of Operation.............................. 17
Business....................................... 20
Management..................................... 30
Executive Compensation......................... 31
Beneficial Ownership...........................
Principal Stockholders......................... 35
Certain Transactions........................... 36
Description of Capital Stock...................
Description of Securities...................... 37
Shares Eligible for Future Sale................ 37
Underwriting................................... 39
Concurrent Offering............................ 40
Legal Matters.................................. 40
Experts........................................ 40
Available Information.......................... 41
Financial Statements........................... F-1
</TABLE>
_____________________________ _____________________________
2,500,000 SHARES
TTR INC.
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
Josephthal & Co. Inc.
JULY 31, 1998
_____________________________ _____________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, among other things,
and subject to certain conditions, authorizes the Company to indemnify its
officers and directors against certain liabilities and expenses incurred by such
persons in connection with the claims made against them as a result of their
being an officer or director. The Company's By-Laws provide that the Company
will indemnify its directors, executive officers, other officers, employees and
agents to the fullest extent permitted by Delaware law. The Company shall
indemnify any person who is or was a director or officer of the Company and is a
party or is threatened to be made a party to any action or proceeding to the
fullest extent permitted by Delaware law.
The Company's Certificate of Incorporation provides for the elimination of
liability for monetary damages for breach of the director's fiduciary duty of
care and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Company, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
any transaction from which the director derived an improper personal benefit,
and for payment of dividends or approval of stock repurchases or redemptions
that are unlawful under Delaware law. The provisions does not affect a
director's responsibilities under any other laws, such as the federal securities
laws or state or federal environmental laws.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses to be incurred and borne by the
Company in connection with the sale and distribution of the shares of Common
Stock offered hereby (other than underwriting discounts and commissions). All
amounts shown are estimates, except for the Securities and Exchange Commission
filing fee and the NASD, Inc. filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee........................................ $3,781
NASD, Inc. Filing Fee................................................................ $1,400
Transfer Agent's fee................................................................. $
Legal fees and expenses.............................................................. $
Accounting fees and expenses......................................................... $
Blue Sky fees and expenses........................................................... $
Printing and engraving expenses...................................................... $
Miscellaneous........................................................................ $
------
Total fees and expenses......................................................... $
------
------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following paragraphs set forth certain information with respect to all
securities sold by the Company within the past three years without registration
under the Securities Act. The information includes the names of the purchasers,
the dates of issuance, the title and number of securities sold and the
consideration received by the Company for the issuance of these shares.
1. (a) In January 1996, the Company sold 50,000 shares of Common Stock to
the Chana Sasha Foundation.
(b) There were no underwriters with respect to the above transaction.
(c) The shares were issued in consideration of $100,000.
(d) The Company believes that the shares of Common Stock were issued in a
transaction not involving a public offering in reliance upon an exemption from
registration provided by Section 4(2) of the Securities Act.
II-1
<PAGE>
<PAGE>
2. (a) In April 1996, the Company completed a private placement of 650,000
shares of Common Stock and warrants to purchase an additional 1,000,000 shares
of Common Stock (the 'Warrants') to four investors (the 'Equity Financing'). In
July 1998, the Warrants were exchanged for 400,000 shares of Common Stock.
(b) There were no underwriters with respect to the above transaction.
(c) The aggregate purchase price of the securities sold in the Equity
Financing was $200,000, including $10,000 ascribed to the Warrants.
(d) The Company believes that the shares of Common Stock and Warrants were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Sections 4(2) and 4(6) of the Securities
Act, and Regulation D promulgated thereunder.
3. (a) In June 1996, the Company issued in a private placement to six
accredited investors one-year 10% promissory notes (the 'Bridge Financing'). In
connection with the Bridge Financing, the Company issued to such investors an
aggregate of 150,000 shares of Common Stock. The investors returned to treasury
and cancelled 135,000 shares of Common Stock.
(b) The Company paid commissions and non-accountable expense allowances of
approximately $55,000 to First Metropolitan Securities, Inc.
(c) The total offering price was $500,000 (ascribing $75,000 to the shares
of Common Stock), and the total underwriting discount was $50,000.
(d) The Company believes that the promissory notes and the shares of Common
Stock were issued in a transaction not involving a public offering in reliance
upon an exemption from registration provided by Section 4(6) of the Securities
Act, and Regulation D promulgated thereunder.
4. (a) In July 1996, the Company issued 5,000 options to Sheldon Rich, a
former director of the Company. The options are exercisable at $6.00 per share
until January 15, 2001.
(b) There were no underwriters with respect to the above transaction.
(c) Pursuant to the Option Plan, the options were issued in consideration
of services performed.
(d) The Company believes that the options were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
5. (a) In September 1996, the Company agreed to issue 217,473 options to
Arik Shavit, a director of the Company. The options are exercisable at $.01 per
share until September 2006 and are subject to a four-year vesting schedule.
(b) There were no underwriters with respect to the above transaction.
(c) The options were issued in consideration of services to be performed
prior to vesting.
(d) The Company believes that the options were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
6. (a) From December 1996 through January 1997, the Company issued
short-term 15% promissory notes in an aggregate principal amount of $450,000 to
accredited investors.
(b) The Company paid fees in the aggregate amount of $45,000 to placement
agents.
(c) The Company believes that the notes were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Sections 4(2) and 4(6) of the Securities Act, and Regulation D
promulgated thereunder.
7. (a) In January through February 1997, pursuant to the Option Plan the
Company issued to eight employees and two consultants options to purchase in the
aggregate 34,000 shares of Common Stock. The options are exercisable at $7.00
per share until 2006.
(b) There were no underwriters with respect to the above transaction.
(c) The options were issued in consideration of services to be performed
prior to vesting pursuant to the Option Plan.
II-2
<PAGE>
<PAGE>
(d) The Company believes that the options were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
8. (a) In connection with the IPO, the Company issued to First Metropolitan
Securities, Inc. warrants to purchase up to 80,000 shares of Common Stock of the
Company at an exercise price per share of $11.20. In July 1998, the Warrants
were exchanged for 32,000 shares of Common Stock.
(b) There were no underwriters with respect to the above transaction.
(c) The warrants were issued in consideration of services performed in
connection with the IPO.
(d) The Company believes that the warrants were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provide Section 4(2) of the Securities Act.
9. (a) In March 1997, the Company issued 5,000 shares of Common Stock to
Allon Guez, a former consultant to the Company.
(b) There were no underwriters with respect to the above transaction.
(c) The shares were issued in consideration of services performed.
(d) The Company believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided Section 4(2) of the Securities Act.
10. (a) In March 1997, the Company issued 50,000 shares of Common Stock to
Robert Friedman, of which 25,000 shares vested on July 31, 1997 and the
remaining 25,000 shares vested on January 31, 1998. In addition, in March 1997,
the Company issued, under the Option Plan, to Robert Friedman (i) non-qualified
options to purchase up to 40,000 shares of Common Stock at an exercise price per
share of $10.00 and (ii) incentive stock options to purchase up to 60,000 shares
of Common Stock at an exercise price per share of $5. The options are
exercisable until 2006.
(b) There were no underwriters with respect to the above transaction.
(c) The shares and options were issued in consideration of services to be
performed prior to vesting and, additionally, the options were issued under the
Option Plan.
(d) The Company believes that the shares and options were issued in a
transaction not involving a public offering in reliance upon an exemption from
registration provided by Section 4(2) of the Securities Act.
11. (a) In April 1997, the Company issued 15,000 shares of Common Stock to
Holborn Systems, Ltd. and 4,000 shares of Common Stock to Ascent Inner
Dimensions of Jewish Life, Inc.
(b) There were no underwriters with respect to the above transaction.
(c) The shares were issued in consideration of services performed.
(d) The Company believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
12. (a) In May 1997, the Company issued 15,000 shares of Common Stock to
Henry Israel, a former consultant to the Company.
(b) There were no underwriters with respect to the above transaction.
(c) The shares were issued in consideration of the settlement of an
outstanding lawsuit.
(d) The Company believes that the shares were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
13. (a) In May 1997, the Company issued, under the Option Plan, to a total
of three consultants and employees options to purchase 15,000, 5,000 and 3,000
shares of Common Stock, at an exercise price per share equal to, respectively,
$13 7/8, $13 15/16 and $14 1/2. All of these issuances were subsequently
canceled and such consultants and employees were issued on December 31, 1997
options for an identical number of shares of Common Stock at an exercise price
per share of 5 13/16. The options are exercisable until 2006.
(b) There were no underwriters with respect to the above transaction.
II-3
<PAGE>
<PAGE>
(c) The options were issued in consideration of services to be performed
prior to vesting pursuant to the Option Plan.
(d) The Company believes that the options were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
14. (a) In July and October 1997, the Company issued under the Company's
Option Plan to a consultant and an employee options to purchase, respectively,
2,000 and 2,500 shares of Common Stock, at an exercise price per share equal to,
respectively, $11 and $11 1/4. Such issuances were subsequently canceled and the
employees were issued on December 31, 1997 options for an identical number of
shares of Common Stock at an exercise price per share of 5 13/16. The options
are exercisable until 2006.
(b) There were no underwriters with respect to the above transaction.
(c) The options were issued in consideration of services to be performed
prior to vesting pursuant to the Option Plan.
(d) The Company believes that the options were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
15. (a) In November 1997, pursuant to the Option Plan, the Company issued
to an employee options to purchase 1,600 shares of Common Stock, at an exercise
price per share equal to $10 1/4. Such issuance was subsequently canceled and
the employee was issued on December 31, 1997 options for an identical number of
shares of Common Stock at an exercise price per share of 5 13/16. The options
are exercisable until 2006.
(b) There were no underwriters with respect to the above transaction.
(c) The options were issued in consideration of services to be performed
prior to vesting pursuant to the Option Plan.
(d) The Company believes that the options were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
16. (a) In December 1997, the Company issued to Biscount Overseas Ltd.
('Biscount') 64,000 shares of Common Stock and four (4) year warrants to
purchase 33,000 shares of Common Stock at an exercise price per share of $7.80.
(b) There were no underwriters with respect to the above transaction.
(c) The shares and warrants were issued in consideration of the payment of
$400,000.
(d) The Company believes that the options were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
17. (a) In January 1998, pursuant to the Option Plan, the Company issued to
a consultant options to purchase 4,000 shares of Common Stock, at an exercise
price per share equal to $5 7/8. The options are exercisable until 2006.
(b) There were no underwriters with respect to the above transaction.
(c) The options were issued in consideration of services to be performed
prior to vesting pursuant to the Option Plan.
(d) The Company believes that the options were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
18. (a) In April 1998, the Company issued four (4) year warrants to the
Underwriter to purchase 25,000 shares of Common Stock at an exercise price per
share of $5 5/8.
(b) There were no underwriters with respect to the above transaction.
(c) The warrants were issued in consideration of services to be performed.
(d) The Company believes that the warrants were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
19. (a) In July 1998, the Company completed a private placement of 10%
promissory notes for an aggregate amount of $1,475,000. In connection therewith
the Company issued warrants to purchase in
II-4
<PAGE>
<PAGE>
the aggregate 339,250 shares of Common Stock at an exercise price equal to 115%
of the price per share of Common Stock in this Offering or as the date of grant
if no offering takes place by December 31, 1998.
(b) The Company paid commissions to the placement agents of approximately
$96,000.
(c) The Company believes that the promissory notes and warrants were issued
in a transaction not involving a public offering in reliance upon an exemption
from registration provided by Section 4(2) of the Securities Act.
20. (a) In June 1998, the Company issued to three consultants a total of
125,000 shares of Common Stock and warrants for an additional 25,000 shares of
Common Stock. The warrants are exercisable at a price per share equal to 115% of
the price of the Common Stock in this Offering or 115% of the price of Common
Stock on the date of the grant if no offering takes place by December 31, 1998.
(b) There were no underwriters with respect to the above transaction.
(c) The shares and warrants were issued in consideration of services to be
performed.
(d) The Company believes that the options were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
21. (a) In April 1998, pursuant to the Option Plan, the Company issued to
employees options to purchase 7,000 shares of Common Stock at an exercise price
per share equal to $5 3/8.
(b) There were no underwriters with respect to the above transaction.
(c) The options were issued in consideration of services to be performed
prior to vesting pursuant to the Option Plan.
(d) The options were issued in a transaction not involving a public
offering in reliance upon an exemption from registration provided by Section
4(2) of the Securities Act.
22. (a) In April 1998, the Company entered into a consulting agreement
pursuant to which the Company will issue to the consultant 50,000 shares of
Common Stock at the closing of this Offering.
(b) There were no underwriters with respect to the above transaction.
(c) The shares of Common Stock were issued in consideration of services to
be performed by the consultant.
(d) The options were issued in a transaction not involving a public
offering in reliance upon an exemption from registration provided by Section
4(2) of the Securities Act.
23. (a) In June 1998, pursuant to an Option Plan, the Company issued to an
employee options to purchase 4,000 shares of Common Stock at an exercise price
per share equal to $4 5/8.
(b) There were no underwriters with respect to the above transaction.
(c) The options were issued in consideration of services to be performed
prior to vesting pursuant to the Option Plan.
(d) The options were issued in a transaction not involving a public
offering in reliance upon an exemption from registration provided by Section
4(2) of the Securities Act.
24. (a) In July 1998, pursuant to an Option Plan, the Company issued to an
employee options to purchase 250,000 shares of Common Stock at an exercise price
per share equal to $2 15/16.
(b) There were no underwriters with respect to the above transaction.
(c) The options were issued in consideration of services to be performed
prior to vesting pursuant to the Option Plan.
(d) The options were issued in a transaction not involving a public
offering in reliance upon an exemption from registration provided by Section
4(2) of the Securities Act.
II-5
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ITEM 27. EXHIBITS
<S> <C>
1.1** -- Form of Underwriting Agreement with Josephthal & Co. Inc. ('Josephthal').
3.1 -- Certificate of Incorporation of the Company, as amended.(1)
3.2 -- By-Laws of the Company, as amended.(1)
3.3 -- Memorandum of Association of TTR Israel.(1)
3.4 -- Articles of Association of TTR Israel.(1)
4.1** -- Form of Josephthal's Warrants.
4.2 -- Specimen Common Stock Certificate.
4.3* -- Form of Lock-up Agreements between certain of the Company's shareholders and Josephthal.
5.1** -- Opinion of Baer Marks & Upham LLP.
9.1 -- Voting Trust Agreement.(1)
10.1** -- Form of Financial Consulting Agreement with Josephthal.
10.2 -- Incentive and Non-Qualified Stock Option Plan.(1)
10.3 -- Employment Agreement between TTR Israel and Marc D. Tokayer.(1)
10.4 -- Employment Agreement between TTR Israel and Baruch Sollish.(1)
10.5 -- Employment Agreement between TTR Israel and Arik Shavit, as amended.(1)
10.6 -- Employment Agreement between TTR Inc. and Robert Friedman.(2)
10.7 -- Unprotected Tenancy Agreement between TTR Israel and Pharmastate Ltd. dated June 10, 1996.(1)
10.8 -- Consulting Agreement dated November 1, 1994 between the Company and Shane Alexander Unterburgher
Securities Inc.(1)
10.9 -- Consulting Agreement dated October 1, 1995 between the Company and Holborn Systems Ltd.(1)
10.10 -- Loan and Security Agreement dated September 30, 1996 between the Company and 732498 Ontario Ltd.(1)
10.11 -- Form of Note Extension Agreement.(1)
10.12 -- Form of Promissory Note (1).
10.13 -- Settlement Agreement dated May 6, 1997 between the Company and Henry Israel settling certain
outstanding claims.(2)
10.14 -- Agreement dated January 19, 1998 between the Company and Henry Israel.(2)
10.15 -- Development and OEM Licensing Agreement dated October 31, 1997 between the Company and Doug Carson &
Associates Inc.(2)
10.16 -- Development and OEM Licensing Agreement dated October 31, 1997 between the Company, Doug Carson &
Associates Inc. and Nimbus CD International, Inc.(2)
10.17 -- Management Agreement dated October 1, 1997 between the Company and Ultimus Ltd.(2)
10.18 -- Stock Purchase Agreement dated December 24, 1997 between the Company and Biscount Overseas Ltd.(2)
10.19 -- Consulting Agreement between the Company and Pioneer Management Corporation.(1)
10.20 -- Purchase Agreement and Assignment dated January 5, 1995 between TTR Israel and Rina Marketing R&D
Ltd.(1)
10.21* -- Employment Agreement between TTR Inc. and Steven L. Barsh dated July 6, 1998.
10.22* -- Form of Stock Purchase Agreement between the Company and certain of its securityholders.
10.23* -- Form of Proposed Non-Executive Director Stock Option Plan
21.1* -- Subsidiaries of the Company.
23.1** -- Consent of Baer Marks & Upham LLP (included in Exhibit 5.1).
23.2** -- Consent of Aboudi & Brounstein.
23.3* -- Consent of Schneider Ehrlich & Wengrover LLP, certified public accountants.
23.4* -- Consent of BDO Almagor & Co., certified public accountants.
24.1* -- Powers of Attorney (included on page II-8).
27.1* -- Financial Data Schedule.
</TABLE>
- ------------
* Filed with this Registration Statement.
** To be filed by Amendment.
(1) Filed as an Exhibit to the Registration Statement of the Company on Form
SB-2, dated February 10, 1997, No. 333-11829, and incorporated herein by
reference).
(footnotes continued on next page)
II-6
<PAGE>
<PAGE>
(footnotes continued from previous page)
(2) Filed as an Exhibit to the Company's Annual Report on Form 10-KSB filed for
the year ended December 31, 1997.
ITEM 28. UNDERTAKINGS
(a) The Registrant hereby undertakes the following:
(i) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 424(b)(1), or
(4), or 497(h) under the Securities Act as part of this Registration
Statement as of the time the Commission declared it effective.
(ii) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus as a new
Registration Statement, and that offering of the securities at that time as
the initial bona fide offering of those securities.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against the
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-7
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this Registration
Statement to be signed on its behalf by the undersigned in the City of New York,
State of New York, on July 30, 1998.
TTR INC.
By: /s/ MARC D. TOKAYER
.................................
MARC D. TOKAYER,
CHAIRMAN OF THE BOARD AND PRESIDENT
(PRINCIPAL EXECUTIVE AND FINANCIAL
OFFICER AND OFFICER
DULY AUTHORIZED TO SIGN ON BEHALF OF
REGISTRANT)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints Marc D. Tokayer, or Samuel F.
Ottensoser, or either of them, as his true and lawful attorneys-in-fact and
agents, with full powers of substitution and resubstitution, for him and in his
name, place and stead, to sign in any and all capacities any and all amendments
(including post-effective amendments) to this Registration Statement on Form
SB-2 and to file the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------------------------- ---------------
<C> <S> <C>
/s/ MARK D. TOKAYER Chairman of the Board and President (Principal July 31, 1998
......................................... Executive and Financial Officer)
(MARC D. TOKAYER)
/s/ BARUCH SOLLISH Vice President -- Research and Development, Chief July 31, 1998
......................................... Technology Officer
(BARUCH SOLLISH) and Director
/s/ ARIK SHAVIT Vice President and Director July 31, 1998
.........................................
(ARIK SHAVIT)
</TABLE>
II-8
<PAGE>
<PAGE>
INDEX TO EXHIBITS FILED WITH THIS
FORM SB-2 REGISTRATION STATEMENT
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ ----------------------------------------------------------------------------------------------------
<S> <C>
4.3 -- Form of Lock-up Agreement between certain of the Company's Shareholders and Josephthal...........
10.21 -- Form of Employment Agreement between TTR Inc. and Steven L. Barsh................................
10.22 -- Form of Stock Purchase Agreement between the Company and certain of its securityholders..........
10.23 -- Form of Proposed Non-Executive Director Stock Option Plan........................................
21.1 -- Subsidiaries of the Company......................................................................
23.3 -- Consent of Schneider Ehrlich & Wengrover LLP, certified public accountants.......................
23.4 -- Consent of BDO Almagor & Co., certified public accountants.......................................
24.1 -- Powers of Attorney (included on page II-8).......................................................
27.1 -- Financial Data Schedule..........................................................................
</TABLE>
II-9
STATEMENT OF DIFFERENCES
The trademark symbol shall be expressed as..................... 'tm'
The registered trademark symbol shall be expressed as.......... 'r'
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LOCK-UP AGREEMENT
July __, 1998
Josephthal & Co. Inc.
200 Park Ave.
New York, NY
10166
Re: TTR Inc.
Dear Sirs:
In order to induce Josephthal & Co. Inc. (the "Underwriter") to enter
into an Underwriting Agreement with TTR Inc. (the "Company") which provides for
the public offering of securities of the Company pursuant to a registration
statement (the "Registration Statement") filed with the Securities and Exchange
Commission (the "Commission"), the undersigned agrees that, without the prior
written consent of the Underwriter, the undersigned will not, for a period of
SIX months following the date the Registration Statement is declared effective
(the "Effective Date") by the Commission, directly or indirectly, offer, sell,
transfer, pledge, assign, hypothecate or otherwise encumber or dispose of any of
64,000 shares of Common Stock of the Company or the warrants to acquire up to
33,000 shares of the Company's Common Stock that the undersigned holds.
Notwithstanding the above, the undersigned maintains the right to make
a private transfer provided that the transferee agrees to be bound by the same
restrictions set forth in this agreement.
Yours sincerely,
Biscount Overseas Ltd.
By: ___________________________
Name:
Title:
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LOCK-UP AGREEMENT
July __, 1998
Josephthal & Co. Inc.
200 Park Avenue
New York, NY
10166
Re: TTR Inc.
Dear Sirs:
In order to induce Josephthal & Co., Inc. (the "Underwriter") to enter
into an Underwriting Agreement with TTR Inc. (the "Company") which provides for
the public offering of securities of the Company pursuant to a registration
statement (the "Registration Statement") filed with the Securities and Exchange
Commission (the "Commission"), the undersigned agrees that, without the prior
written consent of the Underwriter, the undersigned will not, for a period of
NINE months following the date the Registration Statement is declared effective
(the "Effective Date") by the Commission, directly or indirectly offer, sell,
contract to sell, grant any option to purchase or right to acquire, transfer,
hypothecate or dispose of or otherwise encumber any beneficial interest in any
of the warrants to acquire shares of the Company's Common Stock that the
undersigned holds ("Warrants") or, if such warrants are exercised by the
undersigned, the shares issuable upon exercise,.
In addition, the undersigned agrees that, for a period of SIX months
following the Effective Date, the undersigned will not exercise any of the
Warrants. In the event that the undersigned exercises the Warrants while the
restrictions contained above are in force, such restrictions shall also apply
with respect to such shares until nine months following the Effective Date.
Notwithstanding the above, the undersigned maintains the right to make
a private transfer provided that the transferee agrees to be bound by the same
restrictions set forth in this agreement.
Yours sincerely,
_____________________________
Signature
_____________________________
Print Name
_____________________________
Print Address
_____________________________
Print Social Security Number
or Taxpayer ID Number
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EMPLOYMENT AGREEMENT
between
TTR INC.
and
STEVEN L. BARSH
Employment Agreement ("Agreement") dated as of July 6, 1998 between
Steven L. Barsh, residing at 316 Winding Way, Merion Station, PA 19066 (the
"Executive") and TTR Inc., a Delaware corporation (the "Company"), with its
principal executive offices at The Columbus Circle Building, 1841 Broadway, 11th
floor, New York, NY 10023.
WHEREAS, the Company desires to employ the Executive as its Chief
Executive Officer, and the Executive desires to accept such employment, upon the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Executive and the Company hereby agree as follows:
ARTICLE I.
Employment
Section 1.01 Position; Responsibilities.
(i) The Company hereby employs the Executive commencing on July
22, 1998 (the "Effective Date") in accordance with the terms
and conditions herein. The employment hereunder shall be for
a term of eighteen (18) months (the "Term") and shall be
terminable by either party on the terms and subject to the
conditions set forth in this Agreement. After expiration of
the initial Term, this Agreement shall be automatically
renewed for additional one year terms, unless either party
shall send notice of termination to the other party at least
ninety (90) days before the end of the initial Term or any
renewal term.
(ii) The Board of Directors of the Company has elected Executive
as Chief Executive Officer of the Company, effective upon the
Effective Date. The Executive's responsibilities from and
after the Effective Date shall include all matters
customarily associated with the position of Chief Executive
Officer, including, without limitation, subject to direction
by the Board (as defined below), or the President of the
Company (the "Company President"), currently Mr. Marc D.
Tokayer, those related to engaging and terminating employees,
establishing appropriate personnel and employment policies
and benefits, negotiating and entering into contracts,
finance, and financial reporting. The Executive shall perform
such duties and services consistent with his position as may
be assigned to him from time to time by the Company
President. The Executive shall report to the Company
President.
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(iii) It is the intention of the Board of Directors of the Company
(hereinafter the "Board") that the Executive serve on the
Board, in accordance with and subject to the terms and
conditions set forth in this Agreement. In addition,
Executive shall serve as a member on any nominating committee
appointed by the Board to nominate outside directors to serve
on the Board. In the event that Executive's employment
hereunder shall for any reason whatsoever terminate, then
Executive's membership on the Board shall, without any
further action on the part of the Company, Board or
Executive, forthwith terminate, subject to the requirements
of the Company's By-laws. Executive acknowledges and agrees
that the Company's By-laws currently provide for a Board
comprised of no more than three (3) individuals and that
Executive's designation and election to serve on the Board
are subject to the approval by the Company's shareholders of
a proposal, to be considered at the Company's next annual
meeting of its shareholders, to repeal the existing By-laws
and adopt new proposed By-laws that will enable the Board to
fix the number of directors and fill vacancies. The Company
and the Board will use their best efforts to obtain such
approval.
(iv) The Company will maintain a United States office in New York
City, where Executive will perform his duties and
responsibilities, and such office will be adequately staffed
for that purpose. The parties acknowledge and agree that (i)
in the performance of his services hereunder Executive need
not be present in the New York City office on a daily basis
but only as is warranted by the exercise of reasonable
judgment for the promotion of the Company's business, and
(ii) the nature of the Executive's duties under this
Agreement will also require substantial domestic and
international travel.
Section 1.02 Performance of Duties. The Executive shall duly and
faithfully perform all of the duties assigned to him to the best of his
abilities, and Executive's services to the Company shall be full-time and
exclusive, it being understood that the Executive may engage in the activities
set forth on Schedule I annexed hereto provided that the same shall not
otherwise constitute a breach of Executive's obligations or covenants hereunder
or materially impair or materially interfere with the performance of Executive's
responsibilities hereunder.
Section 1.03 Representation and Warranty of Company. The Company hereby
represents and warrants to Executive that it has received all authorizations
necessary for the execution and performance of the Agreement on the terms and
conditions set forth herein.
Section 1.04 Representation and Warranty of Executive. The Executive
represents and warrants to the Company that the execution and delivery of this
Agreement and the fulfillment of the terms hereof (i) will not constitute a
breach of any agreement or other instrument to which Executive is party, and
(ii) does not require the consent of any person. Additionally, the Executive
represents and warrants to the Company that he shall not utilize during the term
of his employment any proprietary information of any third party, including
prior employers of the Executive.
Section 1.05 Termination of Barsh Technology Ventures, Inc. Services
Agreement. The parties acknowledge and agree that effective upon the Effective
Date, the Services Agreement
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between the Company and Barsh Technology Ventures, Inc. ("BTV") will be
terminated. The Company shall pay to BTV all expense reimbursements, upon
evidence of appropriate receipts, and unpaid invoices for services provided up
to and including the termination date. BTV shall have no obligation to destroy
or return any Confidential Information of the Company as defined under the
Services Agreement, and any such Confidential Information shall be transferred
to or remain in the possession of Executive, and same shall be subject to the
provisions of this Agreement.
ARTICLE II.
Compensation
Section 2.01 General. The Company shall compensate the Executive for
all of his services under this Agreement, as set forth below.
Section 2.02 Salary. The Executive's minimum annual salary ("Base
Salary") commencing on the Effective Date, shall be at the rate of $210,000 and
shall be payable in bi-weekly or other installments in accordance with the
Company's normal payment schedule for senior management. The Base Salary shall
be subject to annual review commencing at the end of 1999 and at the end of each
year thereafter, if the Executive is employed by the Company at that time, and
may be increased (but not decreased) for subsequent years.
Section 2.03 Stock Option. The Executive shall be entitled to
participate in the Company's existing Incentive Stock Option Plan (1996)
(hereinafter, the "1996 Plan") and shall be granted an option under the 1996
Plan to purchase shares of the Company's Common Stock, on the terms and
conditions set forth on the attached Option Agreement (the "Option"). The Option
is for the purchase of an aggregate of 250,000 Shares of common stock of the
Company. The Option is exercisable at $2 and 15/16 per Share (which is the Fair
Market Value per Share on the date of grant as defined in the 1996 Plan). The
Option vests over five years, as to 20% of the number of Shares covered thereby
during each year, prorated for each completed month of employment, and the
Option expires ten years from the date on which the Board approved the 1996
Plan. The terms of the Option are as set forth in the Option Agreement attached
as Exhibit A, and is otherwise subject to all other provisions of the 1996 Plan.
In the event that the Company shall approve or adopt any other
stock option plan, bonus plan or other compensation program ("Incentive
Programs") that the Company may hereafter establish for senior management,
Executive shall be entitled to participate in such Incentive Programs, and the
Option granted above may be issued and made subject to any stock option plan
adopted as part of any such Incentive Programs (in lieu of Executive
participating in the 1996 Plan), provided that the terms and conditions of the
Option are no less favorable to Executive than those to which he is entitled
under the 1996 Plan.
Section 2.04 Fringe Benefits. The Executive shall be entitled to
participate in all employee benefit plans, including retirement programs, if
any, group health care plans and Incentive Programs established for senior
management. Executive shall be entitled to such participation on a basis no less
favorable to the Executive than is made available to other senior management of
the Company and its affiliates. A list of all of the benefits to be provided to
Executive, and the benefit
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plans in which Executive will be a participant or beneficiary at the date of
commencement of this Agreement, is attached to this Agreement as Exhibit B. In
addition to the foregoing, the Executive shall be entitled to receive the
following:
(i) Vacation, Sick Leave and Personal Days. The Executive shall
be entitled to an aggregate of 20 business days of paid
vacation per contract year. In addition, the Executive shall
be entitled to paid sick leave until such date as the
Executive becomes entitled to receive long term disability
benefits under any disability insurance policy provided by
the Company or the date that Executive is terminated under
this Agreement by reason of disability. Vacation days shall
be prorated for any portion of a year to the date of
termination. The Executive shall consult with the Company
President regarding the timing of any vacation extending for
a period of more than 10 consecutive business days. In
addition to the foregoing, the Executive shall be entitled to
paid vacation for the following legal holidays in the United
States: New Year's, President's Day, Memorial Day, July 4,
Labor Day, Thanksgiving Day (Thursday and Friday), and
Christmas; and during the holidays of Rosh Hashana, Yom
Kippur, first two days and last two days of Succot, Passover
and Shavuot. Vacation days may not be carried forward or
accumulated for use by Executive more than one year following
the year in which such vacation was earned.
(ii) Expense Reimbursements. The Company shall reimburse the
Executive promptly for all reasonable and proper expenses
incurred by him, in promoting the business of the Company and
the performance of his duties hereunder, upon presentation by
Executive of receipts or other appropriate evidence of
expenses incurred. The Company and Executive acknowledge and
agree that the Company will reimburse the Executive's
reasonable expenses and conference fees for attendance at
seminars, conferences and education courses that are relevant
to the Company's business and Executive's duties and
responsibilities under this Agreement.
(iii) Travel. Executive shall be entitled to fly business class in
any flight, or combination of flights to get to one
destination, of a duration of over five (5) hours.
(iv) Mobile Communication. The Company will provide Executive
with, or reimburse any reasonable expense incurred by
Executive with respect to, suitable tele-communications and
computer equipment used by Executive in the performance of
his duties and responsibilities under this Agreement.
Section 2.05 Withholding. The Base Salary and all other payments to the
Executive for his services to the Company shall be subject to all withholding
and deductions required by federal, state or local law, including those
authorized by the Executive but not otherwise required by law.
Section 2.06 Expense Reimbursement. The Company shall pay to Executive,
within five (5) business days after signing of this Agreement, a non-accountable
expense allowance of $10,000 for the purpose of reimbursing Executive for costs
and expenses incurred by Executive in the negotiation and execution of this
Agreement, including, but not limited to, travel, lodging, meals,
telecommunications charges, and attorney's fees and costs.
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ARTICLE III.
Termination of Employment
Section 3.01 Events of Termination. Executive may terminate his
employment hereunder at any time for any reason by delivering to the Company 90
days' advance written notice of termination.
In addition, Executive may resign and terminate his employment
hereunder for "Good Reason" (which shall also be deemed a termination by the
Company other than for Cause). For purposes of this Agreement, "Good Reason"
means (i) the failure to elect and continue, except as otherwise provided in
this Agreement, Executive as Chief Executive Officer and a member of the Board,
or, except with respect to the Company 1998 annual meeting of shareholders, to
nominate Executive for re-election as a member of the Board (except where a
majority of the sitting directors vote against the nomination of Executive for
such re-election for reasons related to the best interests of the Company), (ii)
the failure to assign Executive duties, authorities, responsibilities and
reporting requirements that are in the aggregate substantially consistent with
his position, or if the scope of Executive's duties and responsibilities as
Chief Executive Officer of the Company are in the aggregate materially reduced,
except for any reduction in duties and responsibilities due to Executive's
illness or disability, PROVIDED, THAT, Good Reason shall not exist where a
majority of the sitting directors on the Board determine that certain duties and
functions which may otherwise have been assigned to the Executive are to be
assigned to an employee, consultant or agent of the Company other than Executive
for bona fide reasons related to the conduct of the Company's business or where
the failure to assign duties and responsibilities consistent with Executive's
position and any material reduction in the scope of Executive's responsibilities
are warranted, in the reasonable judgment of the Board, by Executive's
performance, (iii) a material reduction in or a material delay in the payment of
Executive's total cash compensation and benefits from those required to be
provided in accordance with the provisions of this Agreement, or a breach by the
Company of any other material provision of this Agreement or the Options
referred to in Section 2.03 where the Company has failed to cure such breach
within 10 business days following receipt of written notice from Executive
detailing the basis of the alleged breach, (iv) a requirement by the Company or
the Board that Executive be based outside of the greater New York City area
(which shall include New Jersey), other than on travel reasonably required to
carry out Executive's obligations under this Agreement, or (v) the failure of
the Company to obtain the assumption in writing of its obligations to perform
this Agreement by any successor to all or substantially all of the assets of the
Company at or before consummation of a merger, consolidation, sale or similar
transaction.
Executive shall remit to the Board in writing notice of the existence
of Good Reason, specifying in reasonable detail the basis therefor, not later
than three months from the occurrence of the event which Executive is deeming as
Good Reason. Within 10 business days following the Company's receipt of
Executive's notice relating to Good Reason, the Executive and the entire Board
shall confer in a good-faith attempt to reach an amicable resolution of any
outstanding issue. In the event that the parties shall fail to reach such
amicable resolution, the parties jointly shall promptly refer this matter to an
Arbitrator in the manner prescribed below. Pending determination of the
Arbitrator as herein provided, at the option of Executive and upon notice to the
Company, Executive may continue in the employ of the Company. In any event,
pending a determination by the Arbitrator, no payments shall be due Executive
under Section 3.02 (i) or (ii) hereof until the
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conclusion of the arbitration proceeding or further proceeding contemplated
by Section 5.04 hereof and only if an award is rendered by the Arbitrator in
favor of Executive. If the Arbitrator finds that the Executive does not have
Good Reason for terminating his employment with the Company then the Company may
consider the notice of Good Reason received from Executive as termination by
Executive without Good Reason as of the date of original receipt thereof (unless
the Executive has elected to continue in the employ of the Company during such
arbitration proceeding, in which case the date of termination shall be deemed to
be the date of receipt of the Arbitrator's determination).
The Company shall have the right to terminate for "Cause" upon notice
to the Executive only in the event of (a) a failure by the Executive (other than
any such failure resulting from Executive's incapacity due to physical or mental
illness or injury) substantially to perform his duties hereunder (not including,
however, failure to meet performance targets), or (b) a failure by the Executive
to substantially comply with the direct lawful and proper instructions of the
Board which causes material harm or loss to the Company or which in the
reasonable opinion of the Board is likely to cause material harm or loss to the
Company, or (c) Executive's illegal or unethical acts or conduct which causes
material harm or loss to the Company or otherwise brings notoriety to the
Company or has a material adverse effect on the name or public image of the
Company, provided, however that with respect to clauses (a), (b) and (c) the
foregoing shall not constitute "Cause" if Executive, after being notified in
writing by the Company of the particular acts or circumstances of such material
breach, cures such failure within 30 days after receipt of such notice (if such
failure is reasonably susceptible to cure).
Termination by the Company for Cause shall not be effective until and
unless (i) notice of intention to terminate for Cause has been given by the
Company within three months after the Board learns of the act, failure or event
constituting "Cause" and (ii) the Board has resolved to terminate Executive for
Cause after Executive has been given notice of the particular acts or
circumstances which are the basis for the termination for Cause and has been
afforded at least 10 business days notice of the meeting at which such
resolution is to be voted upon and an opportunity to present his position in
writing and the Company has given notice of termination to Executive within
three days thereafter (and the Executive's termination of employment shall be
effective immediately upon receipt of such notice but shall not be deemed a
termination of employment for Cause unless and until all of the conditions set
forth in clauses (i) through (iii) hereof have occurred), and (iii) if Executive
has commenced an arbitration in the manner prescribed below within 15 days after
such notice of termination, disputing the Company's right under this Agreement
to terminate for Cause, the Arbitrator shall thereafter have determined that the
Executive was terminated for Cause; provided, however, that (a) Company may
suspend the Executive with pay at any time during the period commencing with the
giving of notice to Executive under clause (i) above until final notice of
termination is given under clause (ii) above; and (b) payments due Executive
under Section 3.02 hereof shall not be payable until such time as the Arbitrator
shall have determined that the Executive was terminated without Cause. If
Executive or his representative fails to file a demand for arbitration with the
American Arbitration Association and file the requisite fees pursuant to Rule 4
of the National Rules for the Resolution of Employment Disputes effective June
1, 1996 within 20 days of receipt of notice of termination from the Board, and
diligently pursue such proceeding in accordance with the procedures set forth in
Section 5.04 hereof, such termination shall be conclusively presumed to have
been for Cause.
If the Arbitrator does not rule that the Executive was terminated for
Cause, the Executive
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shall be treated as having been terminated without Cause and Executive shall
have the rights provided under Section 3.02 below with respect to a termination
without Cause.
For all purposes of this Agreement and the Option Agreement attached
hereto as Exhibit A, "Good Reason" and "Cause" shall have the applicable defined
meaning as set forth above in this Section 3.01.
Section 3.02 Severance Package. In the event the Executive's employment
under this Agreement is terminated by the Company other than for "Cause" (a
termination due to the Executive's death or disability, or notice by the Company
of non-renewal of this Agreement, shall be treated for purposes of this
Agreement as a termination by the Company other than for Cause) or by the
Executive for "Good Reason", then the Executive shall be entitled to receive, in
addition to all amounts of Base Salary, earned but unpaid incentive or bonus
compensation under any Incentive Programs (prorated for any partial year), and
other benefits due or payable to him through the date of termination, the
following ("Severance Package"):
(i) in the event that such termination occurs at any time
following the first anniversary of the Effective Date of this
Agreement, an amount, which shall be payable in one lump sum
within 90 days of the date of determination that the
Executive's termination is (x) other than for Cause, or (y)
for Good Reason, as applicable, equal to one year's Base
Salary based on the Base Salary then in effect; provided,
that, if such termination occurs at any time prior to the
first anniversary of the Effective Date of this Agreement,
then the amount payable hereunder shall be equal to one-half
(1/2) of one year's Base Salary, plus, in either case, an
amount equal to the value of all benefits (other than Base
Salary, expense reimbursement and medical insurance benefits)
that would be provided to Executive for the Base Salary
continuation period (one year or one-half year, as the case
may be) including but not limited to amounts due to Executive
under any Incentive Programs at the rate paid or otherwise
provided to Executive for the preceding contract year;
(ii) so long as Executive remains in the employ of the Company for
at least six months following the Effective Date, the
immediate vesting of the Options granted pursuant to Section
2.03 hereof which would have vested by the end of the
contract year in which Executive's employment is terminated,
and, following timely exercise of any such Options, the
Executive shall receive title to the Shares issued in respect
of such Options free and clear of any lien, claim or
encumbrance by, through or under the Company;
(iii) in the event that such termination takes place after the end
of the sixth month following the Effective Date of this
Agreement, Company paid medical insurance benefits available
to all other senior executives of the Company during the
12-month period subsequent to termination of employment shall
be paid by the Company, and thereafter all COBRA rights
available to the Executive shall be paid by the Executive,
but COBRA rights shall be measured from the termination date.
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During any delays permitted by Section 3.01 for arbitration to
determine whether the Executive's termination by the Company was other than for
"Cause" or by the Executive for "Good Reason," if a transaction is agreed to
which would constitute a Change of Control event as defined in this Agreement,
the Company will include appropriate provisions protective of the Executive's
rights hereunder as if the arbitration were resolved favorably to the Executive,
but subject to such a favorable resolution. For the purposes of this Agreement
"Change of Control" means any agreement, transfer, conveyance, assignment,
acquisition, merger or other transaction which results in, directly or
indirectly, any entity acquiring (or obtaining the right to acquire) ownership
of all or substantially all of the assets of the Company or ownership of or
voting power with respect to 50% or more of the common stock (or other ownership
interests) in the Company or any parent or parents of the Company.
Section 3.03 Rights on Termination for Cause or Without Good Reason. No
Severance Package shall be due or owing to the Executive in the event that the
Company shall terminate the Executive's employment for "Cause" or in the event
that the Executive shall terminate his employment with the Company for reasons
other than "Good Reason"; provided, however that Executive shall in all events
be paid all accrued but unpaid Base Salary earned, but unpaid incentive or bonus
compensation under any Incentive Programs (prorated for any partial year), and
other benefits due or payable to him through the date of termination. In
addition, in the event that the Company shall terminate the Executive's
employment for "Cause" or in the event that the Executive shall terminate his
employment with the Company for reasons other than "Good Reason", then except as
provided in the following two sentences, all unvested Options then held by
Executive shall automatically be forfeited (subject, however, to any contrary
determination of the Board in its sole discretion). No forfeiture of unvested
Options shall occur until 15 days after the later of (i) the conclusion of any
arbitration proceeding or further proceeding contemplated by Section 3.01 hereof
or, (ii) if no arbitration proceeding is commenced, until the time for
commencing such a proceeding has lapsed (the later of such two dates being
referred to herein as the "Forfeiture Date"), but no additional service-based or
time-based vesting shall occur with respect to any such Options following the
date Executive's employment is deemed terminated under Section 3.01. Executive
may exercise vested Options at any time as permitted under the Option Agreement.
In all other respects, the terms of the grant of any such Options shall govern.
Section 3.04 Disability. For purposes of this Agreement "disability"
shall mean any physical or mental illness or injury as a result of which
Executive remains absent from work for a period of six (6) successive months, or
an aggregate of 180 days in any twelve (12) month period. Disability shall occur
at the end of any such period.
Section 3.05 Cooperation of Executive. During the period following
notice of termination until the effective date of termination by either party
for whatever reason, the Executive shall cooperate with the Company and use
reasonable efforts to assist the integration into the Company the person or
persons who will assume the Executive's responsibilities.
Section 3.06 Resignation from the Board. Upon the termination for
whatsoever reason of Executive's employment hereunder, Executive shall be deemed
to have resigned forthwith from his position on the Board of Directors, subject
to compliance with the Company's By-laws.
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ARTICLE IV.
Non-competition; Confidential Information; Development Rights
Section 4.01 Other Business Ventures. During the term of the
Executive's employment hereunder, and for a period of twelve (12) months
following the date on which Executive's termination of employment with the
Company becomes effective, the Executive shall not, without the prior written
approval of the Board, directly or indirectly engage in, represent, be connected
with or have a financial interest in any business which is or, to the best of
his knowledge, is about to become engaged in the design, development,
production, sale or distribution of any product or component that directly
competes with a product or component (i) then being designed, produced, sold or
distributed by the Company or any of its affiliates, or (ii) to which the
Company or any of its affiliates shall then have proprietary rights to sell or
distribute (hereinafter the "Company's Business"); provided, however, that
nothing herein contained shall be deemed to prohibit the Executive from (i)
being a passive investor owning up to 5% of any class of outstanding securities
of any company whose stock is publicly traded, or (ii) being an owner, officer,
director or trustee of family businesses or partnerships not engaged in the
Company's Business.
Executive acknowledges that the restricted period of time and the
geographical location specified under this section 4.01 are reasonable, in view
of the nature of the business in which the Company is engaged and Executive's
knowledge of the Company's business and products. If such a period of time or
geographical location should be determined to be unreasonable in any judicial
proceeding, then the period of time and area of restriction shall be reduced so
that this Agreement may be enforced in such an area and during such a period of
time as shall be determined to be reasonable by such judicial proceeding.
Section 4.02 Confidential Information. Except (i) in the course of his
employment with the Company, or (ii) as he may be required pursuant to any law
or court order or similar process, the Executive shall not at any time during or
after the term of the Executive's employment hereunder, directly or indirectly
disclose or use any Confidential Information (as defined below) or proprietary
data with respect to the Company. The term "Confidential Information" as used in
this section means any and all confidential and proprietary information
including but not limited to any and all specifications, formulae, prototypes,
software design plans, computer programs, and any and all records, data,
methods, techniques, processes and projections, plans, marketing information,
materials, financial statements, memoranda, analyses, notes, and other data and
information (in whatever form), as well as improvements and know-how related
thereto, relating to the Company or its products. Confidential Information shall
not include information that (a) was already known to or independently developed
by the Executive prior to its disclosure as demonstrated by reasonable and
tangible evidence satisfactory to the Company, (b) shall have appeared in any
printed publication or patent or shall have become part of the public knowledge
or known generally in the Company's industry except as a result of breach of
this Agreement by the Executive, (c) shall have been received by the Executive
from another person or entity having no obligation to the Company, or (d) is
approved in writing by the Company for release by the Executive.
The Executive agrees to disclose the Information only to persons
necessary in connection with Executive's work with the Company as determined by
the Executive in good faith. The Executive agrees to prevent the unauthorized
disclosure by him of the Confidential Information, and shall take appropriate
measures to ensure that persons acting on his behalf are bound by a like
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covenant or other duty of secrecy.
The Executive acknowledges and agrees that the Confidential Information
furnished to him hereunder is and shall remain proprietary to the Company.
Unless otherwise required by statute or government rule or regulation, and
excluding Executive's personal financial and business records, all copies of the
Confidential Information shall be returned to the Company immediately upon
request without retaining copies thereof.
Section 4.03 Hiring of Company Employees. During the term of the
Executive's employment hereunder, and for a period of twelve (12) months
following the date on which Executive's termination of employment with the
Company becomes effective, the Executive shall not, except in the course of the
performance of his duties hereunder or with the prior approval of the Board, in
any way directly or indirectly, with respect to any person who to the
Executive's knowledge was employed by the Company or its affiliates ("Company
Employee") at any time during the period commencing six months prior to the date
of the hiring of such Company Employee, hire or cause to be hired any Company
Employee, or contract the services of any closely held private corporation or
other entity in which such Company Employee is an officer or director or holds a
25% or greater equity ownership interest.
Section 4.04 Development Rights. The Executive agrees and declares that
all proprietary information including but not limited to trade secrets,
know-how, patents and other rights in connection therewith developed by or with
the contribution of Executive's efforts during his employment with the Company
shall be the sole property of the Company. Executive shall at Company's request
do all things and execute all documents as Company may reasonably require to
vest in Company the rights and protection herein referred to.
ARTICLE V.
Miscellaneous
Section 5.01 Notices. All notices, requests or other communications
provided for in this Agreement shall be made, if to the Company, to the Chairman
of the Board of TTR, and if to the Executive, to his address on the books of the
Company (or to such other address as the Company or Executive may give to the
other for purposes of notice hereunder).
Notices given to Executive shall be sent to:
Steven L. Barsh
316 Winding Way
Merion Station, PA 19066
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With a copy to:
Connolly Epstein Chicco Foxman Oxholm & Ewing
1515 Market St. - 9th Floor
Philadelphia, PA 19102
Attention: Stephen M. Foxman, Esq.
Notices given to the Company shall be sent to:
TTR, Inc.
The Columbus Circle Bldg. - 11th Floor
1841 Broadway
New York, NY 10023
Attention: Moshe D. Tokayer.
With a copy to:
Aboudi & Brounstein
136 Rothschild Blvd.
Tel Aviv 65272, Israel
All notices, requests or other communications provided for in this
Agreement shall be made in writing either (a) by personal delivery to the party
entitled thereto, (b) by facsimile or electronic mail with confirmation of
receipt, (c) by mailing in the United States mails to the last known address of
the party entitled thereto or (d) by express courier service. The notice,
request or other communication shall be deemed to be received upon personal
delivery, upon confirmation of receipt of facsimile or electronic mail
transmission or upon receipt by the party entitled thereto if by United States
mail or express courier service; provided, however, that if a notice, request or
other communication is not received during regular business hours, it shall be
deemed to be received on the next succeeding business day of the Company.
Section 5.02 Assignment and Succession. The rights and obligations of
the Company under this Agreement shall inure to the benefit of and be binding
upon its successors and assigns. The Executive's rights and obligations
hereunder are personal and may not be assigned; provided, however that in the
event of the termination of the Executive's employment due to the Executive's
death or disability, the Executive's legal representative shall have the right
to receive the Severance Package as set forth in Section 3.02 above.
Section 5.03 Headings. The Article, Section , paragraph and
subparagraph headings are for convenience of reference only and shall not define
or limit the provisions hereof.
Section 5.04 Arbitration. In the event of any controversy, dispute or
claim arising out of or related to this Agreement or the Executive's employment
by the Company, the parties shall negotiate in good faith in an attempt to reach
a mutually acceptable settlement of such dispute. If
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negotiations in good faith do not result in a settlement of any such
controversy, dispute or claim, it shall be finally settled by expedited
arbitration in accordance with the National Rules of the American Arbitration
Association governing employment disputes, except to the extent deemed modified
by the following:
(i) The Arbitrator shall be determined from a list of names of
five impartial arbitrators each of whom shall be an attorney
experienced in arbitration matters concerning executive
employment disputes, supplied by the American Arbitration
Association (the "Association") chosen by Executive and the
Company each in turn striking a name from the list until one
name remains.
(ii) The expenses of the arbitration shall be borne equally by
each party; and each party shall bear its own legal fees and
expenses, except that the Arbitrator shall have authority to
award to the prevailing party his or its reasonable
attorney's fees and expenses if an award is rendered by the
Arbitrator in such party's favor.
(iii) The Arbitrator shall determine whether and to what extent any
party shall be entitled to damages under this Agreement. No
party shall be entitled to punitive damages, and each party
waives all such rights if any.
(iv) Each party shall prepare a submission and proposed finding
with such affidavits, memoranda of law, exhibits and other
documents as are appropriate to support the position taken by
such party. The Arbitrator shall take such evidence in the
hearing or request further submissions that the Arbitrator
believes would be necessary to evaluate the submission or the
credibility of the evidence, provided that the Arbitrator
will use every effort to avoid a general hearing. The
Arbitrator shall render a decision in writing, providing the
reasons and support therefor. Such determination by the
Arbitrator is intended to constitute an award and will be an
award entitled to full recognition under Article 75 of the
New York Civil Practice Law and Rules.
(v) Subject to subparagraph (d) above, the Arbitrator shall have
the authority to award any remedy or relief provided for in
this Agreement, in addition to any other remedy or relief
(including provisional remedies and relief) that a court of
competent jurisdiction could order or grant. In addition, the
Arbitrator shall have the authority to decide issues relating
to the interpretation, meaning or performance of this
Agreement even if such decision would constitute an advisory
opinion in a court proceeding or if the issues would
otherwise not be ripe for resolution in a court proceeding,
and any such decision shall bind the parties in their
continuing performance of this Agreement. The Arbitrator's
written decision shall be rendered within sixty days of the
submission by both parties, or if the Arbitrator determines
to hold a hearing, then within sixty days of the hearing. The
decision reached by the Arbitrator shall be final and binding
upon the parties as to the matter in dispute. To the extent
that the relief or remedy granted by the Arbitrator is relief
or remedy on which a court could enter judgment, a judgment
upon the award rendered by the Arbitrator shall be entered in
any court having jurisdiction thereof (unless in the case of
an award of damages, the full amount of the award is paid
within 15 days of its determination by the Arbitrator).
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Otherwise, the award shall be binding on the parties in
connection with their continuing performance of this
Agreement and in any subsequent arbitration or judicial
proceedings between the parties.
(vi) The arbitration shall take place in New York City or in the
locale of the Company's office in the United States where
Executive is based, as elected by the party commencing
arbitration.
(vii) The arbitration proceeding and all filing, testimony,
documents and information relating to or presented during the
arbitration proceeding shall be disclosed exclusively for the
purpose of facilitating the arbitration process and for no
other purpose and shall be deemed to be information subject
to the confidentiality provisions of this Agreement.
(viii) The parties shall continue performing their respective
obligations under this Agreement notwithstanding the
existence of a dispute while the dispute is being resolved
unless and until such obligations are terminated or expire in
accordance with the provisions hereof.
(ix) The parties may obtain an exchange of information including
depositions, interrogatories, production of documents,
exchange of summaries of testimony or exchange of statements
of position, and the Arbitrator shall limit such disclosure
to avoid unnecessary burden to the parties and shall schedule
promptly all discovery and other procedural steps and
otherwise assume case management initiative and control to
effect an efficient and expeditious resolution of the
Dispute. At any oral hearing of evidence in connection with
an arbitration proceeding, each party and its counsel shall
have the right to examine its witness and to cross-examine
the witnesses of the other party who testify at the hearing.
(x) Notwithstanding the dispute resolution procedures contained
in this Section 5.04, either party may apply to any court
having jurisdiction (i) to enforce this Agreement to
arbitrate, (ii) to seek provisional injunctive relief so as
to maintain the status quo until the arbitration award is
rendered or the Dispute is otherwise resolved, or (iii) to
challenge or vacate any final judgment, award or decision of
the Arbitrator that does not comport with the express
provisions of this Section 5.04.
Section 5.05 Invalidity. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect under any law, the
validity, legality or enforceability of the remaining provisions hereof shall
not in any way be affected or impaired.
Section 5.06 Waivers. No omission or delay by either party hereto in
exercising any right, power or privilege hereunder shall impair such right,
power or privilege, nor shall any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof, or the exercise of
any other right, power or privilege.
Section 5.07 Counterparts. This Agreement may be executed in multiple
counterparts,
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each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
Section 5.08 Entire Agreement. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof. No representation, promise
or inducement has been made by either party hereto that is not embodied in this
Agreement and neither party shall be bound by or liable for any alleged
representation, promise or inducement not set forth herein. This Agreement may
not be amended, except by a written instrument hereafter signed by each of the
parties hereto.
Section 5.09 Interpretation. The parties hereto acknowledge and agree
that each party and its or his counsel reviewed and negotiated the terms and
provisions of this Agreement and have contributed to its drafting. Accordingly,
(i) the rules of construction to the effect that any ambiguities are resolved
against the drafting party shall not be employed in the interpretation of this
Agreement, and (ii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto and not in favor of or against any
party regardless of which party was generally responsible for the preparation of
this Agreement.
Section 5.10 Governing Law. This Agreement and the performance hereof
shall be construed and governed in accordance with the internal laws of the
State of New York without reference to principles of conflict of laws.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officer and the Executive has signed this Agreement as of
the day and year first above written.
TTR INC.
By: /s/ Marc D. Tokayer
_________________________
Name: Marc D. Tokayer
______________________
Its: Chairman & President
_________________________
/s/STEVEN L. BARSH
_____________________________
STEVEN L. BARSH
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By: /s/ Marc D. Tokayer
__________________________
Name: Marc D. Tokayer
__________________________
Its: Chairman & President
__________________________
Accepted this ____ day of July, 1998.
/s/ Steven L. Barsh
_________________________________________
Steven L. Barsh
"Optionee"
Memorandum
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SCHEDULE I
Other Business-related Activities of the Executive
Executive may continue to own and operate Barsh Technology Ventures,
Inc. ("Barsh Inc."). The Executive shall not materially increase the scope or
breadth of the activities currently engaged in by Barsh Inc. beyond those
presently existing or incidental thereto without the prior written consent of
the Company. The Executive shall refer exclusively to the Company any business
opportunity in the line of the Company's business of which he shall become
aware.
The Executive shall have the right to appear or participate in any
trade, industry, professional, business or other forum, conference or meeting;
provided, however, that Executive shall disclose that he is affiliated with, and
appearing solely on behalf of, the Company.
The Executive shall have the right to participate in charitable,
religious and civic activities; provided, however, that such activities do not
materially impair or materially interfere with the performance of his duties and
responsibilities on behalf of the Company.
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EXHIBIT A
to Employment Agreement between TTR, Inc. and Steven L. Barsh dated
July 6, 1998.
TTR INC.
INCENTIVE STOCK OPTION AGREEMENT
TTR Inc., a corporation organized under the laws of Delaware (the
"Company"), hereby grants to Steven L. Barsh (the "Optionee") as of July 6,
1998 (the "Option Date"), pursuant to the provisions of the TTR Inc. Stock
Option Plan (the "Plan"), an incentive stock option (the "Option") to purchase
from the Company 250,000 Shares, at the price of $2 and 15/16 per Share upon and
subject to the terms and conditions set forth below. References to employment by
the Company shall include employment by a subsidiary or affiliate of the
Company.
Capitalized terms not defined herein or in the Employment Agreement
entered into between Optionee and the Company dated July 6, 1998 (the
"Employment Agreement") shall have the meanings specified in the Plan.
1. Option Subject to Acceptance of Agreement.
The Option may not be exercised unless the Optionee shall accept this
Agreement by executing it in the space provided below and returning such
original execution copy to the Company.
2. Time and Manner of Exercise of Option.
2.1. Maximum Term of Option. In no event may the option be
exercised, in whole or in part, after ten years from the date on which
the Board approved the Plan (the "Expiration Date").
2.2. Exercise of Option.
(a) The Option shall become exercisable as to
one-fifth of the number of Shares subject to the Option during
each year of employment, prorated over the number of complete
months which Optionee is employed by the Company, and otherwise
as provided below in this Section 2.2. Notwithstanding the
foregoing, in the event that the Optionee resigns (other than
for Good Reason) or is terminated for Cause, as defined in the
Employment Agreement, prior to the first anniversary of the
date of grant none of the Shares exercisable under the Option
shall vest in the Optionee.
(b) If the Optionee's employment by the Company
terminates for Cause, the Option, to the extent not then
vested, shall terminate automatically on the
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effective date of the Optionee's termination of employment for
Cause. For purposes of this Section 2.2, Optionee shall only be
deemed terminated by the Company for Cause if his termination
for Cause has become effective under and pursuant to the
Employment Agreement (but, as provided in the Employment
Agreement, only upon the conclusion of an arbitration
proceeding, if it is timely commenced in accordance with such
Agreement).
(c) If the performance standards set forth in the
Term Sheet attached to this Agreement are met, then all or a
portion of the Option shall be accelerated and become fully
vested and exercisable to the extent provided for in such Term
Sheet. If the Term Sheet has not been completed and attached at
the time of the delivery of this Option Agreement to the
Optionee, this Option Agreement will be fully valid,
enforceable and binding, and the Company and the Optionee will
act in good faith to agree upon a Term Sheet and attach such
Term Sheet to this Agreement within the ninety (90) day period
following delivery of this Option Agreement to the Optionee.
(d) If there is a Change of Control, as defined in the
Employment Agreement, whereby shareholders of the Company
generally will be entitled to exchange or sell their shares, or
otherwise be entitled to participate in such event, then in
such case, the Option shall be accelerated and become fully
vested and exercisable, and may be exercised by the Optionee or
the Optionee's Legal Representative, so that Optionee may
participate in such event as a shareholder of the Company with
respect to the Shares that would be issued upon exericise of
the Option.
(e) If (i) the Optionee's employment by the Company is
terminated by the Company other than for "Cause" within the
meaning of Section 2.2(b) hereof (a termination due to
Optionee's death or disability, as defined in the Employment
Agreement, or notice by the Company of non-renewal of the
Employment Agreement, shall be treated for purposes of this
Agreement as a termination by the Company other than for
"Cause") , or (ii) the Optionee's employment by the Company is
terminated by the Optionee for "Good Reason" as determined in
accordance with the provisions of the Employment Agreement,
then in any such case, that portion of the Option which would
have vested on the next succeeding anniversary of the date of
grant but for the specified event shall be accelerated and
become fully vested and exercisable, and may thereafter be
exercised by the Optionee or the Optionee's Legal
Representative until and including the Expiration Date.
(f) If the Optionee's employment by the Company is
treated (after giving effect to any arbitration proceeding) as
having been terminated by the Optionee without Good Reason
under the Employment Agreement, the Option shall be exercisable
only to the extent it is exercisable on the effective date of
the Optionee's termination of employment and may thereafter be
exercised by the Optionee or the Optionee's Legal
Representative until and including the earlier of (i) the date
which is three months after the effective date of the
Optionee's
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termination of employment or service (or, if later, the date
which is 15 days after the Arbitrator's determination that
Optionee's employment was terminated by the Optionee without
Good Reason) and (ii) the Expiration Date.
(g) If the Optionee dies at any time prior to the
Expiration Date following termination of employment for a
reason giving Optionee the right to exercise until the
Expiration Date under paragraph (e) above, the Option shall be
exercisable by the Optionee's Legal Representative or Permitted
Transferees, as the case may be, until and including the
Expiration Date.
2.3 Method of Exercise. Subject to the limitations set forth in
this Agreement, the Option may be exercised by the Optionee (1) by
giving written notice to the Company specifying the number of whole
Shares to be purchased and accompanied by payment therefor in full (or
arrangement made for such payment to the Company's satisfaction) either
(i) in cash or by bank or certified check, (ii) previously owned whole
Shares (which the Optionee has held for at least six months prior to
the delivery of such Shares or which the Optionee purchased on the open
market and for which the Optionee has good title, free and clear of all
liens and encumbrances) having a fair market value, determined as of
the date of exercise, equal to the aggregate purchase price payable
pursuant to the Option by reason of such exercise, (iii) a promissory
note bearing interest as provided for in the Plan, (iv) in cash by a
broker-dealer acceptable to the Company to whom the Optionee has
submitted an irrevocable notice of exercise or (v) a combination of
(i), (ii) and (iii), and (2) by executing such documents as the Company
may reasonably request. Any fraction of a Share which would be required
to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by the Optionee. No certificate
representing a Share shall be delivered until the full purchase
therefor has been paid.
2.4 Termination of Option.
(a) In no event may the Option be exercised after it
terminates as set forth in this Section 2.4. The Option shall
terminate, to the extent not exercised pursuant to Section 2.3
or earlier terminated pursuant to Section 2.2, on the
Expiration Date.
(b) In the event that rights to purchase all or a
portion of the Shares subject to the Option expire or are
exercised, cancelled or forfeited, the Optionee shall promptly
return this Agreement to the Company upon the Company's request
for full or partial cancellation, as the case may be. Such
cancellation shall be effective regardless of whether the
Optionee returns this Agreement. If the Optionee continues to
have rights to purchase Shares hereunder, the Company shall,
within 10 days of the Optionee's delivery of this Agreement to
the Company, either (i) mark this Agreement to indicate the
extent to which the Option has expired or been exercised,
cancelled or forfeited or (ii) issue to the Optionee a
substitute option agreement applicable to such rights, which
agreement shall otherwise be identical to this Agreement in
form and substance.
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3. Additional Terms and Conditions of Option.
3.1. Nontransferability of Option. The Option may not be
transferred by the Optionee other than (i) by will or the laws of
descent and distribution or pursuant to beneficiary designation
procedures approved by the Company or (ii) as otherwise permitted under
Rule 16b-3 under the Exchange Act (to the extent applicable). Except to
the extent permitted by the foregoing sentence, during the Optionee's
lifetime the Option is exercisable only by the Optionee or the
Optionee's Legal Representative. Except as permitted by the foregoing,
the Option may not be sold, transferred, assigned, pledged,
hypothecated, voluntarily encumbered or otherwise disposed of (whether
by operation of law or otherwise) or be subject to execution,
attachment or similar process.
3.2. Investment Representation. The Optionee hereby represents
and covenants that (a) any Shares purchased upon exercise of the Option
will be purchased for investment and not with a view to the
distribution thereof within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), unless such purchase has been
registered under the Securities Act and any applicable state securities
laws; (b) any subsequent sale of any such Shares shall be made either
pursuant to an effective registration statement under the Securities
Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state
securities laws; and (c) if requested by the Company, the Optionee
shall submit a written statement, in form satisfactory to the Company,
to the effect that such representation (x) is true and correct as of
the date of purchase of any Shares hereunder or (y) is true and correct
as of the date of any sale of any such Shares, as applicable. As a
further condition precedent to any exercise of the Option, the Optionee
shall comply with all regulations and requirements of any regulatory
authority having control of or supervision over the issuance or
delivery of the Shares.
3.3. Withholding Taxes.
(a) As a condition precedent to the delivery of Shares
upon exercise of the Option, the Optionee shall, upon request
by the Company, pay to the Company in addition to the purchase
price of the Shares, such amount of cash as the Company may be
required, under all applicable federal, state, local or other
laws or regulations, to withhold and pay over as income or
other withholding taxes (the "Required Tax Payments") with
respect to such exercise of the Option. If the Optionee shall
fail to advance the Required Tax Payments after request by the
Company, the Company may, in its discretion, deduct any
Required Tax Payments from any amount then or thereafter
payable by the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her
obligation to advance the Required Tax Payments by any of the
following means: (1) a cash payment to the Company pursuant to
Section 3.3(a), (2) delivery to the Company of previously owned
whole Shares (which the Optionee has held for at least six
months prior to the delivery of such Shares or which the
Optionee purchased on the open market and for which the
Optionee has good title, free and clear of all liens and
encumbrances) having a fair market value, determined as of the
date the obligation
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to withhold or pay taxes first arises in connection with the
Option (the "Tax Date"), equal to the Required Tax Payments,
(3) a cash payment by a broker-dealer acceptable to the Company
to whom the Optionee has submitted an irrevocable notice of
exercise or (4) any combination of (1) and (2). Shares to be
delivered may not have a Fair Market Value in excess of the
minimum amount of the Required Tax Payments. Any fraction of a
Share which would be required to satisfy any such obligation
shall be disregarded and the remaining amount due shall be paid
in cash by the Optionee. No certificate representing a Share
shall be delivered until the Required Tax Payments have been
satisfied in full.
(c) Unless the Committee otherwise determines, if the
Optionee is subject to Section 16 of the Exchange Act, the
Optionee may deliver to the Company previously owned whole
Shares in accordance with Section 3.3(b), but only if such
delivery is in connection with the delivery of Shares in
payment of the exercise price of the option.
3.4 Adjustment. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other similar
change in capitalization or event, or any distribution to holders of
Shares other than a regular cash dividend, the number and class of
securities subject to the Option and the purchase price per security
shall be appropriately adjusted by the Committee without an increase in
the aggregate purchase price. If any adjustment would result in a
fractional security being subject to the Option, the Company shall pay
the Optionee, in connection with the first exercise of the Option, in
whole or in part, occurring after such adjustment, an amount in cash
determined by multiplying (i) the fraction of such security (rounded to
the nearest hundredth) by (ii) the excess, if any, of (A) the fair
market value of a Share on the exercise date over (B) the exercise
price of the Option.
3.5. Compliance with Applicable Law. The Option is subject to
the condition that if the listing, registration or qualification of the
Shares subject to the Option upon any securities exchange or under any
law, or the consent or approval of any governmental body, or the taking
of any other action is necessary or desirable as a condition of, or in
connection with, the purchase or delivery of Shares hereunder, the
Option may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been
effected or obtained. The Company agrees to use reasonable efforts to
effect or obtain any such listing, registration, qualification, consent
or approval.
3.6. Delivery of Certificates. Upon the exercise of the Option,
in whole or in part, the Company shall deliver or cause to be delivered
one or more certificates representing the number of Shares purchased
against full payment therefor. The Company shall pay all original issue
or transfer taxes and all fees and expenses incident to such delivery,
except as otherwise provided in Section 3.3.
3.7. Option Confers No Rights as Stockholder. The Optionee
shall not be entitled to any privileges of ownership with respect to
Shares subject to the Option unless and until purchased and delivered
upon the exercise of the option, in whole or in part, and the Optionee
becomes a stockholder of record with respect to such delivered Shares;
and the
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Optionee shall not be considered a stockholder of the Company with
respect to any such Shares not so purchased and delivered.
3.8. Option Confers No Rights to Continued Employment. In no
event shall the granting of the Option or its acceptance by the
Optionee give or be deemed to give the Optionee any right to continued
employment by the Company or any affiliate of the Company.
3.9. Decisions of Board or Committee. The Board or the
Committee shall have the right to resolve all questions which may arise
in connection with the Option or its exercise. Any interpretation,
determination or other action made or taken by the Board or the
Committee regarding the Plan or this Agreement shall be final, binding
and conclusive (subject to the provisions for termination by the
Company for Cause and termination by the Optionee for Good Reason, and
arbitration of disputes, as set forth in the Employment Agreement).
3.10. Company to Reserve Shares. The Company shall at all times
prior to the expiration or termination of the Option reserve or cause
to be reserved and keep or cause to be kept available, either in its
treasury or out of its authorized but unissued Shares, the full number
of Shares subject to the Option from time to time.
3.11. Agreement Subject to the Plan. Except to the extent
otherwise expressly provided herein, this Agreement is subject to the
provisions of the Plan and shall be interpreted in accordance
therewith. The Optionee hereby acknowledges receipt of a copy of the
Plan. To the extent of any inconsistency or conflict between (i) this
Agreement or the terms of the Employment Agreement and (ii) the Plan,
upon approval of the Employment Agreement by the Board the Plan shall
be deemed amended in such respects as to cause the provisions of the
Employment Agreement and this Agreement to take precedence and be fully
valid, enforceable, effective, and legally binding upon the Company.
3.12. Gross-Up. In the event that a Change in Control as
defined in the Employment Agreement has occurred, and the aggregate of
all payments or benefits made or provided to the Optionee under this
Agreement, the Employment Agreement and under all other plans and
programs of the Company (the "Aggregate Payment") is determined by the
Internal Revenue Service ("IRS") or by the "Auditor" (as hereinafter
defined) to constitute a Parachute Payment, as such term is defined in
Section 28OG(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code"), the Company shall pay to the Optionee, prior to the time
any excise tax imposed by Section 4999 of the Code ("Excise Tax") is
payable with respect to such Aggregate Payment, an additional amount
which, after the imposition of all income and excise taxes thereon, is
equal to one-half (50%) of the Excise Tax on the Aggregate Payment. In
no event shall the Company be obligated to pay the Optionee's income
taxes due with respect to his exercise of the Option or with respect to
payments or benefits received under any plans or programs of the
Company. Unless a determination is made by the IRS, the determination
of whether the Aggregate Payment constitutes a Parachute Payment and,
if so, the amount to be paid to the Executive and the time of payment
pursuant to the preceding sentence of this Section 3.12
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shall be made by a United States national accounting firm reasonably
acceptable to the Company (the "Auditor").
4. Miscellaneous Provisions.
[4.1. Designation as Incentive Stock Option. The Option is
hereby designated as constituting an "incentive stock option" within
meaning of section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"); this Agreement shall be interpreted and treated
consistently with such designation. If, for any reason, any part of the
Option granted herein is not qualified to be treated as an incentive
stock option at the time of grant, then as to that portion of the
Option only, the Option shall be deemed a nonstatutory option, subject
to and in accordance with the provisions of the Code.
4.2. Meaning of Certain Terms. (a) As used herein, the term
"Legal Representative" shall include an executor, administrator, legal
representative, beneficiary or similar person and the term "Permitted
Transferee" shall include any transferee (i) pursuant to a transfer
permitted under the Plan and Section 3.1 hereof or (ii) designated
pursuant to beneficiary designation procedures which may be approved by
the Company.
4.3. Successors. This Agreement shall be binding upon and inure
to the benefit of any successor or successors of the Company and any
person or persons who shall, upon the death of the Optionee, acquire
any rights hereunder in accordance with this Agreement or the Plan.
4.4. Notices. All notices, requests or other communications
provided for in this Agreement shall be made in accordance with the
notice provisions in the Employment Agreement.
4.5. Governing Law. The Option, this Agreement, and all
determinations made and actions taken pursuant hereto and thereto, to
the extent not governed by the laws of the United States, shall be
governed by the laws of the State of New York and construed in
accordance therewith without giving effect to principles of conflicts
of laws.
4.6. Counterparts. This Agreement may be executed in two
counterparts each of which shall be deemed an original and both of
which together shall constitute one and the same instrument.
4.7 Dispute Resolution. The provisions of Section 5.04 of the
Employment Agreement relating to resolution of disputes shall also
apply to resolution of disputes under this Agreement.
TTR INC.
23
<PAGE>
<PAGE>
By:_____________________________
Name:___________________________
Its:____________________________
Accepted this ____ day of July, 1998.
- -----------------------------------------
Steven L. Barsh
"Optionee"
Memorandum
24
<PAGE>
<PAGE>
ATTACHMENT A
TO OPTION AGREEMENT BETWEEN TTR, INC. AND STEVEN L. BARSH DATED JULY __,
1998.
TERM SHEET
STEVEN L. BARSH
PERFORMANCE STANDARDS FOR ACCELERATION OF OPTIONS
1. All defined terms used in this Term Sheet and not defined in the
Employment Agreement and/or Option Agreement between TTR, Inc. and
Steven L. Barsh ("Executive") dated July __, 1998 (the "Employment
Agreement") shall have the meaning specified in the TTR, Inc. Stock
Option Plan (the "Plan").
2. This Term Sheet shall apply to 250,000 Shares under Option.
3. [to be inserted at a later date as provided for in the Employment
Agreement]
Notice and all other "Miscellaneous" provisions of Article V of the
Employment Agreement shall be equally applicable to this Term Sheet.
Date: _______________
TTR, Inc.
By:__________________________
Its:__________________________
_____________________________
Steven L. Barsh
25
<PAGE>
<PAGE>
EXHIBIT C
to Employment Agreement between TTR, Inc. and Steven L. Barsh
dated July 6, 1998.
TTR, INC.
BENEFITS TO BE PROVIDED OR MADE AVAILABLE TO EXECUTIVE
26
<PAGE>
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, entered into this day of July, 1998, by and
between TTR Inc., a Delaware corporation with offices in New York, New York
("TTR" or the "Company") and _________________________________ the ("Holder").
W I T N E S S E T H
WHEREAS, the Holder is the holder of Warrant No. _______ dated
__________ which grants the Holder the right to purchase up to ___________
shares of the Common Stock, par value $0.001 of the Company, on the terms and
conditions set forth in such Warrant (hereinafter the "Warrants");
WHEREAS, Company and the Holder desire to set forth their mutual
understanding regarding the disposition of the Warrants.
NOW THEREFORE, in consideration of the mutual agreements and consideration set
forth herein, the parties hereto agree as follows
1. Return of Warrant. Subject to the terms and conditions set forth herein, in
consideration of the issuance by the Company to the Holder of the Replacement
Shares (as defined below), the Holder agrees to return to the Company the
Warrants and hereby waives the right to exercise any of the rights set forth in
the Warrants. In consideration for the return of Warrants the Company agrees to
issue to the Holder 0.40 shares of its common stock for each Warrant returned by
the Holder (the "Replacement Shares").
2. Issuance of the Replacement Shares. The Company shall cause to be issued a
certificate to the Holder as soon as possible reflecting the amount of
Replacement Shares being issued hereunder.
3. Restrictions on Transfer; Holder's Representations and Warranties
3.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, the Holder agrees that it will
not transfer any of the Replacement Shares.
3.2 Not for Resale. The Holder represents that it is acquiring the
Replacement Shares for investment for its own account and not with a view to, or
for resale in connection with, the distribution or other disposition thereof.
The Holder agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Replacement Shares unless such Transfer complies with the provisions
of this Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Securities Act"), or (ii) counsel for the
Holder shall have furnished the Company with an opinion, reasonably acceptable
to the Company, that no such registration is required because of the
availability of an exemption under the Securities Act.
<PAGE>
<PAGE>
2
3.3 Certain Permitted Transfers. (i) Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
(ii) The Holder may sell at any time any of its Replacement Shares in a
Rule 144 Transaction (as hereinafter defined); provided, that, each such sale
shall be made in compliance with Section 3.4 below.
3.4 Rule 144 Sales. If any of the Replacement Shares are disposed of
according to Rule 144 ("Rule 144 Transaction") under the Securities Act of 1933,
as amended or otherwise, the Purchaser shall promptly notify the Company of such
intended disposition and shall deliver to the Company at or prior to the time of
such disposition such documentation as the Company may reasonably request in
connection with such sale and, in the case of a disposition pursuant to Rule
144, shall deliver to the Company an executed copy of any notice on Form 144
required to filed with the Securities and Exchange Commission.
3.5 Legend. Each certificate representing the Replacement Shares shall
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS SUCH TRANSFER, SALE OR ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF A STOCK PURCHASE
AGREEMENT DATED AS OF July __, 1998 (A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY)."
3.6 Qualified Investor The Holder hereby represents and warrants to the
Company as follows:
(a) it has the requisite knowledge and experience in financial
and business matters to be capable of evaluating the merits and risks of this
investment and to make an informed investment decision with respect thereto, and
it or its advisors have received such information requested by them concerning
the Company in order to evaluate the merits or risks of making this investment.
Further, it is acknowledged that the holder or its attorney, accountant or
advisor have had the opportunity to ask questions of, and receive answers from,
the officers of the Company concerning the terms and conditions of this
investment and to obtain information relating to the Company.
(b) The purchase of the Replacement Shares involves risks which
it has evaluated, and is able to bear the economic risk of such purchase
including the total loss of its investment. It has been advised of the current
financial condition of the Company and of the possible adverse effects of such
financial condition on the Company's general business.
<PAGE>
<PAGE>
3
4. Registration and Lock-Up
4.1 Registration Rights. At any time that the Company proposes to
register any of its stock or other securities under the Securities Act of 1933,
as amended (the "Act") in connection with the public offering ("public
Offering") of such securities solely for cash (other than registration relating
solely to the sale of securities to participants in a Company stock plan), the
Company shall use its best efforts to cause to be registered under the Act all
of the Replacement Shares, PROVIDED, that managing underwriter may limit the
number of Replacement Shares to such number (or none) which such underwriter
reasonably determines will not have an adverse effect on the Public Offering. If
the managing underwriter of such underwritten offering shall advise the Company
that it declines to include a portion or all of the Replacement Shares, then the
portion of Replacement Shares to be included shall be allocated among the
Holders in proportion to the respective number of Replacement Shares held by
each.
Notwithstanding the foregoing, in the event that any of the Replacement
Shares are not so registered as provided hereunder by the end of the lock-up
period referred to in Section 4.2 below, then the Company agrees to file a
registration statement [ON FORM S-3 OR OTHER APPROPRIATE FORM] under the Act,
respecting the resale of the Replacement Shares and to use reasonable efforts to
cause such registration statement to become effective as soon as practicable
thereafter. The Holder, or its counsel, shall assist the Company in completing
such registration statement, provided, that, the Company's obligations to file
the registration statement and to use its reasonable efforts to cause the same
to become effective shall be suspended in the event and during such period as
unforeseen circumstances (including, without limitation, pending negotiations
relating to, or the consummation of, a transaction or the occurrence of any
event) which, based upon advice of the Company's counsel, would require
additional disclosure of material information by the Company in the registration
statement as to which the Company has a bona fide business purpose for
preserving the confidentiality thereof or which, based upon the advice of such
counsel, renders the Company unable to comply with SEC requirements. Any such
suspension shall continue only for so long as such event is continuing.
4.2 Lock Ups. Notwithstanding anything to the contrary contained herein,
the Holder agrees that it will not, for a period of SIX months following the
date the Registration Statement is declared effective by the Commission, offer,
sell, contract to sell, grant any option to purchase or right to acquire, or
dispose of any of the Replacement Shares, but in no event will this lock-up
extend for more than one year from the date of this Agreement. Notwithstanding
the above, the Holder maintains the right to make a private transfer provided
that the transferee agrees to be bound by the same restrictions set forth in
this Agreement.
5. Miscellaneous
5.1 Notices. All notices and other communications provided herein shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by mail, postage prepaid, to a party's designated address or,
if sent by facsimile, to its facsimile number at such address.
<PAGE>
<PAGE>
4
5.2 Counterparts; Entire Agreement. This Agreement may be executed in
counterparts. This Agreement shall constitute the entire agreement between the
parties hereto with respect to the subject matter hereof.
5.3 Binding Effect. The provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
5.4 Amendment. This Agreement may be amended only by a written
instrument signed by the parties hereto which specifically states that it is
amending this Agreement.
5.5 Applicable Governing Law. This Agreement and the rights and
obligations of the parties hereto shall be governed by and construed and
enforced in accordance with, the laws of the State of New York.
5.6 Headings. The headings herein are for convenience of reference only,
do not constitute a part of this Agreement, and shall not be deemed to limit,
expand or otherwise affect any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TTR INC.
---------------------------
By: By:
------------------------- -------------------------
<PAGE>
<PAGE>
NON-EXECUTIVE DIRECTOR
STOCK OPTION PLAN OF
TTR INC.
1. Purpose
The purpose of this Non-Executive Director Stock Option Plan (the
"Director Plan") is to provide a means by which each director of TTR INC. (the
"Company") who is not an employee of the Company or any subsidiary of the
Company (each such person being hereafter referred to as a "Non-Executive
Director") will be given an opportunity to purchase Common Stock, par value
$0.001, of the Company ("Common Stock"). The Company, by means of the Director
Plan, seeks to attract and retain the services of qualified independent persons
to serve as Non-Executive Directors of the Company and to provide incentives for
such persons to exert maximum efforts for the success of the Company.
2. Administration
(a) The Director Plan shall be administered by the Board of Directors
(the "Board") of the Company.
(b) All option awards under the Director Plan shall be in the Board's
discretion. All questions of interpretation of the Director Plan or of any
option issued under it shall be determined by the Board and such determination
shall be final and binding upon all persons having an interest in the Director
Plan. All determinations shall be made by a majority of the Board. Any
determination reduced to writing and signed by all of the members of the Board
shall be fully effective as if it had been made by a majority vote at a meeting
duly called and held.
3. Shares Subject to Plan
Subject to the provisions of Section 10 hereof, the shares that may be
acquired pursuant to options granted under the Director Plan shall not exceed in
the aggregate 25,000 shares of the Company's Common Stock.
The Common Stock subject to the Director Plan may be in whole or in part
authorized and unissued shares of Common Stock or issued shares of Common Stock
which shall have been reacquired by the Company. If any option shall expire or
terminate for any reason without having been exercised in full, the unissued
shares subject thereto shall again be available for purposes of the Director
Plan.
4. Eligibility
Options shall be granted to Non-Executive Directors serving on the Board
of Directors of the Company.
<PAGE>
<PAGE>
5. Limitation on Grants
In no event will the grant amount, that is, the amount determined by
multiplying the number of shares with respect to which options have been granted
by the Fair Market Value (as defined in Section 6) of the Company's Common Stock
on the date of grant, exceed $100,000 with respect to an annual grant to a
Non-Executive Director. To the extent the grant amount exceeds the foregoing
limitations, the number of shares subject to the Option to be granted to the
Non-Executive Director will be reduced accordingly.
6. Option Provisions
Each Option shall be evidenced by a written agreement ("Stock Option
Agreement") and shall contain the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") five years from the date of grant. The term of each option may terminate
sooner than such Expiration Date if the optionee's service as a Non-Executive
Director of the company terminates for any reason whatsoever. In the event of
such termination of service, the option shall terminate for Non-Executive
Directors, on the earlier of the Expiration Date or the date two (2) months
following the date of termination of service as a Director. In any and all
circumstances, an option may be exercised following termination of the
optionee's service as a Non-Executive Director only as to that number of shares
as to which it was exercisable on the date of termination of such service, in
accordance with the provisions hereunder.
(b) The exercise price of each option shall be one hundred percent
(100%) of the Fair Market Value of the shares subject to such option on the date
such option is granted. "Fair Market Value" of a share of common stock shall
mean (i) if the common stock is traded on a national securities exchange or on
the NASDAQ National Market System ("NMS"), the per share closing price of the
Common Stock on the principal securities exchange on which they are listed or on
NMS, as the case may be, on the date of grant (or if there is no closing price
for such date of grant, then the last preceding business day on which there was
a closing price); or (ii) if the Common Stock is traded in the over-the-counter
market and quotations are published on the NASDAQ quotations system (but not on
NMS), the per share closing bid price of the Common Stock on the date of grant
as reported by NASDAQ (or if there is no closing bid price for such date of
grant, then the last preceding business day on which there was a closing bid
price); or (iii) if the Common Stock is traded in the over-the-counter market
but bid quotations are not published on NASDAQ, the closing bid price per share
for the Common Stock as furnished by a broker-dealer which regularly furnishes
price quotations for the Common Stock; or (iv) if the Common Stock is not traded
on a securities exchange or the over-the-counter market, the valuation accorded
to each share by the Company's Board.
(c) The optionee may elect to make payment of the exercise price under
one of the following alternatives:
<PAGE>
<PAGE>
(i) Payment of the exercise price per share in cash at the time
of exercise; or
(ii) Payment by delivery of shares of Common Stock of the Company
already owned by the optionee, which Common Stock shall be valued at
Fair Market Value on the date of exercise; or
(iii) Payment by a combination of the methods of payment
specified in subsections 6-(c) (i) and 6-(c) (ii) above.
(d) An option shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his guardian or
legal representative.
(e) All options granted under the Director plan shall be non-qualified
stock options, which do not qualify as incentive stock options within the
meaning of Section 422, or any successor section, of the Internal Revenue Code
of 1986, as amended.
7. Right of the Company to Terminate Services as a Non-Executive Director
Nothing contained in the Director Plan or in any instrument executed
pursuant hereto shall confer upon any Non-Executive Director any right to
continue in the service of the company or any of its subsidiaries or interfere
in any way with the right of the Company or a subsidiary to terminate the
service of any Non- Executive Director at any time, with or without cause or
entitle the Non-Executive Director to be nominated for re-election as a
director.
8. Nonalienation of Benefits
No right or benefit under the Director Plan shall be subject to
alienation, sale, assignment, hypothecation, pledge, exchange, transfer,
encumbrance or charge, and any attempt to alienate, sell, assign, hypothecate,
pledge, exchange, transfer, encumber or charge the same shall be void. No right
or benefit hereunder shall in any manner be liable for or subject to the debts,
contracts, liabilities or the person entitled to such benefit.
9. Adjustments Upon Changes in Capitalization
The stock option Agreements evidencing options may contain such
provisions as the Board shall determine to be appropriate for the adjustment of
the number and class of shares subject to all outstanding options and the option
prices thereof in the event of changes in the outstanding Common Stock of the
Company by reason of any stock dividend, distribution, split-up,
recapitalization, combination or exchange of shares, merger, consolidation or
liquidation and the like, and, in the event of any such change in the
outstanding common stock, the aggregate number and class of shares available
under the Director plan and the number of shares subject to grants pursuant to
Section 6 hereof shall be appropriately adjusted by the Board, whose
determination shall be conclusive and binding on all persons.
<PAGE>
<PAGE>
10. Termination and Amendment
Unless the Director plan shall theretofore have been terminated as
hereinafter provided, no grant of Options may be made under the Director Plan
after July, 2008. The Board may at any time, but not more than once every six
months except to comply with the changes in applicable law, amend, alter,
suspend or terminate the Director Plan; provided, however, that the Board may
not, without the requisite vote of the stockholders of the Company approving
such action (i) materially increase (except as provided in Section 9 hereof) the
maximum number of shares which may be issued under the Director Plan; (ii)
extend the term of the Director Plan; (iii) materially increase the requirements
as to eligibility for participants under the Director Plan or (iv) materially
change the benefits accruing to participants under the Director Plan. No
termination, modification or amendment of the Director Plan or any outstanding
stock option agreement may, without the consent of the Non-Executive Director to
whom any option shall theretofore have been granted, adversely affect the rights
of such Director with respect to such option.
11. Effectiveness of the Plan
The Director Plan shall become effective upon the requisite vote of the
stockholders of the Company approving such action, and upon the approvals, if
required, of any other public authorities. Any grant of options under the
Director Plan prior to such approval shall be expressly subject to the condition
that the Director Plan shall have been so approved. Unless the Director Plan
shall be so approved, the Director Plan and all options theretofore granted
thereunder shall be and become null and void.
12. Government and Other Regulations
The obligation of the Company with respect to options shall be subject
to (i) all applicable laws, rules and regulations and approvals by the
governmental agencies as may be required, including, without limitation, the
effectiveness of a registration statement under the Securities Act of 1933, as
amended, and (ii) the rules and regulations of any stock exchange on which the
Common Stock may be listed.
13. Governing Law
The Director Plan Shall be governed by, and construed in accordance
with, the laws of the State of New York.
<PAGE>
<PAGE>
Subsidiaries of TTR Inc.
<TABLE>
<CAPTION>
Name Jurisdiction of Organization Other Business Names
- ---- ---------------------------- --------------------
<S> <C> <C>
T.T.R. Technologies Ltd. Israel n/a
</TABLE>
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Expert" and to
the use of our report dated April 15, 1997, in the Registration Statement on
Form SB-2 and related Prospectus of TTR Inc.
SCHNEIDER EHRLICH & WENGROVER LLP
Schneider Ehrlich & Wengrover LLP
Woodbury, New York
July 31, 1998
<PAGE>
<PAGE>
[BDO LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
As independent auditors of T.T.R. Inc. ("the Company"), we hereby consent to the
inclusion of our report on the Company's consolidated financial statements as of
December 31, 1997 and the year then ended, dated July 12, 1998, and to the
references to our firm under the heading "Experts" in the Company's Registration
Statement on Form SB-2 and related prospectus to be filed in July/August 1998.
BDO ALMAGOR & CO.
BDO Almagor & Co.
Certified Public Accountants (Israel)
Ramat-Gan, Israel,
July 31, 1998
<PAGE>
<PAGE>
[BDO LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
As independent auditors of T.T.R. Technologies Ltd. ("the Company"), we hereby
consent to the inclusion of our report on the Company's financial statements as
at December 31, 1996, dated April 13, 1997, accompanying the consolidated
financial statements of T.T.R. Inc. in the Registration Statement on Form SB-2
and related prospectus of T.T.R. Inc. to be filed in July/August 1998.
BDO ALMAGOR & CO.
BDO Almagor & Co.
Certified Public Accountants (Israel)
Ramat-Gan, Israel,
July 29, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements accompanying the filing of Form SB-2 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-1-1997 JAN-1-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<CASH> 450,040 94,820
<SECURITIES> 0 0
<RECEIVABLES> 100,000 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 681,578 236,912
<PP&E> 416,045 378,805
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,188,627 691,337
<CURRENT-LIABILITIES> 232,899 511,678
<BONDS> 0 0
<COMMON> 4,272 4,053
0 0
0 0
<OTHER-SE> 672,957 117,692
<TOTAL-LIABILITY-AND-EQUITY> 1,188,627 691,337
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 3,865,736 844,784
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 113,445 6,324
<INCOME-PRETAX> (4,119,612) (850,964)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,119,612) (850,964)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,119,612) (850,964)
<EPS-PRIMARY> (1.35) (0.26)
<EPS-DILUTED> (1.35) (0.26)
</TABLE>
