As filed with the Securities and Exchange Commission on August 13, 1997
Registration No. 333-31691
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
AMENDMENT NO. 1 TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
SIGMA ALPHA GROUP, LTD.
(Name of small business Issuer in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
6799
----------------------
(Primary Standard Industrial Classification Code Number)
23-2498715
----------------------
(I.R.S. Employer Identification No.)
--------------------
1341 North Delaware Avenue
Philadelphia, Pennsylvania 19125
(215) 425-8682
(Address and telephone number of principal executive offices and
principal place of business)
--------------------
Peter S. Pelullo, President
Sigma Alpha Group, Ltd.
1341 North Delaware Avenue
Philadelphia, Pennsylvania 19125
(215) 425-8682
(Name, address and telephone number of agent for service)
Copies of all communications to:
Anthony M. Collura, Esq.
Silverman, Collura, Chernis & Balzano, P.C.
381 Park Avenue South, Suite 1601
New York, New York 10016
(212) 779-8600
<PAGE>
Approximate date of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended, check the following box: [X]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. [X]
If this Form is filed to Register additional securities or an offering
pursuant to Rule 462(b) under the Securities Act, 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, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
===============================================================================
CALCULATION OF REGISTRATION FEE
===============================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class of Offering Aggregate Amount of
Securities to be Amount to be Price Offering Registration
Registered (2) Registered Per Share(1) Price (1) Fee
===============================================================================
Common Stock, $.001 Par Value 5,132,500 $2.00 $10,265,000 $3,110.60
===============================================================================
Common Stock Underlying 100,000 $2.00 $ 200,000 $ 60.61
Common Stock Purchase
Warrant
===============================================================================
Total 5,232,500 $2.00 $10,465,000 $3,171.21
===============================================================================
(1) Estimated solely for the purpose of calculating the registration fee
herein.
(2) Includes such additional number of Shares as may become issuable by reason
of anti-dilution provisions of the Warrants pursuant to Rule 416.
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, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
ii
<PAGE>
SIGMA ALPHA GROUP, LTD.
Cross-Reference Sheet to Prospectus on Form S-2
Furnished Pursuant to Item 501(b) of Regulation S-K
Item Form S-2 Caption Location in Prospectus
- ---- ---------------- ----------------------
1. Forepart of the Registration Outside Front Cover Page
Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Inside Front Cover Page
Pages of Prospectus Outside Front Cover Page
3. Summary Information, Risk Prospectus Summary; Selected Financial
Factors and Ratio of Earnings Data; Risk Factors
to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Terms of the Offering
6. Dilution Dilution
7. Selling Securityholders Resales by Selling Securityholders
8. Plan of Distribution Cover Page; Resales by Selling
Securityholders/Terms of the Offering
9. Description of Securities Description of Securities;
to be Registered Shares Eligible for Future Sale
10. Interest of Named Experts Experts and Legal Matters
and Counsel
11. Information with Respect to Business; Description of
the Registrant Securities; Financial Statements;
Selected Financial Data;
Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; Certain Transactions;
Management; Price Range of Common
Stock; Dividend Policy; Principal
Shareholders
12. Incorporation of Certain Incorporation of Certain
Information By Reference Documents By Reference
13. Disclosure of Commission Not Applicable
Position on Indemnification
for Securities Act Liabilities
iii
<PAGE>
[TO BE INSERTED ALONG LEFTHAND SIDE OF PROSPECTUS COVER PAGE]
[RED HERRING LEGEND]
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 soli-
citation of any 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 State.
iv
<PAGE>
DATED AUGUST 13, 1997 SUBJECT TO COMPLETION
PROSPECTUS
- ----------
SIGMA ALPHA GROUP, LTD.
5,232,500 SHARES OF COMMON STOCK
Sigma Alpha Group, Ltd. (the "Company") is offering (the "Offering")
hereby up to 5,000,000 shares of its Common Stock, $.001 par value (the "Common
Stock" or "Shares"), at a price of $2.00 per share during the 30 day period
commencing on the date of the Prospectus. Shares of the Company's Common
Stock are quoted on the OTC Bulletin Board (the "Bulletin Board") under the
symbol "SGAL". On July 14, 1997 the last sale price of the Common Stock as
reported on the Bulletin Board was $2 1/16.
This Prospectus also relates to the possible resale of up to 132,500
Shares of outstanding Common Stock and up to 100,000 shares of the Company's
Common Stock issuable upon exercise of a Common Stock Purchase Warrant (the
"Warrant") by certain selling securityholders (the "Selling Securityholders").
The Company will not receive proceeds from the sale of shares of Common Stock
by Selling Securityholders. The Warrant is exercisable until August 31, 1999
at a price of $2.00 per Share. The Selling Securityholders may effect the sale
of their shares from time to time in transactions (which may include block
transactions) in the over-the-counter market, in negotiated transactions,
through the writing of options on the Common Stock, or a combination of such
methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. See "Resales By
Selling Securityholders".
THESE SECURITIES ARE HIGHLY SPECULATIVE. THEY INVOLVE A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION. THEY SHOULD BE PURCHASED ONLY
BY PERSONS WHO CAN AFFORD TO SUSTAIN A TOTAL LOSS OF THEIR ENTIRE
INVESTMENT (SEE "RISK FACTORS" AND "DILUTION".)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTA-
TION TO THE CONTRARY IS A CRIMINAL OFFENSE.
===============================================================================
Price to the Public(1) Commissions(2) Proceeds to
the Issuer(2)
- -------------------------------------------------------------------------------
Total Per Share $2.00 $.20 $1.80
- -------------------------------------------------------------------------------
Total Maximum(3) $10,000,000 $1,000,000 $9,000,000
===============================================================================
(See Notes on Following Page)
SIGMA ALPHA GROUP, LTD.
1341 North Delaware Avenue
Philadelphia, PA 19125
(215) 425-8682
The date of this Prospectus is August __, 1997
<PAGE>
[Inside Front Cover]
(1) The Company intends to offer the Shares directly to the public through
Peter Pelullo, an officer and director of the Company, on a "best efforts-no
minimum basis." Mr. Pelullo will not receive compensation based upon the offer
and sale of the Shares. The Company may also offer the Shares through broker/
dealers who are members of the National Association of Securities Dealers, Inc.
("NASD") and/or other overseas parties who are not NASD members. NASD members
may receive up to $.20 for each share sold in the Offering. Overseas parties
may receive a combination of cash commissions and shares of the Company's
Common Stock not to exceed 10% of the Shares sold. Payment for the Shares
shall be made by check or money order payable to the Company and must be
delivered to the Company along with a duly executed subscription agreement in
the form attached hereto to 1341 North Delaware Avenue, Philadelphia, PA 19125.
(2) The figures for Commissions and Net Proceeds to Issuer assumes that a 10%
cash commission will be paid on all Shares sold in this Offering and does not
reflect the payment of expenses in connection with this Offering estimated at
$50,000.
(3) Refers to the 5,000,000 Shares being offered for sale by the Company.
The Company currently plans to offer the Shares for sale in the state of
New York and in foreign countries. No assurances can be given that the Shares
will in fact be available for offer and sale in any such jurisdictions. The
Company may also seek to offer and sell the Shares in other jurisdictions.
CAVEATS
THE OFFERING IS MADE SUBJECT TO WITHDRAWAL, CANCELLATION, OR MODIFICATION BY
THE COMPANY WITHOUT NOTICE. THE COMPANY RESERVES THE RIGHT, IN ITS SOLE
DISCRETION, TO REJECT ANY AND ALL SUBSCRIPTIONS, AND NO SUBSCRIPTION WILL BE
EFFECTIVE UNTIL ACCEPTED BY THE COMPANY.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-2 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act") with respect to the Shares offered hereby. This Prospectus
does not contain all of the information set forth in the Registration State-
ment, certain parts of which are omitted in accordance with the Rules and reg-
ulations of the Commission. For further information with respect to the Company
and the securities offered hereby, reference is made to the Registration State-
ment. Statements contained in this Prospectus as to the contents of any con-
tract or other document are not necessarily complete, and in each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference.
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information filed by the Company can be
2
<PAGE>
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material
can be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http:\\www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which are on file with the Commission, are
incorporated in this Prospectus by reference and made a part hereof: (i) The
Company's Annual Report on Form 10-KSB for the year ended July 31, 1996, filed
with the Commission on October 29, 1996, and (ii) Quarterly Reports on Form
10-QSB for the quarters ended October 31, 1996, January 31, 1997, and April 30,
1997, filed with the Commission on December 13, 1996, February 28, 1997, and
June 13, 1997, respectively.
This Prospectus is accompanied by a copy of the Company's latest Annual
Report on Form 10-KSB as filed with the Commission. The Company hereby will
provide without charge to each person to whom a copy of this Prospectus has
been delivered, on the written or oral request of any such person, a copy of
any or all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents including, without limitation, the Company's latest Form 10-QSB.
Written requests for such copies should be directed to Sigma Alpha Group, Ltd.,
at its executive offices at 1341 North Delaware Avenue, Philadelphia, PA 19125,
Attention Carol Diaddorio. Oral requests should be directed to such individual
(telephone number (215) 425-8682).
-----------------
No broker, dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus in connection with the offer made hereby, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or the Selling Securityholders. This Prospectus
does not constitute an offer to sell, or a solicitation or an offer to buy,
the securities offered hereby to any person in any state or other jurisdiction
in which such offer or solicitation is unlawful. The delivery of this
Prospectus at any time does not imply that information contained herein is
correct as of any time subsequent to its date.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND
FINANCIAL STATEMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. EXCEPT
WHEN OTHERWISE INDICATED, ALL SHARE AND PER SHARE INFORMATION CONTAINED IN THIS
PROSPECTUS REFLECT A TWO FOR ONE STOCK SPLIT EFFECTIVE MAY 10, 1991 AND A ONE
FOR THREE REVERSE STOCK SPLIT EFFECTIVE OCTOBER 21, 1992.
THE COMPANY
Sigma Alpha Group, Ltd. (the "Company") was incorporated under the Laws of
the Commonwealth of Pennsylvania in February 1988 and commenced operations in
June 1989, as the successor-in-interest of Sigma Sound Studios, Inc. ("Sigma
Sound"). The Company became publicly held upon its merger in January 1991 with
Fabulous Mergers, Inc., an inactive public company incorporated in Nevada.
Pursuant to the terms of the merger, Fabulous Mergers, Inc., as the surviving
corporation, changed its name to Sigma Alpha Entertainment Group, Ltd., and was
subsequently reincorporated in Delaware. In 1995 the Company changed its name
to the Sigma Alpha Group, Ltd. In April 1995 the Company acquired 80% of Global
Telecommunications of Delaware, Inc. ("Global"), a company engaged in the
development and marketing of certain technology pertaining to telecommunication
products.
Since 1995, the Company has expended approximately $2,700,000 in developing
its telecommunication technologies and products, including a digital voice
information pager ("Voice Pager") and a stock market information receiver
("SIR") to be sold in the People's Republic of China ("China"). The Company
intends to market the Voice Pager in China and other emerging markets utilizing
direct relationships with radio stations and/or through joint ventures with
local businesses. Under the joint venture approach, the Company plans to
participate in the monthly paging subscription revenues.
The Voice Pager is designed to allow for the development and implemen-
tation of a cost-effective paging system in countries which lack substantial
telecommunication system infrastructures such as China and other emerging
markets. The Company's paging system will utilize existing FM radio frequencies
to transmit voice messages directly to a subscriber's hand held Voice Pager.
The Voice Pager stores a digital voice message for playback immediately upon
demand by the subscriber. The Company believes that with minimal capital
investment, Chinese and other emerging markets' radio stations can modify their
existing FM Radio transmitters to implement the Company's Voice Pager system
and create a Voice Paging service that reduces problems associated with
traditional beepers, numeric pagers and alphanumeric pagers currently in use in
China and other emerging markets. Traditional beepers and numeric paging
systems require a paging subscriber to have ready access to a telephone to
return or retrieve a message. The Company believes that the lack of easy
access to telephones throughout China and other emerging markets negatively
effects the use of beepers and numeric pagers in those countries. Chinese
character pagers allow for a subscriber to receive a message consisting of
numerals and characters that have been input by typists at a central station.
The Company believes that its Voice Pager technology affords significant
advantages over Chinese character pagers which require the entry of complex
4
<PAGE>
and numerous Chinese characters in order for messages to be received correctly.
Traditional beepers, numeric pagers and alphanumeric and Chinese character
pagers are currently marketed in China. The Chinese Ministry of Posts and
Telecommunications has reported that approximately 25,000,000 pagers were
in service in China at the end of 1995. The Company believes that its Voice
Pager will be competitively priced with Chinese character pagers presently
marketed in China.
The Company expects that engineering prototypes of the Voice Pager will be
available in the third quarter of 1997 and production prototypes in the fourth
quarter of 1997. The Company believes that additional funding of approximately
$750,000 will be necessary in order to meet the foregoing timetable and
prepare for commercialization of the product. Accordingly there can be no
assurance that the Company will meet its milestones.
The SIR system was designed to allow for the transmission of stock market
information through FM radio frequencies to a subscriber's hand held SIR
receiver. The information is transmitted to the SIR in a "scrambled" format
and is designed to be "unscrambled" by the SIR. In June 1996 Global received
its first order for SIR units from an affiliate of Radio Guangdong. Global has
has expended approximately $1,600,000 in developing the SIR system. While there
are orders presently outstanding for the first generation of SIR units
("SIR 100"), it will be necessary to complete the development of a second
generation of SIR units ("SIR 200") designed to eliminate certain locking prob-
lems which affected a percentage of SIR 100 units. The Company is currently
evaluating whether to continue the further development of the SIR 200 units or
devote its full resources to the development and commercialization of the Voice
Pager. Management continues to believe that the SIR system can be developed
into a commercially successful product for the Chinese market. Therefore, the
Company has decided to evaluate strategic alternatives for the SIR program that
will minimize use of the Company's capital resources. Alternatives to be eval-
uated include, but are not limited to, joint venture arrangements and royalty/
licensing arrangements (see "Business - Recent Developments").
Significant funding will be required to complete the development and
commercialization of the Voice Pager and SIR. The Company intends to utilize
proceeds raised from this Offering to continue to fund the development,
manufacture and marketing of the Voice Pager and possibly the SIR technologies.
There can be no assurance, however, that the Company will be able to raise
sufficient proceeds to successfully develop, manufacture and/or market its
products (see "Business - Recent Developments").
The Company's offices are located at 1341 N. Delaware Avenue, Philadelphia,
Pennsylvania 19125. The Company's telephone number is (215) 425-8682.
5
<PAGE>
Securities Outstanding
Prior to Offering(1) Shares of Common Stock 18,906,704
Shares of Series B Preferred Stock 664,110
Securities Outstanding
After Offering(1) Shares of Common Stock 23,906,704
Shares of Series B Preferred Stock 664,110
Use of Proceeds(1): The Company intends to use the net proceeds of approx-
imately $8,950,000 raised in this Offering (excluding
any funds that may be raised upon exercise of the
Warrant) for the further development and commercial-
ization of its technology and products, the financing
of accounts receivable and inventories for the Voice
Pager and possibly the SIR products, and for general
corporate and working capital purposes.
Risk Factors: An investment in the Company's securities involves a
high degree of risk. For a discussion of certain risk
factors affecting the Company, see "Risk Factors".
OTC Common Stock
Bulletin Board
Symbol: SGAL
(1) Unless indicated to the contrary, all references in this Prospectus to the
Company's outstanding securities and proceeds from the Offering do not give
effect to the possible issuance of (i) 3,070,000 shares reserved for
issuance upon exercise of outstanding warrants and options (including 100,000
Shares issuable upon exercise of the Warrant); and (ii) shares reserved for
issuance pursuant to the Company's employee stock option plan.
6
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table summarizes certain selected financial information of
the Company and is qualified in its entirety of the more detailed Financial
Statements and Notes thereto incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
For the Years Ended July 31,
(amounts in thousands, except per share data)
------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of
Operating Data
Sales $ -- $ -- $ -- $ 666 $ 347
Cost of Sales -- -- -- 337 343
------- -------- ------- ------- -------
Gross Profit (Loss) -- -- -- 329 4
------- -------- ------- ------- -------
Operating Expenses -- -- 51 417 1,651
General and
Administrative
Expenses 2,253 1,993 1,213 2,382 3,521
------- -------- ------- ------- -------
Total Operating
Expenses and General
and Administrative
Expenses 2,253 1,993 1,264 2,799 5,172
------- -------- ------- ------- -------
Loss from Continuing
Operations before
Other Income
(Expense) (2,253) (1,993) (1,264) (2,470) (5,168)
Other Income
(Expense) 2 (193) (295) (565) (259)
------- -------- ------- ------- -------
Loss from Continuing
Operations (2,251) (2,186) (1,559) (3,035) (5,427)
Income from
Discontinued
Studio Operations -- -- -- -- 4
Extraordinary Gain 62 710 -- -- --
------- ------- ------- ------- -------
Net (Loss) $(2,189) $(1,476) $(1,559) $(3,035) $(5,423)
======= ======= ======= ======= =======
7
<PAGE>
(Loss) Per Share:
Cont. Operations $ (.16) $ (.23) $ (.21) $ (.45) $ (1.19)
Discont. Operations -- -- -- -- --
Extraordinary Gain -- .07 -- -- --
------- ------- ------- ------- -------
(Loss) Per Share $ (.16) $ (.16) $ (.21) $ (.45) $ (1.19)
======= ======= ======= ======= =======
Weighted Average
Number of Shares of
Common Stock
Outstanding 13,848 9,444 7,378 6,751 4,554
</TABLE>
<TABLE>
<CAPTION>
As of July 31,
(amounts in thousands)
---------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
Total Assets $ 1,459 $ 1,728 $ 40 $ 30 $ 876
Working Capital
(Deficit) $ 924 $ 1,204 $(6,762) $(5,850) $(4,111)
Long Term Debt $ -- $ -- $ 29 $ 29 $ 171
Total Stockholders'
Equity (Deficiency) $ 1,071 $ 1,304 $(6,770) $(5,851) $(3,832)
</TABLE>
8
<PAGE>
Statement of Operating Data (Unaudited)
(amounts in thousands, except per share data)
Nine Months Ended Nine Months Ended
April 30, 1997 April 30, 1996
----------------- -----------------
Sales $ 348 $ --
Cost of sales 314 --
------- -------
Gross Profit 34 --
Total Operating Expenses 2,370 1,874
------- -------
Loss from Continuing Operations
Before Other Income (Expense) (2,336) (1,874)
Other Income (Expense) 54 (1)
------- -------
Loss before extraordinary gain (2,282) (1,875)
Extraordinary Gain 10 52
------- -------
Net (Loss) $(2,272) $(1,823)
======= =======
Net Loss Per Share (.13) (.13)
Weighted Average Number of
Shares of Common Stock Outstanding 17,063 13,798
Balance Sheet Data (Unaudited)
(amounts in thousands)
April 30, 1997
---------------------------
Actual As Adjusted(1)
------ -----------
Total Assets $3,453 $12,403
Working Capital $2,890 $11,840
Long Term Debt -- --
Total Stockholder's
Equity $3,070 $12,020
(1) Gives effect to the net proceeds of approximately $8,950,000 to be received
by the Company on the sale of all 5,000,000 Shares offered hereby.
9
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE IN NATURE AND INVOLVE A
HIGH DEGREE OF RISK. THEY SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO
LOSE THEIR ENTIRE INVESTMENT. THEREFORE, EACH PROSPECTIVE INVESTOR SHOULD,
PRIOR TO PURCHASE, CONSIDER VERY CAREFULLY THE FOLLOWING RISK FACTORS, AS WELL
AS ALL OTHER INFORMATION SET FORTH IN THIS PROSPECTUS.
1. Significant Accumulated Deficit and Operating Losses.
The Company has incurred significant losses from operations since its
inception and has accumulated a deficit of approximately $20,108,000 and
$22,380,000 through July 31, 1996 and April 30, 1997, respectively. The Company
reported net losses of approximately $2,189,000, $1,476,000 and $1,559,000
for the years ended July 31, 1996, 1995 and 1994, respectively, and a
net loss for the nine month period ended April 30, 1997 of $2,272,000. All of
the Company's losses prior to fiscal 1995 amounting to $16,443,000 related to
its failed attempts to engage in the music and recording industry. The
Company's recent losses relate to corporate overhead, administrative expenses
and other expenses, including expenses incurred in developing the Company's
Voice Pager and SIR technologies.
The Company began to generate revenues in fiscal 1997 on a limited basis
from the sale of SIR units. However, such sales were not sufficient to allow
the Company to operate profitably. Moreover, the Company may not pursue the
sale of additional SIR units (see "Business - Recent Developments"). Accord-
ingly, the Company's ability to generate sufficient revenue in the future will
be dependent upon many factors including the successful development of the
Company's Voice Pager technology, the Company's ability to effectively compete
with existing products in China and other markets, the degree of competition
faced by the Company, the Company's ability to respond to changes in economic
and regulatory conditions in China and other foreign markets and the ability of
Chinese and other radio stations to successfully market the use of the
Company's products in China and other foreign market places. There can be no
assurance that the Company will generate sufficient revenues to generate
positive cash flow or operating income.
2. Recent Attempts to Reorganize Business.
During fiscal 1996 the Company decided to focus its efforts exclusively on
the development, manufacture and sale of the Voice Pager and SIR products as
well as other technologies which may develop therefrom. In the recent past the
Company attempted to reorganize its business through the entry into agreements
and letters of intent to acquire a Chinese air conditioner manufacturer and
establish a joint venture to manufacture silk products. The Company terminated
these agreements and a number of other non-binding memorandum agreements
regarding other proposed ventures in Southeast Asia and Europe. Since the
Company has only recently been involved in its current business it will be
subject to all the risks inherent in attempting to establish relatively new
business ventures as well as the risks associated with engaging in business
operations in China and other foreign jurisdictions. These risks include the
potential inability of the Company to efficiently operate the business, the
need for substantial working capital, and the absence of an existing operating
history. There can be no assurance that the Company will either generate
sufficient proceeds or operate its business effectively.
10
<PAGE>
3. Need for Further Financing.
The Company intends to rely upon the proceeds derived from the sale of the
Shares to fund its business plans and further the development of its technology
as well as market its products. The Company believes that a minimum of
$750,000 is necessary to finalize development of the Voice Pager. In the
event the Company decides to continue the further development of its SIR
technology, at least $350,000 of additional funds will be required. There can
be no assurance that any of the Shares will be sold. Moreover, there is no
minimum number of Shares which must be sold in order for an investor's
subscription to be accepted by the Company. In the event that a minimum of
$5,000,000 is not raised through the sale of the Shares, the Company will be
required to seek out additional sources of capital and/or debt financing in
order to raise the funds necessary to consummate its plans. The Company
presently has no binding commitments and/or agreements to secure such funding.
Accordingly there can be no assurance that such financing would be available or
if available on terms acceptable to the Company. In the event additional or
acceptable financing is unavailable the Company would not be able to consummate
its plans.
4. Lack of Experience in Existing Business
The Company lacks any substantial prior expertise in the telecommunica-
tions industry. Accordingly, the Company will be required to rely upon its
relationship with Chinese and other radio stations to assist the Company in the
marketing and sale of the Company's products. The Company intends to engage
consultants to review operations of its businesses and provide advice to the
Company regarding the efficiencies of such operations. In addition, the
Company plans to hire key personnel with experience in the telecommunications
industry.
5. Lack of Customers and Limited Suppliers.
The Company currently does not have any orders for its Voice Pager.
Accordingly the Company will be required to seek out customers for its Voice
Pager products in order to successfully operate its business. Since the
Company's products represent new technologies, there is no proven market which
exists for its products. Therefore, the Company will be required to establish
with its potential customers the superiority and advantages that the Company's
products possess over existing technologies. However, there is no assurance
that the Company will be successful in this regard. While Global has
outstanding orders for the SIR units, further development of certain aspects of
SIR technology is needed in order to meet such orders. The Company has
determined to concentrate its efforts on finalizing the development of the
Voice Pager system before focusing significant additional resources on SIR
related develop- ment projects. Accordingly, the Company may not realize any
revenues from its outstanding SIR orders.
The Company currently relies on a limited number of suppliers of
components and other parts for the SIR and proposed Voice Pager systems. The
Company, when needed, will most likely rely on only one manufacturer for appli-
cation specific integrated circuits for its products. Failure or delay by the
Company's suppliers in fulfilling its anticipated needs would adversely affect
the Company's ability to deliver and market its products. The Company may have
difficulty in obtaining alternative suppliers due to, among other things,
possible material shortage or possible lack of adequate purchasing power.
11
<PAGE>
6. Evolving Market; New Product Development; Technological Obsolescence.
The telecommunication and pager markets are characterized by evolving
industry requirements which may result in product or technology obsolescence.
As a result, certain companies may be developing technologies or products which
may be functionally similar, or superior, to some or all of those offered by
the Company. As a result of the above, the ability of the Company to compete
will depend on its ability to finalize the development of its products, adapt,
enhance and improve its existing products and technology and, if necessary, to
develop and introduce to the marketplace in a timely and cost-competitive
manner new products and technology. There can be no assurance that the Company
will be able to compete successfully, that its competitors or future compet-
itors will not develop technologies or products that render the Company's
products and technology obsolete or less marketable or that the Company will be
able to successfully enhance its products or technology or adapt them satis-
factorily. In addition, the Company's success will depend upon its current and
proposed technologies and products meeting acceptable cost and performance
criteria in the marketplace. There can be no assurance that technologies and
products will meet applicable price or performance objectives or that unan-
ticipated technical or other problems will not occur which would result in
increased costs or material delays. Also, there can be no assurance that new
technologies will not be developed in the near future by the Company or its
competitors which would render the Company's products obsolete. See "Business".
New product development efforts are subject to all of the risks inherent
in the development of new technology and products (including unanticipated
delays, expenses, technical problems or difficulties, as well as the possible
insufficiency of funding to complete development). There can be no assurance
as to when, or whether, the Voice Pager will be successfully developed. No
assurance can be given that prototypes and final products can be developed
within a reasonable development schedule, if at all. There can be no assurance
that the Company will have sufficient economic or human resources to complete
such development in a timely manner, or at all, or that it could enter into
economically reasonable arrangements for the completion of such products by
third parties.
7. Product Protection and Infringement.
The Company intends to rely on a combination of patents, trade secret,
copyright and trademark laws, together with non-disclosure agreements, to
establish and protect proprietary rights in its product. In January 1996 the
Company filed an application for a U.S. Patent on its Voice Pager. There can be
no assurance that such patent will be issued or if issued that it will afford
the Company's product adequate protection. Although the issuance of a United
States Patent entitles the owner to a statutory presumption of validity, that
presumption is not conclusive as to validity or the scope or other enforce-
ability of the claims therein. The validity and enforceability of a patent
can be challenged by litigation after its issuance, and, if the outcome of such
litigation is adverse to the owner of the patent, other parties may be free to
use the subject matter covered by the patent. Moreover, the cost of defending
patents against infringing uses could require substantial expenditures which
the Company may be unable to afford. There can be no assurance that the steps
taken by the Company to protect its proprietary rights will be adequate to
12
<PAGE>
prevent misappropriation of its technology or the independent development by
others of similar technology. In addition, the laws of China and other
countries where the Company may attempt to engage in business may not protect
the Company's proprietary rights to the same extent as do the laws of the
United States. There can be no assurance that unauthorized parties will not
attempt to copy aspects of the Company's products or obtain and use information
that the Company regards as proprietary.
8. Competition.
The Company's products compete with those of numerous well-established
companies which design, manufacture or market beepers, numeric, alphanumeric
and voice pager systems and products. All of these companies have substan-
tially greater financial, technical, personnel and other resources than the
Company and have established reputations for success in the development,
licensing, sale and service of their products and technology. Certain of these
competitors may also have the financial resources necessary to enable them to
withstand substantial price competition or downturns in the market for such
products.
9. Challenges of Growth.
Should the Company successfully raise funds in this Offering and
successfully achieve market acceptance for its Voice Pager and possibly the SIR
products in China and other foreign markets, of which there can be no
assurance, the Company anticipates a period of rapid growth that is expected to
place a strain on the Company's administrative, financial and operational
resources. The Company's ability to manage any staff and facilities growth
effectively may require it to continue to improve its operations, financial and
management controls, reporting systems and procedures, install new management
information and control systems and to train, motivate and manage its
employees. There can be no assurance that the Company will install such
management information and control systems in an efficient and timely manner or
that the new systems will be adequate to support the Company's operations. If
the Company's management is unable to manage growth effectively, the Company
could experience significant delays or unforeseen costs in the transition of
its technology and research and development activities, which delays or costs
could have a material adverse impact on the Company's prospects or result of
operations.
10. Reliance upon Chinese Radio Station Owners.
Successful implementation of the Company's telecommunication products
requires access by users to FM radio frequencies. Accordingly, the Company has
concentrated its marketing efforts on Chinese and other radio stations by
explaining the benefits of the Company's products as compared to competing
products and the ability of radio stations to generate revenue from a portion
of their FM signals which are currently underutilized. The Company must also
convince radio stations to invest funds necessary to adapt their existing FM
radio transmitters to accommodate the Company's technology and establish
support and marketing departments necessary to operate a pager information
business. There can be no assurance that the Company will be successful in
this regard.
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11. Implementation of Technology.
The implementation of the Company's products requires existing FM radio
transmitters to undergo various technical changes, operational changes and
improvements. There can be no assurance that the Company's technology will be
able to deliver to subscribers commercially marketable stored voice messages or
stock information services. In addition, delayed delivery of new technology
is not uncommon in the telecommunications industry. There can be no assurance
that the Company's development consultants and/or suppliers will be able to
meet completion and delivery target dates for the Company's products. To the
extent that components required to deliver the Company's products are unavail-
able the implementation of the Company's technology will be delayed, adversely
affecting the Company's financial condition and results of future operations.
12. Dependence on Contract Manufacturers.
The Company will rely on contract manufacturers to produce the Company's
products. Therefore, the Company will be dependent upon such contract
manufacturers to timely produce the Company's products based upon the Company's
specifications. There can be no assurance that such contract manufacturers
will perform to the Company's satisfaction or be responsive to the needs of the
Company's customers.
13. Foreign Operations.
The Company's existing operations currently relate to the conduct of
operations in China. The Company may also seek to establish business or joint
ventures in other foreign countries. These operations will be subject to the
risks of conducting business internationally, including the possible
instability of foreign governments, changes in regulatory requirements,
difficulties in obtaining foreign licenses, as well as other general barriers
and restrictions in relation to compliance with foreign laws. In addition, any
future revenues generated by the Company upon successful consummation of its
planned activities would be subject to currency fluctuations which could
negatively affect the Company. Furthermore, the laws of various jurisdictions
where the Company intends to establish its business activities may not
recognize or permit the assertion of certain claims with respect to violation
of securities laws which are commonly recognized in the United States.
Accordingly, should the Company be in violation of any such securities laws,
shareholders may be unable to seek and/or obtain redress with respect to such
violations against assets of the Company's operations located in international
jurisdictions.
14. Dependence Upon Key Personnel.
The Company is substantially dependent upon the continued services of
Peter Pelullo, its Chairman and President. Mr. Pelullo has entered into an
employment agreement with the Company which expires in 2006. The loss of the
services of Mr. Pelullo through incapacity or otherwise would have a material
adverse effect upon the Company's business and prospects. To the extent that
the services of Mr. Pelullo become unavailable, the Company will be required to
retain other qualified personnel, and there can be no assurance that it will
be able to recruit and hire qualified persons upon acceptable terms. The
Company does not possess key person life and disability insurance on the life
of Mr. Pelullo.
14
<PAGE>
15. No Underwriter.
The Shares are being offered by the Company through Peter Pelullo, an
officer and director of the Company, and may also be offered by broker-
dealers and others. The Company has not retained an underwriter to assist in
offering the Shares. Mr. Pelullo has very limited experience in the offer
and sale of securities, consequently, he may be unable to effect the sale of
the Shares even with the assistance of broker-dealers. In the event an
underwriter is retained by the Company, the offering of the Company's Shares
would be suspended until such time as the Company's Registration Statement,
including this Prospectus, was amended to reflect such retention. The
Registration Statement would then require additional review and clearances by
the Securities and Exchange Commission, the National Association of Securities
Dealers, Inc. (the "NASD") and state regulatory authorities. The Company could
be expected to incur significant additional legal and accounting costs if
further review were required to be undertaken by government authorities. There
is no assurance the Company and/or others are capable of selling all, or any,
of the Shares offered or that a sufficient number of Shares will be sold to
fund the Company's plans. The Company believes that a minimum of $5,000,000 is
necessary in order to complete the development of and begin the commercializing
of the Voice Pager and market the Company's products. (See "Terms of
Offering.")
16. OTC Bulletin Board.
The Company's Common Stock is currently quoted on the OTC Bulletin Board.
The OTC Bulletin Board is an NASD sponsored and operated inter-dealer automated
quotation system for equity securities not included on the NASDAQ System. The
OTC Bulletin Board has only recently been introduced as an alternative to "pink
sheets" trading of over-the-counter securities. Consequently, liquidity and
stock price of the Company's securities in the secondary market may be
adversely affected.
17. No Assurance of Continued Public Market.
There is no assurance that a regular trading market for the Company's
securities will continue after the Offering. The market price of the Company's
Common Stock may be subject to significant volatility and purchasers of the
Company's securities may not be in a position to sell such securities at
prices related to the price at which purchases were made.
18. Penny Stock Regulations.
The Securities Enforcement Penny Stock Act of 1990 requires specific
disclosure to be made available in connection with trades in the stock of
companies defined as "penny stocks." The Commission has adopted regulations
that generally define a penny stock to be any equity security that has a market
price of less than $5.00 per share, subject to certain exceptions. Such
exceptions include any equity security listed on NASDAQ and any equity security
issued by an issuer that has (i) net tangible assets of at least $2,000,000, if
such issuer has been in continuous operation for three years; (ii) net tangible
assets of at least $5,000,000, if such issuer has been in continuous operation
for less than three years; or (iii) average annual revenue of at least
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<PAGE>
$6,000,000, if such issuer has been in continuous operation for less than three
years. Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the risk associated therewith as well as
the written consent of the purchaser of such security prior to engaging in a
penny stock transaction. The regulations on penny stocks may limit the ability
of the purchasers of the Company's securities to sell their securities in the
secondary marketplace. The Company's outstanding shares of Common Stock are,
and the Shares will be upon issuance, considered a penny stock.
19. Control by Management.
The Company's management owns a significant portion of the Company's
outstanding Common Stock (approximately 28% prior to completion of the Offering
and 22% after giving effect to the sale of 5,000,000 shares in the Offering)
and will be able to materially influence the election of future Company
directors and otherwise control the Company.
20. Shares Eligible for Future Sale.
Approximately 9,385,925 outstanding shares of the Company's Common Stock
are restricted securities, as that term is defined in Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). Absent
registration under the Securities Act or the availability of an exemption under
the Securities Act, the sale of such shares is subject to Rule 144. In general,
under Rule 144, subject to the satisfaction of certain other conditions, a
person, including an affiliate of the Company, who has beneficially owned
restricted shares of Common Stock for at least one year 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, if
the Common Stock is quoted on NASDAQ or a stock exchange, or the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
presently is not and who has not been an affiliate of the Company for at least
three months immediately preceding the sale and who has beneficially owned the
shares of Common Stock for at least two years is entitled to sell such shares
under Rule 144, without regard to any of the volume limitations described
above. There are 4,497,391 of such restricted shares currently outstanding. The
future sale by holders of restricted stock and shares issued upon exercise of
the Warrant and other outstanding warrants and options, may have an adverse
effect on the market price of the Company's Shares.
21. Possible Effects of Certain Articles of Incorporation and Bylaw
Provisions.
The Company's Articles of Incorporation and Bylaws contain provisions that
may discourage acquisition bids for the Company. Upon completion of the
Offering, the Company will have substantial authorized but unissued capital
stock available for issuance. The Company's Articles of Incorporation contain
provisions which authorize the Board of Directors, without the consent of
stockholders, to issue additional shares of Common Stock and issue shares of
Preferred Stock in series, including establishment of the voting powers,
designation, preferences, limitations, restrictions and relative rights of each
series of Preferred Stock.
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<PAGE>
22. Absence of Cash Dividends.
The Board of Directors does not anticipate paying cash dividends on the
Common Stock for the foreseeable future and intends to retain any future
earnings to finance the growth of the Company's business. Payment of dividends,
if any, will depend, among other factors, on earnings, capital requirements and
the general operating and financial conditions of the Company. See "Dividend
Policy."
23. Potential Future Dilution.
In order to consummate its business plans, the Company may be required to
issue significant additional shares of its Common Stock and other securities.
Moreover, the Company had outstanding as of the date of this Prospectus
(i) 664,110 shares of Series B Preferred Stock and (ii) warrants and options to
purchase an aggregate of up to an additional 3,070,000 shares of Common Stock.
Each share of Series B Preferred Stock will be automatically converted into
one share of Common Stock on April 30, 1998, if they have not been previously
redeemed by the Company. In addition all Series B Preferred Shares shall be
automatically converted into one share of Common Stock once $5.00 per share has
been paid as a dividend or distribution to preferred holders. The Company may,
at its option, redeem all of the Preferred Shares by either the payment of cash
or through the issuance of Common Stock at different rates depending upon when
the redemption is made. The maximum number of shares of Common Stock issuable
upon the Company's election to redeem the Series B Preferred Stock is 1,328,220
which, when combined with the 3,070,000 shares issuable upon exercise of all of
the warrants and options, represents approximately 13% of the Company's out-
standing shares of stock (18,906,704) as of the date of this Prospectus.
Presently, preferred shareholders are entitled to one vote for every five
preferred shares which they own. Upon conversion of preferred shares into
Common Stock, the preferred shareholders will be afforded one vote for every
share of Common Stock owned. Assuming that the maximum number of shares of
Common Stock were issued in order to redeem the preferred shares, the preferred
shareholders voting power would increase from its present level of 132,822
votes or 1% of the total outstanding votes as of the date of this Prospectus
to 1,328,220 votes or 7% of outstanding votes. In addition the 3,070,000
shares issuable upon exercise of all of the outstanding warrants and options,
including the Warrant (without giving effect to Preferred Share conversions),
would represent 14% of the outstanding shares of Common Stock after giving
effect to such exercise. In the event the maximum number of shares of Common
Stock were issued to redeem the Preferred Shares (1,328,220 Shares) and all
outstanding warrants and options were exercised (3,070,000 shares), an
aggregate of 4,398,220 additional Shares would be issued which Shares would
represent 19% of the issued and outstanding shares (23,304,000) of the
Company's Common Stock. Accordingly, the percentage of the Company owned by
purchasers in this Offering, as well as existing shareholders, will be substan-
tially reduced and their respective voting power over the Company significantly
diluted upon the conversion of preferred shares into Common Stock and the
exercise of the warrants and options. In addition, further dilution will occur
in the event the Company issues additional shares of its securities in con-
nection with the consummation of its business plans described above.
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<PAGE>
24. Priority of Preferred Stock.
The Company has outstanding an aggregate of 664,110 shares of Series B
Preferred Stock which were issued in satisfaction and retirement of certain
liabilities. The Company's Common Stock is subordinated to the Series B
Preferred Stock in regard to liquidation rights and dividend payments. The
Company may issue additional shares of Series B Preferred Stock in the future
in order to retire additional liabilities. The existence of outstanding shares
of Series B Preferred Stock adversely affects holders of Common Stock upon the
liquidation of the Company and will otherwise preclude the Company from paying
dividends to Common Stock holders until all past dividends on Preferred shares
have been paid in full.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is quoted on the National Association of
Securities Dealers, Inc., over-the-counter market on the OTC Bulletin Board
(the "Bulletin Board") under the symbol "SGAL".
The following table sets forth, for the periods indicated, the high and
low bid prices per share of Common Stock as reflected in the Bulletin Board.
All prices have been adjusted to reflect a 2 for 1 stock split which was
effective May 10, 1991, and a 1 for 3 reverse stock split effective October 21,
1992.
Fiscal Year Ended July 31, 1995
High Bid Low Bid
-------- -------
First Quarter 1 7/8 7/8
Second Quarter 3 1/8 1 11/16
Third Quarter 4 15/16 2 7/8
Fourth Quarter 5 7/8 4 3/4
Fiscal Year Ended July 31, 1996
High Bid Low Bid
-------- -------
First Quarter 6 5 1/4
Second Quarter 5 7/8 3 1/8
Third Quarter 5 1/8 4 1/4
Fourth Quarter 4 7/8 2 3/8
Fiscal Year Ended July 31, 1997
High Bid Low Bid
-------- -------
First Quarter 3 1/8 1 1/2
Second Quarter 2 11/16 2 1/16
Third Quarter 3 2 1/4
Fourth Quarter 2 7/16 1 7/8
The above quotations reflect inter-dealer prices, and do not include
retail mark-up, mark-downs or commissions and may not necessarily represent
actual transactions.
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<PAGE>
On July 14, 1997, the last sale price of the Company's Common Stock as
reported on the Bulletin Board was $2 1/16 per share.
As of July 14, 1997, the Company estimates that it had approximately 235
stockholders of record. Such number of record holders was derived from the
stockholder list maintained by the Company's transfer agent, American Stock
Transfer & Trust Co., and does not include beneficial owners of the Company
whose shares are held in the names of various dealers and clearing agencies.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends and does not
intend to do so for the foreseeable future. The Company currently intends to
retain all earnings, if any, to finance the continued development of its
business. Any future payment of dividends will be determined solely in the
discretion of the Company's Board of Directors.
USE OF PROCEEDS
The Company currently intends to utilize the net proceeds received from
this Offering, estimated to be approximately $8,950,000, for the further
development and commercialization of the Company's technology and products
(approximately $2,000,000), financing of accounts receivable and inventory for
the Voice Pager and possibly the SIR products (approximately $5,000,000), and
for general corporate and working capital purposes (approximately $1,950,000).
Pending the utilization by the Company of funds for the foregoing purposes, the
Company may invest the net proceeds of this Offering in investment grade,
interest bearing securities, primarily with maturities of one year or less,
money market funds and/or certificates of deposit.
The Company believes that the net proceeds of this Offering and interest
earned thereon, together with existing resources will be sufficient to fund the
Company's activities for the next 12 months. However, there can be no assurance
that the Company will not require additional funds in order to successfully
consummate its business plans. The Company intends to utilize the proceeds,
if any, from the exercise of any Warrants for general working capital purposes
as well as continued expansion plans.
The foregoing represents the Company's best estimate of its allocation of
net proceeds generated in this Offering based upon the current state of its
business operations, its current plans and current economic and industry
conditions. These proposed expenditures are subject to reallocation among the
categories listed above or to new categories. Any such changes will be made at
the discretion of the Board of Directors of the Company. If the forecasted
estimates of expenditures are inadequate, additional sums may be drawn from
working capital. Conversely, any amount which is over-estimated will be
retained and used as general working capital.
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
April 30, 1997 (unaudited), and as adjusted to give effect to the sale of
5,000,000 Shares offered hereby and the utilization of net proceeds from such
sales as described in "Use of Proceeds" (amounts rounded to nearest thousand).
April 30, 1997 April 30, 1997
Actual As Adjusted (1)
-------------- ---------------
Long Term Debt $ -- $ --
------------ ------------
Stockholders' Equity:
Common Stock $.001 par value
50,000,000 shares authorized;
18,774,000 shares issued and
outstanding; 23,774,000 shares
outstanding as adjusted 19,000 24,000
Additional Paid in Capital 22,079,000 31,024,000
Preferred Stock Series B, $5.00
convertible, $.001 par value;
800,000 shares authorized;
664,000 issued and outstanding
at April 30, 1997 and as
adjusted 1,000 1,000
Additional Paid in Capital 3,321,000 3,321,000
Accumulated (Deficit) (22,380,000) (22,380,000)
Warrants 30,000 30,000
------------ ------------
Total Stockholders Equity 3,070,000 12,020,000
------------ ------------
Total Capitalization $ 3,070,000 $ 12,020,000
============ ============
(1) Assumes payment of a 10% commission on the sale of all Shares and the
payment of $50,000 in estimated expenses of the Offering. Does not assume the
exercise of any outstanding warrants or options.
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<PAGE>
DILUTION
As of April 30, 1997, the Company had a net tangible book value (total
tangible assets less total liabilities) of $3,003,000 or $.16 per share of
Common Stock. After giving effect to the sale of 5,000,000 shares of Common
Stock offered hereby and the receipt of the net proceeds therefrom, the pro
forma net tangible book value of the Company will be approximately $11,953,000
or $.50 per share of Common Stock. This represents an immediate dilution of
$1.50 for each share of Common Stock purchased by public investors and an
immediate increase of $.34 per share to existing shareholders. There can be no
assurance that any or all of the shares offered will be sold. In the event less
than all of the shares are sold, the Company's book value will be lower and
investors will experience greater dilution. The following table which illus-
trates this dilution assumes no exercise of outstanding warrants and options:
Public offering price per share............ $2.00
-----
Net tangible book value per
share at April 30, 1997................... .16
Increase in net tangible book value
per share of Common Stock
attributable to public investors.......... .34
-----
Pro forma net tangible book value
per share after Offering.................. .50
-----
Dilution per share to public
investors................................. $1.50
=====
The following table summarizes as of July 14, 1997, the differences
between existing stockholders and public investors with respect to the number
and percentage of shares of Common Stock purchased from the Company, the total
consideration and percentage of total consideration paid to the Company and the
average consideration per share paid (at an assumed initial public offering
price of $2.00 per share):
Total Average Price
Shares Purchased Consideration Per Share
------------------ ------------------- ------------
Number Percent Amount Percent
------ ------- ------ -------
Existing stockholders 18,906,704 79% $22,347,534 69 % $1.18
Purchases in this
offering 5,000,000 21% 10,000,000 31% 2.00
---------- ---- ---------- ---- -----
Total 23,906,704 100% $32,347,534 100% $1.35
========== ==== =========== ==== =====
The foregoing table assumes no exercise of outstanding warrants and
options on or after July 14, 1997. As of that date there were 3,070,000
outstanding options or warrants to purchase shares of Common Stock. To the
extent these options and warrants are exercised, there will be further dilution
to the investors in this Offering.
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BUSINESS
The Company incorporates by reference the description of its business
contained in its Annual Report on Form 10-KSB for the year ended July 31, 1996,
subject to the following changes:
RECENT DEVELOPMENTS
In April 1997 the Company entered into a development and licensing agree-
ment ("Mikros Agreement") with Mikros Systems Corporation ("Mikros") and Data,
Design and Development Corporation ("3-D"). Pursuant to the Mikros Agreement,
the Company engaged Mikros to provide certain design work and services regard-
ing the further development of the Company's Voice Pager and licensed certain
existing equipment and software from Mikros and 3-D for use in the Voice Pager.
The Voice Pager utilizes digital signal processing to transmit voice messages
over existing FM broadcast subcarriers to a handheld Voice Pager unit. The
Voice Pager is designed to allow for the development and implementation of a
cost-effective paging system in countries which lack substantial
telecommunication system infrastructures such as China and other emerging
markets. The Company believes that with minimal capital investment, Chinese
and other emerging market radio stations can modify their existing FM radio
transmitters to implement the Company's Voice Pager system and create a voice
paging service that reduces problems associated with traditional beepers and
pagers currently in use in China and other emerging countries. Traditional
beepers and numeric paging systems require a paging subscriber to have ready
access to a telephone to return or retrieve a message. The Company believes
that the lack of easy access to telephones throughout China and other emerging
countries negatively affects the use of traditional beepers and numeric pagers
in such countries. The Company believes that its Voice Pager will be compet-
itively priced with pagers presently marketed in China and other emerging
countries.
The Mikros Agreement provides for Mikros to deliver to the Company
preproduction prototypes for the Voice Pager on or before September 30, 1997.
The Company currently recognizes that such date will have to be extended into
the fourth quarter of 1997. Mikros currently produces digital radio communi-
cation systems for the U.S. Navy and radio data transmission systems for
commercial clients.
In April 1997 the Company entered into a letter of intent with the Batista
Group providing for the formation of a joint venture between the Company and
the Batista Group for the purpose of marketing, selling and distributing the
Company's Voice Pager and other telecommunication products in Central and South
America pursuant to the terms of a definitive joint venture agreement (the
"Batista Agreement") to be negotiated between the parties. The Batista Agree-
ment will provide that the Batista Group will have a 51% interest in the joint
venture and the Company will own the remaining 49% interest. The Batista Group
will be responsible for marketing, distribution and sale of products in the
countries and the Company shall supply its Voice Pager and other product
technology together with technical training and marketing support.
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<PAGE>
The Batista Agreement also provides for the purchase by the Batista Group
of $5,000,000 of the Company's restricted Common Stock at a price of $2.00 per
share and the issuance of an option to acquire an additional $5,000,000 of
restricted Common Stock at a price of $2.50 per share. The transaction is
subject to the satisfactory completion of due diligence by the Batista Group
and the terms of the Agreement. The shares to be purchased by the Batista
Group will be afforded certain registration rights. The parties have agreed to
use their best efforts to execute the Batista Agreement on or before August 30,
1997, subject to further extension upon mutual agreement. There can be no
assurance the Company will consummate the Batista Agreement or receive any
funds from the Batista Group for the sale of any of the Company's securities.
In July 1997, the Company determined that the expected cost of continuing
activities directed toward development, production and sale of a second gener-
ation of the SIR product line was higher than originally anticipated. As a
result, the Company concluded that its limited capital resources would not
allow for the continued development of the SIR system in parallel with the
Company's core business strategy of developing and commercializing its Voice
Pager technology. The Company currently intends to complete the development of
the Voice Pager before devoting significant additional funds to the SIR
program.
Management continues to believe that the SIR system can be developed into
a commercially successful product for the Chinese market. However, significant
capital resources will be required in order to address certain locking problems
associated with the Global's first generation SIR and to commercialize the
product. Therefore, the Company has decided to evaluate strategic alternatives
for the SIR program that will minimize use of the Company's capital resources.
Alternatives to be evaluated include, but are not limited to, joint venture
arrangements and royalty/licensing arrangements.
In April 1997 the Company settled an action instituted by Josephberg,
Grosz & Company, Inc. ("JGC") in the United States District Court for the
Southern District of New York for specific performance of a contract which
JGC claimed entitles them to receive 15,000 shares of the Company's Common
Stock or in the alternative the sum of $66,000. The Company settled the claim
("JGC Action") through the issuance of 7,500 shares of the Company's restricted
Common Stock to designees of JGC. JGC's designees are Selling Securityholders
pursuant to this Prospectus.
In February 1997 the Company hired James M. Boyd, Jr. as its new Vice
President of Finance and Chief Accounting Officer. Since 1981 Mr. Boyd was
employed by Sun Company, Inc., a Philadelphia, Pennsylvania based public
company engaged in petroleum refining and marketing. Mr. Boyd has extensive
experience in financial and external and reporting areas including the
preparation of annual, current and quarterly reports required to be filed with
the Securities and Exchange Commission. Mr. Boyd was formerly a senior
accountant with Price Waterhouse. Mr. Boyd is a certified public accountant in
the State of Pennsylvania and has a Masters of Business Administration Degree
in Finance and a Bachelors Degree in Accounting. Mr. Boyd replaced Scott
McPherson who left the Company to pursue other opportunities. The Company
agreed to pay Mr. Boyd $90,000 per year for three months increasing to $95,000
per year after the three months and increasing 5%, 6% and 7% cumulatively and
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respectively for each of the three years. As consideration for entering into
the agreement, the Company will issue to Mr. Boyd 5,000 shares of restricted
Common Stock two years from the date of the agreement, provided that he has not
terminated employment prior to that time. Additionally, the Company issued to
Mr. Boyd options to purchase 25,000 shares of Common Stock at the market price
as of the date his employment with the Company commenced, and options after
each year of employment to purchase 10,000 shares of Common Stock at the market
price on the anniversary date of the agreement. The options remain in effect
for two years from the date of the grant, except upon termination, in which
case Mr. Boyd will have 30 days to exercise the options before they are
canceled.
In July 1997 the Company entered into an employment agreement with David
C. Bryan to serve as Chief Operating Officer and Senior Vice President of the
Company. Mr. Bryan was formerly Director of Business Development for General
Atronics Corporation ("GAC") in Wyndmoor, Pennsylvania. Mr. Bryan brings over
20 years of engineering, marketing and operations management experience,
including general management, business development, engineering staff manage-
ment, program and project management to the Company. Mr. Bryan was employed by
GAC in various capacities since 1979. Mr. Bryan received an MBA from Temple
University in 1985, an MSEE in computer engineering from Villanova University
in 1979 and a BSEE from Bucknell University in 1977. Mr. Bryan's agreement
provides for the payment of $125,000 per year in base salary plus annual
minimum increases of 5%, 6% and 7% respectively during the next three years.
In addition, Mr. Bryan received a 10 year option to purchase an aggregate of
350,000 shares of the Company's Common Stock at a price of $2.00 per share.
The option vests over three years. Mr. Bryan will also receive standard
medical insurance and other benefits available to all of the Company's full-
time personnel.
In May 1997, the Company retained the services of Mitchell Herbets as a
consultant and Chairman of the Company's Product Advisory Board. Mr. Herbets
is currently Senior Vice President, Product and Business Development for Racal
Communications, Inc. in Rockville, Maryland. Mr. Herbets has nearly 20 years
of experience in many facets of telecommunications, including engineering,
marketing, strategic planning, and product policy. He received his MBA in
Management of Technology from George Washington University and a BSEE from
Lehigh University. In accordance with Mr. Herbets' consulting agreement with
the Company, he receives $2,000 per month in consulting fees and was awarded a
five year warrant to purchase an aggregate of 100,000 shares of the Company's
Common Stock at a price of $3.00 per share.
RESALES BY SELLING SECURITYHOLDERS
This Prospectus relates to the proposed resale by the Selling Security-
holders of a total of 132,500 shares of Common Stock and of up to 100,000
shares issuable upon conversion of the Warrant. The following table sets forth
as of July 14, 1997 certain information with respect to the entity for whom the
Company is registering the Shares for sale to the public except as footnoted
below. The Company will not receive any of the proceeds from the resale of
Common Stock by Selling Securityholders. However, if the Warrant is exercised,
the Company would receive $200,000. Other than as set forth in the following
table, there are no material relationships between the Selling Securityholders
and the Company, nor have any such relationships existed within the past three
years.
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Names of Selling Common Stock Beneficially Common Stock Offered
Securityholders Owned Prior to July 14, 1997 By Beneficial Owner
- ---------------- ---------------------------- -------------------
Fondicri Alto
Potenziale ("FAP") 125,000 125,000
Craig Josephberg(1) 1,667 1,667
Kara Josephberg (1) 1,667 1,667
Arlene Josephberg, as
custodian for
Jessica Josephberg(1) 1,666 1,666
Sullivan & Villios(1) 834 834
Michael T. Sullivan(1) 833 833
John N. Villios(1) 833 833
Anthony M. Collura(2) 70,000(3) 70,000(3)
Paul Chernis(2) 15,000(3) 15,000(3)
Ronald A. Balzano(2) 15,000(3) 15,000(3)
(1) These individuals are designees of JGC and are collectively referred to as
the "JGC Designees."
(2) These individuals are members of the law firm of Silverman, Collura,
Chernis & Balzano, P.C., securities counsel to the Company and are
hereinafter referred to as "SCCB Designees."
(3) Represents shares of Common Stock underlying a Warrant exercisable through
August 31, 1999, at an exercise price of $2.00 per share.
FAP, the JGC Designees and the SCCB Designees are collectively referred to
in this Prospectus as the Selling Securityholders. The Selling Securityholders
may effect the sale of their shares from time to time in transactions (which
may include block transactions) in the over-the-counter market, in negotiated
transactions, through the writing of options on the Common Stock, or a com-
bination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, or at negotiated prices.
The Company is not aware of any agreements, undertakings or arrangements
with any Underwriters, broker-dealers or others regarding the sale of Selling
Securityholders' securities. The Selling Securityholders may effect such
transactions by selling the Shares, as applicable, directly to purchasers or to
or through broker-dealers which may act as agents or principals. Such broker-
dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Securityholders, and/or the purchasers of their
Shares, as applicable, for which such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The Selling
Securityholders and any broker-dealers that act in connection with the sale of
their Shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act.
The Company has notified the Selling Securityholders of the prospectus
delivery requirements for sales made pursuant to this Prospectus and that, if
there are material changes to the stated plan of distribution, a post-effective
amendment with current information would need to be filed before offers are
made and no sales could occur until such amendment is declared effective.
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<PAGE>
FAP purchased its shares from the Company in June 1997 for $2.00 per share.
In accordance with the subscription agreement executed by FAP, the Company is
required to use its best efforts to register FAP's shares under the Securities
Act of 1933, as amended, on or before September 14, 1997. The JCG Designees
received their Shares in connection with the settlement of the JGC Action (see
"Business - Recent Developments"). In accordance with the Company's settlement
agreement with JGC, the Company was required to include the JGC shares in this
Prospectus. The settlement also provides that the JGC Designees as a group are
prohibited from selling more than 2,500 shares of Common Stock per quarter.
However, if the Company's Common Stock trades at an average volume equal to or
greater than 50,000 shares per day for 15 consecutive days, the JGC Designees
are free to sell any amount of the Company's Common Stock they still hold. SCCB
has served as securities counsel to the Company since January 1995. In June
1997, SCCB transferred the Warrant to the SCCB Designees.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 50,000,000 shares of Common Stock,
$.001 par value, and 2,000,000 shares of Preferred Stock, $.001 par value
("Preferred Stock"). The Company's Board designated 750,000 shares of Preferred
Stock as Series A, $5.00 convertible Preferred Stock ("Series A Preferred
Stock"), 800,000 shares of Preferred Stock as Series B, $5.00 convertible
Preferred Stock ("Series B Preferred Stock"), and 108,759 shares of Preferred
Stock as Series C, $5.00 convertible Preferred Stock ("Series C Preferred
Stock"). As of July 14, 1997 the Company had 18,906,704 shares of Common Stock
outstanding and 664,110 shares of Series B Preferred Stock outstanding. In
February 1997, the Company's Board of Directors retired the Series A and C
Preferred Stock designations. The following describes classes of securities
registered in this Registration Statement to which this Prospectus relates.
COMMON STOCK
Each holder of Common Stock is entitled to one vote per share on all
matters to be voted upon by the Company's stockholders. Stockholders do not
have cumulative voting rights in the election of directors. Subject to
preferences that may be applicable to any shares of Preferred Stock, the
holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the Board of Directors out of funds
legally available therefor. The Company has not paid, and does not presently
intend to pay, dividends on its Common Stock. In the event of a liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities,
subject to prior distribution rights of holders of Preferred Stock, if any,
then outstanding. The Common Stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
available to the Common Stock. All outstanding shares of Common Stock are
validly authorized and issued and are fully paid and non-assessable, and the
shares of Common Stock to be issued upon completion of the Offering will be
validly authorized and issued, fully paid and non-assessable.
WARRANT
In August 1996 the Company issued to Silverman, Collura, Chernis &
Balzano, P.C. a warrant to purchase up to 100,000 shares of the Company's
26
<PAGE>
Common Stock at an exercise price of $2.00 per share subject to adjustment in
certain circumstances described below (the "Warrant"). In June 1997, the
Warrant was transferred to the SCCB Designees. The Warrant is exercisable
through August 31, 1999, subject to extension in the sole discretion of the
Company. The Warrant is not redeemable by the Company. The Shares issuable
upon exercise of the Warrant are subject to adjustments upon certain events,
including the declaration by the Company of a stock split, the reclassifica-
ion, subdivision or combination of outstanding shares of Common Stock into a
greater or lesser number of shares. In such event, the exercise price of the
Warrant may be adjusted accordingly.
The Warrant may be exercised, in whole or in part, upon surrender of the
Warrant Certificate representing the Warrant on or prior to the expiration date
of the Warrant accompanied by payment of the exercise price of the Warrant. The
holders of the Warrant will not have the rights or privileges of holders of
common shares until the Warrant is exercised. The Company has agreed to
register the shares of Common Stock underlying the Warrant under the Securities
Act.
POSSIBLE ANTI-TAKEOVER EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
The Company has significant shares of authorized but unissued capital
stock. One of the effects of the existence of authorized but unissued capital
stock may be to enable the Board of Directors to render more difficult or to
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise, and thereby to protect the continuity
of the Company's management. If in the due exercise of its fiduciary obliga-
tions, for example, the Board of Directors were to determine that a takeover
proposal was not in the Company's best interests, such shares could be issued
by the Board of Directors without stockholder approval in one or more private
placements or other transactions that might prevent or render more difficult
or costly the completion of the takeover transaction by diluting the voting or
other rights of the proposed acquiror or insurgent stockholder or stockholder
group, by creating a substantial voting block in institutional or other hands
that might undertake to support the position of the incumbent Board of
Directors, by effecting an acquisition that might complicate or preclude the
takeover, or otherwise. In this regard, the Company's Articles of Incorporation
grant the Board of Directors broad power to establish the rights and prefer-
ences of the authorized and unissued Preferred Stock, one or more series of
which could be issued entitling holders to vote separately as a class on any
proposed merger or share exchange, to convert Preferred Stock into a large
number of shares of Common Stock or other securities, to demand redemption
at a specified price under prescribed circumstances related to a change in
control, or to exercise other rights designed to impede a takeover.
CERTAIN CHARTER AND BYLAWS PROVISIONS
LIMITATION OF LIABILITY
The Company's Amended Certificate of Incorporation and Amended and
Restated Bylaws limit the liability of directors and officers to the maximum
extent permitted by Delaware law. Delaware law provides that directors of a
corporation will not be personally liable for monetary damages for breach of
their fiduciary duties as directors, including gross negligence, except
27
<PAGE>
liability for (i) breach of the directors' duty of loyalty; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (iii) the unlawful payment of a dividend or
unlawful stock purchase or redemption, and (iv) any transaction from which the
director derives an improper personal benefit. Delaware law does not permit a
corporation to eliminate a director's duty of care, and this provision of the
Company's Amended and Restated Certificate of Incorporation has no effect on
the availability of equitable remedies, such as injunction or rescission,
based upon a director's breach of the duty of care.
The Company's Amended and Restated Certificate of Incorporation authorizes
the Company to purchase and maintain insurance for the purposes of indemnifica-
tion. At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent for which indemnification will be required
or permitted under the Company's Amended and Restated Certificate of Incorpora-
tion, Amended and Restated Bylaws or indemnification agreements. The Company
is not aware of any threatened litigation or proceeding which may result in a
claim for such indemnification.
CORPORATION TAKEOVER PROVISIONS
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Under Section 203, certain "business
combinations" between a Delaware corporation whose stock generally is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that
such stockholder became an interested stockholder, unless (i) the corporation
has elected in its original certificate of incorporation not to be governed by
Section 203 (the Company did not make such an election), (ii) the business
combination was approved by the Board of Directors of the corporation before
the other party to the business combination became an interested stockholder,
(iii) upon consummation of the transaction that made it an interested stock-
holder, the interested stockholder owned at least 85% of the voting stock of
the corporation outstanding at the commencement of the transaction (excluding
voting stock owned by directors who are also officers or held in employee
benefit plans in which the employees do not have a confidential right to render
or vote stock held by the plan) or, (iv) the business combination was approved
by the Board of Directors of the corporation and ratified by two-thirds of the
voting stock which the interested stockholder did not own. The three-year
prohibition also does not apply to certain business combinations proposed by an
interested stockholder following the announcement or notification of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of the majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an "interested
stockholder," transactions with an "interested stockholder" involving the
assets or stock of the corporation or its majority-owned subsidiaries and
transactions which increase an interested stockholder's percentage ownership of
stock. The term "interested stockholder" is defined generally as a stockholder
who, together with affiliates and associates, owns (or, within three years
prior, did own) 15% or more of a Delaware corporation's voting stock. Section
28
<PAGE>
203 could prohibit or delay a merger, takeover or other change in control of
the Company and therefore could discourage attempts to acquire the Company.
STOCKHOLDER MEETINGS AND OTHER PROVISIONS
Under the Amended and Restated By-laws, special meetings of the stock-
holders of the Company may be called only by the Company's President or by the
Company's President and Secretary at the request of a majority of the members
of the Board of Directors. Stockholders are required to comply with certain
advance notice provisions with respect to any nominations of candidates for
election to the Company's Board of Directors or other proposals submitted for
stockholder vote. These provisions may have the effect of deterring hostile
takeovers or delaying changes in control or management of the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, 46th Floor, New York, NY 10005-1303.
TERMS OF THE OFFERING
The Company hereby offers the right to subscribe at $2.00 per share for up
to 5,000,000 shares of its Common Stock, $.001 par value, through Peter
Pelullo, an officer and director of the Company, with the possible assistance
of broker-dealers who are members of the National Association of Securities
Dealers, Inc. and/or overseas parties and to compensate such broker-dealers,
if any, in a maximum amount of $.20 per Share payable in cash or stock.
Overseas parties may receive compensation equal to 10% of the Shares sold by
such parties in a combination of cash and stock. Mr. Pelullo will not receive
compensation based on the offer and sale of the Shares.
As of the date of this Prospectus, no underwriter has been retained by the
Company in connection with the sale of the securities being offered hereby. In
the event that an underwriter is retained or a broker-dealer who can be deemed
an underwriter is retained by the Company, an amendment to the Company's Reg-
istration Statement will be filed with the Securities and Exchange Commission
delaying this Offering. The Company in its sole discretion determined the price
of the of the Shares. The offering price is not based on, and bears no rela-
tionship to, the assets, earnings and/or book value of the Company. (See
"Selling Securityholders" for the plan of distribution for Selling Security-
holders.)
METHOD OF SUBSCRIBING
Persons may subscribe to this Offering by filling in and signing the
Subscription Agreement attached hereto and delivering it, prior to the expir-
ation date (as defined below), to the Company. The subscription price of $2.00
per Share must be paid in cash or by check, bank draft or postal or express
money order payable in United States dollars to the order of the Company.
Certificates for the Shares subscribed will be issued as soon as practicable
after subscriptions have been accepted by the Company.
29
<PAGE>
EXPIRATION DATE
The subscription offer will expire at 5:00 p.m., New York time, on Septem-
ber __, 1997, 30 days from the date of this Prospectus.
RIGHT TO REJECT
The Company reserves the right to reject any subscription in its sole
discretion for any reason whatsoever and to withdraw this Offering at any time
prior to acceptance by the Company of the subscriptions received.
LEGAL MATTERS
Certain legal matters in connection with the Offering are being passed
upon for the Company by Silverman, Collura, Chernis & Balzano, P.C. ("SCCB"),
381 Park Avenue South, Suite 1601, New York, New York 10016. Members of SCCB
are the beneficial owners of the Warrant which entitles such owners to purchase
an aggregate of 100,000 shares of the Company's Common Stock at an exercise
price of $2.00 per share. See "Description of Securities - Warrant".
EXPERTS
The financial statements incorporated by reference onto this Registration
Statement have been audited by Cogen Sklar LLP, independent certified public
accountants, for the periods and to the extent as set forth in their report
appearing elsewhere herein, and are included in reliance upon such report and
upon the authority of said firm as experts in accounting and auditing.
30
<PAGE>
===============================================================================
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company or the Representative. Neither the delivery of
this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer
or solicitation.
TABLE OF CONTENTS
Page
----
Available Information....................................................... 2
Incorporation of Certain Documents By Reference............................. 3
Prospectus Summary.......................................................... 4
Summary Financial Information............................................... 7
Risk Factors................................................................10
Price Range of Common Stock.................................................18
Dividend Policy.............................................................19
Use of Proceeds.............................................................19
Capitalization..............................................................20
Dilution....................................................................21
Business....................................................................22
Resales By Selling Securityholders..........................................24
Description of Securities...................................................26
Legal Matters...............................................................30
Experts.....................................................................30
--------------------
Until ______ __ , 1997 all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a Prospectus. This delivery requirement is in addition to the
obligation of dealers to deliver a Prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
===============================================================================
31
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===============================================================================
SIGMA ALPHA GROUP, LTD.
5,232,500
SHARES OF
COMMON STOCK
---------------
PROSPECTUS
---------------
August __, 1997
===============================================================================
32
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC Registration Fee $ 3,171
Printing 4,300*
Legal Fees and Expenses 15,000*
Accounting Fees and Expenses 2,000*
Miscellaneous Expenses (including travel
and promotional expenses) 25,529*
-------
TOTAL $50,000*
=======
* Estimated
The Selling Securityholders will not be paying any portion of the fore-
poing expenses of issuance and distribution.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware and
Article 7 of the Company's Articles of Incorporation contain provisions for
indemnification of officers, directors, employees and agents of the Company.
The Articles of Incorporation require the Company to indemnify such persons in
any proceeding if he acted in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interest of the Company.
Indemnification would cover expenses, including attorney's fees, judgments,
fines and amounts paid in settlement.
The Company's By Laws also provided that the Company's Board of Directors
may cause the Company to purchase and maintain insurance on behalf of any
present or past director or officer insuring against any liability asserted
against such person incurred in the capacity of direct or officer or arising
out of such status, whether or not the Company would have the power to
indemnify such person. The Company may seek to obtain directors' and
officers' liability insurance.
Item 16. Exhibits
The following exhibits marked with an asterisk (*) are included with this
Registration Statement. All other listed exhibits are incorporated by reference
to the filiongs indicated.
3(i) Articles of Incorporation(a)
3(ii) Bylaws(a)
4.6 Form of Silverman, Collura & Chernis, P.C. Warrant.(d)
4.7 Form of Subscription Agreement.*
II-1
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5.1 Opinion of Silverman, Collura, Chernis & Balzano, P.C., special
counsel for the Registrant, as to the legality of the securities
being registered.*
10.1 Amendment to Employment Agreement between the Registrant and
Joseph Tarsia.(e)
10.3 Joint Venture Agreement between the Registrant, China Record Corp.
and Dragon International Investment, Ltd.(e)
10.4 Memorandum of Agreement between the Registrant, Kogayashi
Suisakusho Ltd and Dragon International Investment, Ltd.(e)
10.5 Memorandum of Agreement between the Registrant, Galkase Investment
Limited(e)
10.6 Memorandum of Agreement between the Registrant and Multimax Group
Limited(e)
10.7 Memorandum of Agreement between the Registrant and Global
Telecommunications(e)
10.8 Letter of Intent between the Registrant and Sepp Schlaminger
Help-Verwaltungs-U BeteiligungsgesmbH, Albert Vogl, Kurt
Reichenberger and Helmut Presske(e)
10.10 Agreement between the Registrant, Mid-West Financial Corporation
and Kurt Reichenberger(e)
10.11 Stock Exchange Agreement between the Registrant, China Cool Air
Holdings Ltd. and the Shareholders of China Cool Air Holdings Ltd.
(b)
10.12 Agreement between the Registrant and Global Telecommunications
Inc.(b)
10.13 Separation Agreement between the Registrant and Joseph Tarsia (b)
10.14 Memorandum of Understanding with Kaidi Silk Co., Ltd.(e)
10.15 Employment Agreement with Scott McPherson (c)
23.1 Consent of Cogen Sklar LLP, Independent Auditors.*
23.2 Consent of Silverman, Collura, Chernis & Balzano, P.C. (included
in the opinion filed as Exhibit 5.1).*
Incorporated by reference from the Company's (a) Form S-18 Registration State-
ment on Form S-18 (File No. 32881-NY), (b) the Company's Current Report on
Form 8K dated April 25, 1995, (c) Annual report on Form 10KSB for the year
ended July 31, 1995, (d) Form S-1 Registration Statement dated August 30, 1996
(File No. 333-11233, and (e) Form S-1 Registration Statement dated March 15,
1995 and amendments (File No. 33-90344). All other applicable exhibits are
incorporated by reference from the Company's Annual Reports on Form 10-KSB for
the years ended July 31, 1996, 1994, 1993 and 1992.
II-2
<PAGE>
Item 17. Undertakings.
(a) Rule 415 Offerings.
The undersigned issuer hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change
in the information in the Registration Statement; and
(iii) Include any additional or changed material information on
the plan of distribution.
provided, however, the paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information required
in a post-effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) For determining liability under the Act, treat each post-effective
amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Act, may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for indem-
nification against such liabilities (other than the payment by the small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of
any action, suit or proceedings) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
small business issuer will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such court.
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POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Peter
Pelullo his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him and in his name, place and stead, in
any and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and to take such actions in, and file with
the appropriate authorities in, whatever states said attorney-in-fact and agent
shall determine, such applications, statements, consents and other documents as
may be necessary or expedient to register securities of the Company for sale,
granting unto said attorney-in-fact and agent full power and authority to do so
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney-in-
fact and agent or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof and the Registrant hereby confers like authority on its
behalf.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-2 and has duly caused this registration state-
ment to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Philadelphia, State of Pennsylvania on August 13, 1997.
SIGMA ALPHA GROUP, LTD.
By:
-------------------------------
Peter S. Pelullo, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Peter
Pelullo his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him and in his name, place and stead, in
any and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and to take such actions in, and file with
the appropriate authorities in, whatever states said attorney-in-fact and agent
shall determine, such applications, statements, consents and other documents as
may be necessary or expedient to register securities of the Company for sale,
granting unto said attorney-in-fact and agent full power and authority to do so
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney-in-
fact and agent or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof and the Registrant hereby confers like authority on its
behalf.
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Regis-
tration statement was signed by the following persons in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ President, Principal August 13, 1997
- ----------------------- Executive Officer,
Peter S. Pelullo Principal Financial
Officer, Principal
Accounting Officer
and Chairman of the Board
and as Power of Attorney
for Members of the Board
/s/ Principal Financial Officer August 13, 1997
- ----------------------- and Accounting Officer
James M. Boyd, Jr.
/s/
- ----------------------- Director August 13, 1997
John N. D'Anastasio
/s/
- ---------------------- Director August 13, 1997
Robert S. Sannelli
II-6
SUBSCRIPTION AGREEMENT
SIGMA ALPHA GROUP, LTD.
The undersigned hereby acknowledges receipt of the Prospectus dated ____ __,
1997 of Sigma Alpha Group, Ltd. (the "Company"). The undersigned is over 18
years of age and is a resident of the State of ____________________________,
Country of ________________.
I hereby subscribe to the following number of Shares of the Company.
A. Number of Shares subscribed for _____________
B. Price per Share $2.00
C. Total subscription price (Line A x Line B) ______________
Enclosed is my check, bank draft or postal or express money order for the full
subscription price stated on line C above, which has been made payable to Sigma
Alpha Group, Ltd.
The Subscription Agreement and payment should be delivered to: Sigma Alpha
Group, Ltd., 1341 North Delaware Avenue, Philadelphia, PA 19125.
It is understood that this Subscription is subject to allotment. The Company
reserves the right to reject all or any portion of this subscription in its
sole discretion for any reason whatsoever by refunding all monies paid thereon
without interest. The cashing of any check, bank draft or postal or express
money order will not be deemed to be an acceptance in whole or in part of any
subscription. The subscriber understands that there is no minimum number of
Shares which must be sold prior to the Company's utilization of the funds
received from subscribers.
THIS SHALL CONFIRM THAT I HAVE NOT RELIED UPON ANY INFORMATION OR REPRESENTA-
TIONS OTHER THAN AS CONTAINED IN THE COMPANY'S PROSPECTUS DATED ____ __, 1997
IN MAKING MY DECISION TO INVEST IN THE COMPANY'S OFFERING AND THAT I HAVE BEEN
AFFORDED THE OPPORTUNITY TO REQUEST ADDITIONAL INFORMATION ABOUT THE COMPANY.
Dated: ___________, 199_
Very truly yours,
____________________________________
Name: _________________________________
Address: _________________________________
_________________________________
_________________________________
SS# or Taxpayer ID # _______________________
[LETTERHEAD OF SILVERMAN, COLLURA, CHERNIS & BALZANO, P.C.]
August 13, 1997
Sigma Alpha Group, Ltd.
1341 North Delaware Avenue
Philadelphia, PA 19125
Re: Amentment No. 1 to Registration Statement on Form S-2
Gentlemen:
We have acted as counsel to Sigma Alpha Group, Ltd. (the "Company"), a
Delaware corporation, pursuant to Amendment No. 1 to a Registration Statement
on Form S-2, as filed with the Securities and Exchange Commission on August 13,
1997 (the "Registration Statement"), covering 5,132,500 shares of the
Company's Common Stock, $.001 par value, and 100,000 shares of Common Stock
underlying a Common Stock Purchase Warrant (the "Securities").
In acting as counsel for the Company and arriving at the opinions as
expressed below, we have examined and relied upon originals or copies, certi-
fied or otherwise identified to our satisfaction, of such records of the
Company, agreements and other instruments, certificates of officers and
representatives of the Company, certificates of public officials and other
documents as we have deemed necessary or appropriate as a basis for the
opinions expressed herein.
In connection with our examination we have assumed the genuineness of all
signatures, the authenticity of all documents tendered to us as originals, the
legal capacity of natural persons and the conformity to original documents of
all documents submitted to us as certified or photostated copies.
Based on the foregoing, and subject to the qualifications and limitations
set forth herein, it is our opinion that:
1. The Company has authority to issue the Securities in the manner
and under the terms set forth in the Registration Statement.
2. The Securities have been duly authorized and when issued,
delivered and paid for in accordance with their respective terms, will be
validly issued, fully paid and non-assessable.
We express no opinion with respect to the laws other than those of the
State of New York and Federal Laws of the United States of America, and we
assume no responsibility as to the applicability thereto, the effect thereon,
of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and it its use as part of the Registration Statement.
<PAGE>
We are furnishing this opinion to the Company solely for its benefit in
connection with the Registration Statement. It is not to be used, circulated,
quoted or otherwise relied upon for any other purpose.
Very truly yours,
SILVERMAN, COLLURA, CHERNIS & BALZANO, P.C.
CONSENT OF INDEPENDENT AUDITOR
We consent to the reference to our firm as "EXPERTS" and to the use of our
reports dated September 13, 1996 and September 11, 1995 in Amendment No. 1 to
the Registration Statement on Form S-2 and the related Prospectus of Sigma
Alpha Group, Ltd.
COGEN SKLAR LLP
Bala Cynwyd, Pennsylvania
August 13, 1997
