As filed with the Securities and Exchange Commission on June 23, 1998
Registration No. 333-52921
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
AMENDMENT NO. 1 TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
CLARITI TELECOMMUNICATIONS INTERNATIONAL, LTD.
(formerly 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.)
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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, Chief Executive Officer
Clariti Telecommunications International, 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: From time to time or at
one time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended ("Securities Act"), other than securities offered only in
connection with dividend or reinvestment plans, 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. [ ]
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. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
===============================================================================
CALCULATION OF REGISTRATION FEE
===============================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to be Offering Aggregate Amount of
Securities to be Registered Price Per Offering Registration
Registered (1)(2)(3) Share(4) Price Fee
===============================================================================
Common Stock(3) 3,488,102 $1.50 $5,232,153 $1,585.50
===============================================================================
Total 3,488,102 $1.50 $5,232,153 $1,585.50
===============================================================================
(1) Includes such additional number of Shares as may become issuable by reason
of anti-dilution provisions of the Warrants pursuant to Rule 416.
(2) Pursuant to Rule 429,this Registration Statement also incorporates 100,000
shares of Common Stock issuable upon exercise of Common Stock Purchase
Warrants which were originally registered on Form S-2, File No. 333-31691
and was declared effective on August 18, 1997. The Company previously paid
a registration fee of $60.61 to register the aforesaid securities.
(3) Includes 3,338,102 shares of Common Stock held by Selling Securityholders
and 150,000 shares of Common Stock issuable upon exercise of outstanding
warrants, excluding the 100,000 shares described in Note 2 above.
ii
<PAGE>
(4) Common Stock price per share calculated in accordance with Rule 457(c) of
the Securities Act using the last sale price for the Common Stock on
May 5, 1998.
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.
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>
CLARITI TELECOMMUNICATIONS INTERNATIONAL, 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 Inside Front Cover Page
Pages of Prospectus Outside Front Cover Page
3. Summary Information, Risk Prospectus Summary; Summary Financial
Factors and Ratio of Earnings Data; Risk Factors
to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Securityholders Resales by Selling Securityholders
8. Plan of Distribution Cover Page; Resales by Selling
Securityholders
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 Securities;
the Registrant 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
v
<PAGE>
DATED JUNE 29, 1998 SUBJECT TO COMPLETION
PROSPECTUS
- ----------
CLARITI TELECOMMUNICATIONS INTERNATIONAL, LTD.
3,588,102 SHARES OF COMMON STOCK
This Prospectus relates to (i) the possible resale from time to time by
certain selling securityholders ("Selling Securityholders") of up to 3,338,102
shares of Clariti Telecommunications International, Ltd. ("Company") Common
Stock, $.001 par value ("Common Stock"); and (ii) the issuance of up to
150,000 shares of Common Stock upon exercise of outstanding Common Stock
purchase Warrants. This Prospectus also relates to the possible resale of up
to 100,000 shares of Common Stock issuable upon exercise of Common Stock
Purchase Warrants that were registered in the Company's registration statement
which was declared effective on August 18, 1997. The Company will not receive
any proceeds from the possible resale by the Selling Securityholders of their
respective shares of Common Stock. All of the shares of Common Stock to which
this Prospectus relates are collectively referred to as the Shares.
The Selling Securityholders may sell their Shares from time to time, in
market transactions, in negotiated transactions, through the writing of
options, or a combination of such methods of sale, at fixed prices which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The Selling
Securityholders may effect such transactions by selling their Shares to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Securityholders
and/or the purchasers of such Shares for whom such broker-dealer may act as
agents or to whom they may sell as principals, or both (which compensation as
to a particular broker-dealer might be in excess of customary commissions.)
The Company has agreed to bear all expenses in connection with the registration
of the Shares to which this Prospectus relates.
The Company's Common Stock is quoted on the OTC Bulletin Board ("Bulletin
Board") under the symbol CLRI. On May 5, 1998 the last sale price of the
Common Stock as reported on the Bulletin Board was $1.50. After the exercise
of the Warrants, of which there can be no assurance, officers and directors of
the Company will own 22 percent of the Company's outstanding common stock.
THESE SECURITIES ARE HIGHLY SPECULATIVE. THEY INVOLVE A HIGH DEGREE OF RISK.
THEY SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN A TOTAL LOSS
OF THEIR ENTIRE INVESTMENT (SEE "RISK FACTORS" BEGINNING ON PAGE 9 OF THE
PROSPECTUS).
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 REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is June __, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith, files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copied at the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at Room 1204, Everett McKinley Dirksen Building,
219 South Dearborn Street, Chicago, Illinois 60604; and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can also be
obtained at prescribed rates from the Public Reference Section of the Commis-
sion at its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such material may also be accessed electronically by means of the Commission's
home page on the Internet at http:\\www.sec.gov.
This Prospectus does not contain all of the information set forth in the
Registration Statements of which this Prospectus is a part and which the
Company has filed with the Commission. For further information with respect to
the Company and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits filed as a part thereof, copies
of which can be inspected at, or obtained at prescribed rates from the Public
Reference Section of the Commission at the address set forth above. Additional
updating information with respect to the Company may be provided in the future
by means of appendices or supplements to the Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus is delivered, upon written or oral request of
such person, a copy of any and all of the information that has been or may be
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents).
Requests should be directed to Clariti Telecommunications International, Ltd.,
1341 North Delaware Avenue, Philadelphia, Pennsylvania 19125 (215) 425-8682.
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, 1997, filed
with the Commission on October 29, 1997, (ii) Quarterly Reports on Form 10-QSB
for the quarters ended October 31, 1997, January 31, 1998 and April 30,
1998,filed with the Commission on December 15, 1997, February 19, 1998, and
June 15, 1998, respectively, and (iii) reports on Form 8-K filed with the
Commission on March 4, 1998 and April 24, 1998.
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 Clariti
Telecommunications International, Ltd., at its executive offices at 1341 North
Delaware Avenue, Philadelphia, PA 19125, Attention Investor Relations. Oral
requests should be directed to such department (telephone number 215-425-8682).
-----------------
2
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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.
THE COMPANY
Clariti Telecommunications International, Ltd., f/k/a Sigma Alpha Group,
Ltd. ("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 rein-
corporated in Delaware. In 1995, the Company changed its name to Sigma Alpha
Group, Ltd. On March 4, 1998, the Company changed its name to Clariti Tele-
communications International, Ltd.
Since April 1995, the Company has engaged in the development of a
telecommunications technology using FM radio frequencies to transmit voice
messages to a Digital Voice Pager. The Company's technology is designed to
provide for quick and inexpensive implementation of a Digital Voice Paging
system in regions that lack substantial telecommunication infrastructures, such
as Latin America, China and other emerging markets. The Company's Digital
Voice Paging System will utilize existing FM sub-carrier radio frequencies to
transmit digital voice messages directly to a subscriber's hand held Digital
Voice Pager, which will store the voice message for playback on demand. The
Digital Voice Paging System provides paging that coexists with, but does not
interfere with, the FM radio station's existing commercial broadcasts.
The Company believes that its Digital Voice Paging System can be
implemented with minimal capital investment in virtually any area that has FM
radio stations. Since the Digital Voice Paging System operates using the radio
station's existing transmitter, the network equipment required to implement the
Company's Digital Voice Paging System consists only of a pager terminal and two
SCA generators. The cost of this equipment is approximately $130,000
installed. In the U.S. there are no frequency licenses to acquire because the
radio station already owns the rights to its FM-SCA channels as part of its
license to operate an FM radio station. The Company believes that this is also
true of its target markets outside the U.S.
The Company's technology will create a voice paging service that reduces
problems associated with traditional beepers, numeric pagers and
text pagers currently in use. Beepers and numeric paging systems require a
subscriber to have ready access to a telephone in order to return or retrieve a
message. The Company believes that the lack of ready access to telephones
throughout many emerging markets negatively affects the demand for beepers and
numeric pagers in such markets. Text pagers allow for a subscriber to receive
a message that usually has been transcribed by typists at a central station.
The Company believes, based upon its market research, that text paging systems
present significant problems, particularly in China, due to the number and
complexity of Chinese characters (in excess of 13,000). These problems include
4
<PAGE>
the need for large pools of typists who possess the skills needed to translate
different Chinese dialects with accuracy and speed into correct Chinese
characters. In addition, substantial investment is required in China and other
marketplaces to establish a traditional paging network.
The Company plans to market it Digital Voice Paging System through joint
ventures with local companies in specified target areas. The Company is in
discussions with potential joint venture partners; however, no joint venture
agreements have been consummated yet. The joint ventures will be responsible
to market voice pager services to local subscribers and implement support
operations needed to run the voice paging service. The Company believes that
its Digital Voice Pager and Digital Voice Paging service will be competitively
priced with text pagers presently marketed in the local markets.
Significant funding will be required to complete the development of the
Digital Voice Paging technology and market same. The Company has successfully
completed testing the "Beta" version of its Digital Voice Paging technology and
is now in the process of completing development of production equipment. This
process includes the miniaturization of the Digital Voice Pager, finalizing the
software on the Pager Terminal and SCA Generator, and testing the entire
system. The Company estimates that it will require approximately $8.4 million
of additional equity capital to complete development of the Digital Voice
Paging System and launch the service in the first market. Depending on the
pace of subsequent market deployments, the Company estimates it will require an
additional $50 million to $75 million of funds before its operating and
investing cash flow turns positive (see Management's Discussion and Analysis of
Financial Condition and Results of Operation in the Company's Form 10-KSB for
the year ended July 31,1997 and in the Company's Forms 10-QSB for the quarters
ended October 31, 1997, January 31, 1998, and April 30, 1998). There can be no
assurance, however, that the Company will be able to raise sufficient funds to
successfully develop, manufacture and market its products (see "Risk Factors").
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>
SUMMARY FINANCIAL INFORMATION
The following tables set forth, for the periods and at the dates
indicated, summary financial data for the Company. The information presented
below under the captions "Statement of Operating Data" for each of the five
fiscal years in the period ended July 31, 1997 and "Balance Sheet Data" as of
July 31, 1997, 1996, 1995, 1994 and 1993 is derived from the Company's audited
financial statements, which are incorporated by reference into this Prospectus.
The summary financial data for the Company presented below under the captions
"Statement of Operating Data" for the nine months ended April 30, 1998 and
1997 and the "Balance Sheet Data" as of April 30, 1998 are derived from the
Company's unaudited financial statements. In the opinion of management, such
unaudited financial information contains all adjustments (which consist only of
recurring adjustments) necessary to present fairly the financial position and
results of operations of the Company as of such dates and for such periods.
The Summary Financial Data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the more detailed Financial Statements and Notes thereto incorporated by
reference into this Prospectus.
6
<PAGE>
For the Years Ended July 31,
(amounts in thousands, except per share data)
------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Statement of
Operating Data
- --------------
Sales $ 348 $ -- $ -- $ -- $ 666
Cost of Sales 314 -- -- -- 337
------- -------- ------- ------- -------
Gross Profit 34 -- -- -- 329
------- -------- ------- ------- -------
Operating Expenses -- -- -- 51 417
General and
Administrative
Expenses 4,566 2,253 1,993 1,213 2,382
------- -------- ------- ------- -------
Total Operating
Expenses and General
and Administrative
Expenses 4,566 2,253 1,993 1,264 2,799
------- -------- ------- ------- -------
Loss from Continuing
Operations before
Other Income (Expense) (4,532) (2,253) (1,993) (1,264) (2,470)
Other Income (Expense) 82 2 (193) (295) (565)
------- -------- ------- ------- -------
Loss from Continuing
Operations (4,450) (2,251) (2,186) (1,559) (3,035)
Extraordinary Gain -- 62 710 -- --
------- ------- ------- ------- -------
Net Loss $(4,450) $(2,189) $(1,476) $(1,559) $(3,035)
======= ======= ======= ======= =======
Net Loss Per Share:
Cont. Operations $ (.25) $ (.16) $ (.23) $ (.21) $ (.45)
Extraordinary Gain -- -- .07 -- --
------- ------- ------- ------- -------
Net Loss Per Share $ (.25) $ (.16) $ (.16) $ (.21) $ (.45)
======= ======= ======= ======= =======
Weighted Average
Number of Shares of
Common Stock
Outstanding 17,519 13,848 9,444 7,378 6,751
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As of July 31,
(amounts in thousands)
---------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Balance Sheet Data
- ------------------
Total Assets $ 1,898 $ 1,459 $ 1,728 $ 40 $ 30
Working Capital
(Deficit) $ 1,412 $ 924 $ 1,204 $(6,762) $(5,850)
Long Term Debt $ -- $ -- $ -- $ 29 $ 29
Total Stockholders'
Equity (Deficiency) $ 1,524 $ 1,071 $ 1,304 $(6,770) $(5,851)
Statement of Operating Data (Unaudited)
(amounts in thousands, except per share data)
Nine Months Ended Nine Months Ended
April 30 , 1998 April 30, 1997
----------------- -----------------
Sales $ -- $ 348
Cost of sales -- 314
------- -------
Gross Profit -- 34
Total Operating Expenses 3,158 2,360
------- -------
Loss from Continuing Operations
Before Other Income (3,158) (2,326)
Other Income (Expense) ( 3) 54
------- -------
Net Loss $(3,161) $(2,272)
======= =======
Net Loss Per Share $ (.16) $ (.13)
======= =======
Weighted Average Number of
Shares of Common Stock Outstanding 20,072 17,063
Balance Sheet Data (Unaudited)
(amounts in thousands)
April 30, 1998
--------------
Total Assets $1,533
Working Capital $ 119
Long Term Debt $ --
Total Stockholder's Equity $ 656
8
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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; No Paging Revenues.
The Company has incurred significant losses from operations since its
inception and has accumulated a deficit of approximately $24,558,000 and
$26,890,000 through July 31, 1997 and January 31, 1998, respectively. The
Company reported net losses of approximately $4,450,000, 2,189,000 and
$1,476,000 for the years ended July 31, 1997, 1996 and 1995, respectively, and
a net loss for the six month period ended January 31, 1998 of $2,332,000. All
of the Company's losses prior to fiscal 1995 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 Digital Voice Paging technology.
The Company has not yet generated any revenues from its Digital Voice
Paging technology. Accordingly, 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 Digital Voice Paging technology, the
Company's ability to effectively compete with existing products in those
markets it chooses to enter, the Company's ability to respond to changes in
economic and regulatory conditions in those markets it chooses to enter and the
ability of the Company to successfully market the use of the Company's
products. There can be no assurance that the Company will generate sufficient
revenues to generate positive cash flow or operating income.
2. 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 significant
additional funding is necessary to finalize development of the Digital Voice
Paging technology. The Company has successfully completed testing the "Beta"
version of its Digital Voice Paging technology and is now in the process of
completing development of the production equipment. This process includes the
miniaturization of the Digital Voice Pager, finalizing the software on the
Pager Terminal and SCA Generator, and testing the entire system. The Company
estimates that it will require approximately $8.4 million of additional equity
capital to complete development of the Digital Voice Paging System and launch
the service in the first market. Depending on the pace of subsequent market
deployments, the Company estimates it will require an additional $50 million to
$75 million of funds to be invested before its operating and investing cash
flow turns positive. 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.
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<PAGE>
3. Limited Experience in Existing Business
Until recently, the Company has lacked substantial prior experience in the
telecommunications industry. In response to this issue, the Company hired a
new Chief Operating Officer in July 1997 and a new President in October 1997,
both of whom have substantial experience in development and marketing of new
telecommunications products. In addition, since April 1998, the Company has
hired five new engineering employees, all of whom have substantial experience
in the development of new telecommunications products. The Company is
currently continuing this process of hiring additional personnel with
experience in the telecommunications industry. The Company has also engaged
consultants and subcontractors from the telecommunications industry to assist
in the development of the Company's Digital Voice Paging technology.
In addition, the Company will be required to enter into joint venture
arrangements with partners that have experience in local markets the Company
plans to enter.The Company has not entered into any binding joint venture
agreements to date. However, the Company signed a letter of intent with the
Batista Group in Brazil in April 1997 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 Digital Voice Pager and other
telecommunication products in Central and South America pursuant to the
terms of a definitive joint venture agreement to be negotiated between the
parties. The Company is continuing to negotiate with the Batista Group and
has not yet finalized a definitive joint venture agreement. There can be no
assurance that the Company will be successful in this regard (see Risk Factor
4).
4. Reliance on Proposed Joint Ventures
The Company intends to develop joint venture relationships with local
companies in targeted market areas. The Company will rely on these joint
ventures to provide local marketing, regulatory, distribution and operating
experience. Although the Company has entered into a letter of intent with a
proposed joint venture partner in Brazil (see Risk Factor 3), the Company has
not yet entered into any binding joint venture agreements. In connection with
such proposed joint venture arrangements, the Company may be required to
contribute monetary funding to the venture and/or other non-monetary
contributions such as personnel. There can be no assurance that the Company
will be able to obtain the necessary funds to meet such commitments to its
proposed joint venture partners. The Company's potential inability with
respect to such commitments may inhibit the successful negotiation of joint
venture agreements. In the event of the Company's failure to enter into joint
venture agreements with local partners and/or the inability of such partners to
successfully assist the Company with the deployment and marketing of the
Company's products and services in local markets, such failures would have a
material adverse effect on the Company's business, its financial condition and
results of operations.
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<PAGE>
5. Lack of Customers and Limited Suppliers.
The Company currently does not have any orders for its Digital Voice Pager.
Accordingly the Company will be required to seek out customers for its Digital
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.
The Company currently relies on a limited number of suppliers of components
and other parts for the proposed Digital Voice Paging systems. To date, the
Company has a contract with TekNow for the supply of pager terminals. The
Company, when needed, will most likely rely on only one manufacturer for
application 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 lack of adequate purchasing power.
6. Evolving Market; 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
competitors 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
unanticipated 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".
7. Product Testing; Completion of Product Development
In April 1998, the Company successfully tested its digital voice paging
"Beta System" in Philadelphia. The Beta System is comprised of multiple,
individually addressable, handheld, battery-operated voice pagers receiving
pages over the Company's Digital Voice Paging system. The pages were sent over
the FM subcarrier frequencies of WIOQ 102.1 FM, a commercial radio station in
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Philadelphia. The performance of the Beta System,including the error correction
algorithms and the pagers' audio quality met or exceeded the Company's
expectations. The Company plans to continue its Beta testing in Brazil in July
1998. There can be no assurance, however, that the successful test of the Beta
System will result in the successful development of the production model.
The Company is now in the process of completing development of production
equipment. This process consists mainly of miniaturizing the Digital Voice
Pager, finalizing the software on the Pager Terminal and SCA Generator, and
testing the entire system. 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. The
Company estimates that it will require approximately $8.4 million (expected to
be raised through the issuance of additional equity capital) to complete
development of the Digital Voice Paging System and launch the service in the
first market. There can be no assurance as to when, or whether, the Digital
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.
The Company previously suspended the development of a Stock Information
Receiver ("SIR") after experiencing higher than expected development costs.
There can be no assurance that the Company will not experience similar problems
with the Digital Voice Paging System. Moreover, since the SIR was the only
product which generated revenues for the Company in the fiscal year ended July
31, 1997, the Company will be required to rely on capital raising activities to
fund the development of the Digital Voice Paging System and the Company's
operations (see Risk Factor 2, "Need for Further Financing").
8. 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 Digital Voice Pager. The
Company also has filed similar patent applications in numerous foreign
countries. In September 1997, the Company was notified that its patent appli-
cation was approved by government authorities in South Africa. There can be no
assurances as to the ultimate success of the patent applications in the United
States or any other foreign country. Furthermore, even if a patent is issued
to the Company, there can be no assurance that such patent 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
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<PAGE>
prevent misappropriation of its technology or the independent development by
others of similar technology. In addition, the laws of foreign 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.
9. Competition.
The Company's products compete with those of numerous well-established
companies which design, manufacture or market beepers, numeric, text and voice
paging products and services. Many of these companies have substantially
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.
10. Challenges of Growth.
Should the Company successfully achieve market acceptance for its Digital
Voice Pager products, 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.
11. Access to Radio Stations; Telecommunications Regulations.
Successful implementation of the Company's telecommunication products
requires access to FM radio frequencies. Accordingly, the Company will be
required to secure the use of FM radio subcarrier frequencies in the markets it
intends to enter. The Company does not believe, based on the experience of its
management, that the use of sub-carrier frequencies is extensive in its
targeted market areas and, accordingly, the Company does not expect difficulty
in accessing such frequencies. Thus far, the Company has obtained access to
one SCA channel in Rio de Janeiro for use in testing its Digital Voice Paging
System outside the United States. However, there can be no assurance that FM
radio station owners in targeted market areas will not develop other uses for
their subcarrier frequencies, which would have a material adverse effect on the
Company's business.
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In the United States, the Federal Communications Commission ("FCC")
considers FM-SCA channels to be part of the total FM frequency allocated to a
radio station and therefore does not separately license or regulate FM-SCA
channels for paging. The Company believes that regulators in the foreign
markets it plans to enter take a similar position in their countries to that of
the FCC regarding the licensing and regulation of FM-SCA channels. The Company
plans to rely on its local joint venture partners to facilitate access to and
use of FM-SCA channels in the local markets. There can be no assurance that the
Company will be successful in this regard.
12. Commercialization of Technology.
The Company expects to complete commercialization of its Digital
Voice Paging technology in 1999. However, 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. In the past the Company has experienced delays in product development
activities by development consultants. 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 product development consultants and components required to deliver the
Company's products are unavailable, the implementation of the Company's
technology will be delayed, adversely affecting the Company's financial
condition and results of future operations.
13. Dependence on Contract Manufacturers and Outside Development Consultants.
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. The Company is currently in the process of identifying
and evaluating the capabilities of potential contract manufacturers, but has
not yet begun negotiations with any such firms.
The Company also relies on development consultants who perform certain
development functions for the Company's Digital Voice Paging System under the
supervision of the Company's Chief Operating Officer. All such development
consultants have entered into confidentiality agreements. However, there can
be no assurance that such agreements will adequately protect the Company's
proprietary technology.
14. International Operations.
The Company's existing operations currently relate to the conduct of
operations in Latin America, China and other international regions. The Company
also expects to establish business or joint ventures in other international
regions. These operations will be subject to the risks of conducting business
internationally, including the possible instability of certain governments,
changes in regulatory requirements, difficulties in obtaining necessary
operating licenses, as well as other general barriers and restrictions in
relation to compliance with local laws. In addition, any future revenues
14
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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.
The Company's operations may also be affected by unfavorable financial and
economic conditions in Asia, Latin America and other targeted market areas, all
of which are outside of the control of the Company. Recent economic events in
Asia and Latin America have had a material adverse effect on currency
fluctuations and consumer spending in such areas. The Company's ability to
consummate its plans may be adversely affected by such crises due to the
potential for significant decreases in demand for the Company's products and
services, the inability to secure manufacturing arrangements with financially
sound foreign companies, the potential for foreign governments to implement
prohibitions and limitations on U.S. companies, and the potential for foreign
currency losses.
The Company's plans may also be affected by foreign government objections
to the use by the Company of FM subcarrier frequencies for the operation of a
paging network. The Company is not aware of any requirement to obtain separate
licenses for the use of subcarrier frequencies in any market the Company
intends to enter. The Company will rely on its joint venture partners to
interface with local governments in this regard. The Company does not believe,
based on the experience of its management, that the use of subcarrier
frequencies is extensive in its targeted market areas, and accordingly, the
Company does not expect difficulty in accessing such frequencies. However,
there can be no assurance that FM radio station owners in targeted market areas
will not develop other uses for their subcarrier frequencies, which would have
a material adverse effect on the Company's business.
15. Dependence Upon Key Personnel.
The Company is substantially dependent upon the continued services of
Michael McAndrews and Peter Pelullo, its President and Chairman, respectively.
Messrs. McAndrews and Pelullo have entered into employment agreements with the
Company which expire in 2001 and 2006, respectively. The loss of the services
of either Mr. McAndrews or 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 either Mr. McAndrews or 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 lives of Mr. McAndrews or Mr.
Pelullo.
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16. Legal Proceedings.
As of October 10, 1997, the Company and Alpha International Record Company,
a subsidiary previously active in the recording business, had several judgments
related to accounts payable and taxes payable, the aggregate amount of which is
not material to the Company's results of operations and cash flows. Management
has been negotiating actively and attempting to work out settlements with
respect to these judgments and tax assessments.
In September 1997, Global Telecommunications of Delaware, Inc. ("Global")
the Company's subsidiary, was served with a Summons and Complaint by a former
supplier of electronic parts in the U.S. District Court for the Eastern
District of Pennsylvania. The Complaint seeks specific performance of a
contract and plaintiff claims they are entitled to receive approximately
$106,000 from Global. Global has filed an answer to the complaint denying
complainant's right to receive any monetary compensation.
17. 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.
18. No Assurance of Continued Public Market.
There is no assurance that a regular trading market for the Company's
securities will continue. 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.
19. 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
$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 holders of the Company's securities to sell their securities in the
secondary marketplace. According to the above definitions, the Company's
outstanding Common Stock is currently considered to be a penny stock.
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20. Control by Management.
The Company's officers and directors own a significant portion (22%) of
the Company's outstanding Common Stock and are able to materially influence the
election of future Company directors and otherwise control the Company.
21. Shares Eligible for Future Sale.
Approximately 9,892,002 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 4,426,003 of such restricted shares currently outstanding. The
future sale by holders of restricted stock and shares issued upon exercise of
outstanding warrants and options, may have an adverse effect on the market
price of the Company's Common Stock.
22. 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. These provisions also classify the Company's Board
of Directors into three classes, staggered for terms of one, two, or three
years. The existence of a classified board may make a change in control of the
Company more difficult as potential suitors of the Company may be deterred from
seeking to acquire the Company since part of the Company's existing board would
remain in place after such acquisition.
23. 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."
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24. 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
warrants and options to purchase an aggregate of up to an additional 5,470,000
shares of Common Stock, representing approximately 24% of the Company's out-
standing shares of stock (22,650,426), including shares for which subscriptions
have been received, as of the date of this Prospectus. Accordingly, the
percentage of the Company owned by purchasers in this Offering, as well as
existing shareholders, will be substantially reduced and their respective
voting power over the Company significantly diluted upon 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 connection with the
consummation of its business plans described above.
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 "CLRI".
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.
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 15/16 2 1/8
Third Quarter 5 1/4 4 1/8
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 3/16
Fourth Quarter 2 1/2 1 27/32
Fiscal Year Ended July 31, 1998
High Bid Low Bid
-------- -------
First Quarter 2 3/8 1 3/4
Second Quarter 1 15/16 2 1/8
Third Quarter 1 17/32 1 1/16
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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.
On May 5, 1998, the last sale price of the Company's Common Stock as
reported on the Bulletin Board was $1.50 per share.
As of May 5, 1998, the Company estimates that it had approximately 180
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 will not receive proceeds from any sale of the Selling
Securityholder Securities. The proceeds to be received by the Company from the
exercise of the 350,000 outstanding warrants covered by this Prospectus (the
"Warrants") would be approximately $660,000. The Company intends to use
proceeds from the possible exercise of the Warrants for general corporate
purposes, including development of the Company's Digital Voice Paging System.
Pending use of the proceeds, they will be invested in short term, interest
bearing securities or money market funds.
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, 1997,
subject to the following changes:
RECENT DEVELOPMENTS
As discussed on a current report on Form 8K filed on April 24, 1998, the
Company announced it has terminated discussions with General Atronics
Corporation ("GAC") regarding the possible acquisition of GAC by the Company.
In April 1998, the Company successfully tested its digital voice paging
"Beta System" in Philadelphia. The Beta System is comprised of multiple,
individually addressable, handheld, battery-operated voice pagers receiving
pages over the Company's Digital Voice Paging system. The pages were sent over
the SCA subcarrier frequencies of WIOQ 102.1 FM, a commercial radio station in
Philadelphia. The performance of the Beta System,including the error correction
algorithms and the pagers' audio quality met or exceeded the Company's
expectations. The Company plans to continue its Beta testing in Brazil in July
1998.
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On May 20, 1998, the Company signed an engagement letter with a major
investment banking firm to assist the Company in raising the additional equity
capital necessary to achieve the Company's objectives. There can be no
assurance that such engagement will result in the raising of any capital for
the Company.
RESALES BY SELLING SECURITYHOLDERS
This Prospectus relates to the proposed resale by the Selling Security-
holders of the Shares. The following table sets forth as of June 23, 1998
certain information with respect to the persons for whom the Company is
registering the Shares for sale to the public except as footnoted below. None
of such persons has had a material relationship with or has held any position
or office with the Company or any of its affiliates within three years, other
than as footnoted below. The Company will not receive any proceeds from the
sale of the Shares with the exception of the possible exercise of the Warrants
(see USE OF PROCEEDS).
Number of Shares Number of Shares
Of Common Stock Of Common Stock
Beneficially Offered for
Owned As Of Account Of
Name of Selling Securityholder June 23, 1998(1) Beneficial Owner
- ------------------------------ ---------------- ----------------
LGT Bank in Liechtenstein Vaduz 300,000 300,000
Erste Bank 100,000 100,000
Pennsylvania Merchant Group (2) 280,721 280,721
Richard A. Hansen (2) 200,000 200,000
James Saltzman (2) 59,781 59,781
Karen Eidiloth 200,000 200,000
Stuart Gimbel 100,000 100,000
Alfred Sussman 25,000 25,000
Bernard Kobrowsky, Trustee 30,000 30,000
Harry Berman 35,000 35,000
FMS Profit Sharing 200,000 200,000
George Parlby 50,000 50,000
Marjorie K. Hansen 50,000 50,000
Fred C. Applegate/Fred C. Applegate Trust 50,000 50,000
Tanya Christopher 50,000 50,000
PMG Eagle Fund 300,000 300,000
Royal Bank of Scotland 150,000 150,000
Bank of New York 50,000 50,000
Bank of Scotland Isle of Man 95,000 95,000
Sigler c/o Chase Manhattan Bank 166,000 166,000
Bath Street Nominees 14,000 14,000
First Global Technologies Corp. 800,000 800,000
Grosvenor Capital (2) 17,600 17,600
Scarlet Associates 15,000 15,000
Anthony M. Collura (3) 145,000(4) 145,000(4)
Paul Chernis (3) 52,500(4) 52,500(4)
Ronald A. Balzano (3) 52,500(4) 52,500(4)
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(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares of Common Stock which such person has
the right to acquire within 60 days of June 23, 1998. For purposes of
computing the percentage of outstanding shares of Common Stock held by
each person or group of persons named above, any security which such
person or persons has or have the right to acquire within such period is
deemed to be outstanding but is not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person. Except
as indicated in the footnotes to this table and pursuant to applicable
community property laws, the Company believes based on information
supplied by such persons, that the persons named in this table have sole
voting and investment power with respect to all shares of Common Stock
which they beneficially own.
(2) Presently serves and/or served as a financial and business planning
consultant to the Company. The following table presents the consulting
fees paid to such consultants during the year ended July 31, 1998 and the
nine months ended April 30, 1998:
Year Ended Nine Months Ended
July 31, 1997 April 30, 1998
------------- -----------------
Pennsylvania Merchant Group $ 89,900 $ 75,600
Richard A. Hansen $ - $ -
James Saltzman $ 30,000 $ 8,500
Grosvenor Capital $ 31,500 $ -
(3) These individuals are members of the law firm Silverman, Collura, Chernis
& Balzano, P.C., securities counsel to the Company.
(4) Represents an aggregate of 100,000 shares of Common Stock underlying a
Warrant exercisable through August 31, 1999, at an exercise price of $2.00
per share, an aggregate of 50,000 shares of Common Stock underlying
warrants exercisable through June 4, 2001 at an exercise price of
$2.1875 per share, and an aggregate of 100,000 shares of Common Stock
underlying warrants exercisable through June 4, 2001 at an exercise
price of $3.50 per share.
PLAN OF DISTRIBUTION
The Selling Securityholders may offer and sell shares of Common Stock from
time to time in the discretion of the Selling Securityholders in the over-the-
counter market or otherwise at prices and at terms then prevailing or at prices
related to the then current market price, or at negotiated prices. The
distribution of the shares of Common Stock may be effected from time to time in
one or more transactions including, without limitation: (a) a block trade in
which the broker-dealer so engaged will attempt to sell the Common Stock as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospec-
tus; (c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and (d) face-to-face or other direct transactions between
the Selling Securityholders and purchasers without a broker-dealer or other
intermediary. In effecting sales, broker-dealers or agents engaged by the
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<PAGE>
Selling Securityholders may arrange for other broker-dealers or agents to
participate. From time to time, one or more of the Selling Securityholders may
pledge, hypothecate or grant a security interest in some or all of the Common
Stock owned by them, and the pledgees, secured parties or persons to whom such
securities have been hypothecated shall, upon foreclosure in the event of
default, be deemed to be Selling Securityholders hereunder. In addition, the
Selling Securityholders may from time to time sell short the Common Stock of
the Company, and in such instances, this Prospectus may be delivered in
connection with such short sale and the Common Stock offered hereby may be used
to cover such short sale.
Sales of Selling Securityholders' Common Stock may also be made pursuant
to Rule 144 under the Securities Act, where applicable. The Selling
Securityholders' shares may also be offered in one or more underwritten
offerings, on a firm commitment or best efforts basis. The Company will receive
no proceeds from the sale of Common Stock by the Selling Securityholders.
To the extent required under the Securities Act, the aggregate amount of
Selling Securityholders' Common Stock being offered and the terms of the
offering, the names of any such agents, brokers, dealers or underwriters and
any applicable commission with respect to a particular offer will be set forth
in an accompanying Prospectus supplement. Any underwriters, dealers, brokers
or agents participating in the distribution of the Common Stock may receive
compensation in the form of underwriting discounts, concessions, commissions or
fees from a Selling Securityholder and/or purchasers of Selling Security-
holders' shares of Common Stock, for whom they may act. In addition, sellers
of Selling Securityholders' shares of Common Stock may be deemed to be under-
writers under the Securities Act and any profits on the sale of Selling
Securityholders' shares of Common Stock by them may be deemed to be discounts
or commissions under the Securities Act. Selling Securityholders may have
other business relationships with the Company and its subsidiaries or affil-
iates in the ordinary course of business.
From time to time each of the Selling Securityholders may transfer, pledge,
donate or assign Selling Securityholders' shares of Common Stock to lenders,
family members and others and each of such persons will be deemed to be a
"Selling Securityholder" for purposes of this Prospectus. The number of
Selling Securityholders' shares of Common Stock beneficially owned by those
Selling Securityholders who so transfer, pledge, donate or assign Selling
Securityholders' shares of Common Stock will decrease as and when they take
such actions. The plan of distribution for Selling Securityholders' shares of
Common Stock sold hereunder will otherwise remain unchanged, except that the
transferees, pledgees, donees or other successors will be Selling Security-
holders hereunder.
Including, and without limiting the foregoing, in connection with
distributions of the Common Stock, a Selling Securityholder may enter into
hedging transactions with broker-dealers and the broker-dealers may engage in
short sales of the Common Stock in the course of hedging the positions they
assume with such Selling Securityholder. A Selling Securityholder may also
enter into option or other transactions with broker-dealers that involve the
delivery of the Common Stock to the broker-dealers, who may then resell or
otherwise transfer such Common Stock. A Selling Securityholder may also loan
or pledge the Common Stock to a broker-dealer and the broker-dealer may sell
the Common Stock so loaned or upon default may sell or otherwise transfer the
pledged Common Stock.
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Under applicable rule and regulations under the Exchange Act, any person
engaged in the distribution of the Common Stock may not bid for or purchase
shares of Common Stock during a period which commences one business day (5
business days, if the Company's public float is less than $25 million or its
average daily trading volume is less than $100,000) prior to such person's
participation in the distribution, subject to exceptions for certain passive
market making activities. In addition and without limiting the foregoing, each
Selling Securityholder will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including, without limitation,
Regulation M which provisions may limit the timing of purchases and sales of
shares of the Company's Common Stock by such Selling Securityholder.
The Company is bearing all costs relating to the registration of the
shares of Common Stock (other than fees and expenses, if any, of counsel or
other advisors to the Selling Securityholders). Any commissions, discounts or
other fees payable to broker-dealers in connection with any sale of the shares
of Common Stock will be borne by the Selling Securityholder selling such shares
of Common Stock.
DESCRIPTION OF SECURITIES TO BE REGISTERED
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"). As of June 23, 1998 the Company had 23,550,426 shares of Common Stock
outstanding and no Preferred Stock outstanding. The Company's Board of
Directors retired the Series A and C Preferred Stock designations in February
1997 and retired the Series B Preferred Stock designation in September 1997.
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.
23
<PAGE>
WARRANTS
The Company issued to Silverman, Collura, Chernis & Balzano, P.C.
warrants to purchase up to an aggregate of 250,000 shares of the Company's
Common Stock as follows:
- 100,000 warrants may be exercised at a price of $2.00 per share through
August 31, 1999.
- 50,000 warrants may be exercised at a price of $2.1875 per share through
June 4, 2001.
- 100,000 warrants may be exercised at a price of $3.50 per share through
June 4, 2001.
All of the foregoing warrants are collectively referred to as the Warrants. The
Warrants are subject to extension in the sole discretion of the Company. The
Warrants are not redeemable by the Company. The Shares issuable upon exercise
of the Warrants are subject to adjustments upon certain events, including the
declaration by the Company of a stock split, the reclassification, 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 Warrants may be
adjusted accordingly.
The Warrants may be exercised, in whole or in part, upon surrender of the
certificate representing the Warrants on or prior to the expiration date of the
Warrant accompanied by payment of the exercise price of the Warrants. The
holders of the Warrants will not have the rights or privileges of holders of
common shares until the Warrants are exercised. The Company has agreed to
register the shares of Common Stock underlying the Warrants 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 acquirer 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.
24
<PAGE>
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
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
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
25
<PAGE>
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
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.
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. Certain members
of SCCB are the beneficial owners of 19,500 shares of the Company's common
stock and the Warrants which entitles such owners to purchase an aggregate of
250,000 shares of the Company's Common Stock at exercise prices ranging from
$2.00 per share to $3.50 per share. See "Description of Securities - Warrants".
EXPERTS
The annual 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
reports and upon the authority of said firm as experts in accounting and
auditing.
26
<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............................. 2
Prospectus Summary.......................................................... 4
Summary Financial Information............................................... 6
Risk Factors................................................................ 9
Price Range of Common Stock.................................................18
Dividend Policy.............................................................19
Use of Proceeds.............................................................19
Business....................................................................19
Resales By Selling Securityholders..........................................20
Plan of Distribution.......................................................21
Description of Securities to be Registered..................................23
Legal Matters...............................................................26
Experts.....................................................................26
--------------------
Until ______ __ , 1998 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.
===============================================================================
27
<PAGE>
===============================================================================
CLARITI TELECOMMUNICATIONS INTERNATIONAL, LTD.
3,588,102
SHARES OF
COMMON STOCK
---------------
PROSPECTUS
---------------
===============================================================================
28
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC Registration Fee $ 1,585
Printing 4,300*
Legal Fees and Expenses 15,000*
Accounting Fees and Expenses 2,000*
-------
TOTAL $22,885*
=======
* Estimated
The Selling Securityholders will not be paying any portion of the fore-
going 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 bylaws 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 filings indicated.
3(i) Articles of Incorporation(a)
3(ii) Bylaws(a)
4.6 Form of Silverman, Collura & Chernis, P.C. Warrant.(d)
5.1 Opinion of Silverman, Collura, Chernis & Balzano, P.C., special
counsel for the Registrant, as to the legality of the securities
being registered.*
II-1
<PAGE>
10.1 Amendment to Employment Agreement between the Registrant and
Joseph Tarsia.(e)
10.2 Separation Agreement between the Registrant and Joseph Tarsia (a)
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, 1997, 1996, 1994 and 1993.
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.
II-3
<PAGE>
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 June 29, 1997.
CLARITI TELECOMMUNICATIONS INTERNATIONAL, LTD.
By:
-----------------------------------------
Peter S. Pelullo, Chief Executive Officer
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-4
<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/ Principal Executive June 29, 1998
- ----------------------- Officer, Principal
Peter S. Pelullo Financial Officer and
Chairman of the Board
and as Power of Attorney
for Members of the Board
/s/ President June 29, 1998
- -----------------------
Michael P. McAndrews
/s/ Principal Accounting June 29, 1998
- ----------------------- Officer
James M. Boyd, Jr.
/s/ Director
- ----------------------- June 29, 1998
John N. D'Anastasio
/s/ Director
- ---------------------- June 29, 1998
Robert S. Sannelli
II-5
[LETTERHEAD OF SILVERMAN, COLLURA, CHERNIS & BALZANO, P.C.]
June 29, 1998
Clariti Telecommunications International, Ltd.
1341 North Delaware Avenue
Philadelphia, PA 19125
Re: Registration Statement on Form S-2
Gentlemen:
We have acted as counsel to Clariti Telecommunications International, Ltd.
(the "Company"), a Delaware corporation, pursuant to a Registration Statement
on Form S-2, as filed with the Securities and Exchange Commission on June 29,
1998 (the "Registration Statement"), covering 3,638,102 shares of the
Company's Common Stock, $.001 par value, and 1,300,000 shares of Common Stock
underlying Common Stock Purchase Warrants (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.
<PAGE>
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and its use as part of the Registration Statement.
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
report dated October 16, 1997 in Amendment No. 1 to the Registration Statement
on Form S-2 and the related Prospectus of Clariti Telecommunications
International, Ltd. (f/k/a Sigma Alpha Group, Ltd.).
COGEN SKLAR LLP
Bala Cynwyd, Pennsylvania
June 29, 1998
