As filed with the Securities and Exchange Commission on January 19, 2001
Registration No.: 333-50158
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-----------------------------------------------------
TECH LABORATORIES, INC.
(Name of small business issuer in its charter)
New Jersey 3679, 3573, 3629, and 3613 22-1436279
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
-----------------------------------------------------
955 Belmont Avenue, North Haledon, New Jersey 07508, (973) 427-5333
(Address and telephone number of principal executive offices)
-----------------------------------------------------
955 Belmont Avenue, North Haledon, New Jersey 07508, (973) 427-5333
(Address of principal place or intended principal place of business)
-----------------------------------------------------
Bernard M. Ciongoli, President and Chief Executive Officer
Tech Laboratories, Inc.
955 Belmont Avenue, North Haledon, New Jersey 07508, (973) 427-5333
(Name, address, and telephone number of agent for service)
-----------------------------------------------------
Copies to:
C. Walter Stursberg, Jr., Esq.
Stursberg & Veith
405 Lexington Avenue
New York, New York 10174
-----------------------------------------------------
Approximate date of proposed sale to the public: As soon as practicable
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, check the following box. |X|
If this Form is filed to register additional securities for 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. |_| ________
<PAGE>
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. |_|
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum maximum Amount of
Title of each class of Amount to Offering Price aggregate registration
securities to be registered be Registered Per Share offering price(1) fee
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock,
par value $.01 per share
("Common Stock")(2) 1,321,154 $3.18(8) $4,201,269 $1,167.95
-----------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock (3) 1,154,828 $1.4375(9) $1,660,065 $ 461.33
-----------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock (4) 412,500 $4.80 $1,980,000 $ 550.44
-----------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock (5) 100,000 $1.25 $ 125,000 $ 34.75
-----------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock (6) 100,000 $1.75 $ 175,000 $ 48.65
-----------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock (7) 75,000 $1.12 $ 84,000 $ 23.35
-----------------------------------------------------------------------------------------------------------------------------
Total Registration (10) $2,286.47
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457.
(2) Consists of shares issuable upon the conversion of convertible notes.
Pursuant to the terms of the subscription agreement we are required to
register 200% of the number of shares issuable upon conversion of the
convertible notes. The number of shares being registered is equal to 200%
of the number of shares of common stock which would be issuable if the
entire note and any accrued interest were converted into common stock. Also
registered hereunder are an indeterminate number of additional shares of
common stock which may become issuable by virtue of anti-dilution
provisions in the notes, in accoreance with Rule 416.
(3) Consists of shares issuable upon the conversion of convertible notes, which
is issuable upon exercise of a put option. Pursuant to the terms of the
subscription agreement we entered into with the selling securityholders, we
are required to register 200% of the number of shares issuable upon
conversion of the convertible notes. The number of shares being registered
is equal to 200% of the number of shares of common stock which would be
issuable if the notes and any accrued interest were converted into common
stock. Also registered hereunder are an indeterminate number of additional
shares of common stock which may become issuable by virtue of anti-dilution
provisions in the notes, in accordance with Rule 416.
(4) Consists of shares purchasable upon exercise of warrants issued to certain
securityholders, having an exercise price of $4.80 per share. Also
registered hereunder are an indeterminate number of additional shares of
common stock which may become issuable by virtue of anti-dilution
provisions in the warrants, in accordance with Rule 416.
(5) Consists of shares purchasable upon exercise of warrants issued to certain
securityholders having an exercise price of $1.25 per share. Also
registered hereunder are an indeterminate number of additional shares of
common stock which may become issuable by virtue of anti-dilution
provisions in the warrants, in accordance with Rule 416.
(6) Consists of shares purchasable upon exercise of warrants issued to certain
securityholders having an exercise price of $1.75 per share. Also
registered hereunder are an indeterminate number of additional shares of
common stock which may become issuable by virtue of anti-dilution
provisions in the warrants, in accordance with Rule 416.
(7) Consists of shares purchasable upon exercise of warrants issued to certain
securityholders having an exercise price of $1.12 per share. Also
registered hereunder are an indeterminate number of additional shares of
common stock which may become issuable by virtue of anti-dilution
provisions in the warrants, in accordance with Rule 416.
(8) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457(c), based on the average of the high and low prices of
the Registrant's common stock for November 13, 2000, which date is within 5
business days prior to the initial filing date of this registration
statement.
(9) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457(c), based on the average of the high and low prices of
the Registrant's common stock for January 17, 2001, which date is within 5
business days prior to the filing date of this amendment to the
registration statement.
(10) $1,825.14 of which has previously been paid.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
EXPLANATORY NOTE
This Registration Statement covers the registration of (i) $4,619,316
shares of common stock, $.01 par value, of Tech Laboratories, Inc., a New Jersey
Corporation, issuable upon conversion of convertible notes, and (ii) 687,500
shares of common stock upon exercise of warrants. The information in this
prospectus is not complete and may be changed. These may not be sold until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
SUBJECT TO COMPLETION, DATED January 19, 2001
<PAGE>
PROSPECTUS
5,306,816 Shares
TECH LABORATORIES, INC.
This is on offering of 5,306,816 shares of common stock of Tech
Laboratories, Inc. Of the 5,306,816 shares being offered, up to 4,619,316 may be
sold upon conversion of convertible notes and up to 412,500 may be sold upon the
exercise or warrants issued in connection to the convertible notes. The
remaining 275,000 shares may be sold upon the exercise of warrants issued to
certain selling securityholders. All of the shares are being offered by the
selling security holders named in this prospectus. We will not receive any of
the proceeds from the sale of the common stock, although we will receive
approximately $2,364,000 if all of the warrants being registered are exercised.
The selling securityholders may offer the shares from time to time through
public or private transactions, at prevailing market prices, or at privately
negotiated prices.
Our shares of common stock trade on the OTC Bulletin Board under the symbol
"TCHL.OB" On ______ _____________, 2001, the last reported sale price of our
common stock was $____ per share
This investment involves certain risks. See "Risk Factors," which begins on
page 2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is January 19, 2001.
<PAGE>
PROSPECTUS SUMMARY
Unless the context indicates otherwise, all references herein to "we"
include Tech Labs and its wholly-owned subsidiaries, Tech Logistics, Inc. and
Tech Labs Community Networks, Inc., collectively, and references to "Tech Labs",
"Tech Logistics" and/or "Community Networks" shall mean each of such companies
alone. You should read the entire prospectus carefully, especially the risks of
investing in the common stock discussed under "Risk Factors."
THE OFFERING
Common Stock Offered............................5,306,816 shares of common stock
Shares of Common Stock Outstanding..............4,019,039
Use of Proceeds ................................We will not receive any proceeds
from the sale of common stock by
the selling security holders,
although we shall receive
approximately $2,364,000 if all
of the warrants being registered
are exercised.
Common Stock Trading Symbol ....................TCHL-OB
OUR BUSINESS
Tech Labs manufactures and markets various electrical, electronic and
telecommunications switching and distribution equipment and associated software.
We also market and manufacture, under our exclusive license, an infrared
perimeter intrusion and anti-terrorist detection system or "IDS".
We also acquired a high-speed, telecommunications management network
switching system. This switching system, the DynaTraX(TM) technology, permits
users to bypass current telephone and CATV companies' "Last Mile" connections,
allowing them to realize recurring revenues and to make their properties more
attractive to computer users, while providing bundled digital multi-media
services.
We have been in business since the 1930s, and in 1947 we were incorporated
in New Jersey. Our principal offices are located at 955 Belmont Avenue, North
Haledon, New Jersey 07508, and our telephone number is (973) 427-5333.
<PAGE>
RISK FACTORS
In addition to other matters described in this document, investors should
carefully consider the following factors:
Our inability to protect certain intellectual property from being copied by
our competition could impair our business.
We have no patent or copyright protection on our current products, other
than aspects of the DynaTraX(TM) product and technology. Our ability to compete
effectively with other companies will depend, in part, on our ability to
maintain the proprietary nature of our technologies. Other than with regard to
the DynaTraX(TM) patents, which have been issued to date only in England, we
intend to rely substantially on unpatented, proprietary information and
know-how. We are also presently prosecuting the patent applications filed in the
United States and Europe.
-2-
<PAGE>
Since we have no product liability insurance we could incur substantial
expenses if product liability claims are filed against us.
There is a risk that our current products may malfunction and cause loss
of, or error in, data, loss of man hours, damage to, or destruction of,
equipment or delays. Consequently, we, as the manufacturer of components,
assemblies and devices may be subject to claims if such malfunctions or
breakdowns occur. We are not aware of any past or present claims against us.
While we presently do not maintain product liability insurance, we intend to
obtain such coverage at the completion of this offering if such coverage can be
obtained on affordable terms. We cannot predict at this time our potential
liability if customers make claims against us asserting that DynatraX(TM), IDS
or other new products fail to function. Since we have no insurance we could
incur substantial expenses defending ourselves against a product liability
claim. If we are found to be liable for any product liability claim it could
could result in substantial losses to our business.
-3-
<PAGE>
We manufacture and sell the IDS system under a license agreement which, if
terminated, would prevent us from using technology owned by EAG in our perimeter
detection system products, and would harm our business.
We entered into an Amended Joint Marketing Agreement as of October 1, 1997
with Elektronik Apparatebau GmbH (EAG), W.T. Sports, Ltd. and FUA Safety
Equipment, AG and a Confidentialty and Manufacfuring Agreement with the same
parties and dated the same date, pursuant to which Tech Labs was granted the
exclusive right to manufacture in the U.S. and market and sell in the U.S.,
Canada and South America the IDS products. The agreements terminate on September
30, 2007 subject to automatic renewals for successive one-year periods unless
either party gives notice of non-renewal. The agreements can be terminated
earlier upon a default of any material obligation. If the license is terminated,
we would be unable to use EAG's technology in our perimeter detection system
products. Even if the agreements remain in effect until September 30, 2007, it
will be necessary at that time to negotiate a new agreement or license or
acquire a suitable replacement technology.
Our marketing plan to sell the DynaTraX(TM) switch technology in hospitality
environments is reliant upon a joint marketing agreement which, if terminated,
would hamper our growth and curtail our sales.
Our hospitality software sales are greatly dependent upon a Joint Marketing
Agreement we entered into on October 15, 1999 with TravelNet Technologies, Inc.,
pursuant to which we were granted the right to sell the "Data Valet" software
system, which operates with the DynaTraX(TM) switch technology. This integrated
system provides high-speed Internet and bundled digital services to business
travelers and hotel guests. This agreement, which terminates on September 10,
2002, can be renewed with the mutual consent of both parties. It will be
necessary at that time to negotiate a new agreement or license or acquire a
suitable replacement technology. If replacement software is not available it
could greatly harm our ability to sell the DynaTraX(TM) switch technology in
hospitality environments.
-4-
<PAGE>
Our lack of insurance on the DynaTraX(TM) product inventory could result in
substantial expenses and losses if the product inventory were damaged or lost.
In connection with the acquistion of the DynaTraX(TM) technology, we
acquired digital switches, finished products and parts from NORDX/CDT. We do not
have insurance on that inventory. Damage or destruction of some or all of the
inventory by fire, theft or by acts of nature would result in substantial
losses and would harm our business.
Volatility of stock prices may increase the number of shares issuable upon
conversion of the notes.
The stock market from time to time experiences significant price and
volume fluctuations, some of which are unrelated to the operating performance of
particular companies. We believe that a number of factors can cause the price of
our common stock to fluctuate, perhaps substantially. These factors include,
among others:
o Announcements of financial results and other developments relating to our
business;
o Changes in the general state of the economy; and
o Changes in market analyst estimates and recommendations for our common
stock.
Significant downward fluctuations of the price of our stock may
substantially increase the number of shares of common stock issuable upon
conversation of outstanding notes as a result of the conversion formula, which
is tied to the market price of the common stock.
The issuance of additional shares of common stock upon conversion of the notes
may cause significant dilution of existing shareholders' interests and exert
downward pressure on the price of our common stock.
Significant dilution of existing shareholders' interests may occur if we
issue additional shares of common stock underlying the convertible notes. We are
presently registering 4,619,316 shares of common stock which are issuable upon
conversion of the notes and interest thereon. The actual number of shares of
common stock issuable upon conversion of the notes may constitute a
significantly greater percentage of the total outstanding shares of our common
stock, as such conversion is based on a formula pegged to the market price of
the common stock. The notes are convertible at a price equal to 85% of the
average of the five lowest closing bid prices of the common stock during the
twenty-two (22) business days immediately preceding the issuance of the notes or
85% of the five lowest bid prices during the twenty-two business days through
the date of conversion of the notes, whichever is lower. The average of the five
lowest closing bid prices of the company's common stock during the twenty-two
(22) business days prior to January 19, the date of this prospectus, was
$0.865929. Therefore, there is a possibility that the notes may convert to
common stock at a rate which may be below the prevailing market price of the
common stock at the time of conversion.
The exact number of shares of common stock into which the notes may
ultimately be convertible will vary over time as the result of ongoing changes
in the trading price of our common stock. Decreases in the trading price of our
common stock would result in increases in the number of shares of common stock
issuable upon conversion of the notes. The following consequences could result:
o If the market price of our common stock declines, thereby
proportionately increasing the number of shares of common stock
issuable upon conversion of the notes, an increasing downward pressure
on the market price of the common stock might result, which is
sometimes referred to as a downward "spiral" effect.
o The dilution caused by conversion of the notes and sale of the
underlying shares could also cause downward pressure on the market
price of the common stock.
o The conversion of the notes would dilute the book value and earnings
per share of common stock held by our existing shareholders.
-5-
<PAGE>
This prospectus contains forward-looking information.
This prospectus contains forward-looking statements. These forward-looking
statements are not historical facts but rather are based on current
expectations, estimates and projections about our industry, our beliefs, and
assumptions. Words such as " anticipates," "expects," "intends", "plans,"
"believes," "seeks," "estimates" and variations of these words and similar
expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond our control,
are difficult to predict and could cause actual results to differ materially
from those expressed or forecasted in the forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
prospectus. We undertake no obligation to update these statements or publicly
release the result of any revisions to the forward-looking statements that we
may make to reflect events or circumstances after the date of this prospectus or
to reflect the occurrence of unanticipated events.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
common stock owned by the selling security holders, although we will receive
approximately $2,364,000 if all of the warrants being registered are exercised.
All proceeds from the sale of shares of common stock owned by the selling
security holders will be for the account of the selling securityholders
described below. See "Selling Securityholders."
-6-
<PAGE>
PRICE RANGE OF COMMON STOCK
Our common stock has been trading publicly on the OTC Bulletin Board under
the symbol "TCHL-OB" since 1994. The table below sets forth the range of
quarterly high and low closing sales prices for our common stock on the OTC
Bulletin Board during the calendar quarters indicated. The quotations reflect
inter-dealer prices, without retail mark-ups, mark-downs, or conversion, and may
not represent actual transactions.
TCHL COMMON STOCK
<TABLE>
<CAPTION>
CLOSING BID CLOSING ASK
--------------------- -------------------------
YEAR ENDING DECEMBER 31, 2000 HIGH LOW HIGH LOW
----------------------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter................................... $10.18 $4.18 $ 10.62 $4.68
Second Quarter.................................. 10.81 5.12 11 5.37
Third Quarter................................... 6.37 4.43 7.37 5.25
Fourth Quarter ................................. 4.75 0.875 5.0625 1.00
YEAR ENDING DECEMBER 31, 1999
-----------------------------
First Quarter................................... $ 2.625 $1.0625 $ 3.0 $1.3125
Second Quarter.................................. 3.125 1.50 3.875 2.00
Third Quarter................................... 3.25 1.50 3.625 1.625
Fourth Quarter ................................. 3.87 1.00 4.12 1.25
YEAR ENDING DECEMBER 31, 1998
-----------------------------
First Quarter................................... $ 3.125 $1.75 $ 3.375 $2.125
Second Quarter.................................. 2.6875 1.6875 3.00 2.00
Third Quarter................................... 2.1875 1.125 2.625 1.4375
Fourth Quarter.................................. 2.0625 1.25 2.625 1.50
</TABLE>
As of January 15, 2001, there were approximately 250 holders of record of
our common stock.
DIVIDEND POLICY
We have never paid any cash dividends on our common stock and anticipate
that, for the foreseeable future, we will continue to retain any earnings for
use in the operation of our business. Payment of cash dividends in the future
will depend upon our earnings, financial condition, any contractual
restrictions, restrictions imposed by applicable law, capital requirements, and
other factors deemed relevant by our Board of Directors.
-7-
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 2000
and has been derived from financial information appearing in the Financial
Statements included in this prospectus:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 2000
-------------------------------------------------
Actual
Unaudited Pro-Forma(1) Pro-Forma as Adjusted(2)
-------- --------- ------------------------
<S> <C> <C> <C>
Total Debt: $169,599 $2,169,599 $169,599
Stockholders' equity:
Common Stock, $.01 par value; 10,000,000 shares
authorized; 4,019,039 shares issued and
outstanding; 11,316 shares held in treasury,
Pro-Forma 6,440,193 shares, authorized and issued...... $39,379 $39,379 $63,591
Additional paid-in capital............................. $4,060,287 $4,060,287 $10,404,287
Accumulated deficit.................................... ($1,131,965) ($1,131,965) ($1,261,965)
Total stockholders' equity (deficiency)................ $2,967,701 $2,967,701 $9,205,913
Total Capitalization................................... $3,137,300 $5,137,300 $9,375,512
</TABLE>
(1) $2,000,000 Convertible Debenture issued in the fourth quarter of 2000.
(2) Convertible Debenture redeemed and existing warrants exercised one year
hence.
SELECTED FINANCIAL DATA
The financial data included in the following table has been derived from
our unaudited financial statements and should be read together with our
unaudited financial statements and related notes.
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
December 31, September 30,
--------------------------------------- ---------------------------------------
1997 1998 1999 1998 1999 2000
------- -------- -------- --------- -------- ---------
Unaudited
---------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Sales 444,322 $552,486 $689,190 $341,352 $535,160 $849,106
Cost of Sales 446,457 386,425 472,790 317,702 374,612 372,967
------- -------- -------- --------- -------- --------
Gross Profit (2,135) 166,061 216,400 23,650 160,548 476,139
Operating Expenses
General and administrative 257,826 311,716 846,174 306,352 548,384 507,030
Depreciation and
amortization 7,278 18,133 15,000 -- -- --
------- -------- -------- --------- -------- --------
Income (loss) from operations (267,239) (163,788) (644,774) (282,702) (387,836) (30,891)
Other income--Interest 166 1,654 1,150 83 -0- 34,796
Interest expense 6,996 6,970 11,305 6,970 -0- 5,465
------- -------- -------- --------- -------- --------
Income (loss) before provision
for income taxes (274,069) (169,104) (654,929) (289,589) (387,836) (1,560)
Provision for income taxes -0- -0- -0- -0- -0- -0-
Net income (loss) (274,069) (169,104) (654,929) (289,589) (387,836) (1,560)
Net income (loss) per share ($0.18) ($0.06) ($0.18) ($0.10) ($0.12) -0-
</TABLE>
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
December 31, September 30,
-------------------------------------- ----------------------------------------
1997 1998 1999 1998 1999 2000
---- ---- ---- ---- ---- ---------
Balance Sheet Data: Unaudited
------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total assets $609,526 $1,018,597 $1,258,172 $431,838 $1,341,420 $3,137,30
Working Capital 405,548 851,540 566,966 315,339 878,255 2,778,489
Current Portion of long-term debt 34,445 32,742 28,559 32,742 30,293 25,821
Long-term debt (less current portion) -0- -0- -0- -0- -0- -0-
Shareholders' equity $429,615 $ 863,727 $722,305 $327,526 $1,000,791 $2,967,701
</TABLE>
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
We were incorporated in 1947 as a New Jersey corporation. Our focus has
historically been the design, manufacture, and sale of rotary switches. Switches
have been a significant part of our revenue for five decades. In 1995, to
augment revenues, we sought business in transformers and contract manufacturing.
In 1998, we made a shift to new product development. In 1998, we also made our
first sales of the IDS product, and in April of 1999, we completed the
acquisition of the DynaTraX(TM) switch and technology. We will continue to focus
on IDS and DynaTraX(TM) sales and development of additional products using these
technologies.
The following table sets forth the components of our revenues for each of
our major business activities in 1997, 1998, 1999, and nine months ended
September 30, 1999 and 2000 and their approximate percentage contribution to
revenues for the period indicated:
<TABLE>
<CAPTION>
PRODUCT TYPE 1997 % of Revenue 1998 % of Revenue 1999 % of Revenue
------------ ---- ------------ ---- ------------ ---- ------------
<S> <C> <C> <C> <C> <C> <C>
Switches $199,324 44.8% $166,550 30.1% $269,739 39.1%
IDS Sensors 0 0 254,900 46.2% 298,853 43.4%
Transformers/Coils 53,595 12.1% 50,515 9.1% 46,786 6.8%
Contract Manufacturing 191,404 43.1% 80,520 14.6% 73,812 10.7%
-------- ------ -------- ------ -------- ------
Totals $444,323 100.0% $552,485 100.0% $689,190 100.0%
======== ====== ======== ====== ======== ======
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------------------------
2000
PRODUCT TYPE 1999 % of Revenue (unaudited) % of Revenue
------------ -------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Switches $256,877 47.5 $308,666 36.4%
IDS Sensors 155,731 29.6 399,646 47.1%
Transformers/Coils 73,852 13.8 26.498 3.1%
Contract Manufacturing 48,700 9.1 114,296 13.4%
-------- ------- -------- ------
Totals $535,160 100.0% $849,106 100.0%
======== ======= ======== ======
</TABLE>
There has been a significant decrease in sales of rotary switches and
contract manufacturing, due to a shift to new product development and sales.
There were no sales of the new IDS sensors in 1997. In 1998 and 1999 sales of
the IDS sensors were $254,900 and $298,853. This increase is continuing in the
year 2000.
The following table sets forth the percentages of gross profit for each of
our major business activities in 1997, 1998, 1999 and the nine months ended
September 30, 1999 and 2000.
<TABLE>
<CAPTION>
Nine Months
ended
-----------------------
September 30,
Net Net 2000 Net
PRODUCT TYPE 1997 1998 Change 1998 1999 Change 1999 (unaudited) Change
------------ ---- ---- ------ ---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rotary Switches 44.2% 45.0% 0.8% 45.0% 45.0% -0- 45.0% 55.0 10.0%
IDS Sensors -0- 52.0% 52.0% 52.0% 54.6% 2.6% 54.6% 69.0% 14.4%
Transformers/Coils 22.7% 25.0% 2.3% 25.0% 25.0% -0- 25.0% 25.0% -0-
Contract Manufacturing 20.0% 22.8% 2.8% 22.8% 22.8% -0- 22.8% 22.8% -0-
Unallocated company Expenses,
Including Physical
Inventory Adjustments
and Factory Overhead (31.2%) (13.1%) 18.1% (13.1%) (14.0%) (0.9%) (13.1%) (0.2) 12.9%
Total Gross Profit % (0.5%) 30.1% 30.6% 30.1% 31.4% 1.3% 30.0% 56.1% 26.1%
</TABLE>
We have begun to shift out of the subcontracting and transformer business
which provides low gross profit margins, for higher gross profit margin sales of
IDS and other new products. While rotary switches produce high gross profits,
demand for rotary switches is low.
We have gradually shifted our product offering from less profitable to more
profitable proprietary products.
-9-
<PAGE>
Results of Operations
Nine Months Ended September 30, 2000, Compared to Nine Months Ended
September 30, 1999.
Sales were $849,106 for the nine months ended September 30, 2000 as
compared to $535,160 for the similar period of 1999. This increase was due to
sales of our IDS Sensor Products to the Department of Energy plus an increase in
Dynatrax Sales.
Cost of sales of $372,967 for the first nine months of the year 2000 has
decreased by $1,645 compared to the same period for 1999, primarily due to
a shift in sales to our more profitable IDS Senors and Dynatrax Products.
Selling, general and administrative expenses decreased by $41,354 compared
to the same period in 1999 due to non-recurring stock related expenses incurred
to support our self-underwritten public offering in the second quarter of 1999,
which was partially offset by increased marketing efforts of our more profitable
product lines.
Income from operations increased by $386,276 compared to a loss of
[$387,836] for the prior period as a direct result of increased sales plus the
elimination of non-recurring stock related expenses.
Nine Months Ended September 30, 2000, Compared to Year Ended
December 31, 1999.
Significant Changes
In the first nine months of 2000, Tech Labs continued to reverse several
negative trends.
Sales trends improved substantially due to the full intregration of the
DynaTraX product line into Tech Labs' sales and marketing efforts plus increased
IDS Sensor sales.
Cash Flow for the first nine months of 2000 was positive at $1,299,395 as a
result of the completion of Tech Labs' self-underwritten public offering on
May 2, 2000.
1999 Compared to 1998
Sales were $689,190 for 1999 as compared to $552,485 for the year ended
1998. The increase was due to growth in switch and sensor sales. We will
continue efforts in the future to increase sales of these high margin products.
Cost of sales of $472,790 for the year ended 1999 compared to $386,425 for
the year ended 1998 increased due to sales of IDS sensors to the Department of
Energy's Los Alamos facility and increased switch sales.
Selling, general, and administrative expenses increased by $531,325 in 1999
as compared to the prior period in 1998 which resulted from higher than normal
expenses in 1999 due to professional fees associated with the acquisition of
DynaTraX(TM), and the fees incurred in connection with Tech Labs'
self-underwritten public offering.
Losses from operations of ($654,929) in 1999 increased by $485,825 compared
to losses of ($169,104) for the prior period as a direct result of higher
administrative expenses, due to the non-recurring DynaTraX(TM) acquisition fees
and legal fees and self underwritten public offering legal fees.
1998 Compared to 1997.
Sales increased 24% from $444,322 in 1997 to $552,486 in 1998. This was due
to an increase in sales of the Intrusion Detection System (IDS). We will
continue our efforts to grow high margin IDS sales.
Cost of sales decreased 16% from $446,457 in 1997 to $386,425 in 1998 due
to an increase in sales of lower cost IDS products, which have a higher gross
profit than historical products.
Selling, general and administrative expenses, including depreciation,
increased 24% from $265,104 in 1997 to $329,849 in 1998 due to increased sales
efforts, engineering, testing, and promotion of new product introductions, as
well as consulting, legal, and other expenses in connection with the acquisition
of the DynaTraX(TM) product line.
Income (loss) from operations decreased 39% from a loss of ($267,239) in
1997 to a loss of ($163,788) in 1998 due to higher gross profit margins on new
products.
Interest expense decreased negligibly from $6,996 in 1997 to $6,970 in
1998.
Liquidity and Capital Resources.
During the years ended December 31, 1997 and 1998 and for the nine months
ended September 30, 1998 and 1999 we have had difficulty meeting our working
capital requirements, which was a result of lower sales, limited marketing
efforts, and continued losses from operations. During the years ended December
31, 1997 and 1998, we completed sales of our common stock which raised
approximately $407,000 in 1997 and $603,716 in 1998.
During calendar year 1999 we raised an additional $250,000 for the
acquisition of the DynaTraX(TM) assets and an additional $200,000 for working
capital. On October 25, 1999 Tech Labs borrowed $50,000 at 10% interest per year
pursuant to a promissory note and security agreement with the lender. Under the
terms of the security agreement, Tech Labs assigned a security interest in two
of Tech Labs' purchase orders totaling $543,000. Under the terms of the
promissory note, the $50,000 was to be repaid in full no later than December 24,
1999. The Note was extended to a due date of December 31, 2000 at an interest
rate of 14%. In addition, Tech Labs entered into three unsecured promissory
notes, as described below, in the amount of $50,000 each, at an interest rate of
10%:
o Note 1. Executed December 13, 1999 and is due February 13, 2000
o Note 2. Executed December 15, 1999 and is due February 15, 2000
o Note 3. Executed December 20, 1999 and is due February 20, 2000
During 1998 we sold our first IDS products to the U.S. government Los
Alamos facility. Continued sales will, however, be dependent upon sustained
marketing efforts. Because sales from our historical lines of products have not
in the past, and are not in the future expected to generate sufficient revenue
to support our product development and marketing and sales efforts for our
DynaTraX(TM) and IDS products, we will be required to meet our capital needs to
finance our business plan through the sale of our shares of common stock in
public and private securities transactions and/or through credit facilities. In
the event we are unable to raise or borrow sufficient funds, we will be required
to curtail the implementation of our business plan.
-10-
<PAGE>
BUSINESS
General
Tech Laboratories, Inc. manufactures and sells various electrical and
electronic components. During 1999, we completed the acquisition of the
DynaTraX(TM) high-speed digital switch matrix system, an electronic switching
unit. We believe that the acquisition of the DynaTraX(TM) technology will enable
us to become a provider of multi-media digital network distribution and
management equipment for use in campus and building facilities. This equipment
manages voice, video and data transmissions on a network.
In addition, during the last two and a half years, through our subsidiary,
Tech Logistics, Inc., we have been manufacturing and marketing under our
exclusive license, an infrared perimeter intrusion and anti-terrorist detection
system or "IDS." The IDS was originally designed for military applications, and
we currently market this product to government agencies and private industry for
use in nuclear, industrial and institutional installations.
Historical Business
We also manufacture and sell standard and customized transformers, test
equipment and rotary switches, the latter of which products permits an
electrical signal to be diverted from point A to point B. In addition, we act as
a contract manufacturer for other companies and produce on an OEM basis
electronic and electrical assemblies, printed circuit board assemblies, cable
and harness assemblies and specialized electronic equipment. Approximately 15%
of our products are manufactured for military applications.
We sell our switch, transformer and test equipment products in the
electronics and electrical industries, primarily as a contract manufacturer for
other companies or for inclusion in OEM products. We market our products in
these industries in the United States. This is a mature market. Competition is
on the basis of price and service. Pricing of our products is based upon
obtaining a margin above cost of production. The margin we will accept varies
with quantity and the channels of distribution.
We intend to market our historical products over the Internet, as well as
through our distribution and outside sales agents. Our website is currently
on-line. Our website address is www.techlabsinc.com.
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<PAGE>
The DynaTraX(TM) Asset Acquisition - Material Terms of Purchase Agreement
On April 27, 1999, pursuant to an asset acquisition agreement with
NORDX/CDT, Inc., we completed the purchase of the DynaTraX(TM) product, for a
purchase price of $500,000. The entire amount of the purchase price was paid
upon closing. In connection with the acquisition of DynaTraX(TM) technology, we
acquired certain inventory, patents and patent applications, and other equipment
related to the DynaTraX(TM) product. Under the agreement, NORDX/CDT, Inc.
retained a limited amount of inventory to service customers who had purchased
the technology prior to the discontinuance of the DynaTraX(TM) business by
NORDX/CDT, Inc.
Industry
DynaTraX(TM) Networking Management and Maintenance Technology
We believe that there is a rapidly growing marketplace for "digital"
multi-media, including Internet, high-speed data, digital voice and video, and,
information equipment and systems. We intend to use our DynaTraX(TM) technology
to produce a line of standard, digital telecommunication distribution and
management equipment that OEM's and/or Value-Added-Resellers will be able to use
as a platform they can custom configure, through software, to supply a variety
of industry and customer-specific applications and functions.
We entered into an agreement in October 1999 with TravelNet Technologies,
Inc. to sell the "Data Valet" software system which runs on a Dynatrax(TM)
distributing switch system. This system provides high-speed, bundled,
multi-media Internet and video services to business travelers and hotel guests.
This integrated system also monitors and bills guests for services used. The
agreement expires on September 10, 2002.
The TravelNet Agreement provides that Tech Labs and TravelNet will jointly
o promote DynaTraX(TM) and the Data Valet products in trade shows;
o share the costs of trade show participation;
o select and pay for retaining an advertising agency;
o training of sales personnel; and
o share information, literature, sales projections, sales leads and
technical support.
We intend to build industry recognition for producing private,
customer-premise (community, commercial, educational and hospitality complexes,
and residential buildings), high-speed Internet, Long Distance, Intranet
information distribution and management switching systems.
We believe the future trend in communications is reselling local loop
services, which is the service connection between the local phone company's
local office and the telephone customer, using new digital transmission
technology and equipment to get around the present "de facto monopoly" telephone
and CATV companies maintain over local connection and distribution services.
The DynaTraX(TM) product, we believe, offers a faster switch and a much
larger port size than any competing product and is not limited to a specific
type of network as with some competing products. Port size refers to the number
of network connections available for user equipment and for network distribution
equipment.
DynaTraX(TM) is proposed to be sold in the multi-media digital network
distribution and management equipment industry. The growth in digital networks
is clear as is the cost in supporting and maintaining these networks. We
initially intend to market the DynaTraX(TM) product in the eastern portion of
the United States with expansion to other markets over time.
Our goal is to have our DynaTraX(TM) technology play a large role in
helping developers, builders and/or managers of private residential communities
and commercial, industrial, educational and hospitality complexes establish
facilities that will distribute and manage high-speed digital Internet, Long
Distance and CATV services. This technology permits these users to bypass
current telephone and CATV companies' "Last Mile" connection service. "Last
Mile" connection service is the interconnection between a wide range of
computing resources to "Wide Area Network", and may allow users to increase
rents and to make their properties more attractive to tenants.
In making progress towards that objective, we, through a subsidiary, in
June, 2000 acquired three contracts to provide residential bundled communication
services to property developments in Florida from M3Communications, Inc. Each of
the contracts is for a 10 year term. Two of the contracts are with NTS in
Orlando, Florida, representing 357 existing apartment units, and the third
contract is with Premier Properties in Ft. Myers, Florida, representing 300 new
apartments projected to be completed within the next eighteen months. Tech Labs
Community Networks, Inc., a wholly-owned subsidiary of Tech Labs, acquired the
contracts through its subsidiary, Tech Labs Community Networks of the Southeast,
Inc. As partial consideration for the sale, M3 was given a 20% stake in Tech
Labs Community Netorks of the Southeast. Tech Labs Community Networks retains
the remaining 80% of Southeast's outstanding shares. M3 will also receive 20% of
the operating income derived from the three contracts and any contracts signed
by Southeast within 120 days of June 23, 2000. Tech Labs agreed to provide all
residential broadband-bundled servies in Virginia, South Carolina, Kentucky,
Tennessee, Georgia, Louisiana, Mississippi and Florida through Southeast.
We formed Tech Labs Community Networks, Inc. to be the holding company of
regionally oriented subsidiaries which would provide residential bundled
communication services to property developments. Tech Labs Community Networks of
the South East, Inc. focuses on the southeastern region of the United States. No
other subsidiaries of Tech Labs Community Networks have been formed to date.
There are at least four companies that have products that compete with the
DynaTraX(TM) product. However, we believe none of these competitors offer a
product with all of the features or capabilities of DynaTraX(TM).
-12-
<PAGE>
We expect that competition in the sale of our DynaTraX(TM) product will be
on the basis of price, features, service and technical support. Pricing of our
products is based upon obtaining a margin above cost of production. The margin
we will accept varies with quantity and the channels of distribution.
Competition for network management products comes from several different
sources. One source of competition is the designated employees of large
organizations which have been hired to manage and maintain their internal
networks. However, we believe the need to reduce costs through the
implementation of automated cost saving technologies such as the DynaTraX(TM)
technology will provide Tech Labs with market opportunities.
Another group of competitors which produces products to manage and maintain
the network physical layer consists of NHC, RIT and Cyteck. Of these three
companies, NHC is the only one that offers a product comparable to DynaTrax(TM),
but which is not as fast as DynaTraX(TM). In addition, V-LAN switching, which is
a technology utilized by a number of companies, can be regarded as a competing
technology. However, V-LAN switching is limited to a specific type of network,
i.e. Ethernet, and not able to support many tasks which our DynaTraX(TM)
technology is designed to complete. These tasks are:
o rearranging network physical layer connections e.g.s moves, adds and
changes of equipment such as computer terminals; fax machines; and
printers;
o testing circuits;
o managing and mainatining end-to-end network configuration, which is
the connection between different points on a network from the
telecommumunications closet to the user outlet; and
o maintaining asset inventory records.
We regard V-LAN as complementary to DynaTraX(TM) circuit switching since
they can work together to provide a more comprehensive network
management/maintenance solution. The four competitors all have greater financial
and other resources and currently account for substantially all of the existing
market.
Although we believe that the DynaTraX(TM) technology will serve as the
basis for new products in the area of multi-media, digital network distribution
and management equipment for use in campus and building facilities, our ability
to successfully market our products will depend upon several factors including,
among others:
o The development of an effective marketing and distribution network;
o The acceptance of our products by potential users; and
o Our ability to support existing products and develop and support new
products that are compatible with other systems in use by potential
customers and provide useful features that are user friendly.
In the past we have experienced, and we are likely to experience in the
future, delays in the development and introduction of products. We cannot assure
you that we will keep pace with the rapid rate of change in security and network
switching systems research, or that our new products will adequately meet the
requirements of the marketplace or achieve market acceptance.
Infrared Intrusion Detection System or "IDS"
In April 1997, we formed Tech Logistics, Inc., a joint venture subsidiary
owned at that time 80% by Tech Labs and 20% by Carmine O. Pellosie, Jr., a
director of our company and president of International Logistic, Inc., a
privately owned company that distributes police, security, safety and
communication security devices. In May 1998, we acquired Mr. Pellosie's interest
in Tech Logistics. The IDS, which is an active infrared sensor system able to
detect intrusions by humans or vehicles into protected areas, was originally
designed for military applications.
We have recently begun marketing IDS to government agencies and private
industry for use in nuclear, industrial, and institutional installations. We
have also begun to manufacture and market products currently sold by
International Logistics Inc., as well as new security, police training, bomb
detection and disposal equipment, anti-terrorism countermeasures and lie
detection devices. New devices are intended to include hand-held letter bomb
detectors, hand-held weapons detectors, video surveillance equipment as well as
integrated audio-visual surveillance vehicles for government and police use.
We have entered into an agreement dated effective as of October 1, 1997
with EAG, W.T. Sports, Ltd. and FUA Safety Equipment. Under the terms of the
agreement we were granted an exclusive right until September 30, 2007 to
manufacture and sell in the U.S., Canada and South America the IDS products. The
agreement provides that until March 31, 2001 gross pre-tax profits will be
shared 70% to Tech Labs and 30% to FUA. From April 1, 2001 until September 30,
2007 the gross pre-tax profits in excess of 16% will be shared 70% to Tech Labs
and 30% to FUA. We will also pay FUA a royalty of 5% of the cost of any IDS
products we manufacture and sell. We also intend to market metal detection
equipment manufactured by EAG for use in security and industrial applications,
such as walk-through metal detectors and hand-held metal detectors.
We are marketing our IDS product to the security and anti-terrorist
industry. We believe this is a growing industry and that terrorist incidents and
security breaches serve to increase the demand for our products. We have
recently completed the sale of an IDS to Los Alamos National
-13-
<PAGE>
Laboratories.
This industry has a number of different competing products and
technologies. Competition in the industry is partly based on price and partly on
other factors such as effectiveness of a product in the field, acceptable levels
of false alarms for a given application and service. We are marketing the IDS
product for global distribution. We have a number of competitors for the IDS
products offering competitive technology, many of whom have greater financial
and other resources.
We have received approval for the IDS from the U.S. Air Force for inclusion
in their Tactical Automated Security System program, which is a $500 million
program to thwart enemy attacks on critical military installations throughout
the world. Subsequent to this approval, Tech Labs has received a blanket order
to provide 50 IDS systems to the U.S. Air Force. Tech Labs has as of the date of
this prospectus shipped 12 systems under its blanket order to the Air Force
prime contractor. Pricing of our products is based upon obtaining a margin above
cost of production. The margin we will accept varies with quantity and the
channels of distribution.
Marketing Strategies
Marketing. We plan to implement a three-pronged marketing program
consisting of:
o Industry announcements and presentations through business and industry
trade groups;
o Establishing relationships with several industry recommenders and
specifiers, who are consultants and engineering companies to help
present our cable management and network physical layer solutions to
the end-users and their contract management or system integrators; and
o A promotional campaign of ads, mailings, and on-line Web site media,
targeted at the end-user communications managers, their consultants
and advisers.
Initially, we will focus on the communication/computer centers in the
eastern part of the United States. We plan to divide this area into four sales
regions:
o New England states;
o New York metropolitan area;
o Mid-Atlantic/Washington DC area; and
o South East Coast states.
We will quickly set up several regional representatives, sales agents,
and/or certified value added resellers in each of the four regions. Our plan is
to have one representative and, initially, up to two VARs for each region.
Whenever possible, we plan to use former NORDX/CDT trained sales agents and
certified VARs.
Sales representatives will be commissioned sales agents. VARs will be
system integrators who will purchase DynaTraX(TM) products at a volume based
discount price for resale as part of a turn-key service in which the system
integrator designs the system, purchases the component products and installs and
maintains the system.
We also plan to expand on the initial program by opening up additional
sales areas in the country and overseas. We contemplate doing this by adding
regional representatives or agents, or through current VAR organizations that
have a national presence.
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<PAGE>
In the established East Coast area, we intend to set up three regional
sales/service centers:
o Massachusetts;
o Washington, DC; and
o Florida
We will repeat the process in the other areas as they become established.
We plan to use our sales/service centers to introduce new, enhanced
versions of the DynaTraX(TM) system and to provide territory customer support
services. We also plan to set up a separate marketing campaign and sales
operations to build markets for our expanded high-speed, customer-premise
DynaTraX(TM) gateway networking switch.
In addition, working with VARs, we will focus on providing turn-key,
private customer-premise digital gateway exchange networking systems. We will
target real estate developers, builders and/or owners of private communities,
commercial community retail complexes and shared rental buildings to enable them
to control and resell Internet, long distance, CATV, and building automation
information services going into and out of their private facilities.
Source of Supply
Current inventory component purchases for all our products are made from
OEMs, brokers, and other vendors. We typically have more than a single source of
supply for each part, component, or service, but from time to time we may
utilize a single supplier for a particular part or component. During the year
ended December 31, 1999, Wiggins Plastics was our largest supplier with 7.4% of
our overall inventory purchases. These purchases were primarily used in the
manufacture of electromechanical switches. During the year ended December 31,
1998, Wiggins Plastics accounted for 14.2% of our supply of inventory. We have
no long-term agreements with any of our suppliers.
Order Backlog
The backlog of written firm orders for our products and services as of
September 30, 2000 and December 31, 1999, was as follows:
As of December 31, 1999: $742,765
As of September 30, 2000: $443,737
Patents
In connection with our acquisition of the DynaTraX(TM) assets, we acquired
certain patents and pending patent applications. Four patents have been granted
in Great Britain, which are listed below:
o Patent title: User Interface for Local Area Network. This patent covers
technology which allows communication between the user and the equipment
controlling the network. This patent expires in 2013.
o Patent title: Token Ring. This patent covers technology which transmits
information between devices on a network. This patent expires in 2013.
o Patent title: Half Duplex Circuit for Local Area Network. This patent
covers technology which allows one-way communication either to or from the
Local Area Network. This patent expires in 2013.
o Patent title: Matrix Switch Arrangement. This patent covers technology
which is a switch that can either connect or disconnect one or more devices
on a network. This patent expires 2015.
We also have patents pending in the United States and in the European
Common Market.
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<PAGE>
Employees
As of November 10, 2000, we had 16 full-time employees, including our
officers, seven of whom were engaged in manufacturing, one in repair services,
one in administration and financial control, two in engineering and research and
development, and two in marketing and sales, and three in management.
Facilities; Manufacturing
Our corporate headquarters and manufacturing facility is located in North
Haledon, New Jersey. Our primary manufacturing and office facility is a
one-story building that is adequate for our current needs. We lease this
facility of 8,000 square feet, from a non-affiliated person, under a lease that
ends in May, 2001. The annual base rent is $48,000 and includes property taxes
and other adjustments. We believe our premises are adequate for our current
needs and that if and when additional space is required, it would be available
on acceptable terms.
We are an integrated manufacturer and, accordingly, except for plastic
moldings and extrusions, produce nearly all major subassemblies and components
of our devices from raw materials. We purchase certain components from outside
sources and maintain an in-house, light machine shop allowing fabrication of a
variety of metal parts and castings, complete tool room for making and repairing
dies, a stamping shop and an assembly shop with light assembly presses. Our test
lab checks and tests our products at various stages of assembly and each
finished product undergoes a complete test prior to shipment.
We anticipate that we will either manufacture any new products ourselves or
subcontract their manufacture, in whole or in part, to others. We believe that
personnel, equipment, and/or subcontractors will be readily available as and
when needed.
We offer warranties on all our current products, including parts and labor
for one year.
We have limited research and development facilities and currently employ
one engineer.
Litigation
We are involved in a lawsuit arising from a letter of intent relating to a
small potential transaction we did not complete because we believed there were
misrepresentations made to us. We believe that the outcome is likely to be
favorable, but that our maximum liability if we do not prevail would be $30,000.
The suit is pending in the Superior Court of New Jersey, Law Division, Passaic
County.
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<PAGE>
MANAGEMENT
Directors, Executive Officers, and Key Consultants
Name Age Title
---- --- -----
Bernard M. Ciongoli 53 President, Treasurer, and Director
Earl M. Bjorndal 48 Vice President and Director
Carmine O. Pellosie, Jr. 57 Secretary and Director
Salvatore Grisafi 70 Director
Each director is elected for a period of one year and until his successor
is duly elected by shareholders and qualified. Officers serve at the will of the
board of directors.
Bernard M. Ciongoli became our president and a director in late 1992, and
became Treasurer in 1998. From 1990 through 1991 he served as president of
HyTech Labs, a company engaged in sales and servicing of electronic test
equipment. During the years of 1987 to 1990, he acted as the principal owner and
President of Bernco Developers, a real estate developer. Mr. Ciongoli holds a
degree in electronic engineering from Paterson Institute of Technology.
Earl M. Bjorndal has been with us in various capacities since 1981. He has
been a director since 1985, and became a vice president in 1992. He is a
graduate of the New Jersey Institute of Technology with both bachelor's and
master's degrees in industrial engineering.
Carmine O. Pellosie, Jr. has been a director since the formation of Tech
Logistics, Inc. in 1997 and has been our secretary since April 1999. Since
January 1, 1999, he has been the Controller of the Passaic County Department of
Health and Human Services. Prior to January 1999, he was, for more than five
years, president of International Logistics, Inc.
Salvatore Grisafi, 70, is president of MPX Network Solutions, a privately
held telecommunications/networking business development and marketing consulting
company. Mr. Grisafi has served as a consultant to the Company since 1998, and
assisted the Company in the acquisition of the DynaTrax(TM) technology from
NORDX/CDT and in identifying other opportunities and business strategies. Mr.
Grisafi is a graduate of the New York Institute of Technology.
Tech Labs' success will depend to a large extent upon the continued efforts
of Bernard M. Ciongoli, our president and chief executive officer. Mr. Ciongoli
has an intricate understanding of Tech Labs, its business operations and the
technology underlying its products. It would be very difficult for Tech Labs to
replace Mr. Ciongoli, and accordingly the loss of his services would be
detrimental to our operations. We do, however, maintain key man life insurance
on Mr. Ciongoli to compensate for any such loss, and have an employment
agreement with him. Expansion of our business may require additional managers
and employees with industry experience. In general, only highly qualified
managers have the necessary skills to develop and market our products and
provide our services.
Competition for skilled management personnel in the industry is intense,
which may make it more difficult and expensive to attract and retain qualified
managers and employees. Expansion of our business will likely also require
additional non-employee board members with business and industry experience. We
do not, however, have directors' and officers' liability insurance, which may
limit our ability to attract qualified non-employee board members.
Executive Compensation
The following table summarizes the compensation paid to or earned by our
president. No other officer has received compensation in excess of $100,000 in
any recent fiscal year.
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<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------- -------------
Shares of
Common Stock
Issuable Upon
Name and 2000 Exercise of
Principal Position Year Salary($) Bonus($) Options
------------------ ---- --------- -------- -------
<S> <C> <C> <C> <C>
Bernard M. Ciongoli 2000 $125,000 0 250,000
President, Treasurer 1999 $125,000 0 0
1998 $125,000 0 300,000
</TABLE>
The following table sets forth information relating to all options granted
to named executive officers:
Option Grants in Fiscal Year 2000
<TABLE>
<CAPTION>
Percent of
Number of Total Options
Securities Underlying Granted to Employees Exercise Expiration
Name Options Granted in Fiscal Year (%) Price Date
---- --------------- ------------------ ----- ----
<S> <C> <C> <C> <C> <C>
Bernard M. Ciongoli 111,000 40.36 $2.68125 1/02/06
139,000 50.00 $2.4375 1/02/06
</TABLE>
We have a five (5) year employment contract with Mr. Ciongoli that
commenced October 1, 1998, and was amended June 18, 1999. Mr. Ciongoli is
currently compensated at the base salary rate of $125,000 per annum. Mr.
Ciongoli is also entitled to receive two (2%) percent of our sales in excess of
$1,000,000 during any year he is employed by us. In addition, Mr. Ciongoli was
also granted an option exercisable for five (5) years from date of grant to
purchase 300,000 shares of stock at $.50 per share, such option to vest in
increments of 100,000 shares per annum on each anniversary date of the agreement
commencing October 1, 1998. The agreement is automatically renewed for one (1)
year unless either party terminates the agreement in writing at least 180 days
prior to the expiration of the term or of any renewal period.
In 1996 we granted to Mr. Ciongoli an option to purchase 100,000 shares of
common stock exercisable for five (5) years at $.50 per share under our 1996
stock option plan. In 2000 we granted to Mr. Ciongoli an option to purchase up
to 111,000 shares of common stock under our 1996 stock option plan exercisable
for five (5) years at $2.68125 per share and which vests over a period of three
(3) years. We also granted to Mr. Ciongoli a non-plan option, subject to the
approval of shareholders, in consideration and in recognition of his services to
Tech Labs to purchase up to 139,000 shares exercisable over (5) years at $2.4375
and which vests over the course of three (3) years from the date of grant.
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<PAGE>
We do not have employment agreements with any other named executive
officers. Our directors are not presently compensated.
Consultants
We have entered into a consulting agreement with MPX Network Solutions,
Inc. The agreement expires on March 14, 2001, and provides that:
o MPX will provide consulting services in the areas of marketing,
customer relations and strategic and product development planning,
particularly with regard to communications products;
o MPX will receive an annual fee of $52,000 and commissions on sales of
telecommunications products during the term of the agreement ranging
from 3% of the first $1,000,000 of the net sale prices to 1/2% of the
net sale prices over $4,000,000, and
o MPX will also receive 50,000 shares of common stock and will be issued
options to purchase up to 50,000 shares of common stock, at a purchase
price of $1.25 per share, depending on net sales of telecommunications
products during the initial term and the extension term of the
agreement. These services will be provided on an as needed basis,
primarily by MPX's president, Mr. Sal Grisafi.
We have also entered into a consulting agreement with Scott Coby. Under the
terms of the agreement, the consultant will provide certain marketing and
financial services. In consideration for entering into the agreement, which has
an initial term of two years, we issued to the consultant a warrant to purchase
50,000 shares of common stock at $1.85 per share exercisable for five (5) years.
We issued an additional warrant to Scott Coby to purchase up to 200,000
shares of common stock at $3.50 per share exercisable for five (5) years. This
warrant vests in increments of 25,000 warrants for every $250,000 of sales of
Tech Lab's products to purchasers obtained by consultant within the initial two
(2) year term of the consulting agreement with Mr. Coby. The shares underlying
the warrants have certain registration rights.
We have also entered into a consulting agreement with Barry Bendett. Under
the terms of the agreement the consultant will provide certain business
develpment services, including but not limited to, expanding the customer base,
financial planning, corporate structuring and marketing matters. In
consideration for entering into the agreement, which has an initial term of two
(2) years, we issued to the consultant an option to purchase 100,000 shares of
common stock at $4.00 per share exercisable for three (3) years. Unless the
agreement is earlier terminated, we shall also issue to the consultant (i)
65,000 shares of common stock for services to be performed through January 15,
2001, (ii) 35,000 shares for services to be performed through April 15, 2001,
(iii) 35,000 shares for services to be performed through July 15, 2001, and (iv)
35,000 shares for services to be performed through October 15, 2001.
Stock Option Plans
On December 11, 1996, the board of directors adopted a stock option plan
for officers, directors, and other key employees. Options issued pursuant to the
stock option plan to qualified key employees are meant to qualify as incentive
stock options within the meaning of Section 422A of the Internal Revenue Code. A
total of 450,000 shares were set aside for this purpose. Under this plan options
for an aggregate of 190,000 shares have been granted at an exercise price of
$.50 per share, options for 111,000 shares have been granted at an exercise
price of $2.68125 and options for 25,000 shares have been granted at an exercise
price of $2.4375.
The 1996 Plan is administered by a committee appointed by the board of
directors, which is comprised of two or more members of the board. The
committee's interpretation and construction of the stock option plan is final
unless otherwise determined by the board.
Options granted under the 1996 Plan shall have an option price not less
than 100% of the fair market value of the shares of Tech Labs' common stock on
the date of the granting of the option, or 110% of the fair market value for
stockholders who, at the time of grant, posses more than 10% of the total voting
power of all classes of stock. If the aggregate fair market value of the shares
of stock, determined as of the date of grant, during any calendar year exceeds
$100,000 then only the first $100,000 of such shares exercised will be treated
as incentive stock options.
Any option must be granted within 10 years of the date the plan was adopted
or approved by the shareholders, whichever is earlier. The option, by its terms,
must be exercisable within 10 years of the date it is granted. If, however,
options are granted to an optionee who, at the time of grant, posseses more than
10% of the total voting power of all classes of stock, the options granted shall
be exercisable no more than 5 years from the date of grant. Options generally
may be exercised only if the optionee remains continuously associated with Tech
Labs from the date of grant to the date of exercise. However, options may be
exercised upon termination of employment or upon death of any employee within
certain specified time periods.
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In May 2000 the board of directors adopted two additional stock option
plans, an incentive stock option plan and a non-employee director plan. The
plans were submitted to a vote by the shareholders at the Annual Meeting of
Shareholders held on August 10, 2000 but were not approved. In November 2000 the
board of directors adopted the November 2000 Incentive Stock Option Plan and the
November 2000 Non-employee Director Plan. Both plans will be submitted to the
shareholders for their approval at a Special Meeting of the Shareholders
tentatively scheduled for the first quarter of 2001.
The November 2000 Employee Plan authorizes the grant of incentive stock
options within the meaning of Section 422 of the Internal Revenue Code for the
purchase of an aggregate of 150,000 shares (subject to adjustment for stock
splits and similar capital changes) of common stock to employees of Tech Labs.
By adopting the 2000 Employee Plan, the board belives that Tech Labs will be
better able to attract, motivate and retain as employees people upon whose
judgment and special skills the success of Tech Labs in large measure depends.
The November 2000 Employee Plan will be administered by the 2000 Employee
Plan Committee of the board of directors, which will be comprised of one or more
of the independent members of the board. The Committee can make such rules and
regulations and establish procedures for the administration of the 2000 Employee
Plan as it deems appropriate.
The exercise price of an incentive stock option must be at the fair market
value of Tech Labs' common stock on the date of grant or 110% of the fair
market value for shareholders who, at the time the option is granted, own more
than 10% of the total combined classes of stock of Tech Labs or any
subsidiary. No employees may exercise more than $100,000 in options held by them
in any year.
No option may have a term of more than ten years, or five years for 10% or
greater shareholders. Options generally may be exercised only if the option
holder remains continuously associated with Tech Labs or a subsidiary from the
date of grant to the date of exercise. However, options may be exercised upon
termination of employment or upon death or disability of any employee within
certain specified periods.
The November 2000 Non-employee Director Plan was adopted in order to link
the personal interests of non-employee directors to the long-term financial
success of Tech Labs.
The total number of shares for which options may be granted from time to
time under the plan is 100,000 shares.
The plan will be administered by a committee of directors who are not
eligible to participate in the plan. Options become exercisable with respect to
such shares granted on the date on which the option was granted, so long as the
optionee remains an eligible director. No option may be exercised more than five
years after the date on which it is granted. The number of shares available for
options, the number of shares subject to outstanding options and their exercise
prices will be adjusted for changes in outstanding shares such as stock splits
and combinations of shares. Shares purchased upon exercise of options, in whole
or in part, must be paid for in cash or by means of unrestricted shares of
common stock or any combinations thereof.
CERTAIN TRANSACTIONS
The following information describes certain transactions between Tech Labs
and certain affiliated parties. Future transactions, if any, must be approved by
the board of directors.
In March, 1999, we entered in to a consulting agreement with MPX Network
Solutions, Inc. Sal Grisafi is the president of MPX and a director of Tech
Labs'. See "Management-Consultants."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table describes, as the date of this prospectus, the
beneficial ownership of our common stock by:
o persons known to us to own more than 5% of such stock, and
o the ownership of common stock by our directors, and by all officers
and directors as a group.
Number of
Shares Owned % of
Name Beneficially Common Stock
---- ------------- ------------
Bernard M. Ciongoli 957,000 19.52%
Earl Bjorndal 273,344 6.02%
Carmine O. Pellosie, Jr. 80,000 1.78%
Salvatore Grisafi 50,000* 1.11%
Libra Finance, S.A. 275,000 6.15%
Celeste Trust Reg 446,500 9.99%
The Endeavour Capital Investment
Fund, S.A. 446,500 9.99%
Esquire Trade & Finance 446,500 9.99%
All officers and directors as a 1,360,344 28.43%
group (4 persons)
* These shares are owned by Mr. Grisafi's wife.
** Pursuant to the rules and regulations of the Securities and Exchange
Commission, shares of common stock that an individual or entity has a right
to acquire within 60 days purusant to the exercise of options or warrants
are deemed to be outstanding for the purposes of computing the percentage
ownership of such individual or entity, but are not deemed to be
outstanding for the purposes of computing the percentage ownership of such
individual or entity, but are not deemed to be outstanding for the purposes
of computing the percentage ownership of any other person or entity shown
in the table.
o The information for Mr. Ciongoli includes 137,000 shares that may be
acquired within 60 days pursuant to the exercise of options granted under
our 1996 stock option plan and 300,000 shares issuable upon exercise of
options earned under our employment agreement with Mr. Ciongoli.
o The information for Mr. Bjorndal includes 75,000 shares that may be
acquired within 60 days pursuant to the exercise of options granted under
our 1996 stock option plan.
o The information for Mr. Pellosie includes 20,000 shares issuable upon the
exercise of immediately exercisable options granted under our 1996 stock
option plan.
o The number of shares beneficially owned by each of Celeste Trust Reg, The
Endeavour Capital Investment Fund, S.A., and Esquire Trade & Finance may
not exceed, by the terms of their Subscription Agreement with Tech Labs,
9.99% of the outstanding number of shares of common stock of Tech Labs.
Beneficial ownership is calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Based on a conversion price for the notes of $0.865929, no more
than an amount equal to 446,500 shares may be converted by each of Celeste
Trust Reg, The Endeavour Capital Investment Fund, S.A., and Esquire Trade &
Finance at any one time; provided, however, each of the above mentioned
parties is not precluded from converting the maximum amount permissible
under the notes, immediately disposing of some or all of those shares and
subsequently converting additional amounts remaining under the notes.
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<PAGE>
PLAN OF DISTRIBUTION
Tech Labs is registering this offering of shares on behalf of the selling
securityholders. Tech Labs will pay all costs, expenses and fees related to the
registration, including all registration and filing fees, printing expenses,
fees and disbursements of its counsel, blue sky fees and expenses.
The selling securityholders shares may be sold to purchasers from time to
time directly by and subject to the discretion of the selling securityholders.
The selling securityholders may, from time to time, offer their securities for
sale through underwriters, dealers, or agents, who may receive compensation in
the form of underwriting discounts, concessions, or commissions from the selling
securityholders and/or the purchasers of the securities for whom they may act as
agents.
The securities sold by the selling securityholders may be sold from time to
time in one or more transactions at an offering price that is fixed or that may
vary from transaction to transaction depending upon the time of sale or at
prices otherwise negotiated at the time of sale. Such prices will be determined
by the selling securityholders or by agreement between the selling
securityholders and any underwriters.
Any underwriters, brokers, dealers, or agents who participate in the
distribution of the securities may be deemed to be "underwriters" under the
Securities Act, and any discounts, commissions, or concessions received by any
such underwriters, dealers, or agents may be deemed to be underwriting discounts
and commissions under the Securities Act. Accordingly, any commission, discount
or concession received by them and any profit on the resale of the shares
purchased by them may be deemed to be underwriting discounts or commissions
under the Securities Act of 1933. Because the selling stockholders may be deemed
to be "underwriters" within the meaning of Section 2(11) of the Securites Act of
1933, the selling stockholders will be subject to the prospectus delivery
requirements of the Securities Act of 1933. Each selling stockholder has advised
Tech Labs that the stockholder has not yet entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of the shares.
At the time a particular offer is made by or on the behalf of the selling
securityholders, a prospectus, including any necessary supplement thereto, will
be distributed which will set forth the number of shares of common stock and
other securities being offered, and the terms of the offering, including the
name or names of any underwriters, dealers, or agents, the purchase price paid
by any underwriter for the shares purchased from the selling securityholders,
any discounts, commissions and other items constituting compensation from the
selling securityholders, any discounts, commissions, or concessions allowed,
reallowed, or paid to dealers, and the proposed selling price to the public.
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<PAGE>
The selling securityholders have agreed to sell the shares only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states the shares may not be sold
unless they have been registered or qualified for sale in the applicable state
or an exemption from registration or qualification is available and is complied
with.
The selling securityholders will be subject to applicable provisions of the
Securities Exchange Act of 1934 and their associated rules and regulations,
including Regulation M. These provisions may limit the timing of purchases and
sales of shares of the common stock of Tech Labs by the selling securityholders.
Tech Labs will make copies of this prospectus available to the selling
securityholders and has informed them of the need for delivery of copies of this
prospectus to purchases at or before the time of any sale of the shares.
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<PAGE>
OFFERING BY SELLING SECURITYHOLDERS
The following tables set forth certain information concerning each of the
selling securityholders. The shares are being registered to permit the selling
securityholders and their transferees or other successors in interest to offer
the shares from time to time. Except for Stursberg & Veith none of the selling
securityholders has held any position or office or had a material relationship
with Tech Labs or any of our affiliates within the past three years other than
as a result of the ownership of our common stock.
Selling securityholders are under no obligation to sell all or any portion
of their shares. Particular selling shareholders may not have a present
intention of selling their shares and may sell less than the number of shares
indicated. The following table assumes that the selling shareholders will sell
all of their shares.
<TABLE>
<CAPTION>
Number of
Shares
Beneficially Number of Percent of
Owned and Number of Shares Shares Percent of
to be Owned Shares Owned Owned Shares
Prior to Being After Prior to the Owned After
Selling Shareholders Offering(1) Offered Offering Offering the Offering
------------------------------------------- ------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Celeste Trust Reg(2)(3)
c/o Trevisa-Treuhand-Anstalt Landstrasse
8 Furstentums
99996 Balzers
Liechtenstein 446,500 446,500 0 9.99% 0%
The Endeavour Capital Investment Fund, S.A.(2)(3)
Cumberland House 27
Cumberland Street
Nassau New Providence
Bahamas 446,500 446,500 0 9.99% 0%
Esquire Trade & Finance, Inc.(2)(3)
Trident Chambers
P.O. Box 146, Road Town
Tortolu, BVI 446,500 446,500 0 9.99% 0%
The Endeavour Management Inc. S.A (4)
Cumberland House 27
Cumberland Street
Nassau New Providence
Bahamas 137,500 137,500 0 3.33% 0%
Libra Finance, S.A (4)
P.O. Box 4603
Zurich, Switzerland 275,000 275,000 0 6.40% 0%
Stursberg & Veith (5)
405 Lexington Avenue
New York, NY 75,000 75,000 0 1.83% 0%
Mint Corporation (5)
211 Park Avenue
Hicksville, New York 11801 200,000 200,000 0 4.74% 0%
</TABLE>
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<PAGE>
(1) Based upon the information we have received, we assume that the selling
securityholders have sole voting and investment power with respect to all shares
owned.
(2) The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Exchange Act, and the information is not
necessarily indicative of beneficial ownership for any other purpose. The number
of shares of common stock shown as beneficially owned both prior to and after
the offering by the selling securityholders represents an estimate of the number
of shares of common stock to be offered by such selling securityholders assuming
a conversion price of $0.865929 of the currently outstanding $1,500,000 note and
the potentially outstanding $500,000 convertible note and payment of interest
thereon. The actual number of shares of common stock issuable upon conversion of
the notes is indeterminate, is subject to adjustment and could be materially
less or more than such estimated number depending on factors which cannot be
predicted by Tech Labs at this time, including the future market price of the
common stock.
The actual number of shares being registered under this registration
statement also includes 200% of the number of shares of common stock issuable
upon exercise of the notes and interest payable thereon. The notes are
convertible at a price equal to 85% of the average of the five lowest closing
bid prices of the common stock during the twenty-two (22) business days
immediately preceding the closing of the financing transaction in which Tech
Labs delivered the notes and to the selling securityholders or 85% of the five
lowest bid prices during the twenty-two (22) business days through the date of
conversion of the notes, whichever is lower. Therefore, the number of shares
issuable upon conversion of the notes may be less than or greater than the
number of shares shown as beneficially owned by the selling securityholders or
otherwise covered by this prospectus.
Pursuant to the terms of the subscription agreement entered into between
the selling securityholders and Tech Labs, the notes are convertible by each
selling securityholder and interest is payable in common stock only to the
extent that the number of shares of common stock then beneficially owned, as
determined in accordance with section 13(d) of the 1934 Act and Rule 13d-3
thereunder, by such selling securityholder and its affiliates would not exceed
9.9% of the then outstanding shares of common stock of Tech Labs, provided such
selling securityholder has not sent written notification to Tech Labs that it
wishes to void the 9.9% limitation. Furthermore, the selling securityholders are
not precluded from converting the maximum amount permissible under the notes,
immediately disposing of some or all of those shares and subsequently converting
additional amounts remaining under the notes.
(3) Assumes the purchase of an additional $500,000 of Tech Labs 6.5% convertible
notes.
(4) The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Exchange Act, and the information is not
necessarily indicative of beneficial ownership for any other purpose. The number
of shares of common stock shown as beneficially owned both prior to and after
the offering represents 200% of the number of shares of common stock issuable
upon the exercise of warrants to purchase common stock at an exercise price of
$4.80.
(5) Represents shares of common stock issuable upon the exercise of warrants to
purchase common stock.
In recognition of the fact that certain selling securityholders may wish to
be legally permitted to sell their shares of common stock when they deem
appropriate, we agreed with certain selling securityholders to file with the
United States Securities and Exchange Commission, under the Securities Act of
1933, as amended, a registration statement on Form SB-2, of which this
prospectus is a part, with respect to the resale of the shares of common stock,
and have agreed to prepare and file amendments and supplements to the
registration statement as may be necessary to keep the registration statement
effective until the shares of common stock are no longer required to be
registered for the sale thereof by certain sellingsecurity holders.
Stursberg & Veith has been legal counsel to Tech Labs for the past two
years.
The sale of the securityholder shares may be effected from time to time in
transactions, which may include block transactions, in:
o the over-the-counter market;
o in negotiated transactions; or
o a combination of such methods of sale or otherwise.
Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices.
Selling securityholders may effect such transactions by selling their
securities directly to purchasers
o through broker-dealers acting as agents; or
o to broker-dealers who may purchase shares as principals and thereafter
sell the securities from time to time in the market in negotiated
transactions or otherwise.
The selling security holders have been advised that the shares may only be
sold in New Jersey through a registered broker-dealer or in reliance upon an
exemption from registration.
Broker-dealers, if any, may receive compensation in the form of discounts,
commissions, or concessions and/or the purchasers from whom such broker-dealers
may act as agents or to whom they may sell as principals or otherwise, which
compensation as to a particular broker-dealer may exceed customary commissions.
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<PAGE>
If any of the following events occurs, this prospectus will be amended to
include additional disclosure before offers and sales of the securityholder
shares are made:
o To the extent such securities are sold at a fixed price or by option
at a price other than the prevailing market price, such price would be
set forth in this prospectus;
o If the securities are sold in block transactions and the purchaser
wishes to resell, such arrangements would be described in this
prospectus;
o If the compensation paid to broker-dealers is other than usual and
customary discounts, commissions, or concessions, disclosure of the
terms of the transaction would be included in this prospectus.
This prospectus would also disclose if there are other changes to the
stated plan of distribution, including arrangements that either individually or
as a group would constitute an orchestrated distribution of the securityholder
shares.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of securityholder shares may not simultaneously
engage in market making activities with respect to any securities of Tech Labs
for a period of at least two (and up to nine) business days prior to the
commencement of such distribution. In addition, each selling securityholder
desiring to sell securityholder shares will be subject to the applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Regulation M, which provisions may limit the
timing of the purchases and sales of shares of Tech Labs' securities by such
selling securityholders.
The selling securityholders and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commission received by
them and any profit on the resale of the securities may be deemed underwriting
discounts and commissions under the Securities Act.
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DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 10,000,000 shares of common stock
having a par value of $.01 each, of which 4,019,039 shares are currently
outstanding and 11,316 shares are held in treasury. There are currently
approximately 250 holders of common stock.
Common Stock
Each share of common stock is entitled to one vote on all matters submitted
to a vote of shareholders. The common stock does not have cumulative voting
rights, which means that the holders of a majority of the outstanding shares may
elect all of the directors of Tech Labs. The common stock does not have any
preemptive rights. Stockholders holding a majority of the voting power of the
capital stock issued and outstanding and entitled to vote, represented in person
or by proxy, are necessary to constitute a quorum at any meeting of our
stockholders, and the vote by the holders of a majority of such outstanding
shares is required to effect certain fundamental corporate changes such as
liquidation, merger or amendment of our certificate of incorporation.
Holders of common stock are entitled to receive dividends pro rata based on
the number of shares held, when, as and if declared by the board of directors,
from funds legally available therefor. In the event of the liquidation,
dissolution or winding up of the affairs of our company, all assets and funds of
our company remaining after the payment of all debts and other liabilities shall
be distributed, pro rata, among the holders of the common stock. Holders of
common stock are not entitled to preemptive, subscription, or conversion rights,
and there are no redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are, and the shares of common
stock offered hereby will be when issued, fully paid and non-assessable.
Common Stock Purchase Warrants
In October 2000, Tech Labs issued 412,500 warrants to purchase shares of
common stock at an exercise price of $4.80 per share, subject to adjustment, at
any time until 5:00 pm New York time, on October 13, 2003. Tech Labs may call
the warrants on thirty days written notice, provided the average closing
bid price equals or exceeds $8.00 per share for twenty consecutive business
days and the average daily volume is at least 90,000 shares per day.
The exercise price of the warrants and the number of shares of common stock
issuable upon exercise thereof are subject to adjustment in certain events,
including stock splits or combinations, stock dividends, or through
recapitalization resulting from stock split or combination.
6.5% Convertible Notes
In October 2000, Tech Labs issued a $1,500,000 principal amount convertible
note which is due on October 13, 2003. Interest is payable quarterly in cash or
in shares of common stock at the option of the noteholder. Upon the
effectiveness of this registration statement, Tech Labs has the right, subject
to certain conditions, to require the purchasers of the $1,500,000 note to
purchase up to an additional $500,000 principal amount of convertible note on
the same terms and conditions as the $1,500,000 note.
The notes and their accrued interest are convertible at anytime while any
portion of them are outstanding into shares of Tech Labs common stock. The notes
are convertible at a price equal to 85% of the average of the lowest closing bid
prices of the common stock during the five lowest bid prices during the
twenty-two (22) business days immediately preceding the issuance date of the
notes or 85% of the five (5) lowest bid prices during the twenty-two business
days through the date of conversion of the notes, whichever is lower.
Upon satisfaction of certain conditions and the good faith negotiations of
Tech Labs and the purchasers of the notes, a portion of the notes may be
converted into convertible preferred stock, which shall contain terms nearly
identical to the terms that the notes are subject to.
Stock Options and Stock Option Plan
In addition to the warrants to purchase 412,500 shares of our common
stock, we have outstanding options to consultants and third parties:
o to purchase 50,000 shares exercisable for five years at $1.85 per
share,
o to purchase 75,000 shares exercisable for five years at $1.12 per
share,
o to purchase 200,000 shares exercisable for two years, as to 100,000
shares at $1.25 per share and as to 100,000 shares at $1.75 per share,
o to purchase 100,000 shares exercisable for three years at $4.00 per
share.
Tech Labs has granted options to purchase 300,000 shares exercisable at
$.50 per share pursuant to an employment agreement with our president, all of
which options have vested. As additional incentive, Mr. Ciongoli was granted
options to purchase up to 111,000 shares under our 1996 stock option plan and a
non-plan option to purchase up to 139,000 shares, which is subject to the
approval of the shareholders of Tech Labs.
We issued 50,000 shares of common stock to MPX pursuant to our consulting
agreement. Pursuant to the consulting agreement dated March 10, 1999 with Mint,
in addition to the options set forth above, we issued an aggregate of 100,000
shares.
We have also adopted a 1996 stock option plan for officers, directors, and
other key employees. A total of 450,000 shares have been reserved for issuance
under the 1996 Plan. Under this plan options for an aggregate of 190,000 shares
granted at an exercise price of $.50 per share, options to purchase 111,000
shares granted at an exercise price of $2.68125 and options for 25,000 shares
have been granted at an exercise price of $2.4375. The board has also approved
two new stock option plans, the November 2000 Incentive Stock Option Plan and
the November 2000 Non-employee Director Plan. Both plans will be submitted to
the shareholders of Tech Labs at a Special Meeting of the Shareholders for
approval. No options have been granted to date under either of the 2000 plans.
SHARES ELIGIBLE FOR FUTURE SALE
No assurance can be given as to the effect, if any, that future sales of
common stock will have on the market price of our common stock. Of our shares of
common stock currently outstanding, assuming no exercise of warrants or
conversion of convertible notes into shares of our common stock, 1,108,912 are
"restricted securities" as the term is defined in Rule 144 under the Securities
Act of 1933, as amended, and under certain circumstances may be sold without
registration pursuant to that rule. Subject to the compliance with the notice
and manner of sale requirement of Rule 144 and provided that we are current in
our reporting obligations under the Securities Exchange Act of 1934, a person
who beneficially owns restricted shares of stock for a period of at least one
year is entitled to sell, within any three month period, shares equal to the
greater of 1% of the then outstanding shares of common stock, or if the common
stock is quoted on the NASDAQ System, the average weekly trading volume of the
common stock during the four calendar weeks preceding the filing of the required
notice of sale on the Form 144, with the United States Securities and Exchange
Commission. As of the date of this prospectus, 1,083,912 shares of common stock,
held by beneficial owners, are eligible for sale pursuant to Rule 144. We are
unable to predict the effect that the sales made under Rule 144 otherwise may
have on the market price of the common stock prevailing at the time of any such
sales. Nevertheless, sales of substantial amounts of the restricted shares of
common stock in the public market could adversely effect the then prevailing
market for our common stock.
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Market Information
Our common stock is listed on the OTC Electronic Bulletin Board under the
symbol "TCHL-OB." Trading in the common stock has historically been very
limited.
Transfer Agent
The transfer agent for our common stock is Interwest Transfer Co., Inc., P.
O. Box 17136, Salt Lake City, Utah 84117.
LEGAL MATTERS
The validity of the common stock offered in this offering will be passed
upon for us by Stursberg & Veith, 405 Lexington Avenue, New York, New York
10174, the partners of which law firm own options to purchase 75,000 shares and
which are being registered pursuant to this prospectus.
EXPERTS
Charles J. Birnberg, CPA, independent auditors, have audited our financial
statements for the years ended December 31, 1997, 1998 and 1999 as set forth in
their report. We have included our financial statements in the prospectus and
elsewhere in the registration statement in reliance on Charles J. Birnberg's
report, given on their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed a registration statement on Form SB-2 under the Securities
Act of 1933, with the Securities and Exchange Commission with respect to the
common stock being registered pursuant to this prospectus. This prospectus,
which forms a part of the registration statement, does not contain all of the
information included in the registration statement and any of its amendments and
the exhibits, which are available for inspection without charge, and copies of
which may be obtained at prescribed rates, at the office of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission at 7 World Trade Center, 13th Floor, New York, New York 10048,
and at the Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511. The Commission maintains a Website at www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
INFORMATION NOT REQUIRED IN PROSPECTUS
We will provide, without charge, to each person who received a prospectus,
upon written or oral request of such person to us at the mailing address or
telephone number listed below, a copy of any of the information incorporated by
reference. The mailing address of our principal executive offices is Tech
Laboratories, Inc., 955 Belmont Avenue, North Haledon, New Jersey 07508, (973)
427-5333.
-28-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Charles J. Birnberg, CPA Independent Auditors.....................F-2
Audited Financial Statements
Balance Sheets.........................................................F-3, F-4
Statement of Stockholders' Equity ..........................................F-5
Statements of Operations....................................................F-6
Statements of Cash Flows....................................................F-7
Notes to Financial Statements...............................................F-8
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Charles J. Birnberg, CPA
150 Overlook Avenue
Hackensack, New Jersey 07601
November 17, 2000
To The Board of Directors of Tech Laboratories, Inc.
I have audited the Balance Sheets of Tech Laboratories, Inc. as of December
31, 1997, 1998 and 1999 and the related Statements of Income and Retained
Earnings, and Cash Flows for the years then ended. These financial statements
are the responsibility of the Company's management.
The audits were conducted in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that the audits provide a reasonable basis for my opinion.
Therefore, the financial statements in my opinion, present fairly the
financial position of Tech Laboratories, Inc. as of December 31, 1997, 1998 and
1999 and the results of operations and cash flows for the years then ended in
conformity with generally accepted accounting principles.
Sincerely,
/s/ Charles J. Birnberg
Charles J. Birnberg
Certified Public Accountant
Hackensack, New Jersey
F-2
<PAGE>
TECH LABORATORIES, INC.
BALANCE SHEETS
DECEMBER 31, 1997, 1998, 1999 AND
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
ASSETS
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31 SEPTEMBER 30,
-------------------------------------------- 1999 2000
1997 1998 1999 (UNAUDITED)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash $ 166,173 $ 532,780 $ 162,925 $ 212,348 $1,462,319
Marketable Securities, at the Lower of
Cost or Market (Note 1) 59,343 56,693 61,453 61,923 61,453
Accounts Receivable, net of Allowance
of $10,000 in 1999, 1998 and 1997 90,734 143,462 57,697 150,359 169,251
Inventories (Notes 1 & 2) 269,209 270,118 816,703 788,586 1,251,010
Prepaid Expense 0 3,357 4,055 5,668 4,055
---------- ---------- ---------- ---------- ----------
Total Current Assets $ 585,459 $1,006,410 $1,102,833 $1,218,884 $2,948,088
---------- ---------- ---------- ---------- ----------
Property, Plant and Equipment, at Cost (Note 1):
Leasehold Improvements 2,247 2,247 2,247 2,247 2,247
Machinery, Equipment and Instruments 223,884 230,137 379,815 340,337 410,425
Furniture and Fixtures 67,425 67,425 75,899 67,574 79,161
---------- ---------- ---------- ---------- ----------
$ 293,556 $ 299,809 $ 457,961 $ 410,158 $ 491,833
Less: Accumulated Depreciation & Amortization 281,029 299,162 314,162 299,162 314,162
---------- ---------- ---------- ---------- ----------
Net, Property, Plant and Equipment $ 12,527 $ 647 $ 143,799 $ 110,996 $ 177,671
---------- ---------- ---------- ---------- ----------
Other Assets $ 11,540 $ 11,540 $ 11,540 $ 11,540 $ 11,541
---------- ---------- ---------- ---------- ----------
Total Assets $ 609,526 $1,018,597 $1,258,172 $1,341,420 $3,137,300
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
TECH LABORATORIES, INC.
BALANCE SHEETS
DECEMBER 31, 1997, 1998, 1999 AND
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31 SEPTEMBER 30,
---------------------------------------------- 1999 2000
1997 1998 1999 (UNAUDITED)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Current Liabilities:
Current Portion of Long Term Debt (Note 5) $ 34,445 $ 32,742 $ 28,559 $ 30,293 $ 25,821
Short-Term Loans Payable (Note 6) 43,373 43,373 243,373 43,373 79,956
Accounts Payable and Accrued Expenses 48,148 42,155 260,745 189,025 34,765
Other Utilities 53,945 36,600 3,190 77,938 29,057
----------- ----------- ----------- ---------- ----------
Total Current Liabilities $ 179,911 $ 154,870 $ 535,867 340,629 $ 169,599
----------- ----------- ----------- ---------- ----------
Stockholders' Investment:
Common Stock. $.01 Par Value;
10,000,000 Shares Authorized; 3,650,660
issued in 1999 and 4,019,039 issued
as of September 30, 2000 $ 13,753 $ 23,483 $ 36,507 $ 35,870 $ 39,492
Less: 11,316 Shares Reacquired and
and Held in Treasury (113) (113) (113) (113) (113)
----------- ----------- ----------- ---------- ----------
$ 13,640 $ 23,370 $ 36,394 $ 35,757 $ 39,379
Common Stock Subscribed (Note 7) 0 500 0 0 0
Capital Contributed in Excess of Par Value 721,847 1,315,833 1,816,316 1,828,346 4,060,287
Retained Earnings 0 0 0 0 0
Accumulated Deficit (306,372) (475,476) (1,130,405) (863,312) (1,131,965)
----------- ----------- ----------- ---------- ----------
$ 429,615 $ 863,727 $ 722,305 1,000,791 2,967,701
----------- ----------- ----------- ---------- ----------
Total Liabilities and Stockholders'
Investment $ 609,526 $ 1,018,597 $ 1,258,172 $1,341,420 $3,137,300
=========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
TECH LABS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS 1997, 1998, 1999 AND NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
COMMON STOCK
CAPITAL IN
EXCESS OF ACCUMULATED
SHARES AMOUNT PAR VALUE DEFICIT TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance
December 31, 1996 1,101,532 $ 9,189 $ 317,585 $ (32,303) $ 294,471
Stock Issued -- 4,451 404,262 408,713
Stock Subscribed -- 500 500
Net Income/
(Loss) (274,069) (274,069)
----------- ----------- ----------- ----------- -----------
Balance
December 31, 1997 1,546,632 $ 14,140 $ 721,847 $ (306,372) $ 429,615
Stock Issued 1,323,311 9,230 593,986 603,216
Net Income/(loss) (169,104) (169,104)
----------- ----------- ----------- ----------- -----------
Balance
December 31, 1998 2,869,943 $ 23,370 $ 1,315,833 $ (475,476) $ 863,727
Stock Issued 780,717 13,024 500,483 513,507
Net Income/(loss) (654,929) (654,929)
----------- ----------- ----------- ----------- -----------
Balance
December 31, 1999 3,650,660 $ 36,394 $ 1,816,316 $(1,130,405) $ 722,305
Stock Issued 368,379 2,985 2,243,971 2,246,956
Net Income/(loss) (1,560) (1,560)
----------- ----------- ----------- ----------- -----------
Balance
September 30, 2000 4,019,039 $ 39,379 $ 4,060,287 $(1,131,965) $ 2,967,701
</TABLE>
F-5
<PAGE>
TECH LABORATORIES, INC.
STATEMENTS OF OPERATIONS
DECEMBER 31, 1997, 1998, AND NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND 2000
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED)
1997 1998 1999 1999 2000
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sales $ 444,322 $ 552,486 $ 689,190 $ 535,160 $ 849,106
----------- ----------- ----------- ---------- ----------
Costs and Expenses:
Cost of Sales 446,457 386,425 472,790 374,612 372,967
Selling, General and Administrative
Expenses 265,104 329,849 861,174 548,384 507,030
----------- ----------- ----------- ---------- ----------
711,561 716,274 1,333,964 922,996 $ 879,997
----------- ----------- ----------- ---------- ----------
Income/(Loss) From Operations ($ 267,239) ($ 163,788) ($ 644,774) ($ 387,836) ($ 30,891)
----------- ----------- ----------- ----------
Other Income (Expenses):
Interest Income $ 166 $ 1,654 $ 1,150 $ 0 34,796
Interest Expense (6,996) (6,970) (11,305) 0 (5,465)
----------- ----------- ----------- ---------- ----------
($ 6,830) ($ 5,316) ($ 10,155) -- 29,331
----------- ----------- ----------- ---------- ----------
Income/(Loss) Before Income Taxes ($ 274,069) ($ 169,104) ($ 654,929) ($ 387,836) ($ 1,560)
Provision for Income Taxes (Notes 1 & 4) -- -- -- 0 0
----------- ----------- ----------- ---------- ----------
Net Income/(Loss) ($ 274,069) ($ 169,104) ($ 654,929) ($ 387,836) ($ 1,560)
Accum. Earnings/(Deficit), Beg. of Year ($ 32,303) ($ 306,372) ($ 475,476) (475,476) (1,130,405)
----------- ----------- ----------- ---------- ----------
Accum. Earnings/(Deficit,) End of Year ($ 306,372) ($ 475,476) ($1,130,405) ($ 863,312) ($1,131,965)
----------- ----------- ----------- ---------- ----------
Income/(Loss) Per Share (Note 3) ($ 0.18) ($ 0.06) ($ 0.18) ($ 0.12) $ 0
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
TECH LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
DECEMBER 31, 1997, 1998 AND THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND 2000
<TABLE>
<CAPTION>
-------------------------
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED)
1997 1998 1999 1999 2000
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Cash Flows From (For) Operating Activities:
Net Income/(Loss) From Operations ($274,069) ($169,104) ($654,929) ($387,836) (1,560)
Add/(Deduct) Items Not Affecting Cash:
Depreciation/Amortization (Note 1) 7,278 11,880 15,000 0 0
Unrealized (Gain)/ Loss on Valuation of
Marketable Securities (Note 1) 0 3,357 470 0 0
Changes in Operating Assets and Liabilities:
Marketable Securities (35,001) (2,650) (4,290) (5,230) 0
Accounts Receivable 2,615 (52,728) 85,765 (6,897) (111,554)
Inventories 22,665 (909) (546,585) (518,468) (434,307)
Accounts Payable (7,925) (40,249) 216,359 146,870 (225,980)
Other Assets and Liabilities 15,862 14,997 593 39,027 23,129
--------- --------- --------- ---------- ----------
Net Cash Flows For Operating Activities ($268,575) ($235,406) ($887,617) ($732,534) ($750,272)
--------- --------- --------- ---------- ----------
Cash Flows From (For) Investing Activities
DynatraX Machinery & Equipment $ 0 $ 0 ($158,152) ($ 110,349) ($33,872)
--------- ---------- ----------
Net Cash Flows From (For) Investing Activities $ 0 $ 0 ($158,152) ($ 110,349) ($33,872)
--------- ---------- ----------
Cash Flows From (For) Financing Activities:
Acquisition/(Repayment) of Short Term Debt ($ 10,000) ($ 1,703) $ 162,407 ($ 2,449) (163,417)
Issuance of Common Stock 407,500 603,716 513,507 524,900 2,246,956
--------- --------- --------- ---------- ----------
Net Cash Flows From (For) Financing Activities $ 397,500 $ 602,013 $ 675,914 $ 522,451 2,083,539
--------- --------- --------- ---------- ----------
Net Increase/(Decrease) in Cash $ 128,925 $ 366,607 ($369,855) ($ 320,432) 1,299,395
Cash Balance, Beginning of Year 21,398 166,173 532,780 532,780 162,924
--------- --------- --------- --------- ----------
Cash Balance, End of Year $ 150,323 $ 532,780 $ 162,925 $ 21,348 1,462,319
--------- --------- --------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
TECH LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998, 1999 AND
NINE MONTHS ENDED SEPTEMBER 30, 2000
(1) Summary of Significant Accounting Policies
CASH - Includes Tech Lab's checking account at Hudson United Bank. There
are no Cash Equivalents.
ACCOUNTS RECEIVABLE - Tech Labs recognizes sales when orders are shipped to
customers. The allowance for bad debts is accrued based on a review of customer
accounts receivables aging.
INVENTORIES - Inventories are valued at cost or market, whichever is lower.
The FIFO cost method is generally used to determine the cost of the inventories.
At December 31, 1997, 1998 and 1999 physical inventories were taken and tested.
No physical inventory was taken on September 30, 2000.
PROPERTY AND DEPRECIATION - Additions to property and equipment are recorded at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets as follows:
ASSETS ESTIMATED USEFUL LIVES
Machinery 5 to 7 years
Furniture & Fixtures 5 to 7 years
Maintenance and repairs are charged to expense as incurred. The cost of
betterments is capitalized and depreciated at appropriate rates. Upon retirement
or other disposition of property items, cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in the statement of
income.
INCOME TAXES - Income tax expense is based on reported income and deferred tax
credit is provided for temporary differences between book and taxable income.
MARKETABLE SECURITIES - The marketable securities are recorded at the lower
of cost or market. The cost of securities was $59,343 at December 31, 1997,
$56,693 at December 31, 1998, $61,453 at December 31, 1999 and $61,453 at
September 30, 2000.
(2) Inventories:
Inventories at December 31, 1997, 1998, 1999 and September 30, 2000 were:
<TABLE>
<CAPTION>
1997 1998 1999 2000
---- ---- ---- -------
<S> <C> <C> <C> <C>
Raw Materials & Finished Components $231,202 $202,359 $715,438 $1,057,725
Work in Process & Finished Goods 38,007 67,759 107,265 193,285
-------- -------- -------- ----------
$269,209 $270,118 $816,703 $1,251,010
-------- -------- -------- ----------
</TABLE>
(3) Income/(loss) Per Share:
Income/(loss) per share was calculated on the weighted average number of shares
outstanding during the year ended December 31, 1997 of 1,550,048, during the
year ended December 31, 1998 of 2,202,905 shares, during the year ended December
31, 1999, 3,650,660 shares and 4,019,039 shares at September 30, 2000.
(4) Income Taxes:
At December 31, 1997, 1998 and 1999 the balance of operating loss carryforward
was $1,049,903, $1,219,007 and $1,873,936, respectively, which can be utilized
to offset future taxable income.
(5) Current Portion of Long-Term Debt:
Loans payable to banks were as follows for the years indicated:
CURRENT NON-CURRENT
YEAR ENDED PAYEE INTEREST RATE AMOUNT AMOUNT
---------- ----- ------------- ------ ------
1997 Hudson United Bank Prime +1.5% $34,445 --
1998 Hudson United Bank Prime +1.5% $32,742 --
1999 Hudson United Bank Prime +1.5% $28,559 --
September 30, 2000 Hudson United Bank Prime +1.5% $25,821 --
Certain marketable securities are pledged as collateral on the above loan.
(6) Short-Term Loans Payable
Demand loans payable include loans from stockholders, officers, members of the
board of directors and third parties. The outstanding loan balances due as of
December 31, 1997, 1998 and December 31, 1999 was $43,373 for 1997 and 1998, and
$243,373 for 1999, which includes accrued interest for all three years. The
annual interest rate for these loans ranged between six (6%) percent and ten
(10%) percent. One loan in the principal amount of $11,500 together with accrued
interest of $4,294 at December 31, 1999 is secured by the assets of Tech Labs.
In October of 1999, three short-term loans for a total of $200,000 at (10%) ten
percent annual interest were completed. Certain contractural revenues were
pledged to secure this loan. As of September 30, 2000, $150,000 of these
October, 1999 loans had been repaid.
(7) Common Stock
In 1997, Tech Labs converted $217,500 of short term loans into 198,750 shares of
common stock.
In 1997 and 1998, Tech Labs completed a private placement of common stock
pursuant to Rule 504 which raised $917,324.
In 1999, Tech Labs began a self-underwritten public offering to raise between
$2,000,000 (minimum) and $3,500,000 (maximum). This offering was completed in
May, 2000.
(8) Commitments and Contingencies
Tech Labs entered into an exclusive agreement with Elektronik Apparatebau
(EAG), FUA Safety Equipment and Double T Sports Ltd. whereby it received
exclusive rights to manufacture and market IDS products until September 30, 2007
in the US, Canada and South America. Gross profits will be calculated according
to GAAP and distributed quarterly 70% to Tech Labs and 30% to FUA until March
2001. Thereafter, until 2007 quarterly distribution will be based on pretax
profits in excess of 16% being shared 70% to Tech Labs and 30% to FUA. In
addition, FUA will receive a 5% royalty based on the cost of any IDS products
Tech Labs manufactures and sells.
F-7
<PAGE>
(9) Subsequent Events
On April 27, 1999, Tech Labs completed the purchase of existing inventories
and test equipment of the discontinued DynaTraX(TM) Product Line from NORDX/CDT
for $500,000. In accordance with the purchase price method of accounting, the
purchase price for the assets referenced above was allocated to the assets
acquired on the basis of preliminary fair market values, which may be revised at
a later date. Results subsequent to the date of acquisition will be included in
Tech Lab's financial statements. Had the results of the DynaTraX acqusition been
included in our consolidated statements for 1997, 1998 and 1999, the effect
would have been material.
Year Ended Year Ended
DynaTraX December 31, December 31,
(Unaudited) 1998 1999
----------- ----------- -----------
Net Sales $ 400,000 $ 100,000
Cost of Sales 300,000 20,000
----------- -----------
Gross Profit 100,000 80,000
Research/Development 900,000 -0-
Selling & G&A Expenses 1,700,000 50,000
----------- -----------
Pre-Tax Inc./(Loss) $(2,500,000) $ 30,000
Income Tax (Expense)/
Benefit-Pro-Forma 1,150,000 -0-
----------- -----------
Net Income/(Loss) $(1,350,000) $ 30,000
----------- -----------
Investment Purchase
(Unaudited) Price*
---------- -----------
Inventory 2,700,000 $ 400,000
Test Equip. 355,000 100,000
----------- -----------
Total 3,055,000 500,000
=========== ===========
* Included in December 31, 1999 Tech Labs balance sheet.
Effect on (Unaudited)
Tech Labs Year Ended Year Ended
(Pro-Forma) December 31, 1998 December 31, 1999
----------------- -----------------
Net Sales $ 952,486 $ 535,160
Net Income/(loss) (1,519,104) $ (387,836)
----------- -----------
EPS $ (0.54) $ (0.14)
=========== ===========
F-8
<PAGE>
_____________, 2001
TECH LABORATORIES, INC.
5,306,816 Shares of Common Stock
------------------------------------
PROSPECTUS
------------------------------------
--------------------------------------------------------------------------------
We have not authorized any dealer, salesperson, or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the company
have not changed since the date hereof.
================================================================================
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY......................................................... 1
RISK FACTORS............................................................... 2
USE OF PROCEEDS............................................................ 6
PRICE RANGE OF COMMON STOCK................................................ 7
DIVIDEND POLICY............................................................ 7
CAPITALIZATION............................................................. 8
SELECTED FINANCIAL DATA.................................................... 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................. 9
BUSINESS .................................................................. 11
MANAGEMENT................................................................. 17
CERTAIN TRANSACTIONS....................................................... 20
PRINCIPAL STOCKHOLDERS..................................................... 21
PLAN OF DISTRIBUTION....................................................... 22
OFFERING BY SELLING SECURITYHOLDERS........................................ 24
DESCRIPTION OF SECURITIES.................................................. 27
SHARES ELIGIBLE FOR FUTURE SALE............................................ 27
LEGAL MATTERS.............................................................. 28
EXPERTS .................................................................. 28
ADDITIONAL INFORMATION..................................................... 28
INFORMATION NOT REQUIRED IN PROSPECTUS..................................... 28
INDEX TO FINANCIAL STATEMENTS ............................................. F-1
Until _________, 2001 (25 days after the date of this prospectus), all dealers
that effect transactions in these shares of Common Stock may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as an underwriter and with respect to their unsold
allotments or subscriptions.
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers
Tech Labs is incorporated in New Jersey. Under Section ____ of the
Corporation Law of the State of New Jersey, a New Jersey corporation has the
power, under specified circumstances, to indemnify its directors, officers,
employees, and agents in connection with actions, suits, or proceedings brought
against them by a third party or in the right of the corporation, by reason of
the fact that they were or are such directors, officers, employees, and agents,
against expenses incurred in any action, suit, or proceeding. The Certificate of
Incorporation and the By-laws of Tech Labs provide for indemnification of
directors and officers to the fullest extent permitted by the General
Corporation Law of the State of New Jersey.
The General Corporation Law of the State of New Jersey provides that a
certificate of incorporation may contain a provision eliminating the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such provision
shall not eliminate or limit the liability of a director (a) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (b) for
acts of omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section ____ (relating to liability for
unauthorized acquisitions or redemptions of, or dividends on, capital stock) of
the General Corporation Law of the State of New Jersey, or (d) for any
transaction from which the director derived an improper personal benefit. Tech
Labs's Certificate of Incorporation contains such a provision.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS, OR PERSONS
CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE OPINION
OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST
PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
Other Expenses of Issuance and Distribution
The following table sets forth the expenses in connection with this
Registration Statement. All of such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission.
Filing Fee-- Securities and Exchange Commission $ 1,825
Fees and Expenses of Accountants $ 15,000
Fees and Expenses of Legal Counsel $ 70,000
Blue Sky Fees and Expenses $ 3,500
Printing and Engraving Expenses $ 7,500
Miscellaneous Expenses $ 2,175
Total.................................... $100,000
Recent Sales of Unregistered Securities
As listed below, the Company issued shares of its common stock, par value
$.01 per share, to the following individuals or entities for the consideration
as listed in cash or services. All sales
II-1
<PAGE>
made within the United States or to United States citizens or residents were
made in reliance upon the exemptions from registration under the Securities Act
of 1933 as follows:
1. In November 2000 we issued to Barry Bendett, a consultant to Tech Labs,
options to purchase 100,000 shares at $4.00 per share. The issuance of the
options was exempt from registration under the Securities Act pursuant to
Section 4(2) thereof. Mr. Benett is a sophisticated investor and had complete
access to all relevant information regarding Tech Labs.
2. In October 2000 we issued a $1,500,000 principal amount convertible note
which is due on October 13, 2000 to certain accredited investors. The issuance
of the note was made pursuant to Rule 506 of Regulation D under the Securities
Act.
3. In October 2000 we issued warrants to purchase 412, 500 shares of our common
stock to accredited investors in connection with the issuance of the convertible
note described above in Item 1. The issuance of the warrants was made pursuant
to Rule 506 of Regulation D under the Securities Act.
4. In July 2000 we issued 25,000 shares to m3communications, Inc. pursuant to an
asset purchase agreement between Tech Labs, Tech Labs Community Networks of the
Southeast, Inc., a subsidiary of Tech Labs, and the shareholders of
m3communications, Inc. The issuance of the shares was exempt from registration
under the Securities Act pursuant to Section 4(2) thereof.
5. In June 2000 we issued 25,000 shares to Nathan Perlmutter pursuant to a
convertible note agreement dated September 5, 1997, which was part of the
transaction described in item 12, below.
6. In July 2000 we issued 20,000 shares to Louis Tomasella, who is a former
director of Tech Labs, pursuant to Mr. Tomasella's exercise of stock options
granted to him under Tech Labs stock option plan.
7. In November 1999 we issued 75,000 shares to Mint Corporation for consulting
services pursuant to our agreement with Mint dated March 10, 1999. The issuance
of the shares was exempt from registration under the Securities Act pursuant to
Section 4(2) thereof. The principals of Mint are sophisticated and had complete
access to all relevant information regarding Tech Labs.
8. In June 1999 we issued to Coby Capital Corporation, a consultant to Tech
Labs, options to purchase 50,000 shares at $1.85 per share. The issuance of the
options was exempt from registration under the Securities Act pursuant to
Section 4(2) thereof. The principal of Coby Capital is accredited and had access
to all relevant information regarding Tech Labs.
9. In June 1999 we sold 90,045 shares to two "accredited" investors for gross
proceeds of $200,000. The issuance of the shares was exempt from registration
under the Securities Act pursuant to Section 4(2) thereof.
10. In June 1999 we issued 25,000 shares to Mint Corporation for previously
rendered consulting services pursuant to our agreement with Mint dated March 10,
1999. Pursuant to said agreement, Mint was also granted options to purchase
100,000 shares at $1.25 per share and 100,000 shares at $1.75 per share. The
issuance of the shares and options was exempt from Registration under the
Securities Act pursuant to Section 4(2) thereof.
11. In June 1999 we issued 50,000 shares to MPX Network Solutions, Inc. pursuant
to a consulting agreement in exchange for services. The issuance of the shares
was exempt from registration under the Securities Act pursuant to Section 4(2)
thereof. The principal of MPX is sophisticated and had complete access to all
relevant information regarding Tech Labs.
12. In March 1999 we issued 600 shares to a noteholder in payment of $600 in
interest in lieu of cash, as provided under the terms of the note. The issuance
of the shares was exempt from registration under the Securities Act pursuant to
Section 4(2) thereof. The noteholder purchased the note beteween December 1996
and October 1997 as part of the transaction set forth in transaction No. 15. The
noteholder was sophisticated and had the access to information described in
transaction No. 15.
13. From September 1998 to April 1999, we sold shares of our common stock
pursuant to Rule 504 of Regulation D under the Securities Act to eight investors
who were either sophisticated or "accredited" as that term is defined under Rule
501(a) of Regulation D under the Securities Act. Each investor was given a
private placement memorandum which included financial statements describing Tech
Labs. Each investor also had access to Bernard M. Ciongoli, Tech Labs'
president, and to other pertinent documentation. The offering raised a total of
$443,200.00, $250,000 of which was raised in April 1999.
14. On July 10, 1998, we issued 20,300 shares of common stock for services
rendered by prior counsel to Tech Labs for $22,167.40. The issuance of the
shares was exempt from registration under the Securities Act pursuant to Section
4(2) thereof. The prior counsel was sophisticated and had complete access to
relevant information regarding Tech Labs.
15. From September 1997 to March 1998, we sold shares of our common stock
pursuant to Rule 504 of Regulation D under the Securities Act to eleven
investors who were either sophisticated or "accredited" as that term is defined
under Rule 501(a) of Regulation D under the Securities Act. Each investor was
given a private placement memorandum, which included financial statements,
describing Tech Labs. Each investor also had access to Mr. Ciongoli and to other
pertinent documentation. The offering raised a total of $665,791.
II-2
<PAGE>
16. In December 1998 we issued options to purchase 75,000 shares exercisable at
$1.12 per share to Stursberg & Veith, counsel to Tech Labs, in exchange for
services. The issuance of the options were exempt from registration under the
Securities Act pursuant to Section 4(2) thereof. The partners of Stursberg &
Veith are sophisticated and have complete access to all relevant information
regarding Tech Labs.
17. In November 1998 we issued 15,000 shares to Mr. Sal Grisafi in exchange for
consulting services. The issuance of the shares was exempt from registration
under the Securities Act pursuant to Section 4(2) thereof. Mr. Grisafi was a
sophisticated investor and had complete access to all relevant information
regarding Tech Labs.
18. In November 1998 we issued 40,000 shares to Emerson Callahan, a former
director of the company, for consulting services. The issuance of the shares was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof. Mr. Callahan was an accredited investor.
19. In November 1998, we issued 25,000 shares to Carmine Pellosie, a director of
the company, for services rendered to Tech Logistics, Inc. The issuance of the
shares was exempt from registration under the Securities Act pursuant to Section
4(2) thereof. Mr. Pellosie was an accredited investor.
20. In November 1998, we issued 15,000 shares to Carmine Pellosie, a director of
the company, in exchange for his ownership of 20% of Tech Logistics, Inc. a
partly owned subsidiary of our company. The issuance of the shares was exempt
from registration under the Securities Act of 1933 pursuant to Section 4(2)
thereof.
Exhibits and Financial Statement Schedules
EXHIBIT INDEX
3.1 Certificate of Incorporation.(1)
3.2 By-Laws of Tech Labs.(1)
5.1 Opinion of Stursberg & Veith
10.1 Amended Joint Marketing Agreement and Confidentiality and Manufacturing
Agreement dated as of October 1, 1998 between Tech Labs and Elktronic
Apparutebau Gmbh (EAG), W.T. Sports, Ltd. and FVA Safety Equipment,
AG.(1)
10.2 Employment Agreement between Tech Labs and Bernard M. Ciongoli.(1)
10.3 First Amendment to Employment Agreement between Tech Labs and Bernard
M. Ciongoli.(2)
10.6 Patent and Trademark assignments.(1)
10.7 Consulting Agreement dated March 10, 1999 between Tech Labs and Mint
Corporation.(2)
10.8 Consulting Agreement dated March 22, 1999 between Tech Labs and MPX
Network Solutions.(2)
10.9 Consulting Agreement dated June 2, 1999 between Tech Labs and Coby
Capital Corporation.(2)
10.10 Assignment of Lease dated May 1, 1992 between William Tanis as
Landlord, Forsee Corporation as Assignor and Tech Labs as Assignee.(2)
10.11 Asset Acquisition Agreement dated as of March 12, 1999 by and between
NORDX/CDT, Inc. and Tech Labs.(2)
10.12 Tech Labs Stock Option Plan.(2)
10.13 Stock Option Agreement dated June 3, 1999 between Tech Labs and Coby
Capital Corporation.(2)
10.14 Stock Option Agreement dated March 10, 1999 between Tech Labs and Mint
Corporation.(2)
10.15 Stock Option Agreement dated March 10, 1999 between Tech Labs and Mint
Corporation.(2)
10.16 Joint Marketing Agreement dated October 15,1999 between Tech Labs and
TravelNet Technologies, Inc.(3)
10.17 Promissory Note and Security Agreement dated October 25, 1999 between
Tech Labs and Peter B. Hirschfield, Trustee, Olive Cox-Sleeper Trust
dated 10/3/58 f/b/o Bert L. Atwater.(4)
10.18 November 2000 Incentive Stock Option Plan was previously filed.
10.19 November 2000 Non-employee Stock Option Plan was previously filed.
10.20 Asset Purchase Agreement, dated June 1, 2000 by and between Tech Labs,
M3communications, Inc. and the shareholders of m3 was previously filed.
10.21 Shareholders Agreement dated June 23, 2000 by and between Tech Labs
Community Networks, Inc., the Shareholders of M3Communications, Inc.
and Tech Labs Community Networks of the South East, Inc. was previously
filed.
10.22 Warrant Agreement dated June 23, 2000 executed by Tech Labs and
delivered to m3communications, Inc. was previously filed.
10.23 First Amendment to Asset Purchase Agreement dated June 9, 2000 entered
into by and between Tech Labs, M3communications, Inc. and the
shareholders of M3 was previously filed.
10.24 Consulting Agreement dated as of November 13, 2000 by and between Barry
Bendette and Tech Labs was previously filed.
10.25 Subscription Agreement entered into between the subscribers and Tech
Labs dated October 13, 2000.(5)
10.26 Common Stock Purchase warrant entered into between the warrant holders
and Tech Labs dated October 13, 2000.(5)
21.1 Subsidiaries of the Company
24.1 Consent of Charles J. Birnberg, CPA, certified public accountants
24.2 Consent of Stursberg & Veith (included in Exhibit 5.1).
----------
(1) Incorporated by reference to the Registrant's registration statement filed
on Form SB-2 (file No. 333-82595) filed on July 9, 1999.
(2) Incorporated by reference to the Registrant's amendment No. 1 to its
registration statement filed on Form SB-2 (file No. 333-82595) filed on
October 18, 1999.
(3) Incorporated by reference to the Registrant's amendment No. 2 to its
registration statement filed on Form SB-2 (file No. 333-82595) filed on
November 19, 1999.
(4) Incorporated by reference to the Registrant's amendment No. 3 to its
registration statement filed on Form SB-2 (file No. 333-82595) filed on
December 17, 1999.
(5) Incorporated by reference to the Registrant's current report filed on Form
8-K (file No. 000-27592) filed on October 17, 2000.
(b) The following financial statement schedules are included in this
Registration Statement:
None.
Undertakings
The undersigned registrant hereby undertakes:
<PAGE>
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(2) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement, or the most recent
post-effective amendment thereof, which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(3) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities other than
the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense
of any action, suit, or proceeding is asserted by such director, officer,
or controlling person in connection with the securities being registered,
the registrant 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 issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Offering Statement has been
signed on behalf of the registrant in the City of North Haledon and State of New
Jersey on the 19th day of January, 2001.
TECH LABORATORIES, INC.
By: /s/ Bernard M. Ciongoli
------------------------------
Bernard M. Ciongoli, President
As required by the Securities Act of 1933, this Offering Statement has been
signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Bernard M. Ciongoli President, Treasurer, CEO, January 19, 2001
----------------------------- CFO, and Director ------------------
Bernard M. Ciongoli
/s/ Earl M. Bjorndal* Vice President and Director January 19, 2001
----------------------------- ------------------
Earl M. Bjorndal
/s/ Carmine O. Pellosie, Jr.* Secretary and Director January 19, 2001
----------------------------- ------------------
Carmine O. Pellosie, Jr.
/s/ Salvatore Grisafi* Director January 19, 2001
----------------------------- ------------------
Salvatore Grisafi
By: /s/ Bernard M. Ciongoli
------------------------
Bernard M. Ciongoli
Attorney-in-Fact*
<PAGE>
EXHIBIT INDEX
3.1 Certificate of Incorporation.(1)
3.2 By-Laws of Tech Labs.(1)
5.1 Opinion of Stursberg & Veith
10.1 Amended Joint Marketing Agreement and Confidentiality and Manufacturing
Agreement dated as of October 1, 1998 between Tech Labs and Elktronic
Apparutebau Gmbh (EAG), W.T. Sports, Ltd. and FVA Safety Equipment,
AG.(1)
10.2 Employment Agreement between Tech Labs and Bernard M. Ciongoli.(1)
10.3 First Amendment to Employment Agreement between Tech Labs and Bernard
M. Ciongoli.(2)
10.6 Patent and Trademark assignments.(1)
10.7 Consulting Agreement dated March 10, 1999 between Tech Labs and Mint
Corporation.(2)
10.8 Consulting Agreement dated March 22, 1999 between Tech Labs and MPX
Network Solutions.(2)
10.9 Consulting Agreement dated June 2, 1999 between Tech Labs and Coby
Capital Corporation.(2)
10.10 Assignment of Lease dated May 1, 1992 between William Tanis as
Landlord, Forsee Corporation as Assignor and Tech Labs as Assignee.(2)
10.11 Asset Acquisition Agreement dated as of March 12, 1999 by and between
NORDX/CDT, Inc. and Tech Labs.(2)
10.12 Tech Labs Stock Option Plan.(2)
10.13 Stock Option Agreement dated June 3, 1999 between Tech Labs and Coby
Capital Corporation.(2)
10.14 Stock Option Agreement dated March 10, 1999 between Tech Labs and Mint
Corporation.(2)
10.15 Stock Option Agreement dated March 10, 1999 between Tech Labs and Mint
Corporation.(2)
10.16 Joint Marketing Agreement dated October 15,1999 between Tech Labs and
TravelNet Technologies, Inc.(3)
10.17 Promissory Note and Security Agreement dated October 25, 1999 between
Tech Labs and Peter B. Hirschfield, Trustee, Olive Cox-Sleeper Trust
dated 10/3/58 f/b/o Bert L. Atwater.(4)
10.18 November 2000 Incentive Stock Option Plan was previously filed.
10.19 November 2000 Non-employee Stock Option Plan was previously filed.
10.20 Asset Purchase Agreement, dated June 1, 2000 by and between Tech Labs,
M3communications, Inc. and the shareholders of m3 was previously filed.
10.21 Shareholders Agreement dated June 23, 2000 by and between Tech Labs
Community Networks, Inc., the Shareholders of M3Communications, Inc.
and Tech Labs Community Networks of the South East, Inc. was previously
filed.
10.22 Warrant Agreement dated June 23, 2000 executed by Tech Labs and
delivered to m3communications, Inc. was previously filed.
10.23 First Amendment to Asset Purchase Agreement dated June 9, 2000 entered
into by and between Tech Labs, M3communications, Inc. and the
shareholders of M3 was previously filed.
10.24 Consulting Agreement dates as of November 13, 2000 by and between Barry
Bendette and Tech Labs was previously filed.
10.25 Subscription Agreement entered into between the subscribers and Tech
Labs dated October 13, 2000.(5)
10.26 Common Stock Purchase warrant entered into between the warrant holders
and Tech Labs dated October 13, 2000.(5)
21.1 Subsidiaries of the Company
24.1 Consent of Charles J. Birnberg, CPA, certified public accountants
24.2 Consent of Stursberg & Veith (included in Exhibit 5.1).
----------
(1) Incorporated by reference to the Registrant's registration statement filed
on Form SB-2 (file No. 333-82595) filed on July 9, 1999.
(2) Incorporated by reference to the Registrant's amendment No. 1 to its
registration statement filed on Form SB-2 (file No. 333-82595) filed on
October 18, 1999.
(3) Incorporated by reference to the Registrant's amendment No. 2 to its
registration statement filed on Form SB-2 (file No. 333-82595) filed on
November 19, 1999.
(4) Incorporated by reference to the Registrant's amendment No. 3 to its
registration statement filed on Form SB-2 (file No. 333-82595) filed on
December 17, 1999.
(5) Incorporated by reference to the Registrant's current report filed on Form
8-K (file No. 000-27592) filed on October 17, 2000.
