-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OKy02/EuOSGKKdy81yOrDmhG89AftdaYQvMRaFkWZI/a7Za+lQWoi1jUaa0is9PX CqkKti5V6SZz5nJZUfzNyw== 0000891554-99-001386.txt : 19990712 0000891554-99-001386.hdr.sgml : 19990712 ACCESSION NUMBER: 0000891554-99-001386 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19990709 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TECH LABORATORIES INC CENTRAL INDEX KEY: 0000096664 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 221436279 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2 SEC ACT: SEC FILE NUMBER: 333-82595 FILM NUMBER: 99662160 BUSINESS ADDRESS: STREET 1: 955 BELMONT AVE CITY: NORTH HALEDON STATE: NJ ZIP: 07508 BUSINESS PHONE: 9734275333 MAIL ADDRESS: STREET 1: TECH LABORATORIES INC STREET 2: 955 BELMONT AVE CITY: NORTH HALEDON STATE: NJ ZIP: 07508 SB-2 1 REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on July 9, 1999 Registration No.: 333- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------------------------------------- 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 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. |_| ________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| ________ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| ________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------------------------------------------------------- Proposed Proposed Maximum maximum 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 - -------------------------------------------------------------------------------------------------------------------------------- Shares of Common Stock, par value $.01 per share ("Common Stock") 1,000,000 $3.50 $3,500,000 $973.00 - -------------------------------------------------------------------------------------------------------------------------------- Shares of Common Stock 90,045 3.50 $315,516 88.20 - -------------------------------------------------------------------------------------------------------------------------------- Shares of Common Stock 25,000 3.50 $87,500 24.33 - -------------------------------------------------------------------------------------------------------------------------------- Common Stock, $.01 par value(2) 50,000 1.85 $92,500 25.72 - --------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(o). (2) Represents shares issuable upon the exercise of warrants issued by the Company having an exercise price of $1.85 per share. Pursuant to Rule 416, also includes such additional shares as may be issuable as a result of the anti-dilution provisions of said warrants. ================================================================================ The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or 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) 1,000,000 shares of Common Stock, $.01 par value ("Common Stock"), of Tech Laboratories, Inc., a New Jersey Corporation, for sale by our company in a self-underwritten public offering, and (ii) 165,045 shares of Common Stock (collectively, the "Selling Securityholder Shares") for sale by the holders thereof and by the holders of certain outstanding warrants (collectively, the "Selling Securityholders"), all for resale from time to time by the Selling Securityholders. We will amend and complete the information in this Prospectus. Although we are permitted by US federal securities laws to offer to sell these securities using this Prospectus, we may not sell them or accept your offer to buy them until the documentation filed with the SEC relating to these securities has been declared effective by the SEC. This Prospectus is not an offer to sell these securities and it is not soliciting your offer to buy these securities in any state where that would not be permitted or legal. SUBJECT TO COMPLETION, DATED July 9, 1999 PROSPECTUS 1,000,000 Shares TECH LABORATORIES, INC. 955 Belmont Avenue North Haledon, New Jersey 07508 (973) 427-5333 We have just completed the purchase of the DynaTraX(TM) network management switch and technology, an all digital, high-speed, customer-premise networking technology. We also currently manufacture and sell various electrical and electronic components. In the last two years, we have developed and marketed infrared security and anti-terrorist products under an exclusive license granted to our company. We are selling a minimum of 571,428 and a maximum of 1,000,000 shares of common stock (the "Shares") at a price of $____ per Share, on a "best efforts" basis. Until we receive and accept subscriptions for the minimum number or 571,428 shares, subscribers' funds will be deposited in escrow with ______________ Bank. If we do not receive subscriptions for the minimum number of shares within 90 days after the date of this Prospectus, unless we extend the offering period for up to an additional 90 days, the Offering will be terminated and all subscribers' funds will be returned promptly, in full, without interest or deduction. You may not withdraw funds deposited in escrow. We are also registering 115,090 shares of common stock for certain persons and 50,000 shares of common stock issuable upon exercise of certain outstanding warrants that may be resold from time to time in the future by certain securityholders (the "Selling Securityholders"). We have covenanted to use our best efforts to keep the Registration Statement of which this Prospectus is a part effective with the Securities and Exchange Commission in order to permit such resales, and it is expected that such resales will be made from time to time on the electronic bulletin board, or otherwise. Such resales are subject to prospectus delivery and other requirements of the Securities Act of 1933, as amended (the "Securities Act"). We will not receive any proceeds from the market sales of the Selling Securityholder shares or the shares of Common Stock issuable upon exercise of such warrants other than proceeds relating to the exercise price of such warrants. We are paying all costs and expenses of registering these shares of Common Stock. See "Offering by Selling Securityholders." Our shares of common stock trade on the OTC Bulletin Board under the symbol "TCHL." On ______ _____________, 1999, the last reported sale price of our common stock was $____ per share ----------------------------------------------------- This investment involves certain risks. See "Risk Factors," which begins on page 4. ----------------------------------------------------- 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. You should only rely on the information incorporated by reference or provided in this Prospectus or any supplement. We have not authorized anyone else to provide you with different information. Our common stock is not being offered in any state where the offer is not permitted. You should not assume that the information in this Prospectus or any supplement is accurate as of any date other than the date on the front of those documents.
==================================================================================================== Price to Underwriting Discounts Proceeds to Public and Commissions the Company(1) - ---------------------------------------------------------------------------------------------------- Per Share.............................. $3.50 $0 $3.50 Total Maximum.......................... $3,500,000 $0 $3,500,000 Total Minimum.......................... $2,000,000 $0 $2,000,000 ====================================================================================================
(1) Before deducting expenses of the Offering, estimated to be $100,000. The date of this Prospectus is ____________, 1999 [PICTURES OF IDS AND DYNATRAX] PROSPECTUS SUMMARY This summary highlights certain information contained elsewhere in this Prospectus. This summary is not complete and does not contain all of the information that you should consider before investing in the Common Stock. Unless the context indicates otherwise, all references herein to "we" include Tech Laboratories, Inc. and its wholly-owned subsidiary, Tech Logistics, Inc., collectively, and references to "Tech Laboratories" or "Tech Logistics" 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 Company We currently manufacture and sell various electrical and electronic components. On April 27, 1999, we acquired from NORDX/CDT, INC., a subsidiary of Cable Design Technologies Corp., the DynaTraX(TM) digital matrix switch system, which is a patented, state-of-the-art, transparent customer-premise, high-speed network switching system. 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 community campus and building facilities. We feel our DynatraX(TM), all digital, high-speed, customer-premise networking technology will 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, possibly allowing them to realize recurring revenues and to make their properties more attractive to tenants. In addition to our DynaTraX(TM) technology, during the last two years, through our subsidiary, Tech Logistics, Inc., we have been marketing and manufacturing, 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. 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. The Offering Shares Offered: Maximum.......................... 1,000,000 shares Minimum.......................... 571,428 shares The shares are being offered on a minimum/maximum basis. No shares will be sold in the Offering unless at least 571,428 shares are sold. Shares of Common Stock to be Outstanding After the Offering(1): If Maximum Sold.......... 4,575,660 shares If Minimum Sold.......... 4,147,088 shares Current Trading Symbol: OTC Bulletin Board...... TCHL-BB Risk Factors.................. For a discussion of risks that you should consider before buying the Shares, see "RISK FACTORS." Use of Proceeds(2)............ Transition of DynatraX(TM) assets, product development, marketing and sales, completion of DynatraX(TM) inventory, sales and marketing for IDS and working capial. See "Use of Proceeds." Plan of Distribution.......... The shares will be offered and sold by our executive officers and directors. We may retain the services of one or more NASD-registered broker-dealers as selling agents to effect offers and sales on our behalf. Escrow........................ All funds we receive with respect to the sale of the first 571,428 shares will be deposited in a special escrow account at a federally insured national bank. If 571,428 shares are not sold within ninety (90) days following the effective date of the Registration Statement of which this Prospectus is a part (the "Effective Date"), unless we extend the offering period for up to an additional ninety (90) days in our sole discretion, the offering will automatically terminate and all funds received from the sale of shares will be returned to the purchasers thereof. - -------- (1) Excludes (i) 75,000 shares issuable pursuant to a consulting agreement, (ii) options to purchase 100,000 shares at $1.25 per share and an additional 100,000 shares at $1.75 per share pursuant to a consulting agreement, (iii) options to purchase 50,000 shares exercisable at $1.85 per share pursuant to a consulting agreement, (iv) options to purchase an aggregate of 190,000 shares exercisable at $.50 per share granted under our company's stock option plan for officers and directors, (v) options to purchase 75,000 shares exercisable at $1.12 per share, and (vi) pursuant to the employment agreement with our president, options to purchase up to 300,000 shares, 100,000 options of which are vested, with the balance to vest in 100,000 increments on each of October 1, 1999, and October 1, 2000, so long as the president is employed, such options to be exercisable at $.50 per share. See "Management," "Management-- Stock Option Plan" and "Description of Securities." (2) Assuming the maximum number of shares offered hereby are sold. -2- Summary Financial Information The summary Consolidated Financial Data provided herein should be read in conjunction with our financial statements, including the Notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Prospectus. The summary financial information set forth below is derived from the financial statements appearing elsewhere in this Prospectus. Such information should be read in conjunction with such financial statements, including the Notes thereto.
Statement of Operations Data Years Ended December 31 March 31 ----------------------------------------- ----------------------- 1996 1997 1998 1998 1999 ---- ---- ---- ---- ---- (unaudited) Income Statement Data: Sales .............................. $647,015 $444,322 $552,486 $86,160 $59,714 Net Income (loss) .................. 49,182 (274,069) (169,104) (96,423) (44,937) Earnings (loss) per share .......... $0.04 ($0.18) ($0.06) ($0.04) ($0.03)
March 31, 1999 ------------------------------------------------------------ (unaudited) Actual Pro Forma(2) As Adjusted(1)(2) December 31, 1998 ------ ----------- ----------------- Balance Sheet Data ---------------- (unaudited): Minimum Maximum - ------------ ------- ------- Total Assets ........................ $1,018,597 $1,035,303 $1,604,311 $3,429,311 $4,929,311 Working Capital ..................... 851,540 887,724 1,456,732 3,281,732 4,781,732 Current Portion of Long-Term ........ 32,742 32,742 32,742 32,742 32,742 Debt Long-Term Debt ...................... 0 0 0 0 0 Shareholders' Equity ................ 863,727 $899,911 $1,468,919 $3,293,919 $4,793,919
- ---------- (1) Adjusted to give effect to the sale of shares offered hereby, after deducting estimated offering expenses. (2) Gives effect to (i) 278,572 shares of common stock issued for an aggregate of $250,000; (ii) 90,045 shares of common stock issued for an aggregate of $200,000 and (iii) 50,000 shares and 25,000 shares of common stock issued to two of our consultants, respectively. RISK FACTORS In addition to other matters described in this document, prospective investors should carefully consider the following factors: We have had a History of Limited Sales and Operating Losses. We have had limited sales and have experienced operating losses. For the years ended December 31, 1997 and 1998 our sales were $444,322 and $552,486, respectively, and we had net losses of ($274,069) and ($169,104). As of December 31, 1998, we had an accumulated deficit of ($475,476). We have had limited cash flow and working capital, which has restricted our recent operations. Although the proceeds of this Offering will enable us to implement our business plan, sales of our products must be made at greatly increased volumes and with sufficient margins to avoid continued losses. No assurance can be given that we will be able to sell sufficient quantities of our products with margins great enough to achieve profitability. We have a Need for Substantial Additional Capital. The net proceeds from this offering are estimated to be approximately $1,900,000, if only the minimum number of Shares is sold, and $3,400,000 if the maximum number of Shares is sold. We are significantly under-capitalized and if less than all of the Shares are sold, we will still be in need of significant additional capital after completion of this Offering in order to expand our operations in the manner contemplated by our management if we are successful in raising the maximum proceeds from this Offering. Our primary capital requirements over the next 12 months include payments of trade payables, marketing expenses, research and development and tooling costs for improved versions of our existing products and development of new products. We believe that funds generated by operations and the proceeds of this Offering, if only the minimum number of Shares is sold, will be sufficient to sustain current operating levels; however, expansion of operations will need to proceed at a slower pace as operating funds permit unless we are able to arrange for financing from other sources. We currently have no agreements or understanding with respect to additional sources of capital or financing in addition to amounts raised in this Offering. We face all of the difficulties of a company that is undercapitalized. We lack adequate capital to expand our operations, particularly if only the minimum number of Shares is sold. Accordingly, investors should be aware of the substantial risk that we may not achieve all of our proposed business objectives due to a lack of adequate capital. See "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business." Although We Have Acquired and/or Developed New Products, We Have Had Limited Sales of These Products to Date. We have, in the past two years, entered into a number of agreements and arrangements to acquire, develop and/or market a broader range of products, some of which incorporate some of our historical products and others of which involve diversification into the areas of security devices and systems and network switching systems. Due to our limited resources, we have engaged in only limited development and marketing of these products, and our revenues from such activities have been minimal. We will require the proceeds of this Offering to market these products and develop and market new products; however, there can be no assurance that any of these products will achieve significant market acceptance or that we will derive significant revenues from these products. -4- The Success of Our Business is Dependent on Our Ability to Market DynaTraX(TM) and Develop and Market Other New Products. 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. However, there can be no assurance that we will successfully market such products or develop and market other new products. Our success depends upon several factors including, among others, (i) the development of an effective marketing and distribution network, (ii) the acceptance of our products by potential users, and (iii) 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. While we are not a new enterprise, because we are in the process of substantially changing our product line, we are encountering many of the problems faced by a new enterprise. You should be aware of the difficulties normally encountered by a new enterprise and the high rate of failure of such enterprises. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and there can be no assurance that we will become a viable or profitable business. The likelihood of our success must be considered in light of the delays, uncertainties, difficulties and risks inherent in a new business, many of which may be beyond our control. These include, but are not limited to, unanticipated problems relating to testing, manufacturing, marketing and competition, development of additional products, and additional costs and expenses that may exceed current estimates. In addition, there can be no assurance that the DynaTraX products will receive commercial acceptance or generate significant revenues. Further, there can be no assurance that revenues will increase significantly in the future or that we will ever achieve profitable operations. See "Business." Our Market Share Depends on the Technical Superiority of Our Products, Our 7bility to Keep Pace with Technological Changes and Customer Acceptance. Our future success will depend in large part on timely development and introduction of new products that provide enhanced security, network switching capabilities and related features. The security systems and products that we intend to develop and market represent a significant investment on the part of a customer. Our products will have to be technologically equivalent or superior to competing products and cost effective. We will also have to demonstrate that our products are flexible and can be designed to meet specific and changing customer needs. Customers will be seeking to invest in systems that will not be rendered obsolete or inadequate in the foreseeable future. In addition, we will have to develop and maintain a service capacity for the systems we sell and install. If we fail to introduce technologically superior, cost-competitive products and to demonstrate our ability to maintain and service our products, we will not be able to achieve significant sales. We have made a substantial investment in acquiring the technology underlying the DynaTraX(TM) products and services from NORDX/CDT, Inc. Although NORDX/CDT, Inc. has made some sales of DynaTraX-based products, the sales and operations history of such products has been limited. We cannot be sure that our DynaTraX(TM) products will perform as anticipated. There can be no assurance that any products will be compatible with other systems in use by potential customers, be capable of being sold, installed and supported in commercial volumes at reasonable prices and costs or be successfully marketed. We will be required to create product awareness and demand, and persuade potential customers of the advantages of adapting or replacing existing network switching systems. We cannot be sure that our products will achieve significant commercial success or that revenues will equal or exceed the cost of our investment. -5- 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. We Have Limited Marketing and Sales Capabilities and We Are Dependent on Third Parties for Marketing Activities. Our operating results will depend to a large extent on our ability to educate sophisticated potential customers about the advantages of our products and to market our products to the users and decision makers within those potential customers. We currently market our existing products primarily through our catalog. We have very limited marketing capabilities and experience, and we need to develop a sales and marketing program and sales distribution channels. We are currently primarily dependent on our President, Bernard M. Ciongoli, who, because of his other duties as President, is only able to devote a part of his time to such activities, and our consultant, MPX Network Solutions, Inc., for development and implementation of our sales and marketing program, as well as for customer development and contact. We anticipate that we will depend, to a significant extent, on distributors to market and support our products. We have not established any such arrangements to date. The success of any such relationship will depend in part upon such parties' own competitive, marketing and strategic considerations, including the relative advantages of alternative products being marketed by such persons, and there can be no assurance that such parties will have the interest or ability to successfully market our products. We cannot be sure that we will be able to arrange third party distribution of our products or that such arrangements would result in significant sales. Further, we could be dependent for a substantial portion of our sales on one or a very small number of distributors. In such event, the loss of one or more significant distributors could have a material adverse effect on our business and financial condition. Our success will depend in great part on our ability to successfully implement our marketing and sales program and create sufficient levels of demand for our products. There can be no assurance that any marketing and sales efforts undertaken by us or on our behalf will be successful or will result in any significant sales of our products. See "Business -- Marketing Strategies." We Have No Assurance as to Protection of Intellectual Property, and We May Be Dependent on Intellectual Property. We have no patent or copyright protection on our current products, other than 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, we intend to rely substantially on unpatented proprietary information and know-how, and there can be no assurance that others will not develop such information and know-how independently or otherwise obtain access to our technology. In addition, we cannot be sure that others will not challenge the DynatraX(TM) patents or develop competing products that use equivalent or superior technology. Also, it is uncertain whether our proprietary technology will not infringe on other rights owned by others and that as a result we may not be in a position to license such technology at a reasonable cost. Competition. We compete against a variety of other concerns, most of which are larger and have greater financial, technical and marketing capacities and other resources than we do. See "Business -- Industry." -6- We May Incur Product Liability or Other Liabilities Relating to New Products. 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. We cannot be sure that such coverage will be available to us on terms we can afford. 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. Management Owns a Significant Interest at a Lower Cost than Purchasers of the Shares in this Offering. Management has acquired a significant interest in the Company at a cost substantially less than that which the new investors will pay for their shareholdings. Therefore, the investors will bear a substantial risk of loss, while, as a practical matter, control of our company is likely to remain in the hands of management. The Purchasers Will Incur Immediate Dilution. As a purchaser of the shares, you will incur an immediate dilution in the per share book value of their Common Stock from $3.50 to $2.82 if the minimum number of Shares is sold and from $3.50 to $2.56 if the maximum number of Shares is sold. In addition, the investors in the Shares will bear a substantially larger portion of the risk of loss of this venture, while essential control of our company will remain with the present shareholders. See "Dilution." There Is a Very Limited Market for Our Securities. There is a very limited market for the Common Stock of the Company, and no assurance can be given that any greater market will develop in the future or, once developed, be maintained, or that the market price of our Common Stock will not decline. Even if a more active trading market does develop, the market price of our Common Stock is likely to be highly volatile and could be subject to wide fluctuations in response to factors such as: o actual or anticipated variations in our quarterly operating results; o announcements of new product or service offerings; o future technological innovations; o new commercial products; o changes in regulation; o changes in financial estimates by securities analysts; o conditions and trends in the electrical, electronic component, security, and network switching industries; -7- o changes in the economic performance and/or market valuations of other security and network switching companies; and o general market conditions and other general factors. Furthermore, the stock markets, and in particular, the OTC Bulletin Board and NASDAQ stock markets, have experienced extreme price and volume fluctuations that have particularly affected the market prices of many technology companies, and have often been unrelated or disproportionate to the operating performance of such companies. Additionally, the market price of our Common Stock could be adversely affected by losses and other negative news regarding one or more other companies, despite the fact that such information is not related to us specifically. The trading prices of many technology companies' stocks are at or near their historical highs. We cannot assure you that such high trading prices will be sustained. These broad market factors may adversely affect the market price of our Common Stock. In addition, general economic, political, and market conditions, such as recessions, changes in interest rates, or international currency fluctuations, may adversely affect the market price of our Common Stock. The Offering Price of the Shares Was Arbitrarily Determined. While our shares trade on the OTC Bulletin Board, the volume is substantially less than that being offered in this Offering, and does not reflect the market price for the amount of stock we are offering in this Offering. The price at which the Shares are being offered has been arbitrarily determined by us, and does not necessarily bear any relationship to assets, earnings, book value, or any other ordinary investment criterion. Shareholders Are Not Entitled to Cumulative Voting. Neither our Articles of Incorporation nor our by-laws provide for cumulative voting. Since the election of directors and all other questions will be decided by majority vote, except as otherwise provided by the Articles of Incorporation and the laws of the State of New Jersey, the shareholders who purchase the shares offered hereby may not have the power to elect even a single director and, as a practical matter, our company will continue to be controlled by the current management. See "Principal Shareholders" and "Description of Common Stock." We Have Never Paid Dividends and Are Unlikely to Pay Dividends in the Foreseeable Future. We have not paid any dividends on our Common Stock for at least the last six years and intend to follow a policy of retaining earnings, if any, to finance the development and expansion of our business. Although we do not envision payment of dividends, payment of dividends, if any, will depend upon future earnings, financial requirements, and other factors. See "Business." Dependence Upon Joint Venture Agreement. We have entered into an Amended Joint Marketing Agreement (the "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 our company 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 Agreement 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, no assurances can be given that the agreements will be renewed or that we will be able to replace the IDS with other satisfactory technology and products. -8- Potential Unavailability of Components; Limited or Single Source of Supply. Current inventory purchases 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 will have only a single supplier for a particular part or component. During the year ended December 31, 1998, Wiggins Plastics was our largest supplier with 14.2% of our overall inventory purchases. These purchases were primarily used in the manufacture of electromechanical switches. During the year ended December 31, 1997, Wiggins Plastics accounted for 16.8% of our supply of inventory. Those components were in products that produced approximately 25.7% of our revenue for such year. We have no long-term agreements with any of our suppliers. Should a supplier, particularly a principal supplier, be unwilling or unable to supply any inventory part, component, or service in a timely manner, our business could be adversely affected. In addition, even if such parts or components are available, shortage of supply could result in an increase in procurement costs which may adversely affect our profitability. Additionally, even though we carry insurance, if our inventory is destroyed or damaged as a result of a catastrophe, it would materially adversely affect our ability to deliver products to our customers. We Have No Insurance on the DynatraX(TM) Product Inventory. We currently do not have insurance on the DynatraX(TM) inventory of furnished products and parts purchased from NORDX/CDT. These are currently in possession of NORDX/CDT in Canada awaiting shipment to us. Damage or destruction of some or all of the inventory would result in a substantial loss to us. We are Dependent on our Key Personnel, and we will also need Additional Management and Outside Directors with Business Expertise. We are highly dependent upon the efforts of Bernard M. Ciongoli, our president and chief executive officer. The loss of the services of Mr. Ciongoli 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. See " Management -- Director, Executive Officers, and Key Consultants." Expansion of our business may require additional managers and employees with industry experience. 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. Additionally, our board of directors currently consists of Mr. Ciongoli, Mr. Earl M. Bjorndal, Mr. Louis Tomasella, and Mr. Carmine O. Pellose, Jr. Mr. Ciongoli and Mr. Bjorndal are both employed by the company. Expansion of our business will likely require additional non-employee board members with business and industry experience. We do not have directors' and officers' liability insurance. This may limit our ability to attract qualified non-employee board members. There are Risks Associated with our Proposed Business Expansion. We have plans to expand our business operations in a number of ways over the next 12 to 18 months, provided that we receive the proceeds of this Offering. We plan to begin the sale of the DynatraX(TM) switch, to complete the DynatraX(TM) unfinished inventory we -9- acquired, and to develop improved and modified DynatraX(TM) products. Additional financing may be necessary to pursue these plans, and there can be no assurance that such financing will be available. In pursuing business expansion, we may incur expenses that we cannot recover, and we will be required to expense certain costs which may negatively affect our operating results. See "Use of Proceeds," and "Management's Discussion and Analysis of Financial Condition and Results of Operations." We had a Net Loss in 1998. For the year ended December 31, 1998, we incurred a net loss of $169,104. We attribute such loss to a decrease in sales of our old line of products, an increase in sales, engineering, testing, and promotion expenses of our IDS product, and other related expenses, as well as consulting and legal expenses in conjunction with the acquisition of the DynatraX(TM) product line. There can be no assurance that we will not generate losses in the future. There May be Possible Restrictions on Trading Due to Penny Stock Regulation. The Securities and Exchange Commission has adopted Rule 15g-9 which requires broker-dealers who recommend "penny stocks" to persons other than established customers and accredited investors to make a special written suitability determination for the purchaser and receive the purchaser's written agreement to a transaction prior to sale. The regulations that generally define a "penny stock" to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such exceptions include an equity security listed on NASDAQ and an equity security issued by an issuer that has (a) net tangible assets of at least $2,000,000, if such issuer has been in continuous operation for three years, (b) net tangible assets of at least $5,000,000, if such issuer has been in continuous operation for less than three years, or (c) average annual revenue of at least $6,000,000 for the preceding three years. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith. After receipt of the net proceeds from this Offering, our net tangible assets are expected to exceed $2,000,000, providing an exception to this regulation even though our share price is below $5.00, so this regulation should not be applicable, initially, to our Shares. If our net tangible assets fall below $2,000,000 and the market price of our Shares is less than $5.00 per Share, then this regulation will apply. If our securities were subject to the regulations applicable to penny stocks, the market liquidity for the securities would be severely affected by limiting the ability of broker-dealers to sell the securities and the ability of purchasers in this Offering to sell their securities in the secondary market. There is no assurance that trading in our securities will not be subject to these or other regulations that would adversely affect the market for such securities. -10- USE OF PROCEEDS The net proceeds from the sale by us of the minimum number of 571,428 Shares (after deducting estimated expenses of this Offering) are estimated to be $1,900,000. The net proceeds from the sale by us of the maximum number of 1,000,000 Shares (after deducting expenses of this Offering) are estimated to be $3,400,000. The net proceeds will be used by us in approximately the following amounts. MINIMUM MAXIMUM Transition of DynatraX(TM) $100,000 $100,000 Product Development of Additional DynaTraX Products 375,000 750,000 Marketing and Sales 560,000 1,000,000 Completion of DynaTraX Inventory 275,000 500,000 IDS Enhancement, Sales, Marketing 150,000 250,000 Working Capital 440,000 800,000 ---------- ---------- Total $1,900,000 $3,400,000 The foregoing represents our best estimate of the net proceeds of the offering based on current planning and business conditions. The exact allocation of the proceeds for the purposes set forth above and the timing of the expenditures may vary significantly depending upon the exact amount of funds raised, the time and cost involved in deploying the funds, and other factors. We believe that the proceeds from the Minimum Offering in addition to revenues from operations will be sufficient to fund our operations for the next 12 months, although such development would be at a reduced pace than if the Maximum Offering proceeds were received. If an amount less than Maximum Offering is raised, we may be required to delay, scale back, or eliminate parts of our development plan or obtain funds through additional financing, including loans or offerings of our securities. We presently have no agreements or understandings with respect to any future financing or loan agreements. -11- PRICE RANGE OF COMMON STOCK Our common stock has been trading publicly on the OTC Bulletin Board under the symbol "TCHL" 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
CLOSING BID CLOSING ASK ----------------------- ------------------------- YEAR ENDING DECEMBER 31, 1999 HIGH LOW HIGH LOW - ----------------------------- ---- --- ---- --- First Quarter................................... $2.625 $1.0625 $3.0 $1.3125 Second Quarter.................................. 3.125 1.50 3.875 2.00 YEAR ENDING DECEMBER 31, 1998 - ----------------------------- First Quarter................................... $3.125 $1.75 $3.375 $2.125 Second Quarter.................................. 2.6875 1.6875 3.0 2.0 Third Quarter................................... 2.1875 1.125 2.625 1.4375 Fourth Quarter.................................. 2.0625 1.25 2.625 1.50 YEAR ENDING DECEMBER 31, 1997 - ----------------------------- First Quarter................................... $2.25 $ .125 $2.75 $ .625 Second Quarter.................................. 3.125 1.4375 4.125 1.9375 Third Quarter................................... 2.75 2.0625 3.875 2.3125 Fourth Quarter.................................. 2.625 1.375 2.75 1.75
As of July __, 1999, there were ___ holders of record of our common stock. DIVIDEND POLICY We have never paid any cash dividends on our 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. -12- CAPITALIZATION The following table sets forth (i) our actual capitalization at March 31, 1999, (ii) our pro forma capitalization at March 31, 1999, as adjusted to reflect the effect of the issuance after March 31, 1999, of 443,617 shares of Common Stock and (iii) the sale of the minimum of 571,428 shares and the maximum of 1,000,000 shares of Common Stock offered hereby, after deducting the estimated Offering expenses, and the application of the estimated net proceeds of approximately $1,900,000 if the minimum number of Shares is sold, and $3,400,000 if the maximum number of shares is sold, as set forth in this Prospectus. See "USE OF PROCEEDS" and "BUSINESS."
March 31, 1999 ------------------------------------------------------- As Adjusted(1) ---------------------- Actual Pro Forma(1) Minimum Maximum ---------- ----------- --------- --------- Total Debt: $135,392 $135,392 $135,392 $135,392 Stockholders' equity: Common Stock, $.01 par value; 5,000,000 shares authorized; 3,575,660 shares issued and outstanding-- actual and 4,147,088 (minimum) and 4,575,660 (maximum)-- as adjusted; 11,316 shares held in treasury(2)............ $29,491 $35,757 $41,471 $45,757 Additional paid-in capital............................. $1,390,833 $1,953,575 $3,772,861 $5,268,575 Accumulated deficit.................................... $520,413 ($520,413) ($520,413) ($520,413) Total stockholders' equity (deficiency)................ $899,911 $1,468,919 $3,293,919 $4,793,919 Total Capitalization................................... $1,035,303 $1,604,311 $3,429,311 $4,929,311
- -------- (1) Includes (i) 278,572 shares of common stock issued for an aggregate of $250,000; (ii) 90,045 shares of common stock issued for an aggregate of $200,000 and (iii) 50,000 shares and 25,000 shares of common stock issued to two of our consultants, respectively. (2) Does not include shares issuable pursuant to a consulting agreement and shares issuable upon the exercise of outstanding (i) options and warrants and (ii) options that may be granted pursuant to certain consulting agreements and under our stock option plans. See "Management" and "Description of Securities -- Stock Options, Stock Option Plan, and Other Agreements to Issue Stock." -13- DILUTION Purchasers of the Shares will experience immediate and substantial dilution in the value of their Shares after purchase. Dilution represents the difference between the initial public offering price per share paid by the purchaser in the offering and the net tangible book value per share immediately after completion of the offering. Net tangible book value per share represents the net tangible assets of our company (total assets less total liabilities), divided by the number of shares of Common Stock outstanding upon closing of the offering. Our net tangible book value (actual) at March 31, 1999 (unaudited), was $899,911 or $.25 per common share. Taking into account the issuance of (i) 443,617 shares after March 31, 1999 and (ii) 571,428 common shares for $2,000,000 after March 31, 1999, and the sale of the shares and the receipt of the estimated net proceeds, the pro forma net tangible book value after March 31, 1999, would have been $2,799,911 or $.68 per common share if only the minimum number of Shares is sold, and $4,299,911 or $.94 per common share if the maximum number of Shares is sold. This represents an immediate increase in net tangible book value of $.43 per common share (minimum offering) and $.69 per common share (at maximum offering) to the existing shareholders and an immediate dilution of $.69 per common share (minimum offering) and $.94 per common share (maximum offering) to persons purchasing Shares in this Offering. The following table illustrates this per share dilution: Minimum Maximum ------- ------- Offering price per Share $3.50 $3.50 Net tangible book value per share at March 31, .25 .25 1999 (unaudited) Increase per common share attributable to .43 .69 payments by new investors ----- ----- Net tangible book value per share at March 31, .68 .94 1999 (unaudited), on a pro forma basis ----- ----- reflecting the proceeds of this Offering(1) Dilution of net tangible book value per share to $2.82 $2.56 new shareholders(2) ----- ----- - --------- (1) Gives effect to the issuance after March 31, 1999 of (i) 278,572 shares for an aggregate of $250,000, (ii) 90,045 shares of common stock for an aggregate of $200,000 and (iii) 50,000 shares and 25,000 shares of common stock issued to two of our consultants, respectively. (2) Represents dilution of approximately 19% with the completion of the Minimum Offering and 37% with the completion of the Maximum offering, respectively, to purchasers of Common Stock offered hereby. -14- The following table sets forth on March 31, 1999, on a pro forma basis, the differences between existing shareholders and new investors in the offering with respect to the number of shares of Common Stock purchased, the total consideration paid, and the average price per share paid by existing shareholders and by new investors.
Minimum Offering(1)(2) Percentage of Percentage of Total Outstanding Consideration Consideration Average Price Number Shares Paid Paid per Share Existing Shareholders(2) 3,575,660 86% $ 35,757 2% $0.01 New Investors 571,428 14% $2,000,000 98% $3.50 Total 4,147,088 100% $2,035,757 100% -- Maximum Offering(1)(2) Percentage of Percentage of Total Outstanding Consideration Consideration Average Price Number Shares Paid Paid per Share Existing Shareholders 3,575,660 78% $ 35,757 1% $0.01 New Investors 1,000,000 22% $3,500,000 99% $3.50 Total 4,575,660 100% $3,535,757 100% --
- -------- (1) Excludes (i) 75,000 shares issuable pursuant to a consulting agreement, (ii) options to purchase 100,000 shares at $1.25 per share and an additional 100,000 shares at $1.75 per share pursuant to a consulting agreement, (iii) options to purchase 50,000 shares exercisable at $1.85 per share pursuant to a consulting agreement, (iv) options to purchase an aggregate of 190,000 shares exercisable at $.50 per share granted under the Company's stock option plans for officers and directors, (v) options to purchase 75,000 shares exercisable at $1.12 per share, and (vi) pursuant to the employment agreement with our president, options to purchase up to 300,000 shares, 100,000 options of which are vested, with the balance to vest in 100,000 increments on each of October 1, 1999, and October 1, 2000, so long as the president is employed, such options to be exercisable at $.50 per share. See "Management," "Management-- Stock Option Plans" and "Description of Securities." (2) Gives effect to the issuance after March 31, 1999 of (i) 278,572 shares for an aggregate of $250,000, (ii) 90,045 shares of common stock for an aggregate of $200,000 and (iii) 50,000 shares and 25,000 shares of common stock issued to two of our consultants, respectively. -15- 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 and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
Years Ended Three Months Ended December 31, March 31, -------------------------------------------- -------------------------- 1996 1997 1998 1998 1999 -------- -------- -------- -------- -------- (unaudited) Statement of Operations Data: Sales $647,015 $444,322 $552,486 $86,160 $59,714 Cost of Sales 337,269 446,457 386,425 86,591 40,008 -------- -------- -------- -------- -------- Gross Profit 309,746 (2,135) 166,061 (431) 19,706 Operating Expenses General and administrative 246,915 257,826 311,716 92,464 60,110 Depreciation and amortization 10,849 7,278 18,133 1,820 4,533 -------- -------- -------- -------- -------- Income (loss) from operations 51,982 (267,239) (163,788) (94,716) (44,937) Other income-- Interest 388 166 1,654 -0- -0- Interest expense 3,188 6,996 6,970 1,707 -0- -------- -------- -------- -------- -------- Income (loss) before provision for income taxes 49,182 (274,069) (169,104) (96,423) (44,937) Provision for income -0- -0- -0- -0- -0- Net income (loss) 49,182 (274,069) (169,104) (96,423) (44,937) Net income (loss) per share $0.04 ($0.18) ($0.06) ($0.04) ($0.03)
December 31, March 31, ------------------------------------------- -------------------------- 1996 1997 1998 1998 1999 ---- ---- ---- ---- ---- Balance Sheet Data: (unaudited) Total assets $459,711 $609,526 $1,018,597 $585,959 $1,035,303 Working Capital 267,436 405,548 851,540 381,040 887,724 Current Portion of long-term debt 34,445 34,445 32,742 32,742 32,742 Long-term debt (less current portion) -0- -0- -0- -0- -0- Shareholders' equity $296,184 $429,615 $ 863,727 $405,107 $ 899,911
-16- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 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 1996, 1997, and 1998 and for the three months ended March 31, 1998 and 1999 and their approximate percentage contribution to revenues for the period indicated:
PRODUCT TYPE 1996 % of Revenue 1997 % of Revenue 1998 % of Revenue - ------------ ---- ------------ ---- ------------ ---- ------------ Rotary Switches $262,858 40.6% $199,324 44.8% $166,550 30.1% IDS Sensors 0 0 0 0 254,900 46.2% Transformers/Coils 60,741 9.4% 53,595 12.1% 50,515 9.1% Contract Manufacturing 323,416 50.0% 191,404 43.1% 80,520 14.6% -------- ----- -------- ------ -------- ------ Totals $647,015 100.0% $444,323 100.0% $552,485 100.0% ======== ===== ======== ====== ======== ====== Three Months Ended March 31, ------------------------------------------------------------ (unaudited) PRODUCT TYPE 1998 % of Revenue 1999 % of Revenue - ------------ ---- ------------ ---- ------------ Rotary Switches $48,493 56.3 $37,998 63.6 IDS Sensors 11,105 12.9 0 0 Transformers/Coils 18,406 21.4 10,260 17.2 Contract Manufacturing 8,156 9.4 11,456 19.2 -------- ------ ------- ------ Totals $86,160 100.0% $59,714 100.0% ======= ====== ======= ======
As the foregoing reflects, there was 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 in 1997. In 1998, sales of the IDS were $254,900. The following table sets forth the percentages of gross profit for each of our major business activities in 1997 and 1998, and for the three months ended March 31, 1998 and 1999:
Three Months Ended March 31, ----------------------------------- (unaudited) PRODUCT TYPE 1997 1998 Net Change 1998 1999 Net Change - ------------ ---- ---- ---------- ---- ---- ---------- Rotary Switches 44.2% 45.0% 0.8% 44.2% 45.0% 0.8% IDS Sensors -0- 52.0% 52.0% 52.0% -0- (52.0%) Transformers/Coils 22.7% 25.0% 2.3% 22.7% 25.0% 2.3% Contract Manufacturing 20.0% 22.8% 2.8% 20.0% 22.8% 2.8% Unallocated company expenses(1) (31.2%) (13.1%) 18.1% (38.3%) (4.3%) 34.0% Total company gross profit % (0.5%) 30.1% 30.6% (0.05%) 33.0% 33.5%
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. - ---------- (1) Includes physical inventory adjustments and factory overhead. -17- Results of Operations Three Months Ended March 31, 1999, Compared to Three Months Ended March 31, 1998 - -- Unaudited. Sales were $59,714 for the first three months of 1999 as compared to $86,160 for the three months ended March 31, 1998. The decrease was due to limited marketing efforts and the lack of new product introductions. Cost of sales of $40,008 for the three months ended March 31, 1999 compared to $86,591 for the same period in 1998 decreased significantly due to reductions in manufacturing costs, efficiencies, and reduction of manufacturing staff. Selling, general, and administrative expenses decreased by $29,642 or 31% in the first quarter of 1999 as compared to the prior period in 1998 which resulted from higher than normal expenses in 1998 and cost reduction efforts implemented in the fourth quarter of 1998. Selling, general, and administrative expenses would be in line with 1998 after eliminating the higher expenses incurred in 1998. Losses from operations of $44,937 in the first quarter of 1999 declined by $49,779 or 53% compared to losses of $94,716 for the prior period as a direct result of reduced costs and lower selling, general, and administrative expenses. 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). Cost of sales decreased 16% from $446,457 in 1997 to $386,425 in 1998 due to an increase in sales of new 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. 1997 Compared to 1996 Sales decreased 31.3% from $647,015 in 1996 to $444,322 in 1997 due to a decrease in subcontracting activity. Cost of sales increased 32.4% from $337,269 in 1996 to $446,457 in 1997 due to fixed overhead. Selling, general and administrative expenses, including depreciation, increased slightly from $257,764 in 1996 to $265,104 in 1997. We had income of $51,982 for 1996 as compared to a loss of ($267,239) for 1997 due to lower sales from subcontracting activity. Interest expense increased 119% from $3,188 in 1996 to $6,996 in 1997. Liquidity and Capital Resources. During the years ended December 31, 1997 and 1998 and for the three months ended March 31, 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 1999 we raised an additional $250,000 for the acquisition of the DynaTraX(TM) assets and an additional $200,000 for working capital. 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. Bacause 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 this offering. In the event we are unable to complete this offering or we sell less than the maximum number of shares offered hereby, we will be required to curtail the implementation of our business plan. -18- BUSINESS General Tech Laboratories, Inc. ("Tech Labs" or the "Company"), which was incorporated in 1947, currently manufactures and sells various electrical and electronic components. On April 27, 1999, we completed the acquisition of the DynaTraX(TM) high-speed digital switch matrix system, a patented, state of the art, transparent, customer-premise, high-speed network switching system. 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. In addition, during the last two years, through our subsidiary, Tech Logistics, Inc., we have been marketing and manufacturing 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 manufacture and sell standard and customized switches, transformers and test equipment. 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. Our switches are primarily incorporated in electronic and electrical devices, test field engineering, manufacturing and quality control equipment, and are standardized and custom-made. Transformers are devices for converting a varying current from one voltage to another and may increase the voltage. Our historic customer base for transformers has been the elevator industry. Our contract manufacturing activities have included fabrication of computer boards and assembly of cables and harnesses. In addition, we have manufactured, on an OEM basis, such products as infrared beam perimeter security devices, microprocessor based machine controls, test instruments for ophthalmology products, test instruments for manufacturers of integrated circuits, control components for photo-lithographic products, high-power control panels and power distribution control panels. We have also expanded our product lines by manufacturing test equipment in which switches are a key component. We have designed test instruments in the fields of resistance, inductance and capacitance decade substitution that serve as calibration and design aids for engineers. We have also developed a new line of decade resistance, capacitance and inductance substituters, utilizing our highly reliable rotary switches. Prototypes for these products have been made and evaluated, and the tooling to produce these products has been completed. We intend to market our new line 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. We have, in the past two years, entered into a number of agreements and arrangements to develop and/or market a broader range of products, some of which incorporate some of our historical products and others of which involve diversification into the areas of security devices and systems and network switching systems. Due to our limited resources, we have only engaged in limited development and marketing of these products, and our revenues from such activities have been minimal. -19- We will require the proceeds of this Offering to market these products and develop additional products, and there can be no assurance that any of these products will achieve significant market acceptance or that we can derive significant revenues from these products. The DynaTraX(TM) Assets Acquisition On April 27, 1999, we completed the acquisition of the DynaTraX(TM) digital switch matrix system, a state-of-the-art, transparent customer premise, high-speed network switching system from NORDX/CDT, INC., a subsidiary of Cable Design Technologies Corp. In connection with the acquisition of DynaTraX(TM) technology, we acquired certain inventory, customer and supplier lists, marketing and promotional materials, patents and patent applications, and other equipment related to the DynaTraX(TM) product. 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. We believe that there is a rapidly growing marketplace for "digital" multi-media (internet, high-speed data, digital voice and video) information equipment and systems. We intend to use the DynaTraX(TM) unique high-speed, transparent digital cross-connect matrix to produce a line of standard, universal firmware, configurable digital network 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. There is no assurance that we will be able to develop or successfully market these proposed products. We will need the funds from this Offering to develop and market our existing DynaTraX(TM) products, as well as developing new products incorporating the DynaTraX(TM) technology. See "Risk Factors." In the long term, 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 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. We feel our DynaTraX(TM), all digital, high-speed, customer-premise networking technology will 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, possibly allowing them to increase rents and to make their properties more attractive to tenants. Industry DynaTraX(TM) Networking Management and Maintenance Technology Our DynaTraX(TM) product 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 have recently completed the purchase of the DynaTraX(TM) technology and inventory and initially intend to market the product in the eastern portion of the United States with expansion to other markets over time. 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 the DynaTraX(TM) product. -20- 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. We believe that our DynaTraX(TM) product offers a faster switch and a much smaller port size than any competing product and is not limited to a specific type of network as with some competing products. Competition for network management products comes in several forms and from several different groups. One group of competitors is the internal staff of large organizations who have built up a business unit to manage and maintain their networks and have a vested interest in maintaining the status quo. However, we believe the need for businesses to reduce costs works in favor of implementing cost saving technologies such as the DynaTraX(TM) technology. Another group of competitors which produce 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 transparent high-speed switch. The NHC switch is not as fast as our DynaTraX(TM) product and much smaller in port size. In addition, V-LAN switching can be regarded as a competing technology. However, V-LAN switching is limited to a specific type of network (Ethernet) and not able to support many tasks associated with rearranging network physical layer connections, testing circuits, managing and maintaining end-to-end network configuration and 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. Infrared Intrusion Detection System ("IDS") In April 1997, we formed Tech Logistics, Inc., a joint venture subsidiary owned at that time 80% by our company and 20% by Carmine O. Pellose, 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. Pellose'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 begun marketing it 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 Amended and Restated Joint Marketing Agreement and a Confidentiality and Manufacturing Agreement as of October 1, 1997 with Elekronik Apparatebau GmbH (EAG), W.T. Sports, Ltd. and FUA Safety Equipment, AG (FUA), pursuant to which our company was granted an exclusive right until September 30, 2007 to manufacture and sell in the U.S., Canada and South America the IDS products. The agreements provide that gross pre-tax profits shall be calculated according to GAAP and shall be distributed quarterly in arrears 70% to our company and 30% to FUA until March 31, 2001. Thereafter, until September 30, 2007 the agreements provide that any pre-tax net profit in excess of 16% shall be distributed 70% to our company and 30% to FUA. In addition, 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. Our IDS products are being sold in 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 products in this industry. We have recently completed the sale of an IDS to Los Alamos National -21- 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 "first look" approval for the IDS from the U.S. Military for inclusion in their Tactical Automated Security System (TASS) program which is a $500 million program to thwart enemy attacks on critical military installations throughout the world. 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. Switches, Transformers and Test Equipment 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 have many competitors in this market who are able to produce similar quality products, many of whom have greater financial and other resources than we do. Marketing Strategies Marketing. We plan to implement a three-pronged marketing program consisting of: (i) Industry announcements and presentations through business and industry trade groups; (ii) 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 (iii) 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 a limited geographical area -- the large communication/computer centers in the eastern part of the United States. We plan to divide this area into four sales regions: (i) New England states; (ii) New York metropolitan area; (iii) Mid-Atlantic/Washington DC area; and (iv) South East Coast states. We will quickly set up several regional representatives, sales agents, and/or certified value added resellers (VARs) 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 (design, install, maintain) service. In the long term, we 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. -22- In the established East Coast area, we intend to set up three company regional sales/service centers: (i) Massachusetts; (ii) Washington, DC; and (iii) Florida. We will repeat the process in the other areas as they become established. We plan to use our company's 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. Although we believe that we can be profitable by the third quarter of 1999 from the increased sales of our IDS products and sales of the newly acquired DynaTraX(TM) completed inventory, our profitability is subject to both the successful and timely implementation of our business plan and market acceptance of our new products. All research and development of our IDS products have been expensed and we have received preliminary approval from the U.S. Air Force for inclusion of the IDS products in its TASS program. Our plan to become profitable included the acquisition of the DynaTraX(TM) product in April 1999 and to sell the finished DynaTraX(TM) inventory we acquired. Because we have incurred substantially all our anticipated research and development costs with respect to our IDS product and have had it preliminarily approved by the U.S. Military for inclusion in the TASS program, and have completed the purchase of the DynaTraX(TM) switch, technology and marketing materials, upon completion of this offering, we believe we will have the funds necessary to market our products and achieve profitability. Our profitability will be delayed if we are not able to sell our products as we have anticipated. We believe we are raising sufficient funds with this offering to achieve the sales necessary to become profitable and to provide sufficient liquidity until such time as we become profitable. In the event that sales and profitability are delayed to the point beyond that anticipated and liquidity is impacted, we would reduce or defer operating expenses, such as expenses to finish work in progress relating to the DynaTraX(TM) inventory and research and development of additional DynaTraX(TM) products. Order Backlog The backlog of written firm orders for our products and services as of March 31, 1999, was as follows: As of March 31, 1999: $151,226 As of March 31, 1998: $165,245 Patents In connection with our acquisition of the DynatraX(TM) assets, we acquired certain patents and pending patent applications. While a patent has been granted in Great Britain, our patent applications in the U.S., Europe and elsewhere are subject to review in those jurisdictions. There can be no assurance that these patents will be granted and even if granted may afford us limited or no protection, depending upon the nature of competing technology and upon our ability to defend our intellectual property rights. Recent Financing In April 1999, we completed our financing plan for, among other things, the acquisition of DynaTraX(TM)technology and related assets pursuant to which we raised $250,000 from the sale of 278,572 shares. Subsequently, in May 1999, we raised an additional $200,000 for general working capital purposes from the sale of 90,045 shares. -23- Employees As of March 31, 1999, we had 11 full-time employees, including our officers, seven of whom were engaged in manufacturing, one in repair services, one in administration and financial control, one in engineering and research and development, and one in marketing and sales. Facilities; Manufacturing Our 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 (1) 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. -24- MANAGEMENT Directors, Executive Officers, and Key Consultants Name Age Title - ---- --- ----- Bernard M. Ciongoli 52 President, Treasurer, and Director Earl M. Bjorndal 47 Vice President and Director Carmine O. Pellose, Jr. 57 Secretary and Director Louis Tomasella 58 Director Each director is elected for a period of three years 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. Pellose, 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. Louis J. Tomasella has served as Director since 1994 and was Treasurer from 1994 through 1998. He devotes only a small portion of his time to Company matters. He is the owner of Tomco Realty, a general real estate brokerage firm in New Jersey. Mr. Tomasella holds a bachelors degree in liberal arts from Rutgers University. Executive Compensation We have a five (5) year employment contract with Mr. Ciongoli that commenced October 1, 1998, and 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 our company. 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. -25- We do not have employment agreements with any other officer or other employee, and no officer had received compensation in excess of $100,000 in any recent fiscal year. Our directors are not presently compensated. Consultants We have entered into a consulting agreement with MPX Network Solutions, Inc. ("MPX"). The term of the agreement is for one year expiring on March 14, 2000, renewable for an additional one year period. MPX will provide consulting services in the areas of marketing, customer relations and strategic and product development planning, particularly with regard to communications products. 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. 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 ("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, our company issued to the consultant a warrant to purchase 50,000 shares of Common Stock at $1.85 per share exercisable for five (5) years, and an additional warrant (the "Second Warrant") to purchase up to 200,000 shares of Common Stock at $3.50 per share exercisable for five (5) years, the Second Warrant to vest in increments of 25,000 shares each for sales of $250,000 or more of our company's product to purchasers obtained by consultant within the initial two (2) year term of the Consulting Agreement. The shares underlying the warrants have certain registration rights. We have also entered into a consulting agreement dated March 10, 1999, with Mint Corporation, a New York corporation ("Mint"), to provide certain financial and business consulting services, which include assisting our management in developing its business plan, introducing our company to members of the financial community, and assisting our company in its financial planning. Under its consulting agreement which may be terminated by our company upon ten (10) days' prior written notice, we agreed to (i) pay consultant up to 100,000 shares, 25,000 of which shares have been earned, and (ii) to grant to consultant an option to purchase up to 200,000 shares of common stock, such options to be exercisable to purchase 100,000 shares at $1.25 per share and options to purchase 100,000 shares at $1.75 per share. The options vests in full if the agreement has not been terminated by our company prior to July 10, 1999. The shares underlying the options have certain registration rights. Stock Option Plan On December 11, 1996, the Board of Directors adopted a stock option plan for officers, directors, and other key employees. A total of 450,000 shares were set aside for this purpose, and options for an aggregate of 190,000 shares have been granted at an exercise price of $.50 per share. CERTAIN TRANSACTIONS The information set forth herein describes certain transactions between the Company and certain affiliated parties. Future transactions, if any, must be approved by the Board of Directors. -26- On December 11, 1996, we agreed to compensate our President, Bernard M. Ciongoli, and our Vice President, Earl M. Bjorndal, for unpaid salary earned during 1996 in the form of Common Stock. Mr. Ciongoli received 280,000 shares for unpaid salary earned in the amount of $14,000 at $0.05 per share, and Mr. Bjorndal received 160,000 shares for unpaid salary earned in the amount of $8,000 at $0.05 per share. In December, 1996, we issued to Louis Tomasella 100,000 shares of Common Stock for consulting services. In April, 1997, we formed Tech Logistics, Inc., a joint venture subsidiary with Carmine O. Pellose, Jr. to market security devices distributed by International Logistics, Inc., a private-owned company, of which Mr. Pellose was the President and principal shareholder. Mr. Pellose became a director of the Company at that time. In May 1998, we acquired Mr. Pellose's interest in Tech Logistics, Inc. for 25,000 shares of our Common Stock. See "Business -- Other Recent Developments." -27- PRINCIPAL STOCKHOLDERS The following table sets forth, as the date of this Prospectus and as anticipated following this Offering, the ownership of the presently issued and outstanding shares of our Common Stock (i) by persons known to us to own more than 5% of such stock, and (ii) the ownership of Common Stock by our directors, and by all officers and directors as a group.
Number of Shares Owned % of Shares % of Shares Beneficially Prior to Outstanding After Name and of Record Offering Offering - ---- ------------- -------- -------- Minimum Maximum ------- ------- Bernard M. Ciongoli(1) 720,000 20.14% 17.36% 15.74% Earl Bjorndal(2) 248,344 6.95% 5.99% 5.43% Carmine O. Pellose, Jr.(3) 40,000 1.12% * * Louis Tomasella(4) 120,000 3.36% 2.89% 2.62% All officers and directors as a 1,028,344 31.57% 27.20% 24.66% group (4 persons)(1-5)
- ----------- * less than 1%. (1) Includes 100,000 shares issuable upon the exercise of immediately exercisable options granted under our stock option plan and 100,000 shares issuable upon exercise of options earned under our employment agreement with Mr. Ciongoli. (2) Includes 50,000 shares issuable upon the exercise of immediately exercisable options granted under our stock option plan. (3) Does not include 20,000 shares issuable upon the exercise of options granted upon our stock option plans, which options are not exercisable until July 2000. (4) Includes 20,000 shares issuable upon the exercise of immediately exercisable options granted under our stock option plan. (5) Excludes (i) 75,000 shares issuable pursuant to a consulting agreement, (ii) options to purchase 100,000 shares at $1.25 per share and an additional 100,000 shares at $1.75 per share pursuant to a consulting agreement, (iii) options to purchase 50,000 shares exercisable at $1.85 per share pursuant to a consulting agreement, (iv) options to purchase an aggregate of 190,000 shares exercisable at $.50 per share granted under the Company's stock option plans for officers and directors, (v) options to purchase 75,000 shares exercisable at $1.12 per share, and (vi) pursuant to the employment agreement with our president, options to purchase up to 300,000 shares, 100,000 options of which are vested, with the balance to vest in 100,000 increments on each of October 1, 1999, and October 1, 2000, so long as the president is employed, such options to be exercisable at $.50 per share. See "Management," "Management--Stock Option Plan" and "Description of Securities." PLAN OF DISTRIBUTION We will receive proceeds from the sale of the shares, aggregating a maximum of $3,500,000 if such shares are sold. We will not receive the proceeds of any sale of the securities by the Selling Securityholders. We will pay all of the expenses incident to the registration of the securities (including registration pursuant to the securities laws of certain states) other than commissions, expenses, reimbursements, and discounts of underwriters, dealers, and agents, if any, made pursuant to the sale by the Selling Securityholders. Minimum Offering and Escrow Account All funds received by us with respect to the sale of the first 571,428 shares will be deposited by us at a federally funded national bank. If 571,428 shares are not sold within ninety (90) days following the effective date of the registration statement of which this Prospectus is a part, the offering will automatically terminate unless extended for up to an additional ninety (90) days in the sole discretion of the Company and all funds received from the sale of the Shares will be returned to -28- the purchasers thereof with interest, at the same rate as paid by the escrow bank. At the time that 571,428 shares have been sold (the Minimum Offering) prior to the 90-day period (as the same may be extended), we will release the funds from the escrow account for deposit into the working account of our company. Although we will continue to sell the offering to attempt to reach the Maximum Offering (1,000,000 Shares), such released funds will be used at that time by our company as described herein. We may use one or more member firms of the National Association of Securities Dealers, Inc. to sell the shares. As of the date hereof, we have not entered into any agreements or arrangements for the sale of the shares with any broker, dealer, or sales agent. Any underwriters, dealers, or agents who participate in the distribution of the Shares 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. We anticipate that we will pay a commission or underwriting fee to such brokers or dealers of no more than 10%. If, at some time, our company meets the requirements of the NASDAQ SmallCap Market, it will apply for listing thereon. If it should be accepted for listing thereon, then certain underwriters may engage in passive market making transactions in our company's Common Stock in accordance with Rule 103 of Regulation M. In order to comply with the applicable securities laws, if any, of certain states, the securities will be offered or sold in such states through registered or licensed brokers or dealers in those states. In addition, in certain states, the securities may not be offered or sold unless they have been registered or qualified for sale in such states or an exemption from such registration or qualification requirement is available and with which we have complied. Limited State Registration We anticipate that we will primarily sell the shares in a limited number of states, depending on the location and registration of any selling broker or dealer that it locates. We will initially seek to qualify or register the sales of the shares in the states of New York, New Jersey, Connecticut, California, Florida, Illinois, and Nevada. We will not accept subscriptions from investors resident in other states unless we effect a registration therein or determines that no such registration is required. Sales by the Selling Securityholders The Selling Securityholders 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. Any underwriters, dealers, or agents who participate in the distribution of the securities may be deemed to be "underwriters" under the 1933 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 1933 Act. 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. -29- Any underwriters, 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. 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. Use of a Broker-Dealer If we determine to use a broker-dealer, such broker-dealer must be a member in good standing of the National Association of Securities Dealers, Inc. and registered, if required, to conduct sales in those states in which it would sell the shares. We anticipate that we would not pay in excess of 10% as a sales commission for any sales of the shares. If a broker-dealer were to sell the shares, it is likely that such broker-dealer would be deemed to be an underwriter of the securities as defined in Section 2(11) of the Securities Act and we would be required to obtain a no-objection position from the National Association of Securities Dealers, Inc. regarding the underwriting and compensation terms entered into between our company and such potential broker-dealer. In addition, we would be required to file a post-effective amendment to the registration statement of which this Prospectus is a part to disclose the name of such selling broker-dealer and the agreed underwriting and compensation terms. In order to comply with the applicable securities laws, if any, of certain states, the securities will be offered or sold in such states through registered or licensed brokers or dealers in those states. Pursuant to Regulation M of the General Rules and Regulations of the Securities and Exchange Commission, any person engaged in a distribution of securities, including on behalf of a selling securityholder, may not simultaneously bid for, purchase or attempt to induce any person to bid for, purchase, or attempt to induce any person to bid for or purchase securities of the same class for a period of five business days prior to the commencement of such distribution and continuing until the selling securityholder (or other person engaged in the distribution) is no longer a participant in the distribution. If, at some time, our company meets the NASDAQ SmallCap Market, it will apply for listing thereon. If it should be accepted for listing thereon, then certain underwriters may engage in passive market making transactions in our Common Stock in accordance with Rule 103 of Regulation M. We may select dealers who are members of the National Association of Securities Dealers, Inc. to sell the shares, and may pay commissions of up to [10]% to such dealers. No underwriter or dealer has made any firm commitment to purchase or sell any of the Shares offered hereby. Determination of Offering Price While there is a limited market for the stock, the amount of stock to be offered in this Offering is substantially greater than the daily volume in our stock. We have, therefore, arbitrarily priced the stock -30- we are offering at a price that we feel is reflective of what the current market would support, given the number of shares we are selling. However, there can be no assurances that after this Offering the market price of the stock will not decline. OFFERING BY SELLING SECURITYHOLDERS An additional 115,045 outstanding shares and 50,000 shares (the "Securityholder Shares") of Common Stock issuable upon exercise of warrants held by the Selling Securityholders have been registered pursuant to the registration statement under the Securities Act, of which this Prospectus forms a part, for sale by such holders. The Securityholder Shares may be sold subsequent to the effective date of the Offering if a current prospectus relating to the Securityholder Shares is in effect and the Securityholder Shares are qualified for sale. None of the shares being registered by the Selling Securityholders pursuant to this registration statement are being offered for sale in connection with the Offering. The shares of Common Stock and the shares underlying any warrants are not, however, subject to a lock-up. We will not receive any proceeds from the market sales of the Securityholder Shares, although it will receive the proceeds from the exercise of the warrants held by the Selling Securityholders. The Company is paying all costs and expenses of registering the Securityholder Shares. Sales of the Securityholder Shares or the potential of such sales could have an adverse effect on the market price of our company's Common Stock. See "Risk Factors -- Shares Eligible for Future Sale." The Selling Securityholders and the number of Securityholder Shares held by each are as listed below: SECURITYHOLDER SELLING SECURITYHOLDERS SHARES ----------------------- ------ Scott Coby.................................................... 45,045 Scott Coby.................................................... 50,000 David Harris.................................................. 45,000 Mint Corporation ............................................. 25,000 -------- TOTAL..................................................... 165,045 There are no other material relationships between any of the Selling Securityholders and our company, nor have any such material relationships existed within the past three years. The sale of the Securityholder Shares by the Selling Securityholders may be effected from time to time in transaction (which may include block transactions by or form the account of the Selling Securityholders) in the over-the-counter market or in negotiated transactions, 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 purchaser, through broker-dealers acting as agents for the Selling Securityholders or 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. Such broker-dealers, if any, may receive compensation in the form of discounts, commissions, or concessions from Selling Securityholders 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). -31- At the time a particular offer of Securityholder Shares is made by or on behalf of a Selling Securityholder, to the extent required, a Prospectus will be distributed that will set forth the number of Securityholder Shares being offered and the terms of the offering, including the name or names of any underwriters, dealers, or agents, if any, the purchase price paid by any underwriter for any Securityholder Shares purchased from the Selling Securityholder, and any discounts, commissions, or concessions allowed or reallowed or paid to dealers, and the proposed selling price to the public. 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: (i) 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; (ii) if the securities are sold in block transactions and the purchaser wishes to resell, such arrangements would be described in this Prospectus; (iii) 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 the Company for a period of at least two (and up to nine) business 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 our company's 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. -32- SHARES ELIGIBLE FOR FUTURE SALE If we sell the maximum number of shares in this Offering, we will have 4,575,660 common shares outstanding. Other than shares sold to affiliates of the Company, the shares sold in this Offering will be freely tradeable without restriction under the Securities Act of 1933 (the "Act"). Of the 3,575,660 shares of common stock currently outstanding, 2,368,266 are freely tradeable without restriction under the Act. The remaining 1,207,394 shares held by existing shareholders are deemed "restricted" securities within the meaning of Rule 144 under the Act. In general, under Rule 144, restricted securities held by any person who is not an affiliate of the company and who has beneficially owned his or her shares for at least two years are freely tradeable. In addition, under Rule 144, a person who has beneficially owned restricted securities for at least one year, including persons who may be deemed "affiliates" of the company, as the term affiliate is defined in Rule 144, would be entitled to sell, within any three-month period, a number of common shares of which does not exceed the greater of 1% of our then outstanding common shares or the average weekly trading volume in the over-the-counter market during the four calendar weeks preceding the date on which notice of the sale is filed with the Securities and Exchange Commission. No sales are permitted, however, unless the current information about the Company prescribed by Rule 144 is publicly available, sales are made through brokers or market makers in the manner prescribed by the rule, and all other requirements of the rule are met. The restricted shares outstanding have been held for varying periods of time, and certain of such shares have been held for the requisite periods and may be sold at any time subject to the volume limitations set forth above. If there are significant sales of our common shares by the company's existing shareholders or sales of any of the shares underlying warrants when such shares have been registered pursuant to an effective registration statement, the price of our common shares may go down. There is presently no agreement by any holder, including "affiliates" of our company, of "restricted" shares not to sell his shares. -33- DESCRIPTION OF SECURITIES The authorized capital stock of the Company consists of 5,000,000 shares of common stock having a par value of $.01 each (the "Common Stock"), of which 3,575,660 shares are currently outstanding and 11,316 shares are held in treasury. There are currently approximately [249] 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 of Common Stock may elect all of the directors of our company. 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. Stock Options, Stock Option Plan, and Other Agreements to Issue Stock We have outstanding (i) options to consultants and third parties (a) to purchase 50,000 shares exercisable for five years at $1.85 per share, (b) options to purchase 75,000 shares exercisable for five years at $1.12 per share, (c) options 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, and (d) 50,000 shares exercisable for five (5) years from date of vesting at $1.25 per share. The Company has granted options to purchase 300,000 shares exercisable at $.50 per share pursuant to an employment agreement with our President, 100,000 options of which have vested and the remaining 200,000 options to vest 100,000 options on each of October 1, 1999, and October 1, 2000. We have also adopted a stock option plan for officers, directors, and other key employees of the Company. A total of 450,000 shares have been reserved for issuance under the plan, and options for an aggregate of 190,000 shares, exercisable at $.50 per share, have been granted to date. 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 25,000 shares under the agreement and we are obligated to issue an additional 37,500 shares to the consultant on June 10, 1999, and an additional 37,500 shares on July 10, 1999, if the consulting agreement has not been previously terminated. -34- Market Information Our Common Stock is listed on the OTC Electronic Bulletin Board under the symbol "TCHL-BB." 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 hereby 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 of our company's Common Stock. EXPERTS Charles J. Birnberg, CPA, independent auditors, have audited our financial statements at December 31, 1998, for the years ended December 31, 1997 and 1998, 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, as amended, with the Securities and Exchange Commission (the "Commission") with respect to the common stock offered 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 amendments thereof and the exhibits thereto, 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 that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission (http://www.sec.gov). 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. -35- INDEX TO FINANCIAL STATEMENTS Page ---- Report of Charles J. Birnberg, CPA Independent Auditors.....................F-1 Audited Financial Statements Balance Sheets.........................................................F-2, F-3 Statements of Operations....................................................F-4 Statements of Cash Flows....................................................F-5 Notes to Financial Statements...............................................F-6 REPORT OF INDEPENDENT AUDITORS Charles J. Birnberg, CPA 150 Overlook Avenue Hackensack, New Jersey 07601 March 16, 1999 To The Board of Directors of Tech Laboratories, Inc. I have audited the Balance Sheets of Tech Laboratories, Inc. as of December 31, 1997 and 1998 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, 1998 and 1997 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-1 TECH LABORATORIES, INC. BALANCE SHEETS DECEMBER 31, 1997 AND 1998
ASSETS For the Three Month For the Years Ended March 31 December 31 ------------------------------ ------------------------------ 1997 1998 1998 1999 ---------- ---------- ---------- ---------- Unaudited Current Assets: Cash $ 166,173 $ 532,780 $ 103,414 $ 259,120 Marketable Securities, at the Lower of Cost or Market (Note 1) 59,343 56,693 59,124 56,693 Accounts Receivable, net of Allowance of $10,000 in 1998 and $10,000 in 1997 90,734 143,462 126,664 108,946 Inventories (Notes 1 & 2) 269,209 270,118 270,100 295,000 Prepaid Expense 0 3,357 2,570 3,357 Investment in DynatraX 0 0 0 300,000 ---------- ---------- ---------- ---------- Total Current Assets $ 585,459 $1,006,410 $ 561,892 1,023,116 ---------- ---------- ---------- ---------- Property, Plant and Equipment, at Cost (Note 1): Leasehold Improvements 2,247 2,247 2,247 2,247 Machinery, Equipment and Instruments 223,884 230,137 223,884 230,137 Furniture and Fixtures 67,425 67,425 67,425 67,425 ---------- ---------- ---------- ---------- $ 293,556 $ 299,809 $ 293,556 $ 299,809 Less: Accumulated Depreciation & Amortz 281,029 299,162 281,029 299,162 ---------- ---------- ---------- ---------- Net, Property, Plant and Equipment $ 12,527 $ 647 $ 12,527 $ 647 ---------- ---------- ---------- ---------- Other Assets $ 11,540 $ 11,540 $ 11,540 $ 11,540 ---------- ---------- ---------- ---------- Total Assets $ 609,526 $1,018,597 $ 585,959 $1,035,303 ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements F-2 TECH LABORATORIES, INC. BALANCE SHEETS DECEMBER 31, 1997 AND 1998
LIABILITIES AND STOCKHOLDERS' INVESTMENT THREE MONTHS YEAR ENDED ENDED DECEMBER 31 MARCH 31 --------------------------------- ------------------------------- 1997 1998 1998 1999 ----------- ----------- ------------- ----------- Unaudited Current Liabilities: Current Portion of L.T. Debt (Note 5) $ 34,445 $ 32,742 $ 32,742 $ 32,742 Short-Term Loans Payable (Note 6) 43,373 43,373 43,373 43,373 Accounts Payable 48,148 42,155 63,813 22,677 Other Liabilities & Investor Notes Payable 53,945 36,600 40,924 36,600 ----------- ----------- ----------- ----------- Total Current Liabilities $ 179,911 $ 154,870 $ 180,852 $ 135,392 ----------- ----------- ----------- ----------- Stockholders' Investment: Common Stock. $.01 Par Value; 5,000,000 Shares Authorized; 2,869,943 Issued (Note 7) $ 13,753 $ 23,483 13,753 29,604 Less: 11,316 Shares Reacquired and and Held in Treasury (113) (113) (113) (113) ----------- ----------- ----------- ----------- $ 13,640 $ 23,370 13,640 29,491 Common Stock Subscribed (Note 7) 500 0 0 -0- Capital Contributed in Excess of Par Value 721,847 1,315,833 794,262 1,390,833 Retained Earnings 0 0 0 0 Accumulated Deficit (306,372) (475,476) (402,795) (520,413) ----------- ----------- ----------- ----------- $ 429,615 $ 863,727 $ 405,107 $ 899,911 ----------- ----------- ----------- ----------- Total Liabilities and Stockholders' Investment $ 609,526 $ 1,018,597 $ 585,959 $ 1,035,303 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements F-3 TECH LABORATORIES, INC. STATEMENTS OF OPERATIONS DECEMBER 31, 1997 AND 1998
YEAR ENDED THREE MONTHS ENDED DECEMBER 31 MARCH 31 ----------------------------- ----------------------------- 1997 1998 1998 1999 --------- --------- --------- --------- (UNAUDITED) Sales $ 444,322 $ 552,486 $ 86,160 $ 59,714 --------- --------- --------- --------- Costs and Expenses: Cost of Sales 446,457 386,425 86,591 40,008 Selling, General and Administrative Expenses 265,104 329,849 94,285 64,643 --------- --------- --------- --------- 711,561 716,274 180,876 104,651 --------- --------- --------- --------- Income/(Loss) From Operations ($267,239) ($163,788) (94,716) (44,937) --------- --------- --------- --------- Other Income (Expenses): Interest Income $ 166 $ 1,654 0 0 Interest Expense (6,996) (6,970) (1,707) 0 --------- --------- --------- --------- ($ 6,830) ($ 5,316) (1,707) 0 --------- --------- --------- --------- Income/(Loss) Before Income Taxes ($274,069) ($169,104) (96,423) (44,937) Provision for Income Taxes (Notes 1 & 4) 0 0 0 0 --------- --------- --------- --------- Net Income/(Loss) ($274,069) ($169,104) (96,423) (44,937) Retained Earnings/(Accum. Deficit,) Beg. of Period ($ 32,303) ($306,372) (306,372) (475,476) --------- --------- --------- --------- Retained Earnings/(Accum. Deficit,) End of Period ($306,372) ($475,476) ($402,795) ($520,413) ========= ========= ========= ========= Income/(Loss) Per Share (Note 3) ($ 0.18) ($ 0.06) ($ 0.04) ($ 0.03)
The accompanying notes are an integral part of these financial statements F-4 TECH LABORATORIES, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998
YEAR ENDED THREE MONTHS ENDED DECEMBER 31 MARCH 31 ----------------------------- --------------------------- (UNAUDITED) 1997 1998 1998 1999 --------- --------- --------- --------- Cash Flows From (For) Operating Activities: Net Income/(Loss) From Operations ($274,069) ($169,104) (96,423) (44,937) Add/(Deduct) Items Not Affecting Cash: Depreciation/Amortization (Note 1) 7,278 11,880 0 4,533 Unrealized (Gain)/ Loss on Valuation of Marketable Securities (Note 1) 0 3,357 0 0 Changes in Operating Assets and Liabilities: Marketable Securities (35,001) (2,650) 219 0 Accounts Receivable 2615 (52,728) (35,930) 34,516 Inventories 22,665 (909) (891) (24,882) Accounts Payable (7,925) (40,249) 15,665 (19,478) Other Assets and Liabilities 15,862 14,997 (15,611) 0 --------- --------- --------- --------- Net Cash Flows For Operating Activities ($252,725) ($235,406) (132,971) (50,248) --------- --------- --------- --------- Cash Flows From (For) Investing Activities: Investment DynatraX $ 0 $ 0 0 (300,000) --------- --------- --------- --------- Net Cash Flows From Investing Activities $ 0 $ 0 0 (300,000) --------- --------- --------- --------- Cash Flows From (For) Financing Activities: Acquisition/(Repayment) of S.T. Debt ($ 10,000) ($ 1,703) (1,703) 0 Acquisition/(Repayment) of L.T. Debt 0 0 0 0 Issuance of Common Stock 407,500 603,716 71,915 76,588 --------- --------- --------- --------- Net Cash Flows From (For) Financing Activities: $ 397,500 $ 602,013 70,212 76,588 --------- --------- --------- --------- Net Increase/(Decrease) in Cash $ 144,775 $ 366,607 (62,759) (273,660) Cash Balance, Beginning of Year 21,398 166,173 166,173 532,780 --------- --------- --------- --------- Cash Balance, End of Year $ 166,173 $ 532,780 $ 103,414 $ 259,120 ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements F-5 TECH LABORATORIES, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998 (1) Summary of Significant Accounting Policies 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 and 1998 physical inventories were taken and tested. 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 and $56,693 at December 31, 1998. (2) Inventories: Inventories at December 31, 1997 and 1998 were as follows: 1997 1998 ---- ---- Raw Materials & Finished Components $231,202 $202,359 Work in Process & Finished Goods 38,007 67,759 -------- -------- $269,209 $270,118 -------- -------- (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 and during the year ended December 31, 1998 of 2,202,905. (4) Income Taxes: At December 31, 1997 and 1998, the balance of operating loss carryforward was $1,049,903 and $1,219,007, respectively, which can be utilized to offset future taxable income. (5) Short-Term Loans Payable: 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 -- Certain marketable securities are pledged as collateral on the above loan. (6) Other Short-Term Loans: Demand loans payable include loans from stockholders, officers and members of the Board of Directors. The outstanding loan balances due as of December 31, 1997 and 1998 were $58,373 and $43,373, respectively. 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 $3,604 at December 31, 1998 is secured by the assets of the Company. (7) Common Stock In 1997, the Company converted $217,500 of short term loans into 198,750 shares of common stock. In 1997 and 1998, the Company completed a placement pursuant to Rule 504 of common stock which raised $917,324. F-6 , 1999 TECH LABORATORIES, INC. 1,000,000 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............................................................... 4 USE OF PROCEEDS............................................................ 11 PRICE RANGE OF COMMON STOCK................................................ 12 DIVIDEND POLICY............................................................ 12 CAPITALIZATION............................................................. 13 DILUTION .................................................................. 14 SELECTED FINANCIAL DATA.................................................... 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.............................................. 17 BUSINESS .................................................................. 19 MANAGEMENT................................................................. 25 CERTAIN TRANSACTIONS....................................................... 26 PRINCIPAL STOCKHOLDERS..................................................... 28 PLAN OF DISTRIBUTION....................................................... 28 OFFERING BY SELLING SECURITYHOLDERS........................................ 31 SHARES ELIGIBLE FOR FUTURE SALE............................................ 33 DESCRIPTION OF SECURITIES.................................................. 34 LEGAL MATTERS.............................................................. 35 EXPERTS .................................................................. 35 ADDITIONAL INFORMATION..................................................... 35 INFORMATION NOT REQUIRED IN PROSPECTUS..................................... 35 Until_________, 1999 (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. INFORMATION NOT REQUIRED IN PROSPECTUS Indemnification of Directors and Officers The Company 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 the Company 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 (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts of omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) 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 (iv) for any transaction from which the director derived an improper personal benefit. The Company'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 $ Fees and Expenses of Accountants Fees and Expenses of Legal Counsel Blue Sky Fees and Expenses Printing and Engraving Expenses Miscellaneous Expenses Total.................................... $ Recent Sales of Unregistered Securities As listed below, the Company issued shares of its Common Stock, par value $.0001 per share, to the following individuals or entities for the consideration as listed in cash or services. All sales II-1 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: In June 1999 we sold 90,045 shares to "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. 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. The issuance of the shares was exempt from Registration under the Securities Act pursuant to Section 4(2) thereof. 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. 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. From September 1997 to April 1999, we sold shares of our Common Stock pursuant to Rule 504 of Regulation D under the Securities Act to various investors who were either sophisticated or "accredited" as that term is defined until Rule 501(a) of Regulation D under the Securities Act. These sales were made on the dates and in the amounts as follows: On April 5, 1999, we sold 278,572 shares of Common Stock for a total of $250,000.00. On January 29, 1999, we sold 168,000 shares of Common Stock for a total of $95,250.00. On December 17, 1998, we sold 18,000 shares of Common Stock for a total of $20,250.00. On December 5, 1998, we sold 17,000 shares of Common Stock for a total of $19,125.00. On November 26, 1998, we sold 31,000 shares of Common Stock for a total of $34,875.00. On November 18, 1998, we sold 100,000 shares of Common Stock for a total of $50,000.00. On November 16, 1998, we sold 27,500 shares of Common Stock for a total of $30,937.00. On November 13, 1998, we sold 111,000 shares of Common Stock for a total of $124,875.00. On October 23, 1998, we sold 107,000 shares of Common Stock for a total of $120,375.00. On October 13, 1998, we sold 18,000 shares of Common Stock for a total of $20,250.00. On October 9, 1998, we sold 18,000 shares of Common Stock for a total of $20,250.00. On October 2, 1998, we sold 51,000 shares of Common Stock for a total of $57,375.00. On September 25, 1998, we sold 44,500 shares of Common Stock for a total of $50,062.50. On July 10, 1998, we issued 20,300 shares of Common Stock for services rendered by prior counsel to our company for $22,167.40. On March 4, 1998, we sold 7,500 shares of Common Stock for a total of $15,000.00. On February 24, 1998, we sold 27,500 shares of Common Stock for a total of $55,000.00. II-2 On February 23, 1998, we sold 95,500 shares of Common Stock for a total of $85,700.00. On February 10, 1998, we sold 10,000 shares of Common Stock for a total of $20,000.00. On December 19, 1997, we sold 125,000 shares of Common Stock for a total of $62,500.00. On December 16, 1997, we sold 100,000 shares of Common Stock for a total of $200,000.00. On September 29, 1997, we sold 2,000 shares of Common Stock at $2.50 for a total of $5,000.00. 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. 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. In November 1998, we issued 25,000 shares to Carmine Pellose, 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. In November 1998, we issued 15,000 shares to Carmine Pellose, 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. Between December 1996 and October 1997 we sold an aggregate of $217,500 principal amount of 8% convertible notes to eleven purchasers, $75,000 of which notes were convertible at $.75 per share and $142,500 were convertible at $1.00 per share. The issuance of the notes was exempt from registration under the Securities Act pursuant to Section 4(2) thereof. In December 1996, we issued 280,000 shares to Bernard M. Ciongoli, our president and a director and 160,000 shares to Earl Bjorndal, our vice president and a director for unpaid salaries in the amounts of $14,000 and $8,000, respectively at $.05 per share. The issuance of the shares was exempt from registration under the Securities Act pursuant to Section 4(2) thereof. In December 1996, we issued 100,000 shares to Louis Tomasella, a director in exchange for consulting services. The issuance of the shares was exempt from registration under the Securities Act pursuant to Section 4(2) thereof. Exhibits and Financial Statement Schedules (a) Exhibits 1.1 Subscription Agreement* 3.1 Certificate of Incorporation 3.2 By-Laws of the Company 4.1* Form of Common Stock Certificate 5.1* Opinion of Stursberg & Veith 10.1 IDS Agreement 10.2 Employment Agreement between the Company and Bernard M. Ciongoli 10.3 Amended Joint Marketing Agreement 10.4 Confidentiality and Manufacturing Agreement 10.5 Patent and Trademark assignments 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)* 27* Financial Data Schedule - -------------- * To be filed by Amendment. (b) The following financial statement schedules are included in this Registration Statement: None. Undertakings The undersigned registrant hereby undertakes: II-3 (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (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: (i) 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. (ii) 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 II-4 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 9th day of July, 1999. 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. Know all men by these presents, that each of the undersigned constitutes and appoints Bernard M. Ciongoli as his true and lawful attorney-in-fact and agent, with full power of substitution, for him, and in his name, place, and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this offering statement or any offering statement relating to the offering to which this offering statement relates and any post-effective amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof. Signature Title Date --------- ----- ---- /s/ Bernard M. Ciongoli President, Treasurer, CEO, July 9, 1999 - ----------------------------- CFO, and Director -------------- Bernard M. Ciongoli /s/ Earl M. Bjorndal Vice President and Director July 9, 1999 - ----------------------------- -------------- Earl M. Bjorndal /s/ Carmine O. Pellose, Jr. Secretary and Director July 9, 1999 - ----------------------------- -------------- Carmine O. Pellose, Jr. /s/ Louis Tomasella Director July 9, 1999 - ----------------------------- -------------- Louis Tomasella II-5 EXHIBIT INDEX 3.1 Certificate of Incorporation 3.2 By-Laws of the Company 4.1* Form of Common Stock Certificate 5.1* Opinion of Stursberg & Veith 10.1 IDS Agreement 10.2 Employment Agreement between the Company and Bernard M. Ciongoli 10.3 Amended Joint Marketing Agreement 10.4 Confidentiality and Manufacturing Agreement 10.5 Patent and Trademark assignments 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)* 27* Financial Data Schedule - -------------- * To be filed by Amendment. EX-3.1 2 CERTIFICATE OF INCORPORATION CERTIFICATES OF INC. 1947 1968 1993 Exhibit 3.1 CERTIFICATE OF INCORPORATION OF TECH LABORATORIES, INC. THIS IS TO CERTIFY, that we, the undersigned, do hereby associate ourselves into a corporation, under and by virtue of Title 14 of the Revised Statutes, and do severally agree to take the number of shares of capital stock set opposite our respective names. 1. The name of the corporation is TECH LABORATORIES, INC. 2. The location of the principal office in this State is at No. 357 Central Avenue, in the City of Jersey City, County of Hudson. 3. The name of the agent therein and in charge thereof, upon whom process against this corporation may be served, is Magnus Bjorndal. 4. The objects for which this corporation is formed are: To design, develop and manufacture electrical, mechanical, electronic and scientific instruments and products; to design, develop and manufacture electronic controls, including attenuators, potentiometers, tap switches, precision resistance instruments, electronic bridges, measuring instruments and electronic control equipment; to carry on the business of engineers and manufacturers of the above described products and such other products as this company may hereafter elect to manufacture; to give engineering advice and assistance; to import and export and deal in any such products and to do any and all other acts and things and to exercise any and all other powers which a copartnership or natural person could do and exercise and which now or hereafter may be authorized by law; to conduct its business in all its branches, have one or more offices and unlimitedly to hold, purchase, mortgage, lease, let and convey real and personal property in any State, Territory or Colony of the United States and in any foreign country or place; to apply for, acquire, hold, sell, assign, lease, mortgage, or otherwise dispose of patent rights, licenses, privileges, inventions, trade-marks, trade-names and pending applications therefor, relating to or useful in connection with any business of the corporation; to acquire the good will, business, property and assets, and to assume or undertake the whole or any part of the liabilities of any person, firm, association or corporation, and to pay for the same in cash, stock, bonds, debentures or other securities of this corporation, or otherwise, as the directors may determine; the corporation may use its surplus earnings or accumulated profits in the purchase or acquisition of its own capital stock from time to time as its board if persons may determine; the corporation may use its surplus earnings or accumulated profits in the purchase or acquisition of its own capital stock from time to time as its board of directors shall determine, and such capital stock so purchased may, if the directors so determine, be held in the treasury of the company as treasury stock to be thereafter disposed of in such manner as the directors shall deem proper; to borrow money, to make and issue promissory notes, bills of exchange, bonds, debentures and obligations and evidences of indebtedness of all kinds, whether secured by mortgage, pledge or otherwise, without limit as to amount, and to secure the same by mortgage, pledge or otherwise; to do all and everything necessary, suitable, convenient or proper for the accomplishment of any of the purposes, or the attainment of any one or more of the objects herein, or incidental to the powers herein named, or which shall at any time appear conducive or expedient for the protection or benefit of the corporation, either as holders of or interested in, any property or otherwise; with all the powers now or hereafter conferred by the laws of New Jersey upon corporations under the act hereinafter referred to. 5. The total authorized capital stock of this corporation is two thousand (2,000) shares of common stock, without nominal or par value. All or any part of said shares of common stock, without nominal or par value, may be issued by the corporation from time to time and for such consideration as may be determined upon and fixed by the Board of Directors, as provided by law. 6. The names and post-office addresses of the incorporators and the number of shares subscribed for by each, the aggregate of which (One thousand (1,000) shares) is the amount of capital stock with which this company will commence business, are as follows: NAME POST-OFFICE ADDRESS NUMBER OF SHARES - ---- ------------------- ---------------- Magnus Bjorndal 67 Kingswood Road, 520 Weehawken, NJ Ruth K. Bjorndal 67 Kingswood Road 430 Weehawken, NJ Erling Bjorndal 67 Kingswood Road, 50 Weehawken, NJ 7. The period of existence of this corporation is unlimited. IN WITNESS WHEREOF, we have hereunto set our hands and seals, the 30 day of January, A.D. One thousand nine hundred and forty-seven (1947). Signed, sealed and delivered /s/ Magnus Bjorndal (L.S.) in the presence of --------------------------------------- Magnus Bjorndal /s/ Ruth K. Bjorndal (L.S.) --------------------------------------- Ruth K. Bjorndal /s/ E.W.A. Schumann /s/ Erling Bjorndal (L.S.) - ---------------------------- --------------------------------------- E.W.A. Schumann Erling Bjorndal STATE OF NEW JERSEY ) SS: COUNTY OF HUDSON ) BE IT REMEMBERED, That on this 30th day of January, 1947, before me, the subscriber, E.W.A. SCHUMANN, A Master in Chancery of New Jersey, personally appeared MAGNUS BJORNDAL, RUTH K. BJORNDAL and ERLING BJORNDAL, who I am satisfied are the persons named in and who executed the foregoing certificate, and I having first made known to them the contents thereof, they did acknowledge that they signed, sealed and delivered the same as their voluntary acts and deeds, for the uses and purposes therein expressed. /s/ E.W.A. Schumann --------------------------------------- E.W.A. Schumann A Master in Chancery of New Jersey Exhibit 3.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF TECH LABORATORIES, INC. The location of the principal office in this state is at Bergen and Edsall Boulevards in the Borough of Palisades Park, County of Bergen and State of New Jersey. 07650. The name of the agent therein and in charge thereof upon whom process against this corporation may be served is, MAGNUS BJORNDAL. RESOLUTION OF DIRECTORS The Board of Directors of the Tech Laboratories, Inc., a corporation of the State of New Jersey, on this 28th day of May 1968, do hereby resolve and declare that it is advisable and in the best interests of this corporation to amend Article FOURTH of the Certificate of Incorporation to read as follows: ARTICLE FOURTH: The objects for which this corporation is formed are; To design, develop and manufacture electrical, mechanical, electronic and scientific instruments and products, to design, develop and manufacture electronic controls, including attenuators, potentiometers, tap switches, precision resistance instruments, electronic bridges, measuring instruments and electronic control equipment; to carry on the business of engineers and manufacturers of the above described products and such other products as this company may hereafter elect to manufacture; to give engineering advice and assistance; to import and export and deal in any such products and to do any and all other acts and things and to exercise any and all other powers which a copartnership or natural person could do and exercise and which now or hereafter may be authorized by law; To conduct its business in all its branches, have one or more offices and unlimitedly to hold, purchase, mortgage, lease, let and convey real and personal property in any State, Territory, or possession of the United States and in any foreign country or place; To apply for, acquire, hold, sell, assign, lease, mortgage, or otherwise dispose of patent rights, licenses, privileges, inventions, trade-marks, trade-names and pending applications therefor, relating to or useful in connection with any business of the corporation, in the State of New Jersey, in any and all States of the United States of America, in the District of Columbia, in any and all territories, dependencies or possessions of the United States of America, and in foreign countries; To acquire the good will, business, property and assets, and to assume or undertake the whole or any part of the liabilities of any person, firm, association or corporation, in the State of New Jersey, in any and all States of the United States of America, in the District of Columbia, in any and all territories, dependencies or possessions of the United States of America, and in foreign countries, and to operate the said firms, associations or corporations in the same manner and with the same powers as said firm, association or corporation had been invested with, prior to such acquisition, and to pay for the same in cash, stock, bonds, debentures or other securities of this corporation, or otherwise, as the directors may determine; The corporation may use its surplus earnings or accumulated profits in the purchase or acquisition of its own capital stock from time to time as its board of directors shall determine and such capital stock so purchased may, if the directors so determine, be held in the treasury of the company as treasury stock to be thereafter disposed of in such manner as the directors shall deem proper; To Borrow money, for its own use or for the use of any of its subsidiaries, to make and issue promissory notes, bills of exchange, bonds, debentures and obligations and evidences of indebtedness of all kinds, whether secured by mortgage, pledge or otherwise, without limit as to amount, and to secure the same by mortgage, pledge or otherwise; To do all and everything necessary, suitable, convenient or proper for the accomplishment of any of the purposes, or the attainment of any one or more of the objects herein enumerated, or incidental to the powers herein named or which shall at any time appear conducive or expedient for the protection or benefit of the corporation, either as holders of or interested in, any property or otherwise; with all the powers now or hereafter conferred by the laws of New Jersey upon corporations under the act hereinabove referred to; To apply for, register, obtain, purchase, lease, take licenses in respect of or otherwise acquire, and to hold, own, use, operate, develop, enjoy, turn to account, grant licenses and immunities in respect of, manufacture under and to introduce sell, assign, mortgage, pledge or otherwise dispose of, and, in any manner deal with and contract, in the State of New Jersey, in any and all States of the United States of America, in the District of Columbia, in any and all territories, dependencies or possessions of the United States of America, and in foreign countries with reference to: (a) inventions, devices, formulae, processes, and any improvements and modifications thereof: (b) letters patent, patent rights, patented processes, copyrights, designs and similar rights, trade-marks, trade symbols and other indications of origin and ownership granted by or recognized under the laws of the United States of America or of any state or subdivision thereof, or of any foreign country or subdivision thereof, and all rights connected therewith or appertaining thereunto; (c) franchises, licenses, grants and concessions. To create optional rights to purchase or subscribe or both to stock of this corporation, on such terms, at such price, in such manner and at such time or times as shall be determined by a Resolution adopted by the Board of Directors of this corporation and to issue such Warrants or other evidence of such rights. And the said Board of Directors of Tech Laboratories, Inc. do also hereby resolve and declare that it is advisable that the present authorized capital stock of $50,000.00 divided into 500,000 shares of the par value of 10(cents) each be changed to provide that the capital stock shall be $50,000.00, divided into 1,000,000 shares of the par value of 5(cents) each, all of which shall be common stock, and for that purpose to amend Article Fifth of the Certificate of Incorporation to read as follows: ARTICLE FIFTH: The total authorized capital stock of this corporation is 1,000,000 shares of a par value of 5(cents) each, all of which shall be common stock. No stockholder shall, because of his ownership of stock, have a preemptive right to purchase, subscribe for, or take any part of any stock or any part of the notes, debentures, bonds, or other securities convertible into or carrying options or warrants to purchase stock, issued, optioned or sold by the corporation. Any part of the capital stock and any part of the notes, debentures, bonds or other securities convertible into or carrying options of warrants to purchase stock authorized by any amended certificate duly filed, may at any time be issued, supplemented for sale, sold, or disposed of by the corporation pursuant to the resolution of its Board of Directors to such persons and upon such terms as may, to such board, seem proper, without first offering such stock or securities or any part thereof to existing stockholders. And do hereby call a meeting of the Stockholders of Tech Laboratories, Inc. to be held at the Hotel Biltmore, Madison Avenue and 43rd Street, New York City, N.Y., on the 25th day of June 1968 at 2:00 o'clock P.M. to act upon the above Resolution. CERTIFICATE OF CHANGE Tech Laboratories, Inc., a corporation of New Jersey, does hereby certify that it has, at a special meeting of the stockholders, duly called in accordance with the By-Laws of this corporation and upon due notice to all stockholders, such special meeting having been held at the Hotel Biltmore, Madison Avenue and 43rd Street, New York City, N.Y. in accordance with said notice on the 25th day of June, 1968 at 2:00 o'clock P.M., approved the amendment of Article Fourth and Article Fifth of the Certificate of Incorporation of this corporation in accordance with the foregoing Certificate, said amendments having been declared by Resolution of the Board of Directors of said corporation (above recited) to be advisable, and having been duly and regularly assented to by the vote of two-thirds in interest of the stockholders having voting powers at the said special meeting duly called by the Board of Directors for that purpose. IN WITNESS WHEREOF, said corporation has made this Certificate under its seal and the hands of its President and Secretary this 17th day of July, 1968. /s/ Magnus Bjorndal --------------------------------------- MAGNUS BJORNDAL, PRESIDENT /s/ Sven Bromander --------------------------------------- SVEN BROMANDER, SECRETARY ATTEST: /s/ Sven Bromander - -------------------------- SVEN BROMANDER, SECRETARY STATE OF NEW JERSEY ) ) ss. COUNTY OF BERGEN ) BE IT REMEMBERED that on this 17th day of July, 1968, before me, the subscriber, a Notary Public of New Jersey, personally appeared SVEN BROMANDER, Secretary of Tech Laboratories, Inc., the corporation named in and which executed the foregoing Certificate, who, being by me duly sworn, according to law, does depose and say and make proof to my satisfaction that he is the Secretary of said corporation; that the seal affixed to said corporation certificate is the corporate seal of said corporation, the same being well known to him; that it was affixed by order of said corporation; that MAGNUS BJORNDAL is president of said corporation, that he saw said MAGNUS BJORNDAL as such and deliver said certificate, and heard him declare that he signed, sealed and delivered said certificate as the voluntary act and deed of said corporation, by its order and by authority of its Board of Directors and by the vote, either in person or by proxy, duly constituted and thereunto duly authorized, of more than two-thirds in interest of each class of said stock-holders having voting powers, for the uses and purposes therein expressed; that the said SVEN BROMANDER signed his name thereto at the same time as subscribing witness. /s/ Sven Bomander --------------------------------------- SVEN BOMANDER Subscribed and Sworn to before me the day and year first above written. s/Catherine Lauer - ----------------------------------- Notary Public of New Jersey My Commission Expires Jan. 2, 1972 Exhibit 3.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF TECH LABORATORIES, INC. The location of the principal office in this state is at 500 Tenth Street in Borough of Palisades Park, County of Bergen and State of New Jersey 07650. The Registered Agent therein and in charge thereof upon whom process against this corporation may be served is BERNARD M. CIONGOLI. RESOLUTION OF DIRECTORS The Board of Directors of Tech Laboratories, Inc., a corporation of the State of New Jersey, on this 17th day of March, 1993, do hereby resolve and declare that it is advisable and in the best interests of this corporation to amend Article Fifth of the Certificate of Incorporation of this corporation to increase the present authorized capital stock of 1,000,000 shares of the par value of $.05 each to provide that the capital stock of this corporation shall be 5,000,000 shares of the par value of $.01 each, all of which will be common stock and for that purpose to amend Article Fifth of the Certificate of Incorporation to read as follows: ARTICLE FIFTH: The total authorized capital stock of this corporation is 5,000,000 shares of a par value of $.01 each, all of which shall be common stock. No shareholder shall, because of his ownership of stock, have a preemptive right to purchase, subscribe for or take any part of any stock or any part of the notes, debentures, bonds, or other securities convertible into or carrying options or warrants to purchase stock, issued, optioned or sold by the corporation. Any part of the capital stock and any part of the notes, debentures, bonds or other securities convertible into or carrying options or warrants to purchase stock authorized by any amended certificate duly filed, may at any time be issued optioned for sale, sold or disposed of by the corporation pursuant to the Resolution of its Board of Directors to such persons and upon such terms as may, to such Board, seem proper, without first offering such stock or securities or any part thereof to existing shareholders. And the said Board of Directors does hereby call a meeting of the shareholders of Tech Laboratories, Inc. to be held at the corporate offices, 500 Tenth Street, Palisades Park, New Jersey 07650 on the 29th day of April, 1993 at 2:30 o'clock P.M. to act upon the above Resolution. CERTIFICATE OF CHANGE Tech Laboratories, Inc., a corporation of New Jersey, does hereby certify that at an annual meeting of the Shareholders, duly called in accordance with the Bylaws of this corporation and upon due notice to all shareholders, such annual meeting having been held at the corporate offices, 500 Tenth Street, Palisades Park, New Jersey in accordance with said notice on the 29th day of April, 1993 at 2:30 o'clock P.M., approved the amendment of Article Fifth of the Certificate of Incorporation of this corporation in accordance with the foregoing Certificate, said amendment having been declared by Resolution (above recited) to be advisable, and having been duly and regularly assented to by the vote of more than two-thirds in interest of the shareholders having voting powers at the said annual meeting duly called by the Board of Directors for that purpose; the total number of shares issued and outstanding and authorized to vote at said annual meeting was 923,184 shares of Common Stock. The vote on the Amendment was 639,754 in favor of the Amendment and 26,673 opposed to the Amendment. The affirmative votes constituted more than two-thirds in interest of the shareholders having voting powers at the said annual meeting. IN WITNESS WHEREOF, said corporation has made this Certificate under its seal and the hands of its President and Secretary this 4th day of August, 1993. ATTEST: TECH LABORATORIES, INC. /s/ Thomas M. Venino /s/ Bernard M. Ciongoli - --------------------------- ---------------------------------- Thomas M. Venino, Secretary Bernard M. Ciongoli, President STATE OF NEW JERSEY ) ) SS.: COUNTY OF BERGEN ) BE IT REMEMBERED that on this 4th day of August 1993, before me, the subscriber personally appeared, Thomas M. Venino, Secretary of Tech Laboratories, Inc., the corporation named in and which executed the foregoing Certificate, who, being by me duly sworn, according to law, does depose and say and make proof to my satisfaction that he is the Secretary of said corporation; that the seal affixed to said corporate certificate is the corporate seal of said corporation, the name being well known to him; that it was affixed by order of said corporation; that Bernard M. Ciongoli is President of said corporation that he saw said Bernard M. Ciongoli as such execute and deliver said certificate, and heard him declare that he signed, sealed and delivered said certificate as the voluntary act and deed of said corporation, by its order and by authority of its Board of Directors and by the vote, either in person or by proxy, duly constituted and thereunto duly authorized, of more than two-thirds in interest of each class of said shareholders having voting powers, for the uses and purposes therein expressed; that the said Thomas M. Venino signed his name thereto at the same time as subscribing witness. /s/ Thomas M. Venino ---------------------------------- THOMAS M. VENINO Subscribed and Sworn to before me the day and year first above written. /s/ Elizabeth Ventura - ------------------------------ ELIZABETH VENTURA A NOTARY PUBLIC OF NEW JERSEY EX-3.2 3 BYLAWS Exhibit 3.2 BYLAWS of TECH LABORATORIES, INC. ARTICLE I OFFICES The Company shall maintain a principal office in the State of New Jersey as required by law. The Company may also have offices in such other places either within or without the State of New Jersey as the Board of Directors may from time designate or as the business of the Company may require. ARTICLE II SEAL The seal of the Company shall be circular in form and shall have the name of the Company on the circumference and the words and numerals "Corporate Seal 1947 New Jersey" in the center. ARTICLE III MEETINGS OF STOCKHOLDERS 1. PLACE - Meetings of the stockholders of the Company shall be held at such place either within or without the State of New Jersey as may from time to time be designated by the Board of Directors and stated in notice of meeting. 2. ANNUAL MEETING - Commencing in 1977, an annual meeting of the stockholders of the Company shall be held in each year on the second Thursday in April (or if that be a legal holiday, then on the next business day) between the hours of 9 a.m. and 4 p.m. for the election of directors and for the election of directors and for the transaction of such other business as may be brought before the meeting. At such annual meeting, if a majority of the stock shall not be represented, the stockholders present shall have the power to adjourn to a day certain, and notice of the meeting of the adjourned day shall be given by depositing the same in the post office, addressed to each stockholder, at least five days before such adjourned meeting, exclusive of the day of mailing, but if a majority of the stock be present in person or by proxy they shall have power from time to time to adjourn the annual meeting to any subsequent day or days, and no notice of adjourned meeting need be given. 3. SPECIAL MEETINGS - Special meetings of the stockholders may be called on the order of the President or of a majority of the Board of Directors. 4. NOTICE - Written notice of all meetings of the stockholders shall be mailed to or delivered to each stockholder at least ten days and not more than 60 days prior to the meeting. Notice of any special meeting shall state in general terms the purposes for which the meeting is to be held. 5. QUORUM - The holders of a majority of the issued and outstanding shares of the capital stock of the Company entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders except as may otherwise be provided by law, by the Certificate of Incorporation or by these ByLaws. 6. VOTING - At all meetings of the stockholders, every registered owner of shares entitled to vote may vote in person or by proxy and shall have one vote for each such share standing in his name on the books of the Company. 7. CHAIRMAN OF MEETING - The President, or, in his absence, a Vice President shall preside at all meetings of the stockholders; and, in the absence of the President and Vice President, the Board of Directors may appoint any stockholder to act as chairman of the meeting. 8. SECRETARY OF MEETING - The Secretary of the Company shall act as secretary of all meetings of the stockholders; and, in his absence, the chairman may appoint any person to act as secretary of the meeting. ARTICLE IV BOARD OF DIRECTORS 1. MANAGEMENT OF COMPANY - The property, business, and affairs of the Company shall be managed and controlled by its Board of Directors. 2. COMPOSITION OF BOARD - The Board of Directors shall consist of 7 members. At the first annual meeting of the stockholders following adoption of these By-Laws, 2 directors shall be elected to serve until the annual meeting of stockholders held in the year following their election; 2 directors shall be elected to serve until the annual meeting of stockholders held two years following their election and 3 directors shall be elected to serve until the annual meeting of stockholders held three years following their election; provided, however, that in each case directors shall continue to serve until their successors shall be elected and shall qualify. At the expiration of the initial term of office of each respective director, his successor shall be elected to serve until the annual meeting of stockholders held three years next following. the number of directors may be increased or decreased by amendment of this provision of the By-Laws. 3. Vacancy - Whenever any vacancy shall occur in the Board of Directors, by reason of death, resignation, or increase in the number of directors or otherwise, it may be filled by a majority of the remaining directors, though less than a quorum, for the balance of the term except that, in the case of an increase in the number of directors, such vacancy may be filled only until the next annual meeting of stockholders, at which time the vacancy shall be filled by vote of the stockholders. 4. MAINTENANCE OF BONDS OUTSIDE STATE - The Board of Directors may hold meetings and keep the books of the Company outside the State of New Jersey except that a duplicate stock ledger shall be maintained at the principal office of the Company in the State of New Jersey. 5. ANNUAL MEETING - The annual meeting of the Board of Directors, of which no notice shall be necessary, shall be held immediately following the annual meeting of the stockholders or immediately following any adjournment thereof for the purpose of the organization of the Board and the election or appointment of officers for the ensuing year and for the transaction of such other business as may conveniently and properly be brought before such meeting. 6. Quorum - A majority of the directors in office shall constitute a quorum for the transaction of all business of the company. 7. SPECIAL MEETING - Special meeting of the Board of Directors may be called by order of the Chairman of the Board, the President, or by one-third of the directors for the time being in office. The Secretary shall give notice of the time, place, and purpose or purposes of each special meeting by mailing the same at least two days before the meeting or by telephoning or telegraphing the same at least one day before the meeting to each director. 8. CONDUCT OF MEETINGS - At meetings of the Board of Directors, the Chairman of the Board, the President, or a designated Vice President shall preside. At any meeting at which every director shall be present, even though without any notice, any business may be transacted. 9. COMPENSATION - The directors shall receive such compensation for their services as directors and as members of any committee appointed by the Board as may be prescribed by the Board of Directors and shall be reimbursed by the Company for ordinary and reasonable expenses incurred in the performance of their duties. 10. MANIFESTATION OF DISSENT - A director of the Company who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such descent by registered mail to the Secretary of the Company immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. ARTICLE V OFFICERS 1. ELECTION - The Board of Directors may elect from its own number a Chairman of the Board and shall elect a President from its own number and such Vice Presidents (who may or may not be directors) as in the opinion of the Board the business of the Company requires, a Treasurer, a Secretary, and a General Counsel; and it shall elect or appoint from time to time such other or additional officers as in its opinion are desirable for the conduct of the business of the Company. 2. REMOVAL - Any officer or agent shall be subject to removal at any time by the affirmative vote of a majority of the whole Board of Directors. Any officer, agent, or employee, other than officers appointed by the Board of Directors, shall hold office at the discretion of the officer appointing them. 3. DUTIES OF CHAIRMAN - The Chairman of the Board of Directors if elected, or failing his election, the President, shall preside at all meetings of the Board of Directors and shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the Bylaws. 4. DUTIES OF PRESIDENT - The President shall be the chief executive and administrative officer of the Company. He shall preside at all meetings of the stockholders and, in the absence of the Chairman of the Board, at meetings of the Board of Directors. He shall exercise such duties as customarily pertain to the office of President and shall have general and active supervision over the property, business, and affairs of the Company and over its several officers. He may appoint officers, agents, or employees other than those appointed by the Board of Directors. He may sign, execute and deliver in the name of the Company powers of attorney, contracts, bonds and other obligations and shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the Bylaws. 5. DUTIES OF VICE PRESIDENTS - The Vice Presidents shall have such powers and perform such duties as may be assigned to them by the Board of Directors or the President. In the absence or disability of the President, the Vice President designated by the Board or the President shall perform the duties and exercise the powers of the President. A Vice President may sign and execute contracts and other obligations pertaining to the regular course of his duties. 6. DUTIES OF TREASURER - The Treasurer shall, subject to the direction of a designated Vice President, have general custody of all the funds and securities of the Company and have general supervision of the collection and disbursement of funds of the Company. He shall endorse on behalf of the Company for collection checks, notes and other obligations, and shall deposit the same to the credit of the Company in such bank or banks or depositaries as the Board of Directors may designate. He may sign, with the President, or such other person or persons as may be designated for the purpose by the Board of Directors, all bills of exchange or promissory notes of the Company. He shall enter or cause to be entered regularly in the books of the Company full and accurate account of all moneys received and paid by him on account of the Company; shall at all reasonable times exhibit his books and accounts to any director of the Company upon application at the office of the Company during business hours; and, whenever required by the Board of Directors or the President, shall render a statement of his accounts. He shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the Bylaws. 7. SECRETARY - The Secretary shall, subject to the direction of a designated Vice President, keep the minutes of all meetings of the stockholders and of the Board of Directors, and to the extent ordered by the Board of Directors or the President, the minutes of meetings of all committees. He shall cause notice to be given of meetings of stockholders, of the Board of Directors, and of any committee appointed by the Board. He shall have custody of the corporate seal and general charge of the records, documents and papers of the Company not pertaining to the performance of the duties vested in other officers, which shall at all reasonable times be open to the examination of any director. He may sign or execute contracts with the President or a Vice President thereunto authorized in the name of the Company and affix the seal of the Company thereto. He shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the Bylaws. 8. COUNSEL - The General Counsel shall advise and represent the Company generally in all legal matters and proceedings and shall act as counsel to the Board of Directors and the Executive Committee. The General Counsel may sign and execute pleading, powers of attorney pertaining to legal matters, and any other contracts and documents in the regular course of his duties. 9. BANK ACCOUNTS - In addition to such bank accounts as may be authorized in the usual manner by resolution of the Board of Directors, the Treasurer with the approval of the President or a Vice President may authorize such bank accounts to be opened or maintained in the name and on behalf of the Company as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Company which may be signed jointly by either the manual or facsimile signature or signatures of such officers of the Company as shall be specified in the written instructions of the Treasurer of the Company with the approval of the President or a Vice President of the Company. 10. VACANCIES - In case any office shall become vacant, the Board of Directors shall have power to fill such vacancies. In case of the absence or disability of any officer, the Board of Directors may delegate the powers or duties of any officer to another officer or a director for the time being. 11. EXERCISE OF RIGHTS AS STOCKHOLDERS - Unless otherwise ordered by the Board of Directors, the President or a Vice President thereunto duly authorized by the President shall have full power and authority on behalf of this Company to attend and to vote at any meeting of stockholders of any corporation in which this Company may hold stock, and may exercise on behalf of this Company any and all of the rights and powers incident to the ownership of such stock at any such meeting, and shall have power and authority to execute and deliver proxies and consents on behalf of this Company in connection with the exercise by this Company of the rights and powers incident to the ownership of such stock. The Board of Directors, from time to time, may confer like powers upon any other person or persons. ARTICLE VI CAPITAL STOCK 1. STOCK CERTIFICATES - Certificates for stock of the Company shall be in such from as the Board of Directors may from time to time prescribe and shall be signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary. If Certificates are signed by a Transfer Agent, acting in behalf of the Company, and a Registrar, the signatures of the officers of the Company may be facsimile. 2. TRANSFER AGENT - The Board of Directors shall have power to appoint one or more Transfer Agents and Registrars for the transfer and registration certificates of stock of any class, and may require that stock certificates shall be countersigned and registered by one or more of such Transfer Agents and Registrars. 3. TRANSFER OF STOCK - Shares of capital stock of the Company shall be transferable on the books of the Company only by the holder of record thereof in person or by a duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares. 4. LOST CERTIFICATES - In case any certificate for the capital stock of the Company shall be lose, stolen, or destroyed, the Company may require such proof of the fact and such indemnity to be given to it and to its Transfer Agent and Registrar, if any, as shall be deemed necessary or advisable by it. 5. HOLDER OF RECORD - The Company shall be entitled to treat the holder of record of any share or shares of stock as the holder thereof in fact and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. 6. CLOSING OF BOOKS - The Board of Directors shall have power to close the stock transfer books of the Company for a period not exceeding 50 days preceding the date of any meeting of stockholders or the date for payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect; provided that, in lieu of closing the stock transfer books, the Board of Directors may fix in advance a date, not exceeding 50 days preceding the date of any meeting of stockholders, or the date for the payment of any dividend or the date for allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of and to vote at any such meeting, or entitled to receive payment of any such dividends, or any such allotment of rights, or to exercise the rights in respect to any such change, conversion, or exchange of capital stock, and in such case only stockholders of record on the date so fixed shall be entitled to such notice of and to vote at such meeting, or to receive payment of such dividend, or allotment of rights, or exercise such rights, as the case may be, and notwithstanding any transfer of any stock on the books of the Company after any such record date fixed as herein provided. ARTICLE VII MISCELLANEOUS 1. FISCAL YEAR - The Board of Directors shall have power to fix, and from time to time change, the fiscal year of the Company. Unless otherwise fixed by the Board, the calendar year shall be the fiscal year. 2. WAIVER OF NOTICE - Any notice required to be given under the provisions of these Bylaws or otherwise may be waived by the stockholder, director, or officer to whom such notice is required to be given. ARTICLE VIII AMENDMENT The Board of Directors shall have power to add any provision to or to alter or repeal any provision of these Bylaws by the vote of a majority of all of the directors at any regular or special meeting of the Board, provided that a statement of the proposed action shall have been included in the notice or waiver of notice of such meeting of the Board. The stockholders may alter or repeal any provision of these Bylaws by the vote of a majority of the stockholders at any meeting, provided that a statement of the proposed action shall have been included in the notice or waiver of notice of such meeting of stockholders. EX-10.2 4 EMPLOYMENT AGREEMENT Exhibit 10.2 EMPLOYMENT AGREEMENT AGREEMENT made as of the 1st day of October, 1998 by and between Tech Laboratories, Inc., with its principal offices at 955 Belmont Ave., North Haledon, NJ 07508 (the "Company"), and Bernard M. Ciongoli, residing at 17 Liberty Ridge Trail, Totowa, NJ (the "Executive"). W I T N E S S E T H: WHEREAS, the Executive is currently employed by the Company in the capacity of President and Chief Executive Officer ("CEO"); WHEREAS, the Company desires to insure the continuing benefit of the services of the Executive, and, WHEREAS, the Executive is willing to continue to render such services to the Company on the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and for other good and valuable consideration, receipt and sufficiency of which is hereby acknowledged by the parties hereto, the parties hereto agree as follows: 1. Upon execution of this Agreement, all prior employment agreements, whether written or oral, between the Executive and the Company, or any of its parents, subsidiaries, affiliates, or predecessor constituent corporations, are terminated and are of no further force and effect. 2. Subject to the terms and conditions hereinafter set forth, the Company hereby employs the Executive, and the Executive hereby agrees to and enters into the employ of the Company, or of affiliate any parent, subsidiary, of affiliate of the Company as the company shall from time to time select, for an employment term commencing as of the 1st day of October, 1998, and continuing for a period of three years from such date (the "Term of Employment"). At the end of the initial Term of Employment, this Agreement shall automatically be renewed for an additional three-year period; unless either party provides at least 180 days written notice of its decision not to renew their Term of Employment. 3. During the Term of Employment, the Executive shall render and perform such services as President and CEO or such other executive officer of the Company as may be assigned to him from time to time by the Board of Directors. If the Executive is elected as a Director of the Company by the Shareholders, he shall receive no additional compensation for serving as a Director so long as he is employed by the Company on a full-time basis in an executive position. 4. During the Term of Employment, the Executive shall devote his business time, attention, skill, and efforts to the performance of his duties for the Company, except for reasonable vacation and except for illness or incapacity, but nothing in this Agreement shall preclude the Executive from devoting reasonable periods for: (a) Serving as a Director, trustee, or member of a committee of any organization involving no conflicting interests with those of the Company; (b) Delivering lectures, fulfilling speaking engagements, teaching at educational institutions or business organizations; (c) Engaging in charitable and community activities; and (d) Managing his personal investments; Provided that such activities do not, individually or together, interfere with the regular performance of his duties and responsibilities under this Agreement. The Company shall pay all reasonable costs and expenses incurred by the Executive in any undertaking under Subsections (a)-(c), inclusive, above when participation in said activities provides direct or indirect benefit to the Company. 5. For all services to be rendered by the Executive in any capacity during the Term of Employment, including, without limitation, services as an executive, officer, director or member of a committee of the Company or its subsidiaries, divisions, and affiliates, the Executive shall be paid as compensation such salary, payable in accordance with the customary payroll practices of the Company (but in no event less frequently than semi-monthly) as the Board of Directors of the Company may determine and any bonus as the Board of Directors of the Company may determine. During the Term of Employment as set forth in this Agreement, it is agreed that the compensation paid to the Executive shall be a base salary no less than Seventy Five Thousand ($75,000) Dollars per annum until the Company completes a financing of at least One Million Dollars in gross proceeds (debt or equity), at which time the base salary shall become One Hundred Twenty-Five Thousand ($125,000) Dollars per annum. It is acknowledged and agreed that the Company has sold approximately $750,000 in an ongoing finance, so that approximately $250,000 needs to be raised to reach the $1,000,000 referred to in the previous sentence. 6. In addition, the Executive will receive a cash bonus of two percent (2%) of the Company's sales in excess of $1,000,000 in each fiscal year that ends during the Term of Employment, beginning with the fiscal year ending December 31, 1998, which bonus will be paid on or before February 15 of each year. The Company will grant to the Executive stock options to purchase up to 100,000 shares of the Company's common stock at a price of $.50 per share on October 1 of each year of this Agreement, beginning with October 1 1998; and the Executive shall participate in any Company incentive plan which may be established and modified by the Board of Directors or shareholders from time to time. The Executive shall also be entitled to reimbursement by the Company for reasonable expenses actually incurred by him on its behalf in the course of his employment by the Company, upon the presentation by the Executive, from time to time, of an itemized account of such expenditures, together with said vouchers and other receipts as the Company may require. 7. The Executive shall be entitled to vacations in accordance with the Company's prevailing policy for its operating executives. 8. The rights of the Executive or any other person to the payment of compensation or other benefits under this Agreement shall not be assigned, transferred anticipated, conveyed, pledged, or encumbered except by will or the laws of descent and distribution; nor shall any such right or interest be in any manner subject to levy, attachment, execution, garnishment, or any other seizure under legal, equitable, or other process for payment of debts, judgements, alimony, or separate maintenance, or reached or transferred by operation of law in the event of bankruptcy, insolvency, or otherwise. 9. In the event of the Executive's involuntary termination of employment due to circumstances beyond the control of the Company, or in the event of the Executive's involuntary termination for any reason, other than for just cause due to theft or fraud, the Executive shall be entitled to severance compensation or benefits as provided in this paragraph 9. Nothing contained herein, however, shall be construed so as to include absence or failure to perform due to illness as a basis for termination. (a) Subject to the provisions of paragraph 9(b) below, the Executive shall be entitled (upon such involuntary termination of employment) to immediate severance compensation equal to an amount equal to the Executive's base salary for the remaining period of the Term of Employment. (b) The Executive shall be entitled (upon such involuntary termination of employment), in addition to the severance compensation described in paragraph 9(a) above, to the benefits described in paragraph 9(c) below, as follows: (c) The Executive will be eligible to continue to participate in the following employee benefit plans (to the extent permissible therein) for a period of one year from the date of such involuntary termination of employment. Cost of such participation for the Executive and eligible dependents shall be born by the Company, provided the Executive continues to make all contributions required as of the date of termination to maintain his eligibility; Medical Insurance Plan.........................COBRA (Company paid)* Dental Plan....................................COBRA (Company paid)* * The Executive will have the option to continue this coverage for an additional six months (beyond the twelve months paid by the Company) by paying the full monthly premium. 10. Nothing contained herein shall in any way affect or interfere with the Executive's rights or privileges under any qualified deferred compensation, retirement, pension, profit sharing, bonus, insurance, hospitalization, or other employee benefit plan, program or arrangement, now in effect or hereafter adopted, in which the Executive is entitled to share or participate as an employee of the Company. 11. During the Term of Employment, if Executive shall, for a period of more than three (3) consecutive months or for periods aggregating more than twelve (12) weeks in any fifty-two consecutive weeks, be unable to perform the services provided for herein, as a result of illness or incapacity or a physical, mental, or other disability of any nature, the Company may, upon not less than thirty (30) days notice, terminate the Executive's employment hereunder. The Executive shall be considered unable to perform the services provided for herein if he is unable to attend to the normal duties required of him. In such event, the Company shall pay to the Executive, or to his legal representatives, base compensation as specified in paragraph 5, hereof, for a period of twelve (12) months from the date of termination. Upon completion of the termination payments provided for in this paragraph, all of the Company's obligations to pay compensation under this Agreement shall cease. 12. The Company makes no representations, guaranty, warranty, or other assurance of any kind to the Executive or any other person regarding the federal, state or local tax consequences of this Agreement or any payments hereunder, and the company does not agree to indemnify the Executive or any other person for any federal, state, or local taxes of any kind with respect to payments hereunder. 13. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Executive and his heirs, executors, administrators, and legal representatives. 14. The Company will not consolidate or merge into or with another corporation or entity, or transfer all or substantially all of its business and/or assets to another entity, directly or indirectly, unless such other entity (hereinafter referred to as the "Successor") shall assume this Agreement and the obligations of the Company hereunder, and upon such assumption, the Executive and the Successor shall become obligated to perform the terms and conditions hereof. However, if during the first 180 days following any such consolidation or merger, the Executive determines that he does not desire to remain employed by the Successor or the Successor determines that the services of the Executive are no longer required, such consolidation or merger shall be deemed an involuntary termination of the Executive's employment, and the Executive shall be paid an amount equal to his annual base salary at the time of the consolidation or merger. This payment will be made to the Executive in a single lump sum at the time of the termination. 15. The Executive will not, at any time during the Term of Employment, or for a period of one year after the voluntary termination of the Executive's employment, directly or indirectly disclose or furnish any other person, firm, or corporation any information relating to the Company or its parent, subsidiaries, or affiliates with respect to technology of the Company's products, methods of obtaining business, advertising products, customers or supplies, or any confidential or proprietary information acquired by the Executive during the course of his employment by the Company or its parent, subsidiaries, or affiliates. 16. This Agreement constitutes the entire agreement between the parties hereto relating to the subject matter set forth herein and supersedes any prior oral and/or written agreements, understandings, negotiations, or discussions of the parties. There are no warranties, representations or agreements between the parties in connection with the subject matter hereof, except as set forth or referred to herein. No supplement, modification, waiver, or termination of this Agreement or any provision hereof shall be binding unless executed in writing by the parties to be bound thereby. Waiver of any of the provisions of this Agreement shall not constitute a waiver of any other provision (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise specifically provided. 17. The failure of either party at any time require performance by the other of any provision hereof shall not affect in any way the full right to require such performance at any time thereafter, nor shall the waiver by either party of the breach of any provision hereof be taken or be held to be a waiver of the provision itself. 18. Any notice or other communication required or permitted to be given under or in connection with this Agreement shall be in writing, delivered in person or by public telegram, or by mailing same, certified or registered mail, postage prepaid, in an envelope addressed to the party to whom notice is given, at the address given at the beginning of this Agreements, and shall be effective upon receipt thereof. Each party shall be entitled to specify a different address by giving notice as aforesaid to the other party. 19. The invalidity or unenforceability of any paragraph, term, or provision hereof shall in no way affect the validity or enforceability of the remaining paragraphs, terms, or provisions hereof. In addition, in any such event, the parties agree that it is their intention and agreement that any such paragraph, term or provision which is held or determined to be unenforceable as written shall nonetheless be in force and binding to the fullest extent permitted by law as though such paragraph, term or provision had been written in such a manner and to such an extent as to be enforceable under the circumstance. Without limiting the foregoing, with respect to any restrictive covenant contained herein, if it is determined that any such provision is excessive as to duration or scope, it is intended that it nevertheless shall be enforced for such short duration, or with such narrower scope, as will render it enforceable. 20. All of the terms and provisions of this Agreements shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, transferees, successors, and assigns. 21. This Agreement shall be governed and construed under the laws of the State of New Jersey. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be entered into as of the date and year herein above first set forth. Date: 10-20-98 Tech Laboratories, Inc. Board of Directors By: /s/ Louis Tomsiella ---------------------------------- Director By: /s/ Earl M. Bjorndal ---------------------------------- Director By: /s/ Emerson Callahan ---------------------------------- Director By: /s/ Carmine O. Pellosie ---------------------------------- Director By: /s/ Bernard M. Ciongoli ---------------------------------- Executive EX-10.3 5 AMENDED JOINT MARKETING AGREEMENT Exhibit 10.3 AMENDED JOINT MARKETING AGREEMENT This Joint Marketing Agreement ("Agreement") is made effective retroactively to October 1, 1997 by and between Tech Logistics, Inc., a Division of Tech Laboratories, Inc., a NJ Corporation ("First Party") and Elektronik Apparatebau GmbH (EAG), a German Corporation; W.T. Sports, Ltd., a NY Corporation; and FUA Safety Equipment, AG, a Swedish Corporation ("Second Party"). First Party and Second Party separately market products and/or services which are complimentary, meaning the products and/or services are each sold to the same general end users or consumers and are often used by them for related purposes. The parties desire to cooperate in marketing their products for their mutual benefit. NOW, THEREFORE, it is agreed: 1. Products. First Party will manufacture two-beam sensors and jointly market them in the United States, Canada, and South America ("First Party's Product"). Second Party will export to the United States four-beam infra red sensors to be marketed in the United States, Canada and South America by First Party. ("Second Party's Product"). First Party's Product and Second Party's Product may hereinafter be referred to collectively as the "Products". The Products may be marketed to and purchased by the same categories of end users and/or consumers. First Party and Second Party agree that First Party shall have the exclusive rights to market the Products as provided in this Agreement. This Agreement may be amended from time to time to include additional products. The Products shall be marketed by Tech Logistics and/or Tech Laboratories in its own name. 2. General Duties. In connection with the joint marketing of the First Party's Product and the Second Party's Product, the parties agree to the following mutual duties: A. To share information with respect to product distribution channels, methods of distribution, competitive information and any other information which can be disclosed without violating any law or breaching any obligations of confidentiality. B. To include, where appropriate, literature concerning the other party's product in individual direct mail or other direct marketing and with product shipments. C. To provide, at the earliest practical date, information about product development, new Products or modification to existing Products jointly marketed pursuant to this Agreement. D. To share information with respect to sales leads. Bernard M. Ciongoli Werner Teichmann Wilfred Teichmann E. To provide a reasonable number of samples, demonstration units or other models of products to the other party. F. To mention or include the other party's products in advertisements, brochures, promotion and press releases. G. To share information with respect to trade shows, seminars and meetings which may be beneficial to the other party. H. To advise the other party about ideas or recommendations for new products or enhancements to existing Products which may be appropriate for the other party's product lines. 3. Specific Duties. In addition to the general duties set forth in Section 2 above, the parties agree to engage in the following specific joint marketing activities during the Initial Term of this Agreement: A. Trade Shows. The parties agree to jointly participate in the following trade show(s): The parties will register for each designated trade show in their joint names, if permitted. If joint registration is not permitted, First Party shall register on behalf of both parties. The parties shall jointly share the cost of registration and participation in the trade show; transportation, preparation, construction and removal of a booth at the trade show; and reasonable related expenses, such as cost of refreshments and other items not specific to the Products. Each party shall separately pay its own cost for transportation of its samples, demonstration units or products to the trade show, travel, lodging and meals for representatives at the trade show and special or extra customer meetings or entertainment. The parties agree to jointly staff the trade show booth at all times. B. Training. Each party agrees to provide one individual to attend a sales meeting of the other party for the purpose of demonstrating and training sales personnel with respect to the party's product. Each party shall bear its own expenses for transportation and other out-of-pocket expenses for sending its representative to the other party's sales meeting. C. Advertising. The parties may select an advertising agency and shall jointly pay the expenses related to preparation of at least one advertisement which shall equally promote the First Party's Product and Second Party's Product. Nothing shall prevent the selection of an advertising agency which represents or has represented either one of the parties. The parties shall share evenly in the amount paid to the advertising agency for the joint advertisement. After the joint advertisement is prepared, each party shall have the equal right to utilize the advertisement in the media of its choice without limitation, provided that each party shall pay one-half of the cost of same during the Initial Term. Additional joint advertisements may be prepared following the agreement of the parties. E. Gross Sales. All sales of the Products shall be invoiced to purchasers by First Party. Bernard M. Ciongoli Werner Teichmann Wilfred Teichmann F. Net Profits. All pre-tax profits shall be calculated according to generally accepted accounting principles fairly and consistently applied; and shall be distributed quarterly in arrears, 70% to the First Party and 30% the Second Party. On April 1, 2001 and annually thereafter for the balance of the Term of this Amended Joint Marketing Agreement or any renewal term as provided herein, the Party shall reanalyze the profit sharing allocation. Such reanalyzation shall involve an analysis of the actual pre-tax profit of the First Party as to the sale of the Products. If the actual pre-tax profit of the First Party is more than 16% then the profit share of the First Party and the Second Party shall be reallocated to increase the percentage of the Second Party and decrease the percentage of the First Party to properly reallocate the profit earned by party of the First Party in excess of 16%. If the profit of the First Party is less than 16%, then the First Party shall have the unilateral right to terminate this Amended Joint Marketing Agreement. F. Royalties. In addition to any other sums earned under this Amended Agreement, the Party of the Second Party shall earn a Royalty equal to 5% of the cost of any Products manufactured by Tech Laboratories, Inc. and marketed pursuant to this Amended Joint Marketing Agreement. 4. Confidentiality. During this Agreement, each party may disclose to the other information that is confidential and proprietary to the disclosing party ("Confidential Information"). Confidential Information may include, but is not limited to, business plans, marketing plans, financial statements, competitive analysis, market research, Product development plans, computer programs, designs, and models, communicated orally, in writing, or by electronic media. Confidential Information disclosed orally or electronically shall be identified as such within five (5) days of disclosure. Confidential Information disclosed in writing shall be marked "Confidential." Each party agrees that it will maintain the Confidential Information of the other party in confidence and shall use such information only for the purposes of this Agreement. Confidential Information may be disclosed by a receiving party within its organization only to specific employees who have a need to know such information for the purposes of this Agreement and who have agreed in writing not to disclose it. Upon expiration or termination of this Agreement or, sooner if demanded by a party, a receiving party shall return to a disclosing party's any of the disclosing party's Confidential Information including all copies thereof. If this Agreement or any subsequent agreement between the Parties or extension hereof is terminated for any reason by either Party, then and in that event, the Second Party shall retain ownership to the Products, as well as to any and all modifications, improvements and extensions of the Products or the related technology whether such was created, implemented, designed, or paid for, by First Party or Second Party. Upon such Termination, Second Party shall pay to First Party, First Party's reasonable expenses in redesigning castings, if any, related to such modifications, improvements and extensions of the Products or the related technology. The obligations of each party in this section shall continue for a period of Two (2) years following the expiration or termination of the Agreement. The obligations of this section shall not apply to any Confidential Information that: Bernard M. Ciongoli Werner Teichmann Wilfred Teichmann A. Is or becomes public through no act of a receiving party; B. Is rightfully received from a third party without obligations of confidentiality; or C. Is independently developed by a receiving party without reference to the other party's Confidential Information. 5. Conflicts. During this Agreement and for a period of Six (6) months thereafter, each party agrees that it will not engage in any marketing, promotion, advertising, or sales effort, individually or jointly, with respect to any product that is competitive with the other party's Product or with respect to any entity that markets, promotes, or sells a product in competition with the other party. Nothing herein shall prevent either party from engaging in any activity that promotes any other product or entity that does not compete with the other party or its products. 6. Term and Termination. A. The "Initial Term" of this Agreement shall start on October 1, 1997 and shall end on September 30, 2007. At least sixty (60) days prior to the end of the Initial Term or any renewal term as provided herein, the parties shall each notify the other as to whether it desires to renew this Agreement. If either party notifies the other that it does not desire to continue this Agreement, then the Agreement shall end upon the expiration of the Initial Term or renewal terms. If, however, both parties desire to renew the Agreement, then the parties shall meet to confer and determine the following: (i) their specific duties for the renewal term in lieu of the specific duties set forth in Section 3 herein as applicable to the preceding Initial Term or renewal term; (ii) the period for the renewal term; and (iii) any other proposed amendments. If the parties fail to agree on all of the foregoing items before end of the Initial Term or renewal term, then this Agreement shall expire as of the end of the Initial Term or the renewal term. If the parties agree to all of the foregoing items, then the Agreement will continue with such specific duties and other amendments for the renewal term agreed upon. B. This Agreement may be terminated at any time upon the occurrence of any of the following events: (i) if either of the parties shall default on any material obligation and such default is not cured within fifteen days following notice from the other party. (ii) if a party files a petition of bankruptcy, is insolvent, makes an assignment for benefit of creditors or if a trustee or receiver is appointed for a party, and such remaining of the foregoing remains undismissed for a period of sixty (60) days. Bernard M. Ciongoli Werner Teichmann Wilfred Teichmann (iii) either party shall cease to do business, the First Party ceases to market First Party's Product or Second Party ceases to market Second Party's Product. 7. Final Agreement. This Amendment to Joint Marketing Agreement terminates and supersedes all prior understandings or agreements on the subject matter hereof. This Agreement may be modified only by a further writing that is duly executed by both parties. 8. Severability. If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable term had never been included. 9. Notices. Any notice required by this Agreement or given in connection with it, shall be in writing and shall be given to the appropriate party by personal delivery or by certified mail, postage prepaid, or recognized overnight delivery service; If to First Party: Bernard M. Ciongoli, President Tech Laboratories, Inc. 955 Belmont Avenue North Haledon, NJ 07508 and if to Second Party: Werner Teichmann, President W.T. Sports, Ltd. PO Box 23 Ellenville, NY 12428 Wilfred Teichmann, President Elektronik Apparatebau GmbH c/o Werner Teichmann PO Box 23 Ellenville, NY 12428 Wilfred Teichmann, President FUA-Safety Equipment, AG c/o Werner Teichmann PO Box 23 Ellenville, NY 12428 Bernard M. Ciongoli Werner Teichmann Wilfred Teichmann 10. Governing Law and Arbitration. A. This Agreement shall be construed and enforced in accordance with the laws of the state of New Jersey. B. The parties agree that they will use their best efforts to amicably resolve any dispute arising out of or relating to this Agreement. Any dispute that cannot be resolved amicably shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. Any such arbitration shall be settled by final binding arbitration in accordance with the Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. Any such arbitration shall be conducted in Paterson, New Jersey or such other place as may be mutually agreed upon by the parties. Within fifteen (15) days after the commencement of the arbitration, each party shall select one person to act as arbitrator, and the two arbitrators so selected shall select a third arbitrator within ten (10) days of their appointment. Each party shall bear its own costs and expenses and an equal share of the arbitrator's expenses and administrative fees of arbitration. 11. No Assignment. Neither party shall assign this Agreement or any interest or obligation herein without the prior written consent of the other party. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. W.T. Sports, Ltd., a NY Corporation FUA-Safety Equipment, AG, a Swedish Corporation By: /s/ Werner Teichmann By: /s/ Wilfred Teichmann ------------------------------- ----------------------------- Werner Teichmann, President Wilfred Teichmann, President Tech Logistics, a Division of Elektronik Apparatebau GmbH(EAG) Tech Laboratories, Inc., a NJ Corporation a Corporation of the Country of Germany By: /s/ Bernard M. Ciongoli By: Wilfred Teichmann ------------------------------- ----------------------------- Bernard M. Ciongoli, President Wilfred Teichmann, President Bernard M. Ciongoli Werner Teichmann Wilfred Teichmann EX-10.4 6 CONFIDENTIALITY AND MANUFACTURING AGREEMENT Exhibit 10.4 CONFIDENTIALITY and MANUFACTURING AGREEMENT This Confidentiality Agreement ("Agreement") is made effective retroactively to October 1, 1997 by and between W.T. Sports, LTD, a NY corporation, FUA Safety Equipment, AG, a Swedish corporation, and Electronik Apparatabau, GmbH, a German Corporation, jointly referred to as ("Owner") and Tech Laboratories, Inc., a NJ Corporation referred to as ("Recipient"). 1. Confidential Information. Owner proposes to disclose certain of its confidential and proprietary information (the "Confidential Information") to Recipient. Confidential Information shall include all data, materials, products, technology, computer programs, specifications, manuals, business plans, software, marketing plans, business plans, financial information, and other information disclosed or submitted, orally, in writing, or by any other media, to Recipient by Owner. Owner shall disclose so much of its Confidential Information as shall reasonably be required for Recipient to manufacture the Owner's Products for marketing pursuant to a certain Amended Joint Marketing Agreement executed simultaneously herewith between Owner and Tech Logistics, Inc. (a wholly owned subsidiary of Recipient). 2. Recipient's Obligations. A. Recipient agrees that the Confidential Information is to be considered confidential and proprietary to Owner and Recipient shall hold the same in confidence, shall not use the Confidential Information other than for the purposes of its business with Owner, and shall disclose it only to its officers, directors, or employees with a specific need to know. Recipient will not disclose, publish or otherwise reveal any of the Confidential Information received from Owner to any other party whatsoever except with the specific prior written authorization of Owner. B. Confidential Information furnished in tangible form shall not be duplicated by Recipient except for purposes of this Agreement. Upon the request of Owner, Recipient shall return all Confidential Information received in written or tangible form, including copies, or reproductions or other media containing such Confidential Information, within ten (10) days of such request. At Recipient's option, any documents or other media developed by the Recipient containing Confidential Information may be destroyed by Recipient. Recipient shall provide a written certificate to Owner regarding destruction within ten (10) days thereafter. C. If this Agreement or any subsequent Agreement between the parties or extension hereof is terminated for any reason by either party, then and in that event the Owner shall retain ownership to the Products, as well as to any and all modifications, improvements and extensions of the Products or the related technology whether such was created, implemented, designed, or paid for, by Owner or Recipient. Upon such Termination, Recipient shall pay to Owner, Owner's reasonable expenses in re-designing castings, if any, related to such modifications, improvements and extensions of the Products or the related technology. 3. Manufacturing. Recipient shall have the exclusive rights to manufacture the Owner's Products (as defined in the Amended Joint Marketing Agreement) for sale by Tech Logistics pursuant to the said Agreement. Recipient shall pay to Owner monthly in arrears, a sum equal to 5% of Recipient's Gross Profit on Sensors manufactured by Tech Laboratories, Inc./Tech Logistics, Inc. Bernard M. Ciongoli Werner Teichmann Wilfred Teichmann 4. Term. The obligations of Recipient herein shall be effective in perpetuity from the date Owner last discloses any Confidential Information to Recipient pursuant to this Agreement. Further, the obligation not to disclose shall not be affected by bankruptcy, receivership, assignment, attachment or seizure procedures, whether initiated by or against Recipient, nor by the rejection of any agreement between Owner and Recipient, by a trustee of Recipient in bankruptcy, or by the Recipient as a debtor-in-possession or the equivalent of any of the foregoing under local law. 5. Other Information. Recipient shall have no obligation under this Agreement with respect to Confidential Information which is or becomes publicly available as a result of public disclosure by Owner. Any developments of the Products, or modifications, changes, deletions, or improvements of or upon the Products by Recipient its' agents servants, or employees, shall belong to Owner and shall be protected by Recipient hereunder as though same had been made by Owner. 6. License. The Manufacturing rights of Recipient hereunder shall be an exclusive License to Recipient to manufacture the Products as hereinabove provided (the License). It is understood and agreed that neither party solicits any change in the organization, business practice, service or products of the other party, and that the disclosure of Confidential Information shall not be construed as evidencing any intent by a party to purchase any products or services of the other party except as provided herein, nor as an encouragement to expend funds in development or research efforts. Confidential Information may pertain to prospective or unannounced products. Recipient agrees not to use any Confidential Information or the License as a basis upon which to develop or have a third party develop a competing or similar product. 7. No Publicity. Recipient agrees not to disclose its participation in this undertaking, the existence or terms and conditions of the Agreement without the prior written consent of Owner which consent shall not be unreasonably withheld. 8. Governing Law and Equitable Relief. This Agreement shall be governed and construed in accordance with the laws of the United States and the State of New Jersey and the parties hereto consent to the exclusive jurisdiction of the state courts and U.S. federal courts located there for any dispute arising out of this Agreement. Recipient agrees that in the event of any breach or threatened breach by Recipient, Owner may obtain, in addition to any other legal remedies which may be available, such equitable relief as may be necessary to protect Owner against any such breach or threatened breach. 9. Final Agreement. This Agreement terminates and supersedes all prior understandings or agreements on the subject matter hereof. This Agreement may be modified only by a further writing that is duly executed by both parties. 10. No Assignment. Recipient may not assign this Agreement or any interest herein without Owner's express prior written consent. Bernard M. Ciongoli Werner Teichmann Wilfred Teichmann 11. Severability. If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable term had never been included. 12. Notices. Any notice required by this Agreement or given in connection with it, shall be in writing and shall be given to the appropriate party by personal delivery or by certified mail, postage prepaid, or recognized overnight delivery services. If to Owner: Werner Teichmann, President, W.T. Sports, Ltd. PO Box 23 Ellenville, New York 12428 If to Recipient: Tech Laboratories, Inc., Attention: Bernard M. Ciongoli, President 955 Belmont Avenue North Haledon, NJ 07508 13. No Implied Waiver. Either party's failure to insist in any one or more instances upon strict performance by the other party of any of the terms of this Agreement shall not be construed as a waiver of any continuing or subsequent failure to perform or delay in performance of any term hereof. 14. Headings. Headings used in this Agreement are provided for convenience only and shall not be used to construe meaning or intent. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. W.T. Sports, Ltd. Tech Laboratories, Inc. By: /s/ Werner Teichmann By: /s/ Bernard M. Ciongoli ------------------------------- ----------------------------- Werner Teichmann, President Bernard M. Ciongoli, President FUA-Safety Equipment, AG Electronik Apparatabau, GmbH By: /s/ Wilfred Teichmann By: /s/ Wilfred Teichmann ------------------------------- ----------------------------- Wilfred Teichmann, President Wilfred Teichmann, President Bernard M. Ciongoli Werner Teichmann Wilfred Teichmann EX-10.5 7 PATENT AND TRADEMARK ASSIGNMENTS N0349/7168 NO349/7168 WO UNITED STATES ASSIGNMENT WHEREAS, Nordx/CDT, Inc. a Canadian corporation, having an office and place of business at 2345 Sources Blvd., Pointe-Claire, Quebec, Canada H9R 5Z3 is the owner of the entire right, title and interest in and to the following United States Patent Application and corresponding International Patent Application: - -------------------------------------------------------------------------------- Application No. Date of Filing - -------------------------------------------------------------------------------- 08/771,979 December 23, 1996 - -------------------------------------------------------------------------------- PCT/CA97/00985 December 19, 1997 - -------------------------------------------------------------------------------- WHEREAS, Tech Laboratories Inc. of 995 Belmont Avenue, North Haledon, New Jersey, U.S.A. 07508 is desirous of acquiring the entire right, title and interest in and to said patent applications, and any and all patents of the United States and of all other countries which may be granted for the said inventions, or any of them; NOW THEREFORE, in consideration of the sum of One Dollar ($1.00) and other good and valuable consideration, the receipt whereof is hereby acknowledged, said Nordx/CDT, Inc. does hereby sell, assign and transfer to the said Tech Laboratories Inc. the entire right, title and interest in and to the said patent applications, all inventions therein disclosed and any and all patents of the United States and of all other countries which may be granted for the said inventions, or any of them. Said Tech Laboratories Inc., its successors and assigns, shall have, hold and enjoy the said inventions and the said Letters Patent to its and their own use and behoof to the full end of the term or terms for which the said Letters Patent have been and may be granted as fully and entirely as the same would have been held and enjoyed by it had this assignment and sale not been made, including the right to sue for past infringement. And it is hereby authorized and requested of the Commissioner of Patents to issue any additional Letters Patent as may be granted on the said inventions to the said Assignee in accordance with the terms of this instrument. UNITED STATES Nordx/CDT, Inc. DATE: May 7, 1999 BY: /s/ Douglas McCollam ----------------------------- NAME: Douglas McCollam --------------------------- TITLE: EVP & CFO --------------------------- DECLARATION OF WITNESS I, Nathalie-Ann Taylor, whose full post office address is 68, 3rd Avenue North, Roxboro, Quebec, Canada, hereby declare that I was personally present and did see the above named person, personally known to me to be the person named in the Assignment, duly sign and execute the same. BY: /s/ Nathalie-Ann Taylor ------------------------------- NAME: Nathalie-Ann Taylor ------------------------------ DATE: May 7, 1999 ------------------------------ Tech Laboratories, Inc. DATE: 6/7/99 BY: /s/ Bernard Ciongoli ------------------------------- NAME: Bernard Ciongoli ------------------------------ TITLE: President ----------------------------- DECLARATION OF WITNESS I, Katherine P. Salminen, whose full post office address is 530 High Mountain Road, North Haledon, N.J. 07508, is hereby declare that I was personally present and did see the above named person, personally known to me to be the person named in the Assignment, duly sign and execute the same. BY: /s/ Katherine P. Salminen ------------------------------- NAME: Katherine P. Salminen ------------------------------ DATE: 6/7/99 ------------------------------ Exhibit 10.5 N0349/7151GB NO349/7152GB NO349/7153GB UNITED KINGDOM ASSIGNMENT WHEREAS, Nordx/CDT., a Canadian corporation, having an office and place of business at 2345 Sources Blvd., Pointe-Claire, Quebec, Canada H9R 5Z3 is the owner of the Patents and Patent Application in the United Kingdom set out on the attached Schedule A. WHEREAS, Tech Laboratories Inc., a corporation of Delaware, U.S.A., having an office and place of business at 955 Belmont Avenue, North Haledon, New Jersey, U.S.A. 07508, is desirous of acquiring said Patents and Patent Application; NOW, THEREFORE, for One Dollar ($1.00) and other good and valuable consideration, the receipt of which is hereby acknowledged, said Nordx/CDT, Inc., without representations or warranties with respect to said patents or the title thereto, does hereby assign, transfer and set over unto the said Tech Laboratories Inc. all of its rights, title and interest in and to the said Patents and Patent Application, including all rights to sue and recover for past infringement of said patents. UNITED KINGDOM Nordx/CDT, INC. DATE: May 7, 1999 BY: /s/ Douglas McCollam ----------------------------- NAME: Douglas McCollam ------------------------- TITLE: EVP & CFO ------------------------- DECLARATION OF WITNESS I, Nathalie-Ann Taylor, whose full post office address is 68, 3rd Avenue North, Roxboro, Quebec, Canada, hereby declare that I was personally present and did see the above named person, personally known to me to be the person named in the Assignment, duly sign and execute the same. BY: /s/ Nathalie-Ann Taylor ----------------------------- NAME: Nathalie-Ann Taylor --------------------------- DATE: May 7, 1999 --------------------------- Tech Laboratories Inc. DATE: 6/7/99 BY: /s/ Bernard Ciongoli ----------------------------- NAME: Bernard Ciongoli --------------------------- TITLE: President -------------------------- DECLARATION OF WITNESS I, Katherine P. Salminen, whose full post office address is 530 High Mountain Road, North Haledon, N.J. 07508, hereby declare that I was personally present and did see the above named person, personally known to me to be the person named in the Assignment, duly sign and execute the same. BY: /s/ Katherine P. Salminen --------------------------------- NAME: Katherine P. Salminen --------------------------- DATE: 6/7/99 --------------------------- UNITED KINGDOM SCHEDULE A I. Patents Patent No. Title Issue Date - ---------- ----- ---------- GB 2 280 573 HALF-DUPLEX CIRCUIT 09 July 1997 FOR A LOCAL AREA NETWORK GB 2 280 574 USER INTERFACE FOR LOCAL 16 July 1997 AREA NETWORKS GB 2 280 826 TOKEN RING 20 August 1997 ii. Patent Applications Serial Number Title Filing Date - ------------- ----- ----------- 9508660.9 CROSSPOINT MATRIX 28 April 1995 SWITCH ARRANGEMENT N0349/2007 GSE Exhibit 10.5 UNITED STATES ASSIGNMENT WHEREAS, Nordx/CDT, Inc., a Canadian corporation having an office and place of business at 2345 Sources Blvd., Pointe-Claire, Quebec, Canada H9R 5Z3 has adopted and used the following mark and the trademark Registration: SCHEDULE OF TRADEMARKS MARK REG. NO. REG. DATE DYNATRAX 2,105,761 OCTOBER 14, 1997 WHEREAS, Tech Laboratories Inc., a corporation of Delaware, U.S.A. having an office and place of business at 955 Belmont Avenue, North Haledon, New Jersey, U.S.A. 07508 is desirous of acquiring the entire right, title and interest in and to the said mark and the registration therefor. NOW, THEREFORE, for One Dollar ($1.00) and other good and valuable consideration, the receipt of which is hereby acknowledged, said Nordx/CDT, Inc. without representations or warranties with respect to said trademarks or registration or the title thereto does hereby assign unto the said Tech Laboratories Inc., its successors and assigns all its rights, title and interest in and to the said marks and the registration therefor, together with the goodwill of the business symbolized by said marks and the registration therefor and including all rights to sue and recover for past infringement of said mark and the registration therefor. Nordx/CDT, Inc. DATE: May 7, 1999 BY: /s/ Douglas McCollam ----------------------------- NAME: Douglas McCollam ---------------------------- TITLE: EVP & CFO --------------------------- DECLARATION OF WITNESS I, Nathalie-Ann Taylor, whose full post office address is 68, 3rd Avenue North, Roxboro, Quebec, Canada, hereby declare that I was personally present and did see the above named person, personally known to me to be the person named in the Assignment, duly sign and execute the same. BY: /s/ Nathalie-Ann Taylor ------------------------------- NAME: Nathalie-Ann Taylor ------------------------------ DATE: May 7, 1999 ------------------------------ Tech Laboratories, Inc. DATE: 6/7/99 BY: /s/ Bernard Ciongoli ------------------------------- NAME: Bernard Ciongoli ------------------------------ TITLE: President ----------------------------- DECLARATION OF WITNESS I, Katherine P. Salminen, whose full post office address is 530 High Mountain Road, North Haledon, N.J. 07508, is hereby declare that I was personally present and did see the above named person, personally known to me to be the person named in the Assignment, duly sign and execute the same. BY: /s/ Katherine P. Salminen ------------------------------- NAME: Katherine P. Salminen ------------------------------ DATE: 6/7/99 ------------------------------ Exhibit 10.5 ASSIGNMENT WHEREAS, Nordx/CDT, Inc., a Canadian corporation, the full post office address of whose principal office or place of business is 2345 Sources Blvd., Pointe-Claire, Quebec, Canada H9R 5Z3 is the owner of the following mark and the trademark Registration: SCHEDULE OF TRADEMARKS MARK REG. NO. REG. DATE DYNATRAX 465,314 October 25, 1996 AND WHEREAS, Tech Laboratories, Inc., a corporation of Delaware, U.S.A., the full post office address of whose principal office or place of business is 955 Belmont Avenue, North Haledon, New Jersey, U.S.A., 07508, is desirous of acquiring the entire right, title and interest for Canada in and to the said trademark, trademark application and trademark registration; NOW, THEREFORE, for One Dollar in hand paid, and other good and valuable consideration, the receipt of which is hereby acknowledged, said Nordx/CDT, Inc. without representations or warranties with respect to said trademark or application or registration or the title thereto does hereby assign unto the said Tech Laboratories Inc., its successors and assigns, all its rights, title and interest in and to the said mark, said application and the registration in Canada therefor, together with the goodwill of the business symbolized by said marks and the application and registration in Canada therefor and including all rights to sue and recover for past infringement of said mark and the registration therefor. IN WITNESS WHEREOF, the ASSIGNOR has caused these presents to be executed under the hands of its officers duly authorized on its behalf this 7th day of May, 1999. CANADA Nordx/CDT, Inc. DATE: May 7, 1999 BY: /s/ Douglas McCollam ----------------------------- NAME: Douglas McCollam ---------------------------- TITLE: EVP & CFO --------------------------- DECLARATION OF WITNESS I, Nathalie-Ann Taylor, whose full post office address is 68, 3rd Avenue North, Roxboro, Quebec, Canada, hereby declare that I was personally present and did see the above named person, personally known to me to be the person named in the Assignment, duly sign and execute the same. BY: /s/ Nathalie-Ann Taylor ------------------------------- NAME: Nathalie-Ann Taylor ------------------------------ DATE: May 7, 1999 ------------------------------ Tech Laboratories, Inc. DATE: 6/7/99 BY: /s/ Bernard Ciongoli ------------------------------- NAME: Bernard Ciongoli ------------------------------ TITLE: President ----------------------------- DECLARATION OF WITNESS I, Katherine P. Salminen, whose full post office address is 530 High Mountain Road, North Haledon, N.J. 07508, is hereby declare that I was personally present and did see the above named person, personally known to me to be the person named in the Assignment, duly sign and execute the same. BY: /s/ Katherine P. Salminen ------------------------------- NAME: Katherine P. Salminen ------------------------------ DATE: 6/7/99 ------------------------------ EX-24.1 8 CONSENT OF INDEPENDENT AUDITORS CONSENT OF CHARLES J. BIRNBERG, CPA, INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated March 16, 1999, in the Registration Statement (Form SB-2) and the related Prospectus of Tech Laboratories, Inc. /s/ Charles J. Birnberg ---------------------------------- Charles J. Birnberg Hackensack, New Jersey July 9, 1999 EX-27 9 FDS --
5 12-MOS 3-MOS DEC-31-1998 MAR-31-1999 JAN-01-1998 JAN-01-1999 DEC-31-1998 MAR-31-1999 532,780 259,120 56,693 56,693 143,462 108,946 (10,000) (10,000) 270,118 108,946 1,006,410 1,023,116 299,809 299,809 (299,162) (299,162) 1,108,597 1,035,303 154,870 135,392 0 0 0 0 0 0 23,370 29,491 840,357 870,420 1,018,597 1,035,303 552,486 59,714 552,486 59,714 386,425 40,008 386,425 40,008 329,849 64,643 0 0 5,316 0 (169,104) (44,937) 0 0 (169,104) (44,937) 0 0 0 0 0 0 (169,104) (44,937) (.06) (.03) (.04) (.01)
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