Item 4. Recent Sales of Unregistered Securities
The following discussion includes certain information as to transactions which occurred prior to the current Management's assumption of control of the Registrant on the Closing Date and is based on information which Management believes to be reasonably accurate, but not all of which does it have direct knowledge.
On the Closing Date, in satisfaction of gross proceeds of $155,000
received by, and certain services rendered, to TPI-Ontario, in the period April 11 to July 25, 1996, the Registrant issued 160,000 shares of Common Stock to 15 investors. TPI-Ontario received such gross proceeds pursuant to a private offering prior to the Closing Date. The 160,000 shares of Common Stock were issued in reliance on the exemption from registration provided by Rule 504 of Regulation D promulgated under the Act.
On the Closing Date, Samuel Hamann Graphix Inc. ("SHGI") issued 4,936,050 shares of Common Stock to Joter and 965,000 shares of Common Stock to DTL, in exchange for common shares of TPI-Ontario, which common shares were issued as of April 1, 1996. Joter and DTL, which are controlled by Messrs. Mighton, McCann and Stepanoff, executive officers and directors of the Registrant, acquired the common shares of TPI-Ontario in consideration for certain rights in technology transferred to, and certain services rendered to, TPI-Ontario prior to the Closing Date, which shares, for accounting purposes are deemed to have been issued in exchange for nominal
consideration as "founder's shares". Such shares were issued to management in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the "Act").
Prior to the Closing Date, SHGI issued 740,469 shares of Common Stock. The Registrant has no records concerning the transactions in which such shares were issued or the consideration received by the Company in respect of such issuances.
Prior to the Closing Date (from August 9 through August 19, 1996), SHGI issued, pursuant to a private offering, an aggregate of 1,465,000 shares of Common Stock in consideration for gross proceeds of $14,654 received by SHGI from investors. These transactions were not disclosed to current management of the Registrant prior to or on the Closing Date. Present management is not
aware of the exemption relied on for the issuance of such shares; however, Samuel Hamann Graphix Inc. filed a Form D dated August 16, 1996 claiming exemption under Rule 504. Management believes that SHGI relied on Rule 504 of Regulation D under the Act in issuing such securities.
On the Closing Date, SHGI issued 1,888,000 shares of Common Stock to certain consultants in consideration for certain services rendered in connection with the reverse acquisition. Current management of the Registrant is uncertain of the exemption relied on for the issuance of such shares, but believes prior management relied on the exemption from registration provided by Section 4(2) of the Act.
On the Closing Date, SHGI issued 455,000 shares of Common Stock to Jaford Holdings Ltd., 100,000 shares of Common Stock to Innovations Ontario Corp. and 150,000 shares of Common Stock to Ronald Content, in consideration for the release by such companies and individual of certain claims with respect to marketing rights as to the technology previously transferred to the Registrant by Vladimir Stepanoff, an executive officer and director of the Registrant. Prior to the incorporation of TPI-Ontario, Mr. Stepanoff had granted marketing rights with respect to such technology to Raconix, of which Mr. Content was the sole shareholder. Ronald Content is a sophisticated
investor, who was involved in the operations of the Registrant and received the shares for investment. The shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Act. See Item 1, "Description of Business -- Intellectual Property."
On November 25, 1996, the Registrant issued options to purchase 15,000 shares of Common Stock at an exercise price of $1.99 expiring on November 27, 1997, to a public relations firm, in consideration for certain services. The options were issued in reliance on the exemption from registration provided by Section 4(2) of the Act. The holder of the option, as the Registrant's public relations firm, was fully familiar with the Registrant's operations and is a sophisticated investor.
On August 23, 1996, Registrant issued 500,000 units to Mayfair Advisory Group Limited in consideration for gross proceeds of $500,000. Each unit consisted of one share of Common Stock and a Common Stock purchase warrant (the "Warrants"). When issued, the Warrants had a per share exercise price of $1.00, were exercisable for a period of two years, commencing 30 days after the closing of the offering, and were redeemable on 20 days prior written notice at a redemption price of $.005 per Warrant. Pursuant to an amendment to the terms of the Warrants dated August 26, 1998, the warrants will not be exercisable until a registration statement has become effective
covering the Common Stock issuable upon the exercise thereof; the term of such warrants has been extended through six months following the effective date of such registration statement, and the exercise price has been reduced to $.80 per share of Common Stock, subject to certain adjustments in the event the market for the Company's Common Stock is less than $.80 at the time of the exercise, but in no event shall the exercise price be reduced below $.50 per share. The Common Stock and the Warrants were issued in reliance on the exemption from registration provided by Rule 504 of Regulation D under the Act.
On January 27, 1997, Registrant issued 208,333 shares of Common Stock to Olive Investments, in consideration for gross proceeds of $150,000. These shares were issued in reliance on the exemption from registration provided by Rule 504 of Regulation D under the Act.
On March 6, 1997, Registrant issued 501,030 shares of Common Stock to Thomson Kernaghan & Co., Ltd. ("Thomson Kernaghan") in consideration for gross proceeds of $375,000. These shares were issued in reliance on the exemption from registration provided by Rule 504 of Regulation D under the Act.
On June 27, 1997, Registrant issued 100,000 units to Pinetree Capital Corp. ("Pinetree") in consideration for gross proceeds of $70,000. The units were issued to Pinetree pursuant to a Subscription Agreement by and between TPI and Pinetree (the "Subscription Agreement") by which Pinetree subscribed for a minimum of 700,000 units and a maximum of 1,000,000 units. The Subscription Agreement was later amended to lower the minimum to 100,000 units. Pinetree purchased the foregoing securities for its own account. Each unit consisted of one share of Common Stock and a common stock purchase warrant expiring two years from the date of issuance, and exercisable at $1.00 per share during the first year and $1.50 per share during the second year. These securities were issued in reliance on the exemption from registration provided by Rule 506 of Regulation D under the Act.
On August 1, 1997, Registrant sold to Thomson Kernaghan an 8%
convertible subordinated debenture due July 31, 1998 in the principal amount of $108,750 the "Debenture" for a gross purchase price of $108,750. The Debenture was converted, on August 28, 1997, into 198,000 shares of Common Stock at the conversion rate of $0.55 per share. The Debenture was issued in reliance on the exemption from registration provided by Rule 504 of Regulation D, under the Act and the shares of Common Stock issued on conversion of the Debenture were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Act.
On September 4, 1997, Registrant issued 589,000 shares of Common Stock to Thomson Kernaghan in consideration for gross proceeds of $125,000 ($.21 a share). These shares were issued in reliance on the exemption from registration provided by Rule 504 of Regulation D under the Act.
On September 26, 1997, Registrant issued 400,000 shares of Common Stock to Thomson Kernaghan in consideration for gross proceeds of $200,000 ($.50 a share). These shares were issued in reliance on the exemption from registration provided by Rule 504 of Regulation D under the Act.
On October 23, 1997, Registrant issued 400,000 shares of Common Stock to Thomson Kernaghan in consideration for gross proceeds of $200,000 ($.50 a share). These shares were issued in reliance on the exemption from registration provided by Rule 504 of Regulation D under the Act.
On October 31, 1997, Registrant issued 100,000 shares of Common Stock to Thomson Kernaghan in consideration for gross proceeds of $50,000 ($.50 a share). These shares were issued in reliance on the exemption from registration provided by Rule 504 of Regulation D under the Act.
On December 10, 1997, Registrant issued 997,778 shares of Common Stock to Thomson Kernaghan in consideration for gross proceeds of $220,000 ($.22 a share). These shares were issued in reliance on the exemption from registration provided by Rule 504 of Regulation D under the Act.
On January 26, 1998, Registrant issued 444,445 shares of Common Stock to Thomson Kernaghan in consideration for gross proceeds of $100,000 ($.22 a share). These shares were issued in reliance on the exemption from registration provided by Rule 504 of Regulation D under the Act.
On April 14, 1998, the Registrant sold 6% Convertible Debentures, due April, 2000, in the aggregate principal amount of $1,000,000 and issued warrants to purchase 301,228 shares of Common Stock for gross proceeds of $1,000,000 (of which $550,000 had a conversion rate of 70% of the 5-day average closing bid price and $450,000 had a conversion rate of 80% of the 5-day average closing asked price) as follows: Canadian Advantage LP ($275,000); Dominion Capital Fund ($275,000); Fetu Holdings ($250,000); and Livingston Asset Management ($200,000). Each of the above claim the status as
accredited investors as organizations described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities purchased, with total assets in excess of $5,000,000. Each purchased its debentures and warrants for investment. Canadian Advantage LP ("Canadian") was issued warrants to purchase 16,500 shares of Common Stock at
$1.50 per share through April 14, 2000 and warrants to purchase 66,338 shares of Common Stock at $.456 per share through April 14, 2000; Dominion Capital Fund ("Dominion") was issued a like number of identical warrants; Fetu Holdings ("Fetu") was issued like warrants to purchase 15,000 shares at $1.50 and 60,307 shares at $.456, and Livingston Asset Management ("Livingston") was issued like warrants to purchase 12,000 shares at $1.50 and 48,245 shares at $.456. On May 14, 1998, an aggregate of $125,000 of Debentures, plus interest, were converted into 111,270 shares of Common Stock as follows:
Dominion and Canadian each converted $34,375 in principal plus interest into 30,599 shares of Common Stock, Fetu converted $31,250 in principal plus interest into 27,818 shares of Common Stock and Livingston converted $25,000 in principal plus interest into 22,254 shares of Common Stock. On May 15, 1998 an aggregate of $175,000 of Debentures plus interest were converted into 154,822 shares of Common Stock as follows: Dominion and Canadian each
converted $48,125 in principal plus interest into 42,576 shares of Common Stock, Fetu converted $43,750 in principal plus interest into 38,706 shares of Common Stock and Livingston converted $35,000 in principal plus interest into 30,964 shares of Common Stock. On July 8, 1998, an aggregate of $300,000 of such Debentures were converted into 468,567 shares of Common Stock as follows: Dominion and Canadian each converted $82,500 of principal plus interest into 128,856 shares of Common Stock, Fetu converted $75,000 of
principal plus interest into 117,142 shares of Common Stock and Livingston converted $60,000 plus interest into 93,713 shares of Common Stock.
The Debentures, the warrants and the Common Stock issued on conversion of the Debentures were issued in reliance upon the exemption set forth in Sections 4(2) of the Act and Rule 506 thereunder. Such securities were purchased for investment and not with a view to the public distribution thereof. The Common Stock issued upon conversion of the Debentures were further issued in reliance on Section 3(a)(9) of the Act. In both the issuance of the Debentures and the Common Stock the certificates representing
such securities bear a legend preventing resale in the absence of
registration with the Commission or an exemption therefrom.
- Jeff
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