Business Context and Reporting Period
This Form 8-K, dated February 7, 2006, reports the completion of a reverse acquisition by Blackfoot Enterprises, Inc. (now renamed Tower Tech Holdings Inc.). On February 6, 2006, Blackfoot acquired 100% of Tower Tech Systems, Inc. ("Tower Tech") in exchange for 25,250,000 newly issued shares. Tower Tech, a Wisconsin-based manufacturer of wind turbine extension towers, is now the sole operating subsidiary. The transaction removed Blackfoot's "shell company" status. The new trading symbol is "TWRT."
Key Financial Metrics
Tower Tech Financials (Unaudited, Nine Months Ended Sept 30, 2005):
- Revenue: $1,144,353 (First revenue recognized in March 2005).
- Net Loss: $2,038,084.
- Accumulated Deficit: Approximately $2.8 million as of September 30, 2005.
- Total Assets: $3,116,088.
- Total Liabilities: $5,508,394.
- Working Capital Deficiency: $3,748,678.
- Cash on Hand: $55,500.
- Debt Status: $625,000 in notes were in default as of September 30, 2005.
Blackfoot Enterprises Financials (Nine Months Ended Sept 30, 2005):
- Revenue: $0.
- Net Loss: $4,612.
- Shareholders' Deficit: $44,742.
Material Changes vs. Prior Period
- Corporate Identity: Company name changed from Blackfoot Enterprises, Inc. to Tower Tech Holdings Inc.; authorized stock increased to 100 million common and 10 million preferred shares.
- Ownership Structure: Former Tower Tech shareholders now own 72.1% of the combined company (25.25 million of 35 million outstanding shares). Former Blackfoot shareholders own the remainder.
- Management: All former Blackfoot directors resigned. A new five-member board was appointed, led by Christopher C. Allie (President and Chairman).
- Operational Status: Transitioned from a shell company with no operations to an active manufacturer with a production capacity of 300 towers per year, planning expansion to 400-500 by 2009.
- Revenue Growth: Tower Tech moved from $0 revenue in 2004 to $1.14 million in the first nine months of 2005, though losses widened significantly due to ramp-up costs.
Guidance, Outlook, Risks, and Contingencies
Outlook and Capital Needs: Management anticipates continued operating losses for the foreseeable future. Current cash is insufficient for the next 12 months. The company is seeking a $6 million convertible debenture (contingent on the acquisition) to fund operations through December 2006 and pay off defaulted notes. If this funding fails, the company may need to raise equity, causing dilution.
Key Risks:
- Going Concern: Auditors have expressed substantial doubt about Tower Tech's ability to continue as a going concern due to accumulated losses and working capital deficiencies.
- Liquidity: Significant reliance on future financing; $625,000 in notes were in default as of Sept 2005.
- Market Liquidity: Stock trades on the OTC Bulletin Board and may be classified as a "penny stock," limiting broker-dealer recommendations and liquidity.
- Customer Concentration: Tower Tech is an exclusive supplier to Vestas Towers Inc. under a contract that restricts manufacturing for others unless negotiated otherwise.
- Product Liability: Potential exposure to claims regarding wind tower defects, with insurance coverage potentially inadequate.
Investor Verification Checklist
- Verify the status of the $6 million convertible debenture commitment and whether funding has been secured to address the $625,000 in defaulted notes.
- Confirm the terms of the exclusive supply agreement with Vestas Towers Inc. and any restrictions on selling to other customers.
- Review the pro forma financial statements (Exhibit 99.2) to understand the combined entity's capital structure post-acquisition.
- Assess the "penny stock" designation risks and the liquidity of the "TWRT" ticker on the OTC Bulletin Board.
- Monitor the company's ability to raise additional capital, as management explicitly states current cash is insufficient for 12 months of operations.