UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
________________________
FORM
10-QSB
Quarterly
Report Pursuant to Section 13 or 15(d)
of
the
Securities Exchange Act of 1934
For
the Quarter Period Ended
|
|
September
30,
2007
|
Commission
File No. 0-15807
|
BIOMETRX,
INC.
(Exact
name of Registrant as specified in its Charter)
Delaware
|
31-1190725
|
(State
or jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
|
|
500
North Broadway, Suite 204, Jericho,
NY
|
11753
|
(Address
of Principal Executive
Office)
|
(Zip
Code)
|
|
|
Registrant’s
telephone number, including area code: |
(516)
937-2828
|
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for a short-er period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
Yes
x No
o
The
number of shares outstanding of the Registrant’s Common Stock, $.001 par value,
as of November 12, 2007 was 14,401,715
PART
I - FINANCIAL INFORMATION
Item
1: Financial
Statements (Unaudited)
Condensed
Consolidated Balance Sheet
|
3
|
|
|
Condensed
Consolidated Statements of Operations
|
4
|
|
|
Condensed
Consolidated Statements of Cash Flows
|
5-6
|
|
|
Notes
to the Condensed Consolidated Financial Statements
|
7-13
|
BIOMETRX,
INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
September
30, 2007
|
(Unaudited)
|
Current
Assets:
|
|
|
|
|
Cash
|
|
$
|
23,218
|
|
Restricted
Cash
|
|
|
630,025
|
|
Deposit
on Inventory
|
|
|
1,800
|
|
Inventory
|
|
|
1,117,291
|
|
Prepaid
Expenses
|
|
|
28,748
|
|
Deferred
Finance Costs
|
|
|
84,279
|
|
Total
Current Assets
|
|
|
1,885,361
|
|
|
|
|
|
|
Property
and Equipment, net
|
|
|
149,246
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
Security
Deposit
|
|
|
17,045
|
|
Patents
|
|
|
864,500
|
|
Total
Other Assets
|
|
|
881,545
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
2,916,152
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
8%
Convertible Notes, net of unamortized discounts of
$850,196
|
|
$
|
998,804
|
|
Convertible
Forbearance Notes, net of unamortized discounts of
$193,719
|
|
|
193,719
|
|
Notes
Payable - Related Parties
|
|
|
400,000
|
|
Notes
Payable - Other
|
|
|
1,550,000
|
|
Accounts
Payable
|
|
|
1,296,001
|
|
Accrued
Taxes
|
|
|
236,397
|
|
Accrued
Interest
|
|
|
134,759
|
|
Accrued
Payroll
|
|
|
3,744
|
|
Customer
Deposits
|
|
|
28,600
|
|
Total
Current Liabilities
|
|
|
4,842,024
|
|
|
|
|
|
|
Long-Term
Liabilities:
|
|
|
-
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
4,842,024
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
Stockholders'
Deficit:
|
|
|
|
|
Preferred
Stock, $.01 par value; 10,000,000 shares
authorized
|
|
|
|
|
no
shares issued and outstanding
|
|
|
-
|
|
Common
Stock, $.001 par value; 25,000,000 shares
authorized
|
|
|
|
|
13,982,821
shares issued and outstanding
|
|
|
13,983
|
|
Additional
Paid-In-Capital
|
|
|
31,375,351
|
|
Deferred
Finance Costs
|
|
|
(754,914
|
)
|
Deferred
Compensation
|
|
|
(40,900
|
)
|
Deficit
Accumulated in the Development Stage
|
|
|
(32,519,392
|
)
|
|
|
|
|
|
Total
Stockholders' Deficit
|
|
|
(1,925,872
|
)
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
2,916,152
|
|
The
accompanying notes are an integral part of these financial
statements.
|
BIOMETRX,
INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
|
(Unaudited)
|
|
|
For
The Three
|
|
For
The Three
|
|
For
TheNine
|
|
For
The Nine
|
|
|
|
Months
Ended
|
|
Months
Ended
|
|
Months
Ended
|
|
Months
Ended
|
|
|
|
September
30, 2007
|
|
September
30, 2006
|
|
September
30, 2007
|
|
September
30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
- net
|
|
$
|
-
|
|
$
|
-
|
|
$
|
11,425
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Goods Sold
|
|
|
-
|
|
|
-
|
|
|
9,010
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Margin
|
|
|
-
|
|
|
-
|
|
|
2,415
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses
|
|
|
645,743
|
|
|
1,528,678
|
|
|
3,159,825
|
|
|
10,271,895
|
|
Research
and Development Expenses
|
|
|
7,974
|
|
|
19,622
|
|
|
231,974
|
|
|
662,066
|
|
Total
Costs and Expenses
|
|
|
653,717
|
|
|
1,548,300
|
|
|
3,391,799
|
|
|
10,933,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before Other Income (Expense)
|
|
|
(653,717
|
)
|
|
(1,548,300
|
)
|
|
(3,389,384
|
)
|
|
(10,933,961
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
446
|
|
|
-
|
|
|
3,271
|
|
|
-
|
|
Interest
Expense and Finance Costs
|
|
|
(1,530,922
|
)
|
|
(370,662
|
)
|
|
(4,535,748
|
)
|
|
(455,107
|
)
|
Unrealized
Loss on Marketable Securities
|
|
|
-
|
|
|
(355
|
)
|
|
-
|
|
|
(230
|
)
|
Total
Other Income (Expense)
|
|
|
(1,530,476
|
)
|
|
(371,017
|
)
|
|
(4,532,477
|
)
|
|
(455,337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
(2,184,193
|
)
|
|
(1,919,317
|
)
|
|
(7,921,861
|
)
|
|
(11,389,298
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock Dividend
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(8,975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss Allocated to Common Shareholders
|
|
$
|
(2,184,193
|
)
|
$
|
(1,919,317
|
)
|
$
|
(7,921,861
|
)
|
$
|
(11,398,273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Common Shares - Outstanding - Basic
|
|
|
12,225,340
|
|
|
7,992,266
|
|
|
10,309,041
|
|
|
7,262,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss per Common Share (Basic)
|
|
$
|
(0.18
|
)
|
$
|
(0.24
|
)
|
$
|
(0.77
|
)
|
$
|
(1.57
|
)
|
The
accompanying notes are an integral part of these financial
statements.
|
BIOMETRX
INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
|
|
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2007
|
|
|
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2006
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(7,921,861
|
)
|
$
|
(11,389,298
|
)
|
Adjustment
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
Non-Cash
Item adjustments:
|
|
|
|
|
|
|
|
Compensatory
Element of Stock and Warrant Issuances
|
|
|
2,123,873
|
|
|
8,586,693
|
|
Amortization
of Deferred Finance Costs
|
|
|
3,521,897
|
|
|
413,784
|
|
Depreciation
|
|
|
6,262
|
|
|
864
|
|
Unrealized
(Gain) Loss on Marketable Securities
|
|
|
-
|
|
|
230
|
|
|
|
|
|
|
|
|
|
Change
in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
Decrease
in Prepaid Expenses
|
|
|
7,316
|
|
|
-
|
|
(Increase)
in Inventory
|
|
|
(693,438
|
)
|
|
(507,881
|
)
|
Decrease
in Other Current Assets
|
|
|
-
|
|
|
54,732
|
|
Decrease
in Deposits on Inventory
|
|
|
55,397
|
|
|
-
|
|
(Increase)
in Security Deposits
|
|
|
-
|
|
|
(509
|
)
|
(Increase)
in Restricted Cash
|
|
|
(630,025
|
)
|
|
66,427
|
|
Increase
in Accounts Payable
|
|
|
712,527
|
|
|
512,008
|
|
Increase
in Accrued Liabilities
|
|
|
363,783
|
|
|
69,362
|
|
Increase
in Customer Deposits
|
|
|
28,600
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Operating Activities
|
|
|
(2,425,669
|
)
|
|
(2,193,588
|
)
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
|
|
(63,694
|
)
|
|
(60,166
|
)
|
Purchases
of Patents
|
|
|
(25,000
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Investing Activities
|
|
|
(88,694
|
)
|
|
(60,166
|
)
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from Issuance of 8% Convertible Notes
|
|
|
1,500,000
|
|
|
950,000
|
|
Proceeds
from Issuance of Notes Payable-Related Parties
|
|
|
400,000
|
|
|
|
|
Proceeds
from Issuance of Notes Payable-Others
|
|
|
925,000
|
|
|
455,000
|
|
Proceeds
from Issuance of Preferred Stock
|
|
|
-
|
|
|
650,000
|
|
Deferred
Finance Costs - 8% Convertible Notes Payable
|
|
|
-
|
|
|
(107,500
|
)
|
Repayments
of Notes Payable - Others
|
|
|
(130,000
|
)
|
|
|
|
Deferred
Finance Costs - Note Payable - Related Parties
|
|
|
(255,000
|
)
|
|
|
|
Proceeds
from Issuances of Common Stock
|
|
|
82,500
|
|
|
372,000
|
|
Commissions
Paid on Sales of Common Stock
|
|
|
-
|
|
|
(152,200
|
)
|
Net
Cash Provided by Financing Activities
|
|
|
2,522,500
|
|
|
2,167,300
|
|
|
|
|
|
|
|
|
|
Net
Increase (Decrease) in Cash
|
|
|
8,137
|
|
|
(86,454
|
)
|
|
|
|
|
|
|
|
|
Cash,
Beginning
|
|
|
15,081
|
|
|
184,116
|
|
|
|
|
|
|
|
|
|
Cash,
Ending
|
|
$
|
23,218
|
|
$
|
97,662
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash Flow Information:
|
|
|
|
|
|
|
|
Cash
Paid During the Period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
32,953
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Income
Taxes
|
|
$
|
-
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial
statements.
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued as Commissions on Sale of Common
Stock
|
|
$
|
-
|
|
$
|
656,489
|
|
|
|
|
|
|
|
|
|
Accrued
Commissions on Sales of Common Stock
|
|
$
|
-
|
|
$
|
431,706
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued for the Purchase of Patents
|
|
$
|
664,500
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock as payment for Accrued Officers'
Salaries
|
|
$
|
-
|
|
$
|
108,402
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock as payment for Deferred Finance
Costs
|
|
$
|
613,675
|
|
$
|
2,248,354
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock Warrants as payment for Deferred Finance
Costs
|
|
$
|
393,325
|
|
$
|
182,716
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock Warrants as payment for Deferred
Compensation
|
|
$
|
81,800
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Beneficial
Conversion Feature of 8% Convertible Notes
Payable
|
|
$
|
1,500,000
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Cashless
Exercise of Stock Options - Related Party
|
|
$
|
299,750
|
|
$
|
250,000
|
|
|
|
|
|
|
|
|
|
Accrued
Deferred Finance Costs
|
|
$
|
-
|
|
$
|
67,948
|
|
|
|
|
|
|
|
|
|
Application
of Loans Receivable-Officer Against Accrued
Compensation
|
|
$
|
-
|
|
$
|
201,598
|
|
|
|
|
|
|
|
|
|
Preferred
Stock Dividend
|
|
$
|
-
|
|
$
|
8,975
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock for Stock Based Compensation
|
|
$
|
655,500
|
|
$
|
1,726,000
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock as Payment of Accounts Payable
|
|
$
|
41,650
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock for Services
|
|
$
|
652,175
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock as payment on Notes
Payable-Others
|
|
$
|
55,000
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock on Conversion of 8% Convertible Notes
Payable
|
|
$
|
850,000
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock as Penalty Shares for
Non-Registration
|
|
$
|
-
|
|
$
|
558,000
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock to pay Notes Payable-Others and Accrued
Interest
|
|
$
|
116,560
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock as payment for Accrued Interest
Payable
|
|
$
|
32,500
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock Warrants as payment for Accrued Interest
Payable
|
|
$
|
29,060
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock for Prepaid Expenses
|
|
$
|
18,900
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial
statements.
|
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
1 - Basis of Presentation
In
the
opinion of the Company’s management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of
only
normal recurring adjustments) necessary to present fairly the information
set
forth therein. These financial statements are condensed and therefore do
not
include all the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements.
Results
of operations for interim periods are not necessarily indicative of the results
of operations for the full year.
The
Company has incurred a net operating loss of $7,896,686 for the nine months
ended September 30, 2007 and has a working capital deficit of $2,956,663
at
September 30, 2007. These factors raise substantial doubt about the Company’s
ability to continue as a going concern.
There
can
be no assurance that sufficient funds will be generated during the next year
or
thereafter from operations or that funds will be available from external
sources
as debt or equity financings or other potential sources. The lack of additional
capital could force the Company to curtail or cease operations and would,
therefore, have an adverse effect on its business. Furthermore, there can
be no
assurance that any such required funds, if available, will be available on
attractive terms or that they will not have significant dilutive effect on
the
Company’s existing stockholders.
The
accompanying condensed financial statements do not include any adjustments
related to the recoverability or classification of asset-carrying amounts
or the
amounts and classifications of liabilities that may result should the Company
be
unable to continue as a going concern.
The
Company is attempting to address its lack of liquidity by raising additional
funds, either in the form of debt or equity, or some combination thereof.
There
can
be no assurances that the Company will be able to raise the additional funds
it
requires.
During
the quarter ended June 30, 2007 the Company exited the development stage
as
their principal operations have commenced.
Reclassifications
Certain
items in these consolidated financial statements have been reclassified to
conform to the current period presentation.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
2 - Recently Issued Accounting Pronouncements
SAB
108
In
September 2006, the SEC staff issued Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements (SAB 108). SAB 108 was
issued
in order to eliminate the diversity in practice surrounding how public companies
quantify financial statement misstatements. SAB 108 requires that registrants
quantify errors using both a balance sheet and income statement approach
and
evaluate whether either approach results in a misstated amount that, when
all
relevant quantitative and qualitative factors are considered, is material.
The
Company has considered the SAB 108 to be not material.
SFAS
157
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157, Fair Value Measurements (SFAS 157). SFAS 157 provides a common definition
of fair value and establishes a framework to make the measurement of fair
value
in generally accepted accounting principles more consistent with comparable.
SFAS 157 also requires expanded disclosures to provide information about
the
extent to which fair value is used to measure assets and liabilities, the
methods and assumptions used to measure fair value, and the effect of fair
value
measures on earnings. SFAS 157 is effective for the Company’s year ended 2008,
although early adoption is permitted. The Company is assessing potential
effect
of SFAS 157 on its financial statements.
Note
3 - Property and Equipment
Property
and equipment at September 30, 2007 consist of the following:
Office
Equipment
|
|
$
|
88,552
|
|
Tooling
and Dies
|
|
|
70,955
|
|
|
|
|
159,507
|
|
Less:
Accumulated Depreciation
|
|
|
10,261
|
|
|
|
$
|
149,246
|
|
Depreciation
expense was $6,309 and $2,178 for the nine months ended September 30, 2007
and
2006, respectively.
Note
4 - Loss Per Share
Loss
per
common share is based upon the weighted average number of common shares
outstanding during the period. Diluted loss per common share is the same
as
basic loss per share, as the effective potentially dilutive securities
(warrants-7,533,995, convertible debt-3,382,437 at September 30, 2007 and
warrants-5,284,245, convertible debt-2,055,000 at September 30, 2006) are
anti-dilutive.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
5 - Patent
On
August
20, 2007 the Company executed an assignment of intellectual property rights
technology purchase agreement, whereby the Company acquired a patent for
a
biometric padlock. The Company paid consideration of $100,000 cash and 100,000
shares of common stock valued at $100,000. The cost of this patent will be
amortized over the remaining life of the patent which is approximately 13
years.
The Company also agreed to pay a royalty of $.37 per unit sold using the
intellectual property until the expiration date of the patent which is
approximately July 2021.
Note
6 - Notes Payable
Notes
payable at September 30, 2007 consist of the following:
Notes
payable to private investors; bearing interest at varying rates
from
|
|
|
|
|
10%
to 24.99% per annum and due May 15, 2008 and July 12,
2008.
|
|
$
|
1,550,000
|
|
On
August
27, 2007 the Company issued two Convertible Notes each in the principal amount
of $400,000 (the “Notes”) to Jane Petri and Joseph Panico. The Notes were issued
in consideration of new loans from the Lenders in the principal amount of
$87,500 each and the rollover and retirement of previously issued notes to
each
Lender in the principal amount of $312,500. In consideration of providing
the
new loan, the Company issued to each Lender 87,500 shares of its common stock,
87,500 common stock purchase warrants (the “Warrants”). The Company also amended
warrants that were previously issued to the Lenders between September 2006
and
November 2006 so as to extend the exercise date of these warrants to August
27,
2011 and amended an aggregate of 125,000 warrants that were issued to the
Lenders in December 2006 so as to reduce the exercise price of these warrants
from $3.00 to $1.00 and extend the exercise date of these warrants to August
27,
2011. In addition, the Company issued each Lender 57,500 additional Warrants
for
failing to pay off the old notes held by the Lenders which became due in
March
2007.
The
Notes
mature on May 27, 2008. The Notes bear interest at the rate of 10%, with
the
first interest payment due four (4) months from the date the Note is issued.
The
Lenders have the option to accept a prepayment of interest in shares of the
Company’s common stock based on the market value of the Company’s common stock
as defined in the Note. The Notes are convertible at the Option of the Lenders
into the Company’s common stock at the rate of $1.00 per share.
Each
Warrant entitles the Lender to purchase one share of the Company’s common stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on the fourth anniversary of the issuance
date. The Company may redeem the Warrants at a call premium equal to 120%
of the
exercise price of the Warrants in effect on such redemption date, provided
however, that the Company provides the Lenders with ten (10) days prior written
notice of the Company’s election to redeem all or a portion of the Warrants. The
Warrants contain provisions that protect the Lenders against dilution by
adjustment of the exercise price in certain events including, but not limited
to, stock dividends, stock splits, reclassifications, or mergers.
As
collateral for providing the loan the Company entered into a Pledge and Escrow
Agreement, whereby the Company through its wholly owned subsidiary bioMETRX
Technologies, Inc., pledged 500,000 shares of the Company’s common stock, such
shares will be deposited into escrow with the Lenders counsel.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
6 - Notes Payable (Continued)
In
addition, as part of the transaction, the Company entered into a piggy-back
registration rights agreement with both Lenders. Under the registration rights
agreement the Company agreed to register no later than April 15, 2008 all
shares
and underlying securities owned by the Lenders when it files its next
registration statement with the SEC.
The
Company also entered into a Royalty Agreement, whereby the Company agreed
to pay
the Lenders $0.13 on each biometric padlock sold, licensed, sublicensed or
otherwise distributed for cash utilizing the technology contained in a specific
Patent. The term of this agreement continues for the life of the patent or
until
August 31, 2017, whichever is later.
On
July
12, 2007, the Company entered into several agreements with Alpha Capital
Anstalt
(“Alpha”) whereby Alpha lent the Company $750,000 to be held in escrow pending
delivery of the Company’s garage door openers. The funds will be used to pay the
manufacturer of the garage openers once they have been completed and inspected
for shipment to fulfill certain outstanding customer purchase
orders.
In
connection with the transaction the Company executed a $750,000 secured
promissory note (“Note”). The Note bears interest at the rate of 24.99% per
annum, payable on the first day of each month and on the maturity date of
the
Note matures fifteen (15) days following the release of funds from the escrow
account to any person other than the holder. The Note may be prepaid all
or any
portion of the Note without penalty or premium.
In
addition to the Note, the Company and each of its subsidiaries entered into
Security Agreements with Alpha whereby each entity pledged all their assets
to
secure the Note. The Company issued Alpha a warrant (“Warrant”) to purchase
375,000 shares of the Company’s common stock at an exercise price of $1 per
share. The warrant is exercisable for a period of five (5) years.
As
a
condition to Alpha providing the loan to the Company, the Company’s CEO Mark
Basile entered into a Guaranty with Alpha whereby Mr. Basile agreed to guaranty
the Company’s obligations under the Note and all related documents.
In
connection with the transaction the Company paid a due diligence fee of $10,000
to Osher Capital Partners, LLC, paid Alpha a commitment fee of $22,500 and
agreed to pay Aplha’s legal fees in connection with this transaction not to
exceed $40,000.
Note
7 - Notes Payable - Related Parties
Notes
payable - related parties at September, 2007 consist of the
following:
Notes
payable to various officer and directors; bearing interest at
12-18%
per
annum
and are due as follows:
November
2007
|
|
$
|
50,000
|
|
December
2007
|
|
|
195,000
|
|
January
2008
|
|
|
25,000
|
|
April
2008
|
|
|
130,000
|
|
|
|
$
|
400,000
|
|
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
8 - Convertible Notes
On
June
29, 2006, the Company entered into a Securities Purchase Agreement, with
four
investors relating to the issuance and sale, in a private placement exempt
from
the registration requirements of the Securities Act of 1933, as amended,
of
units (the “Units”) consisting of 8% Convertible Notes in the principal amount
of $950,000 (“Notes”), Series A Common Stock Purchase Warrants (“A Warrants”)
and Series B Common Stock Purchase Warrants (“B Warrants”). In addition, the
company entered into an Exchange Agreement with the two investors who purchased
$650,000 of the Preferred Stock Units, previously reported on Form 8-K dated
April 28, 2006 whereby the Company agreed to issue the Units in exchange
for the
return and cancellation of the previously issued Preferred Stock Units.
Accordingly, at closing the Company issued its 8% Convertible Notes in the
aggregate principal amount of $1,600,000, 1,600,000 A Warrants and 800,000
B
Warrants to the Investors. The Company also issued an aggregate of 128,000
shares of its common stock valued at $172,800 to the investors representing
one
year’s of prepaid interest on the Notes.
The
Notes
mature 24 months from the closing. The Notes are convertible at the option
of
the holder into the Company’s common stock at the rate of $1.00 per share. The
Notes are mandatorily convertible into the Company’s common stock if the closing
bid price of the Company’s common stock is above $2.50 per share for ten (10)
consecutive trading days and if the daily volume for the same period exceeds
100,000 shares per day. The Company may redeem the Notes for 125% of the
principal amount of the Note together with all accrued and unpaid interest
provided that (i) an event of default has not occurred, and (ii) an effective
registration statement covering the shares underlying the Note
exists.
Each
A
Warrant entitles the holder to purchase one share of the Company’s common stock
at an exercise price of $1.75 per share commencing on the date of issuance
and
expiring at the close of business on the fifth anniversary of the issuance
date.
Each B Warrant entitles the holder to purchase one share of the Company’s common
stock at an exercise price of $.10 per share commencing 181 days after issuance
and expiring at the close of business on the fifth anniversary of the initial
exercise date. Notwithstanding the foregoing if the Company provides the
holder
of a B Warrant with validation and acknowledgement, in the form of bona fide
purchase order demonstrating that at least $1,000,000 of the Company’s products
have been ordered, other than its initial order from a national retailer
in the
amount of approximately 23,000 garage door opening units, within 181 days
after
the date of the Securities Purchase Agreement, the B Warrants shall
automatically terminate. The Company did not receive this purchase order.
Both
the A and B Warrants contain provisions that protect the holder against dilution
by adjustment of the exercise price in certain events including, but not
limited
to, stock dividends, stock splits, reclassifications, or mergers.
Pursuant
to the Selling Agent Letter Agreement between the Company and the Selling
Agent,
the Selling Agent was paid a cash fee of $95,000 (10% of the aggregate purchase
price of the Units sold to the subscribers) in addition to the $75,000 it
received, inclusive of $10,000 in expenses. The Company also issued the Selling
Agent a warrant to purchase 160,000 shares of its common stock on the same
terms
as the A Warrants. Such warrant was valued at $182,716 using the Black Scholes
model. In addition, the Company paid $15,000 to the Selling Agent’s counsel and
$32,500 to its counsel.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
8 - Convertible Notes (Continued)
The
Company recorded a combined debt discount in the amount of $1,215,200 to
reflect
the beneficial conversion feature of the convertible debt and the value of
the
warrants. The beneficial conversion feature, was recorded pursuant to Emerging
Issues Task Force (“ETIF”) 00-27: Application of EITF No. 98-5, “Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios,” to certain convertible instruments. In accordance
with EITF 00-27, the Company evaluated the value of the beneficial conversation
feature and recorded this amount ($207,200) as a reduction of the carrying
amount of the convertible debt and as an addition to paid-in capital.
Additionally, the fair value of the warrants ($1,008,000) was calculated
and
recorded as a further reduction to the carrying amount of the convertible
debt
and as addition to paid-in capital.
The
Company is amortizing the discount over the term of the debt. Amortization
of
the debt discount for the quarter ended September 30, 2007 was $210,249,
and
this amortization is recorded as interest expense.
As
part
of the Private Placement, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with each subscriber who
purchased Units in the Private Placement. Under the Registration Rights
Agreement, the Company is obligated to file a registration statement (the
“Registration Statement”) on Form SB-2, relating to the resale by the holders of
the Common Stock underlying the Notes, Warrants and Selling Agent Warrant.
If
such Registration Statement was not filed by July 14, 2006, or does not become
effective within 90 days after closing, the Company has agreed to pay to
the
investors 1.5% of the gross proceeds of the offering for each month in which
the
Company fails to comply with such requirements. The Company did not file
the
Registration Statement by July 14, 2006 and therefore is accruing 1.5% ($24,000)
of the gross proceeds for each month the Company fails to file the Registration
Statement. For the year ended December 31, 2006 the Company recorded $144,000
as
additional finance costs. In December 2006 the Company issued to the Convertible
Noteholders Forebearance Notes in the amount of $387,437 that included the
$144,000 liquidated damages.
On
October 10, 2006 the Company amended the exercise price of the 1,600,000
Class A
Warrants relating to the above referenced Private Placement from $1.75 to
$1.00.
On
September 21, 2006, the Company issued Jay Pitlake 50,000 shares of its common
stock valued at $65,000 as a finder’s fee in connection with the sale of the
convertible debentures.
The
Company entered into a Securities Purchase Agreement dated as of December
28,
2006, with three investors relating to the issuance and sale, in a private
placement (“Private Placement”) exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”), of units (the
“Units”) consisting of Senior Convertible Debentures in the principal amount of
$1,500,000 (“Debentures”), 1,500,000 Series A Common Stock Purchase Warrants (“A
Warrants”) and 750,000 Series B Common Stock Purchase Warrants (“B Warrants”).
The closing occurred on January 5, 2007.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
8 - Convertible Notes (Continued)
The
Debentures mature on June 29, 2008. The Debentures are convertible at the
option
of the holder into the Company’s common stock at the rate of $1.00 per share.
The Debentures are convertible at the option of the Company into the Company’s
common stock if the closing bid price of the Company’s common stock is above
$2.50 per share for ten (10) consecutive trading days and if the shares
underlying the Debentures are registered. The Company may redeem the Debentures
for 125% of the principal amount of the Debenture together with all accrued
and
unpaid interest provided that (i) an event of default has not occurred, (ii)
the
price of the Company’s common stock exceeds $1.50 and (ii) an effective
registration statement covering the shares underlying the Debentures
exists.
Each
A
Warrant entitles the holder to purchase one share of the Company’s common stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on the fifth anniversary of the issuance
date.
Each B Warrant entitles the holder to purchase one share of the Company’s common
stock at an exercise price of $.10 per share at any time after July 1, 2007
and
expiring at the close of business on the fifth anniversary of the initial
issuance date. Notwithstanding the foregoing if the Company provides the
holder
of a B Warrant with validation and acknowledgement on or before June 30,
2007
that the Company has both received and booked revenues for its products totaling
$1,000,000, the B Warrants shall automatically terminate. Both the A and
B
Warrants contain provisions that protect the holder against dilution by
adjustment of the exercise price in certain events including, but not limited
to, stock dividends, stock splits, reclassifications, or mergers.
The
Company recorded a combined debt discount in the amount of $1,500,000 to
reflect
the beneficial conversion feature of the convertible debt and the value of
the
warrants. The beneficial conversion feature, was recorded pursuant to Emerging
Issues Task Force (“EITF”) 00-27: Application of EITF No. 98-5, “Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios,” to certain convertible instruments. In accordance
with EITF 00-27, the Company evaluated the value of the beneficial conversion
feature and recorded this amount ($284,307) as a reduction of the carrying
amount of the convertible debt and as an addition to paid-in capital.
Additionally, the fair value of the warrants ($1,215,693) was calculated
and
recorded as a further reduction to the carrying amount of the convertible
debt
and as addition to paid-in capital.
The
Company is amortizing the discount over the term of the debt. Amortization
of
the debt discount for the quarter ended September 30, 2007 was $228,505,
and
this amortization is recorded as interest expense for the value of the warrants
and the value of the beneficial conversion feature.
Pursuant
to the Selling Agent Letter Agreement between the Company and First Montauk
Securities Corporation (“Selling Agent”), the Selling Agent was paid a cash fee
of $150,000 (10% of the aggregate purchase price of the Units sold to the
subscribers). The Company also issued the Selling Agent a warrant to purchase
150,000 shares of its common stock on the same terms as the A
Warrants.
As
part
of the Private Placement, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with each subscriber who
purchased Units in the Private Placement. Under the Registration Rights
Agreement, the Company is obligated to file a registration statement (the
“Registration Statement”) on Form SB-2, relating to the resale by the holders of
the Common Stock underlying the Debentures, Warrants and Selling Agent
Warrant.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
8 - Convertible Notes (Continued)
As
a
condition to closing, the Company obtained consents and waivers from the
investors of its private placement of $1,600,000 principal amount of Convertible
Notes (“Notes”) issued on June 29, 2006, pursuant to which each of the prior
investors agreed to waive any and all existing defaults relating to the Notes
and agreed to forebear from exercising any rights accruing upon default until
June 30, 2007. In connection therewith, the Company issued to the investors
Convertible Notes (“Forebearance Notes”) in the aggregate principal amount of
$387,437, representing liquidated damages due under the Notes. The Forebearance
Notes are convertible into the Company’s common stock at $1.00 per
share.
The
Company recorded a debt discount in the amount of $387,437 to reflect the
beneficial conversion feature of the forbearance convertible debt. The
beneficial conversion fature, was recorded pursuant to Emerging Issues Task
Force (“EITF”)00-27 Application of EITF No. 98-5. “Accounting for Convertible
Securities with Benefical Conversion Features or Contingently Adjustable
Conversion Ratios,” to certain convertible instruments. In accordance with EITF
00-27, the Company evaluated the value of the benefical conversion feature
and
recorded this amount as a reduction of the carrying amount of the convertible
debt and as an addition to paid-in capital.
The
Company is amortizing the discount over the term of the debt. Amortization
of
the debt discount for the quarter ended September 30, 2007 was
$64,573.
During
the three months ended September 30, 2007 noteholders converted $469,500
of
notes and $28,323 of interest into 497,823 shares of common stock.
Note
9 - Stockholders’ Deficit
Preferred
Stock
Our
certificate of incorporation authorizes the issuance of up to 10,000,000
shares
of $.01 par value preferred stock, with such designation rights and preferences
as may be determined from time to time by the Board of Directors. Our Board
of
Directors is empowered to, without shareholder approval, issue these shares
of
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders
of
our common stock. In the event of such issuances, the preferred stock could
be
utilized, under certain circumstances, as a method of discouraging, delaying
or
preventing a change in control of our company.
Common
Stock
On
January 2, 2007, the Company issued 40,000 shares of its common stock valued
at
$130,000 to Brad Schwab pursuant to a consulting agreement between the Company
and Mr. Schwab.
On
January 10, 2007, Ms. Yarde exercised 250,000 stock options at $.40 per share.
Ms. Yarde exercised the options via “cash-less exercise” and was issued 217,213
shares of common stock.
On
January 15, 2007 the Company issued 20,000 restricted shares of its common
stock
valued at $58,000 to ICR LLC for services.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
9 - Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
January 16, 2007, the Company issued an aggregate of 4,000 shares of its
common
stock valued at $11,600 to the owners of Vintage Filings, Inc. (Seth Farbman
2,000 and Shai Stern 2,000) for services rendered to the Company in connection
with its SEC filings. These shares were issued under the Company’s 2005 Equity
Incentive Plan.
On
January 22, 2007, the Company issued 50,000 shares of its common stock valued
at
$167,500 to Mark Basile as consideration for Mr. Basile providing the Company
his personal guarantee in connection with the opening of a Letter of Credit
in
the amount of $1,040,400.
On
January 23, 2007, the Company issued 70,000 shares of its common stock to
Mark
Basile in exchange for Mr. Basile foregoing $140,000 of his 2007 salary.
In
addition, the Company issued Mr. Basile 10,000 shares of its common stock
as a
bonus. These shares were valued at $248,000.
On
February 8, 2007, the Company issued an aggregate of 7,000 shares of its
common
stock valued at $18,900 to the owners of Vintage Filings, Inc. (Seth Farbman
3,500 and Shai Stern 3,500) in exchange for Vintage providing one (1) year
of
filing the Company’s reports with the SEC via the Edgar filing system. These
shares were issued under the Company’s 2005 Equity Incentive plan.
On
February 14, 2007, the Company issued 25,000 restricted shares of its common
stock to Barry and Marci Mainzer upon the exercise of a warrant for a like
number of shares. The exercise price of the warrant was $1.00 per share and
was
paid for by forgiving the principal payment of a $25,000 promissory note
due to
the Mainzers.
On
February 14, 2007 the Company issued 25,000 restricted shares of its common
stock valued at $62,500 to Dorothy Christofides upon conversion of a promissory
note in the principal amount of $30,000. As additional consideration for
Ms.
Christofides converting her promissory note, the Company issued her 20,000
common stock purchase warrants exercisable for a period of five years at
$2.00
per share.
On
March
1, 2007, the Company issued 75,000 restricted shares of its common stock
valued
at $153,750 to Interactive Resources Group, Inc. (“IRG”) pursuant to a
consulting agreement between the Company and IRG.
On
March
6, 2007, the Company issued Robert Jacobs 150,000 restricted shares of its
common stock valued at $334,500 as consideration for the purchase of a
patent.
On
March
9, 2007, the Company issued The Incredible Card Company 150,000 restricted
shares of its common stock valued at $330,000 as consideration for the purchase
of a patent the Company acquired in January 2007. Mr. Basile, the Company’s
Chairman and CEO, was a former officer and director of The Incredible Card
Company.
On
April
11, 2007, the Company’s Chief Operating Officer cashlessly exercised 200,000
warrants exercisable at $1.00. The market value of the Company’s common stock on
that date was $2.00. Accordingly, the Company issued 100,000 shares to Ms.
Yarde
pursuant to such cashless exercise. The stock was issued under the Company’s
Employee Stock Plan.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
9 - Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
April
11, 2007, the Company’s Chief Financial Officer cashlessly exercised 200,000
warrants exercisable at $1.05. The market value of the Company’s common stock on
that date was $2.00. Accordingly, the Company issued 95,000 shares to Mr.
Iler
pursuant to such cashless exercise. The stock was issued under the Company’s
Stock Incentive Plan
On
April
24, 2007, the Company issued 1,750 shares valued at $3,150 to the partners
of
its legal counsel, in consideration for legal services rendered in the ordinary
course of business. The stock was issued under the Company’s Stock Incentive
Plan.
On
April
24, 2007, the Company issued 140,000 shares of its common stock valued at
$252,000 and 140,000 warrants exercisable at $1.00 per share expiring in
five
years to Mark Basile, the Company’s President and CEO as consideration for
providing the Company a loan in the amount of $140,000.
On
May
21, 2007, the Company issued 50,000 shares of its common stock valued at
$70,000
and 50,000 warrants exercisable at $1 per share to Lorraine Yarde, the Company’s
Chief Operating Officer as consideration for providing the Company a loan
in the
amount of $50,000.
On
June
1, 2007, the Company issued 300,000 shares of its common stock valued at
$258,750 and 200,000 warrants exercisable at $1.50 per share to IRG as
consideration for performing shareholder relations and other financial advisory
services for a six month period. The aggregate value of such services based
upon
valuations of the Company’s stock at this time was $340,550.
On
June
11, 2007, the Company received notification from Nite Capital to convert
$100,000 of its convertible note into 100,000 shares of common stock. Nite
Capital also notified the Company of its intent to exercise 75,000 Series
B
warrants exercisable at $.10. The company received $7,500 from proceeds from
this exercise.
On
June
15, 2007, the Company issued 45,000 shares of its common stock valued at
$74,250
and 45,000 warrants exercisable at $1 per share to Lorraine Yarde, the Company’s
Chief Operating Officer as consideration for providing the Company a loan
in the
amount of $45,000.
On
June
18, 2007, the Company awarded Lorraine Yarde 150,000 shares of its common
stock
valued at $240,000 as a bonus for securing an increased purchase order from
Home
Depot and an additional purchase order from MasterLOCK.
On
June
18, 2007, the Company issued 20,000 shares valued at $32,000 to an independent
certified public accountant as consideration for accounting services in
connection to the Company’s upgrading its accounting system and electronic data
interchange.
On
June
18, 2007, the Company issued 75,000 shares of its common stock valued at
$120,000 and 75,000 warrants exercisable at $1 per share to The Naples Trust,
of
which the Company’s Chief Executive Officer is a related party as consideration
for proving the Company a loan in the amount of $75,000.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
9 - Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
June
21, 2007, the Company issued 20,000 shares of its common stock valued at
$40,000
to Black Dog Communications as consideration for public relations services
to
the Company.
On
June
25, 2007, the Company received notification from Linden Growth Partners of
its
intent to convert $300,000 of its convertible note into 300,000 shares of
common
stock.
On
June
25, 2007, the Company received notification from Linden Growth Partners Master
Fund of its intent to convert $450,000 of its convertible note into 450,000
shares of common stock.
On
June
27, 2007, the Company issued the Company’s legal counsel 5,000 shares of common
stock valued at $6,500 under the Company’s Employee Incentive Plan in
consideration for $6,000 of legal services performed.
On
June
28, 2007, the Company issued 75,000 shares of its common stock valued at
$75,000
and 75,000 warrants exercisable at $1 per share to J. Richard Iler, the
Company’s Chief Financial Officer as consideration for providing the Company a
loan in the amount of $75,000. $50,000 was advanced during June 2007 and
$25,000
was advanced in July 2007.
On
July
11, 2007 the Company granted 375,000 warrants exercisable at $1.00 to Alpha
Capital in consideration of its loan to the Company to be expressly used
for
manufacturing of the Company’s MasterLOCK™ smartTouch Garage Door Opener. The
proceeds from receivable financing will be used to repay this loan.
On
July
13, 2007, the Company issued 50,000 shares of its common stock to Bridgepointe
Master Fund Ltd. upon the conversion of $50,000 principal amount of a
convertible debenture issued to Bridgepointe Master Fund in the aggregate
principal amount of $1,000,000. The convertible debenture converts into the
Company’s common stock at $1.00 per share.
On
July
13, 2007, the Company issued 25,000 shares of its common stock to Alpha Capital
AG. upon the conversion of $25,000 principal amount of a convertible note
issued
to Alpha Capital in the aggregate principal amount of $400,000. The convertible
note converts into the Company’s common stock at $1.00 per share.
On
July
13, 2007, the Company issued Nite Capital 75,000 shares of its common stock
upon
the exercise of warrants at $0.10 per share.
On
July
24th,
2007,
the Company issued 20,222 shares of common stock as payment in kind for interest
payment due to Bridgepointe Master Fund, Ltd. on a $1,000,000 convertible
note
issued to the Company. on January 5, 2007.
On
July
25th,
2007,
the Company issued 50,000 shares of common stock as payment in kind for fees
related to a factoring commitment to BLX, Funding.
On
July
25th, 2007, the Company issued 25,000 shares of its common stock and 25,000
warrants exercisable at $1.00 per share to Mark Basile, the Company’s Chief
Executive Officer as consideration for providing the Company a loan in the
amount of $25,000.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
9 - Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
July
25th, 2007, the Company issued 150,000 shares of its common stock to Mark
Basile
as consideration for Mr. Basile providing the Company his personal guarantee
in
connection with the opening of an escrow agreement in the amount of
$750,000.
On
August
1, 2007, the Company issued 8,365 of its common stock to A2E Technologies
as
payment of $9,535.75 due A2E Technologies pursuant to a Service Level Agreement
dated March 16, 2007.
On
August
15, 2007, the Company issued 150,000 shares of its common stock to Linden
Growth
Partners L.P. upon the exercise of warrants exercisable at $0.10 per
share.
On
August
15, 2007, the Company issued 225,000 shares of its common stock to Linden
Growth
Partners Master Fund L.P. upon the exercise of warrants exercisable at $0.10
per
share.
On
August
16, 2007 the Company issued 22,269 shares of its common stock to Osher Capital
Partners LLC upon the cashless exercise of 25,000 warrants exercisable at
$0.10
per share.
On
August
24, 2007 the Company issued 178,152 shares of its common stock to Alpha Capital
AG upon the cashless conversion of 200,000 warrants exercisable at $0.10
per
share.
On
August
30, 2007 the Company issued 87,500 shares of its common stock and 87,500
warrants exercisable at $1.00 each to Joe Panico and Jane Petri respectively
as
an inducement to renew with an extension to maturity to May 15th,
2008
and increase a loan to the Company in the amount of $800,000.
On
August
31, 2007 the Company issued 62,500 shares of its common stock upon the exercise
of 62,500 warrants exercisable at $0.10 to Lighthouse Capital Insurance
Company.
On
August
31, 2007 the Company issued 62,500 shares of its common stock upon the exercise
of 62,500 warrants exercisable at $0.10 to Peter Thomson.
On
September 7, 2007, the Company issued to Bridgepointe Master Fund, Ltd. 435,342
shares of its common stock upon the cashless exercise of 500,000 warrants
exercisable at $0.10 per share.
On
September 7, 2007, the Company issued 6,647 shares as payment in kind for
interest payment due to Bridgepointe Master Fund, Ltd. on a $1,000,000
convertible note issued to the Company. on January 5, 2007.
On
September 11, 2007, the Company issued an aggregate of 50,000 shares of its
common stock to Bridgepointe Master Fund, Ltd. upon the conversion of $50,000
principal amount of a convertible note issued to Bridgepointe Master Fund,
Ltd.
in that amount. The convertible note converted into the Company’s common stock
at $1.00 per share
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
9 - Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
September 12, 2007, the Company issued an aggregate of 81,193 shares of its
common stock to Whalehaven Capital Fund Limited upon the conversion of $81,193
of principal and interest amount of a convertible note issued to Whalehaven
Capital Fund Ltd. The convertible note converted into the Company’s common stock
at $1.00 per share.
On
September 12, 2007 the Company issued 250,000 shares of its common stock
upon
the exercise of 250,000 warrants exercisable at $0.10 to Whalehaven Capital
Fund, Ltd.
2005
Equity Incentive Plan
Effective
December 20, 2005, the Board of Directors approved the formation of the 2005
Equity Incentive Plan (“the Plan”) to benefit the Company’s key employees
(including its directors, officers and employees) as well as consultants
of the
Company and its affiliates.
On
January 5, 2006 the Company amended its 2005 Equity Incentive Plan by allowing
for a “cashless exercise” of stock options. When this provision is utilized, the
shareholder will return the cost of the exercise of the option in shares
back to
the Company.
The
aggregate number of shares that may be issued under the Plan is 1,250,000.
The
Plan permits the Company to make awards of stock options, stock appreciations
rights, warrants, stock awards and other equity awards.
Stock
option share activity and weighted average exercise price under these plans
for
the six months ended September 30, 2007 are as follows:
|
|
|
2007
|
|
2006
|
2005
Equity Incentive Plan
|
|
|
Number
of Options
|
|
Weighted Average
Exercise
Price
|
|
Number
of Options
|
|
Weighted Average
Exercise
Price
|
Balance
- January 1,
|
|
|
287,500
|
|
|
|
|
$
|
1.65
|
|
|
375,000
|
|
|
|
|
$
|
2.00
|
|
Options
Granted
|
|
|
-
|
|
|
|
|
|
-
|
|
|
350,000
|
|
|
|
|
$
|
1.00
|
|
Options
Exercised
|
|
|
(100,000
|
)
|
|
|
|
|
1.00
|
|
|
(250,000
|
)
|
|
|
|
$
|
1.00
|
|
Balance
- September 30, 2007
|
|
|
187,500
|
|
|
|
|
$
|
2.00
|
|
|
475,000
|
|
|
|
|
$
|
1.79
|
|
|
|
|
2007
|
|
2006
|
|
|
|
Number
of Options
|
|
Weighted Average
Exercise
Price
|
|
Number
of Options
|
|
Weighted Average
Exercise
Price
|
Balance
- January 1,
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
$
|
|
|
Options
Granted 2007
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
$
|
|
|
Options
Exercised 2007
|
|
|
|
)
|
|
|
|
|
|
|
|
|
)
|
|
|
|
$
|
.40
|
|
Balance
- September 30,
|
|
|
|
|
|
|
|
$
|
2.00
|
|
|
|
|
|
|
|
$
|
|
|
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
9 - Stockholders’ Deficit (Continued)
The
following table summarized information about stock options at September
30, 2007:
|
|
|
Options
Outstanding
|
|
Options
Exercisable
|
|
Range
of Exercise Prices
|
|
Number
Outstanding
|
|
Weighted
Average Remaining Contractual Life (Years)
|
|
Weighted
Average Exercise
Price
|
|
Number
Exercisable
|
|
Weighted
Average
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.00
- $1.99
|
|
|
600,000
|
|
|
3.95
|
|
$
|
1.28
|
|
|
600,000
|
|
$
|
1.28
|
|
$2.00
|
|
|
250,000
|
|
|
2.75
|
|
$
|
2.00
|
|
|
250,000
|
|
$
|
2.00
|
|
$3.00
|
|
|
250,000
|
|
|
2.75
|
|
$
|
3.00
|
|
|
250,000
|
|
$
|
3.00
|
|
$4.00
|
|
|
250,000
|
|
|
2.75
|
|
$
|
4.00
|
|
|
250,000
|
|
$
|
4.00
|
|
$5.00
|
|
|
250,000
|
|
|
2.75
|
|
$
|
5.00
|
|
|
250,000
|
|
$
|
5.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.00
- $5.00
|
|
|
1,600,000
|
|
|
3.20
|
|
$
|
2.67
|
|
|
1,600,000
|
|
$
|
2.67
|
|
Warrants
|
|
2007
|
2006
|
|
|
|
Number
of Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
of Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
Balance
- January 1,
|
|
|
3,626,495-
|
|
$
|
1.17-
|
|
|
475,495
|
|
$
|
2.62
|
|
Warrants
Granted
|
|
|
3,670,000
|
|
|
0.70
|
|
|
3,015,000
|
|
|
1.20
|
|
Warrants
Exercised
|
|
|
(1,550,000
|
)
|
|
0.10
|
|
|
(281,250
|
)
|
|
.80
|
|
Balance
- September 30,
|
|
|
5,746,495
|
|
$
|
1.16
|
|
|
3,209,245
|
|
$
|
1.30
|
|
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
9 - Stockholders’ Deficit (Continued)
Warrants
Outstanding
|
|
Warrants
Exercisable
|
Range
of
Exercise
Price
|
|
Number
Outstanding
|
|
Weighted
Average Remaining Contracted Life (Years)
|
|
Weighted
Average
Exercise
Price
|
|
Number
Exercisable
|
|
Weighted Average
Exercise
Price
|
$
.01-.99
|
|
43,250
|
|
4.06
|
|
$.06
|
|
43,250
|
|
$
.06
|
$1.00-1.99
|
|
5,289,000
|
|
4.07
|
|
$1.04
|
|
5,289,000
|
|
$
1.04
|
$2.00-2.99
|
|
235,198
|
|
4.01
|
|
$2.13
|
|
235,198
|
|
$
2.13
|
$3.00-3.99
|
|
52,698
|
|
2.75
|
|
$3.40
|
|
52,698
|
|
$
3.40
|
$4.00
|
|
126,349
|
|
3.24
|
|
$4.00
|
|
126,349
|
|
$
4.00
|
|
|
5,746,495
|
|
4.02
|
|
$1.16
|
|
5,746,495
|
|
$
1.16
|
Note
10 - Commitments and Contingencies
Lease
Obligations
The
Company operates its business in leased facilities. The Company currently
leases
approximately 3719 square feet for its corporate office facilities located
at
500 North Broadway, Jericho, New York for $8,523 with increases annually
on
January 31. The lease expires January 31, 2010.
Approximate
future minimum commitments under these leases are as follows:
April
1, 2007 - December 31, 2007
|
|
$
|
52,927
|
|
January
1, 2008 - December 31, 2008
|
|
|
109,249
|
|
January
1, 2009 - December 31, 2009
|
|
|
113,073
|
|
January
1, 2010 - January 31, 2010
|
|
|
9,449
|
|
|
|
$
|
284,698
|
|
Rent
expense under the office leases was approximately $96,000 and $79,000 for
the
nine months ended September 30, 2007 and 2006, respectively.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
10 - Commitments and Contingencies (Continued)
Engineering
Contract
On
March
16, 2007 The Company entered into a Service Level Agreement with A2E
Technologies (“A2E”), (the “Agreement”). Pursuant to the Agreement, A2E will
provide engineering and development services to be utilized in bioMETRX’
products. Under the terms of the Agreement, bioMETRX has committed to pay
A2E a
minimum two hundred thousand dollars ($200,000) annually for its services,
payable fifty thousand dollars ($50,000) every three calendar months. In
return
for this commitment, A2E will provide its services to bioMETRX at a discounted
rate. In addition to the cash payments, bioMETRX will also pay A2E $25 an
hour
in restricted common stock, payable no later than 30 days following each
three
calendar month period. The number of shares will be determined by multiplying
the number of hours billed by A2E during the three month period by twenty-five
(25) and divided by the current market price of bioMETRX’ common stock. The term
of the Agreement is one (1) calendar year from the date of the
Agreement
Legal
Proceedings
On
March
7, 2007 the Company’s subsidiary, bioMETRX Technologies Inc. became the subject
of a complaint, by two individuals, a former employee/officer and consultant
with whom it had previously had severed its business relationship. The complaint
was filed in the Supreme Court of the State of New York, County of Nassau.
The
plaintiffs allege damages arising from certain inducements which were relied
upon to their detriment.
The
Company considers these complaints to be baseless and without merit and expects
to file a Motion to Dismiss both claims of both plaintiffs and intends to
vigorously pursue damages in the course of its defense of this complaint
and
other previous acts of the plaintiffs.
Note
11- Subsequent Events
Common
Stock
On
July
6, 2007, Bridgepointe Master Fund, Ltd. converted $50,000 of its convertible
note into 50,000 shares of common stock.
On
July
10, 2007, Alpha Capital AG converted $25,000 of its convertible note into
25,000
shares of common stock.
On
July
11, 2007 the Company granted 375,000 warrants exercisable at $1.00 to Alpha
Capital in consideration of its loan to the Company to be expressly used
for
manufacturing of the Company’s MasterLOCK™ smartTouch Garage Door Opener. The
warrant is exercisable for a period of 5 years.
On
July
12, 2007, Peter Thompsen converted $125,000 of its convertible note into
125,000
shares of common stock.
On
July
12, 2007, Lighthouse Capital converted $125,000 of its convertible note into
125,000 shares of common stock.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STSTEMENTS
Note
11- Subsequent Events (Continued)
Common
Stock (Continued)
On
July
24, 2007, the Company issued 20,222 shares of common stock for interest due
to
Bridgepointe Master Fund, Ltd. on a $1,000,000 convertible note issued to
the
Company. On January 5, 2007.
During
July 2007, the Company issued 50,000 shares as payment for fees related to
a
factoring commitment to BLX, Funding.
On
July
25, 2007, the Company issued 25,000 shares of its common stock and 25,000
warrants exercisable at $1.00 per share to Mark Basile, the Company’s Chief
Executive Officer as consideration for providing the Company a loan in the
amount of $25,000.
On
July
25, 2007, the Company issued 150,000 shares of its common stock to Mark Basile
as consideration for Mr. Basile providing the Company his personal guarantee
in
connection with the opening of an escrow agreement in the amount of
$750,000.
On
August
1, 2007, the Company issued 8,365 shares of its common stock to A2E Technologies
as payment of $9,535.75 due A2E Technologies pursuant to a Service Level
Agreement dated March 16, 2007.
On
October 10, 2007, the Company issued 16,823 shares of common stock to Whalehaven
Capital Fund Limited pursuant to the conversion of $16,448 in principal of
it’s
Convertible Note and $375 of accrued interest.
On
October 11, 2007, the Company issued 218,500 restricted shares to various
employees of the Company of which 150,000 restricted shares were issued to
officers of the Company.
On
October 15, 2007 the Company issued 100,000 restricted shares of common stock
in
aggregate to Richard Quintana and Michael Niccole pursuant to the Companies
acquisition of a patent.
On
October 17, 2007 the Company issued 10,000 restricted shares of common stock
to
it legal counsel Sommer and Schneider for legal services rendered on behalf
of
the Company.
On
November 6th,
2007
the Company issued 114,545 restricted shares of common stock pursuant to
the
cashless exercise of 150,000 warrants exercisable at $.10.
On
November 6, 2007 the Company issued 20,000 restricted shares of common stock
to
its legal counsel, Sommer and Schneider for legal services rendered on behalf
of
the Company.
On
November 6, 2007 the Company issued 150,000 restricted shares of common stock
each respectively to Board members, Mark Basile, Lorraine Yarde and Richard
Iler
as consideration for services rendered in the performance of their duties
as
directors of the Company.
Item
2:
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
Operations
The
Company designs, develops, engineers and markets biometrics-based products
for
the consumer home security and consumer electronics markets. The Company’s
executive offices are located in Jericho, New York.
Originally
founded in 2001, bioMETRX is focused on developing simple-to-use,
cost-efficient, finger-activated, consumer lifestyle products under the
trade
name smartTOUCH™. The Company’s current and future product lines includes
biometrically enabled residential door locks, alarm keypads, thermostats,
garage/gate openers, padlocks, automobile access and ignition systems,
medical
crash carts and industrial medicine cabinets. Our products utilize finger
recognition technology designed to augment or replace conventional security
methods such as keys, keypads, and PIN numbers.
The
Company operates its business through three (3) wholly owned subsidiaries,
bioMETRX Technologies Inc., which conducts the product design and engineering,
smartTOUCH Consumer Products, Inc., the consumer-based marketing and
sales
group, and smartTOUCH Medical, Inc. which is designing and will market
medical
industry products.
The
home
security industry consists of garage door manufacturers, key and lock
manufacturers and central station alarm monitoring companies, representing
a $25
billion global market. bioMETRX develops market-specific products in
this area
which are being sold through retailers, dealers and directly to consumers
in the
United States. The Company’s first product, the garage door opener, also known
as the SmartTOUCH™ GDO, available at Home Depot stores.
The
Company has also developed, and is further developing several additional
finger-activated products including thermostats, doorlocks and other
computer
peripheral and home security products. These products are, and are expected
to
be, marketed directly to the consumers as well as small box retailers,
restaurant chains and small business owners. These products do, and will
provide
consumers and small business owners increased control over various aspects
that
effect energy as well as securing their homes and digital
information.
At
this
point we cannot offer a specific date or assurances that the release
of these
other products will result in any meaningful revenues, but the Company
continues
to develop and engineer new products that it expects to add to its product
line
over the next 24 months.
bioMETRX,
to date, has introduced its products and services commercially and is considered
an entry level market vendor of consumer-based biometric products. bioMETRX
has
limited assets, significant liabilities and limited business operations, though
it has realized meaningful revenues from its initial product, the Company
continues to realize losses from operations and has no assurances that further
revenues from this initial product will create positive cashflow to support
operations.
Management’s
plan of operations for the next twelve months is to raise additional capital,
complete further development of its product line and continue marketing the
Company’s products and services through its disparate distribution channels. The
Company has recently executed a licensing agreement as well as a
co-marketing/co-development agreement with MasterLock™ for its garage door
opener and other products whereby the garage door opener will be marketed
under
the MasterLock™ brand and the companies will jointly undertake development of
new products. The Company expects it will require $8,000,000 - $10,000,000
over
the next 12 months to accomplish these goals, though it is anticipated that
this
will incrementally be raised in stages,and expects to be financed by the
private
sale of its securities and lines of credit with commercial banks for continuous
manufacturing output of its products.. Home Depot has increased its unit
orders
to above 20,600 and the Company has received a further order of 5,000 units
for
its garage door opener from MasterLOCK. The Company has shipped its initial
products to the Home Depot and will realize revenues of nearly $1,500,000
during
the fourth quarter. The Company has received funding by one of its institutional
investors for advance purchase of components in the amount of $750,000. Further
as the Company replenishes orders and maintain inventories, it will require
additional financing until it is internally generating positive cash flow.
There
are no firm commitments on anyone’s part to invest in the Company and if it is
unable to obtain financing through the sale of its securities or other
financing, the Company’s products and services may never be commercially sold.
The Company’s balance sheet continues to reflect negative shareholder equity,
though it has been reduced through the conversion of debt to equity. For
the
foreseeable year, the Company will be solely reliant on the attraction of
additional equity in order for it to reflect shareholder equity unless revenues
should exceed expectations for the current market ready products or other
products planned for release during this fiscal year 2007. Should the
Company prevail in its efforts to attract capital and fulfill its delivery
requirements of its initial orders, it will require strict budget adherence
in
order to manage the many demands for capital.
Our
corporate address is 500 North Broadway, Suite 204, Jericho, New York 11753,
our
telephone number is (516) 937-2828 and our facsimile number is (516)
937-2880.
Current
Market Outlook - Target Markets/Applications
Management
believes that there is a unique opportunity in the consumer electronics market
for the incorporation of biometrics technology in multiple devices, requiring
personal identification or key access. Prospective home/office security and
electronics devices includes the introduction of “biometric” access controls on
anything that presently requires a key, keypad or Personal Identification Number
(“PIN”). bioMETRX is the first company to offer biometric security and
electronics products for the home consumer market at any significant
level.
We
are
focused on developing simple to use, cost efficient, finger activated consumer
electronics products principally under the trade name “smartTOUCH Ô”.
Our
current and prospective consumer products include biometrically enabled and
secure residential garage/gate door openers/locks, central station alarm pads,
padlocks, door locks and thermostats.
Although
market data on the use of automatic garage door openers is limited, management
estimates that there are 30 million homes in the United States equipped with
automatic garage doors. For many families, the automatic garage door opener
has
made the garage door the most frequently used door for entering and exiting
the
home. Consequently, there is a large potential market for the smartTOUCH™ Garage
Door Opener which meets the consumer need for security and convenience combined.
We have been awarded a patent for this device with the United States Patents
and
Trademark Office in January, 2007.
During
the quarter ended March 31, 2006 we received initial purchase orders for the
smartTOUCH™ Garage Door Opener and purchase orders were subsequently modified in
January 2007 in the amount of 17,340 units from The Home Depot. The Home Depot
has also contracted to purchase a minimum quantity per annum from the company.
The Company has been suffering from undercapitalization which has caused
substantial delays in manufacturing this product in the quantities needed to
fulfill orders. A recent re-issuance of the purchase order has increased the
order to 20,464 units and allows for early fall delivery which has substantially
been fulfilled and further deliveries are forthcoming. Management has secured
some manufacturing financing facilities with a prior investor in the Company,
and is continuing its efforts to further secure additional financing to keep
up
with the demand for the product.
As
a
result of its exclusive co-marketing agreement with MasterLock™, the GDO will be
marketed under the co-brand name MasterLock™ smartTOUCH™ which the Company
expects to accelerate product sell-through.
To
date,
in addition to the retail orders, the Company has received approximately 1,600
direct consumer on-line orders for the GDO unit and has shipped a portion of
these orders to customers in the last 60 days representing nearly $50,000 in
revenues.
We
have
initiated large scale manufacturing of the garage door opener with a third
party
contract manufacturer located in the United States with manufacturing operations
in China. An existing investor has provided financing that assures the
manufacturer of payment upon delivery and the Company is in discussions with
other investors, as well as more conventional financing groups, to finance
future purchase orders and set up credit facilities to provide funding for
continuing manufacturing volumes based upon current demand for the product.
However, the Company cannot guarantee that any financing will be secured. The
Company has also established limited credit facilities with our major component
suppliers.
The
Company has also acquired a patent protecting the biometric security application
of an electronic thermostat and biometric application to a padlock.
Management
estimates that approximately 40 million thermostats are sold in the United
States annually, 45% of which are electronic models, either programmable or
non-programmable. Management expects that there will be an increase in the
sale
of electronic thermostats as several states enact laws addressing the sale
and
disposal of mercury-based thermostats, some are even offering rebate programs
to
consumers that replace mercury thermostats with new energy-efficient
programmable models.
Other
smartTOUCH Ô
Consumer Products
The
smartTOUCH Ô
line of
products under development includes products that can be used to secure lockers,
gates, automobiles, trailers and other household and computerized electronic
products.
While
the
Company’s main current focus is to bring to market consumer-based products
through our relationship with MasterLock, we also expect to dedicate additional
focus on the healthcare industry over the next 12 months. Government legislation
surrounding the integrity, confidentiality and privacy of patient data was
enacted under HIPAA. HIPAA requires the healthcare industry to restructure
current information technology (“IT”) infrastructures and methods. We are
identifying opportunities to develop biometric products and solutions for end
users in the healthcare fields, as well as enabling biometric technology for
original equipment manufacturers (“OEMs”) and application developers to
incorporate into their offerings to assist healthcare organizations working
towards meeting legislative demands, while increasing efficiencies and user
convenience and lowering overall administrative costs and risks associated
with
passwords, PINs and keys. To that end, the Company is exploring a number of
prospective medical products, some of which may become available by late 2008.
The Company acquired a patent for the biometric storage and retrieval of an
electronic medical record in January, 2007.
For
the three months ended September 30, 2007 and 2006
For
quarter ended September 30, 2007, bioMetrx did not generate any revenues.
During the quarter ended September 30, 2007, bioMetrx had net losses
before other income (expense) totaling $ 653,717. For
the
quarter ending September 30, 2007, bioMetrx’ general and administrative expenses
totaled $
645,743
or 98.8%
of total expenses, while for the three months ended September 30, 2006 general
and administrative expenses totaled $
1,528,678 or
98.7 %
of total expenses. For quarter ended September 30, 2007, bioMetrx incurred
stock-based compensation of $105,436 or 16.1% of expenses, as compared to
$283,701 or 15.3% of expenses during the three months ended September 30, 2006.
Research and development costs were $ 7,974 or
1.2 %
of total expenses incurred in the period for quarter ending September 30, 2007,
while research and development costs during the three months ended September
30,
2006 totaled $ 19,622 or
1.3%
of total expenses.
For
the nine months ended September 30, 2007 and 2006
During
the nine months ended September 30, 2007, the Company generated a nominal
$11,425 in revenues. However, beginning October 1, 2007, the Company began
shipping orders of its GDO to The Home Depot and directly to customers from
on-line orders, the Company expects to generate approximately $1,450,000 in
revenues from these shipments.
During
the nine months ended September 30, 2007, net losses before other income
(expense) totaled $ 3,389,384.. For the nine months ending September 30,
2007, bioMETRX’ general and administrative expenses totaled $3,159,825, or 93.2
% of total operating expenses. During the same nine month period in 2006,
general and administrative expenses totaled $10,271,895,or 93.9 % of total
operating expenses. The decrease was mostly attributable to
an decrease in professional expenses relating to general corporate matters.
For the nine months ending September 30, 2007 we incurred salaries of $715,905
or 21.1% of total operating expenses as compared to the nine months ended
September 30, 2006 of $786,333 or 7.2% of total operating expenses.
For
the
nine months ending September 30, 2007, interest expense and finance costs
were $4,535,748 as compared to $455,107 for the nine months ending
September 30, 2006.
Research
and development expenses for the nine months ending September 30, 2007 was
$
231,974 compared to $ 662,066 for the same period in 2006.
Liquidity
and Capital Resources
As
of
September 30, 2007 bioMETRX had total assets of $2,916,152 and total current
assets of $ 1,885,361. At September 30, 2007 bioMETRX had total liabilities
of
$4,842,024 and total current liabilities of $4,842,024 bioMETRX’s had negative
working capital at September 30, 2007 of $2,956,663 and an equity deficit of
$1,925,872. Because of these factors, the Company’s ability to continue to
operate and its future remains in question as a going concern unless additional
capital is contributed or until such time as it generates revenues and become
cash flow positive.
On
October 28, 2005 the Company sold 562,500 shares and 562,500 warrants for an
aggregate purchase price of $450,000 or $.80 per share without allocating any
part of the purchase price for the warrants.
The
warrants entitle the holder to purchase shares of the Company’s common stock for
a period commencing on the date of issuance and expiring on December 15, 2005
at
an exercise price of $.80 per share.
From
December 2005 to February 2006, the Company sold an aggregate of 746,250 shares
to Kuhn for an aggregate purchase price of $597,000 or $.80 per share. As part
of this transaction, Kuhn exercised 562,500 warrants, which were issued to
him
on October 28, 2005 in connection with a previously reported financing. In
addition to the exercise of the warrants, Kuhn provided the Company with an
additional $147,000 and the Company agreed to issue him the shares at the same
purchase price ($.80 per share) as the warrants.
On
March
21, 2006, the Company received debt financing in the aggregate amount of
$100,000 from Jane Petri and Joseph Panico. The principal and interest of 12%
per annum was due on June 21, 2006. The note carried a default rate of 18%
per
annum. In addition, the Company issued 25,000 restricted shares of common stock
to Petri and Panico as debt issuance costs at a cost of $71,250.
On
June
29, 2006, the Company entered into a Securities Purchase Agreement dated as
of
June 29, 2006, with four investors relating to the issuance and sale, in a
private placement (“Private Placement”) exempt from the registration
requirements of the Securities Act of 1933, as amended (the “Securities Act”),
of units (the “Units”) consisting of 8% Convertible Notes in the principal
amount of $950,000 (“Notes”), Series A Common Stock Purchase Warrants (“A
Warrants”) and Series B Common Stock Purchase Warrants (“B Warrants”). In
addition, the company entered into an Exchange Agreement with the two investors
who purchased $650,000 of the Preferred Stock Units, previously reported on
Form
8-K dated April 28, 2006 whereby the Company agreed to issue the Units in
exchange for the return and cancellation of the previously issued Preferred
Stock Units. Accordingly, at closing the Company issued its 8% Convertible
Notes
in the aggregate principal amount of $1,600,000, 1,600,000 A Warrants and
800,000 B Warrants to the Investors. The Company also issued an aggregate of
128,000 shares of its common stock to the investors representing one year’s of
prepaid interest on the Notes.
The
Notes
mature 24 months from the closing. The Notes are convertible at the option
of
the holder into the Company’s common stock at the rate of $1.00 per share. The
Notes are mandatorily convertible into the Company’s common stock if the closing
bid price of the Company’s common stock is above $2.50 per share for ten (10)
consecutive trading days and if the daily volume for the same period exceeds
100,000 shares per day. The Company may redeem the Notes for 125% of the
principal amount of the Note together with all accrued and unpaid interest
provided that (i) an event of default has not occurred, and (ii) an effective
registration statement covering the shares underlying the Note
exists.
Each
A
Warrant entitles the holder to purchase one share of the Company’s common stock
at an exercise price of $1.75 per share commencing on the date of issuance
and
expiring at the close of business on the fifth anniversary of the issuance
date.
Each B Warrant entitles the holder to purchase one share of the Company’s common
stock at an exercise price of $.10 per share commencing 181 days after issuance
and expiring at the close of business on the fifth anniversary of the initial
exercise date. Notwithstanding the foregoing if the Company provides the holder
of a B Warrant with validation and acknowledgement, in the form of bona fide
purchase order demonstrating that at least $1,000,000 of the Company’s products
have been ordered, other than its initial order from a national retailer in
the
amount of approximately 23,000 garage door opening units, within 181 days after
the date of the Securities Purchase Agreement, the B Warrants shall
automatically terminate. Both the A and B Warrants contain provisions that
protect the holder against dilution by adjustment of the exercise price in
certain events including, but not limited to, stock dividends, stock splits,
reclassifications, or mergers.
Pursuant
to the Selling Agent Letter Agreement between the Company and the Selling Agent,
the Selling Agent was paid a cash fee of $95,000 (10% of the aggregate purchase
price of the Units sold to the subscribers) in addition to the $75,000 it
received on April 28, 2006, inclusive of $10,000 in expenses. The Company also
issued the Selling Agent a warrant to purchase 160,000 shares of its common
stock on the same terms as the A Warrants. In addition, the Company paid $15,000
to the Selling Agent’s counsel and $32,500 to its counsel.
As
part
of the Private Placement, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with each subscriber who
purchased Units in the Private Placement. Under the Registration Rights
Agreement, the Company is obligated to file a registration statement (the
“Registration Statement”) on Form SB-2, relating to the resale by the holders of
the Common Stock underlying the Notes, Warrants and Selling Agent Warrant.
If
such Registration Statement was not filed by July 14, 2006, or does not become
effective within 90 days after closing, the Company has agreed to pay to the
investors 1.5% of the gross proceeds of the offering for each month in which
the
Company fails to comply with such requirements. The Company did not file the
Registration Statement by July 14, 2006 and therefore is accruing 1.5% ($24,000)
of the gross proceeds for each month the Company fails to file the Registration
Statement. For the period ended December 31, 2006 a total of $72,000 has been
accrued as finance costs to reflect these provisions.
The
Company entered into a Securities Purchase Agreement dated September 18,
2006,
with Jane Petri and Joseph Panico relating to the issuance and sale, in a
private placement exempt from the registration requirements of the Securities
Act of the Company’s 10% Promissory Notes due March 15, 2007 in the aggregate
principal amount of $400,000, 400,000 Common Stock Purchase Warrants and
160,000
Shares of the Company’s Common Stock. In connection with this transaction the
two investors provided the Company with $300,000 and exchanged $100,000 in
Notes, described above, that were previously issued by the Company to the
investors.
Each
Warrant entitles the holder to purchase one share of the Company’s Common Stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on September 15, 2011.
As
part
of the Private Placement, the Company agreed to register the 400,000 shares
of
Common Stock underlying the Warrants and the 160,000 shares of the Common
Stock
issued as part of this Private Placement.
The
Company entered into a Securities Purchase Agreement dated September 30,
2006,
with two investors relating to the issuance and sale, in a private placement
exempt from the registration requirements of the Securities Act of the Company’s
10% Promissory Notes due March 30, 2007 in the aggregate principal amount
of
$55,000, 55,000 Common Stock Purchase Warrants and 22,000 Shares of the
Company’s Common Stock.
Each
Warrant entitles the holder to purchase one share of the Company’s Common Stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on September 15, 2011.
As
part
of the Private Placement, the Company agreed to register the 55,000 shares
of
Common Stock underlying the Warrants and the 22,000 shares of the Common
Stock
issued as part of this Private Placement.
The
Company entered into a Securities Purchase Agreement dated as of December
28,
2006, with three investors relating to the issuance and sale, in a private
placement (“Private Placement”) exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”), of units (the
“Units”) consisting of Senior Convertible Debentures in the principal amount of
$1,500,000 (“Debentures”), 1,500,000 Series A Common Stock Purchase Warrants (“A
Warrants”) and 750,000 Series B Common Stock Purchase Warrants (“B Warrants”).
The closing occurred on January 5, 2007.
The
Debentures mature on June 29, 2008. The Debentures are convertible at the
option
of the holder into the Company’s common stock at the rate of $1.00 per hare. The
Debentures are convertible at the option of the Company into the Company’s
common stock if the closing bid price of the Company’s common stock is above
$2.50 per share for ten (10) consecutive trading days and if the shares
underlying the Debentures are registered. The Company may redeem the Debentures
for 125% of the principal amount of the Debenture together with all accrued
and
unpaid interest provided that (i) an event of default has not occurred, (ii)
the
price of the Company’s common stock exceeds $1.50 and (ii) an effective
registration statement covering the shares underlying the Debentures
exists.
Each
A
Warrant entitles the holder to purchase one share of the Company’s common stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on the fifth anniversary of the issuance
date.
Each B Warrant entitles the holder to purchase one share of the Company’s common
stock at an exercise price of $.10 per share at any time after July 1, 2007
and
expiring at the close of business on the fifth anniversary of the initial
issuance date. Notwithstanding the foregoing if the Company provides the
holder
of a B Warrant with validation and acknowledgement on or before June 30,
2007
that the Company has both received and booked revenues for its products totaling
$1,000,000, the B Warrants shall automatically terminate. Both the A and
B
Warrants contain provisions that protect the holder against dilution by
adjustment of the exercise price in certain events including, but not limited
to, stock dividends, stock splits, reclassifications, or mergers.
Pursuant
to the Selling Agent Letter Agreement between the Company and First Montauk
Securities Corporation (“Selling Agent”), the Selling Agent was paid a cash fee
of $150,000 (10% of the aggregate purchase price of the Units sold to the
subscribers). The Company also issued the Selling Agent a warrant to purchase
150,000 shares of its common stock on the same terms as the A
Warrants.
As
part
of the Private Placement, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with each subscriber who
purchased Units in the Private Placement. Under the Registration Rights
Agreement, the Company is obligated to file a registration statement (the
“Registration Statement”) on Form SB-2, relating to the resale by the holders of
the Common Stock underlying the Debentures, Warrants and Selling Agent
Warrant.
As
a
condition to closing, the Company obtained consents and waivers from the
investors of its private placement of $1,600,000 principal amount of Convertible
Notes (“Notes”) issued on June 29, 2006, pursuant to which each of the prior
investors agreed to waive any and all existing defaults relating to the Notes
and agreed to forebear from exercising any rights accruing upon default until
September 30,2007. In connection therewith, the Company issued to the investors
Convertible Notes (“Forbearance Notes”) in the aggregate principal amount of
$387,437.39, representing liquidated damages due under the Notes. The
Forbearance Notes are convertible into the Company’s common stock at $1.00 per
share.
On
January 17, 2007, the Company entered into several agreements with BLX Funding
LLC (“BLX”) whereby BLX will purchase the Company’s accounts receivable in
factoring transactions.
Pursuant
to the agreements, BLX will purchase accounts receivables from the Company
and
varying discounts from the face value of the individual accounts receivable
dependent upon the age of the receivable. The discounts range from 2.5% for
receivables 30 days or less to 15% for receivables that are older than 90
days.
BLX will advance to the Company 80% of the face amount of each of the accounts
receivable it elects to purchase. To date, BLX has advanced
$786,268.00.
As
a
condition precedent to the obligation of BLX entering into the various
agreements and arrangements with the Company, its CEO was required to provide
BLX a Performance Guaranty guarantying (a) the due and punctual performance
by
the Company of the representations contained in the agreements (b) the payment
(and not merely the collectibility) of any loss, liability or expense incurred
by BLX in the event any one or more of the representations is untrue in any
respect or fail to be performed and (c) the payment (and not merely the
collectibility) of any other obligation owed by the Company to BLX of any
nature. The Company has agreed to issue the CEO 50,000 shares of its common
stock as consideration for providing the Company his guarantee and the Company
has agreed to make additional financial accommodations to the CEO in the
event
there is a demand or claim against Mr. Basile arising out of the personal
guarantee.
On
February 7, 2007, the Company deposited $200,000 into an escrow account with
its
counsel. The funds were utilized in connection with the manufacture of the
Company’s garage door openers. All funds had been expended to the Company’s
manufacturer and there remains no balance in the account at this
time.
On
August
27, 2007 the Company issued two Convertible Notes each in the principal amount
of $400,000 (the “Notes”) to Jane Petri and Joseph Panico. The Notes were issued
in consideration of new loans from the Lenders in the principal amount of
$87,500 each and the rollover and retirement of previously issued notes to
each
Lender in the principal amount of $312,500. In consideration of providing
the
new loan, the Company issued to each Lender 87,500 shares of its common stock,
87,500 common stock purchase warrants (the “Warrants”). The Company also amended
warrants that were previously issued to the Lenders between September 2006
and
November 2006 so as to extend the exercise date of these warrants to August
27,
2011 and amended an aggregate of 125,000 warrants that were issued to the
Lenders in December 2006 so as to reduce the exercise price of these warrants
from $3.00 to $1.00 and extend the exercise date of these warrants to August
27,
2011. In addition, the Company issued each Lender 57,500 additional Warrants
for
failing to pay off the old notes held by the Lenders which became due in
March
2007.
The
Notes
mature on May 27, 2008. The Notes bear interest at the rate of 10%, with
the
first interest payment due four (4) months from the date the Note is issued.
The
Lenders have the option to accept a prepayment of interest in shares of the
Company’s common stock based on the market value of the Company’s common stock
as defined in the Note. The Notes are convertible at the Option of the Lenders
into the Company’s common stock at the rate of $1.00 per share.
Each
Warrant entitles the Lender to purchase one share of the Company’s common stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on the fourth anniversary of the issuance
date. The Company may redeem the Warrants at a call premium equal to 120%
of the
exercise price of the Warrants in effect in such redemption date, provided
however, that the Company provides the Lenders with ten (10) days prior written
notice of the Company’s election to redeem all or a portion of the Warrants. The
Warrants contain provisions that protect the Lenders against dilution by
adjustment of the exercise price in certain events including, but not limited
to, stock dividends, stock splits, reclassifications, or mergers.
As
collateral for providing the loan the Company entered into a Pledge and Escrow
Agreement, whereby the Company through its wholly owned subsidiary bioMETRX
Technologies, Inc., pledged 500,000 shares of the Company’s common stock, such
shares will be deposited into escrow with the Lenders counsel.
In
addition, as part of the transaction, the Company entered into a piggy-back
registration rights agreement with both Lenders. Under the registration rights
agreement the Company agreed to register no later than April 15, 2008 all
shares
and underlying securities owned by the Lenders when it files its next
registration statement with the SEC.
Lastly,
the Company entered into a Royalty Agreement, whereby the Company agreed
to pay
the Lenders $0.13 on each biometric padlock sold, licensed, sublicensed or
otherwise distributed for cash utilizing the technology contained in Patent
#
7,043,060. The term of this agreement continue for the life of the patent
or
until August 31, 2017, whichever is later.
bioMETRX
is dependent on raising additional funding necessary to implement its business
plan. bioMETRX’ auditors have issued a “going concern” opinion on the financial
statement for the year ended December 31, 2006, indicating bioMETRX is in
the
early commercial stage of operations, has a working capital and net equity
deficiency. These factors raise substantial doubt in bioMETRX’ ability to
continue as a going concern. If bioMETRX is unable to raise the funds necessary
or if revenues are insufficient to complete the development of its products
and
fund its operations, it is unlikely that bioMETRX will remain as a viable
going
concern.
Critical
Accounting Policies and Estimates:
Our
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires us to make significant estimates and judgments
that affect the reported amounts of assets, liabilities, revenues, expenses
and
related disclosure of contingent assets and liabilities. We evaluate our
estimates, including those related to contingencies, on an ongoing basis.
We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of
which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may
differ from these estimates under different assumptions or
conditions.
We
believe the following critical accounting policy, among others; involve the
more
significant judgments and estimates used in the preparation of our consolidated
financial statements:
The
Company accounts for compensation costs associated with stock options and
warrants issued to non-employees using the fair-value based method prescribed
by
Financial Accounting Standard No. 123 - Accounting for Stock-Based Compensation.
The Company uses the Black-Scholes options-pricing model to determine the
fair
value of these instruments as well as to determine the values of options
granted
to certain lenders by the principal stockholder. The following estimates
are
used for grants in 2005: Expected future volatility over the expected lives
of
these instruments is estimated to mirror historical experience, measured
by a
weighted average of closing share prices prior to each measurement date.
Expected lives are estimated based on management’s judgment of the time period
by which these instruments will be exercised.
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement No. 123R (“SFAS 123R) “Share Based Payment, “a revision of statement
No. 123, “Accounting for Stock Based Compensation.” This standard requires the
Company to measure the cost of employee services received in exchange for
equity
awards based on grant date fair value of the awards. The Company adopted
SFAS
123R effective January 1, 2006. The standard provides for a prospective
application. Under this method, the Company will begin recognizing compensation
cost for equity based compensation of or all new or modified grants after
the
date of adoption.
Information
Relating To Forward-Looking Statements
When
used
in this Report on Form 10-QSB, the words “may,” “will,” “expect,” “anticipate,”
“continue,” “estimate,” “intend,” “plans”, and similar expressions are intended
to identify forward-looking statements within the meaning of Section 27A
of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934
regarding events, conditions and financial trends which may affect the Company’s
future plans of operations, business strategy, operating results and financial
position. Such statements are not guarantees of future performance and are
subject to risks and uncertainties and actual results may differ materially
from
those included within the forward-looking statements as a result of various
factors. Such factors include, among others: (i) the Company’s ability to obtain
additional sources of capital to fund continuing operations; in the event
it is
unable to timely generate revenues (ii) the Company’s ability to retain existing
or obtain additional licensees who will act as distributors of its products;
(iii) the Company’s ability to obtain additional patent protection for its
technology; and (iv) other economic, competitive and governmental factors
affecting the Company’s operations, market, products and services. Additional
factors are described in the Company’s other public reports and filings with the
Securities and Exchange Commission. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the
date
made. The Company undertakes no obligation to publicly release the result
of any
revision of these forward-looking statements to reflect events or circumstances
after the date they are made or to reflect the occurrence of unanticipated
events.
Recent
Accounting Pronouncements
Statement
of Financial Accounting Standards (“SFAS”) No. 146, “Accounting for Costs
Associated with Exit or Disposal Activities”, SFAS No. 147, “Acquisitions of
Certain Financial Institutions - an Amendment of FASB Statements No. 72 and
144
and FASB Interpretation No. 9”, SFAS No. 148, “ Accounting for Stock-Based
Compensation - Transition and Disclosure - an Amendment of FASB Statement
No.
123”, SFAS No. 149, “Amendment of Statement 33 on Derivative Instruments and
Hedging Activities”, and SFAS No. 150, “Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity”, were recently
issued. SFAS No. 146, 147, 148, 149 and 150 have no current applicability
to the
Company or their effect on the financial statements would not have been
significant.
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement No. 123R (“SFAS 123R”) “Share Based Payment, “a revision of Statement
No. 123, “Accounting for Stock Based Compensation.” This standard requires the
Company to measure the cost of employee services received in exchange for
equity
awards based on grant date fair value of the awards. The Company is required
to
adopt SFAS 123R effective January 1, 2006. The standard provides for a
prospective application. Under this method, the Company will begin recognizing
compensation cost for equity based compensation for all new or modified grants
after the date of adoption.
In
addition, the Company will recognize the unvested portion of the grant date
fair
value of awards issued prior to the adoption based on the fair values previously
calculated for disclosure purposes.
In
December 2004, the FASB issued SFAS No. 153, “Exchanges of Non-monetary Assets,”
(“SFAS 153”). SFAS 153 amends Accounting Principles Board (“APB”) Opinion No.
29, Accounting for Non-monetary Transactions,” to require exchanges of
non-monetary assets are accounted for at fair value, rather than carryover
basis. Non-monetary exchanges that lack commercial substance are exempt from
this requirement.
Statement
of Financial Accounting Standards (“SFAS”) No. 146, “Accounting for Costs
Associated with Exit or Disposal Activities”, SFAS No. 147, “Acquisitions of
Certain Financial Institutions - an Amendment of FASB Statements No. 72 and
144
and FASB Interpretation No. 9”, SFAS No. 148, “ Accounting for Stock-Based
Compensation - Transition and Disclosure - an Amendment of FASB Statement No.
123”, SFAS No. 149, “Amendment of Statement 33 on Derivative Instruments and
Hedging Activities”, and SFAS No. 150, “Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity”, were recently
issued. SFAS No. 146, 147, 148, 149 and 150 have no current applicability to
the
Company or their effect on the financial statements would not have been
significant.
SFAS
153
is effective for non-monetary exchanges entered into in fiscal years beginning
after September 15, 2005. The Company does not routinely enter into exchanges
that could be considered non-monetary; accordingly the Company does not expect
adoption of SFAS 153 to have a material impact on the Company’s financial
statements.
In
January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, (“FIN No. 46”), “Consolidation of Variable Interest
Entities” (VIEs), which is an interpretation of Accounting Research Bulletin
(ARB) No. 51, “Consolidated Financial Statement”. FIN 46, as revised by FIN 46R
in December 2003, addresses the application of ARB No. 51 to VIEs, and generally
would require assets, liabilities and result of activity of a VIE be
consolidated into the financial statements of the enterprise that is considered
the primary beneficiary. FIN 46R shall be applied to all VIEs by the end of
the
first reporting period ending after December 15, 2004. The Company has
determined that FIN 46R has no material impact on its financial
statements.
COMMITMENTS
We
do not
have any commitments that are required to be disclosed in tabular form as
of
September 30, 2006 and as of September 30,2007.
OFF
BALANCE SHEET ARRANGEMENTS
We
do not
have any off balance sheet arrangements.
Item
3:
|
Controls
and Procedures
|
As
of the
end of the period covered by this report, an evaluation was performed under
the
supervision and with the participation of our management, including our chief
executive officer and our chief financial officer, of the effectiveness of
the
design and operation of our disclosure controls and procedures as defined in
Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended. Based
on that evaluation, we concluded that as of the date of the evaluation our
disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed in the Company’s periodic
filings under the Securities Exchange Act of 1934 is accumulated, to allow
timely decisions regarding required disclosure.
As
a
result of reviewing the Company’s consolidated financial statements for the year
ended December 31, 2005, the Company’s CFO and its independent auditor
determined that treatment of stock-based compensation under FASB 123-R was
improperly applied to agreements under which the Company granted stock under
agreements containing no forfeiture clauses. The Company discovered that penalty
shares issued and valued at $629,000 that were originally charged to additional
paid-in capital should have been charged to operations. Compensation-based
stock
options and warrants that were originally deferred have been charged to
operations for a net charge of $222,500 and a settlement of a threatened legal
action has been accrued and charged to operation in the amount of $368,750.
As a
result, the Company reported an additional loss of $1,220,250 for the year
ended
December 31, 2005.
The
Company’s former Chief Financial Officer was responsible for properly recording
the Company’s issuances of its securities. However, he improperly recorded such
issuances which directly led to the errors discussed above and in the
explanatory notes. In addition, the Company did not have a system in place
to
check the recordation of the issuances of the Company’s securities. During the
third and fourth quarter of 2006, the Company’s new Chief Financial Officer
discovered these errors which led to the revisions to the financial statements
for those periods. To address this material weakness, the Company has recently
hired a Certified Public Accountant to manage and to assist the CFO with our
internal accounting of the Company’s books and records. In addition, each
issuance of securities is evaluated and discussed between such internal
accountant and the Chief Financial Officer to insure these issuances are
properly recorded. We have completed a full review of our accounting practices
and we intend on implementing additional process improvements in the future
and
hiring additional personnel in our accounting department to ensure that our
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America.
PART
II - OTHER INFORMATION
Item
1:
|
Legal
Proceedings
|
On
November 16, 2006, the Company was the subject of a complaint filed in the
Supreme Court of New York State, County of Nassau (Index No. 019475-06) by
Intellicon seeking final payment of $20,000 plus accrued interest for
engineering design services performed for the Company. The Company
answered and counter-claimed on January 5, 2007 asserting damages of $25,000
incurred then and continuing to incur to remedy design defects performed by
Intellicon. The Company intends to vigorously defend its position in this
claim.
On
March
7, 2007 the Company’s subsidiary, bioMETRX Technologies Inc. became the subject
of a complaint filed by Frank Giannuzzi, the former Chief Financial Officer
and
Sante Santopadre, a former consultant with whom it had previously had severed
its business relationship. The complaint was filed in the Supreme Court of
the
State of New York, County of Nassau (Index No. 07-004088). The plaintiffs
allege
damages arising from certain inducements which were relied upon to their
detriment.
Item
2:
|
Changes
in Securities and Use of Proceeds
|
(a) None
(b) None
On
July
11, 2007 the Company granted 375,000 warrants exercisable at $1.00 to Alpha
Capital in consideration of its loan to the Company to be expressly used for
manufacturing of the Company’s MasterLOCK™ smartTouch Garage Door Opener. The
proceeds from receivable financing will be used to repay this loan.
On
July
13, 2007, the Company issued 50,000 shares of its common stock to BridgePointe
Master Fund Ltd. upon the conversion of $50,000 principal amount of a
convertible debenture issued to BridgePointe Master Fund in the aggregate
principal amount of $1,000,000. The convertible debenture converts into the
Company’s common stock at $1.00 per share. These shares were registered pursuant
to a Registration Statement on Form SB-2 (SEC File No. 333-140628) which was
declared effective by the SEC on June 25, 2007.
On
July
13, 2007, the Company issued 50,000 shares of its common stock to Alpha Capital
AG. upon the conversion of $25,000 principal amount of a convertible note issued
to Alpha Capital in the aggregate principal amount of $400,000. The convertible
note converts into the Company’s common stock at $1.00 per share. These shares
were registered pursuant to a Registration Statement on Form SB-2 (SEC File
No.
333-140628) which was declared effective by the SEC on June 25,
2007.
On
July
13, 2007, the Company issued Nite Capital 75,000 shares of its common stock
issuable upon the exercise of a like number of warrants exercisable at $0.10
per
share.
On
July
24th,
2007,
the Company issued 20,222 shares as payment in kind for interest payment due
to
BRIDGEPOINTE MASTER FUND, LTD on a $1,000,000 convertible note issued to the
Company. on January 5, 2007.
On
July
25th,
2007,
the Company issued 50,000 shares as payment in kind for fees related to a
factoring commitment to BLX, Funding.
On
July
25th, 2007, the Company issued 25,000 shares of its common stock and 25,000
warrants exercisable at $1.00 per share to Mark Basile, the Company’s Chief
Executive Officer as consideration for providing the Company a loan in the
amount of $25,000.
On
July
25th, 2007, the Company issued 150,000 shares of its common stock to Mark Basile
as consideration for Mr. Basile providing the Company his personal guarantee
in
connection with the opening of an escrow agreement in the amount of
$750,000.
On
August
1, 2007, the Company issued 8,365 of its common stock to A2E Technologies as
payment of $9,535.75 due A2E Technologies pursuant to a Service Level Agreement
dated March 16, 2007.
On
August
15, 2007, the Company issued 150,000 shares of its common stock to Linden Growth
Partners L.P. upon the exercise of a like number of warrants exercisable at
$0.10 per share.
On
August
15, 2007, the Company issued 225,000 shares of its common stock to Linden Growth
Partners Master Fund L.P. upon the exercise of a like number of warrants
exercisable at $0.10 per share.
On
August
16, 2007 the Company issued 22,269 shares of its common stock to Osher Capital
Partners LLC upon the cashless exercise of 25,000 warrants exercisable at $0.10
per share.
On
August
24, 2007 the Company issued 178,152 shares of its common stock to Alpha Capital
AG upon the cashless conversion of 200,000 warrants exercisable at $0.10 per
share.
On
August
30, 2007 the Company issued 87,500 shares of its common stock and 87,500
warrants exercisable at $1.00 each to Joe Panico and Jane Petri respectively
as
an inducement to renew with an extension to maturity to May 15th,
2008
and increase a loan to the Company in the amount of $800,000.
On
August
31, 2007 the Company issued 62,500 shares of its common stock upon the exercise
of 62,500 warrants exercisable at $0.10 to Lighthouse Capital Insurance
Company.
On
August
31, 2007 the Company issued 62,500 shares of its common stock upon the exercise
of 62,500 warrants exercisable at $0.10 to Peter Thomson.
On
September 7th,
2007,
the Company issued 435,342 shares of its common stock upon the cashless exercise
of 500,000 warrants exercisable at $0.10 per share to Bridgepointe Master Fund,
Ltd.
On
September 7th, 2007, the Company issued 6,647 shares as payment in kind for
interest payment due to Bridgepointe Master Fund, Ltd. on a $1,000,000
convertible note issued by the Company on January 5, 2007. These shares were
registered pursuant to a Registration Statement on Form SB-2 (SEC File No.
333-140628) which was declared effective by the SEC on June 25,
2007.
On
September 11th,
2007,
the Company issued an aggregate of 50,000 shares of its common stock to
Bridgepointe Master Fund, Ltd. upon the conversion of $50,000 principal amount
of a convertible note issued to Bridgepointe Master Fund, Ltd.. The convertible
note is convertible into the Company’s common stock at the rate of $1.00 per
share. These shares were registered pursuant to a Registration Statement on
Form
SB-2 (SEC File No. 333-140628) which was declared effective by the SEC on June
25, 2007.
On
September 12th,
2007,
the Company issued an aggregate of 81,193 shares of its common stock to
Whalehaven Capital Fund Limited upon the conversion of $81,193 of principal
and
interest due under a convertible note issued to Whalehaven Capital Fund Ltd.
The
convertible note is convertible into the Company’s common stock at the rate of
$1.00 per share. These shares were registered pursuant to a Registration
Statement on Form SB-2 (SEC File No. 333-140628) which was declared effective
by
the SEC on June 25, 2007.
On
September 12th, 2007 the Company issued 250,000 shares of its common stock
upon
the exercise of 250,000 warrants exercisable at $0.10 to Whalehaven Capital
Fund, Ltd.
On
September 27th,
2007,
the Company issued an aggregate of 14,761 shares of its common stock to
Whalehaven Capital Fund Limited upon the conversion of $14,761 of principal
and
interest due under a convertible note issued to Whalehaven Capital Fund Ltd.
The
convertible note is convertible into the Company’s common stock at the rate of
$1.00 per share. These shares were registered pursuant to a Registration
Statement on Form SB-2 (SEC File No. 333-140628) which was declared effective
by
the SEC on June 25, 2007.
On
October 10, 2007, the Company issued 16,823 shares of its common stock to
Whalehaven Capital Fund Ltd. upon the conversion of $16,823 of principal and
interest due under a convertible note issued to Whalehaven Capital Fund Ltd.
The
convertible note is convertible into the Company’s common stock at the rate of
$1.00 per share. These shares were registered pursuant to a Registration
Statement on Form SB-2 (SEC File No. 333-140628) which was declared effective
by
the SEC on June 25, 2007.
On
October 11, 2007, the Company issued an aggregate of 218,500 shares of its
common stock to employees and executive officers including 50,000 shares each
to
Mark Basile, the Company’s CEO, Lorraine Yarde, the Company’s COO and J.
Richard Iler the Company’s CFO.
On
October 15, 2007, the Company issued an aggregate of 100,000 shares of its
common stock to Richard Quintana (50,000 shares) and Michael Niccole (50,000)
in
connection with the acquisition of a Patent.
On
October 17, 2007, the Company issued 10,000 shares of its common stock to the
partners of Sommer & Schneider LLP, the Company’s securities counsel as
partial payment of legal services rendered to the Company.
On
November 6, 2007, the Company issued 114,545 shares of its common stock to
Mark
Basile, the Company’s CEO upon the cashless exercise of 140,000 warrants,
exercisable at $.10 per share.
On
November 6, 2007, the Company issued 20,000 shares of its common stock to the
partners of Sommer & Schneider LLP.
On
November 6, 2007, the Company issued an aggregate of 150,000 shares of its
common stock to the members of its board of directors Mark Basile (50,000)
Lorraine Yarde (50,000) and J. Richard Iler (50,000) as consideration for
services rendered in the performance of their duties as directors of the
Company.
Unless
otherwise indicated, the securities discussed above were offered and sold in
reliance upon exemptions from the registration requirements of Section 5 of
the
Securities Act of 1933, as amended (the “Act”), pursuant to Section 4(2) of the
Act and Rule 506 promulgated thereunder. Such securities were sold exclusively
to accredited investors as defined by Rule 501(a) under the Act.
d) Not
Applicable
Item
3.:
|
Defaults
upon Senior
Securities
|
None
Item
4.:
|
Submission
of Matters to a Vote of Security
Holders
|
Item
5. Other
Information
(a) |
The following exhibits are filed as part
of this
report: |
|
31.1 |
Certification of Chief Executive
Officer of
Periodic Report Pursuant to Rule 13a-14(a) and Rule
15d-14(a) |
|
31.2
|
Certification
of Chief Financial Officer of Periodic Report Pursuant to Rule 13a-14(a)
and Rule 15d-14(a)
|
|
32.1 |
Certification of Chief Executive Officer pursuant
to 18
U.S.C. Section 1350 |
|
32.2 |
Certification of Chief Financial Officer pursuant
to 18
U.S.C. Section 1350 |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
caused this report to be signed on its behalf by the undersigned thereunto
duly
authorized.
|
|
|
Dated:
November 14, 2007 |
BIOMETRX,
INC. |
|
|
|
|
By: |
/s/ Mark
Basile |
|
Mark
Basile |
|
Chief
Executive Officer |
|
|
|
|
|
|
|
|
|
By: |
/s/ J.
Richard Iler |
|
J.
Richard Iler
|
|
Chief
Financial Officer |