As
filed with the Securities and Exchange Commission on January 24,
2008
Registration
No. 333-147638
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
PRE-EFFECTIVE
AMENDMENT NO. 1 to
FORM
SB-2
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
BRENDAN
TECHNOLOGIES, INC.
(Name
of
small business issuer in its charter)
Nevada
|
7372
|
38-3378963
|
(State
or jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
I.D.
Number)
|
2236
Rutherford Road, Suite 107
Carlsbad,
California 92008
(760) 929-7500
(Address
and telephone number of principal executive offices)
2236
Rutherford Road, Suite 107
Carlsbad,
California 92008
(760) 929-7500
(Address
of principal place of business or intended principal place of
business)
Lowell
W. Giffhorn, Chief Financial Officer
Brendan
Technologies, Inc.
2236
Rutherford Road, Suite 107
Carlsbad,
California 92008
(760) 929-7500
(Name,
address and telephone number of agent for service)
Copies
to:
David
Ficksman, Esquire
Troy
& Gould
1801
Century Park East, Suite 1600
Los
Angeles, CA 90067
(310) 789-1290
(Telephone)
(310) 789-1490
(Facsimile)
Approximate
date of commencement of proposed sale to the public:
As soon
as practicable after the effective date of this registration statement.
If
any of
the securities being registered on this Form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If
this
form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If
this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If
this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If
delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. ¨
Title
of Each Class of
Securities
to be Registered
|
|
|
|
Proposed
Maximum
Offering
Price Per Share
|
|
Proposed
Maximum
Aggregate
Offering Price (4)
|
|
Amount
of
Registration
Fee (5)
|
|
Common
Stock, $0.004995 par value (1)
|
|
|
4,183,800
|
|
$
|
0.27
|
|
$
|
1,129,626
|
|
$
|
34.68
|
|
Common
Stock, $0.004995 par value (2)
|
|
|
1,745,000
|
|
$
|
0.27
|
|
$
|
471,150
|
|
$
|
14.46
|
|
Common
Stock, $0.004995 par value (3)
|
|
|
1,270,000
|
|
$
|
0.27
|
|
$
|
342,900
|
|
$
|
10.53
|
|
TOTAL
|
|
|
7,198,800
|
|
|
|
|
$
|
1,943,676
|
|
|
|
|
1)
|
Shares
of the Registrant's common stock, $0.004995 par value per share,
are being
registered for resale on behalf of certain selling security holders.
The
common stock being registered is issuable to the selling security
holders
on their conversion of our 8% Convertible Debentures issued on
June 20,
2006 through June 11, 2007 (the “Debentures”). The terms of the Debentures
fix the number of common shares that may be issuable upon conversion
of
the principal portion of the Debentures. The debentureholders have
elected
to receive interest either quarterly in cash or at the earlier
of
conversion or maturity in common stock. For those debentureholders
electing to receive common stock, the maximum number of common
shares so
issuable have been included in this registration.
|
2) |
Shares of the Registrant's common
stock,
$0.004995 par value per share, are being registered for resale on
behalf
of certain selling security holders. The common stock being
registered was issued to the selling security holders on their exercise
of
common stock purchase warrants pursuant to a rights
offering. |
(3)
|
Shares
of the Registrant's common stock, $0.004995 par value per share,
are being
registered for resale on behalf of certain selling security holders.
The
common stock
being registered is issuable to the selling security holders on
their
exercise of warrants which were issued either for services or related
to
short term financings.
|
(4) |
Estimated
solely for purposes of calculating the registration fee in accordance
with
Rule 457(c) under the Securities Act of 1933, as amended (the "Act"),
based on the average of the closing bid and asked prices for the
Registrant's Common Stock (the "Common Stock") as reported on the
OTC
Bulletin Board on January 18,
2008.
|
(5) |
Paid
with the initial filing of this registration statement on Form
SB2,
Registration No. 333-147638.
|
In
addition to the number of shares set forth above, the amount registered included
any shares of common stock issued as a result of stock splits, stock dividends
and similar transactions in accordance with Rule 416.
THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL IT SHALL FILE A FURTHER
AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
The
information in this preliminary prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with
the
Securities and Exchange Commission is effective. This preliminary prospectus
is
not an offer to sell these securities and we are not soliciting an offer to
buy
these securities in any state where the offer or sale is not
permitted.
AS
FILED WITH THE SECURITIES AND
EXCHANGE
COMMISSION ON JANUARY 24, 2008
PROSPECTUS
BRENDAN
TECHNOLOGIES, INC.
2236
Rutherford Road, Suite 107
Carlsbad,
CA 92008
(760)
929-7500
THE
OFFERING
The
resale of up to 7,198,800 shares of common stock by the selling shareholders
in
the over-the-counter market at the prevailing market price or in negotiated
transactions as follows:
· up
to 4,183,800 shares issuable to
certain selling shareholders upon the conversion of our 8% Convertible
Debentures which are comprised of 4,055,000 shares issuable for principal
and
128,800 shares issuable as interest payments under the
Debentures.
· 1,745,000
shares which were issued to
certain selling shareholders upon their exercise of common stock warrants
under
a rights offering.
· up
to 1,270,000 shares issuable to
certain selling shareholders upon the exercise of warrants comprised of 570,000
warrant shares issued for services and 700,000 warrant shares issued related
to
short term financings.
We
will
receive no proceeds from the sale of the shares by the selling shareholders.
We
may receive proceeds of up to $762,000 from the exercise of the
warrants.
Our
shares of common stock are currently trading on the OTC Bulletin Board under
the
symbol “BDTE”.
THIS
INVESTMENT INVOLVES A HIGH DEGREE OF RISK.
Please
refer to Risk Factors Beginning on Page 3
THE
SECURITIES AND EXCHANGE COMMISSION (SEC) AND STATE SECURITIES REGULATORS
HAVE
NOT
APPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL
OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS
PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES, NOR IS THE SOLICITATION OF
AN
OFFER
TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE OF THESE
SECURITIES
IS NOT PERMITTED.
Please
read this prospectus carefully. It describes our company, finances and products.
Federal and state securities laws require that we include in this prospectus
all
the material information that you will need to make an investment
decision.
We
have
not authorized anyone to provide you with information that is different from
that which is contained in this prospectus.
The
following table of contents has been designed to help you find important
information contained in this prospectus. We have included subheadings to aid
you in searching for particular information you might want to return to. We
encourage you to read the entire prospectus.
TABLE
OF
CONTENTS
|
Page
|
PROSPECTUS
SUMMARY
|
1
|
SUMMARY
FINANCIAL DATA
|
4
|
RISK
FACTORS
|
4
|
PLAN
OF DISTRIBUTION
|
10
|
SELLING
SHAREHOLDERS
|
10
|
THE
COMPANY
|
|
General
|
12
|
Background
|
13
|
Business
|
13
|
Marketing
and distribution
|
17
|
Dependence
upon single customers
|
17
|
Facilities
|
17
|
Employees
|
18
|
Government
regulation
|
18
|
USE
OF PROCEEDS
|
18
|
LITIGATION
|
18
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|
18
|
CHANGES
IN ACCOUNTANTS
|
24
|
MANAGEMENT
|
25
|
PRINCIPAL
SHAREHOLDERS
|
29
|
CERTAIN
TRANSACTIONS
|
31
|
TRADING
MARKET AND RELATED MATTERS
|
31
|
DESCRIPTION
OF SECURITIES
|
32
|
LEGAL
MATTERS
|
33
|
EXPERTS
|
34
|
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE F-1
|
|
PROSPECTUS
SUMMARY
About
Our Company
We
provide software solutions to improve the accuracy, quality control, workflow,
and regulatory compliance of immunoassay testing in laboratories in the
biopharmaceutical, clinical, research, veterinarian and agricultural industries.
Our software platform manages the raw, computed and analytical data in testing
laboratories and in manufacturing.
We
evolved from the initial work of our founder, John R. Dunn II, Ph.D., now our
Chairman, President, Chief Executive Officer and Chief Technical Officer. Our
first commercialized product is StatLIA®, software designed specifically for
immunoassay testing. Since Dr. Dunn’s early work on StatLIA® over ten years ago,
StatLIA® has been developed with software engineers, mathematicians and
laboratory professionals who specialize in laboratory testing. Over the years,
StatLIA® has been used in laboratories, undergoing numerous revisions and
additions to develop the product.
Our
auditors have stated in their report on our consolidated financial statements
as
of and for the year ended June 30, 2007, substantial doubt about our ability
to
continue operating as a going concern because of recurring net losses and
negative cash flows from operations. We had accumulated deficits of $9,059,858
and $8,352,407 as of September 30 and June 30, 2007 and a history of substantial
operating losses, net losses and negative cash flow.
Our
principal executive offices are located at 2236 Rutherford Road, Suite 107,
Carlsbad, California 92008, and our telephone number is (760) 929-7500.
About
Our Convertible Debentures
Overview.
From
June 20, 2006 through June 11, 2007, we sold to and received cash from certain
of the selling shareholders an aggregate of $2,027,500 of 8% convertible
debentures with two year maturity dates. The aggregate conversion prices
of the
debentures represented a $329,350 premium to the aggregate market value of
$1,698,150 on the dates of the issuances. In addition, the debentureholders
received warrants exercisable into up to 8,110,000 shares of our common
stock.
Number
Of Shares Debentures May Be Converted Into.
The
principal portion of the debentures can be converted into 4,055,000 shares
of
our common stock at a fixed conversion rate of $0.50 per share. The
debentureholders have elected to receive interest either quarterly in cash
or in
common stock at the earlier of conversion or maturity of the
debenture.
Warrants.
Concurrent with the issuance of the convertible debentures, we issued warrants
to purchase up to 8,110,000 shares of our common stock to the debentureholders.
These warrants are exercisable for from one to five years from the date of
issuance at exercise prices ranging from $0.60 to $1.00 per
share.
Restrictive
Covenants.
For a
period of 18 months from the date of the debentures, we are prohibited from
engaging in certain transactions without obtaining the debentureholders'
prior
written approval. These types of transactions include the issuance of any
debt
or equity securities in a private transaction which are convertible or
exercisable into shares of common stock at a price based on the trading price
of
the common stock at any time after the initial issuance of such securities;
the
issuance of any debt or equity securities with a fixed conversion or exercise
price subject to adjustment; and any private equity line type agreements.
Right
Of First Refusal.
The
debentureholders have a right of first refusal to purchase or participate
in any
securities offered by us in any private transaction which closes on or prior
to
the date that is two years after the issue date of each
debenture.
Registration
Rights.
We are
responsible for registering the resale of the shares of our common stock which
will be issued on the conversion of the debentures.
Additional
Shares We Are Registering
In
October 2007, we extended a rights offering to existing warrant holders whereby
they could exercise their warrants at a reduced exercise price of $0.25 per
share for a period through November 7, 2007. A group of 18 warrant holders,
including two who are affiliates of ours, exercised warrants for 1,745,000
shares of our common stock for aggregate proceeds of $436,250. The aggregate
market value of the warrant shares exercised as of November 7, 2007 was
$471,150, $0.27 per share, resulting in a discount to the exercising warrant
holders of $34,900 or 7.4% of the market value. The shares were issued with
restrictive legends and are being registered herewith.
Additional
Warrants We Are Registering
We
are
also registering 1,270,000 shares that are issuable to certain selling security
holders on their exercise of warrants issued for either services they provided
or related to short term financings.
Key
Facts
Shares
being offered for resale to the public
|
7,198,800
(28% of our shares currently outstanding,
73% of our shares currently
held
by non-affiliates)
|
|
|
Total
shares outstanding prior to the offering
|
25,450,594
as of January 24, 2008
|
|
|
Total
shares held by non-affiliates prior to the offering
|
9,918,016
as of January 24, 2008
|
|
|
Total
shares outstanding assuming conversion of
the debentures, including shares issuable as
interest
payments under the debentures, and exercise
of the warrants
|
30,904,394
|
Total
shares that would be outstanding assuming conversion
of the debentures, including shares
issuable
as interest payments under the debentures, and
exercise of all outstanding options and
warrants
|
41,396,261
|
|
|
Total
proceeds raised by offering
|
None.
However we may receive proceeds of
up to $762,000 on the exercise of
warrants
|
|
|
Convertible
debentures
|
A
form of our convertible debenture was included
as Exhibit 4.8 to our Current Report
on Form 8K filed as of July 18, 2006
|
|
|
Dividend
policy
|
We
have never paid a dividend and do not anticipate
paying a dividend in the foreseeable
future
|
Payments
to selling shareholders
|
We
have made or anticipate to make payments
to the selling shareholders as follows:
|
|
|
|
|
Convertible
debentures
|
|
|
|
|
Finders
fees
|
|
$
|
120,000
|
|
Interest
payments
|
|
|
324,400
|
|
|
|
|
|
|
Short-term
financings
|
|
|
|
|
Finders
fees
|
|
$
|
90,000
|
|
Interest
payments
|
|
|
68,914 |
|
|
|
|
|
|
Net
proceeds raised from financings
Convertible
debentures
|
|
|
|
|
Gross
proceeds
|
|
$
|
2,027,500
|
|
Less
finders fee
|
|
|
120,000 |
|
Less
first year interest
|
|
|
162,200 |
|
Net
proceeds
|
|
$
|
1,745,300
|
|
|
|
|
|
|
Short-term
financings
|
|
|
|
|
Gross
proceeds
|
|
$
|
700,000
|
|
Less
finders fee
|
|
|
90,000 |
|
Less
first year interest
|
|
|
68,914 |
|
Net
proceeds
|
|
$
|
541,086
|
|
SUMMARY
FINANCIAL DATA
The
following summary financial data should be read in conjunction with
“Management’s Discussion and Analysis or Plan of Operation” and our audited
financial statements and related notes included elsewhere in this prospectus.
Consolidated
Statement of Operations Data:
|
|
Three
Months Ended September 30,
|
|
Year
Ended June 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Net
sales
|
|
$
|
159,826
|
|
$
|
87,395
|
|
$
|
521,330
|
|
$
|
681,337
|
|
Net
(loss)
|
|
$
|
(707,451
|
)
|
$
|
(405,872
|
)
|
$
|
(2,110,698
|
)
|
$
|
(845,393
|
)
|
Net
(loss) per basic share
|
|
$
|
(0.03
|
)
|
$
|
(0.02
|
)
|
$
|
(0.09
|
)
|
$
|
(0.06
|
)
|
Balance
Sheet Data:
|
|
September
30, 2007
|
|
June
30, 2007
|
|
Working
capital deficit
|
|
$
|
(3,129,340
|
)
|
$
|
(1,679,643
|
)
|
Total
assets
|
|
$
|
522,062
|
|
$
|
435,525
|
|
Total
liabilities
|
|
$
|
4,020,517
|
|
$
|
3,311,490
|
|
Stockholders'
deficit
|
|
$
|
(3,498,455
|
)
|
$
|
(2,875,965
|
)
|
RISK
FACTORS
The
shares of common stock offered by this prospectus involve a high degree of
risk
and represent a highly speculative investment. You should not purchase these
shares if you cannot afford the loss of your entire investment. In addition
to
the other information contained in this prospectus, you should carefully
consider the following risk factors in evaluating our company, our business
prospects and an investment in our shares of common stock.
RELATED
TO OUR BUSINESS
We
have a limited operating history.
We
commenced operations in November, 1997 and have a limited operating history.
Our
success will be dependent upon our ability to successfully exploit our unique
proprietary technology. Our success will depend in large part on our ability
to
deal with the problems, expenses, and delays frequently associated with
developing and marketing our software technology. Losses are likely to continue
before our operations will become profitable. There is no assurance that our
operations will prove profitable.
We
depend on new products and development to generate
revenues.
Substantially
all of our revenues have been derived, and substantially all of our future
revenues are expected to be derived, from the license of the software and sale
of our associated services, and the development and sale of future products.
Accordingly, broad acceptance of our software products and services by customers
is critical to our future success as is our ability to design, develop, test
and
support new software products and enhancements on a timely basis that meet
changing customer needs and respond to technological developments in emerging
industry standards. There can be no assurance that we will be successful in
developing and marketing new software products and enhancements that meet
changing customer needs and respond to such technological changes or evolving
industry standards.
Our
success depends upon developing distribution channels.
Our
distribution strategy is to develop multiple distribution channels. We have
historically sold our products only through direct sales, Internet sales, and
original equipment manufacturers (“OEMs”). We expect to increasingly utilize
OEMs and independent sales representatives, and to pursue utilizing systems
integrators, value added resellers (“VARs”), and software retailers. There can
be no assurances that these distribution channels will be effective sales
channels.
Our
success is dependent on our founders and other key
personnel.
Our
performance is substantially dependent upon the performance of our executive
officers and key employees, particularly that of Dr. John R. Dunn, II. Dr.
Dunn
was responsible for creation of the software and the scientific principles
incorporated therein. As a result, Dr. Dunn is the single most knowledgeable
person with regard to the software. It would be difficult for us to find an
adequate replacement for Dr. Dunn in the immediate future.
Given
our
early stage of development, we are further dependent upon our ability to retain
and motivate high quality personnel, especially our management and highly
skilled development teams. We do not have key person life insurance policies
on
any of our employees. The loss of the services of any of our executive officers
or other key employees could have a materially adverse effect on our business,
operating results or financial condition. We intend to purchase key man life
insurance when management decides funds are available.
Our
future success also depends on our continuing ability to identify, hire, train,
and retain other highly qualified technical and managerial personnel.
Competition for such personnel is intense and there can be no assurance that
we
will be able to attract, hire or retain other highly qualified technical and
managerial personnel in the future. The inability to attract and retain the
necessary technical and managerial personnel could have a materially adverse
effect upon our business operating results or financial condition.
Our
success will depend, in part, on the continuing and growing interest in quality
control and quality assurance regarding reliable laboratory and manufacturing
testing results among the markets targeted by our products.
An
additional factor which we believe will be critical to the acceptance of our
products is a continuing need in our targeted markets for more powerful
solutions for instrument connectivity, networking, and data
management.
No
governmental or regulatory agency must approve the production or sale of any
of
our products at this time. However, we intend to voluntarily pursue the
acknowledgment and approval of certain federal agencies to gain further
awareness and acceptance for our new statistical methodologies. There can be
no
assurance that the interest in quality control and quality assurance will
continue among the testing industry, general public or governmental and
regulatory agencies.
We
have worker’s compensation and general liability insurance but do not have
professional liability insurance at this time.
We
do
intend to purchase such insurance when funds become available if management
concludes that the benefit of having such a policy outweighs our cost. Any
professional liability claims made prior to acquiring such insurance or for
amounts exceeding the coverage after the insurance is purchased, could have
an
adverse material effect on us. In addition, we will purchase a key man life
insurance policy naming Dr. John Dunn II as the insured and we as the
beneficiary if management concludes that the benefit of having such a policy
outweighs our cost. We further intend to purchase director and officer liability
insurance when management decides that funds are available in order to attract
additional directors and officers.
We
are subject to the risks and uncertainties inherent in new
businesses.
We
are
subject to the risks and uncertainties inherent in new businesses, including
the
following:
· We
may
not be able to raise enough money to develop our services and bring them to
market;
· Our
projected capital needs may be inaccurate, and we may not have enough money
to
develop our services and bring them to market;
· We
may
experience unanticipated development or marketing expenses, which may make
it
more difficult to develop our services and bring them to market;
· Even
if
we are able to develop our services and bring them to market, we may not earn
enough revenues from the sales of our services to cover the costs of operating
our business.
· If
we are
unsuccessful in our development efforts, we are not likely to ever become
profitable.
We
have never paid cash dividends on our Common Stock, and do not anticipate that
we will pay cash dividends in the foreseeable future.
The
payment of dividends by us will depend on our earnings, financial condition
and
such other factors as our Board of Directors may consider relevant. We currently
plan to retain any earnings to provide for our development and
growth.
We
will need additional financing.
Our
ability to continue as a going concern is dependent upon our ability to generate
profitable operations in the future and/or to obtain the necessary financing
to
meet our obligations and repay our liabilities arising from normal business
operations when they come due. The outcome of these matters cannot be predicted
with any certainty at this time. Since inception, we have satisfied our capital
needs through debt and equity financings. We will need to seek additional
financing to meet our liquidity requirements. There is no assurance that
financings can be obtained in amounts and at terms acceptable to us. If capital
is not available, we may be required to curtail our operations.
RELATED
TO OUR INDUSTRY
The
market for our products is unproven and acceptance of our products is
crucial.
The
market for our software and services has only recently begun to develop, is
rapidly evolving and could be subject to an increasing number of competitive
market entries. While we believe that our software products offer significant
advantages for quality assurance, regulatory compliance and reliability in
the
clinical, pharmaceutical, environmental, and manufacturing industries, there
can
be no assurance that our products will become widely adopted for use in those
industries.
Because
a
market for our products and services is new and evolving, it is difficult to
predict the future growth rate, if any, and size of this market. There can
be no
assurance that the market for our products and services will develop or that
our
products and services will be used in the marketplace. If the market fails
to
develop, develops more slowly than expected, or becomes saturated with
competitors, or if our products do not achieve market acceptance, our business,
operating results and financial condition will be materially adversely
affected.
We
compete with companies that have substantially greater
resources.
Our
management believes that over 90% of our current competitors are instrument
manufacturers. These manufacturers primarily develop and market their software
programs to be used with only their instruments and not as stand-alone programs
(which could be used with competing manufacturers’ instruments or even earlier
models of their own instruments). The level of interoperability of such software
with the instruments sold by their competitors or with laboratory computer
systems is minimal or nonexistent. This market is splintered into many fragments
and no one or few of these instrument manufacturers hold a commanding percentage
of market share. To our knowledge, no commercial product available in the world
today offers the quality control and quality assurance capabilities or many
of
the advanced computational features found in StatLIA®. However, we believe that
at some point in the future, many of our competitors will use quality assurance
methodologies similar to, or as effective as, those incorporated in StatLIA®.
Some of these competitors may be of greater size and have greater financial
resources than ours. We believe that most instrument manufacturers currently
marketing immunoassay software will remain focused on instrumentation and not
develop software as complex as StatLIA® for the limited market share held by any
one of these manufacturers. We believe that most of our future competition
will
be from software companies but we can give no assurances. Because our products
are either newly-developed or in the process of being developed, no guarantees
can be given as to how commercially viable such new products will be in the
marketplace.
We
intend
to interface StatLIA® with all immunoassay testing instruments which are capable
of exporting unprocessed raw data. Although we has been able to receive, decode
and process data from all instruments attempted to date, there can be no
assurance that we will be able to collect data from all immunoassay instruments
manufactured.
Although
device manufacturers are currently the largest competitors, we believe that
OEM’s will soon serve as ideal partners as equipment makers seek to remove
themselves from software development and partner with more powerful programs.
We
will focus on OEM’s as a primary sales channel.
We
believe that the statistical quality control and quality assurance principles
and the connectivity and data management methodologies incorporated in StatLIA®
can be applied in new products for other disciplines and technologies. We
have
outlined other programs in addition to StatLIA® to be developed in the next
three years for application in testing laboratories and manufacturing. However,
the statistical quality control and quality assurance principles and methodology
have been tested only in the immunoassay field for which StatLIA® was designed,
and to a lesser extent, in steel tensile testing. There can be no assurances
that we will be able to successfully develop and market all of our intended
products.
Our
success and ability to compete is dependent in part upon our proprietary
technology.
While
we
rely on trademark, trade secret and copyright law to protect our technology,
we
believe that factors such as the technological and creative skills of our
personnel, new product developments, frequent product enhancements, name
recognition and reliable product maintenance are more essential to establishing
and maintaining a technology leadership position. We do not presently have
any
patents or patent applications pending. There can be no assurance that others
will not develop technologies that are similar or superior to our technology.
The source code for our proprietary software is protected both as a trade secret
and as a copyrighted work. We generally enter into confidentiality or license
agreements with our employees, consultants and vendors, and generally control
further access to and distribution of our software, documentation and other
proprietary information. Despite these precautions, it may be possible for
a
third party to copy or otherwise obtain and use our products or technology
without authorization, or to develop similar technology independently. Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt
to copy aspects of our products or to obtain and use information that we regard
as proprietary. Policing unauthorized use of our products is difficult. There
can be no assurance that the steps taken by us will prevent misappropriation
of
our technology or that such agreements will be enforceable.
Vigorous
protection and pursuit of intellectual property rights or positions characterize
the fiercely competitive software industry, which has resulted in significant
and often protracted and expensive litigation. Therefore, our competitors may
assert that our technologies or products infringe on their patents or
proprietary rights. Problems with patents or other rights could increase the
cost of our products or delay or preclude new product development and
commercialization by us. If infringement claims against us are deemed valid,
we
may not be able to obtain appropriate licenses on acceptable terms or at all.
Litigation could be costly and time-consuming but may be necessary
to protect our future patent and/or technology license positions or to defend
against infringement claims.
We
may be
effected by changes in Securities Laws and Regulations
We
have
made, and will need to continue to make, changes in our corporate governance
and
securities disclosure and compliance practices as a result of the Sarbanes-Oxley
Act of 2002. The SEC and the NASD have enacted, and we expect will continue
to
enact, new rules on a variety of subjects as a result of the Sarbanes-Oxley
Act
of 2002. While we believe that we can ultimately comply with the new legislated
requirements associated with being a public company, compliance with the
Sarbanes-Oxley Act of 2002 will increase our costs and may present new
challenges and risks. These developments could also possibly make it more
difficult and more expensive to obtain director and officer liability insurance.
We may be required to accept reduced coverage or incur substantially higher
costs to obtain coverage for our officers and directors, which may make it
more
difficult for us to attract and retain qualified board members or executive
officers. We are currently evaluating and monitoring regulatory developments
and
cannot estimate the timing or magnitude of additional costs that may be incurred
as a result of the Sarbanes-Oxley Act of 2002.
We
will
be required to implement an internal control structure and procedures for
financial reporting, including those contemplated by Section 404 of the
Sarbanes-Oxley Act, designed to enable management to contest to the
effectiveness of our internal controls during the initial year, our year ending
June 30, 2008, and our registered public accounting firm to opine to the
effectiveness of our internal controls subsequent to the initial year, our
year
ending June 30, 2009. To comply with these requirements, we expect that we
may
need to hire additional accounting and finance staff and implement new financial
systems and procedures. There can be no assurance that we will be able to
implement such controls in a timely fashion and, therefore, we may not be able
to contest to or receive an opinion from independent sources that our internal
controls are effective.
RELATED
TO OUR OFFERING AND SHARE PRICE
Shares
of
our common stock which are eligible for sale by our stockholders
may decrease the price of our common stock.
We
have
25,450,594 common shares outstanding of which 1,227,079 are freely tradable
and
24,223,515 are saleable under Rule 144. We also may have up to 16,635,667
additional shares which could be outstanding following conversions of
debentures, exercise of warrants and exercise of stock options. If our
stockholders sell substantial amounts of our common stock, the market price
of
our common stock could decrease.
There
is
a limited but potentially volatile trading market in our common stock, which
may adversely affect our stock price.
Our
common stock trades on the OTC Bulletin Board. The Bulletin Board tends to
be
highly illiquid, in part because there is no national quotation system by which
potential investors can track the market price of shares except through
information received or generated by a limited number of broker-dealers that
make a market in particular stocks. There is a greater chance of market
volatility for securities that trade on the Bulletin Board as opposed to a
national exchange or quotation system. This volatility may be caused by a
variety of factors, including:
|
·
|
The
lack of readily available price quotations;
|
|
·
|
The
absence of consistent administrative supervision of “bid” and “ask”
quotations;
|
|
·
|
Lower
trading volume; and
|
There
could be wide fluctuations in the market price of our common stock. These
fluctuations may have an extremely negative effect on the market price of our
securities.
Because
our common stock is classified as “penny stock,” trading in it could be limited,
and our stock price could decline.
Our
common stock falls under the definition of “penny stock.” “Penny stocks” are
equity securities with a market price below $5.00 per share, other than a
security that is registered on a national exchange or included for quotation
on
the NASDAQ system, unless the issuer has net tangible assets of more than
$2,000,000 and has been in continuous operation for greater than three years.
Issuers who have been in operation for less than three years must have net
tangible assets of at least $5,000,000. As a result, trading in our common
stock
is limited because broker-dealers are required to provide their customers with
disclosure documents prior to allowing them to participate in transactions
involving our common stock. These disclosure requirements are burdensome to
broker-dealers and may discourage them from allowing their customers to
participate in transactions involving our common stock.
Rules promulgated
by the Securities and Exchange Commission under Section 15(g) of the
Exchange Act require broker-dealers engaging in transactions in penny stocks,
to
first provide to their customers a series of disclosures and documents,
including:
|
·
|
A
standardized risk disclosure document identifying the risks inherent
in
investment in penny stocks;
|
|
·
|
All
compensation received by the broker-dealer in connection with the
transaction;
|
|
·
|
Current
quotation prices and other relevant market data; and
|
|
·
|
Monthly
account statements reflecting the fair market value of the securities.
In
addition, these rules require that a broker-dealer obtain financial
and
other information from a customer, determine that transactions in
penny
stocks are suitable for such customer and deliver a written statement
to
such customer setting forth the basis for this determination.
|
FORWARD-LOOKING
STATEMENTS
This
prospectus includes "forward-looking" statements. The forward-looking statements
in this prospectus reflect our current views with respect to possible future
events and financial performance. These forward-looking statements are subject
to certain risks and uncertainties, including specifically the absence of
significant revenues and financial resources, a history of losses, no assurance
that the development of technology can be completed or that our completion
will
not be delayed, significant competition, the uncertainty of patent and
proprietary rights, uncertainty as to royalty payments and indemnification
risks, trading risks of low-priced stocks and those other risks and
uncertainties discussed herein that could cause our actual results to differ
materially from our historical results or those we anticipate. In this
prospectus, the words "anticipates," "believes," "expects," "intends," "future"
and similar expressions identify certain forward-looking statements. You are
cautioned to consider the specific risk factors described in "Risk Factors"
and
elsewhere in this prospectus and not to place undue reliance on the
forward-looking statements contained in this prospectus, which speak only as
of
the date of this prospectus. We undertake no obligation to publicly revise
these
forward-looking statements to reflect the effect of events or circumstances
that
may arise after the date of this prospectus. All written and oral
forward-looking statements made subsequent to the date of this prospectus and
attributable to us or persons acting on our behalf are expressly qualified
in
their
entirety by this section.
PLAN
OF DISTRIBUTION
After
the
effective date of the registration statement of which this prospectus is a
part,
each selling shareholder will be free to offer and sell his or her common shares
at such times, in such manner and at such prices as he or she may determine.
The
types of transactions in which the common shares are sold may include
transactions in the over-the-counter market (including block transactions),
negotiated transactions, the settlement of short sales of common shares, or
a
combination of such methods of sale. The sales will be at market prices
prevailing at the time of sale or at negotiated prices. Such transactions
may
or
may not involve brokers or dealers. The selling shareholders have advised us
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their securities.
The selling shareholders do not have an underwriter or coordinating broker
acting in connection with the proposed sale of the common shares.
The
selling shareholders may effect such transactions by selling common stock
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the selling shareholders. They
may
also
receive compensation from the purchasers of common shares for whom such
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
The
selling shareholders and any broker-dealer that acts in connection with the
sale
of common shares may be "underwriters" within the meaning of Section 2(11)
of
the Securities Act. Any commissions received by such broker-dealers and any
profit on the resale of the common shares sold by them while acting as
principals may be deemed to be underwriting discounts or
commissions.
Because
the selling shareholders may be "underwriters" within the meaning of Section
2(11) of the Securities Act, the selling shareholders will be subject to
prospectus delivery requirements.
Selling
shareholders also may resell all or a portion of their common shares in open
market transactions in reliance upon Rule 144 under the Securities Exchange
Act,
provided they meet the criteria and conform to the requirements of such
Rule.
SELLING
SHAREHOLDERS
SELLING
SHAREHOLDERS
The
following table sets forth certain information with respect to the selling
shareholders as of January 24, 2008. Except as set forth below, none of the
selling shareholders currently is an affiliate of ours, and none of them
has had
a material relationship with us during the past three years. None of the
selling
shareholders are or were affiliated with registered
broker-dealers.
|
|
|
|
|
|
Amount
and Percentage of
|
|
|
|
Beneficial
Ownership
|
|
Maximum
Number of
|
|
Common
Stock After the Sale
|
|
Name
|
|
of
Common Stock as
of
November 27, 2007
|
|
Shares
of Common
Stock
Offered for Sale
|
|
Number
|
|
%
|
|
Aladray,
Adnan
|
|
|
120,000
|
|
|
(1
|
)
|
|
120,000
|
|
|
-
|
|
|
*
|
|
Aladray,
Nazeah
|
|
|
60,000
|
|
|
(1
|
)
|
|
60,000
|
|
|
-
|
|
|
*
|
|
Belz,
Bruce Trustee
|
|
|
100,000
|
|
|
(1
|
)
|
|
100,000
|
|
|
-
|
|
|
*
|
|
Carter,
Shanon
|
|
|
21,600
|
|
|
(2
|
)
|
|
21,600
|
|
|
-
|
|
|
*
|
|
Chrobak,
Jerome
|
|
|
200,000
|
|
|
(1
|
)
|
|
200,000
|
|
|
-
|
|
|
*
|
|
Ciner,
Eugene and Natalie
|
|
|
10,000
|
|
|
(3
|
)
|
|
10,000
|
|
|
|
|
|
*
|
|
Daniels,
Richard
|
|
|
150,000
|
|
|
(1
|
)
|
|
150,000
|
|
|
-
|
|
|
*
|
|
Duchein,
Derek IRA
|
|
|
388,800
|
|
|
(2
|
)
|
|
388,800
|
|
|
-
|
|
|
*
|
|
Duchein,
Julie IRA
|
|
|
259,200
|
|
|
(2
|
)
|
|
259,200
|
|
|
-
|
|
|
*
|
|
Flannery,
Todd
|
|
|
100,000
|
|
|
(9
|
)
|
|
100,000
|
|
|
-
|
|
|
*
|
|
Flowers,
Tim
|
|
|
43,200
|
|
|
(2
|
)
|
|
43,200
|
|
|
-
|
|
|
*
|
|
Holland,
Bryan
|
|
|
58,000
|
|
|
(10
|
)
|
|
58,000
|
|
|
-
|
|
|
*
|
|
Garbourel,
Victor
|
|
|
800,000
|
|
|
(1
|
)
|
|
800,000
|
|
|
-
|
|
|
*
|
|
Giffhorn,
Jesse
|
|
|
113,500
|
|
|
(2
|
)
|
|
112,000
|
|
|
1,500
|
|
|
*
|
|
Giffhorn,
Lowell
|
|
|
577,000
|
|
|
(4
|
)
|
|
532,000
|
|
|
45,000
|
|
|
*
|
|
Griesel,
Dian
|
|
|
240,000
|
|
|
(5
|
)
|
|
240,000
|
|
|
-
|
|
|
*
|
|
Iroquois
Master Fund Ltd.
|
|
|
250,000
|
|
|
(3)
(11
|
)
|
|
250,000
|
|
|
|
|
|
*
|
|
Kybartai
Trust
|
|
|
100,000
|
|
|
(3)
(12
|
)
|
|
100,000
|
|
|
|
|
|
*
|
|
Kincaid,
Doug
|
|
|
150,000
|
|
|
(9
|
)
|
|
150,000
|
|
|
-
|
|
|
*
|
|
Little
Bear Investments LLC
|
|
|
100,000
|
|
|
(3)
(13
|
)
|
|
100,000
|
|
|
|
|
|
*
|
|
Luedloff,
Mitchell
|
|
|
43,200
|
|
|
(2
|
)
|
|
43,200
|
|
|
-
|
|
|
*
|
|
Midtown
Partners LLC
|
|
|
60,000
|
|
|
(5)
(14
|
)
|
|
60,000
|
|
|
|
|
|
*
|
|
Morrisett,
Michael
|
|
|
470,000
|
|
|
(5
|
)
|
|
270,000
|
|
|
200,000
|
|
|
*
|
|
Neilitz,
Jason
|
|
|
150,000
|
|
|
(9
|
)
|
|
150,000
|
|
|
-
|
|
|
*
|
|
Opperman,
Anthony Wayne
|
|
|
200,000
|
|
|
(1
|
)
|
|
200,000
|
|
|
-
|
|
|
*
|
|
Opperman,
Donald
|
|
|
43,200
|
|
|
(2
|
)
|
|
43,200
|
|
|
-
|
|
|
*
|
|
Pensky,
Zachary
|
|
|
140,000
|
|
|
(3
|
)
|
|
140,000
|
|
|
|
|
|
*
|
|
Potawatomi
Business Devel Corp
|
|
|
2,000,000
|
|
|
(8
|
)
|
|
2,000,000
|
|
|
-
|
|
|
*
|
|
Pratt,
Steven
|
|
|
23,200
|
|
|
(10
|
)
|
|
23,200
|
|
|
-
|
|
|
*
|
|
Shady
Beach Trust
|
|
|
108,000
|
|
|
(2)
(15
|
)
|
|
108,000
|
|
|
-
|
|
|
*
|
|
Vermaelen,
Theo
|
|
|
740,759
|
|
|
(6
|
)
|
|
86,400
|
|
|
654,359
|
|
|
2.7
|
%
|
Zolin,
James and Josephine
|
|
|
280,000
|
|
|
(7
|
)
|
|
280,000
|
|
|
-
|
|
|
*
|
|
*
less
than 1%
|
(1)
|
Includes
shares of common stock issuable upon the conversion of 8% convertible
debenture(s) plus shares of common stock currently outstanding
issued on
the exercise of the rights
offering.
|
|
(2)
|
Includes
shares of common stock issuable upon the conversion of 8% convertible
debenture(s) plus the payment of interest in common stock plus
shares of
common stock currently outstanding issued on the exercise of the
rights
offering.
|
|
(3)
|
Includes
shares of common stock issuable upon the exercise of common stock
purchase
warrants issued to investors who participated in a short term bridge
loan.
|
|
(4)
|
Mr.
Giffhorn, an affiliate, is a director and Chief Financial Officer
of the
Company. The number of shares includes 345,000 shares of common
stock and
232,000 shares of common stock issuable upon the conversion of
8%
convertible debentures, including
interest.
|
|
(5)
|
Includes
shares of common stock issuable upon the exercise of common stock
purchase
warrants issued to individuals for services they
provided.
|
|
(6)
|
Dr.
Vermaelen, an affiliate, is a director of the Company. The number
of
shares includes 694,359 shares of common stock and 46,400 shares
of common
stock issuable upon the conversion of an 8% convertible debenture,
including interest.
|
|
(7)
|
Includes
90,000 shares of common stock issuable upon the conversion of 8%
convertible debentures, including interest, 100,000 shares of common
stock
issuable upon the exercise of a common stock purchase warrant issued
for
their participation in a short term loan and 90,000 shares of common
stock
currently outstanding issued on the exercise of the rights
offering.
|
|
(8)
|
Includes
2,000,000 shares of common stock issuable upon the conversion of
an 8%
convertible debenture. The shares issuable to the Potawatomi Business
Development Corp. (PBDC) on the conversion of debentures or the
exercise
of warrants would not be deemed beneficially owned (due to exercise
restrictions within the debenture and warrants) within the meaning
of
Sections 13(d) and 13(g) of the Exchange Act to the extent that
their
acquisition in a debenture conversion or a warrant exercise by
the PBDC
would cause the PBDC to own in excess of 4.99% of our outstanding
common
stock immediately following such exercise. By the terms of the
debenture
and warrants, the 4.99% limitation may be increased to a maximum
of 9.99%
if the Company accepts a tender offer and a change in control takes
place.
Therefore, it is expected that the PBDC will not beneficially own
more
than 9.99% of our outstanding common stock at any time. Carol Lease
has
the sole voting and/or dispositive powers with respect to the securities
owned by the PBDC.
|
|
(9)
|
Includes
shares of common stock issuable upon the conversion of 8% convertible
debenture(s).
|
|
(10)
|
Includes
shares of common stock issuable upon the conversion of 8% convertible
debenture(s) plus the payment of interest in common
stock.
|
|
(11) |
Iroquois
Capital Management, LLC is the trading manager of Iroquois Master
Fund
Ltd. and has voting and investment discretion over the securities
held by
Iroquois Master Fund Ltd. Joshua Silverman has control over Iroquois
Capital Management, LLC and, in turn, has voting and investment
discretion
over the securities held by Iroquois Master Fund, Ltd. Both Iroquois
Capital Management, LLC and Joshua Silverman disclaim beneficial
ownership
of the securities held by Iroquois Master Fund.
|
|
(12) |
Wolf Prensky has the sole voting and/or dispostive
powers
with respect to the securities owned by The K ybartai
Trust. |
|
(13) |
Jeffrey Mann and Zachary Prensky share the voting
and/or
dispositive powers with respect to the shares owned by Little Bear
Investments LLC. |
|
(14) |
Bruce Jordan has the sole voting and/or dispostive
powers
with respect to the securities owned by Midtown Partners
LLC. |
|
(15) |
Nancy Hughes has the sole voting and/or dispostive
powers
with respect to the securities owned by Shady Beach
Trust. |
INFORMATION
ABOUT US
The
Company
On
September 15, 2006, we changed our name to Brendan Technologies, Inc., a Nevada
corporation (“Brendan”) from Omni U.S.A., Inc., a Nevada corporation (“Omni”).
On December 29, 2005, Omni merged with Brendan Technologies, Inc., a Michigan
corporation formed on October 31, 1997 doing business as Brendan Scientific
Corporation (“Brendan Sub”). Brendan Sub became the surviving corporation in the
merger and a wholly-owned subsidiary of Omni. Brendan Sub continues its
corporate existence under the laws of the State of Michigan and is our only
subsidiary. We conduct all of our operations through Brendan Sub. Our address
is
2236 Rutherford Road, Suite 107, Carlsbad, California 92008, and our telephone
number is (760) 929-7500. Our home page can be located on the World Wide Web
at
http://www.brendan.com.
We
are a
software company that designs, develops and markets computational analytical
software products for the laboratory testing industry. Brendan’s laboratory
workflow and analysis software platform manages the raw, computed and analytical
data in testing laboratories and in manufacturing.
Brendan
evolved from the initial work of our founder John R. Dunn II, Ph.D., now our
Chairman, President, Chief Executive Officer and Chief Technical Officer.
Brendan’s first commercialized product is StatLIA®, software designed
specifically for immunoassay testing. Since Dr. Dunn’s early work on StatLIA®
over ten years ago, StatLIA® has been developed with software engineers,
mathematicians and laboratory professionals who specialize in laboratory
testing. Over the years, StatLIA® has been used in laboratories, undergoing
numerous revisions and additions to develop the product.
There
can
be no assurance that we can achieve profitable operations, and we will need
additional financial resources during the next twelve months.
Background
Concurrent
with the merger, 4,754,709
shares
of
Brendan Sub common stock outstanding immediately before the merger were
converted into 19,018,836
shares
of
Omni common stock, a four for one ratio. Also concurrently with the merger,
(i)
4,352,879
shares
of
Omni common stock were issued to the holders of Brendan Sub Senior and Bridge
Notes totaling $2,654,198
in
aggregate principal and interest, a conversion rate of 1.64 shares per $1.00
under such debt; and (ii) 900,000 shares of Omni common stock were issued
to
individuals who participated in the arrangement of the
merger.
Common
stock options and warrants exercisable into 973,500
shares
of
Brendan Sub before the merger became exercisable into 3,894,000
common
shares of Omni after the merger. The exercise price of the Omni stock options
and warrants was adjusted to 25% of the exercise price of the Brendan Sub stock
options and warrants.
Concurrent
with the merger, on December 29, 2005, Omni entered into an agreement pursuant
to which, immediately following the merger, Omni sold all of the issued and
outstanding shares of capital stock of Omni U.S.A., Inc., a Washington
corporation and Butler Products Corporation, each of which was previously a
wholly-owned subsidiary, in exchange for a three-year promissory note due on
December 29, 2008, in the amount of $672,000, which was discounted to $498,000.
Prior
to
the transactions effected by the merger, Omni-Washington and Butler constituted
substantially all of Omni’s operations. Following the transactions effected by
the merger, Brendan Sub is now our sole wholly-owned subsidiary, and we conduct
all our operations through Brendan.
BUSINESS
Available
Information
We
file
reports, proxy statements and other information with the SEC, and these reports
may be inspected and copied at the public reference facilities maintained by
the
SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. You
may
obtain information on the operation of the public reference room by calling
the
SEC at 1-800-SEC-0330. The same information may be obtained at the following
Regional Offices of the SEC: 75 Park Place, New York, New York 10007, and the
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60621. Copies of such material may be obtained from the Public Reference Section
of the SEC's Washington, D.C. office at prescribed rates.
We
will
mail a copy of our Annual Report on Form 10-K along with a proxy statement,
or
in the alternative an information statement, to our shareholders prior to any
annual meeting.
We
have
filed a registration statement on Form SB-2, of which this prospectus is a
part,
with the SEC. This registration statement or any part thereof may also be
inspected and copied at the public reference facilities of the SEC.
Our
filings may also be accessed through the SEC's web site (http://www.sec.gov)
or
by visiting our web site at (http://www.brendan.com) and linking to the SEC's
site.
Organization
and Corporate Development.
Our
only
product is StatLIA®, analytical software used in immunoassay testing. StatLIA®
is developed, marketed and sold by Brendan Technologies, Inc., a Michigan
corporation, our wholly owned subsidiary. This is our only
subsidiary.
StatLIA®
Immunoassays,
one of the world’s largest and fastest growing testing technologies, is used to
test for metabolites found in AIDS, hepatitis, cancer, environmental pollutants,
side effects of new drugs and thousands of other biological and environmental
substances. Immunoassays are a broadly applicable technology allowing low cost,
rapid analysis through high throughput testing. Immunoassays are used
extensively in pharmaceutical, hospital, clinical reference, academic and
industrial research, environmental, agricultural, food processing and
veterinarian laboratories throughout the world.
StatLIA®
uses comprehensive statistics to directly or indirectly analyze the performance
of each of the nine immunoassay components (label, tracer, antibody, buffer,
incubation, separation, standards, controls and unknowns). StatLIA® stores a
fixed set of stable reference assays which are statistically compared to a
single assay or multiple assays to detect changes in reagents or incubation
conditions. With a reference set of at least two assays, standard curve and
control specimen parameters in the current assay are statistically compared
to
the same parameter in the reference assays to identify any statistically
significant differences.
StatLIA®
is intended to address the following:
· Insufficient
Quality
- Error
rates in Immunoassay testing is estimated to be as high as 4%. Testing errors
and the inability to directly locate error sources is costly and time consuming.
We believe that StatLIA® will reduce the error rates and enhance the tester’s
ability to locate the error source.
· Lack
of
Automation
-
Immunoassay testing is very labor intensive due to many manual steps in the
processing, tracking and analysis of the data produced. With high throughput
testing becoming the industry norm, the data needs to be managed with even
greater efficiency. We believe that StatLIA® will reduce such labor costs.
· Regulatory
Compliance
-
Federal regulations are placing increasing demands for compliance with the
Food
and Drug Administration’s (“FDA”)
quality assurance regulations. We believe that StatLIA® will meet the growing
need for automated software that can assist laboratories in complying with
the
regulations.
· Need
for
Better Data Management
-
Improved technologies have allowed greater automation in Immunoassay testing,
increasing throughput volumes but requiring better connectivity and
standardization for the management of the data generated. We believe that
StatLIA® will address the need for greater connectivity and
standardization.
Brendan
first targeted the immunoassay market with StatLIA® because it is a fragmented
and large market that may allow Brendan to sell our software to testing
equipment distributors and original equipment manufacturers (“OEMs”),
and
earn a share of business from large organizations.
Users
of
StatLIA® include device and reagent manufacturers, pharmaceutical companies,
clinical diagnostic centers and government testing laboratories. Distributors
of
StatLIA® include device and reagent manufacturers and their distributors, as
well as Brendan’s direct sales force.
Customer
Base
We
have
used most of our capital to date in the development of StatLIA® and the
expansion of the program to encompass all of the differing immunoassay
technologies and workflow configurations found in research and clinical
laboratories. Existing customers who have used StatLIA® in laboratories
include several large pharmaceutical companies, clinical diagnostic
organizations, reagent manufacturers and research entities. This client base
also serves as a source of revenue for additional instruments and workstations,
and support and maintenance renewal fees.
Many
of
our institutional clients operate under rigorous FDA regulations, or the
European equivalent, and the FDA requires that new software products be
validated.
Strategy
Industry
Analysis
Using
data obtained from Morgan Stanley Dean Witter, Global Industry Analysts, and
other published industry and marketing reports, and instrument manufacturer
sales figures, we estimate this market to represent over $1 billion in
revenue and does not include the food processing, agricultural, veterinarian,
or
the rapidly expanding environmental immunoassay markets. This also does not
include software applications for other technologies. According to the Health
Industry Manufacturer’s Association, more than $50 billion in medical devices,
diagnostic products and health information systems are currently purchased
annually in the United States and more than $120 billion worldwide. This
represents only the clinical market segment and not pharmaceutical, research,
environmental and other segments.
Conventional
laboratory software falls into two primary areas: laboratory management or
instrumentation. Laboratory management software handles billing, report
generation, and other administrative tasks. The software is not designed for
complex technical computation. Software for the testing instruments operates
as
dedicated systems and is basically designed only to generate results. It is
not
designed for the complete statistical analysis and data management and record
keeping requirements for pharmaceutical, clinical or research labs, nor is
it
designed to exist in a cooperative environment with other immunoassay
instruments.
StatLIA®
was introduced to meet this need, which we believe no other commercial software
available meets. By using StatLIA® for their assay validation and documentation
as well as standardizing on it as one uniform system throughout their
organization, pharmaceutical companies may save substantial time and resources
supplying the necessary documentation to get new drugs to market and clinical
laboratories may increase productivity and reliability while reducing costs.
Market
We
believe that through Brendan we have the opportunity to introduce a product
to
serve an under-served niche market: the software used in biomedical and
non-biomedical testing laboratories. The testing industry generates more than
$100 billion in revenues each year to run tests for drug development, medical
diagnostics and treatments, water and soil samples, infectious disease research,
food contaminants, and numerous other health and industry-critical applications.
Brendan
has focused on the analytical segment of the market. This is the computation,
storage and analysis of the raw signal data generated by a testing instrument.
However, the majority of the software used to analyze these tests is a part
of
the instrument software that is provided by the instrument manufacturer. These
routines do not provide all of the capabilities and are not as extensive as
the
data currently computed by StatLIA®.
StatLIA®
allows laboratories to interface all of their immunoassay testing instruments
into one uniform system. As one system, as compared to the more common
configurations consisting of isolated testing instruments, the StatLIA® system
can be easily interfaced to our customer’s main database for reporting patient
results and recording clinical trial data, among other processes. The system
also integrates into a laboratory’s network, so that multiple computers can be
used to prepare, compute, analyze and report all assay data, thereby increasing
workflow. StatLIA®’s superior quality control process not only determines the
accuracy of the test more reliably than other software currently available,
but
also pinpoints the specific cause of a problem in a bad test, dramatically
reducing laboratory downtime and reagent costs.
Competition
Almost
all immunoassay software is produced and sold by manufacturers bundled with
their instruments. The software is included to stimulate sales of their
instruments and is not usually marketed as a stand-alone product.
Conventional laboratory software falls into two primary areas: laboratory
management or instrumentation functionality. Laboratory management software
handles billing, report generation and other administrative tasks. The software
is not designed for complex technical computation. On the other hand, software
for testing instruments operates as a dedicated system and is designed primarily
to generate testing data. This software has limitations meeting the complete
statistical analysis, data management, data utilization and record keeping
demands of pharmaceutical, clinical or research labs, nor is it designed to
exist in a cooperative environment with other testing instruments.
Prior
to
Brendan, we believe that no company has focused as extensively on the gap
between instrument operational software and administrative LIM software. Brendan
has worked with several industry-leading labs to develop StatLIA® and we believe
that StatLIA® is a unique software product that surpasses any software currently
available for this market.
To
date,
the majority of StatLIA® sales have been replacing existing OEM software on
testing equipment. This software, bundled with the instruments, is Brendan’s
current main competition. Existing equipment-specific software include Softmax,
used for Molecular Device’s microplate readers and KC4 used for BioTek
Instrument’s microplate readers. We believe instrument manufacturers are
excellent prospects for distribution agreements to incorporate or bundle our
software with their instruments.
Intellectual
Property
We
attempt to protect the proprietary aspects of our products with copyrights,
trade secret law and internal nondisclosure safeguards. The source code for
the
software contained in our products is considered proprietary and we do not
furnish source code to our customers. We have also entered into confidentiality
agreements with our employees. Despite these restrictions, it may be possible
for competitors or users to copy aspects of our products or to obtain
information that we regard as a trade secret.
There
is
a rapid pace of technological change in the software industry, which in turn
compels us to continually enhance and extend our product lines. We believe
that
patent, trade secret and copyright protection is less significant to our
competitive position than factors such as the knowledge, ability and experience
of our personnel, new product development, frequent product enhancements, name
recognition and ongoing, reliable product maintenance and support.
Marketing
and Distribution.
Our
products are marketed through a combination of direct sales and distributors.
Approximate sales by principal geographic area (as a percentage of sales) for
the fiscal years ended June 30, 2007 and 2006 were as follows:
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Domestic
sales
|
|
|
96.5
|
%
|
|
90.4
|
%
|
Foreign
sales
|
|
|
|
|
|
|
|
Europe
|
|
|
2.8
|
%
|
|
6.6
|
%
|
Other
|
|
|
.7
|
%
|
|
3.0
|
%
|
Total
sales
|
|
|
100.0
|
%
|
|
100.0
|
%
|
All
of
our operating assets are located within the United States. While sales to
certain geographic areas generally vary from year to year, we do not expect
that
changes in the geographic composition of sales will have a material adverse
effect on operations.
Dependence
Upon Single Customers.
Ten
percent (10%) or more of our consolidated net sales were derived from shipments
to the following customers for the fiscal years ended June 30, 2007 and 2006
as
follows:
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
$
|
125,000
|
|
$
|
289,000
|
|
Amgen
|
|
|
61,900
|
|
|
-
|
|
All
of
the above sales were shipped against multiple purchase orders from each
customer.
Facilities
We
conduct our corporate functions and manufacturing, product development, sales
and marketing activities in Carlsbad, California. We rent 3,988 square feet
of
office space at 2236 Rutherford Road, Suite 107, Carlsbad, California 92008
under a two-year lease ending May 31, 2008 for a monthly rent ranging from
$4,825 for the first year increasing to $4,985 for the second year. The average
monthly rent for the two-year period is $4,905. This space is adequate to meet
our foreseeable future needs.
Employees
Brendan
currently has 14 full time employees and two part time consultants. Brendan
has
entered into employment agreements with certain of our employees.
Our
future success depends in significant part upon the continued services of our
key technical and senior management personnel. The competition for highly
qualified personnel is intense, and there can be no assurance that we will
be
able to retain our key managerial and technical employees or that we will
be
able
to
attract and retain additional highly qualified technical and managerial
personnel in the future. None of our employees is represented by a labor union,
and we consider our relations with our employees to be good. None of our
employees is covered by key man life insurance policies.
Government
Regulation
To
our
knowledge, our products are not subject to governmental regulation by any
federal, state or local agencies that would affect the manufacture, sale or
use
of our products, other than occupational health and safety laws and labor laws
which are generally applicable to most companies. We cannot, of course, predict
what sort of regulations of this type may be imposed in the future but do not
anticipate any unusual difficulties in complying with governmental regulations
which may be adopted in the future.
We
have
not incurred costs associated with environmental laws and do not anticipate
such
laws will have any significant effect on our future business.
USE
OF PROCEEDS
We
will
not receive any proceeds from the resale of these securities. We may receive
proceeds on the exercise of the warrants of up to $762,000.
LEGAL
PROCEEDINGS
None.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR
PLAN
OF OPERATION
Preliminary
Notes Regarding Forward-Looking Statements
Investors
should understand that several factors govern whether any forward-looking
statement contained herein will be or can be achieved. Any one of those factors
could cause actual results to differ materially from those projected herein.
These forward-looking statements include plans and objectives of management
for
future operations, including plans and objectives relating to our products
and
future economic performance. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic, competitive
and
market conditions, future business decisions, and the time and money required
to
successfully complete development projects, all of which are beyond our control.
Although we believe that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of those assumptions could
prove
inaccurate and, therefore, there can be no assurance that the results
contemplated in any of the forward-looking statements contained herein will
be
realized. Based on actual experience and business developments, the impact
of
which may cause us to alter our marketing, capital expenditure plans or other
budgets, which may in turn affect our results of operations in light of the
other significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of any such statement should not be regarded
as a
representation by us or any other person that our objectives or plans will
be
achieved.
Overview
Brendan
completed a reverse merger transaction on December 29, 2005 with Brendan Sub,
a
Michigan corporation formed in October 1997. Prior to the merger, Omni, through
its wholly-owned subsidiary, Omni U.S.A., Inc., a Washington corporation
("Omni-Washington") and Omni-Washington's wholly-owned subsidiary, Omni
Resources, Ltd., a Hong Kong company ("Omni Resources"), through its
wholly-owned manufacturing facility, Shanghai Omni Gear Co., Ltd.("Shanghai
Omni
Gear"), designed, developed, manufactured and distributed power transmissions
(also known as "gearboxes" or "enclosed gear drives") for use in agricultural,
industrial, "off-highway" and construction equipment. Omni, through another
wholly-owned subsidiary, Butler Products Corporation, designed, developed,
manufactured and distributed trailer and implement jacks and couplers, which
included light and heavy-duty jacks and couplers used in a variety of trailers.
Immediately following the closing of the merger, the subsidiaries of Omni were
sold to its founders and Brendan Sub became the only wholly owned subsidiary
of
Omni, the public company which was renamed Brendan Technologies, Inc, a Nevada
corporation, in September 2006. Brendan Sub continues to be the only operating
subsidiary of Brendan Technologies, Inc.
Critical
Accounting Policies and Estimates
The
preparation of consolidated financial statements in accordance with accounting
principles generally accepted in the United States requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and
liabilities.
On
an
ongoing basis, we evaluate our estimates, including those related to our product
returns, bad debts, intangible assets, long-lived assets and contingencies
and
litigation. 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
have
identified two accounting policies that we believe are key to an understanding
of our financial statements. These important accounting policies require
management's most difficult, subjective judgments.
1.
Revenue Recognition
We
recognize revenues related to software licenses and software maintenance in
accordance with the American Institute of Certified Public Accountants (“AICPA”)
Statements of Position (“SOP”) No. 97-2, “Software Revenue Recognition,” as
amended by SOP No. 94-4 and SOP No. 98-9. We follow the guidance established
by
the SEC in Staff Accounting Bulletin No. 104, as well as generally accepted
criteria for revenue recognition, which require that, before revenue is
recorded, there is persuasive evidence of an arrangement, the fee is fixed
or
determinable, collection is reasonably assured, and delivery to our customer
has
occurred. In addition, our invoices may include multiple elements that identify
vendor specific objective evidence of fair value for each of those elements.
We
recognize revenue as follows:
Software-
our software is sold with an indefinite license period, and as such, product
revenue is recorded at the time of the customer’s acceptance (generally 30 days
after shipment which allows for a 30 day return guarantee if the customer is
not
satisfied with the product), net of estimated allowances and returns.
Post-contract
customer support- (“PCS”) obligations are generally for annual services and are
recognized over the period of service. Revenues for which payment has been
received are treated as deferred revenue until services are provided and
revenues have been earned.
Training
and service calls- recognized at the time training or service calls are
provided.
Royalties-
we recognize revenue from royalties only after the cash has been collected
(typically 30 days after the end of the quarter on which the royalty payment
is
based.)
Licensing-
we also derive license revenue from fees for the transfer of proven and reusable
intellectual property components. Generally, these payments will include a
nonrefundable technology license fee, which will be payable upon the transfer
of
intellectual property. License fees will be recognized upon the execution of
the
license agreement and transfer of intellectual property provided no further
significant performance obligations exist and collectibility is deemed probable.
Customization
revenue- fees related to software service contracts to aid customers in adapting
such intellectual property to their particular instruments, which will be
performed on a best efforts basis and for which we will receive periodic
milestone payments, will be recognized as revenue over the estimated development
period, using a cost-based percentage of completion method.
2.
Going Concern
The
financial statements have been prepared on a going concern basis. However,
during the quarter ended September 30, 2007 and the years ended June 30,
2007
and 2006, we incurred net losses of $707,451, $2,110,698 and $845,393,
respectively, and had an accumulated deficit of $9,059,858, $8,352,407 and
$6,241,709, at September 30, 2007 and June 30, 2007 and 2006, respectively.
In
addition, at September 30, 2007, we had a working capital deficit of $3,129,340
and are in default on $228,890 of debt and interest. Our ability to continue
as
a going concern is dependent upon our ability to generate profitable operations
in the future and/or to obtain the necessary financing to meet our obligations
and repay our liabilities arising from normal business operations when they
come
due. The outcome of these matters cannot be predicted with any certainty
at this
time and as such raise substantial doubt as to our ability to continue as
a
going concern. Since inception, we have satisfied our capital needs through
debt
and equity financings and expect to continue to fund from these sources until
profitability is achieved. There can be no assurance that funds will be
available at terms favorable to us or that future profitability can be
achieved.
Results
of Operations
On
December 29, 2005, we completed the acquisition of substantially all the assets
of Brendan Sub pursuant to the Merger Agreement and completed the disposition
of
substantially all the assets of Omni-Washington and Butler pursuant to the
Stock
Purchase Agreement. As a result of these transactions and the issuance of common
stock to the shareholders, noteholders and individuals who assisted in the
merger, Brendan Sub, a now wholly-owned subsidiary of ours, became the
accounting acquirer and the transaction was accounted for as a reverse merger
acquisition.
Three
Months Ended September 30, 2007 Compared to Three Months Ended September
30,
2006
Selected
Financial Information
|
|
Three
Months Ended September 30,
|
|
Increase
|
|
|
|
|
|
2007
|
|
2006
|
|
(Decrease)
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Statements
of Operations
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
159,826
|
|
$
|
87,395
|
|
$
|
72,431
|
|
|
82.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
42,688
|
|
|
23,205
|
|
|
19,483
|
|
|
84.0 |
% |
Research
and development
|
|
|
118,768
|
|
|
83,136
|
|
|
35,632
|
|
|
42.9 |
% |
General
and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expenses
|
|
|
467,255
|
|
|
317,923
|
|
|
149,332
|
|
|
47.0 |
% |
Interest
expense
|
|
|
238,566
|
|
|
69,003
|
|
|
169,563
|
|
|
245.7 |
% |
Total
expenses
|
|
|
867,277
|
|
|
493,267
|
|
|
374,010
|
|
|
75.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$
|
(707,451
|
)
|
$
|
(405,872
|
)
|
$
|
301,579
|
|
|
74.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) per basic and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
share
|
|
$
|
(0.03
|
)
|
$
|
(0.02
|
)
|
$
|
0.01
|
|
|
50.0 |
% |
Revenues
Revenues
for the quarter ended September 30, 2007 increased $72,431, 82.9%, to $159,826
compared to $87,395 for the quarter ended September 30, 2006. The primary
reason
for the revenue increase was an approximately $30,000 increase in the sale
of
our existing StatLIA software plus an approximately $35,000 increase in
validation revenue related to certifying that software. We anticipate that
revenue will decline for the next quarter as our customers are anticipating
the
release of our upgraded version of the StatLIA software to an enterprise
level
during the first half of calendar year 2008.
Selling
Expenses
Selling
expenses increased by $19,483, 84.0%, to $42,688 for the three months ended
September 30, 2007 from $23,205 for the three months ended September 30,
2006.
This increase was primarily due to an increase of one additional sales person
during the current fiscal quarter.
Research
and Development Expenses
Research
and development expenses increased by $35,632, 42.9%, to $118,768 for the
three
months ended September 30, 2007 from $83,136 for the three months ended
September 30, 2006. This increase was primarily due to an increase in software
engineers to complete the upgrade of our StatLIA software to an enterprise
version.
General
and Administrative Expenses
General
and administrative expenses increased by $149,332, 47.0%, to $467,255 for
the
quarter ended September 30, 2007 from $317,923 for the quarter ended September
30, 2006. The primary reasons for the increase were approximately $96,000
increase in personnel to ramp up for the anticipated release of our StatLIA
software to an enterprise version during the first half of calendar year
2008,
approximately $34,000 related to our investor relations program, and
approximately $21,000 related to travel and trade show
presentations.
Interest
Expense
Interest
expense increased by $169,563, 245.7% increase, to $238,566 for the quarter
ended September 30, 2007 from $69,003 for the quarter ended September 30,
2006.
The primary reason for the increase in interest was a result of the issuance
of
8% convertible debentures and the issuance of secured bridge
loans.
Year
Ended June 30, 2007 Compared to the year ended June 30, 2006
Selected
Financial Information
|
|
Year
Ended
|
|
Year
Ended
|
|
Increase
|
|
|
|
|
|
June
30, 2007
|
|
June
30, 2006
|
|
(Decrease)
|
|
%
|
|
Statements
of Operations
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
521,330
|
|
$
|
681,337
|
|
$
|
(160,007
|
)
|
|
-23.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
101,296
|
|
|
103,190
|
|
|
(1,894
|
)
|
|
-1.8
|
%
|
General
and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expenses
|
|
|
2,115,310
|
|
|
1,215,966
|
|
|
899,344
|
|
|
74.0
|
%
|
Other
income
|
|
|
(38,121
|
)
|
|
-
|
|
|
(38,121
|
)
|
|
NM
|
|
Interest
expense
|
|
|
453,543
|
|
|
207,574
|
|
|
245,969
|
|
|
118.5
|
%
|
Total
expenses
|
|
|
2,632,028
|
|
|
1,526,730
|
|
|
1,105,298
|
|
|
72.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$
|
(2,110,698
|
)
|
$
|
(845,393
|
)
|
$
|
(1,265,305
|
)
|
|
149.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) per basic and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
share
|
|
$
|
(0.09
|
)
|
$
|
(0.06
|
)
|
$
|
(0.03
|
)
|
|
50.0
|
%
|
Revenue
Revenue
for the year ended June 30, 2007 decreased $160,007, 23.5%, to $521,330 compared
to $681,337 for the year ended June 30, 2006. The primary reason for the sales
decrease was during the year ended June 30, 2006 we received a pre-release
order
amounting to approximately $127,000 for a minor segment of our upgraded version
of the StatLIA® software. No similar licenses were received during the current
fiscal year. In addition, revenue has been negatively impacted due to our
customers waiting for the release of our upgraded version of StatLIA®. The
upgraded version of StatLIA® is scheduled to be released during the first half
of fiscal year 2008.
Selling
Expenses
Selling
expenses for the year ended June 30, 2007 remained stable at $101,296 compared
to $103,190 for the year ended June 30, 2006.
General
and Administrative Expenses
General
and administrative expenses increased by $899,344, 74.0%, to $2,115,310 for
the
year ended June 30, 2007 from $1,215,966 for the year ended June 30, 2006.
The
primary reasons for the increase were approximately $673,000 related to an
increase in personnel, approximately $45,000 related to increasing the
infrastructure to upgrade our StatLIA® software, approximately $113,000 related
to our investor relations program and approximately $39,000 increase in travel
and trade show costs.
Interest
Expense
Interest
expense increased by $245,969, 118.5%, to $453,543 for the year ended June
30,
2007 from $207,574 for the year ended June 30, 2006. The primary reason for
the
increase was the increase in interest expense related to convertible
debentures.
Capital
Resources
|
|
As
of
|
|
Increase
|
|
|
|
September
30, 2007
|
|
June
30, 2007
|
|
(Decrease)
|
|
Working
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
$
|
349,991
|
|
$
|
250,218
|
|
$
|
99,773
|
|
Current
liabilities
|
|
|
3,479,331
|
|
|
1,929,861
|
|
|
1,549,470
|
|
Working
capital deficit
|
|
$
|
(3,129,340
|
)
|
$
|
(1,679,643
|
)
|
$
|
1,449,697
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
$
|
541,186
|
|
$
|
1,381,629
|
|
$
|
(840,443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
deficit
|
|
$
|
(3,498,455
|
)
|
$
|
(2,875,965
|
)
|
$
|
622,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended September 30,
|
|
|
Increase
|
|
|
|
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
Statements
of Cash Flows Select Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided (used) by:
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
$
|
(562,052
|
)
|
$
|
(354,694
|
)
|
$
|
207,358
|
|
Investing
activities
|
|
$
|
(9,956
|
)
|
$
|
(15,414
|
)
|
$
|
(5,458
|
)
|
Financing
activities
|
|
$
|
498,192
|
|
$
|
773,500
|
|
$
|
(275,308
|
)
|
|
|
As
of
|
|
Increase
|
|
|
|
September
30, 2007
|
|
June
30, 2007
|
|
(Decrease)
|
|
Balance
Sheet Select Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
11,200
|
|
$
|
85,016
|
|
$
|
(73,816
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
148,842
|
|
$
|
75,283
|
|
$
|
73,559
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
1,574,193
|
|
$
|
1,478,257
|
|
$
|
95,936
|
|
Liquidity
We
have
historically financed our operations through debt and equity financings.
At
September 30, 2007, we had cash holdings of $11,200, a decrease of $73,816
compared to June 30, 2007. Our net working capital deficit at September 30,
2007, was $3,129,340 compared to $1,679,643 as of June 30, 2007.
These
financial statements have been prepared on a going concern basis. However,
during the three months ended September 30, 2007 and the year ended June
30,
2007, the Company incurred net losses of $707,451 and $2,110,698, respectively,
and had an accumulated deficit of $9,059,858 and $8,352,407, at September
30,
2007 and June 30, 2007, respectively. Our ability to continue as a going
concern
is dependent upon our ability to generate profitable operations in the future
and/or to obtain the necessary financing to meet our obligations and repay
our
liabilities arising from normal business operations when they come due. The
outcome of these matters cannot be predicted with any certainty at this time.
Since inception, we have satisfied our capital needs through debt and equity
financings. During the three months ended September 30, 2007, we issued $555,000
of 15% secured bridge loans, net of costs amounting to
$45,000.
Management
plans to continue to provide for our capital needs during the twelve months
ending September 30, 2008, by increasing sales through the continued development
of our products and by debt and/or equity financings. There is no assurance
that
we will be able to increase sales or obtain financing. To the extent we are
unable to do so, we may be required to curtail our operations. These financial
statements do not include any adjustments to the amounts and classification
of
assets and liabilities that may be necessary should we be unable to continue
as
a going concern.
New
Accounting Pronouncements
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”. This Statement permits entities to
choose to measure many financial assets and financial liabilities at fair
value.
Unrealized gains and losses on items for which the fair value option has
been
elected are reported in earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007, which for us will be the fiscal year
beginning April 1, 2008. We are currently assessing the impact of SFAS No.
159
on our financial position and results of operations.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measures”.
This Statement defines fair value, establishes a framework for measuring
fair
value in generally GAAP, expands disclosures about fair
value measurements, and applies under other accounting pronouncements that
require or permit fair value measurements. SFAS No. 157 does not
require any new fair value measurements. However, the FASB anticipates that
for
some entities, the application of SFAS No. 157 will change current
practice. SFAS No. 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, which for us will be the fiscal
year beginning April 1, 2008. We are currently evaluating the impact of
SFAS No. 157 but do not expect that it will have a material impact on
our financial statements.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
On
December 29, 2005, Omni completed the acquisition of substantially all the
assets of Brendan Sub pursuant to the Merger Agreement and completed the
disposition of substantially all the assets of Omni-Washington and Butler
pursuant to the Stock Purchase Agreement. On December 29, 2005, Omni provided
notice to Harper & Pearson Company (“Harper & Pearson”) that they would
no longer be retained as Omni’s independent registered accounting firm. Harper
& Pearson’s reports on the consolidated financial statements of Omni and its
subsidiaries for the two most recent fiscal years ended June 30, 2005, did
not
contain any adverse opinion or disclaimer of opinion, nor were they qualified
or
modified as to uncertainty, audit scope, or accounting principles.
On
December 29, 2005, the Board of Directors of Omni elected to engage Farber
Hass
Hurley McEwen LLP (“FHHM”) to serve as Omni’s independent registered accounting
firm.
On
December 29, 2005, Omni was informed that it had been accepted as a client
of
FHHM.
During
our two most recent fiscal years ended June 30, 2005 and the subsequent interim
period through December 29, 2005, there were no disagreements between Omni
and
Harper & Pearson on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to Harper & Pearson's satisfaction, would
have caused them to make reference to the subject matter of the disagreement
in
their reports on the financial statements for such years.
Omni
has
authorized Harper & Pearson to respond fully to the inquiries of FHHM
concerning the subject matter of the reportable event and has provided Harper
& Pearson with a copy of the foregoing disclosures. Attached as Exhibit 99.3
to our Current Report on Form 8-K filed on January 5, 2006 is a copy of Harper
& Pearson's letter, dated January 4, 2006, stating its agreement with the
statements related to it.
During
Omni's two fiscal years ended June 30, 2005, and the subsequent interim period
through December 29, 2005, Omni did not consult FHHM with respect to the
application of accounting principles to a specific transaction, either completed
or contemplated, or the type of audit opinion that might be rendered on Omni’s
consolidated financial statements, or any other matters of reportable events
as
set forth in Items 304(a)(2)(i) and (ii) of Regulation S-B.
MANAGEMENT
Directors
and Executive Officers
Our
directors and executive officers are as follows:
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
John
R. Dunn II
|
|
56
|
|
Chairman,
Chief Executive Officer, President, and Director
|
George
Dunn
|
|
50
|
|
Secretary,
Chief Operating Officer
|
Lowell
W. Giffhorn
|
|
60
|
|
Chief
Financial Officer and Director
|
Theo
Vermaelen
|
|
53
|
|
Director
|
Stephen
Eisold
|
|
60
|
|
Director
|
Jason
Booth
|
|
41
|
|
Director
|
The
business experience of each of our executive officers and directors is set
forth
below.
John
R.
Dunn II is the founder of Brendan and has served as the Chairman, Chief
Executive Officer, President and Director of Brendan since 1997. Dr. Dunn has
had extensive experience in hospital and clinical laboratories, including
bio-science laboratories. He has set up and run a reference laboratory
specializing in immunoassays and been a consultant in immunoassay development
and statistics for several clinical and hospital laboratories. Dr. Dunn obtained
a Ph.D. in Biology from Wayne State University, Detroit, MI, in 1987 and he
obtained a B.S. in Biology from Wayne State University in 1974.
George
Dunn has served as the Secretary and Chief Operating Officer of Brendan since
1997. Mr. Dunn has extensive experience in marketing and sales and the
implementation of strategic plans, market segment analysis, promotions, sales
and sales support development. Mr. Dunn received his B.A. in Communication
Arts
from Michigan State University in 1981.
Lowell
W.
Giffhorn has served as our Chief Financial Officer since October 2005. Since
July 2005, Mr. Giffhorn also serves as the Chief Financial Officer of
Imagenetix, Inc., a publicly held nutritional supplement company. Mr. Giffhorn
was the Chief Financial Officer of Patriot Scientific Corp., a publicly held
semiconductor and intellectual property company, from May 1997 to June 2005
and
was a member of its Board of Directors from August 1999 to April 2006. From
June
1992 to August 1996 and from September 1987 to June 1990 he was the CFO of
Sym-Tek Systems, Inc. and Vice President of Finance for its successor, Sym-Tek
Inc., a supplier of capital equipment to the semiconductor industry. Mr.
Giffhorn obtained a M.B.A. degree from National University in 1976 and he
obtained a B.S. in Accountancy from the University of Illinois in 1969. Mr.
Giffhorn is also a director and chairman of the audit committee of DND
Technologies, Inc., a publicly held company. Mr. Giffhorn devotes approximately
50% of his time to our affairs.
Theo
Vermaelen has served as a Director since December 2005. Since 2001, Dr.
Vermaelen has been the Schroders Chaired Professor of International Finance
and
Asset Management at INSEAD, a business school with campuses in Fontainebleau,
France and Singapore. From 1998 to 2003, Dr. Vermaelen was portfolio manager
of
the KBC equity buyback fund. Dr. Vermaelen has taught at the University of
British Columbia, the Catholic University of Leuven, London Business School,
UCLA, the University of Chicago, and Maastricht University. He is the co-editor
of the Journal of Empirical Finance. He is also a consultant to various
corporations and government agencies and Program Director of the Amsterdam
Institute of Finance, a training institute for investment bankers and other
financial professionals. Dr. Vermaelen obtained his M.B.A. in 1976 and Ph.D.
in
Finance in 1980 from the Graduate School of Business, University of Chicago.
Stephen
C. Eisold has served as a Director since December 2005. From February 2001
to
November 2005, Mr. Eisold was the Chief Executive Officer of Brendan. From
1998
to 2001, Mr. Eisold was the Chief Executive Officer at Axiom Biotechnologies,
Inc. From 1996 to 1998, Mr. Eisold was the Executive Vice President and Chief
Operating Officer at Cypros Pharmaceutical. Previously Mr. Eisold was the
General Manager of North America Pharmaceuticals for Gensia and before which
he
held various marketing and business development positions with Marion
Laboratories. Mr. Eisold obtained a M.B.A. degree from Rockhurst College, Kansas
City, MO, in 1981 and a B.S. in Biology from Springfield College, Springfield,
MA, in 1968.
Jason
Booth has served as a Director since August 2006. Since 1999, Mr. Booth has
been
the owner of Booth Publications, Inc., which focuses on sales and marketing
campaigns primarily for the pharmaceutical industry. For the five years previous
to that, Mr. Booth provided executive recruiting and retention consulting
services for large and small company human resource departments as an Account
Manager for Pro Staff Personnel Services. Mr. Booth is also on the board of
directors of the Potawatomi Business Development Corporation, who in July 2006,
purchased from us a $1 million 8% convertible debenture with attached common
stock purchase warrants. He is also a tribal member of the Turtle Mountain
Band
of Chippewa Indians. Mr. Booth obtained a B.S. in English from the University
of
Minnesota in 1989.
John
R.
Dunn II and George Dunn are brothers.
Except
for Dr. Dunn and Mr. Giffhorn, all of our directors are independent directors,
as defined by current NASDAQ listing standards and the rules and regulations
of
the SEC.
Liability
and Indemnification of Officers and Directors
Our
Articles of Incorporation provides that our directors will not be liable for
monetary damages for breach of their fiduciary duty as directors, other than
the
liability of a director for:
|
|
A
breach of the director’s duty of loyalty to our company or our
stockholders;
|
|
|
Acts
or omissions by the director not in good faith or which involve
intentional misconduct or a knowing violation of law;
|
|
|
Willful
or negligent declaration of an unlawful dividend, stock purchase
or
redemption; or
|
|
|
Transactions
from which the director derived an improper personal benefit.
|
Our
Articles of Incorporation require us to indemnify all persons whom we may
indemnify pursuant to Nevada law to the full extent permitted by Nevada law.
Our
bylaws require us to indemnify our officers and directors and other persons
against expenses, judgments, fines and amounts incurred or paid in settlement
in
connection with civil or criminal claims, actions, suits or proceedings against
such persons by reason of serving or having served as officers, directors,
or in
other capacities, if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to our best interests and, in a
criminal action or proceeding, if he had no reasonable cause to believe that
his/her conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction or upon a plea of no contest or
its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he or she reasonably believed to be
in
or not opposed to our best interests or that he or she had reasonable cause
to
believe his or her conduct was unlawful. Indemnification as provided in our
bylaws shall be made only as authorized in a specific case and upon a
determination that the person met the applicable standards of conduct. Insofar
as the limitation of, or indemnification for, liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling us pursuant to the foregoing, or otherwise, we have been advised
that, in the opinion of the Securities and Exchange Commission, such limitation
or indemnification is against public policy as expressed in the Securities
Act
of 1933 and is, therefore, unenforceable.
Executive
Compensation
There
is
shown below information concerning the compensation of our principal executive
officer and the most highly compensated executive officers whose total
compensation exceeded $100,000 (each a “Named Officer”) for the fiscal years
ended June 30, 2007 and 2006.
SUMMARY
COMPENSATION TABLE
Name
and
|
|
Fiscal
|
|
|
|
Option
|
|
|
|
Principal
Position
|
|
Year
|
|
Salary
($)
|
|
Awards
($)
|
|
Total
($)
|
|
[a]
|
|
[b]
|
|
[c]
|
|
[f]
|
|
[j]
|
|
John
R. Dunn II
|
|
|
2007
|
|
$
|
108,000
|
|
$
|
5,071
|
|
$
|
113,071
|
|
President,
CEO and
|
|
|
2006
|
|
$
|
108,000
|
|
$
|
27,427
|
|
$
|
135,427
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
Dunn
|
|
|
2007
|
|
$
|
108,000
|
|
$
|
5,071
|
|
$
|
113,071
|
|
VP,
Secretary and
|
|
|
2006
|
|
$
|
102,000
|
|
$
|
24,565
|
|
$
|
126,565
|
|
COO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We
estimate the fair value of the options issued at the issuance date by using
the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for those options issued during the year ended:
|
|
June
30, 2007
|
|
June
30, 2006
|
|
|
|
|
|
|
|
Dividend
yield
|
|
|
0
|
%
|
|
0
|
%
|
Volatility
|
|
|
42
|
%
|
|
1%-30
|
%
|
|
|
|
5.10
|
%
|
|
2.76%-4.84
|
%
|
Expected
life
|
|
|
5
years
|
|
|
5
years
|
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
Number
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
Underlying
|
|
|
|
|
|
|
|
Unexercised
|
|
Option
|
|
|
|
|
|
Options
|
|
Exercise
|
|
Option
|
|
|
|
(#)
|
|
Price
|
|
Expiration
|
|
Name
|
|
Exercisable
|
|
($)
|
|
Date
|
|
[a]
|
|
[b]
|
|
[e]
|
|
[f]
|
|
John
R. Dunn II
|
|
|
40,000
|
|
$
|
0.75
|
|
|
April
6, 2011
|
|
President,
CEO and
|
|
|
60,000
|
|
$
|
0.64
|
|
|
April
6, 2011
|
|
Director
|
|
|
50,000
|
|
$
|
0.64
|
|
|
June
15, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
George
Dunn
|
|
|
400,000
|
|
$
|
0.125
|
|
|
April
6, 2011
|
|
VP,
Secretary and
|
|
|
400,000
|
|
$
|
0.025
|
|
|
April
6, 2011
|
|
COO
|
|
|
60,000
|
|
$
|
0.64
|
|
|
April
6, 2011
|
|
|
|
|
50,000
|
|
$
|
0.64
|
|
|
June
15, 2012
|
|
Director
Compensation
|
|
Fees
|
|
|
|
|
|
|
|
|
|
Earned
|
|
|
|
|
|
|
|
|
|
or
|
|
|
|
|
|
|
|
|
|
Paid
In
|
|
Option
|
|
|
|
|
|
|
|
Cash
|
|
Awards
|
|
Compensation
|
|
Total
|
|
|
|
($)
|
|
($)
|
|
|
|
($)
|
|
[a]
|
|
[b]
|
|
[d]
|
|
[g]
|
|
[h]
|
|
Lowell
W. Giffhorn
|
|
|
-
|
|
$
|
5,071
|
|
$
|
75,000
|
|
$
|
80,071
|
|
Theo
Vermaelen
|
|
|
-
|
|
$
|
5,071
|
|
|
-
|
|
$
|
5,071
|
|
Stephen
Eisold
|
|
|
-
|
|
$
|
5,071
|
|
|
-
|
|
$
|
5,071
|
|
Jason
Booth
|
|
|
-
|
|
$
|
9,043
|
|
|
-
|
|
$
|
9,043
|
|
Mr.
Giffhorn is our Chief Financial Officer and one of our directors. The amount
reflected as other compensation is the amount he was paid as our Chief Financial
Officer. He received no compensation for being a director.
We
reimburse our directors for any travel related expenses incurred in performing
their duties as directors. In addition, we granted stock options to each of
Messrs. Dunn, Giffhorn, Vermaelen, and Eisold in the amounts of 50,000 and
100,000 shares and to Mr. Booth in the amount of none and 100,000 shares during
the years ended June 30, 2007 and 2006, respectively.
Employment
Contracts
In
November 2004, we entered into an employment agreement with our Chairman,
President and Chief Executive Officer, Dr. John Dunn II, which expires on
November 1, 2011. The employment agreement provides for an annual salary of
$108,000. The agreement also provides that we may terminate the agreement with
30 days written notice if termination is without cause. Our obligation would
be
to pay Dr. Dunn monthly payments equal to his base salary for 24 months. In
addition, all of Dr. Dunn’s options would immediately vest. The agreement also
provides that Dr. Dunn can terminate employment if we merge with or consolidate
with another entity, or we are subject in any way to a transfer of a substantial
amount of our assets, resulting in the assets, business or operations of ours
being controlled by an entity or individual other than Brendan.
In
November 2004, we entered into an employment agreement with our Vice President
of Marketing and Chief Operating Officer, George Dunn, which expires on November
1, 2011. The employment agreement provides for an annual salary of $96,000.
The
annual salary was increased to $108,000 as of January 1, 2006. The agreement
also provides that we may terminate the agreement with 30 days written notice
if
termination is without cause. Our obligation would be to pay Mr. Dunn monthly
payments equal to his base salary for 24 months. In addition, all of Mr. Dunn’s
options would immediately vest. The agreement also provides that Mr. Dunn can
terminate employment if we merge with or consolidate with another entity, or
we
are subject in any way to a transfer of a substantial amount of our assets,
resulting in the assets, business or operations of ours being controlled by
an
entity or individual other than Brendan.
SECURITY
OWNERSHIP OF EXECUTIVE OFFICERS, DIRECTORS AND
BENEFICIAL
OWNERS OF GREATER THAN 5% OF OUR COMMON STOCK
The
following table sets forth certain information concerning our common stock
ownership as of January 24, 2008, by (1) each person who is known by us to
be
the beneficial owner of more than five percent of our common stock; (2) each
of
our executive officers and directors; and (3) all of our directors and executive
officers as a group. The address of each such stockholder is in care of us
at
2236 Rutherford Road, Suite 107, Carlsbad, California 92008.
|
|
|
|
Shares
of Common
|
|
Percentage
|
|
|
|
|
|
Stock
Beneficially
|
|
of
Outstanding
|
|
Name
|
|
Postion
with the Company
|
|
Owned
(1) (2)
|
|
Shares
|
|
|
|
|
|
|
|
|
|
Executive
Officers and
|
|
|
|
|
|
|
|
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
R. Dunn II (3)
|
|
|
Chairman
of the Board,
|
|
|
5,005,000
|
|
|
21.0
|
%
|
|
|
|
Chief
Executive Officer,
|
|
|
|
|
|
|
|
|
|
|
Chief
Technical Officer and
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
Dunn (4)
|
|
|
Vice
President, Secretary
|
|
|
2,301,000
|
|
|
9.4
|
%
|
|
|
|
and
Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lowell
W. Giffhorn (5)
|
|
|
Vice
President, Chief
|
|
|
645,000
|
|
|
2.7
|
%
|
|
|
|
Financial
Officer and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theo
Vermaelen (6)
|
|
|
Director
|
|
|
859,359
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Eisold (7)
|
|
|
Director
|
|
|
724,494
|
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Jason
Booth (8)
|
|
|
Director
|
|
|
75,000
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Exective Officers and
|
|
|
|
|
|
|
|
|
|
|
Directors
as a Group
|
|
|
|
|
|
|
|
|
|
|
(6
persons) (9)
|
|
|
|
|
|
9,609,853
|
|
|
37.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Greater
than 5% Owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potawatomi
Business
|
|
|
|
|
|
|
|
|
|
|
Development
Corp.
|
|
|
|
|
|
4,000,000
|
|
|
Note
10
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
Tabor
|
|
|
|
|
|
4,730,589
|
|
|
20.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Massoud
Kharrazian
|
|
|
|
|
|
1,487,136
|
|
|
6.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
*
Less than 1%
|
|
|
|
|
|
|
|
|
|
|
(1) |
Reflects
amounts as to which the beneficial owner has sole voting power and
sole
investment power.
|
(2) |
Includes
stock options, common stock purchase warrants and convertible debentures
exercisable within 60 days
from the date hereof.
|
(3) |
Comprised
of 4,880,000 shares and 125,000 stock options.
|
(4) |
Comprised
of 1,416,000 shares and 885,000 stock options.
|
(5) |
Comprised
of 345,000 shares, 125,000 stock options, and 200,000 shares issuable
on
the conversion of a debenture.
|
(6) |
Comprised
of 694,359 shares, 125,000 stock options and 40,000 shares issuable
on the
conversion of a debenture.
|
(7) |
Comprised
of 599,494 shares and 125,000 stock
options.
|
(8) |
Comprised
of 75,000 stock options.
|
(9) |
Comprised
of 7,889,853 shares, 1,460,000 stock options and 240,000 shares
issuable
on the conversion of a debenture.
|
10) |
The
shares issuable to Potawatomi Business Development Corp. (PBDC)
on the
conversion of debentures or the exercise of warrants would not
be deemed
beneficially owned (due to exercise restrictions within the debentures
and
warrants) within the meaning of Sections 13(d) and 13(g) of the
Exchange
Act to the extent that their acquisition in a debenture conversion
or a
warrant exercise by PBDC would cause PBDC to own in excess of
4.99% of our
outstanding common stock immediately following such conversion
or
exercise. By the terms of the debentures and warrants, the 4.99%
limitation may be increased to a maximum of 9.99% if we accept
a tender
offer and a change in control takes place. Therefore, it is expected
that
PBDC will not beneficially own more than 9.99% of our outstanding
common
stock at any time. Carol Leese has ultimate voting and/or investment
control over the securities owned by
PBDC.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
There
were no transactions, or series of transactions, during fiscal 2006 or 2007,
nor
are there any currently proposed transactions, or series of transactions, to
which the Company is a party, in which the amount exceeds $60,000, and in which
to our knowledge any director, executive officer, nominee, five percent or
greater shareholder, or any member of the immediate family of any of the
foregoing persons, has or will have any direct or indirect material interest
other than as described below.
In
June
and December 2006 we entered into 8% Convertible Debentures with attached
common
stock purchase warrants with Mr. Giffhorn, an executive officer and director,
and Dr. Vermaelen, a director, aggregating $120,000. The Convertible Debentures
mature in two years and the common stock purchase warrants were exercised
for
$0.25 per share as part of a rights offering during October 2007.
We
believe that the above transactions were fair, reasonable and upon terms at
least as favorable to us as those we might have obtained from unaffiliated
third
parties.
One
of
our directors, Jason Booth, is also a director for the Potawatomi Business
Development Corporation.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our
Common Stock is traded in the over-the-counter market and is quoted on the
NASD
OTC Bulletin Board system maintained by the National Association of Securities
Dealers, Inc. Prices reported represent prices between dealers, do not include
markups, markdowns or commissions and do not necessarily represent actual
transactions. The market for our shares has been sporadic and at times very
limited.
The
following table sets forth the high and low closing price for the Common
Stock
for the period ended January 18, 2008 and the fiscal years ended June 30,
2007
and 2006. Closing prices previous to the reverse merger date of December
29,
2005, are reflective of the closing prices for the predecessor
corporation.
|
|
Closing
Price
|
|
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
Fiscal
Year Ended June 30, 2008
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
0.44
|
|
$
|
0.29
|
|
Second
Quarter
|
|
$
|
0.33
|
|
$
|
0.20
|
|
Third
Quarter (through January 18, 2008)
|
|
$
|
0.35
|
|
$
|
0.30
|
|
Fiscal
Year Ended June 30, 2007
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
0.50
|
|
$
|
0.21
|
|
Second
Quarter
|
|
$
|
1.01
|
|
$
|
0.40
|
|
Third
Quarter
|
|
$
|
0.60
|
|
$
|
0.35
|
|
Fourth
Quarter
|
|
$
|
0.51
|
|
$
|
0.37
|
|
Fiscal
Year Ended June 30, 2006
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
1.85
|
|
$
|
1.36
|
|
Second
Quarter
|
|
$
|
1.75
|
|
$
|
1.10
|
|
Third
Quarter
|
|
$
|
1.20
|
|
$
|
0.60
|
|
Fourth
Quarter
|
|
$
|
0.68
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
We
had
approximately 715 shareholders of record as of January 24, 2008. Because
most of
our common stock is held by brokers and other institutions on behalf of
stockholders, we are unable to estimate the total number of beneficial owners
represented by these record holders. We have never paid a cash dividend on
our
common stock and do not expect to pay one in the foreseeable
future.
DESCRIPTION
OF CAPITAL STOCK
General
We
are
authorized to issue 50,000,000 shares of common stock, $0.004995 par value
per
share, and 5,000,000 shares of preferred stock, $.004995 par value per share.
Common
Stock
We
have
25,450,594 shares of common stock outstanding. The holders of common stock
are
entitled to one vote per share on all matters submitted to a vote of
stockholders, including the election of directors. There is no right to cumulate
votes in the election of directors. The holders of common stock are entitled
to
any dividends that may be declared by the Board of Directors out of funds
legally available therefor subject to the prior rights of holders of preferred
stock and any contractual restrictions we have against the payment of dividends
on common stock. In the event of our liquidation or dissolution, holders
of
common stock are entitled to share ratably in all assets remaining after
payment
of liabilities and the liquidation preferences of any outstanding shares
of
preferred stock.
Holders
of common stock have no preemptive rights and have no right to convert their
common stock into any other securities. All of the outstanding shares of common
stock are fully paid and nonassessable.
Preferred
Stock
We
are
authorized to issue 5,000,000 shares of preferred stock in one or more series
with such designations, voting powers, if any, preferences and relative,
participating, optional or other special rights, and such qualifications,
limitations and restrictions, as are determined by resolution of our Board
of
Directors. The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of our company without further
action by stockholders and could adversely affect the rights and powers,
including voting rights, of the holders of common stock. In certain
circumstances, the issuance of preferred stock could depress the market price
of
the common stock. There are no shares of Preferred Stock outstanding.
Dividends
We
do not
intend to pay dividends on our capital stock in the foreseeable future.
Transfer
Agent
American
Stock Transfer & Trust Co., 6201 15th
Ave.,
Brooklyn, NY 11219, is our transfer agent.
Shares
Eligible For Future Sale
We
have
25,450,594 common shares outstanding of which 1,227,079 are freely tradeable
and
24,223,515 are saleable under Rule 144. We also may have up to 5,453,800
shares
outstanding which have been registered by this prospectus and may be issued
upon
the conversion of our 8% convertible debentures or the exercise of our common
stock purchase warrants. In addition, we may have up to 11,181,867 additional
shares outstanding which have not been registered and may be issued upon
the
exercise of our common stock purchase warrants and our stock options.
In
general, under Rule 144 as will be in effect in February 2008, a person, or
persons whose shares are aggregated, who owns shares that were purchased
from
us, or any affiliate, at least six months previously, including a person
who may
be deemed our affiliate, is entitled to sell within any three month period
1% of
the then outstanding shares of our common stock.
Sales
under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about us.
Effective in February 2008, any person who is not deemed to have been our
affiliate at any time during the 90 days preceding a sale, and who owns
shares within the definition of “restricted securities” under Rule 144
under the Securities Act that were purchased from us, or any affiliate, at
least
one year previously, is entitled to sell such shares under
Rule 144(k) without regard to the volume limitations, manner of sale
provisions, public information requirements or notice requirements.
Future
sales of restricted common stock under Rule 144 or otherwise or of the
shares which we are registering under this prospectus could negatively impact
the market price of our common stock. We are unable to estimate the number
of
shares that may be sold in the future by our existing stockholders or the
effect, if any, that sales of shares by such stockholders will have on the
market price of our common stock prevailing from time to time. Sales of
substantial amounts of our common stock by existing stockholders could adversely
affect prevailing market prices.
LEGAL
MATTERS
The
validity of our common stock offered hereby will be passed upon for us by the
law firm of Troy & Gould, 1801 Century Park East, Suite 1600, Los Angeles,
CA 900067. Mr. David Ficksman, a partner with Troy & Gould, owns
100,000 shares of our common stock.
EXPERTS
Our
financial statements included in this prospectus as of and for the years
ended June 30, 2007 and 2006 have been included in reliance on the report of
Farber Hass Hurley & McEwen LLP, independent registered public accounting
firm, given on the authority of this firm as experts in accounting and auditing.
Index
to Consolidated Financial Statements
Report
of Independent Registered Public Accounting Firm
|
|
F-2
|
|
|
|
Consolidated
Balance Sheets, June 30, 2007 and 2006
|
|
F-3
|
|
|
|
Consolidated
Statements of Operation, for the years ended June 30, 2007 and
2006
|
|
F-4
|
|
|
|
Consolidated
Statement of Stockholders' Deficit, for the years ended June 30,
2007 and
2006
|
|
F-5
|
|
|
|
Consolidated
Statements of Cash Flows, for the years ended June 30, 2007 and
2006
|
|
F-6
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
F-7-F-22
|
|
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2007 (unaudited)
and June
30, 2007
|
|
F-23
|
|
|
|
Condensed
Consolidated Statements of Operations for the three months ended
September
30, 2007 and 2006 (unaudited)
|
|
F-24
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the three months ended
September
30, 2007 and 2006 (unaudited)
|
|
F-25
|
|
|
|
Notes
to Condensed Unaudited Consolidated Financial Statements
|
|
F-26-F-31
|
Report
of Independent Registered Public Accounting Firm
To
the
Board of Directors
Brendan
Technologies, Inc.
Carlsbad,
California
We
have
audited the accompanying consolidated balance sheets of Brendan Technologies,
Inc. (“the Company”) as of June 30, 2007 and 2006, and the related consolidated
statements of operations, stockholders’ equity (deficit) and cash flows for the
years ended June 30, 2007 and 2006. These consolidated financial statements
are
the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with
the
standards of the Public Company Accounting Oversight Board (United
States).
Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial reporting
as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Brendan
Technologies, Inc. as of June 30, 2007 and 2006, and the results of their
operations and their cash flows for the years ended June 30, 2007 and 2006,
in
conformity with accounting
principles generally accepted in the United States.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As discussed in the notes to
the
financial statements, the Company has incurred a loss of approximately
$2,111,000 in the current year, has negative working capital of approximately
$1,680,000, and is in default on two of its notes payable. These matters raise
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are also described in the notes to the
consolidated financial statements. The consolidated financial statements do
not
include any adjustments that might result from the outcome of this uncertainty.
Farber
Hass Hurley McEwen LLP
/s/
Farber Hass Hurley McEwen LLP
Camarillo,
California
August
26, 2007
Brendan
Technologies, Inc.
|
|
Consolidated
Balance Sheets
|
|
June
30,
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
85,016
|
|
$
|
149,512
|
|
Accounts
receivable, net
|
|
|
75,283
|
|
|
56,107
|
|
Prepaid
expenses
|
|
|
89,919
|
|
|
301
|
|
Total
current assets
|
|
|
250,218
|
|
|
205,920
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
157,356
|
|
|
72,740
|
|
Other
assests
|
|
|
27,951
|
|
|
8,190
|
|
|
|
|
|
|
|
|
|
|
|
$
|
435,525
|
|
$
|
286,850
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Convertible
notes payable in default
|
|
$
|
130,000
|
|
$
|
255,000
|
|
Accrued
interest in default
|
|
|
95,382
|
|
|
78,217
|
|
Note
payable
|
|
|
100,000
|
|
|
-
|
|
Accounts
payable
|
|
|
12,916
|
|
|
161,430
|
|
Accrued
wages and vacation
|
|
|
842,525
|
|
|
772,030
|
|
Accrued
interest
|
|
|
527,434
|
|
|
414,959
|
|
Deferred
revenue
|
|
|
98,394
|
|
|
77,651
|
|
Current
portion of lease obligations
|
|
|
7,388
|
|
|
6,442
|
|
Current
portion 8% convertible debentures net of debt discount
|
|
|
24,010
|
|
|
-
|
|
Current
portion 8% convertible debentures net of debt discount-
|
|
|
|
|
|
|
|
related
parties
|
|
|
91,812
|
|
|
-
|
|
Total
current liabilities
|
|
|
1,929,861
|
|
|
1,765,729
|
|
|
|
|
|
|
|
|
|
Long
term portion of lease obligations
|
|
|
3,607
|
|
|
10,996
|
|
8%
Convertible debentures net of debt discount
|
|
|
1,343,868
|
|
|
23,002
|
|
8%
Convertible debentures net of debt discount - related
parties
|
|
|
34,154
|
|
|
83,652
|
|
Total
liabilities
|
|
|
3,311,490
|
|
|
1,883,379
|
|
|
|
|
|
|
|
|
|
Stockholders'
deficit
|
|
|
|
|
|
|
|
Preferred
stock, $.004995 par value; 5,000,000 shares
|
|
|
|
|
|
|
|
authorized:
none outstanding
|
|
|
-
|
|
|
-
|
|
Common
stock, $.004995 par value; 50,000,000 shares
|
|
|
|
|
|
|
|
authorized:
23,705,594 and 25,498,794 issued and
|
|
|
|
|
|
|
|
outstanding
at June 30, 2007 and 2006, respectively
|
|
|
118,409
|
|
|
127,366
|
|
Additional
paid in capital
|
|
|
5,358,033
|
|
|
4,517,814
|
|
Accumulated
deficit
|
|
|
(8,352,407
|
)
|
|
(6,241,709
|
)
|
Total
stockholders' deficit
|
|
|
(2,875,965
|
)
|
|
(1,596,529
|
)
|
|
|
$
|
435,525
|
|
$
|
286,850
|
|
See
accompanying report of independent registered public accounting
firm,
summary of accounting policies and
notes to consolidated financial statements.
|
|
Brendan
Technologies, Inc.
|
|
Consolidated
Statements of Operation
|
|
Year
Ended June 30,
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
521,330
|
|
$
|
681,337
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
101,296
|
|
|
103,190
|
|
General
and administrative expenses
|
|
|
2,115,310
|
|
|
1,215,966
|
|
|
|
|
2,216,606
|
|
|
1,319,156
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
|
(1,695,276
|
)
|
|
(637,819
|
)
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
Other
income
|
|
|
38,121
|
|
|
-
|
|
Interest
expense
|
|
|
(453,543
|
)
|
|
(207,574
|
)
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
|
(2,110,698
|
)
|
|
(845,393
|
)
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,110,698
|
)
|
$
|
(845,393
|
)
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
|
$
|
(0.09
|
)
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average
|
|
|
|
|
|
|
|
common
shares outstanding
|
|
|
23,710,507
|
|
|
15,146,106
|
|
|
|
|
|
|
|
|
|
See
accompanying report of independent registered public accounting
firm,
summary of accounting policies and notes to consolidated financial
statements.
|
Brendan
Technologies, Inc.
|
|
Consolidated
Statements of Stockholders' Deficit
|
|
|
|
Common
Stock
|
|
Additional
Paid
|
|
Retained
Earnings
|
|
Stockholders'
|
|
Years
Ended June 30, 2007 and 2006
|
|
Shares
|
|
Amount
|
|
in
Capital
|
|
(Deficit)
|
|
(Deficit)
|
|
Balance,
July 1, 2005
|
|
|
4,687,209
|
|
$
|
23,413
|
|
$
|
1,161,948
|
|
$
|
(5,396,316
|
)
|
$
|
(4,210,955
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock at $3.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
per
share
|
|
|
67,500
|
|
|
337
|
|
|
202,163
|
|
|
-
|
|
|
202,500
|
|
Offering
costs paid in cash
|
|
|
|
|
|
|
|
|
(31,875
|
)
|
|
-
|
|
|
(31,875
|
)
|
Brendan
shares converted to Omni at 4 to 1
|
|
|
14,264,127
|
|
|
71,248
|
|
|
(71,248
|
)
|
|
-
|
|
|
-
|
|
Brendan
notes payable and accrued interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
converted
to Omni stock
|
|
|
4,352,879
|
|
|
21,743
|
|
|
2,632,455
|
|
|
-
|
|
|
2,654,198
|
|
Omni
common shares issued in payment of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brendan
accounts payable related to merger
|
|
|
100,000
|
|
|
500
|
|
|
34,500
|
|
|
-
|
|
|
35,000
|
|
Omni
common shares issued to an
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
individual
as costs of the merger
|
|
|
800,000
|
|
|
3,996
|
|
|
(3,996
|
)
|
|
-
|
|
|
-
|
|
Omni
shares previously outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
recapitalized
due to the merger
|
|
|
1,227,079
|
|
|
6,129
|
|
|
(6,129
|
)
|
|
-
|
|
|
-
|
|
Sale
of previous Omni operating subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
treated
as contributed capital
|
|
|
-
|
|
|
-
|
|
|
498,000
|
|
|
-
|
|
|
498,000
|
|
Value
of warrants and stock options issued
|
|
|
-
|
|
|
-
|
|
|
101,996
|
|
|
-
|
|
|
101,996
|
|
Net
(loss) for the year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(845,393
|
)
|
|
(845,393
|
)
|
Balance,
June 30, 2006
|
|
|
25,498,794
|
|
$
|
127,366
|
|
$
|
4,517,814
|
|
$
|
(6,241,709
|
)
|
$
|
(1,596,529
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation
of shares
|
|
|
(1,793,200
|
)
|
|
(8,957
|
)
|
|
8,957
|
|
|
-
|
|
|
-
|
|
Warrant
valuation related to financing costs
|
|
|
-
|
|
|
|
|
|
40,403
|
|
|
-
|
|
|
40,403
|
|
Warrant
valuation as result of services provided
|
|
|
-
|
|
|
|
|
|
30,390
|
|
|
-
|
|
|
30,390
|
|
Non
cash issuance of stock options
|
|
|
-
|
|
|
|
|
|
80,208
|
|
|
-
|
|
|
80,208
|
|
Non
cash debt discount on issuance of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8%
convertible debentures, net of amortization
|
|
|
-
|
|
|
|
|
|
680,261
|
|
|
-
|
|
|
680,261
|
|
Net
(loss) for the year ended June 30, 2007
|
|
|
-
|
|
|
|
|
|
-
|
|
|
(2,110,698
|
)
|
|
(2,110,698
|
)
|
Balance,
June 30, 2007
|
|
|
23,705,594
|
|
$
|
118,409
|
|
$
|
5,358,033
|
|
$
|
(8,352,407
|
)
|
$
|
(2,875,965
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying report of independent registered public accounting
firm,
summary of accounting policies and
notes to consolidated financial
statements.
|
Brendan
Technologies, Inc.
|
|
Consolidated
Statements of Cash Flows
|
|
Year
Ended June 30, |
|
2007
|
|
2006
|
|
Operating
activities:
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,110,698
|
)
|
$
|
(845,393
|
)
|
Adjustments
to reconcile net loss
|
|
|
|
|
|
|
|
to
cash provided by operating activities:
|
|
|
|
|
|
|
|
Amortization
and depreciation
|
|
|
46,189
|
|
|
14,858
|
|
Provision
for uncollectible receivables
|
|
|
1,000
|
|
|
-
|
|
Stock
option compensation
|
|
|
80,208
|
|
|
83,650
|
|
Amortization
of debt discount
|
|
|
164,951
|
|
|
-
|
|
Amortization
of financing costs
|
|
|
17,398
|
|
|
-
|
|
Amortization
of warrant valuation issued for services
|
|
|
11,397
|
|
|
-
|
|
Other
non cash items
|
|
|
(38,122
|
)
|
|
98,000
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
(Increase)
decrease in accounts receivable
|
|
|
(20,176
|
)
|
|
15,644
|
|
(Increase)
decrease in prepaid expense and other assets
|
|
|
(67,381
|
)
|
|
29
|
|
Increase
(decrease) in accounts payable
|
|
|
(110,392
|
)
|
|
48,773
|
|
Increase
(decrease) in accrued liabilities
|
|
|
200,135
|
|
|
60,967
|
|
Increase
(decrease) in deferred revenue
|
|
|
20,743
|
|
|
14,654
|
|
Net
cash (used in) operating activities
|
|
|
(1,804,748
|
)
|
|
(508,818
|
)
|
Investing
activities:
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(130,805
|
)
|
|
(67,351
|
)
|
Net
cash (used in) investing activities
|
|
|
(130,805
|
)
|
|
(67,351
|
)
|
Financing
activities:
|
|
|
|
|
|
|
|
Principal
payments of lease obligations
|
|
|
(6,443
|
)
|
|
(2,448
|
)
|
Principal
payments on notes payable in default
|
|
|
(125,000
|
)
|
|
-
|
|
Proceeds
from notes receivable on sale of Omni divisions
|
|
|
-
|
|
|
400,000
|
|
Proceeds
from issuance of 8% convertible debentures
|
|
|
1,902,500
|
|
|
125,000
|
|
Proceeds
from issuance of short term note payable
|
|
|
100,000
|
|
|
-
|
|
Proceeds
from issuance of common stock, net of cash
|
|
|
|
|
|
|
|
paid
for costs
|
|
|
-
|
|
|
170,625
|
|
Net
cash provided by financing activities
|
|
|
1,871,057
|
|
|
693,177
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(64,496
|
)
|
|
117,008
|
|
Cash
and cash equivalents, beginning of year
|
|
|
149,512
|
|
|
32,504
|
|
Cash
and cash equivalents, end of year
|
|
$
|
85,016
|
|
$
|
149,512
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
88,306
|
|
$
|
17,708
|
|
Income
taxes
|
|
$
|
-
|
|
$
|
-
|
|
Non
Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
Debt
discount on 8% convertible debentures
|
|
$
|
680,261
|
|
$
|
18,346
|
|
Financing
costs related to debentures and notes
|
|
$
|
40,403
|
|
$
|
-
|
|
Valuation
of warrants issued for services
|
|
$
|
30,390
|
|
$
|
-
|
|
Property
and equipment acquired through lease
|
|
$
|
-
|
|
$
|
7,886
|
|
Conversion
of Brendan notes payable into common stock
|
|
$
|
-
|
|
$
|
1,692,972
|
|
Conversion
of Brendan accrued interest into common stock
|
|
$
|
-
|
|
$
|
961,226
|
|
Issuance
of common stock in payment of accounts payable
|
|
$
|
-
|
|
$
|
35,000
|
|
See
accompanying reports of independent registered public accounting
firms,
summary of accounting policies and
notes to consolidated financial
statements.
|
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements
Note
1 - Business
Nature
of Business
Brendan
Technologies, Inc., a Nevada corporation (“we”
or“Brendan”)
provides software solutions to improve the accuracy, quality control, workflow,
and regulatory compliance of immunoassay testing in laboratories in the
biopharmaceutical, clinical, research, veterinarian and agricultural industries.
Name
Change and Merger of Brendan Technologies, Inc. into Omni, U.S.A.,
Inc.
On
September 15, 2006, Omni changed its name to Brendan Technologies, Inc. On
December 29, 2005, Omni U.S.A., Inc., a Nevada corporation (“Omni”),
Omni’s
wholly-owned subsidiary Omni Merger Sub, Inc., a Michigan corporation
(“Merger
Sub”)
entered into an Agreement and Plan of Merger (the “Merger
Agreement”)
with
Brendan Technologies, Inc., a Michigan corporation (“Brendan
Sub”),
pursuant to which Merger Sub was merged with and into Brendan Sub and Brendan
Sub became the surviving corporation in the merger and a wholly-owned subsidiary
of Omni. Brendan Sub continues its corporate existence under the laws of the
State of Michigan. Concurrently with the merger, 4,754,709
shares
of
Brendan Sub common stock outstanding immediately before the merger were
converted into 19,018,836
shares
of
Omni common stock, a four for one ratio. Also concurrently with the merger,
(i)
4,352,879
shares
of
Omni common stock were issued to the holders of Brendan Sub Senior and Bridge
Notes totaling $2,654,198
in
aggregate principal and interest, a conversion rate of 1.64 shares per $1.00
under such debt; (ii) 900,000 shares of Omni common stock was issued to
individuals who participated in the arrangement of the merger.
Common
stock options and warrants exercisable into 973,500
shares
of
Brendan Sub before the merger became exercisable into 3,894,000
common
shares of Omni after the merger. The exercise price of the Omni stock options
and warrants were adjusted to 25% of the exercise price of the Brendan Sub
stock
options and warrants.
Following
the transactions effected by the Merger Agreement, Brendan Sub is now our sole
wholly-owned subsidiary and we conduct all our operations through Brendan
Sub.
Note
2- Going Concern
Going
Concern
These
financial statements have been prepared on a going concern basis. However,
during the years ended June 30, 2007 and 2006, we incurred net losses of
$2,110,698 and $845,393, respectively, and had an accumulated deficit of
$8,352,407 and $6,241,709, at June 30, 2007 and 2006, respectively. In addition,
at June 30, 2007, we had a working capital deficit of $1,679,643 and are in
default on $225,382 of debt and interest. Our ability to continue as a going
concern is dependent upon our ability to generate profitable operations in
the
future and/or to obtain the necessary financing to meet our obligations and
repay our liabilities arising from normal business operations when they come
due. The outcome of these matters cannot be predicted with any certainty at
this
time and as such raise substantial doubt as to our ability to continue as a
going concern. Since inception, we have satisfied our capital needs through
debt
and equity financings and expect to continue to fund our operations from these
sources until profitability is achieved. There can be no assurance that funds
will be available at terms favorable to us or that future profitability can
be
achieved. The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts
or
the amounts and classification of liabilities that might be necessary should
we
be unable to continue as a going concern.
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
Management’s
Plans
Management's
plans to eliminate the going concern situation include, but are not limited
to,
the following:
|
· |
Obtain
additional equity or debt financing from investors. Subsequent to
June 30,
2007, we received net proceeds of $555,000 from the issuance of a
bridge
loan to a group of five investors.
|
|
· |
Increase
revenue from the sale of our software. We are anticipating releasing
an
upgraded version of our software during the next twelve months that
will
address customer enterprise level
requirements.
|
|
· |
If
necessary, we will initiate cost cutting programs that would reduce
cash
requirements.
|
Note
3 - Summary
of Significant Accounting Policies
Consolidation
Policy
The
foregoing financial information has been prepared from the books and records
of
Brendan. Brendan’s consolidated financial statements include the accounts of our
wholly-owned subsidiary, Brendan Sub. All significant intercompany balances
and
transactions have been eliminated in consolidation. In the opinion of
management, the financial information reflects all adjustments necessary for
a
fair presentation of the financial condition, results of operations and cash
flows of ours in conformity with accounting principles generally accepted in
the
United States.
Cash
and cash Equivalents
Cash
and
cash equivalents include cash, funds invested in money market funds and cash
invested temporarily in various instruments with maturities of three months
or
less at the time of purchase.
Trade
Accounts Receivable
We
provide for the possible inability to collect accounts receivable by recording
an allowance for doubtful accounts. We write off an account when it is
considered to be uncollectible.
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
Property
and Equipment
Property
and equipment are stated at cost. Expenditures for major renewals and
betterments that extend the useful lives of property and equipment are
capitalized, upon being placed in service. Expenditures for maintenance and
repairs are charged to expense as incurred. Depreciation is computed over the
estimated useful life of three years, except leasehold improvements which are
depreciated over the lesser of the remaining lease life or the life of the
asset, using the straight-line method. We follow the provisions of the Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting Standards
("SFAS") No. 144, "Accounting for the Impairment of Long-lived Assets."
Long-lived assets and certain identifiable intangibles to be held and used
by us
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. We periodically
evaluate the recoverability of our long-lived assets based on estimated future
cash flows and the estimated fair value of such long-lived assets, and provide
for impairment if such undiscounted cash flows are insufficient to recover
the
carrying amount of the long-lived asset.
Revenue
Recognition
We
recognize revenues related to software licenses and software maintenance in
accordance with the American Institute of Certified Public Accountants (“AICPA”)
Statements of Position (“SOP”) No. 97-2, “Software Revenue Recognition,” as
amended by SOP No. 94-4 and SOP No. 98-9. We follow the guidance established
by
the SEC in Staff Accounting Bulletin No. 104, as well as generally accepted
criteria for revenue recognition, which require that, before revenue is
recorded, there is persuasive evidence of an arrangement, the fee is fixed
or
determinable, collection is reasonably assured, and delivery to our customer
has
occurred. In addition, our invoices may include multiple elements that identify
vendor specific objective evidence of fair value for each of those elements.
We
recognize revenue as follows:
Software-
our software is sold with an indefinite license period, and as such, product
revenue is recorded at the time of the customer’s acceptance (generally 30 days
after shipment which allows for a 30 day return guarantee if the customer is
not
satisfied with the product), net of estimated allowances and returns.
Post-contract
customer support- (“PCS”) obligations are generally for annual services and are
recognized over the period of service. Revenues for which payment has been
received are treated as deferred revenue until services are provided and
revenues have been earned.
Training
and service calls- recognized at the time training or service calls are
provided.
Royalties-
we recognize revenue from royalties only after the cash has been collected
(typically 30 days after the end of the quarter on which the royalty payment
is
based.)
Licensing-
we also derive license revenue from fees for the transfer of proven and reusable
intellectual property components. Generally, these payments will include a
nonrefundable technology license fee, which will be payable upon the transfer
of
intellectual property.
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
License
fees will be recognized upon the execution of the license agreement and transfer
of intellectual property provided no further significant performance obligations
exist and collectibility is deemed probable.
Customization
revenue- fees related to software service contracts to aid customers in adapting
such intellectual property to their particular instruments, which will be
performed on a best efforts basis and for which we will receive periodic
milestone payments, will be recognized as revenue over the estimated development
period, using a cost-based percentage of completion method.
Software
Development Costs
Costs
associated with the development and enhancement of proprietary software for
sale
is expensed as incurred. The costs incurred between the time when our products
reach technological feasibility and when they are available for general release
to the public are capitalized
and amortized over their estimated useful lives. When such assets have been
capitalized, they are reviewed each period to determine if the value of the
asset has been impaired. We currently have no capitalized and unamortized
software development costs.
Research
and Development
We
account for research and development costs in accordance with several accounting
pronouncements, including SFAS No. 2, Accounting
for Research and Development Costs,
and
SFAS No. 86, Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed.
Costs to
maintain and upgrade our software after initial release to our customers are
expensed when incurred. Research and development costs were immaterial during
each period.
Stock
Based Compensation
Effective
January 1, 2006, we adopted FASB Statement No. 123R, “Accounting for Stock-Based
Compensation” (“SFAS 123R”). SFAS 123R requires all share-based payments to
employees, including grants of employee stock options and restricted stock,
to
be recognized in the financial statements based on their fair values. Under
SFAS
123R, the pro forma disclosures previously permitted under APB 25 are no longer
an alternative for financial statement reporting purposes.
We
have
selected the Black-Scholes method of valuation for share-based compensation
and
have adopted the modified prospective transition method under SFAS 123R, which
requires that compensation cost be recorded, as earned, for all unvested stock
options outstanding at the beginning of the first quarter of adoption of SFAS
123R. As permitted by SFAS 123R, prior periods have not been restated. The
charge is being recognized in non cash compensation, which is included in
stock-based compensation expense, on a straight-line basis over the remaining
service period after the adoption date based on the options’ original estimate
of fair value. Prior to the adoption of SFAS 123R, the Company applied the
intrinsic-value-based method of accounting prescribed by Accounting Principles
Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees.”
Under this method, compensation cost was recorded only if the market price
of
the underlying stock on the grant date exceeded the exercise price. As permitted
by SFAS 123, the Company elected the disclosure only requirements of SFAS 123.
The fair-value based method used to determine historical pro forma amounts
under
SFAS 123 was similar in most respects to the method used to determine
stock-based compensation expense under SFAS 123R.
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
The
following table illustrates the pro forma effect on our net loss and net loss
per share as if we had adopted the fair value based method of accounting for
stock-based compensations under the provisions of SFAS 123R at the beginning
of
the year ended June 30, 2006:
|
|
Year
Ended June 30,
|
|
|
|
2006
|
|
|
|
|
|
Net
income (loss), as reported
|
|
$
|
(845,393
|
)
|
Stock-based
employee compensation,
|
|
|
|
|
net
of tax effects
|
|
|
(57,078
|
)
|
Proforma
net income (loss)
|
|
$
|
(902,471
|
)
|
|
|
|
|
|
Net
income (loss) per share:
|
|
|
|
|
Basic
and diluted- as reported
|
|
$
|
(0.06
|
)
|
Basic
and diluted- proforma
|
|
$
|
(0.06
|
)
|
For
purposes of computing the pro forma disclosures required by SFAS No. 123, the
fair value of each option granted to employees and directors is estimated using
the Black-Scholes option-pricing model.
Stock
options to purchase up to 695,000 and 460,000 shares of common stock were
granted to employees and directors during the years ended June 30, 2007 and
2006
and $80,208 and $83,650 was charged to expense for the years ended June 30,
2007
and 2006. The stock options were valued using the Black-Scholes option-pricing
model with the following weighted-average assumptions used for the years ended
June 30:
|
|
2007
|
|
2006
|
|
Dividend
yield
|
|
|
None
|
|
|
None
|
|
Interest
rate
|
|
|
4.62%
to 5.10
|
%
|
|
4.84
|
%
|
Expected
lives
|
|
|
5
Years
|
|
|
5
years
|
|
|
|
|
39%
to 43
|
%
|
|
37
|
%
|
Forfeitures
(estimated)
|
|
|
0
|
%
|
|
0
|
%
|
We
apply
SFAS No. 123 in valuing options granted to consultants and estimate the fair
value of such options using the Black-Scholes option-pricing model. The fair
value is recorded as consulting expense and included in general and
administrative expenses as services are provided. Options granted to consultants
for which vesting is contingent based on future performance are measured at
their then current fair value at each period end, until vested.
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
Loss
Per Share
We
utilize SFAS No. 128, “Earnings per Share.” Basic loss per share is computed by
dividing loss available to common shareholders by the weighted-average number
of
common shares outstanding. Diluted loss per share is computed similar to basic
loss per share except that the denominator is increased to include the number
of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive.
Common equivalent shares are excluded from the computation if their effect
is
anti-dilutive.
For
the
years ended June 30, 2007 and 2006, the following common equivalent shares
were
excluded from the computation of loss per share since their effects are
anti-dilutive.
|
|
June
30,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Convertible
debentures
|
|
|
4,055,000
|
|
|
250,000
|
|
Options
|
|
|
4,975,000
|
|
|
4,622,334
|
|
Warrants
|
|
|
8,660,667
|
|
|
720,667
|
|
Total
|
|
|
17,690,667
|
|
|
5,593,001
|
|
Fair
Value of Financial Instruments
Our
financial instruments include accounts receivable, notes receivable, accounts
payable, notes payable and accrued wages. The book value of all financial
instruments is representative of their fair values.
Income
Taxes
We
utilize SFAS No. 109, “Accounting for Income Taxes,” which requires the
recognition of deferred tax assets and liabilities for the expected future
tax
consequences of events that have been included in the financial statements
or
tax returns. Under this method, deferred income taxes are recognized for the
tax
consequences in future years of differences between the tax bases of assets
and
liabilities and their financial reporting amounts at each period-end based
on
enacted tax laws and statutory tax rates applicable to the periods in which
the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
Estimates
The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
Concentrations
of Credit Risk
Financial
instruments which potentially subject us to credit risk are primarily accounts
receivable. Credit risk concentration with respect to receivables is limited
due
to the geographic dispersion of our customer base. We conduct ongoing credit
evaluations but do not obtain collateral or other forms of security. We believe
our credit policies do not result in significant adverse risk and historically
have not experienced significant credit-related losses. We had two customers
whose balances due at June 30, 2007 exceeded 10% of gross accounts receivable
(12% and 10%). At June 30, 2006, we had two customers which accounted for 29%
and 18% of our accounts receivable balance.
We
have
several customers which accounted for greater than 10% of our sales. Two
customers accounted for 24% and 12% of our sales for the year ended June 30,
2007 and one customer accounted for 42% of our sales for the year ended June
30,
2006.
Recently
Enacted Accounting Standards
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”. This Statement permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. We are currently assessing the impact of
SFAS No. 159 on our financial position and results of operations.
In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans.” This Statement requires an
employer to recognize the over funded or under funded status of a defined
benefit post retirement plan (other than a multiemployer plan) as an asset
or
liability in its statement of financial position, and to recognize changes
in
that funded status in the year in which the changes occur through comprehensive
income. SFAS No. 158 is effective for fiscal years ending after December
15, 2006. The adoption of SFAS No. 158 had no impact on our financial position
and results of operations.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measures”.
This Statement defines fair value, establishes a framework for measuring fair
value under GAAP, expands disclosures about fair value measurements, and applies
under other accounting pronouncements that require or permit fair value
measurements. SFAS No. 157 does not require any new fair value
measurements. However, the FASB anticipates that for some entities, the
application of SFAS No. 157 will change current practice. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, which for us would be the fiscal year beginning April 1,
2008. We are currently evaluating the impact of SFAS No. 157 but do
not expect that it will have a material impact on our financial statements.
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
In
September 2006, the SEC issued Staff Accounting Bulletin
(“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements.” SAB
No. 108 addresses how the effects of prior year uncorrected misstatements
should
be
considered when quantifying misstatements in current year financial statements.
SAB No. 108 requires companies to quantify misstatements using a balance
sheet and income statement approach and to evaluate whether either approach
results in quantifying an error that is material in light of relevant
quantitative and qualitative factors. SAB No. 108 is effective for periods
ending after November 15, 2006. The adoption of SAB No. 108 had no
impact on our financial position and results of operations.
In
June
2006, the FASB issued FASB Interpretation Number 48, "Accounting for Uncertainty
in Income Taxes - an interpretation of FASB Statement No. 109." This
Interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with FASB
Statement No. 109, "Accounting for Income Taxes." This Interpretation is
effective for fiscal years beginning after December 15, 2006. We are currently
assessing the effect of this Interpretation on our financial
statements.
Note
4- Accounts
Receivable
Accounts
receivable are carried at the expected realizable value. Accounts receivable
consisted of the following:
|
|
|
|
|
|
|
|
2006
|
|
Accounts
receivable - trade
|
|
$
|
81,283
|
|
$
|
61,107
|
|
Allowance
for doubtful accounts
|
|
|
(6,000
|
)
|
|
(5,000
|
)
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
$
|
75,283
|
|
$
|
56,107
|
|
Note
5- Property and Equipment
The
following is a summary of equipment, at cost, less accumulated
depreciation:
|
|
June
30,
|
|
|
|
2007
|
|
2006
|
|
Computer
equipment
|
|
$
|
214,131
|
|
$
|
95,047
|
|
Furniture
and fixtures
|
|
|
115,982
|
|
|
104,261
|
|
|
|
|
330,113
|
|
|
199,308
|
|
|
|
|
|
|
|
|
|
Less
accumulated depreciation
|
|
|
172,757
|
|
|
126,568
|
|
|
|
|
|
|
|
|
|
|
|
$
|
157,356
|
|
$
|
72,740
|
|
Depreciation
expense for the years ended June 30, 2007 and 2006 was $46,189 and $14,858,
respectively.
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
Note
6- Accrued Wages and Accrued Interest
From
1999
through 2004, employees deferred a portion of their wages accumulating $687,527.
This amount plus employee taxes payable thereon remains outstanding at June
30,
2007 and 2006.
The
outstanding balance accrues interest at the rate of 12% per annum. The amount
of
accrued interest payable related to the deferred wages equaled $455,974 and
$414,723 at June 30, 2007 and 2006, respectively. We anticipate paying the
accrued wages and interest either in cash or by allowing the employees to
convert to common stock. Two of the employees with accumulated wages payable
of
$352,455 and accrued interest payable of $231,367 and $210,221 at June 30,
2007
and 2006, respectively, are affiliates of ours.
Note
7- Convertible Notes Payable in Default
Three
of
53 convertible notes payable were not converted into common stock of Brendan
at
the time of its merger with Omni. One of these notes was paid in July 2006
and
the remaining two are outstanding and, therefore, remain in default at June
30,
2007 and consist of the following:
|
|
June
30,
|
|
June
30,
|
|
|
|
2007
|
|
2006
|
|
Two
convertible, unsecured, senior subordinated
|
|
|
|
|
|
|
|
notes
payable, due on various dates on or before
|
|
|
|
|
|
|
|
September
2004, bearing interest at 8% per annum.
|
|
$
|
130,000
|
|
$
|
130,000
|
|
|
|
|
|
|
|
|
|
Unsecured,
convertible note payable for $125,000,
|
|
|
|
|
|
|
|
with
an interest rate of 12% per annum.
|
|
|
-
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
$
|
130,000
|
|
$
|
255,000
|
|
Note
8- 8% Convertible Debentures
Overview.
From
June 2006 through June 2007, we sold an aggregate of $2,027,500 of 8%
convertible debentures to a group of 24 investors, two of which are affiliates
of ours. The convertible debentures entitle the debenture holder to convert
the
principal into our common stock for two years from the date of closing. Interest
on the debentures is payable, at the election of the debenture holder, either
quarterly in cash or in common stock at the earlier of the conversion or
maturity of the debenture.
Number
of Shares Debentures May Be Converted Into.
The
debentures can be converted into a number of our common shares at a conversion
price equal to $0.50 per share.
Warrants.
Concurrent with the issuance of the convertible debentures, we issued two
warrants to each debenture holder to purchase shares of our common stock. One
warrant is exercisable at $0.60 per share within five years of issuance while
the other warrant is exercisable at $1.00 per share within one year of
issuance.
Right
of First Refusal.
The
debentureholders have a right of first refusal to purchase or participate in
any
equity securities offered by us in any private transaction which closes on
or
prior to the date that is two years after the issue date of each
debenture.
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
Registration
Rights.
We are
responsible for registering the resale of the shares of our common stock which
will be issued on the conversion of the debentures.
Restrictions
on Use of Funds.
We may
not pay any cash dividends without the debentureholders’ prior written
approval.
The
following table presents the status, as of June 30, 2007 and 2006, of
our
convertible
debentures:
|
|
As
of
|
|
|
|
June
30, 2007
|
|
June
30, 2006
|
|
Convertible
debentures issued
|
|
$
|
2,027,500
|
|
$
|
125,000
|
|
Less
debt discount
|
|
|
(533,656
|
)
|
|
(18,346
|
)
|
|
|
|
|
|
|
|
|
|
|
|
1,493,844
|
|
|
106,654
|
|
Less
current portion
|
|
|
(115,822
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
Long
term portion
|
|
$
|
1,378,022
|
|
$
|
106,654
|
|
|
|
|
|
|
|
|
|
Current
issued to related parties
|
|
$
|
91,812
|
|
$
|
-
|
|
Long
term issued to related parties
|
|
$
|
34,154
|
|
$
|
83,652
|
|
|
|
|
|
|
|
|
|
Maturity
dates of outstanding
|
|
|
|
|
|
|
|
convertible
debentures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
2008
|
|
$
|
125,000
|
|
$
|
125,000
|
|
June
2009
|
|
|
1,902,500
|
|
|
-
|
|
|
|
$
|
2,027,500
|
|
$
|
125,000
|
|
Note
9- Lease Obligations
Operating
Lease
We
have
entered into a two-year building lease for our office commencing in June 2006
and expiring in May 2008 with a one year option to renew. Lease expense for
the
years ended June 30, 2007 and 2006 amounted to $73,854 and $71,076,
respectively. The following is a schedule of minimum annual rental payments
for
the next five years.
Years
ending June 30,
|
|
|
|
2008
|
|
$
|
54,835
|
|
|
|
|
|
|
Total
minimum lease payments
|
|
$
|
54,835
|
|
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
Note
10- Capital Stock
Preferred
Stock
We
have
authorized 5,000,000 shares of preferred stock, $.004995 par value, with such
rights, preferences and designations and to be issued in such series as
determined by the Board of Directors. No shares are issued and outstanding
at
June 30, 2007.
Common
Stock
We
have
authorized 50,000,000 shares of common stock at $.004995 par value. At June
30,
2007, we had 23,705,594 shares of common stock issued and
outstanding.
During
the year ended June 30, 2006, we issued 67,500 shares of common stock for
proceeds of $202,500 less offering costs of $31,875; reflected 14,264,127 shares
to affect a 4 for 1 reverse merger with shareholders of Brendan Sub, issued
4,352,879 shares in exchange for notes payable and accrued expenses to note
holders of Brendan Sub, and issued 900,000 shares to individuals who
participated in the reverse merger. At the conclusion of the reverse merger,
the
shareholders of the predecessor corporation held 1,227,079 shares of common
stock. Of the 14,264,127 shares discussed above, 12,470,927 have been issued
and
1,793,200 are for an individual and relate to a 1999 agreement with an
investment banking firm in which the individual was a principal. The individual
was obligated to use his best efforts to secure private placement financings
and
the investment banking firm was to underwrite an initial public offering for
us.
Although outstanding on the records as of June 30, 2006, the individual was
not
entitled to these shares and we had not issued the shares as of June 30, 2006.
The 1,793,200 shares were cancelled during the year ended June 30,
2007.
Warrants
During
the year ended June 30, 2007, we issued 7,610,000 common stock purchase warrants
to a group of 21 investors, one of which is our affiliate, related to the
issuance of 8% convertible debentures. In addition, we issued a common stock
purchase warrant for the purchase of 240,000 common shares to one individual
who
assisted us in raising funds, a warrant to one individual for the purchase
of
240,000 common shares related to our investor relations program and a warrant
to
one investor for 100,000 common shares related to a short term note. During
the
year, one year warrants issued in conjunction with the 8% convertible debentures
representing 250,000 common shares expired. A warrant to purchase up to 166,667
common shares remains outstanding which was issued by the predecessor company
as
a result of their financings with an institutional investor.
During
the year ended June 30, 2006, we issued 500,000 common stock purchase warrants
to a group of five individual investors, two of which are our affiliates,
related to the issuance of 8% convertible debentures. In addition, we issued
a
common stock purchase warrant for the purchase of 54,000 post-merger shares
to
one individual who assisted us in raising funds. In addition, a warrant
exercisable into up to 358,400 post merger shares expired during the year ended
June 30, 2006.
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
A
summary
of the status of the warrants granted under various agreements at June 30,
2007
and
2006,
and
changes during the years then ended is presented below:
|
|
Warrants
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
|
|
Exercise
|
|
|
|
Shares
|
|
Price
|
|
Outstanding,
June 30, 2005
|
|
|
89,600
|
|
|
2.25
|
|
|
|
|
|
|
|
|
|
Post
Merger warrants at 4 for 1
|
|
|
358,400
|
|
|
0.56
|
|
Predecessor
warrants outstanding
|
|
|
166,667
|
|
|
6.00
|
|
Granted
|
|
|
554,000
|
|
|
0.80
|
|
Cancelled
|
|
|
(358,400
|
)
|
|
0.56
|
|
Outstanding,
June 30, 2006
|
|
|
720,667
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
8,190,000
|
|
|
0.79
|
|
Cancelled
|
|
|
(250,000
|
)
|
|
1.00
|
|
Outstanding,
June 30, 2007
|
|
|
8,660,667
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
Exercisable,
June 30, 2006
|
|
|
720,667
|
|
$
|
2.00
|
|
Exercisable,
June 30, 2007
|
|
|
8,660,667
|
|
$
|
0.88
|
|
The
weighted average grant date fair value of warrants issued during the year ended
June 30, 2007 was $0.08.
We
estimate the fair value of each warrant at the issuance date by using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for the year ended June 30, 2007: dividend yield of zero
percent; expected volatility of 39% to 43%, risk-free interest rates of 4.57%
to
5.20%; and expected lives of 1 to 5 years and for the year ended June 30, 2006:
dividend yield of zero percent, expected volatility of 37%, risk-free interest
rates of 5.13% to 5.28%, and expected lives of 1 to 5 years..
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
|
|
Outstanding
|
|
Exercisable
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted
|
|
|
|
Weighted
|
|
Range
of
|
|
|
|
Remaining
|
|
Average
|
|
|
|
Average
|
|
Exercise
|
|
Number
|
|
Contractual
|
|
Exercise
|
|
Number
|
|
Exercise
|
|
Prices
|
|
Outstanding
|
|
Life
|
|
Price
|
|
Exercisable
|
|
Price
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
$0.60
|
|
|
4,635,000
|
|
|
4.31
|
|
$
|
0.60
|
|
|
4,635,000
|
|
$
|
0.60
|
|
$0.75
|
|
|
54,000
|
|
|
3.13
|
|
$
|
0.75
|
|
|
54,000
|
|
$
|
0.75
|
|
$1.00
|
|
|
3,805,000
|
|
|
0.33
|
|
$
|
1.00
|
|
|
3,805,000
|
|
$
|
0.33
|
|
$6.00
|
|
|
166,667
|
|
|
2.01
|
|
$
|
6.00
|
|
|
166,667
|
|
$
|
6.00
|
|
|
|
|
8,660,667
|
|
|
2.51
|
|
$
|
0.88
|
|
|
8,660,667
|
|
$
|
0.88
|
|
Stock
Option Plan
In
April 2006 we adopted a Stock Option Plan, which we refer to as the "Plan,"
which provides for the grant of stock options intended to qualify as "incentive
stock options" and "nonqualified stock options" (collectively "stock options")
within the meaning of Section 422 of the United States Internal Revenue
Code of 1986 (the "Code"). Stock options may be issued to any of our officers,
directors, key employees or consultants.
Under
the
Plan, we have reserved 7.5 million shares underlying stock options for
issuance, of which 4,950,000 options are issued and outstanding to executive
officers, employees and consultants at prices ranging from $0.025 to $0.75
per
share. The Plan is administered by the full Board of Directors, who determine
which individuals shall receive stock options, the time period during which
the
stock options may be exercised, the number of shares of common stock that may
be
purchased under each stock option and the stock option price.
The
per
share exercise price of incentive stock options may not be less than the fair
market value of the common stock on the date the option is granted. The
aggregate fair market value (determined as of the date the stock option is
granted) of the common stock that any person may purchase under an incentive
stock option in any calendar year pursuant to the exercise of incentive stock
options will not exceed $100,000. No person who owns, directly or indirectly,
at
the time of the granting of an incentive stock option, more than 10% of the
total combined voting power of all classes of our stock is eligible to receive
incentive stock options under the Plan unless the stock option price is at
least
110% of the fair market value of the common stock subject to the stock option
on
the date of grant.
No
incentive stock options may be transferred by an optionee other than by will
or
the laws of descent and distribution, and, during the lifetime of an optionee,
the stock option may only be exercisable by the optionee. Except as otherwise
determined by the Board of Directors, stock options may be exercised only if
the
stock option holder remains continuously associated with us from the date of
grant to the date of exercise. The exercise date of a stock option granted
under
the Plan may not be later than ten years from the date of grant. Any stock
options that expire unexercised or that terminate upon an optionee's ceasing
to
be employed by us will become
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
available
once again for issuance. Shares issued upon exercise of a stock option will
rank
equally with other shares then outstanding. No stock options will be granted
by
us at an exercise price less than 85% of the fair market value of the stock
underlying the option on the date the option is granted. During the years ended
June 30, 2007 and 2006, there were options granted to purchase up to 695,000
and
460,000 shares of common stock.
There
also remain outstanding stock options inherited from another stock option plan
of the predecessor company which were issued to employees, directors and
consultants of the predecessor company. The number of stock options outstanding
at June 30, 2007 from the predecessor company’s plan is 25,000 with exercise
prices ranging from $3.56 to $6.75 per share.
A
summary
of the status of the options granted under the stock option plan and other
agreements at June 30, 2007, are presented in the table below:
|
|
Options
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
|
|
Exercise
|
|
|
|
Shares
|
|
Price
|
|
Outstanding,
June 30, 2005
|
|
|
960,000
|
|
$
|
1.25
|
|
|
|
|
|
|
|
|
|
Post
Merger options at 4 for 1
|
|
|
3,840,000
|
|
|
0.31
|
|
Granted
|
|
|
460,000
|
|
|
0.68
|
|
Predecessor
options outstanding
|
|
|
322,334
|
|
|
3.13
|
|
Outstanding,
June 30, 2006
|
|
|
4,622,334
|
|
|
0.55
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
695,000
|
|
|
0.64
|
|
Cancelled
|
|
|
(342,334
|
)
|
|
2.69
|
|
Outstanding,
June 30, 2007
|
|
|
4,975,000
|
|
|
0.41
|
|
|
|
|
|
|
|
|
|
Exercisable,
June 30, 2006
|
|
|
4,472,334
|
|
$
|
0.54
|
|
Exercisable,
June 30, 2007
|
|
|
4,559,500
|
|
$
|
0.36
|
|
The
weighted average grant date fair value of options issued during the year ended
June 30, 2007 was $0.15.
As
of
June 30, 2007 and 2006, the number of unvested shares equaled 415,500 and 150,
000 shares, respectively. As of June 30, 2007, the unamortized portion of stock
compensation expense on all existing stock options was $56,471. This cost is
expected to be recognized over a weighted average period of 1.2
years.
The
aggregate pre-tax intrinsic value of outstanding options, based on the closing
price of $0.38 as of June 30, 2007, was $774,200 and there was no intrinsic
value for options granted during the year ended June 30, 2007.
The
total
fair value of options vested during the year ended June 30, 2007 was
approximately $80,208 and for June 30, 2006 was $83,650.
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
|
|
Outstanding
|
|
Exercisable
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Weighted
|
|
|
|
Weighted
|
|
Range
of
|
|
|
|
Remaining
|
|
Average
|
|
|
|
Average
|
|
Exercise
|
|
Number
|
|
Contractual
|
|
Exercise
|
|
Number
|
|
Exercise
|
|
Prices
|
|
Outstanding
|
|
Life
|
|
Price
|
|
Exercisable
|
|
Price
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
$0.025
|
|
|
1,520,000
|
|
|
3.77
|
|
$
|
0.03
|
|
|
1,520,000
|
|
$
|
0.03
|
|
$0.125
|
|
|
920,000
|
|
|
3.77
|
|
$
|
0.13
|
|
|
920,000
|
|
$
|
0.13
|
|
$0.64-0.65
|
|
|
950,000
|
|
|
4.36
|
|
$
|
0.64
|
|
|
534,500
|
|
$
|
0.64
|
|
$0.75
|
|
|
1,560,000
|
|
|
3.77
|
|
$
|
0.75
|
|
|
1,560,000
|
|
$
|
0.75
|
|
$3.00-6.75
|
|
|
25,000
|
|
|
2.20
|
|
$
|
4.73
|
|
|
25,000
|
|
$
|
4.73
|
|
|
|
|
4,975,000
|
|
|
3.87
|
|
$
|
0.41
|
|
|
4,559,500
|
|
$
|
0.36
|
|
Note
11- Income Taxes
We
account for income taxes in accordance with Statement of Financial Accounting
Standards No. 109. SFAS No. 109 requires us to provide a net deferred tax asset
or liability equal to the expected future tax benefit or expense of temporary
reporting differences between book and tax accounting and any available
operating loss or tax credit carryforwards.
The
temporary differences gave rise to the following deferred tax asset
(liability):
|
|
June
30,
|
|
|
|
2007
|
|
2006
|
|
Allowance
for bad debts
|
|
$
|
2,000
|
|
$
|
2,000
|
|
Valuation
of stock options and warrants
|
|
|
96,000
|
|
|
33,000
|
|
Accrued
wages
|
|
|
274,000
|
|
|
274,000
|
|
Accrued
vacation
|
|
|
27,000
|
|
|
-
|
|
Deferred
income
|
|
|
39,000
|
|
|
31,000
|
|
Net
operating loss carryforwards
|
|
|
2,888,000
|
|
|
2,146,000
|
|
Valuation
allowance
|
|
|
(3,326,000
|
)
|
|
(2,486,000
|
)
|
Net
deferred tax asset
|
|
$
|
-
|
|
$
|
-
|
|
As
of
June 30, 2007, a valuation allowance equal to the net deferred tax asset
recognized has been recorded, as Management has not determined that it is more
likely than not that the deferred tax asset
will be realized. No current tax provision was recorded for the years ended
June
30, 2007 and 2006 due to reported losses. The valuation allowance increased
$840,000 from the prior period.
At
June
30, 2007, we have federal net operating loss carryforwards of approximately
$7,251,000 that expire from 2017 through 2025 and are subject to certain
limitations under the Internal Revenue Code of 1986, as amended, and state
net
operating loss carryforwards of approximately $6,800,000 that expire from 2010
through 2015.
BRENDAN
TECHNOLOGIES, INC.
Notes
to
the Consolidated Financial Statements (Continued)
Note
12- Subsequent Events
In
July
2007 we issued a 15% bridge loan with attached common stock purchase warrants
for $600,000 ($555,000 net of costs) to five investors. The bridge loan will
mature in nine months and the interest is payable monthly. The attached common
stock purchase warrants have exercise prices of $0.60 per share for 600,000
shares which expire in five years.
Brendan
Technologies, Inc.
|
Condensed
Consolidated Balance
Sheets
|
|
|
September
30,
|
|
June
30,
|
|
|
|
2007
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
11,200
|
|
$
|
85,016
|
|
Accounts
receivable, net
|
|
|
148,842
|
|
|
75,283
|
|
Prepaid
expenses
|
|
|
189,949
|
|
|
89,919
|
|
Total
current assets
|
|
|
349,991
|
|
|
250,218
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
148,687
|
|
|
157,356
|
|
Other
assets
|
|
|
23,384
|
|
|
27,951
|
|
|
|
$
|
522,062
|
|
$
|
435,525
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Notes
payable in default
|
|
$
|
130,000
|
|
$
|
130,000
|
|
Accrued
interest in default
|
|
|
98,890
|
|
|
95,382
|
|
Note
payable
|
|
|
-
|
|
|
100,000
|
|
Secured
bridge loan payable
|
|
|
600,000
|
|
|
-
|
|
Accounts
payable
|
|
|
97,512
|
|
|
12,916
|
|
Accrued
wages and vacation
|
|
|
833,795
|
|
|
842,525
|
|
Accrued
interest
|
|
|
543,996
|
|
|
527,434
|
|
Deferred
revenue
|
|
|
138,898
|
|
|
98,394
|
|
Current
portion of lease obligations
|
|
|
6,589
|
|
|
7,388
|
|
Current
portion 8% convertible debentures net of debt discount
|
|
|
935,799
|
|
|
24,010
|
|
Current
portion 8% convertible debentures net of debt discount-
|
|
|
|
|
|
|
|
related
parties
|
|
|
93,852
|
|
|
91,812
|
|
Total
current liabilities
|
|
|
3,479,331
|
|
|
1,929,861
|
|
|
|
|
|
|
|
|
|
Long
term portion of lease obligations
|
|
|
2,599
|
|
|
3,607
|
|
8%
Convertible debentures net of debt discount
|
|
|
500,750
|
|
|
1,343,868
|
|
8%
Convertible debentures net of debt discount - related
parties
|
|
|
37,837
|
|
|
34,154
|
|
Total
liabilities
|
|
|
4,020,517
|
|
|
3,311,490
|
|
|
|
|
|
|
|
|
|
Stockholders'
deficit
|
|
|
|
|
|
|
|
Preferred
stock, $.004995 par value; 5,000,000 shares
|
|
|
|
|
|
|
|
authorized:
none outstanding
|
|
|
-
|
|
|
-
|
|
Common
stock, $.004995 par value; 50,000,000 shares
|
|
|
|
|
|
|
|
authorized:
23,705,594 issued and outstanding at
|
|
|
|
|
|
|
|
September
30, 2007 and June 30, 2007
|
|
|
118,409
|
|
|
118,409
|
|
Additional
paid in capital
|
|
|
5,442,994
|
|
|
5,358,033
|
|
Accumulated
deficit
|
|
|
(9,059,858
|
)
|
|
(8,352,407
|
)
|
Total
stockholders' deficit
|
|
|
(3,498,455
|
)
|
|
(2,875,965
|
)
|
|
|
$
|
522,062
|
|
$
|
435,525
|
|
See
accompanying summary of accounting policies and notes to unaudtied
condensed consolidated financial
statements.
|
Brendan
Technologies, Inc.
|
Condensed
Consolidated Statements of Operation
|
(Unaudited)
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
159,826
|
|
$
|
87,395
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
42,688
|
|
|
23,205
|
|
Research
and development
|
|
|
118,768
|
|
|
83,136
|
|
General
and administrative expenses
|
|
|
467,255
|
|
|
317,923
|
|
|
|
|
628,711
|
|
|
424,264
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(468,885
|
)
|
|
(336,869
|
)
|
|
|
|
|
|
|
|
|
Other
expense
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(238,566
|
)
|
|
(69,003
|
)
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
|
(707,451
|
)
|
|
(405,872
|
)
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(707,451
|
)
|
$
|
(405,872
|
)
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
|
$
|
(0.03
|
)
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average
|
|
|
|
|
|
|
|
common
shares outstanding
|
|
|
23,705,594
|
|
|
23,705,594
|
|
|
|
|
|
|
|
|
|
See
accompanying summary of accounting polices and notes to unaudited
condensed consolidated financial
statements.
|
Brendan
Technologies, Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Three
Months Ended September 30,
|
|
|
|
2007
|
|
2006
|
|
Operating
activities:
|
|
|
|
|
|
Net
loss
|
|
$
|
(707,451
|
)
|
$
|
(405,872
|
)
|
Adjustments
to reconcile net loss
|
|
|
|
|
|
|
|
to
cash provided by operating activities:
|
|
|
|
|
|
|
|
Amortization
and depreciation
|
|
|
18,625
|
|
|
8,598
|
|
Stock
option compensation
|
|
|
7,786
|
|
|
18,066
|
|
Amortization
of warrants
|
|
|
77,175
|
|
|
-
|
|
Amortization
of debt discount
|
|
|
74,394
|
|
|
22,287
|
|
Provision
for uncollectible receivables
|
|
|
-
|
|
|
1,000
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(73,559
|
)
|
|
23,477
|
|
Prepaid
expense and other assets
|
|
|
(95,463
|
)
|
|
(10,265
|
)
|
Accounts
payable
|
|
|
83,910
|
|
|
(63,239
|
)
|
Accrued
liabilities
|
|
|
12,027
|
|
|
44,427
|
|
Deferred
revenue
|
|
|
40,504
|
|
|
6,827
|
|
Net
cash used in operating activities
|
|
|
(562,052
|
)
|
|
(354,694
|
)
|
Investing
activities:
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(9,956
|
)
|
|
(15,414
|
)
|
Net
cash used in investing activities
|
|
|
(9,956
|
)
|
|
(15,414
|
)
|
Financing
activities:
|
|
|
|
|
|
|
|
Principal
payments of lease obligations
|
|
|
(1,808
|
)
|
|
(1,500
|
)
|
Principal
payments on notes payable in default
|
|
|
-
|
|
|
(125,000
|
)
|
Principal
payments on notes payable
|
|
|
(100,000
|
)
|
|
-
|
|
Proceeds
from issuance of secured bridge loan
|
|
|
600,000
|
|
|
-
|
|
Proceeds
from issuance of 8% convertible debentures,
|
|
|
|
|
|
|
|
net
of costs
|
|
|
-
|
|
|
900,000
|
|
Net
cash provided by financing activities
|
|
|
498,192
|
|
|
773,500
|
|
Net
increase in cash and cash equivalents
|
|
|
(73,816
|
)
|
|
403,392
|
|
Cash
and cash equivalents,
beginning of year
|
|
|
85,016
|
|
|
149,512
|
|
Cash
and cash equivalents,
end of period
|
|
$
|
11,200
|
|
$
|
552,904
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
63,640
|
|
$
|
2,289
|
|
Income
taxes
|
|
$
|
-
|
|
$
|
-
|
|
Non
Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
Cancellation
of stock
|
|
$
|
-
|
|
$
|
8,957
|
|
Debt
discount on 8% convertible debentures
|
|
$
|
-
|
|
$
|
209,580
|
|
|
|
|
|
|
|
|
|
See
accompanying summary of accounting polices and notes to unaudited
condensed consolidated financial
statements.
|
BRENDAN
TECHNOLOGIES, INC.
Notes
to the Unaudited Condensed Consolidated Financial Statements
Note
1 - Business
Nature
of Business
Brendan
Technologies, Inc., a Nevada corporation (the “Company”,
“we”
or“Brendan”)
provides software solutions to improve the accuracy, quality control, workflow,
and regulatory compliance of immunoassay testing in laboratories in the
biopharmaceutical, clinical, research, veterinarian and agricultural industries.
The
accompanying unaudited condensed consolidated financial statements include
the
accounts of the Company and the Company’s wholly owned subsidiary. The unaudited
condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. All material inter-company accounts and
transactions have been eliminated in consolidation. Certain information and
footnote disclosures normally included in annual financial statements prepared
in accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments, consisting of normal
and recurring adjustments, necessary for a fair presentation of the financial
position and the results of operations for the periods presented have been
included. Operating results for the three month period ended September 30,
2007
are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 2008. For further information, refer to the
financial statements and notes thereto included in the Brendan Technologies,
Inc. Annual Report on Form 10-KSB for the fiscal year ended June 30,
2007.
Recent
Accounting Pronouncements
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”. This Statement permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007, which for us will be the fiscal year
beginning April 1, 2008. We are currently assessing the impact of SFAS No.
159
on our financial position and results of operations.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measures”.
This Statement defines fair value, establishes a framework for measuring fair
value in generally GAAP, expands disclosures about fair
value measurements, and applies under other accounting pronouncements that
require or permit fair value measurements. SFAS No. 157 does not
require any new fair value measurements. However, the FASB anticipates that
for
some entities, the application of SFAS No. 157 will change current
practice. SFAS No. 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, which for us will be the fiscal
year beginning April 1, 2008. We are currently evaluating the impact of
SFAS No. 157 but do not expect that it will have a material impact on
our financial statements.
Reclassifications
Certain
reclassifications have been made to the September 30, 2006 financial statements
in order for them to conform to the September 30, 2007 presentation. Such
reclassifications have no impact on our financial position or results of
operations.
BRENDAN
TECHNOLOGIES, INC.
Notes
to the Unaudited Condensed Consolidated Financial Statements
(Continued)
Note
2- Going Concern
Going
Concern
These
financial statements have been prepared on a going concern basis. However,
during the three months
ended September 30, 2007 and the year ended June 30, 2007, the Company incurred
net losses of $707,451 and $2,110,698, respectively, and had an accumulated
deficit of $9,059,858 and $8,352,407, at September 30 and June 30, 2007,
respectively. In addition, as of September 30, 2007, the Company had a working
capital deficit of $3,129,340 and is in default on $228,890 of debt and
interest. The Company’s
ability to continue as a going concern is dependent upon its ability to generate
profitable operations in the future and/or to obtain the necessary financing
to
meet its obligations and repay its liabilities arising from normal business
operations when they come due. The outcome of these matters cannot be predicted
with any certainty at this time and as such raise substantial doubt as to the
Company’s ability to continue as a going concern. Since inception, the Company
has satisfied its capital needs through debt and equity financings and expects
to fund the Company from these sources until profitability is achieved. There
can be no assurance that funds will be available at terms favorable to the
Company or that future profitability can be achieved. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification
of
liabilities that might be necessary should the Company be unable to continue
as
a going concern.
Management’s
Plans
Management's
plans to eliminate the going concern situation include, but are not limited
to,
the following:
· Obtain
additional equity or debt financing from investors.
· Increase
revenue from the sale of its software. The Company is anticipating to release
an
upgraded version of its software during the next twelve months that will address
customer enterprise level requirements.
· If
necessary, the Company will initiate cost cutting programs that would reduce
cash requirements.
Note
3 - Loss Per Share
The
Company utilizes SFAS No. 128, “Earnings per Share.” Basic loss per share is
computed by dividing loss available to common shareholders by the
weighted-average number of common shares outstanding. Diluted loss per share
is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have
been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive.
For
the
three months ended September 30, 2007 and 2006, the following common equivalent
shares were excluded from the computation of loss per share since their effects
are anti-dilutive.
BRENDAN
TECHNOLOGIES, INC.
Notes
to the Unaudited Condensed Consolidated Financial Statements
(Continued)
|
|
September
30,
|
|
|
|
2007
|
|
2006
|
|
Convertible
debentures
|
|
|
4,055,000
|
|
|
2,250,000
|
|
Options
|
|
|
4,970,000
|
|
|
4,722,334
|
|
Warrants
|
|
|
7,350,667
|
|
|
4,920,667
|
|
Total
|
|
|
16,375,667
|
|
|
11,893,001
|
|
Estimates
The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting
period. Actual results could differ from those estimates.
Note
4-
Notes Payable and Secured Bridge Loan
Notes
payable in default consisted of the following:
|
|
September
30,
|
|
June
30,
|
|
|
|
2007
|
|
2007
|
|
Two
unsecured, senior subordinated
|
|
|
|
|
|
|
|
notes
payable, due on various dates on or before
|
|
|
|
|
|
|
|
September
2004, bearing interest at 8% per annum.
|
|
$
|
130,000
|
|
$
|
130,000
|
|
The
above
notes which were not converted as part of the reverse merger remain in default.
In
July
2007, we issued secured bridge loans accumulating $600,000 ($555,000 net of
costs) to a group of five investors. The loans are due nine months from the
date
of issuance and interest is paid in cash at the rate of 15% monthly. The bridge
loans are secured by all of our assets. In addition, we issued 690,000 common
stock purchase warrants to the investors and individuals who assisted in the
transaction.
Note
5- 8% Convertible Debentures
Overview.
From
June 2006 through June 2007, we sold an aggregate of $2,027,500 of 8%
convertible debentures to a group of 23 individual investors, two of which
are
affiliates of the Company, and one institutional investor. The convertible
debentures entitle the debenture holder to convert the principal into our common
stock for two years from the date of closing. Interest on the debentures is
payable, at the option of the warrant holder, either quarterly in cash or at
the
earlier of maturity or conversion in common stock of the Company.
Number
of Shares Debentures May Be Converted Into.
The
debentures can be converted into a number of our common shares at a conversion
price equal to $0.50 per share.
BRENDAN
TECHNOLOGIES, INC.
Notes
to the Unaudited Condensed Consolidated Financial Statements
(Continued)
Warrants.
Concurrent with the issuance of the convertible debentures, we issued to the
debentureholders warrants to purchase shares of our common stock. These warrants
are exercisable for one to five years from the date of issuance at exercise
prices ranging from $0.60 to $1.00 per share.
Right
of First Refusal.
The
debentureholders have a right of first refusal to purchase or participate in
any
equity securities offered by us in any private transaction which closes on
or
prior to the date that is two years after the issue date of each
debenture.
Registration
Rights.
We are
responsible for registering the resale of the shares of our common stock which
will be issued on the conversion of the debentures.
Restrictions
on Use of Funds.
We may
not pay any cash dividends without the debentureholders prior written
approval.
The
following table presents the status, as of September 30 and June 30, 2007,
of
our convertible
debentures:
|
|
As
of
|
|
|
|
September
30, 2007
|
|
June
30, 2007
|
|
Convertible
debentures issued
|
|
$
|
2,027,500
|
|
$
|
2,027,500
|
|
Less
debt discount
|
|
|
(459,262
|
)
|
|
(533,656
|
)
|
|
|
|
|
|
|
|
|
|
|
|
1,568,238
|
|
|
1,493,844
|
|
Less
current portion
|
|
|
(1,029,651
|
)
|
|
(115,822
|
)
|
|
|
|
|
|
|
|
|
Long
term portion
|
|
$
|
538,587
|
|
$
|
1,378,022
|
|
|
|
|
|
|
|
|
|
Current
issued to related parties
|
|
$
|
93,852
|
|
$
|
91,812
|
|
Long
term issued to related parties
|
|
$
|
37,837
|
|
$
|
34,154
|
|
|
|
|
|
|
|
|
|
Maturity
dates of outstanding
|
|
|
|
|
|
|
|
convertible
debentures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
2008
|
|
$
|
1,125,000
|
|
$
|
125,000
|
|
September
2009
|
|
|
902,500
|
|
|
1,902,500
|
|
|
|
$
|
2,027,500
|
|
$
|
2,027,500
|
|
Note
6- Equity Transactions
We
recorded additional paid in capital and non-cash compensation expense for stock
options issued to employees and consultants of $7,786 for the three months
ended
September 30, 2007. Also, we recorded additional paid in capital of $77,175
related to warrants issued as a result of receiving secured bridge loans during
the three months ended September 30, 2007.
The
significant assumptions used in the Black-Scholes model to estimate the
compensation and interest expense for the issuance of stock options and warrants
during the current fiscal quarter are as follows:
Expected
term of options and warrants
|
|
|
5
years
|
|
|
|
|
|
|
Expected
volatility
|
|
|
42
|
%
|
|
|
|
|
|
Expected
dividends
|
|
|
None
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
5.03
|
%
|
|
|
|
|
|
Forfeitures
|
|
|
0
|
%
|
BRENDAN
TECHNOLOGIES, INC.
Notes
to the Unaudited Condensed Consolidated Financial Statements
(Continued)
A
summary
of the options outstanding follows:
|
|
For
the Three Months Ended
|
|
|
|
September
30, 2007
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
|
|
Exercise
|
|
Options
|
|
Shares
|
|
Price
|
|
Outstanding
at beginning of year
|
|
|
4,975,000
|
|
$
|
0.41
|
|
Granted
|
|
|
-
|
|
|
-
|
|
Cancelled
|
|
|
(5,000
|
)
|
|
0.65
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Outstanding
at end of the period
|
|
|
4,970,000
|
|
|
0.41
|
|
|
|
|
|
|
|
|
|
Exercisable
at end of the the period
|
|
|
4,569,500
|
|
$
|
0.39
|
|
|
|
|
|
|
|
|
|
Weighted
average fair value of options
|
|
|
|
|
|
|
|
granted
during the period
|
|
|
-
|
|
$
|
-
|
|
As
of
September 30, 2007, the unamortized portion of stock compensation expense on
all
existing stock options was $45,657.
A
summary
of warrants outstanding follows:
|
|
For
the Three Months Ended
September
30, 2007
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
|
|
Exercise
|
|
Warrants
|
|
Shares
|
|
Price
|
|
Outstanding
at beginning of year
|
|
|
8,660,667
|
|
$
|
0.88
|
|
Granted
|
|
|
690,000
|
|
|
0.60
|
|
Cancelled
|
|
|
(2,000,000
|
)
|
|
1.00
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Outstanding
at end of the period
|
|
|
7,350,667
|
|
|
0.82
|
|
|
|
|
|
|
|
|
|
Exercisable
at end of the the period
|
|
|
7,350,667
|
|
$
|
0.82
|
|
BRENDAN
TECHNOLOGIES, INC.
Notes
to the Unaudited Condensed Consolidated Financial Statements
(Continued)
Note
7- Income Taxes
We
or one
of our subsidiaries file income tax returns in the U.S. federal jurisdiction
and
various state jurisdictions.
We
adopted the provisions of FASB Interpretation No. 48, Accounting
for Uncertainty in Income Taxes,
on July
1, 2007. As a result of the implementation of Interpretation 48, we do not
recognize an increase in the liability for unrecognized tax benefits. No
unrecognized tax benefits are being reported for the quarter ended September
30,
2007.
At
June
30, 2007, we had federal net operating loss carryforwards of approximately
$7,251,000 that expire from 2017 through 2025 and are subject to certain
limitations under the Internal Revenue Code of 1986,
as
amended, and state net operating loss carryforwards of approximately $6,800,000
that expire from 2010 through 2015.
Note
8- Subsequent Event
Subsequent
to September 30, 2007, we extended a rights offering to our existing warrant
holders, whereby, through November 10, 2007, at the sole election of the warrant
holder, any outstanding warrant could be exercised at $0.25 per share. For
any
warrants not exercised, the terms of the warrant remained unchanged. As a result
of this rights offering, warrants with original exercise prices ranging from
$.60 to $1.00 per share were exercised at $0.25 per share for the purchase
of
1,745,000 shares of our common stock resulting in proceeds of $436,250. The
difference between the closing price of our common stock on the date of exercise
and $0.25 will be reflected as additional non-cash interest during the quarter
ending December 31, 2007.
BRENDAN
TECHNOLOGIES, INC.
Notes
to the Unaudited Condensed Consolidated Financial Statements
(Continued)
Note
7- Income Taxes
We
or one
of our subsidiaries file income tax returns in the U.S. federal jurisdiction
and
various state jurisdictions.
We
adopted the provisions of FASB Interpretation No. 48, Accounting
for Uncertainty in Income Taxes,
on July
1, 2007. As a result of the implementation of Interpretation 48, we do not
recognize an increase in the liability for unrecognized tax benefits. No
unrecognized tax benefits are being reported for the quarter ended September
30,
2007.
At
June
30, 2007, we had federal net operating loss carryforwards of approximately
$7,251,000 that expire from 2017 through 2025 and are subject to certain
limitations under the Internal Revenue Code of
1986,
as
amended, and state net operating loss carryforwards of approximately $6,800,000
that expire from 2010 through 2015.
Note
8- Subsequent Event
Subsequent
to September 30, 2007, we extended a rights offering to our existing warrant
holders, whereby, through November 10, 2007, at the sole election of the warrant
holder, any outstanding warrant could be exercised at $0.25 per share. For
any
warrants not exercised, the terms of the warrant remained unchanged. As a result
of this rights offering, warrants with original exercise prices ranging from
$.60 to $1.00 per share were exercised at $0.25 per share for the purchase
of
1,745,000 shares of our common stock resulting in proceeds of $436,250. The
difference between the closing price of our common stock on the date of exercise
and $0.25 will be reflected as additional non-cash interest during the quarter
ending December 31, 2007.
Until
the
completion of the resale of the Common stock included in this prospectus,
all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver A prospectus.
This is
in addition to the dealers’ obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
Table
of Contents
|
|
|
|
|
|
|
|
Prospectus
Summary
|
|
|
1
|
|
Risk
Factors
|
|
|
4
|
|
Plan
of Distribution
|
|
|
10
|
|
Selling
Shareholders
|
|
|
10
|
|
Business
|
|
|
12
|
|
Use
of Proceeds
|
|
|
18
|
|
Litigation
|
|
|
18
|
|
Management’s
Discussion and Analysis or
|
|
|
|
|
Plan
of Operation
|
|
|
18
|
|
Changes
in Accountants
|
|
|
24
|
|
Management
|
|
|
25
|
|
Principal
Shareholders
|
|
|
29
|
|
Certain
Transactions
|
|
|
31
|
|
Trading
Market and Related Matters
|
|
|
31
|
|
Description
of Securities
|
|
|
32
|
|
Legal
Matters
|
|
|
33
|
|
Experts
|
|
|
34
|
|
Financial
Statements
|
|
|
F-1
|
|
Of
|
|
Common
Stock
|
|
Offered
by
|
|
Selling
Shareholders
|
|
BRENDAN
TECHNOLOGIES, INC.
|
|
PROSPECTUS
|
|
Subject
to Completion,
|
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our
bylaws require us to indemnify our officers and directors and other persons
against expenses, judgments, fines and amounts incurred or paid in settlement
in
connection with civil or criminal claims, actions, suits or proceedings against
such persons by reason of serving or having served as officers, directors,
or in
other capacities, if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to our best interests and, in a
criminal action or proceeding, if he had no reasonable cause to believe that
his/her conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction or upon a plea of no contest or
its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he or she reasonably believed to be
in
or not opposed to our best interests or that he or she had reasonable cause
to
believe his or her conduct was unlawful. Indemnification as provided in our
bylaws shall be made only as authorized in a specific case and upon a
determination that the person met the applicable standards of conduct. Insofar
as the limitation of, or indemnification for, liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling us pursuant to the foregoing, or otherwise, we have been advised
that, in the opinion of the Securities and Exchange Commission, such limitation
or indemnification is against public policy as expressed in the Securities
Act
of 1933 and is, therefore, unenforceable.
ITEM
25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION(1)
SEC
Registration Fee
|
|
$
|
60
|
|
Printing
Expenses
|
|
$
|
1,000
|
|
Legal
Fees
|
|
$
|
15,000
|
|
Accounting
Fees
|
|
$
|
15,000
|
|
Blue
Sky Fees and Expenses
|
|
$
|
1,000
|
|
Total
|
|
$
|
32,060
|
|
(1)
|
All
expenses are estimated.
|
ITEM
26. RECENT SALES OF UNREGISTERED SECURITIES
During
the last three years, we sold the following securities which were not
registered under the Securities Act, as amended:
On
December 29, 2005, Omni issued 24,847,889 shares of common stock to the previous
shareholders, noteholders and certain other persons. Subsequent to December
29,
2005, 1,793,200 of these shares were cancelled. In addition, Omni issued stock
options and warrants exercisable for up to 3,894,000 shares of common stock
to
employees, directors and consultants of Brendan.
|
|
Number
of
|
|
|
|
|
|
Common
Shares
|
|
outstanding
|
|
Shareholder
|
|
Issued
|
|
shares
|
|
John
R. Dunn II
|
|
|
4,880,000
|
|
|
20.6
|
%
|
Robert
L. Tabor
|
|
|
4,730,589
|
|
|
20.0
|
%
|
Massoud
Kharrazian
|
|
|
1,487,136
|
|
|
6.3
|
%
|
George
P. Dunn
|
|
|
1,416,000
|
|
|
6.0
|
%
|
Danny
Wu
|
|
|
1,066,664
|
|
|
4.5
|
%
|
Theo
Vermaelen
|
|
|
654,359
|
|
|
2.8
|
%
|
Stephen
Eisold
|
|
|
599,494
|
|
|
2.5
|
%
|
David
Dean Wade
|
|
|
400,000
|
|
|
1.7
|
%
|
Gretchen
A. Decker
|
|
|
400,000
|
|
|
1.7
|
%
|
Kenneth
H. Swartz
|
|
|
400,000
|
|
|
1.7
|
%
|
Michael
J. Fitzpatrick
|
|
|
400,000
|
|
|
1.7
|
%
|
Robert
H. Lane
|
|
|
400,000
|
|
|
1.7
|
%
|
Bjorn
J. Steinholt
|
|
|
320,000
|
|
|
1.3
|
%
|
Robert
E. Dettle
|
|
|
293,449
|
|
|
1.2
|
%
|
Liberta
Ltd.
|
|
|
266,664
|
|
|
1.1
|
%
|
As
a group less than 1%
|
|
|
5,083,876
|
|
|
21.4
|
%
|
During
the period of June 20, 2006 through June 11, 2007, the Company sold to and
received cash from a group of investors 8% Convertible Debentures for an
aggregate $2,027,500 and common stock purchase warrants.
8%
Convertible Debentures
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
Issuance
|
|
|
|
Shares
|
|
Maturity
|
|
|
|
Date
of
|
|
Amount
of
|
|
May
Be Converted
|
|
Date
of
|
|
Debenture
holder
|
|
Debenture
|
|
Debenture
|
|
Into
|
|
Debenture
|
|
Lowell
Giffhorn
|
|
|
6/20/2006
|
|
$
|
50,000
|
|
|
100,000
|
|
|
6/20/2008
|
|
Lowell
Giffhorn
|
|
|
12/18/2006
|
|
$
|
50,000
|
|
|
100,000
|
|
|
12/18/2008
|
|
Jesse
Giffhorn
|
|
|
6/20/2006
|
|
$
|
25,000
|
|
|
50,000
|
|
|
6/20/2008
|
|
Jesse
Giffhorn
|
|
|
1/2/2007
|
|
$
|
12,500
|
|
|
25,000
|
|
|
1/2/2009
|
|
Shanon
Carter
|
|
|
6/20/2006
|
|
$
|
5,000
|
|
|
10,000
|
|
|
6/20/2008
|
|
Theo
Vermaelen
|
|
|
6/20/2006
|
|
$
|
20,000
|
|
|
40,000
|
|
|
6/20/2008
|
|
Shady
Beach Trust
|
|
|
6/27/2006
|
|
$
|
25,000
|
|
|
50,000
|
|
|
6/27/2008
|
|
Potawatomi
Business Devel. Corp.
|
|
|
7/14/2006
|
|
$
|
1,000,000
|
|
|
2,000,000
|
|
|
7/14/2008
|
|
James
and Josephine Zolin
|
|
|
12/18/2006
|
|
$
|
25,000
|
|
|
50,000
|
|
|
12/18/2008
|
|
Victor
Gabourel
|
|
|
12/18/2006
|
|
$
|
50,000
|
|
|
100,000
|
|
|
12/18/2008
|
|
Anthony
Wayne Opperman
|
|
|
12/18/2006
|
|
$
|
50,000
|
|
|
100,000
|
|
|
12/18/2008
|
|
Tim
Flowers
|
|
|
12/18/2006
|
|
$
|
10,000
|
|
|
20,000
|
|
|
12/18/2008
|
|
Steven
Pratt
|
|
|
12/18/2006
|
|
$
|
10,000
|
|
|
20,000
|
|
|
12/18/2008
|
|
Donald
Opperman
|
|
|
12/18/2006
|
|
$
|
10,000
|
|
|
20,000
|
|
|
12/18/2008
|
|
Mitchell
Luedloff
|
|
|
12/18/2006
|
|
$
|
10,000
|
|
|
20,000
|
|
|
12/18/2008
|
|
Nazeah
Aladray
|
|
|
12/18/2006
|
|
$
|
10,000
|
|
|
20,000
|
|
|
12/18/2008
|
|
Jason
Neilitz
|
|
|
1/10/2007
|
|
$
|
75,000
|
|
|
150,000
|
|
|
1/10/2009
|
|
Doug
Kincaid Jr.
|
|
|
1/10/2007
|
|
$
|
75,000
|
|
|
150,000
|
|
|
1/10/2009
|
|
Todd
Flannery
|
|
|
1/10/2007
|
|
$
|
50,000
|
|
|
100,000
|
|
|
1/10/2009
|
|
Adnan
Aladray
|
|
|
1/15/2007
|
|
$
|
20,000
|
|
|
40,000
|
|
|
1/15/2009
|
|
James
and Josephine Zolin
|
|
|
1/24/2007
|
|
$
|
10,000
|
|
|
20,000
|
|
|
1/24/2009
|
|
Victor
Gabourel
|
|
|
1/24/2007
|
|
$
|
50,000
|
|
|
100,000
|
|
|
1/24/2009
|
|
Jerome
Chrobak
|
|
|
1/24/2007
|
|
$
|
25,000
|
|
|
50,000
|
|
|
1/24/2009
|
|
Bruce
Belz, Trustee Belz Family Trust
|
|
|
1/24/2007
|
|
$
|
25,000
|
|
|
50,000
|
|
|
1/24/2009
|
|
Richard
Daniels
|
|
|
4/12/2007
|
|
$
|
25,000
|
|
|
50,000
|
|
|
4/12/2009
|
|
Victor
Gabourel
|
|
|
4/26/2007
|
|
$
|
100,000
|
|
|
200,000
|
|
|
4/26/2009
|
|
James
and Josephine Zolin
|
|
|
4/26/2007
|
|
$
|
10,000
|
|
|
20,000
|
|
|
4/26/2009
|
|
Jerome
Chrobak
|
|
|
4/26/2007
|
|
$
|
25,000
|
|
|
50,000
|
|
|
4/26/2009
|
|
Derek
Duchein
|
|
|
6/6/2007
|
|
$
|
90,000
|
|
|
180,000
|
|
|
6/6/2009
|
|
Julie
Duchein
|
|
|
6/6/2007
|
|
$
|
60,000
|
|
|
120,000
|
|
|
6/6/2009
|
|
Bryan
Holland
|
|
|
6/11/2007
|
|
$
|
25,000
|
|
|
50,000
|
|
|
6/11/2009
|
|
|
|
|
|
|
$
|
2,027,500
|
|
|
4,055,000
|
|
|
|
|
Common
Stock Purchase Warrants
Warrant
Holder
|
|
Date
of Issuance
|
|
Number
of Shares
|
|
Exercise
Price
|
|
Expiraton
Date
|
|
Lowell
Giffhorn
|
|
|
6/20/2006
|
|
|
100,000
|
|
$
|
0.60
|
|
|
6/20/2011
|
|
Lowell
Giffhorn
|
|
|
12/18/2006
|
|
|
100,000
|
|
$
|
0.60
|
|
|
12/18/2011
|
|
Jesse
Giffhorn
|
|
|
6/20/2006
|
|
|
50,000
|
|
$
|
0.60
|
|
|
6/20/2011
|
|
Jesse
Giffhorn
|
|
|
1/2/2007
|
|
|
25,000
|
|
$
|
0.60
|
|
|
1/2/2012
|
|
Shanon
Carter
|
|
|
6/20/2006
|
|
|
10,000
|
|
$
|
0.60
|
|
|
6/20/2011
|
|
Theo
Vermaelen
|
|
|
6/20/2006
|
|
|
40,000
|
|
$
|
0.60
|
|
|
6/20/2011
|
|
Shady
Beach Trust
|
|
|
6/27/2006
|
|
|
50,000
|
|
$
|
0.60
|
|
|
6/27/2011
|
|
Potawatomi
Business Devel. Corp.
|
|
|
7/14/2006
|
|
|
2,000,000
|
|
$
|
0.60
|
|
|
7/14/2011
|
|
James
and Josephine Zolin
|
|
|
12/18/2006
|
|
|
50,000
|
|
$
|
0.60
|
|
|
12/18/2011
|
|
Victor
Gabourel
|
|
|
12/18/2006
|
|
|
100,000
|
|
$
|
0.60
|
|
|
12/18/2011
|
|
Anthony
Wayne Opperman
|
|
|
12/18/2006
|
|
|
100,000
|
|
$
|
0.60
|
|
|
12/18/2011
|
|
Tim
Flowers
|
|
|
12/18/2006
|
|
|
20,000
|
|
$
|
0.60
|
|
|
12/18/2011
|
|
Steven
Pratt
|
|
|
12/18/2006
|
|
|
20,000
|
|
$
|
0.60
|
|
|
12/18/2011
|
|
Donald
Opperman
|
|
|
12/18/2006
|
|
|
20,000
|
|
$
|
0.60
|
|
|
12/18/2011
|
|
Mitchell
Luedloff
|
|
|
12/18/2006
|
|
|
20,000
|
|
$
|
0.60
|
|
|
12/18/2011
|
|
Nazeah
Aladray
|
|
|
12/18/2006
|
|
|
20,000
|
|
$
|
0.60
|
|
|
12/18/2011
|
|
Jason
Neilitz
|
|
|
1/10/2007
|
|
|
150,000
|
|
$
|
0.60
|
|
|
1/10/2012
|
|
Doug
Kincaid Jr.
|
|
|
1/10/2007
|
|
|
150,000
|
|
$
|
0.60
|
|
|
1/10/2012
|
|
Todd
Flannery
|
|
|
1/10/2007
|
|
|
100,000
|
|
$
|
0.60
|
|
|
1/10/2012
|
|
Lowell
Giffhorn
|
|
|
6/20/2006
|
|
|
100,000
|
|
$
|
1.00
|
|
|
6/20/2007
|
|
Lowell
Giffhorn
|
|
|
12/18/2006
|
|
|
100,000
|
|
$
|
1.00
|
|
|
12/18/2007
|
|
Jesse
Giffhorn
|
|
|
6/20/2006
|
|
|
50,000
|
|
$
|
1.00
|
|
|
6/20/2007
|
|
Jesse
Giffhorn
|
|
|
1/2/2007
|
|
|
25,000
|
|
$
|
1.00
|
|
|
1/2/2008
|
|
Shanon
Carter
|
|
|
6/20/2006
|
|
|
10,000
|
|
$
|
1.00
|
|
|
6/20/2007
|
|
Theo
Vermaelen
|
|
|
6/20/2006
|
|
|
40,000
|
|
$
|
1.00
|
|
|
6/20/2007
|
|
Shady
Beach Trust
|
|
|
6/27/2006
|
|
|
50,000
|
|
$
|
1.00
|
|
|
6/27/2007
|
|
Potawatomi
Business Devel. Corp.
|
|
|
7/14/2006
|
|
|
2,000,000
|
|
$
|
1.00
|
|
|
7/14/2007
|
|
James
and Josephine Zolin
|
|
|
12/18/2006
|
|
|
50,000
|
|
$
|
1.00
|
|
|
12/18/2007
|
|
Victor
Gabourel
|
|
|
12/18/2006
|
|
|
100,000
|
|
$
|
1.00
|
|
|
12/18/2007
|
|
Anthony
Wayne Opperman
|
|
|
12/18/2006
|
|
|
100,000
|
|
$
|
1.00
|
|
|
12/18/2007
|
|
Tim
Flowers
|
|
|
12/18/2006
|
|
|
20,000
|
|
$
|
1.00
|
|
|
12/18/2007
|
|
Steven
Pratt
|
|
|
12/18/2006
|
|
|
20,000
|
|
$
|
1.00
|
|
|
12/18/2007
|
|
Donald
Opperman
|
|
|
12/18/2006
|
|
|
20,000
|
|
$
|
1.00
|
|
|
12/18/2007
|
|
Mitchell
Luedloff
|
|
|
12/18/2006
|
|
|
20,000
|
|
$
|
1.00
|
|
|
12/18/2007
|
|
Nazeah
Aladray
|
|
|
12/18/2006
|
|
|
20,000
|
|
$
|
1.00
|
|
|
12/18/2007
|
|
Jason
Neilitz
|
|
|
1/10/2007
|
|
|
150,000
|
|
$
|
1.00
|
|
|
1/10/2008
|
|
Doug
Kincaid Jr.
|
|
|
1/10/2007
|
|
|
150,000
|
|
$
|
1.00
|
|
|
1/10/2008
|
|
Todd
Flannery
|
|
|
1/10/2007
|
|
|
100,000
|
|
$
|
1.00
|
|
|
1/10/2008
|
|
Michael
Morrisett
|
|
|
7/14/2006
|
|
|
200,000
|
|
$
|
0.60
|
|
|
7/14/2011
|
|
Michael
Morrisett
|
|
|
1/10/2007
|
|
|
40,000
|
|
$
|
0.60
|
|
|
1/10/2012
|
|
Dian
Griesel
|
|
|
10/1/2006
|
|
|
240,000
|
|
$
|
0.60
|
|
|
10/1/2011
|
|
Adnan
Aladray
|
|
|
1/15/2007
|
|
|
40,000
|
|
$
|
0.60
|
|
|
1/15/2012
|
|
Adnan
Aladray
|
|
|
1/15/2007
|
|
|
40,000
|
|
$
|
1.00
|
|
|
1/15/2008
|
|
James
and Josephine Zolin
|
|
|
1/24/2007
|
|
|
20,000
|
|
$
|
0.60
|
|
|
1/24/2012
|
|
Victor
Gabourel
|
|
|
1/24/2007
|
|
|
100,000
|
|
$
|
0.60
|
|
|
1/24/2012
|
|
Jerome
Chrobak
|
|
|
1/24/2007
|
|
|
50,000
|
|
$
|
0.60
|
|
|
1/24/2012
|
|
Bruce
Belz, Trustee Belz Family Trust
|
|
|
1/24/2007
|
|
|
50,000
|
|
$
|
0.60
|
|
|
1/24/2012
|
|
James
and Josephine Zolin
|
|
|
1/24/2007
|
|
|
20,000
|
|
$
|
1.00
|
|
|
1/24/2008
|
|
Victor
Gabourel
|
|
|
1/24/2007
|
|
|
100,000
|
|
$
|
1.00
|
|
|
1/24/2008
|
|
Jerome
Chrobak
|
|
|
1/24/2007
|
|
|
50,000
|
|
$
|
1.00
|
|
|
1/24/2008
|
|
Bruce
Belz, Trustee Belz Family Trust
|
|
|
1/24/2007
|
|
|
50,000
|
|
$
|
1.00
|
|
|
1/24/2008
|
|
Richard
Daniels
|
|
|
4/12/2007
|
|
|
50,000
|
|
$
|
0.60
|
|
|
4/12/2012
|
|
Victor
Gabourel
|
|
|
4/26/2007
|
|
|
200,000
|
|
$
|
0.60
|
|
|
4/26/2012
|
|
James
and Josephine Zolin
|
|
|
4/26/2007
|
|
|
20,000
|
|
$
|
0.60
|
|
|
4/26/2012
|
|
Jerome
Chrobak
|
|
|
4/26/2007
|
|
|
50,000
|
|
$
|
0.60
|
|
|
4/26/2012
|
|
Derek
Duchein
|
|
|
6/6/2007
|
|
|
180,000
|
|
$
|
0.60
|
|
|
6/6/2012
|
|
Julie
Duchein
|
|
|
6/6/2007
|
|
|
120,000
|
|
$
|
0.60
|
|
|
6/6/2012
|
|
Bryan
Holland
|
|
|
6/11/2007
|
|
|
50,000
|
|
$
|
0.60
|
|
|
6/11/2012
|
|
Richard
Daniels
|
|
|
4/12/2007
|
|
|
50,000
|
|
$
|
1.00
|
|
|
4/12/2008
|
|
Victor
Gabourel
|
|
|
4/26/2007
|
|
|
200,000
|
|
$
|
1.00
|
|
|
4/26/2008
|
|
James
and Josephine Zolin
|
|
|
4/26/2007
|
|
|
20,000
|
|
$
|
1.00
|
|
|
4/26/2008
|
|
Jerome
Chrobak
|
|
|
4/26/2007
|
|
|
50,000
|
|
$
|
1.00
|
|
|
4/26/2008
|
|
James
and Josephine Zolin
|
|
|
5/29/2007
|
|
|
100,000
|
|
$
|
0.60
|
|
|
5/29/2012
|
|
Derek
Duchein
|
|
|
6/6/2007
|
|
|
180,000
|
|
$
|
1.00
|
|
|
6/6/2008
|
|
Julie
Duchein
|
|
|
6/6/2007
|
|
|
120,000
|
|
$
|
1.00
|
|
|
6/6/2008
|
|
Bryan
Holland
|
|
|
6/11/2007
|
|
|
50,000
|
|
$
|
1.00
|
|
|
6/11/2008
|
|
Little
Bear Investments, LLC
|
|
|
7/12/2007
|
|
|
100,000
|
|
$
|
0.60
|
|
|
7/12/2012
|
|
The
Kybartai Trust
|
|
|
7/12/2007
|
|
|
100,000
|
|
$
|
0.60
|
|
|
7/12/2012
|
|
Iroquois
Master Fund, Ltd.
|
|
|
7/12/2007
|
|
|
250,000
|
|
$
|
0.60
|
|
|
7/12/2012
|
|
Eugene
and Natalie Ciner
|
|
|
7/12/2007
|
|
|
10,000
|
|
$
|
0.60
|
|
|
7/12/2012
|
|
Zachary
Prensky
|
|
|
7/12/2007
|
|
|
140,000
|
|
$
|
0.60
|
|
|
7/12/2012
|
|
Midtown
Partners LLC
|
|
|
7/12/2007
|
|
|
60,000
|
|
$
|
0.60
|
|
|
7/12/2012
|
|
Michael
Morrisett
|
|
|
7/12/2007
|
|
|
30,000
|
|
$
|
0.60
|
|
|
7/12/2012
|
|
|
|
|
|
|
|
8,690,000
|
|
|
|
|
|
|
|
With
respect to the above securities issuances, the Registrant relied on exemptions
provided by Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”) and Rule 506 under the Securities Act. No advertising or
general solicitation was employed in offering the securities. The securities
were issued to a limited number of persons all of whom were accredited investors
as that term is defined in Rule 501 of Regulation D under the
Securities Act. All were capable of analyzing the merits and risks of their
investment, acknowledged in writing that they were acquiring the securities
for
investment and not with a view toward distribution or resale, and understood
the
speculative nature of their investment. All securities issued contained a
restrictive legend prohibiting transfer of the shares except in accordance
with
federal securities laws.
ITEM
27. EXHIBIT INDEX
Exhibit
No.
|
|
Document
|
|
|
3.0
|
|
Articles
of Incorporation and Bylaws
|
|
|
|
|
|
|
|
3.1
|
|
Amended
and Restated Articles of the Company, as amended November 30, 1994,
incorporated by reference to Exhibit 3.1 to Amendment No. 1 to
Registration Statement on Form SB-2 dated December 22,
1994
|
|
(1)
|
|
|
|
|
|
3.2
|
|
Certificate
of Designation of Series A Redeemable Convertible Preferred Stock
incorporated by reference to Exhibit 3.2 to Registration Statement
on Form
SB-2 dated October 12, 1994
|
|
(1)
|
|
|
|
|
|
3.3
|
|
Certificate
of Designation of Series B Redeemable Convertible Preferred Stock
incorporated by reference to Exhibit 3.3 to Registration Statement
on Form
SB-2 dated October 12, 1994
|
|
(1)
|
Exhibit
No.
|
|
Document
|
|
|
3.4
|
|
Bylaws
of the Company incorporated by reference to Exhibit 3.4 to Registration
Statement on Form SB-2 dated October 12, 1994
|
|
(1)
|
|
|
|
|
|
3.5
|
|
Certificate
of Amendment of Articles of Incorporation dated May 16, 2006 incorporated
by reference to Exhibit 3.5 to Form 10-KSB for year ended June
30,
2006
|
|
(1)
|
|
|
|
|
|
4.0
|
|
Instruments
Defining the Rights of Security Holders, Including
Debentures
|
|
|
|
|
|
|
|
4.1
|
|
Agreement
and Plan of Merger among Omni U.S.A., Inc., Omni Merger Sub, Inc.,
Edward
Daniel, Jeffrey Daniel and Brendan Technologies, Inc. dated as
of December
29, 2005 incorporated by reference to Exhibit 4.1 to Current Report
on
Form 8-K dated January 5, 2006
|
|
(1)
|
|
|
|
|
|
4.2
|
|
Stock
Purchase Agreement by and among Jeffrey K. Daniel, Craig L. Daniel,
and
Edward Daniel, as the Purchases, and Omni U.S.A., Inc., as the
Seller,
dated as of December 29, 2005 incorporated by reference to Exhibit
4.2 to
Current Report on Form 8-K dated January 5, 2006
|
|
(1)
|
|
|
|
|
|
4.3
|
|
Amendment
to Loan and Related Agreements and Waiver of Default (PACCAR) incorporated
by reference to Exhibit 4.3 to Current Report on Form 8-K dated
January 5,
2006
|
|
(1)
|
|
|
|
|
|
4.4
|
|
Amendment
to Loan and Related Agreements and Waiver of Default (Textron)
incorporated by reference to Exhibit 4.4 to Current Report on Form
8-K
dated January 5, 2006
|
|
(1)
|
|
|
|
|
|
4.5
|
|
Promissory
Note between Jeffrey K. Daniel, Craig L. Daniel, and Edward Daniel,
collectively the Borrowers, and Omni U.S.A., Inc. with a maturity
date of
December 29, 2008 incorporated by reference to Exhibit 4.5 to Current
Report on Form 8-K dated January 5, 2006
|
|
(1)
|
|
|
|
|
|
4.6
|
|
2006
Equity Incentive Plan incorporated by reference to Exhibit 4.6
to
Registration Statement on Form S-8 dated June 15, 2006
|
|
(1)
|
|
|
|
|
|
4.7
|
|
Form
of Securities Purchase Agreement incorporated by reference to Exhibit
4.7
to Current Report on Form 8-K dated July 18, 2006
|
|
(1)
|
|
|
|
|
|
4.8
|
|
Form
of 8% Convertible Debenture incorporated by reference to Exhibit
4.8 to
Current Report on Form 8-K dated July 18, 2006
|
|
(1)
|
|
|
|
|
|
4.9
|
|
Form
of Registration Rights Agreement incorporated by referecne to Exhibit
4.9
to Current Report on Form 8-K dated July 18, 2006
|
|
(1)
|
|
|
|
|
|
4.10
|
|
Form
of Warrant incorporated by reference to Exhibit 4.10 to Current
Report on
Form 8-K dated July 18, 2006
|
|
(1)
|
|
|
|
|
|
4.11
|
|
Form
of Loan and Security Agreement incorporated by reference to Exhibit
4.11
to Current Report on Form 8-K dated July 18, 2007
|
|
(1)
|
|
|
|
|
|
4.12
|
|
Form
of 15% Secured Promissory Note incorporated by referecne to Exhibit
4.12
to Current Report on Form 8-K dated July 18, 2007
|
|
(1)
|
|
|
|
|
|
4.13
|
|
Form
of Warrant incorporated by reference to Exhibit 4.13 to Current
Report on
Form 8-K dated July 18, 2007
|
|
(1)
|
Exhibit
No.
|
|
Document
|
|
|
5.0
|
|
Opinion
on Legality
|
|
|
|
|
|
|
|
5.1
|
|
Legal
opinion of Troy & Gould, attorneys at law
|
|
(2)
|
|
|
|
|
|
10.0
|
|
Material
Contracts
|
|
|
|
|
|
|
|
10.1
|
|
John
R. Dunn II Employment Contract dated November 1, 2004 incorporated
by
reference to Exhibit 10.1 to Current Report on Form 8-K dated January
5,
2006
|
|
(1)
|
|
|
|
|
|
10.2
|
|
George
Dunn Employment Contract dated November 1, 2004 incorporated by
reference
to Exhibit 10.2 to Current Report on Form 8-K dated January 5,
2006
|
|
(1)
|
|
|
|
|
|
14.0
|
|
Code
of Ethics
|
|
|
|
|
|
|
|
14.1
|
|
Code
of Ethics incorporated by reference to Exhibit 14.1 to Form 10-KSB
for
year ended June 30, 2006
|
|
(1)
|
|
|
|
|
|
21.0
|
|
Subsidiaries
of the Small Business Issuer
|
|
|
|
|
|
|
|
21.1
|
|
Subsidiaries
of the small business issuer incorporated by reference to Exhibit
21.1 to
Form 10-KSB for the year ended June 30, 2006
|
|
(1)
|
|
|
|
|
|
23.0
|
|
Consents
of Experts and Counsel
|
|
|
|
|
|
|
|
23.1
|
|
Consent
of Troy & Gould, attorneys at law (included in Exhibit
5.1)
|
|
(2)
|
|
|
|
|
|
23.2
|
|
Consent
of Farber Hass Hurley & McEwen LLP, independent registered public
accounting firm
|
|
(2)
|
(1)
Previously filed in indicated registration statement or
report
|
|
(2)
Exhibit filed herewith
|
ITEM
28. UNDERTAKINGS
|
The
Registrant hereby undertakes:
|
(a) That
insofar as indemnification for liabilities arising under the Securities Act
may
be permitted to directors, officers and controlling persons of the Registrant,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registration of expenses incurred or paid by a director, officer or controlling
person to the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director or controlling person in connection
with the securities being registered, the Registrant will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit
to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Act and will be governed
by
the final adjudication of such issue.
(b) That
subject to the terms and conditions of Section 13(a) of the Securities
Exchange Act of 1934, it will file with the Securities and Exchange Commission
such supplementary and periodic information, documents and reports as may be
prescribed by any rule or regulation of the Commission heretofore or hereafter
duly adopted pursuant to authority conferred in that section.
(c) That
any
post-effective amendment filed will comply with the applicable forms, rules
and
regulations of the Commission in effect at the time such post-effective
amendment is filed.
(d) To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
|
|
(i)
|
To
include any prospectus required by section 10(a)(3) of the
Securities Act;
|
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post- effective
amendment thereof), which, individually or in the aggregate, represent
a
fundamental change in the information set forth in the registration
statement;
|
|
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement.
|
(e) That,
for
the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(f) To
remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the Offering.
(g) Reliance
on Rule 430C.
Each
prospectus filed pursuant to Rule 424(b) of the Securities Act of 1933 as
part
of a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness.
Provided,
however, that
no
statement made in a registration statement or prospectus that is part of
the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of
the
registration statement will, as to a purchaser with a time of contract of
sale
prior to such first use, supersede or modify any statement that was made
in the
registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first
use.
SIGNATURES
Pursuant
to the requirements of the Securities Act, as amended, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
of filing Form SB-2 and has caused this Registration Statement to be signed
on our behalf by the undersigned, thereunto duly authorized, in Carlsbad,
California, on January 24, 2008.
|
BRENDAN
TECHNOLOGIES, INC.
|
|
|
|
|
|
By:
|
/s/
LOWELL W. GIFFHORN
Lowell
W. Giffhorn
Chief
Financial Officer
|
Pursuant
to the requirements of the Securities Act, as amended, this Registration
Statement has been signed below by the following persons on January 24, 2008.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/
JOHN R. DUNN II
John
R. Dunn II
|
|
Chief
Executive Officer,
President
and Director
|
|
January
24, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
GEORGE DUNN
George
Dunn
|
|
Chief
Operating Officer and Secretary,
|
|
January
24, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
LOWELL W. GIFFHORN
Lowell
W. Giffhorn
|
|
Chief
Financial Officer (Principal
Accounting
Officer) and Director
|
|
January
24, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
THEO VERMAELEN
Theo
Vermaelen
|
|
Director
|
|
January
24, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
STEPHEN EISOLD
Stephen
Eisold
|
|
Director
|
|
January
24, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
JASON BOOTH
Jason
Booth
|
|
Director
|
|
January
24, 2008
|