UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-KSB
(Mark
One)
x
|
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the
fiscal year ended December
31, 2007
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the
transition period from ______________ to________________
Commission
file number 0-15807
BIOMETRX,
INC.
(Name
of
small business issuer in its charter)
DELAWARE
|
|
31-1190725
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
Employer Identification No.)
|
|
|
|
500
North Broadway, Suite 204, Jericho, New York
|
|
11753
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(516)
937-2828
Securities
registered under Section 12(b) of the Exchange Act:
Title
of each class
|
|
Name
of each exchange on which registered
|
|
|
|
None
|
|
___________________________________
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|
|
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___________________________________
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|
___________________________________
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Securities
registered under Section 12 (g) of the Exchange Act:
Common
Stock Par Value $.001
(Title
of class)
Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. o
Note
-
Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act from their obligations
under
those Sections.
Check
whether the issuer (1) filed all reports required to be filed by Section 13
or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes x
No
o
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
o
No
x
State
issuer’s revenues for its most recent fiscal year. $1,476,000
The
aggregate market value of the Company’s common stock held by non-affiliates was
approximately $2,154,128 based upon the average bid and asked price of $0.20
as
reported by the OTC Bulletin Board as of April 2, 2008.
The
Company has 19,280,510 shares
of
common stock outstanding, as of April 2, 2008
DOCUMENTS
INCORPORATED BY REFERENCE
None
Transitional
Small Business Disclosure Format (Check one): Yes o
No
x
PART
I
INTRODUCTORY
COMMENT
Throughout this Annual Report on Form 10-KSB the terms “we,” “us,” “our,”
“bioMETRX” and “our company” refer to bioMETRX, Inc., a Delaware corporation,
and, unless the context indicates otherwise, includes our wholly owned
subsidiaries.
FORWARD-LOOKING
STATEMENTS
The discussion in this report on Form 10-KSB contains forward-looking
statements that involve risks and uncertainties. The statements contained in
this Report that are not purely historical are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, including
statements regarding our expectations, beliefs, intentions or strategies
regarding the future. All forward-looking statements included in this document
are based on information available to us on the date hereof, and we assume
no
obligation to update any such forward-looking statements. Our actual results
could differ materially from those described in our forward-looking statements.
Factors that could cause or contribute to such differences include, but are
not
limited to, our unproven business model and a limited operating history in
a new
and rapidly evolving industry; our ability to implement our business plan;
and
our ability to manage our growth, retain and grow our customer base and expand
our service offerings.
We
make
forward-looking statements in the “Management’s Discussion and Analysis of
Financial Condition and, Results of Operations” below. These forward-looking
statements include, but are not limited to, statements about our plans,
objectives, expectations, intentions and assumptions and other statements that
are not historical facts. We generally intend the, words “expect”, “anticipate”,
“intend”, “plan”, “believe”, “seek”, “estimate” and similar expressions to
identify forward-looking statements.
This
Report contains certain estimates and plans related to us and the industry
in
which we operate, which assumes certain events, trends and activities will
occur
and the projected information based on those assumptions. We do not know that
all of our assumptions are accurate. In particular, we do not know what level
of
growth will exist in our industry, if any, and particularly in the foreign
markets in which we operate, have devoted resources and in which we shall seek
to expand. If our assumptions are wrong about any events, trends and activities,
then our estimates for future growth for our business may also be wrong. There
can be no assurances that any of our estimates as to our business growth will
be
achieved.
The
following discussion and analysis should be read in conjunction with our
financial statements and the notes associated with them contained elsewhere
in
this Report. This discussion should not be construed to imply that the results
discussed in this quarterly report will necessarily continue into the future
or
that any conclusion reached in this quarterly report will necessarily be
indicative of actual operating results in the future. The discussion represents
only the best present assessment of management.
ITEM
1.
DESCRIPTION OF BUSINESS.
The
Company, through its wholly owned subsidiaries, designs, develops, engineers
and
markets biometrics-based products for the consumer home security and consumer
electronics markets.
BioMETRX
is focused on developing simple-to-use, cost-effective, power-efficient,
finger-activated, lifestyle products under the trade name smartTOUCH .Through
several agreements in place with consumer security brand giant Master Lock,
most
of the Company’s products are co-branded Master Lock smartTOUCH. The Company’s
product line includes biometrically enabled residential locks, central station
alarm keypads, thermostats, garage/gate openers, mailboxes as well as kitchen,
liquor and gun cabinets. Our products utilize finger recognition technology
designed to augment or replace conventional security methods such as keys,
keypads, and PIN numbers.
The
consumer home security industry consists of garage door manufacturers, key
and
locks manufacturers and central station alarm monitoring companies, representing
a $25 billion global market. bioMETRX develops market-specific products in
these
areas which are being sold through retailers, dealers and direct to consumers
in
the United States. In early October, the Company began fulfilling significant
orders of its first product, the Garage Door Opener, also known as the Master
Lock™ smartTOUCH GDO, and since initial delivery has received thousands of
reorders.
The
Company has also received and shipped against its initial order for its second
product, a biometric USB Flash Drive. This product is also co-branded Master
Lock smartTOUCH and the company has shipped 1,000 units of this product to
Master Lock, to be used as demo and marketing pieces by their sales reps, to
secure additional product orders through existing Master Lock sales
channels.
The
Company is the exclusive biometric provider to Master Lock Corporation, a wholly
owned subsidiary of Fortune Brands, a New York Stock Exchange company, that
owns
and operates some of the most popular consumer home and hardware brands in
the
United States.
Through
Master Lock, other similar OEM relationships and the Company’s own distribution
channels, the Company expects increasing product offerings in 2008 and 2009,
though it cannot offer specific guarantees as to the significance of the
revenues that might be realized.
bioMETRX,
to date, has introduced its products and services commercially and is considered
an entry level market vendor of consumer-based biometric products. bioMETRX
has
limited assets, significant liabilities and limited business operations, though
it has realized initial meaningful revenues from its initial product, the
Company continues to realize losses from operations and cannot provide
assurances that further revenues from this initial product will create positive
cash flow to support operations.
The
Company currently owns four patents and has six patents pending, all of which
incorporate the biometric design and/or architecture used within smartTOUCH
products that have been, or are being developed. owns patents covering biometric
garage door openers, thermostats, padlocks and security/retrieval of electronic
medical records.
Wherever
possible we seek to protect our inventions through filing U.S. patents and
foreign counterpart applications in selected other countries. Because patent
applications in the U.S. are maintained in secrecy for at least eighteen months
after the applications are filed and since publication of discoveries in the
scientific or patent literature often lags behind actual discoveries, we cannot
be certain that we were the first to make the inventions covered by each of
our
issued or pending patent applications or that we were the first to file for
protection of inventions set forth in such patent applications. Our planned
or
potential products may be covered by third-party patents or other intellectual
property rights, in which case continued development and marketing of the
products would require a license. Required licenses may not be available to
us
on commercially acceptable terms, if at all. If we do not obtain these licenses,
we could encounter delays in product introductions while we attempt to design
around the patents, or could find that the development, manufacture or sale
of
products requiring these licenses is foreclosed.
We
may
rely on trade secrets to protect our technology. Trade secrets are difficult
to
protect. We seek to protect our proprietary technology and processes by
confidentiality agreements with our employees and certain consultants and
contractors. These agreements may be breached, we may not have adequate remedies
for any breach and our trade secrets may otherwise become known or be
independently discovered by competitors. To the extent that our employees or
our
consultants or contractors use intellectual property owned by others in their
work for us, disputes may also arise as to the rights in related or resulting
know-how and inventions.
We
do not
own any manufacturing facilities and have been negotiating with, and are now
working with a third party contract manufacturer, RDI, Inc. (“RDI”), to
manufacture our garage door opening units. RDI is located in the United States
and has overseas capabilities which mitigate the production costs,. As the
need
arises, we plan to either contract additional contract manufacturers or license
our technology to third party Original Equipment Manufacturers (“OEMs”) to
incorporate into their products. Each decision will depend on customer demand,
our available cash resources and our ability to access expertise at competitive
rates
Marketing
The
target markets for our home security and electronic products are consumer and
home security OEMs. bioMETRX has established its own marketing initiatives
by
developing initial brand recognition for its smartTOUCH product line through
retailers, development partner's, authorized dealers and these such
OEMs..
The
Company currently markets its products through three (3) distinct sales
channels, (i) Retailers, (ii) partner distribution channels and (iii) direct
to
consumer sales. The Company has entered into a development and co-marketing
agreement with Master Lock™ which allows the Company’s products to be sold and
distributed under the co-brand Master Lock smartTOUCH, through Master Lock’s
existing established channels, which includes almost every home improvement
domestic and international retailer, a network of authorized Master Lock
dealers, as well as specialty security hardware catalogues. .
The
Company has been successful in its initial sale and delivery to over 1400 Home
Depot stores throughout the United States. To date, the Company has delivered
over 18,000 GDO units under the Master Lock smartTOUCH brand, and has
experienced sell through and re-orders from individual Home Depot stores in
excess of 5,000 units and $400,000..
The
Company expects as Master Lock introduces our co-developed products to the
various home improvement, hardware and consumer security markets, our co-branded
products will be incorporated into much wider scale product marketing
initiatives that are expected to result in accelerated revenue growth for our
Company.
Competition
The
markets for our products and solutions are somewhat competitive and are
characterized by rapid technological change as a result of technical
developments exploited by our competitors, the changing technical needs of
our
customers, and frequent introductions of new features. We expect competition
to
increase as other companies introduce products that are competitively priced,
have increased performance or functionality, or that incorporate technological
advances not yet developed or implemented by us. In order to compete effectively
in this environment, we must continually develop and market new and enhanced
products at competitive prices, and have the resources to invest in significant
research and development activities. Based on the Company’s current financial
situation there is a risk that we may not be able to make the technological
advances necessary to compete successfully. Existing and new competitors may
enter or expand their efforts into our markets, or develop new products to
compete against ours. Our competitors may develop new technologies or
enhancements to existing products or introduce new products that will offer
superior price or performance features. New products or technologies may render
our products obsolete.
Employees
As
of
December 31, 2007, the Company has 6 full time employees and no part time
employees. The Company expects that it will hire at least 4 more key people
over
the next 6 months. We believe our employee relations are
satisfactory.
ITEM
2.
PROPERTIES
We
operate our business in leased facilities. We occupy two offices with
approximately 3,900 square feet in an office building in Jericho, New York.
Our
rent for this space is $9,100, plus utilities, per month. The Company’s lease
for this space expires on January 31, 2010. The Company believes this space
is
adequate for its needs.
ITEM
3.
LEGAL PROCEEDINGS
On
November 16, 2006, the Company was the subject of a complaint filed in the
Supreme Court of New York State, County of Nassau (Index No. 019475-06) by
Intellicon seeking final payment of $20,000 plus accrued interest for
engineering design services performed for the Company. The Company
answered and counter-claimed on January 5, 2007 asserting damages of $25,000
incurred then and continuing to incur to remedy design defects performed by
Intellicon. The Company intends to vigorously defend its position in this
claim.
On
March
10, 2008, the Company became the subject of a complaint entitled Arrow
Electronics, Inc. v. bioMETRX Technologies, Inc. etal. The Complaint was filed
in the Supreme Court of the State of New York County of Nassau (Index No.
08-4900). The complaint alleges breach of contract and the plaintiff is seeking
damages of $194,139.15. The Company has requested an extension to answer the
complaint. The Company intends to vigorously defend this action.
The
Company is a defendant in a lawsuit entitled Worldwide Electronic Solutions,
L.L.C. v. Biometrx, Inc. etal.. The action was filed in the Superior Court
of
the State of Arizona for the County of Maricopa (Index No. CV2007-023760).
The
complaint alleged breach of contract and sought damages of approximately
$190,000, the Company did not answer the complaint in that it believes that
the
Court had no jurisdiction. The Plaintiff obtained a default judgment and has
filed an Application for Entry of Default, the Company intends on filing a
motion to vacate the Default Judgment and has been in negotiations with the
Plaintiff to settle this matter.
ITEM
4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The
Company’s Information Statement (the “Information Statement”) was mailed on or
about January 30, 2008 to the holders of record at the close of business on
December 31, 2007, of the Common Stock of bioMETRX, Inc., a Delaware corporation
(“bioMETRX” or the “Company”), in connection with action by written consent in
lieu of a meeting to authorize and approve an amendment to our Certificate
of
Incorporation increasing the number of authorized shares of our Common Stock,
from 25,000,000 to 100,000,000 shares
ITEM
5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market
Information
Our
common stock has been quoted on the OTCBB under the symbol BMRX since March
16,
2006. Prior to that, the Company traded under the symbol BMTX and prior to
that
the Company’s common stock traded under the symbol MKSH. The following table
sets forth, for the periods indicated, the high and low sales prices per share
of common stock as reported on the OTCBB. These quotations reflect interdealer
prices, without retail markup, markdown or commission and may not necessarily
represent actual transactions:
|
|
2005
|
|
|
|
High
|
|
Low
|
|
First quarter
|
|
$
|
1.28
|
|
$
|
0.60
|
|
Second quarter
|
|
$
|
15.40
|
|
$
|
0.60
|
|
Third quarter
|
|
$
|
15.80
|
|
$
|
2.20
|
|
Fourth quarter
|
|
$
|
8.00
|
|
$
|
2.40
|
|
|
|
2006
|
|
|
|
High
|
|
Low
|
|
First quarter
|
|
$
|
6.80
|
|
$
|
2.40
|
|
Second quarter
|
|
$
|
3.75
|
|
$
|
1.35
|
|
Third quarter
|
|
$
|
1.80
|
|
$
|
0.60
|
|
Fourth quarter
|
|
$
|
2.95
|
|
$
|
1.05
|
|
|
|
2007
|
|
|
|
High
|
|
Low
|
|
First quarter
|
|
$
|
3.49
|
|
$
|
1.80
|
|
Second quarter
|
|
$
|
2.20
|
|
$
|
1.05
|
|
Third quarter
|
|
$
|
1.40
|
|
$
|
0.56
|
|
Fourth quarter
|
|
$
|
1.35
|
|
$
|
0.42
|
|
All
prices for fiscal 2005, 2006 and 2007 are split-adjusted to reflect a reverse
1:12 stock split which occurred on December 20, 2004 and also reflect a reverse
1:4 stock split which occurred March 14, 2006.
On
April
2, 2008, the last sale price of our common stock reported by the OTCBB was
$0.20
per share.
Records
of our stock transfer agent indicate that as of April 2, 2008, we had 699
record holders of our common stock. The Company estimates there are nearly
500
holders of lots of 100 or more shares. Since a significant number of our
shares are held by financial institutions in “street name,” it is likely that we
have significantly more stockholders than indicated above. We estimate that
we
have approximately 1,000 beneficial holders, including such shares held in
“street name.” As of April 2, 2008 we had 19,280,510 outstanding shares of
common stock.
Dividend
Policy
Our
board
of directors determines any payment of dividends. We have never declared or
paid
any cash dividends, and we do not anticipate or contemplate paying cash
dividends in the foreseeable future. It is our Board of Directors intention
to
utilize all available funds for working capital of bioMETRX.
Unregistered
Sales of Equity Securities
All
number of shares and other securities described here reflect a 1:4 reverse
stock
split effective March 14, 2006
On
January 4, 2006, the Company issued 12,500 restricted shares of its common
stock
to Ms. Lorraine Yarde in connection with the exercise of a stock option in
such
amount. The exercise price of the option was $.40 per share.
On
February 14, 2006, the Company issued 250,000 shares of its common stock to
Russell Kuhn pursuant to a Consulting Agreement entered into between the Company
and Mr. Kuhn.
In
connection with this transaction, the Company paid a finder’s fee to Harbor View
of $70,950 and issued to Harbor View 102,300 shares of its common
stock.
On
February 27, 2006, the Company issued 25,000 restricted shares of its common
stock to Empire Relations Group, Inc. pursuant to a consulting agreement between
the Company and Empire Relations Group.
On
March
21, 2006, Mr. Basile exercised 250,000 stock options at $1.00 per share pursuant
to his amended employment agreement dated February 6, 2006. Mr. Basile exercised
the options via “cash-less exercise” and was issued 179,578 shares of common
stock.
On
March
21, 2006, the Company received debt financing in the aggregate amount of
$100,000 from Jane Petri and Joseph Panico. The principal and interest of 12%
per annum is due on June 21, 2006. The note carries a default rate of 18% per
annum. In addition, the Company issued an aggregate of 25,000 restricted shares
common stock to Petri and Panico as debt issuance costs.
On
May 4,
2006, the Company issued 20,000 restricted shares of its common stock to
Pasadena Capital Partners, LLC pursuant to a Letter of Engagement entered into
between the parties on March 17, 2006.
On
May 3,
2006, the Company issued 180,000 restricted shares of its common stock to New
Castle Consulting, LLC pursuant to a Consulting Agreement entered into between
the parties on April 10, 2006.
On
May
11, 2006, the Company issued 125,000 restricted shares of its common stock
to
Santo Santopadre as a settlement of a dispute between Mr. Santopadre and the
Company.
On
June
29, 2006, the Company entered into a Securities Purchase Agreement dated as
of
June 29, 2006, with four investors relating to the issuance and sale, in a
private placement exempt from the registration requirements of the Securities
Act of 1933, as amended, of units (the “Units”) consisting of 8% Convertible
Notes in the principal amount of $950,000 (“Notes”), Series A Common Stock
Purchase Warrants (“A Warrants”) and Series B Common Stock Purchase Warrants (“B
Warrants”). In addition, the company entered into an Exchange Agreement with the
two investors who purchased $650,000 of the Preferred Stock Units, previously
reported on Form 8-K dated April 28, 2006 whereby the Company agreed to issue
the Units in exchange for the return and cancellation of the previously issued
Preferred Stock Units. Accordingly, at closing the Company issued its 8%
Convertible Notes in the aggregate principal amount of $1,600,000, 1,600,000
A
Warrants and 800,000 B Warrants to the Investors. The Company also issued an
aggregate of 128,000 shares of its common stock to the investors representing
one year’s of prepaid interest on the Notes.
The
Notes
mature 24 months from the closing. The Notes are convertible at the option
of
the holder into the Company’s common stock at the rate of $1.00 per share. The
Notes are mandatorily convertible into the Company’s common stock if the closing
bid price of the Company’s common stock is above $2.50 per share for ten (10)
consecutive trading days and if the daily volume for the same period exceeds
100,000 shares per day. The Company may redeem the Notes for 125% of the
principal amount of the Note together with all accrued and unpaid interest
provided that (i) an event of default has not occurred, and (ii) an effective
registration statement covering the shares underlying the Note exists. As a
result of the anti-dilution provisions contained in the Notes the conversion
price has been adjusted several times, the lowest conversion price to date
was
approximately $.25 per share.
Each
A
Warrant entitles the holder to purchase one share of the Company’s common stock
at an exercise price of $1.75 per share commencing on the date of issuance
and
expiring at the close of business on the fifth anniversary of the issuance
date.
Each B Warrant entitles the holder to purchase one share of the Company’s common
stock at an exercise price of $.10 per share commencing 181 days after issuance
and expiring at the close of business on the fifth anniversary of the initial
exercise date. Notwithstanding the foregoing if the Company provides the holder
of a B Warrant with validation and acknowledgement, in the form of bona fide
purchase order demonstrating that at least $1,000,000 of the Company’s products
have been ordered, other than its initial order from a national retailer in
the
amount of approximately 23,000 garage door opening units, within 181 days after
the date of the Securities Purchase Agreement, the B Warrants shall
automatically terminate. Both the A and B Warrants contain provisions that
protect the holder against dilution by adjustment of the exercise price in
certain events including, but not limited to, stock dividends, stock splits,
reclassifications, or mergers.
Pursuant
to the Selling Agent Letter Agreement between the Company and the Selling Agent,
the Selling Agent was paid a cash fee of $95,000 (10% of the aggregate purchase
price of the Units sold to the subscribers) in addition to the $75,000 it
received on April 28, 2006, inclusive of $10,000 in expenses. The Company also
issued the Selling Agent a warrant to purchase 160,000 shares of its common
stock on the same terms as the A Warrants. In addition, the Company paid $15,000
to the Selling Agent’s counsel and $32,500 to its counsel.
As
part
of the Private Placement, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with each subscriber who
purchased Units in the Private Placement. Under the Registration Rights
Agreement, the Company is obligated to file a registration statement (the
“Registration Statement”) on Form SB-2, relating to the resale by the holders of
the Common Stock underlying the Notes, Warrants and Selling Agent Warrant.
If
such Registration Statement was not filed by July 14, 2006, or does not become
effective within 90 days after closing, the Company has agreed to pay to the
investors 1.5% of the gross proceeds of the offering for each month in which
the
Company fails to comply with such requirements. The Company did not file the
Registration Statement by July 14, 2006 and therefore is accruing 1.5% ($24,000)
of the gross proceeds for each month the Company fails to file the Registration
Statement. (See Note 11 on “Forebearance Notes”).
On
October 10, 2006 the Company amended the exercise price of the 1,600,000 Class
A
Warrants from $1.75 to $1.00.
On
June
5, 2006 the Company issued 54,201 restricted shares of its common stock to
Mark
Basile in lieu of indebtedness to Mr. Basile by the Company.
On
July
19, 2006, the Company issued an aggregate of 20,000 restricted shares of its
common stock to Jane Petri (10,000) and Joseph Panico (10,000) as an incentive
for them extending the maturity dates of their respective loans.
On
August
4, 2006, the Company granted J. Richard Iler 400,000 options to purchase shares
of its common stock and issued 100,000 shares of its common stock to Mr. Iler
as
a bonus. 200,000 of the options are exercisable at $1.05 per share and 200,000
options are exercisable at $1.10 per share. The 200,000 options exercisable
at
$1.05 were issued under the Company’s 2005 Incentive Equity Plan (the “Plan”)
and the other 200,000 options were issued outside the Plan. The securities
were
issued to Mr. Iler pursuant to his employment agreement. On October 19, 2006,
Mr. Iler returned 100,000 options issued under the Plan in exchange for 100,000
options issued outside of the Plan.
On
August
14, 2006, the Company granted Lorraine Yarde 600,000 options to purchase shares
of its common stock issued 150,000 shares of its common stock a to Ms. Yarde
as
a bonus. 200,000 of the options are exercisable at $1.00 per share, 200,000
options are exercisable at $1.25 per share and 200,000 options are exercisable
at $1.50 per share. The 200,000 options exercisable at $1.00 were issued under
the Plan and the other 400,000 options were issued outside the Plan. On October
19, 2006, Ms. Yarde returned 100,000 options issued under the Plan in exchange
for 100,000 options issued outside of the Plan.
On
September 21, 2006, the Company issued Jay Pitlake 50,000 shares of its common
stock as a finder’s fee in connection with the sale of the units described
above.
The
Company entered into a Securities Purchase Agreement dated September 18, 2006,
with Jane Petri and Joseph Panico relating to the issuance and sale, in a
private placement exempt from the registration requirements of the Securities
Act of the Company’s 10% Promissory Notes due March 15, 2007 in the aggregate
principal amount of $400,000, 400,000 Common Stock Purchase Warrants and 160,000
Shares of the Company’s Common Stock. In connection with this transaction the
two investors provided the Company with $300,000 and exchanged $100,000 in
Notes, described above, that were previously issued by the Company to the
investors.
Each
Warrant entitles the holder to purchase one share of the Company’s Common Stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on September 15, 2011.
As
part
of the Private Placement, the Company agreed to register the 400,000 shares
of
Common Stock underlying the Warrants and the 160,000 shares of the Common Stock
issued as part of this Private Placement.
Each
Warrant entitles the holder to purchase one share of the Company’s Common Stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on September 15, 2011.
As
part
of the Private Placement, the Company agreed to register the 55,000 shares
of
Common Stock underlying the Warrants and the 22,000 shares of the Common Stock
issued as part of this Private Placement.
On
October 23, 2006 the Company issued 25,000 shares of its common stock to Brendan
Hopkins (“Hopkins”) pursuant to a consulting agreement between the Company and
Hopkins. These shares were issued pursuant to the Company’s Plan.
On
November 17, 2006, the Company entered into a Securities Purchase Agreement
with
Jane Petri and Joseph Panico relating to the issuance and sale in a private
placement exempt from the registration requirements of the Securities Act of
the
Company’s 10% Promissory Notes due March 15, 2007 in the aggregate principal
amount of $300,000, 99,000 Common Stock Purchase Warrants and 300,000 shares
of
the Company’s Common Stock. In connection with this transaction, the two
investors provided the Company with $300,000.
Each
Warrant entitles the holder to purchase one share of the Company’s common stock
at an exercise price of $1.25 per share commencing on the date of issuance
and
expiring at the close of business on September 14, 2011.
As
part
of the Private Placement, the Company agreed to register the 99,000 shares
of
common stock underlying the Warrants and the 300,000 shares of the common stock
issued as part of this private placement.
On
October 20, 2006 the Company entered into a Consulting Agreement with
Interactive Resources Group, Inc. (“IRG”). IRG was hired to provide the Company
with corporate consulting services in connection with the Company’s corporate
finance relations, investor relations to enhance the Company’s visibility in the
financial community. The term of the agreement is six months. As compensation,
the Company agreed to issue IRG an aggregate of 225,000 shares of its common
stock, payable 75,000 on November 1, 2006, 75,000 payable on January 1, 2007
and
75,000 payable on March 1, 2007. The Company has issued the first 75,000 shares.
In addition, the Company agreed to issue three hundred thousand (300,000) common
stock purchase warrants which vest on or about January 20, 2007, ninety-one
(91)
days from the date of the Agreement.
100,000
at $1.50 per share
100,000
at $2.00 per share
100,000
at $4.00 per share
The
Company entered into a Securities Purchase Agreement dated as of December 28,
2006, with three investors relating to the issuance and sale, in a private
placement (“Private Placement”) exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”), of units (the
“Units”) consisting of Senior Convertible Debentures in the principal amount of
$1,500,000 (“Debentures”), 1,500,000 Series A Common Stock Purchase Warrants (“A
Warrants”) and 750,000 Series B Common Stock Purchase Warrants (“B Warrants”).
The closing occurred on January 5, 2007.
The
Debentures mature on June 29, 2008. The Debentures are convertible at the option
of the holder into the Company’s common stock at the rate of $1.00 per share.
The Debentures are convertible at the option of the Company into the Company’s
common stock if the closing bid price of the Company’s common stock is above
$2.50 per share for ten (10) consecutive trading days and if the shares
underlying the Debentures are registered. The Company may redeem the Debentures
for 125% of the principal amount of the Debenture together with all accrued
and
unpaid interest provided that (i) an event of default has not occurred, (ii)
the
price of the Company’s common stock exceeds $1.50 and (ii) an effective
registration statement covering the shares underlying the Debentures exists.
As
a result of the anti-dilution provisions contained in the Debentures the
conversion price has been adjusted several times, the lowest conversion price
to
date was approximately $.25 per share.
Each
A
Warrant entitles the holder to purchase one share of the Company’s common stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on the fifth anniversary of the issuance
date.
Each B Warrant entitles the holder to purchase one share of the Company’s common
stock at an exercise price of $.10 per share at any time after July 1, 2007
and
expiring at the close of business on the fifth anniversary of the initial
issuance date. Notwithstanding the foregoing if the Company provides the holder
of a B Warrant with validation and acknowledgement on or before June 30, 2007
that the Company has both received and booked revenues for its products totaling
$1,000,000, the B Warrants shall automatically terminate. Both the A and B
Warrants contain provisions that protect the holder against dilution by
adjustment of the exercise price in certain events including, but not limited
to, stock dividends, stock splits, reclassifications, or mergers.
Pursuant
to the Selling Agent Letter Agreement between the Company and First Montauk
Securities Corporation (“Selling Agent”), the Selling Agent was paid a cash fee
of $150,000 (10% of the aggregate purchase price of the Units sold to the
subscribers). The Company also issued the Selling Agent a warrant to purchase
150,000 shares of its common stock on the same terms as the A
Warrants.
As
part
of the Private Placement, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with each subscriber who
purchased Units in the Private Placement. Under the Registration Rights
Agreement, the Company is obligated to file a registration statement (the
“Registration Statement”) on Form SB-2, relating to the resale by the holders of
the Common Stock underlying the Debentures, Warrants and Selling Agent
Warrant.
As
a
condition to closing, the Company obtained consents and waivers from the
investors of its private placement of $1,600,000 principal amount of Convertible
Notes (“Notes”) issued on June 29, 2006, pursuant to which each of the prior
investors agreed to waive any and all existing defaults relating to the Notes
and agreed to forebear from exercising any rights accruing upon default until
March 31, 2007. In connection therewith, the Company issued to the investors
Convertible Notes (“Forebearance Notes”) in the aggregate principal amount of
$387,437.39, representing liquidated damages due under the Notes. The
Forebearance Notes are convertible into the Company’s common stock at $1.00 per
share.
On
January 9, 2007, Ms. Yarde exercised 250,000 stock options at $.40 per share.
Ms. Yarde exercised the options via “cash-less exercise” and was issued 217,213
shares of common stock.
On
January 9, 2007, the Company issued an aggregate of 44,250 bonus shares of
its
common stock pursuant to the Company’s 2005 Equity Incentive Plan to the
following individuals:
Mark
Basile
|
|
|
15,000
|
|
Lorraine
Yarde
|
|
|
12,500
|
|
J.
Richard Iler
|
|
|
10,000
|
|
Bernie
Lee
|
|
|
2,000
|
|
Peter
O’Neil
|
|
|
1,500
|
|
Donna
Basile
|
|
|
2,000
|
|
Jon
Guttman
|
|
|
1,000
|
|
Christina
Romita
|
|
|
250
|
|
Total
|
|
|
44,250
|
|
On
January 16, 2007, the Company issued an aggregate of 40,000 shares of its common
stock to Patricia Giberson (26,000) and Oceana Partners (14,000) pursuant to
a
consulting agreement between the Company and Ocean Partners.
On
January 16, 2007, the Company issued 40,000 shares of its common stock to Brad
Schwab pursuant to a consulting agreement between the Company and Mr.
Schwab.
On
January 16, 2007, the Company issued an aggregate of 4,000 shares of its common
stock to the owners of Vintage Filings, Inc. (Seth Farbman 2,000 and Shai Stern
2,000) for services rendered to the Company in connection with its SEC filings.
These shares were issued under the Company’s 2005 Equity Incentive
Plan.
On
January 22, 2007, the Company issued 50,000 shares of its common stock to Mark
Basile as consideration for Mr. Basile providing the Company his personal
guarantee in connection with the opening of a Letter of Credit in the amount
of
$1,040,400.
On
January 31, 2007, the Company issued 110,000 restricted shares of its common
stock to Equity Services LLC pursuant to a consulting agreement between the
Company and ICR, LLC.
On
February 13, 2007, the Company issued 75,000 restricted shares of its common
stock to Interactive Resources Group, Inc. (“IRG”) pursuant to a consulting
agreement between the Company and IRG.
On
February 14, 2007, the Company issued 25,000 restricted shares of its common
stock to Barry and Marci Mainzer upon the exercise of a warrant for a like
number of shares. The exercise price of the warrant was $1.00 per share and
was
paid for by forgiving the principal payment of a $25,000 promissory note due
to
the Mainzers.
On
February 14, 2007 the Company issued 25,000 restricted shares of its common
stock to Dorothy Christofides upon conversion of a promissory note in the
principal amount of $30,000. As additional consideration for Ms. Christofides
converting her promissory note, the Company issued her 20,000 common stock
purchase warrants exercisable for a period of five years at $2.00 per
share.
On
February 14, 2007, the Company issued an aggregate of 7,000 shares of its common
stock to the owners of Vintage Filings, Inc. (Seth Farbman 3,500 and Shai Stern
3,500) in exchange for Vintage providing one (1) year of filing the Company’s
reports with the SEC via the Edgar filing system. These shares were issued
under
the Company’s 2005 Equity Incentive plan.
On
March
6, 2007, the Company issued The Incredible Card Company 150,000 restricted
shares of its common stock as consideration for the purchase of a patent the
Company acquired in January 2007. Mr. Basile, the Company’s Chairman and CEO,
was a former officer and director of The Incredible Card Company.
On
March
12, 2007, the Company issued Robert Jacobs 150,000 restricted shares of its
common stock as consideration for the purchase of a patent.
On
April
11, 2007, the Company’s Chief Operating Officer cashlessly exercised 200,000
warrants exercisable at $1.00. The market value of the Company’s common stock on
that date was $2.00. Accordingly, the Company issued 100,000 shares to Ms.
Yarde
pursuant to such cashless exercise. The stock was issued under the Company’s
Employee Stock Plan.
On
April
11, 2007, the Company’s Chief Financial Officer cashlessly exercised 200,000
warrants exercisable at $1.05. The market value of the Company’s common stock on
that date was $2.00. Accordingly, the Company issued 95,000 shares to Mr. Iler
pursuant to such cashless exercise. The stock was issued under the Company’s
Stock Incentive Plan
On
April
24, 2007, the Company issued 1,750 to the partners of its legal counsel, Sommer
& Schneider LLP, in consideration for legal services rendered in the
ordinary course of business. The stock was issued under the Company’s Stock
Incentive Plan.
On
April
24, 2007, the company issued 140,000 shares of its common stock and 140,000
warrants exercisable at $1.00 per share to Mark Basile, the Company’s President
and CEO as consideration for providing the Company a loan in the amount of
$130,000.
On
May
21, 2007, the Company issued 50,000 shares of its common stock and 50,000
warrants exercisable at $1.00 per share to Lorraine Yarde, the Company’s Chief
Operating Officer as consideration for providing the Company a loan in the
amount of $50,000.
On
June
1, 2007, the Company issued 300,000 shares of its common stock and 200,000
warrants exercisable at $1.50 per share to IRG as consideration for performing
shareholder relations and other financial advisory services for a six month
period. The aggregate value of such services based upon valuations of the
Company’s stock at this time was 4486,105.
On
June
11, 2007, the Company issued 100,000 shares of its common stock to Nite Capital
upon the conversion of $100,000 principal amount of a convertible note issued
to
Nite Capital in the aggregate principal amount of $150,000. The convertible
note
converts into the Company’s common stock at $1.00 per share. Seventy-five
thousand (75,000) of these shares were registered pursuant to a Registration
Statement on Form SB-2 (SEC File No. 333-140628)_ which was declared effective
by the SEC on June 25,2007.
On
June
15, 2007, the Company issued 45,000 shares of its common stock and 45,000
warrants exercisable at $1.00 per share to Lorraine Yarde, the Company’s Chief
Operating Officer as consideration for providing the Company a loan in the
amount of $45,000.
On
June
16, 2007, the Company issued an aggregate amount of 125,000 shares of its common
stock to Peter Thompson upon the conversion of $125,000 principal amount of
a
convertible note issued to Mr. Thompson in that amount. The convertible note
converted into the Company’s common stock at $1.00 per share. Sixty-two
thousand-five hundred (62,500) of these shares were registered pursuant to
a
Registration Statement on Form SB-2 (SEC File No. 333-140628) which was declared
effective by the SEC on June 25, 2007.
On
June
16, 2007, the Company issued an aggregate of 125,000 shares of its common stock
to Lighthouse Capital Insurance Company- Policy # 03-046 upon the conversion
of
$125,000 principal amount of a convertible note issued to Lighthouse Capital
Insurance in that amount. The convertible note converted into the Company’s
common stock at $1.00 per share. Sixty-two thousand-five hundred (62,500) of
these shares were registered pursuant to a Registration Statement on Form SB-2
(SEC File No. 333-140628)_ which was declared effective by the SEC on June
25,2007.
On
June
18, 2007,, the Company awarded Lorraine Yarde 150,000 shares of its common
stock
as a bonus for securing an increased purchase order from Home Depot and an
additional purchase order from MasterLOCK.
On
June
18, 2007,, the Company issued 20,000 shares to Rodger Michell, an accountant
as
consideration of accounting services in connection with the Company’s upgrading
its accounting system and electronic data interchange.
On
June
18, 2007, the Company issued 75,000 shares of its common stock and 75,000
warrants exercisable at $1.00 per share to The Naples Trust, of which the
Company’s Chief Executive Officer is a related party as consideration for
providing the Company a loan in the amount of $75,000.
On
June
21, 2007, the Company issued 20,000 shares of its Common stock to Black Dog
Communications as consideration for public relations services to the
Company.
On
June
26, 2007, the Company issued an aggregate of 300,000 shares of its common stock
to Linden Growth Partners upon the conversion of $300,000 principal amount
of a
convertible note issued to Linden Growth Partners in that amount. The
convertible note converted into the Company’s common stock at $1.00 per share.
One hundred and fifty thousand (1500,00) of these shares were registered
pursuant to a Registration Statement on Form SB-2 (SEC File No. 333-140628)
which was declared effective by the SEC on June 25, 2007.
On
June
26, 2007, the Company issued an aggregate of 450,000 shares of its common stock
to Linden Growth Master Fund upon the conversion of $450,000 principal amount
of
a convertible debenture issued to Linden Growth Master Fund in that amount.
The
convertible debenture converted into the Company’s common stock at $1.00 per
share. Two hundred and twenty five thousand (225,000) of those shares were
registered pursuant to a Registration Statement on Form SB-2 (SEC File No.
333-140628) which was declared effective by the SEC on June 25,
2007.
On
June
27, the Company issued 5,000 shares of its common stock to the partners of
its
legal counsel, Sommer and Schneider LLP in consideration of $5,000 in legal
services rendered to the Company. The stock was issued under the Company’s
Equity Incentive Plan.
On
June
28, 2007, the Company issued 75,000 shares of its common stock and 75,000
warrants exercisable at $1.00 per share to J. Richard Iler, the Company’s Chief
Financial Officer as consideration for providing the Company a loan in the
amount of $75,000.
On
July
11, 2007 the Company granted 375,000 warrants exercisable at $1.00 to Alpha
Capital in consideration of its loan to the Company to be expressly used for
manufacturing of the Company’s MasterLOCK™ smartTouch Garage Door Opener. The
proceeds from receivable financing will be used to repay this loan.
On
July
13, 2007, the Company issued 50,000 shares of its common stock to BridgePointe
Master Fund Ltd. upon the conversion of $50,000 principal amount of a
convertible debenture issued to BridgePointe Master Fund in the aggregate
principal amount of $1,000,000. The convertible debenture converts into the
Company’s common stock at $1.00 per share. These shares were registered pursuant
to a Registration Statement on Form SB-2 (SEC File No. 333-140628) which was
declared effective by the SEC on June 25, 2007.
On
July
13, 2007, the Company issued 50,000 shares of its common stock to Alpha Capital
AG. upon the conversion of $25,000 principal amount of a convertible note issued
to Alpha Capital in the aggregate principal amount of $400,000. The convertible
note converts into the Company’s common stock at $1.00 per share. These shares
were registered pursuant to a Registration Statement on Form SB-2 (SEC File
No.
333-140628) which was declared effective by the SEC on June 25,
2007.
On
July
13, 2007, the Company issued Nite Capital 75,000 shares of its common stock
issuable upon the exercise of a like number of warrants exercisable at $0.10
per
share.
On
July
24th, 2007, the Company issued 20,222 shares as payment in kind for interest
payment due to Bridgepointe Master Fund, LTD on a $1,000,000 convertible note
issued to the Company. on January 5, 2007.
On
July
25th, 2007, the Company issued 50,000 shares as payment in kind for fees related
to a factoring commitment to BLX, Funding.
On
July
25th, 2007, the Company issued 25,000 shares of its common stock and 25,000
warrants exercisable at $1.00 per share to Mark Basile, the Company’s Chief
Executive Officer as consideration for providing the Company a loan in the
amount of $25,000.
On
July
25th, 2007, the Company issued 150,000 shares of its common stock to Mark Basile
as consideration for Mr. Basile providing the Company his personal guarantee
in
connection with the opening of an escrow agreement in the amount of
$750,000.
On
August
1, 2007, the Company issued 8,365 of its common stock to A2E Technologies as
payment of $9,535.75 due A2E Technologies pursuant to a Service Level Agreement
dated March 16, 2007.
On
August
15, 2007, the Company issued 150,000 shares of its common stock to Linden Growth
Partners L.P. upon the exercise of a like number of warrants exercisable at
$0.10 per share.
On
August
15, 2007, the Company issued 225,000 shares of its common stock to Linden Growth
Partners Master Fund L.P. upon the exercise of a like number of warrants
exercisable at $0.10 per share.
On
August
16, 2007 the Company issued 22,269 shares of its common stock to Osher Capital
Partners LLC upon the cashless exercise of 25,000 warrants exercisable at $0.10
per share.
On
August
24, 2007 the Company issued 178,152 shares of its common stock to Alpha Capital
AG upon the cashless conversion of 200,000 warrants exercisable at $0.10 per
share.
On
August
30, 2007 the Company issued 87,500 shares of its common stock and 87,500
warrants exercisable at $1.00 each to Joe Panico and Jane Petri respectively
as
an inducement to renew with an extension to maturity to May 15th, 2008 and
increase a loan to the Company in the amount of $800,000.
On
August
31, 2007 the Company issued 62,500 shares of its common stock upon the exercise
of 62,500 warrants exercisable at $0.10 to Lighthouse Capital Insurance
Company.
On
August
31, 2007 the Company issued 62,500 shares of its common stock upon the exercise
of 62,500 warrants exercisable at $0.10 to Peter Thomson.
On
September 7, 2007, the Company issued to Bridgepointe Master Fund, Ltd. 435,342
shares of its common stock upon the cashless exercise of 500,000 warrants
exercisable at $0.10 per share.
On
September 7, 2007, the Company issued 6,647 shares as payment in kind for
interest payment due to Bridgepointe Master Fund, Ltd. on a $1,000,000
convertible note issued to the Company. on January 5, 2007.
On
September 11, 2007, the Company issued an aggregate of 50,000 shares of its
common stock to Bridgepointe Master Fund, Ltd. upon the conversion of $50,000
principal amount of a convertible note issued to Bridgepointe Master Fund,
Ltd.
in that amount. The convertible note converted into the Company’s common stock
at $1.00 per share
On
September 12, 2007, the Company issued an aggregate of 81,193 shares of its
common stock to Whalehaven Capital Fund Limited upon the conversion of $81,193
of principal and interest amount of a convertible note issued to Whalehaven
Capital Fund Ltd. The convertible note converted into the Company’s common stock
at $1.00 per share.
On
September 12, 2007 the Company issued 250,000 shares of its common stock upon
the exercise of 250,000 warrants exercisable at $0.10 to Whalehaven Capital
Fund, Ltd.
On
September 27th, 2007, the Company issued an aggregate of 14,761 shares of its
common stock to Whalehaven Capital Fund Limited upon the conversion of $14,761
of principal and interest due under a convertible note issued to Whalehaven
Capital Fund Ltd. The convertible note is convertible into the Company’s common
stock at the rate of $1.00 per share. These shares were registered pursuant
to a
Registration Statement on Form SB-2 (SEC File No. 333-140628) which was declared
effective by the SEC on June 25, 2007.
On
October 10, 2007, the Company issued 16,823 shares of its common stock to
Whalehaven Capital Fund Ltd. upon the conversion of $16,823 of principal and
interest due under a convertible note issued to Whalehaven Capital Fund Ltd.
The
convertible note is convertible into the Company’s common stock at the rate of
$1.00 per share. These shares were registered pursuant to a Registration
Statement on Form SB-2 (SEC File No. 333-140628) which was declared effective
by
the SEC on June 25, 2007.
On
October 11, 2007, the Company issued an aggregate of 218,500 shares of its
common stock to the following employees and executive officers:
Mark
Basile
|
|
|
50,000
|
|
J.
Richard Iler
|
|
|
50,000
|
|
Lorraine
Yarde
|
|
|
50,000
|
|
Cliff
Zsevc
|
|
|
50,000
|
|
Peter
O’Neill
|
|
|
50,000
|
|
Carol
Seaman
|
|
|
2,500
|
|
Marcia
Strain
|
|
|
1,000
|
|
|
|
|
|
|
TOTAL
|
|
|
218,500
|
|
On
October 15, 2007, the Company issued an aggregate of 100,000 shares of its
common stock to Richard Quintana (50,000 shares) and Michael Niccole (50,000)
in
connection with the acquisition of a Patent.
On
October 17, 2007, the Company issued 10,000 shares of its common stock to the
partners of Sommer & Schneider LLP, the Company’s securities counsel as
partial payment of legal services rendered to the Company.
On
November 6, 2007, the Company issued 114,545 shares of its common stock to
Mark
Basile, the Company’s CEO upon the cashless exercise of 140,000 warrants,
exercisable at $.10 per share.
On
November 6, 2007, the Company issued 20,000 shares of its common stock to the
partners of Sommer & Schneider LLP.
On
November 6, 2007, the Company issued an aggregate of 150,000 shares of its
common stock to the members of its board of directors Mark Basile (50,000)
Lorraine Yarde (50,000) and J. Richard Iler (50,000) as consideration for
services rendered in the performance of their duties as directors of the
Company.
On
November 15th, 2007, the Company issued 17,507 shares of its common stock to
A2E
Technologies
as
partial consideration toward engineering services performed on behalf of the
Company.
On
November 16th, 2007, the Company escrowed 500,000 shares of its stock as
collateral for extending the maturity of loans given by Joseph Panico and Jane
Petri to the Company.
On
November 16th, 2007, the Company granted 50,000 shares to Wendy Borow-Johnson
as
consideration for serving on the Board of the Company.
On
November 27th, 2007 the Company granted 20,000 shares to ICR, LLC as
consideration and settlement of investor relations services to the
Company.
On
December 4th, 2007 the Company issued 125,000 shares to Lighthouse Capital
Insurance Company upon exercise of 125,000 warrants exercisable at
$.30.
On
December 4th, 2007 the Company issued 125,000 shares to Peter Thompson upon
exercise of 125,000 warrants exercisable at $.30.
On
December 4th, 2007 the Company issued 12,500 shares to Robert Casolaro upon
exercise of 125,000 warrants exercisable at $.30.
On
December 6th, 2007 the Company issued 9,135 shares to Fort Mason Partners LP
upon exercise of 9,135 warrants exercisable at $.30. These warrants were
assigned by Nite Capital to the benefit of Fort Mason Partners LP.
On
December 6th, 2007 the Company issued 140,865 shares to Fort Mason Master LP
upon exercise of 140,865 warrants exercisable at $.30. These warrants were
assigned by Nite Capital to the benefit of Fort Mason Master LP.
On
December 18th, 2007, the Company issued 67,857 shares of its common stock to
The
Naples Trust upon the cashless exercise of 75,000 warrants, exercisable at
$.10
per share.
On
December 18th, the Company issued 100,000 shares of its common stock to
Interactive Resources Group in accordance with a consulting agreement of like
date.
On
December 19th, 2007, the Company authorized the issuance of 100,000 shares
of
its common stock to BridgePointe Master Fund, Ltd as part of the conversion
and
Forebearance Agreement dated as of December 19, 2007. The shares were issued
on
January 28, 2008.
On
December 20th, 2007, the Company issued 85,952 shares of its common stock to
the
Company’s Chief Operating Officer upon the cashless exercise of 95,000 warrants,
exercisable at $.10 per share.
.
Unless
otherwise indicated, the securities discussed above were offered and sold in
reliance upon exemptions from the registration requirements of Section 5 of
the
Act, pursuant to Section 4(2) of the Act and Rule 506 promulgated thereunder.
Such securities were sold exclusively to accredited investors as defined by
Rule
501(a) under the Act, unless otherwise noted.
The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the Financial Statements and
the
related notes. This discussion contains forward-looking statements based upon
current expectations that involve risks and uncertainties, such as our plans,
objectives, expectations and intentions. Our actual results and the timing
of
certain events could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those
set
forth under “Risks Relating to Our Business,” “Description of Business” and
elsewhere in this document. See “Forward-Looking Statements.”
Operations
The
Company operates its business current business efforts through two (2) wholly
owned subsidiaries, bioMETRX Technologies Inc., which conducts the product
engineering and design and smartTOUCH Consumer Products, Inc., the
consumer-based marketing and sales group.
Management’s
plan of operations for the next twelve months is to raise additional capital,
complete further engineering of its product line and continue marketing the
Company’s products and services through its distribution channels. The Company
has recently expanded its co-marketing/co-development agreement with Master
Lock™ , adding several new products that will be branded Master Lock smartTOUCH
The Company expects it will require $4,500,000 - $7,500,000 over the next 12
months to accomplish these goals, though it is anticipated that this will
incrementally be raised in stages, and expects to be financed by the private
sale of its securities and lines of credit with commercial banks for continuous
manufacturing output of its products.. The Company has shipped its initial
product to the Home Depot and has realized revenues of nearly $1,500,000 during
the fourth quarter 2007. The Company has received funding from one of its
institutional investors for advance purchase of components in the amount of
$750,000. Further, as the Company replenishes orders and maintains inventory
levels, the Company will require additional financing until it is internally
generating positive cash flow. There are no firm commitments on anyone’s part to
invest in the Company, and if it is unable to obtain financing through the
sale
of its securities or other financing, the Company’s products and services may
never be commercially sold. The Company’s balance sheet continues to reflect
negative shareholder equity, though it has been reduced through the conversion
of institutional debt to equity. For the foreseeable year, the Company will
be
solely reliant on the attraction of additional equity in order for it to reflect
shareholder equity unless revenues should exceed expectations for the current
market ready products or other products planned for release during this fiscal
year 2008. Should the Company not prevail in its efforts to attract
capital, it will require strict budget adherence in order to manage the many
demands for capital.
Our
corporate address is 500 North Broadway, Suite 204, Jericho, New York 11753,
our
telephone number is (516) 937-2828 and our facsimile number is (516)
937-2880.
Current
Market Outlook - Target Markets/Applications
There
is
a unique opportunity in the consumer electronics market for the incorporation
of
biometrics technology in multiple devices, requiring personal identification
or
key access. Two current examples are biometrically secured laptops (IBM-Lenovo
Thinkpad) and cell phones (Samsung SCH370). Prospective home/office security
and
electronics devices includes the introduction of “biometric” access controls on
anything that presently requires a key, keypad or Personal Identification Number
(“PIN”). bioMETRX is the first company to offer biometric security and
electronics products for the home consumer market at any significant
level.
We
are
focused on developing simple to use, cost effective, power-efficient, finger
activated consumer electronics products principally under the trade name
“smartTOUCH Ô”.
Our
current and prospective consumer products include biometrically enabled and
secure residential garage/gate door openers/locks, central station alarm pads
and thermostats.
Product
Offerings
smartTOUCH
Ô
products
allow a person to open a door, or set an alarm or thermostat simply by
placing/swiping a finger upon a sensor chip, a fraction of the size of a postage
stamp. smartTOUCH Ô
products
are designed to simplify access, while substantially increasing the level of
security for the products and applications that incorporate the “powered by
smartTOUCH platform. . Our smartTOUCH Ô
products
use a one-to-one biometrics matching authentication system embedded into each
device. The bioMETRX patent-pending system also includes a hand held universal
programmer designed to control access to the administrative functions of each
smartTOUCH Ô
device.
All smartTOUCH Ô
products
are designed to work with this universal programmer, and permit up to twenty
(20) authorized users to be enrolled. Our system allows two types of users,
an
access user who can only operate the smartTOUCH Ô
device,
and an administrative user who can operate and also add or delete other
users.
Consumer
Products
The
Company has been designing various practical consumer biometric products since
2001, with its first product, a finger activated garage door opener, debuting
in
the summer of 2005 to very strong media and retailer interest. The product
was
featured on several television home improvement shows including HGTV’s “I Want
That”, as well as making appearances in the television reality show, “It Takes a
Thief”, a Discovery Networks program. The smartTOUCH GDO was the very first
practical consumer biometric product offered in the United States, and since
its
debut, is now the most widely distributed consumer biometric product available
in the U.S. through The Home Depot.
The
Company focus continues to be incorporating biometric technology, through
protected proprietary design and architecture, into products that consumers
use
everyday. The Company’s management had established a vision early on for an
entire family of products that would simplify consumers lives by removing the
need to remember PIN codes or carry keys. The Company’s current product
offerings include its GDO, a thermostat, a portable USB drive and a gate
controller. These products are expected to be available at domestic retailers
in
2008, and are in various stages of final testing and/or manufacturing. The
Company also expects that several other products will be launched in 2008,
including a door lock, mailbox and cabinet lock. The Company continues to work
with its partners to generate product ideas, integrated architecture solutions,
as well as low power, low cost designs that will continue to accelerate product
development and introductions to market..
Results
of Operations
Results
of Operation for the years ended December 31, 2006 and
2005
For
Twelve Month period ended December 31, 2006 compared to December 31,
2005
During
the twelve months ended December 31, 2006, net losses totaled $10,837,218
compared to $12,173,969 for the same twelve month period ending December 31,
2005. For the twelve months ending December 31, 2006, the Company’s general and
administrative expenses totaled $12,673,521, or 94.9% of total operating
expenses. During the same twelve month period in 2005, general and
administrative expenses totaled $11,074,632 or 91.0% of total operating
expenses. Salaries comprised $786,333, or 6.90% of total expenses for the twelve
month period ended December 31, 2006 as compared to $396,504, or 4.42% for
the
nine months ended December 31, 2005. Included in the net loss for 2006 was
a
one-time gain of $2,600,000 related to the return to the Company by a former
officer and director of 187,500 stock options valued at $2,362,500 and $2,500
shares of common stock valued at $237,500.
For
the
twelve months ending December 31, 2006, interest expense was $104,356, as
compared to $7,012 for the twelve months ending December 31, 2005.
Research
and development expenses for the year ending December 31, 2006 was $658,579,
5.00% of net loss as compared to $361,490, or 2.97% for the same period in
2005.
Results
of Operations for the years ended December 31, 2007 and
2006
For
Twelve Month period ended December 31, 2007 compared to December 31,
2006
During
the twelve months ended December 31, 2007, net losses totaled $11,126,954
compared to $10, 837,218 for the same twelve month period ending December 31,
2006.
Revenues
- Net
For
the
year ending Dec 31, 2007, the Company received its first revenues of $1,476,370
principally relating to its shipment of its first product,the MasterLOCK
smartTouch ™ Garage Door Opener (GDO) to the Home Depot.
Cost
of Goods Sold
The
Company’s Cost of Goods Sold relating to the production was $1,926,966 due to
higher costs relating to a limited production run, tooling costs and higher
component costs. The Company has commenced a redesign of all parts of the GDO
and believes that it can bring component and production costs to bring the
product’s margin to be more in line with the cost of producing its other
products scheduled for release in fiscal 2008.
Operating
Expenses
General
and Adminstrative
For
the
twelve months ending December 31, 2007, bioMETRX,s general and administrative
expenses totaled $4,227,646,, or 93.9% of total operating expenses as compared
to $11,854,191, or 94,7% for the year ending December 31, 2006.
Salaries
comprised $950,000, or 23.41% of total operating expense for the year ending
December 31, 2007, as to the comparable year’s expense of $1,019,470, or 8.67%
ending December 31,2006.
Interest
Expense and Finance Costs
For
the
twelve month period ending December 31, 2007, the Company incurred interest
and
finance costs of $6,173, 490 of which $4,590,142 was a non-cash item relating
to
the amortization of deferred finance costs on convertible debt held by the
Company. The Company had interest expense of $923,687 for the comparable period
ending December 31, 2006
Other
non-cash items
The
Company had compensatory expenses relating to the issuance of stock and warrants
in the amount of $3,179, 917 for the period ending December 31, 2007 as compared
to $7,573, 591 for the period ending December 31, 2006. If not for these
non-cash items, the Company’s net loss would have been $3,356, 895 as compared
to $2,569,191 for the comparable period ending December 31, 2006.
Liquidity
and Capital Resources
As
of
December 31, 2007 bioMETRX had total assets of $1,896,770 and total current
assets of $864,833. At December 31, 2007 bioMETRX had total liabilities of
$4,356,206 of which all were recorded as current liabilities. bioMETRX’s had
negative working capital at December 31, 2007 of $3,491,373 and an equity
deficit of $2,459,436 positive. The Company’s net cash provided by financing
activities was $2,317,738 and was barely adequate to fund the net cash used
in
operating activities of $2,121,197. . Because of this deficit, the Company’s
ability to continue to operate and its future remains in question as a going
concern unless additional capital is contributed or until such time as it
generates revenues and become cash flow.
|
·
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However,the
Company is optimistic, presuming its ability to raise additional
capital
through the issuance of its securities, about its ability to generate
revenues sufficient to achieve profitability based upon related
events;
|
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·
|
Entering
of a co-development and co-marketing agreement with MasterLOCK™ as of
March 28th,
2007.
|
|
·
|
Amending
of this agreement with MasterLOCK™ to include an additional 9 products as
of March 24th,
2008.
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·
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Demonstrated
ability to sell to big box retailers such as the Home Depot and partner
with other Original Equipment Manufacturers who sell through similar
distribution channels.
|
Since
inception, bioMETRX has financed its activities solely from the private
sales of its securities and the incurrence of debt. In November 2001, bioMetrx
Technologies issued 275,000 shares of its common stock, valued at $275,000
($1.00 per share), for services rendered. In December 2002, bioMETRX sold 20,000
shares of its common stock for $5,000 ($2.50 per share).
On
June
29, 2006, the Company entered into a Securities Purchase Agreement dated as
of
June 29, 2006, with four investors relating to the issuance and sale, in a
private placement (“Private Placement”) exempt from the registration
requirements of the Securities Act of 1933, as amended (the “Securities Act”),
of units (the “Units”) consisting of 8% Convertible Notes in the principal
amount of $950,000 (“Notes”), Series A Common Stock Purchase Warrants (“A
Warrants”) and Series B Common Stock Purchase Warrants (“B Warrants”). In
addition, the company entered into an Exchange Agreement with the two investors
who purchased $650,000 of the Preferred Stock Units, previously reported on
Form
8-K dated April 28, 2006 whereby the Company agreed to issue the Units in
exchange for the return and cancellation of the previously issued Preferred
Stock Units. Accordingly, at closing the Company issued its 8% Convertible
Notes
in the aggregate principal amount of $1,600,000, 1,600,000 A Warrants and
800,000 B Warrants to the Investors. The Company also issued an aggregate of
128,000 shares of its common stock to the investors representing one year’s of
prepaid interest on the Notes.
Each
A
Warrant entitles the holder to purchase one share of the Company’s common stock
at an exercise price of $1.75 per share commencing on the date of issuance
and
expiring at the close of business on the fifth anniversary of the issuance
date.
Each B Warrant entitles the holder to purchase one share of the Company’s common
stock at an exercise price of $.10 per share commencing 181 days after issuance
and expiring at the close of business on the fifth anniversary of the initial
exercise date. Notwithstanding the foregoing if the Company provided the holder
of a B Warrant with validation and acknowledgement, in the form of bona fide
purchase order demonstrating that at least $1,000,000 of the Company’s products
have been ordered, other than its initial order from a national retailer in
the
amount of approximately 23,000 garage door opening units, within 181 days after
the date of the Securities Purchase Agreement, the B Warrants shall
automatically terminate. The Company was unable to provide the holders with
such
validation and therefore the B Warrants were not terminated. Both the A and
B
Warrants contain provisions that protect the holder against dilution by
adjustment of the exercise price in certain events including, but not limited
to, stock dividends, stock splits, reclassifications, or mergers. In December
the Company lowered the exercise price of the A warrants to $.30.
Pursuant
to the Selling Agent Letter Agreement between the Company and the Selling Agent,
the Selling Agent was paid a cash fee of $95,000 (10% of the aggregate purchase
price of the Units sold to the subscribers) in addition to the $75,000 it
received on April 28, 2006, inclusive of $10,000 in expenses. The Company also
issued the Selling Agent a warrant to purchase 160,000 shares of its common
stock on the same terms as the A Warrants. In addition, the Company paid $15,000
to the Selling Agent’s counsel and $32,500 to its counsel.
As
part
of the Private Placement, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with each subscriber who
purchased Units in the Private Placement. Under the Registration Rights
Agreement, the Company is obligated to file a registration statement (the
“Registration Statement”) on Form SB-2, relating to the resale by the holders of
the Common Stock underlying the Notes, Warrants and Selling Agent Warrant.
If
such Registration Statement was not filed by July 14, 2006, or does not become
effective within 90 days after closing, the Company has agreed to pay to the
investors 1.5% of the gross proceeds of the offering for each month in which
the
Company fails to comply with such requirements. The Company did not file the
Registration Statement by July 14, 2006 and therefore is accruing 1.5% ($24,000)
of the gross proceeds for each month the Company fails to file the Registration
Statement. For the period ended December 31, 2006 a total of $72,000 has been
accrued as finance costs to reflect these provisions.
The
Company entered into a Securities Purchase Agreement dated September 18, 2006,
with Jane Petri and Joseph Panico relating to the issuance and sale, in a
private placement exempt from the registration requirements of the Securities
Act of the Company’s 10% Promissory Notes due March 15, 2007 in the aggregate
principal amount of $400,000. In connection there with the Company issued an
aggregate of 400,000 Common Stock Purchase Warrants and 160,000 Shares of the
Company’s Common Stock. In connection with this transaction the two investors
provided the Company with $300,000 and exchanged $100,000 in Notes, described
above, that were previously issued by the Company to the investors.
Each
Warrant entitles the holder to purchase one share of the Company’s Common Stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on September 15, 2011.
As
part
of the Private Placement, the Company agreed to register the 400,000 shares
of
Common Stock underlying the Warrants and the 160,000 shares of the Common Stock
issued as part of this Private Placement.
The
Company entered into a Securities Purchase Agreement dated September 30, 2006,
with two investors relating to the issuance and sale, in a private placement
exempt from the registration requirements of the Securities Act of the Company’s
10% Promissory Notes due March 30, 2007 in the aggregate principal amount of
$55,000, 55,000 Common Stock Purchase Warrants and 22,000 Shares of the
Company’s Common Stock.
Each
Warrant entitles the holder to purchase one share of the Company’s Common Stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on September 15, 2011.
As
part
of the Private Placement, the Company agreed to register the 55,000 shares
of
Common Stock underlying the Warrants and the 22,000 shares of the Common Stock
issued as part of this Private Placement.
The
Company entered into a Securities Purchase Agreement dated as of December 28,
2006, with three investors relating to the issuance and sale, in a private
placement (“Private Placement”) exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”), of units (the
“Units”) consisting of Senior Convertible Debentures in the principal amount of
$1,500,000 (“Debentures”), 1,500,000 Series A Common Stock Purchase Warrants (“A
Warrants”) and 750,000 Series B Common Stock Purchase Warrants (“B Warrants”).
The closing occurred on January 5, 2007.
The
Debentures mature on June 29, 2008. The Debentures are convertible at the option
of the holder into the Company’s common stock at the rate of $1.00 per hare. The
Debentures are convertible at the option of the Company into the Company’s
common stock if the closing bid price of the Company’s common stock is above
$2.50 per share for ten (10) consecutive trading days and if the shares
underlying the Debentures are registered. The Company may redeem the Debentures
for 125% of the principal amount of the Debenture together with all accrued
and
unpaid interest provided that (i) an event of default has not occurred, (ii)
the
price of the Company’s common stock exceeds $1.50 and (ii) an effective
registration statement covering the shares underlying the Debentures exists.
As
of December 31, 2007 a principal amount of $600,000 of these Debentures were
converted into our common stock. The principal amount due under these Debentures
as of December 31, 2007 was $900,000.
Each
A
Warrant entitles the holder to purchase one share of the Company’s common stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on the fifth anniversary of the issuance
date.
Each B Warrant entitles the holder to purchase one share of the Company’s common
stock at an exercise price of $.10 per share at any time after July 1, 2007
and
expiring at the close of business on the fifth anniversary of the initial
issuance date. Notwithstanding the foregoing if the Company provides the holder
of a B Warrant with validation and acknowledgement on or before June 30, 2007
that the Company has both received and booked revenues for its products totaling
$1,000,000, the B Warrants shall automatically terminate. The Company was unable
to provide the holders with the validation and therefore the B Warrants were
not
terminated. Both the A and B Warrants contain provisions that protect the holder
against dilution by adjustment of the exercise price in certain events
including, but not limited to, stock dividends, stock splits, reclassifications,
or mergers. In December 2007, the Company lowered the exercise price of the
A
Warrants to $.30.
Pursuant
to the Selling Agent Letter Agreement between the Company and First Montauk
Securities Corporation (“Selling Agent”), the Selling Agent was paid a cash fee
of $150,000 (10% of the aggregate purchase price of the Units sold to the
subscribers). The Company also issued the Selling Agent a warrant to purchase
150,000 shares of its common stock on the same terms as the A
Warrants.
As
part
of the Private Placement, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with each subscriber who
purchased Units in the Private Placement. Under the Registration Rights
Agreement, the Company is obligated to file a registration statement (the
“Registration Statement”) on Form SB-2, relating to the resale by the holders of
the Common Stock underlying the Debentures, Warrants and Selling Agent
Warrant.
As
a
condition to closing, the Company obtained consents and waivers from the
investors of its private placement of $1,600,000 principal amount of Convertible
Notes (“Notes”) issued on June 29, 2006, pursuant to which each of the prior
investors agreed to waive any and all existing defaults relating to the Notes
and agreed to forebear from exercising any rights accruing upon default until
March 31, 2007. In connection therewith, the Company issued to the investors
Convertible Notes (“Forebearance Notes”) in the aggregate principal amount of
$387,437.39, representing liquidated damages due under the Notes. The
Forebearance Notes are convertible into the Company’s common stock at $1.00 per
share.
During
2007, the Company received an aggregate of $231,250 from the exercise of an
aggregate of 1,162,500 warrants. All but 25,000 of these warrants were issued
in
connection with the two private placements discussed above. Of these warrants
25,000 were exercised at $1.00 per share, 825,000 were B Warrants exercisable
at
$.10 per share and 337,500 were A Warrants with a reduced exercise price of
$.30
per share.
On
February 7, 2007, the Company deposited $200,000 into an escrow account with
its
counsel. The funds were utilized in connection with the manufacture of the
Company’s garage door openers. As of December 31, 2007, all monies were expended
from this fund.
On
February 14, 2007 the Company issued 25,000 restricted shares of its common
stock to Dorothy Christofides upon conversion of a promissory note in the
principal amount of $30,000. As additional consideration for Ms. Christofides
converting her promissory note, the Company issued her 20,000 common stock
purchase warrants exercisable for a period of five years at $2.00 per
share.
On
November 16th, 2007, the Company escrowed 500,000 shares of its stock as
collateral for extending the maturity of loans given by Joseph Panico and Jane
Petri to the Company.
bioMETRX
is dependent on raising additional funding necessary to implement its business
plan. bioMETRX’ auditors have issued a “going concern” opinion on the financial
statement for the year ended December 31, 2007, indicating bioMETRX is in the
development stage of operations, has a working capital and net equity
deficiency. These factors raise substantial doubt in bioMETRX’ ability to
continue as a going concern. If bioMETRX is unable to raise the funds necessary
to complete the development of its products and fund its operations, it is
unlikely that bioMETRX will remain as a viable going concern.
Critical
Accounting Policies and Estimates:
Our
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires us to make significant estimates and judgments
that affect the reported amounts of assets, liabilities, revenues, expenses
and
related disclosure of contingent assets and liabilities. We evaluate our
estimates, including those related to contingencies, on an ongoing basis. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of
which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may
differ from these estimates under different assumptions or
conditions.
We
believe the following critical accounting policy, among others; involve the
more
significant judgments and estimates used in the preparation of our consolidated
financial statements:
The
Company accounts for compensation costs associated with stock options and
warrants issued to non-employees using the fair-value based method prescribed
by
Financial Accounting Standard No. 123 - Accounting for Stock-Based Compensation.
The Company uses the Black-Scholes options-pricing model to determine the fair
value of these instruments as well as to determine the values of options granted
to certain lenders by the principal stockholder. The following estimates are
used for grants in 2007: Expected future volatility over the expected lives
of
these instruments is estimated to mirror historical experience, measured by
a
weighted average of closing share prices prior to each measurement date.
Expected lives are estimated based on management’s judgment of the time period
by which these instruments will be exercised.
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement No. 123R (“SFAS 123R) “Share Based Payment, “a revision of statement
No. 123, “Accounting for Stock Based Compensation.” This standard requires the
Company to measure the cost of employee services received in exchange for equity
awards based on grant date fair value of the awards. The Company adopted SFAS
123R effective January 1, 2006. The standard provides for a prospective
application. Under this method, the Company will begin recognizing compensation
cost for equity based compensation of or all new or modified grants after the
date of adoption.
Information
Relating To Forward-Looking Statements
When
used
in this Report on Form 10-QSB, the words “may,” “will,” “expect,” “anticipate,”
“continue,” “estimate,” “intend,” “plans”, and similar expressions are intended
to identify forward-looking statements within the meaning of Section 27A of
the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
regarding events, conditions and financial trends which may affect the Company’s
future plans of operations, business strategy, operating results and financial
position. Such statements are not guarantees of future performance and are
subject to risks and uncertainties and actual results may differ materially
from
those included within the forward-looking statements as a result of various
factors. Such factors include, among others: (i) the Company’s ability to obtain
additional sources of capital to fund continuing operations; in the event it
is
unable to timely generate revenues (ii) the Company’s ability to retain existing
or obtain additional licensees who will act as distributors of its products;
(iii) the Company’s ability to obtain additional patent protection for its
technology; and (iv) other economic, competitive and governmental factors
affecting the Company’s operations, market, products and services. Additional
factors are described in the Company’s other public reports and filings with the
Securities and Exchange Commission. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
made. The Company undertakes no obligation to publicly release the result of
any
revision of these forward-looking statements to reflect events or circumstances
after the date they are made or to reflect the occurrence of unanticipated
events.
Recent
Accounting Pronouncements
In
June
2006, the FASB issued “Accounting for Uncertain Tax Positions - an
Interpretation of FASB Statement No. 109”, (“FIN No. 48”), which prescribes a
recognition and measurement model for uncertain tax positions taken or expected
to be taken in the Company's tax returns. FIN No. 48 provides guidance on
recognition, classification, presentation, and disclosure of unrecognized tax
benefits. Fin No. 48 is effective for fiscal years beginning after December
15,
2006, The adoption of this statement have no material impact on the Company's
financial position, results of operations or cash flows. In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
defines fair value, establishes a framework for measuring fair value, and
expands fair value disclosures. The standard does not require any new fair
value
measurements. This standard is effective for fiscal years beginning after
November 15, 2007. The adoption of this new standard is not expected to have
a
material effect on the Company's financial position, results of operations
or
cash flows.
In
December 2006, the FASB issued FSP EITF 00-19-2, “Accounting for Registration
Payment Arrangements” ("FSP 00-19-2"), which addresses accounting for
registration payment arrangements. FSP 00-19-2 specifies that the contingent
obligation to make future payments or otherwise transfer consideration under
a
registration payment arrangement, whether issued as a separate agreement or
included as a provision of a financial instrument or other agreement, should
be
separately recognized and measured in accordance with SFAS No. 5, “Accounting
for Contingencies”. FSP 00-19-2 further clarifies that a financial instrument
subject to a registration payment arrangement should be accounted for in
accordance with other applicable generally accepted accounting principles
without regard to the contingent obligation to transfer consideration pursuant
to the registration payment arrangement. For registration payment arrangements
and financial instruments subject to those arrangements that were entered into
prior to the issuance of EITF 00-19-2, this guidance shall be effective for
financial statements issued for fiscal years beginning after December 15, 2006
and interim periods within those fiscal years. The Company does not expect
the
adoption of this standard will have a material impact on its financial position,
results of operations or cash flows.
In
February, 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115" ("SFAS No. 159"). This statement permits entities to choose
to measure many financial instruments and certain other items at fair value.
The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex
hedge
accounting provisions. This Statement is expected to expand the use of fair
value measurement, which is consistent with the Board's long-term measurement
objectives for accounting for financial instruments. This statement is effective
as of the beginning of an entity's first fiscal year that begins after November
15, 2007, although earlier adoption is permitted. Management has not determined
the effect the adoption of this standard will have on the Company's financial
position, results of operations or cash flows.
In
June 2007, the Accounting Standards Executive Committee issued Statement of
Position 07-1, “Clarification of the Scope of the Audit and Accounting Guide
Investment Companies and Accounting by Parent Companies and Equity Method
Investors for Investments in Investment Companies” (“SOP 07-1”). SOP 07-1
provides guidance for determining whether an entity is within the scope of
the
AICPA Audit and Accounting Guide Investment Companies (the “Audit Guide”). SOP
07-1 was originally determined to be effective for fiscal years beginning on
or
after December 15, 2007, however, on February 6, 2008, FASB issued a
final Staff Position indefinitely deferring the effective date and prohibiting
early adoption of SOP 07-1 while addressing implementation issues.
In
June
2007, the FASB ratified the consensus in EITF Issue No. 07-3,“Accounting
for Nonrefundable Advance Payments for Goods or Services to be Used in Future
Research and Development Activities”
(EITF 07-3), which requires that nonrefundable advance payments for goods
or services that will be used or rendered for future research and development
(R&D) activities be deferred and amortized over the period that the goods
are delivered or the related services are performed, subject to an assessment
of
recoverability. EITF 07-3 will be effective for fiscal years beginning
after December 15, 2007. The Company does not expect that the adoption of
EITF 07-3 will have a material impact on its financial position, results of
operations or cash flows.
In
December 2007, the FASB issued SFAS No. 141(R),"Business Combinations"
("SFAS No. 141(R)"), which establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in
an
acquiree, including the recognition and measurement of goodwill acquired in
a
business combination. SFAS No. 141(R) is effective as of the beginning of the
first fiscal year beginning on or after December 15, 2008. Earlier adoption
is prohibited and the Company is currently evaluating the effect, if any, that
the adoption will have on its financial position, results of operations or
cash
flows.
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interest
in Consolidated Financial Statements, an amendment of ARB No. 51" ("SFAS
No. 160"), which will change the accounting and reporting for minority
interests, which will be recharacterized as noncontrolling interests and
classified as a component of equity within the consolidated balance sheets.
SFAS
No. 160 is effective as of the beginning of the first fiscal year beginning
on
or after December 15, 2008. Earlier adoption is prohibited and the Company
is currently evaluating the effect, if any, that the adoption will have on
its
financial position, results of operations or cash flows.
Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Company’s present or future
consolidated financial statements.
COMMITMENTS
We
do not
have any commitments that are required to be disclosed in tabular form as of
December 31, 2006 and as of December 31, 2007.
OFF
BALANCE SHEET ARRANGEMENTS
We
do not
have any off balance sheet arrangements.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Board
of Directors and Stockholders
bioMetrx,
Inc. and Subsidiaries
We
have
audited the accompanying consolidated balance sheet of bioMetrx, Inc. and
Subsidiaries (“the Company”) as of December 31, 2007, and the related
consolidated statements of operations, changes in stockholders’ deficit and cash
flows for each of the two years in the period ended December 31, 2007. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these 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 audit to obtain reasonable assurance about whether the 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 audit 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. Accordingly, we express no such opinion. Also, an audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. 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 bioMetrx,
Inc.
and Subsidiaries as of December 31, 2007 and the results of their operations
and
their cash flows for each of the two years in the period ended December 31,
2007
in conformity with accounting principles generally accepted in the United
States
of America.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company's operations have generated
recurring losses and cash flow deficiencies for the years ended December
31,
2007 and 2006. In addition, as of December 31, 2007 the Company has a
significant working capital deficit and stockholders’ deficit. These factors
raise substantial doubt about the Company’s ability to continue as a going
concern. Management’s plans in regard to these matters are described in Note 2.
The consolidated financial statements do not include any adjustments that
might
result from the outcome of this uncertainty.
WOLINETZ,
LAFAZAN & COMPANY, P.C.
Rockville
Centre, New York
April
8,
2008
ITEM
7.
FINANCIAL STATEMENTS .
BIOMETRX,
INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEET
|
December
31, 2007
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash
|
|
$
|
108,756
|
|
Accounts
Receivable
|
|
|
183,920
|
|
Stock
Subscriptions Receivable
|
|
|
225,000
|
|
Prepaid
Expenses
|
|
|
61,034
|
|
Inventories
|
|
|
286,123
|
|
Total
Current Assets
|
|
|
864,833
|
|
|
|
|
|
|
Property
and Equipment, net
|
|
|
92,170
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
Deferred
Finance Costs, net
|
|
|
53,192
|
|
Security
Deposit
|
|
|
17,045
|
|
Patents
|
|
|
869,530
|
|
Total
Other Assets
|
|
|
939,767
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
1,896,770
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts
Payable
|
|
$
|
1,052,541
|
|
8%
Convertible Notes, net of unamortized discounts of
$695,956
|
|
|
997,544
|
|
Convertible
Forbearance Notes, net of unamortized discounts of
$129,146
|
|
|
258,292
|
|
Notes
Payable - Related Parties
|
|
|
410,000
|
|
Notes
Payable - Other
|
|
|
1,004,088
|
|
Patent
Payable
|
|
|
100,000
|
|
Accrued
Taxes Payable
|
|
|
299,405
|
|
Accrued
Salaries
|
|
|
21,304
|
|
Accrued
Interest
|
|
|
213,032
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
4,356,206
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
4,356,206
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
Stockholders'
Deficit:
|
|
|
|
|
Preferred
Stock, $.01 par value; 100,000,000 shares
authorized;
|
|
|
|
|
no
shares issued and outstanding
|
|
|
-
|
|
Common
Stock, $.001 par value; 25,000,000 shares
authorized;
|
|
|
|
|
16,098,791
shares issued and outstanding
|
|
|
16,599
|
|
Common
Stock Subscribed; 750,000 shares
|
|
|
750
|
|
Shares
held in Escrow; 500,000 shares
|
|
|
(400,000
|
)
|
Additional
Paid-In-Capital
|
|
|
33,881,513
|
|
Deferred
Finance Costs
|
|
|
(233,814
|
)
|
Accumulated
Deficit
|
|
|
(35,724,484
|
)
|
|
|
|
|
|
Total
Stockholders' Deficit
|
|
|
(2,459,436
|
)
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
1,896,770
|
|
The
accompanying notes are an integral part of these financial
statements.
BIOMETRX,
INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
|
For
The Year
|
|
For
The Year
|
|
|
|
Ended
|
|
Ended
|
|
|
|
December
31, 2007
|
|
December
31, 2006
|
|
Revenues
- net
|
|
$
|
1,476,370
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
1,926,966
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Gross
Profit (Deficit)
|
|
|
(450,596
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
Expenses
|
|
|
223,072
|
|
|
94,638
|
|
General
and Administrative Expenses
|
|
|
4,058,299
|
|
|
11,759,553
|
|
Research
and Development Expenses
|
|
|
275,222
|
|
|
658,879
|
|
Total
Expenses
|
|
|
4,556,593
|
|
|
12,513,070
|
|
|
|
|
|
|
|
|
|
Loss
before Other Income (Expense)
|
|
|
(5,007,189
|
)
|
|
(12,513,070
|
)
|
|
|
|
|
|
|
|
|
Other
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of Common Stock and Options Cancelled
|
|
|
|
|
|
2,600,000
|
|
Interest
Income
|
|
|
3,271
|
|
|
-
|
|
Interest
Expense and Finance Costs
|
|
|
(6,123,036
|
)
|
|
(923,687
|
)
|
Unrealized
Loss on Marketable Securities
|
|
|
-
|
|
|
(461
|
)
|
Total
Other Income (Expense)
|
|
|
(6,119,765
|
)
|
|
1,675,852
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
(11,126,954
|
)
|
|
(10,837,218
|
)
|
|
|
|
|
|
|
|
|
Preferred
Stock Dividend
|
|
|
-
|
|
|
(8,975
|
)
|
|
|
|
|
|
|
|
|
Net
Loss Allocated to Common Shareholders
|
|
$
|
(11,126,954
|
)
|
$
|
(10,846,193
|
)
|
|
|
|
|
|
|
|
|
Weighted
Average Common Shares - Outstanding - Basic
|
|
|
11,636,142
|
|
|
7,605,851
|
|
|
|
|
|
|
|
|
|
Net
Loss per Common Share (Basic)
|
|
$
|
(0.96
|
)
|
$
|
(1.43
|
)
|
The
accompanying notes are an integral part of these financial
statements.
BIOMETRX,
INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
|
FOR
THE PERIOD JANUARY 1, 2006 TO DECEMBER 31,
2007
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Common
Shares Held in Escrow
|
|
Common
Stock Subscribed
|
|
Additional
Paid
In Capital
|
|
Prepaid
Interest
|
|
Deferred
Compensation
|
|
Deferred
Finance Costs
|
|
Accumulated
Deficit
|
|
Total
|
|
BALANCE,
JANUARY 1, 2006
|
|
|
5,947,914
|
|
$
|
5,948
|
|
|
|
|
|
|
|
$
|
13,308,776
|
|
$
|
(86,400
|
)
|
$
|
(194,514
|
)
|
$
|
-
|
|
$
|
(13,751,338
|
)
|
$
|
(717,528
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCK
ISSUED FOR CASHLESS EXERCISES
|
|
|
179,578
|
|
|
180
|
|
|
|
|
|
|
|
|
(180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock pursuant to the 2005 Equity Incentive Plan -
Related
Parties.
|
|
|
44,250
|
|
|
44
|
|
|
|
|
|
|
|
|
128,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued exercise of stock warrants - Related
Party
|
|
|
281,250
|
|
|
281
|
|
|
|
|
|
|
|
|
224,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of return of Shares of Common Stock and cancellation of Common
Stock
Options pursuant to a Termination Agreement - Related
Party.
|
|
|
(62,500
|
)
|
|
(63
|
)
|
|
|
|
|
|
|
|
(2,359,342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,359,405
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock for Cash Related Party
|
|
|
183,750
|
|
|
184
|
|
|
|
|
|
|
|
|
146,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock
|
|
|
2,827
|
|
|
2
|
|
|
|
|
|
|
|
|
9,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock Purchase Options for Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued for Services Related Party
|
|
|
500,000
|
|
|
500
|
|
|
|
|
|
|
|
|
1,079,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,080,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued in connection with financing Notes
Payable
|
|
|
527,000
|
|
|
527
|
|
|
|
|
|
|
|
|
888,323
|
|
|
|
|
|
|
|
|
(888,850
|
)
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued for Services
|
|
|
490,000
|
|
|
490
|
|
|
|
|
|
|
|
|
1,364,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,364,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions
paid on sales of common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions
accrued on sale of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(431,706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(431,706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued as commissions on
sales of common stock
|
|
|
164,637
|
|
|
165
|
|
|
|
|
|
|
|
|
656,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
656,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock purchase options - Related Party
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,788,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,788,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Penalty
shares issued to Related Party in connection
with
non-registration
|
|
|
300,000
|
|
|
300
|
|
|
|
|
|
|
|
|
673,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
674,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of Escrow shares issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued in Settlement of Threatened
Litigation
|
|
|
125,000
|
|
|
125
|
|
|
|
|
|
|
|
|
368,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
368,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued as consideration for Accrued
Salaries
|
|
|
54,201
|
|
|
54
|
|
|
|
|
|
|
|
|
108,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued as Prepaid Interest on 8% Convertible
Notes
|
|
|
128,000
|
|
|
128
|
|
|
|
|
|
|
|
|
172,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finder's
Fees paid on sale of Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(147,500
|
)
|
|
|
|
|
|
|
|
(28,500
|
)
|
|
|
|
|
(176,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued as Finder's Fees on the sale of Preferred
Stock
|
|
|
50,000
|
|
|
50
|
|
|
|
|
|
|
|
|
64,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock purchase warrants issued as payment of placement
fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
182,716
|
|
|
|
|
|
|
|
|
(182,716
|
)
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
Conversion Feature of common stock purchase warrants issued relative
to 8%
Convertible Notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,217,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,217,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
Conversion Feature of Forbearance Notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
387,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
387,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Preferred Stock in conjunction with a Private
Placement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
643,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
643,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of Preferred Stock to 8% Convertible Notes in conjunction with
an Exchange
Agreement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(643,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(643,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Dividend accrued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,975
|
|
|
|
|
|
|
|
|
|
|
|
(8,975
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock purchase options for services - Related
Party
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
978,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
978,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock purchase options related to deferred financing
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
377,526
|
|
|
|
|
|
|
|
|
(377,526
|
)
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Costs Related to Issuance of 8% Convertible Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(107,500
|
)
|
|
|
|
|
(107,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of deferred compensation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
194,514
|
|
|
|
|
|
|
|
|
194,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of deferred finance costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
495,233
|
|
|
|
|
|
495,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
PERIOD LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,837,218
|
)
|
|
(10,837,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2006
|
|
|
8,915,907
|
|
|
8,916
|
|
|
|
|
|
|
|
$
|
24,355,224
|
|
$
|
(86,400
|
)
|
$
|
-
|
|
$
|
(1,089,859
|
)
|
$
|
(24,597,531
|
)
|
$
|
(1,409,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCK
ISSUED FOR SERVICES
|
|
|
781,750
|
|
|
782
|
|
|
|
|
|
|
|
|
998,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
999,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCK
ISSUED FOR PURCHASES OF ASSETS
|
|
|
300,000
|
|
|
300
|
|
|
|
|
|
|
|
|
664,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
664,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCK
ISSUED FOR STOCK BASED COMPENSATION
|
|
|
598,500
|
|
|
599
|
|
|
|
|
|
|
|
|
880,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
881,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCK
ISSUED FOR CASHLESS EXERCISES
|
|
|
1,162,521
|
|
|
1,163
|
|
|
|
|
|
|
|
|
(1,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCK
ISSUED FOR PAYMENT OF NOTES PAYABLE, ACCRUED INTEREST, AND RELATED
INTEREST
|
|
|
1,536,991
|
|
|
1,536
|
|
|
|
|
|
|
|
|
1,537,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,538,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCK
ISSUED FOR PAYMENT OF ACCOUNTS PAYABLE AND ACCRUED
EXPENSES
|
|
|
97,622
|
|
|
98
|
|
|
|
|
|
|
|
|
92,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCK
ISSUED FOR DEFERRED FINANCE COSTS
|
|
|
585,000
|
|
|
585
|
|
|
|
|
|
|
|
|
813,165
|
|
|
|
|
|
|
|
|
(813,750
|
)
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCK
ISSUED FOR INTEREST EXPENSE
|
|
|
150,000
|
|
|
150
|
|
|
|
|
|
|
|
|
149,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROCEEDS
FROM ISSUANCE OF STOCK
|
|
|
2,070,500
|
|
|
2,071
|
|
|
|
|
|
|
|
|
454,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
456,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON
STOCK ISSUED TO PAY DEBT ISSUED FOR PATENTS
|
|
|
100,000
|
|
|
100
|
|
|
|
|
|
|
|
|
79,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON
SHARES HELD IN ESCROW
|
|
|
500,000
|
|
|
500
|
|
|
(400,000
|
)
|
|
|
|
|
399,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVERSAL
OF PENALTY SHARES
|
|
|
(200,000
|
)
|
|
(200
|
)
|
|
|
|
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WARRANTS
ISSUED FOR PAYMENT OF INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WARRANTS
ISSUED FOR DEFERRED FINANCE COSTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,062,400
|
|
|
|
|
|
|
|
|
(835,575
|
)
|
|
|
|
|
226,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WARRANTS
ISSUED FOR DEFERRED COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,800
|
|
|
|
|
|
(81,800
|
)
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADDITIONAL
FINANCES COSTS RELATED TO RE-PRICING OF WARRANTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
385,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
385,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions
paid on Equity Raises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WARRANTS
ISSUED FOR SERVICES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
230,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
230,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON
STOCK SUBSCRIBED
|
|
|
|
|
|
|
|
|
|
|
|
750
|
|
|
224,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
Conversion Feature of Common Stock Purchase warrants issued relative
to 8%
Convertible Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of Prepaid interest, Deferred Compensation, and Deferred Finance
Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,400
|
|
|
81,800
|
|
|
2,505,370
|
|
|
|
|
|
2,673,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss for the Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,126,954
|
)
|
|
(11,126,954
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2007
|
|
|
16,598,791
|
|
$
|
16,599
|
|
$
|
(400,000
|
)
|
$
|
750
|
|
$
|
33,881,513
|
|
$
|
-
|
|
$
|
-
|
|
$
|
(233,814
|
)
|
$
|
(35,724,485
|
)
|
$
|
(2,459,436
|
)
|
The
accompanying notes are an integral part of these financial
statements.
BIOMETRX
INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH
FLOWS
|
|
|
FOR
THE YEAR ENDED
DECEMBER
31, 2007
|
|
FOR
THE YEAR ENDED
DECEMBER
31, 2006
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
Net
Loss
|
|
$
|
(11,126,954
|
)
|
$
|
(10,837,218
|
)
|
Adjustment
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
Non-Cash
Item adjustments:
|
|
|
|
|
|
|
|
Compensatory
Element of Stock and Warrant Issuances
|
|
|
3,179,917
|
|
|
7,573,591
|
|
Liquidated
Damages paid by Issuance of Forbearance Notes
|
|
|
-
|
|
|
387,437
|
|
Amortization
of Deferred Finance Costs
|
|
|
4,590,142
|
|
|
694,436
|
|
Depreciation
|
|
|
64,480
|
|
|
3,999
|
|
Unrealized
Loss on Marketable Securities
|
|
|
-
|
|
|
461
|
|
|
|
|
|
|
|
|
|
Change
in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)
in Accounts Receivable
|
|
|
(183,920
|
)
|
|
-
|
|
Decrease
in Prepaid Expenses
|
|
|
64,030
|
|
|
41,989
|
|
(Increase)
Decrease in Inventories
|
|
|
137,730
|
|
|
(423,853
|
)
|
(Increase)
Decrease in Deposits on Inventory
|
|
|
57,197
|
|
|
(57,197
|
)
|
(Increase)
in Security Deposits
|
|
|
-
|
|
|
(509
|
)
|
Increase
in Accounts Payable
|
|
|
573,557
|
|
|
285,406
|
|
Increase
in Accrued Liabilities
|
|
|
528,040
|
|
|
52,759
|
|
(Decrease)
in Accrued Settlement of Threatened Litigation
|
|
|
-
|
|
|
(368,750
|
)
|
(Decrease)
in Accrued Salaries
|
|
|
(5,416
|
)
|
|
-
|
|
Net
Cash Used in Operating Activities
|
|
|
(2,121,197
|
)
|
|
(2,647,449
|
)
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
|
|
(64,836
|
)
|
|
(95,813
|
)
|
Purchases
of Patents
|
|
|
(25,530
|
)
|
|
-
|
|
Payment
of Deferred Finance Costs
|
|
|
(12,500
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Investing Activities
|
|
|
(102,866
|
)
|
|
(95,813
|
)
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
Restricted
Cash
|
|
|
-
|
|
|
66,427
|
|
Proceeds
of Loans
|
|
|
1,312,033
|
|
|
-
|
|
Proceeds
from Related Party notes
|
|
|
440,000
|
|
|
|
|
Proceeds
from Issuance of 8% Convertible Notes
|
|
|
1,500,000
|
|
|
950,000
|
|
Proceeds
from Issuance of Notes Payable
|
|
|
175,000
|
|
|
755,000
|
|
Proceeds
from Issuance of Preferred Stock
|
|
|
-
|
|
|
650,000
|
|
Repayment
of Related Party Loans
|
|
|
(30,000
|
)
|
|
-
|
|
Repayments
of Loans
|
|
|
(1,107,945
|
)
|
|
|
|
Advances
to Employee
|
|
|
-
|
|
|
3,000
|
|
Repayments
of Notes Payable
|
|
|
(130,000
|
)
|
|
-
|
|
Deferred
Finance Costs
|
|
|
(242,500
|
)
|
|
(155,000
|
)
|
Proceeds
from Issuances of Common Stock
|
|
|
456,150
|
|
|
342,000
|
|
Commissions
Paid on Sales of Common Stock
|
|
|
(55,000
|
)
|
|
(37,200
|
)
|
Net
Cash Provided by Financing Activities
|
|
|
2,317,738
|
|
|
2,574,227
|
|
|
|
|
|
|
|
|
|
Net
Increase (Decrease) in Cash
|
|
|
93,675
|
|
|
(169,035
|
)
|
|
|
|
|
|
|
|
|
Cash,
Beginning
|
|
|
15,081
|
|
|
184,116
|
|
|
|
|
|
|
|
|
|
Cash,
Ending
|
|
$
|
108,756
|
|
$
|
15,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash Flow Information:
|
|
|
|
|
|
|
|
Cash
Paid During the Period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
16,300
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Income
Taxes
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
Cash Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
Issued for Patents
|
|
$
|
200,000
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued to pay Debt Issued for Patents
|
|
$
|
75,000
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Warrants
Issued for Deferred Finance Costs
|
|
$
|
774,175
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Warrants
Issued for Deferred Compensation
|
|
$
|
81,800
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Stock
Subscribed
|
|
$
|
225,000
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued as Commissions on
|
|
|
|
|
|
|
|
Sale
of Common Stock
|
|
$
|
-
|
|
$
|
431,706
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued for Interest Expense
|
|
$
|
174,374
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock as Payment of Accrued
|
|
|
|
|
|
|
|
Officers'
Salaries
|
|
$
|
-
|
|
$
|
310,000
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock - Deferred Finance Costs
|
|
$
|
813,750
|
|
$
|
2,248,354
|
|
|
|
|
|
|
|
|
|
Application
of Loans Receivable - Officer Against
|
|
|
|
|
|
|
|
Accrued
Compensation
|
|
$
|
-
|
|
$
|
201,598
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued (Cancelled) as Penalty Shares for
|
|
|
|
|
|
|
|
Non-Registration
|
|
$
|
(313,500
|
)
|
$
|
674,175
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued as Prepaid Interest
|
|
|
|
|
|
|
|
on
8% Convertible Notes
|
|
$
|
-
|
|
$
|
172,800
|
|
|
|
|
|
|
|
|
|
Issuance
of Convertible Forbearance Notes
|
|
|
|
|
|
|
|
in
connection with Liquidated Damages
|
|
$
|
-
|
|
$
|
387,439
|
|
|
|
|
|
|
|
|
|
Beneficial
Conversion Feature of Convertible Forbearance
Notes
|
|
|
|
|
$
|
387,439
|
|
|
|
|
|
|
|
|
|
Cashless
Exercise of Stock Options - Related Parties
|
|
$
|
1,163,000
|
|
$
|
250,000
|
|
|
|
|
|
|
|
|
|
Accrued
Deferred Finance Costs
|
|
$
|
-
|
|
$
|
67,948
|
|
|
|
|
|
|
|
|
|
Preferred
Stock Dividend
|
|
$
|
-
|
|
$
|
8,975
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued as Payment of Accounts Payable
|
|
$
|
114,554.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued for payment of Accrued Interest
|
|
$
|
20,222
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Accrued
Interest Payable funded with new Notes Payable
|
|
$
|
55,000
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued to pay Notes Payable
|
|
$
|
55,000
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued for Conversion of Convertible Notes
Payable
|
|
$
|
1,792,898
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock as Payment of Accrued
|
|
|
|
|
|
|
|
Settlement
of Threatened Litigation
|
|
|
|
|
$
|
368,750
|
|
The
accompanying notes are an integral part of these financial
statements.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
1. Description of Business and Nature of Operations
Description
of Business
The
Company was incorporated with the name “M2 Extreme Sports Centers, Inc” in the
State of Delaware on February 1, 2001. On November 8, 2001 the Company’s
Certificate of Incorporation was amended to change the Company’s name to
“Biostat Technologies S.P.A., Inc”.
On
April
1, 2002 the Company’s certificate of Incorporation was amended to:
|
1.
|
Change
the Company’s name to bioMETRX Technologies, Inc.
|
|
|
|
|
2.
|
Increase
the total number of shares that the corporation is authorized to
issue to
10,000,000 common shares, each with a par value of
$0.01.
|
|
|
|
|
3.
|
Authorize
a 4000 to 1 split of the then outstanding common
shares.
|
In
December 2004, the Board of Directors authorized an increase of the Company’s
common stock from 10,000,000 to 20,000,000 shares, each having a par value
of
$0.001.
On
May
27, 2005, we completed the merger (“Merger”) of Marketshare Merger Sub, Inc.,
(“Merger Sub”) a wholly owned subsidiary of Marketshare Recovery, Inc.
(“Marketshare”) with bioMETRX Technologies, Inc. a Delaware corporation
(“bioMETRX Technologies”) pursuant to the Agreement and Plan of Merger dated
April 27, 2005, by and among the Company, Merger Sub and bioMETRX Technologies
(“Merger Agreement”). bioMETRX Technologies is a development stage company that
is engaged in the development of biometrics-based products for the home security
and electronics market, including biometrically enabled residential door
locks,
central station alarm keypads, thermostats and garage/gate openers.
On
June
1, 2005 bioMETRX Technologies merged with and into Merger Sub. The merger
was
treated as a reorganization of bioMETRX Technologies (reverse merger) for
accounting purposes pursuant to which bioMETRX Technologies is treated as
the
continuing entity although Marketshare is the legal acquirer. The aggregate
amount of shares of Marketshare common stock issued to the shareholders of
bioMETRX Technologies pursuant to the merger represented approximately 90%
of
Marketshare’s issued and outstanding common stock after the merger and related
cancellation of outstanding shares by certain former insiders.
The
merger was accounted for as a reverse merger, which is effectively a
recapitalization of the target company (bioMETRX Technologies) and the
consolidated financial statements presented are those of bioMETRX
Technologies.
On
September 30, 2005 the Company formed two subsidiary companies, smartTOUCH
Medical, Inc and smartTOUCH Security, Inc. The two subsidiaries were
incorporated in the State of Delaware. smartTOUCH Security, Inc tests and
markets the Company’s biometrically secured garage door openers, thermostats,
deadbolts and home alarm keypads. smartTOUCH Medical, Inc designs, tests
and
markets biometrically secured medical crash carts, rolling medicine carts,
portable patient medical information devices and, security and retrieval
systems
for electronic medical records.
On
October 10, 2005 Marketshare changed its name to bioMETRX, Inc. bioMETRX,
Inc.
and its subsidiaries are hereinafter referred to as “the Company”.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
1. Description of Business and Nature of Operations
(Continued)
Nature
of Operations
The
Company is focused on developing simple-to-use, cost-efficient finger print
activation products under the trade name SmartTOUCH Ô
. The
Company’s engineers and manufactures biometrically enabled security products.
These products utilize fingerprint recognition technology designed to augment
or
replace conventional security methods such as keys, keypads, and PIN
numbers.
The
Company operates its business through three (3) wholly owned subsidiaries,
bioMETRX Technologies Inc., which conducts the product engineering and design,
smartTOUCH Consumer Products, Inc., the consumer-based marketing and sales
group
and smartTOUCH Medical, Inc. which will market medical information and products.
The Company’s executive offices are located in Jericho, New York.
Note
2 - Basis of Presentation
The
Company has incurred net losses of $11,126,954 and $10,837,218 during the
years
ended December 31, 2007 and 2006 respectively. In addition, the Company has
a
working capital deficiency of $3,491,373 and a stockholders’ deficiency of
$2,459,436 at December 31, 2007. These factors raises substantial doubt about
the Company’s ability to continue as a going concern.
There
can
be no assurance that sufficient funds required during the next year or
thereafter will be generated from operations or that funds will be available
from external sources such as debt or equity financings or other potential
sources. The lack of additional capital resulting from the Company’s inability
to generate cash flow or to raise capital from external sources would force
it
to substantially curtail or cease operations and would, therefore, have a
material adverse effect of its business. Furthermore, there can be no assurance
that any such required funds, if available, will be available on attractive
terms or that they will have a significant dilutive effect on the Company’s
existing stockholders. The company plans to address its lack of liquidity
by
raising additional funds, either in the form of debt or equity, or some
combination there. There can be no assurances that the Company will be able
to
raise the additional funds it requires.
The
accompanying consolidated financial statements do not include any adjustments
related to the recoverability or classification of asset-carrying amounts
or the
amounts and classification of liabilities that may result should the Company
be
unable to continue as a going concern.
The
Company has exited the development stage during 2007 since principal operations
have commenced.
Note
3 -
Summary
of Significant Accounting Policies
Principles
of Consolidation
The
consolidated financial statements include the accounts of bioMETRX, Inc and
all
of its wholly-owned subsidiaries. Such subsidiaries are bioMETRX Technologies,
Inc., smartTOUCH Medical Inc. and smartTOUCH Consumer Products, Inc. All
significant inter-company accounts and transactions have been eliminated
in
consolidation.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
3 -
Summary
of Significant Accounting Policies (Continued)
Revenue
Recognition
For
revenue from product sales, the Company will recognize revenue in accordance
with Staff Accounting Bulletin No. 104, “Revenue Recognition” (SAB No. 104”),
which superseded Staff Accounting Bulletin No. 101, “Revenue Recognition in
Financial Statements” (SAB No. 101”). SAB No. 104 requires that four basic
criteria must be met before revenue can be recognized: (1) persuasive evidence
of an arrangement exists; (2) delivery has occurred; (3) the selling price
is
fixed and determinable; and (4) collectibility is reasonably assured.
Determination of criteria (3) and (4) are based on management’s judgment
regarding the fixed nature of the selling prices of the products delivered
and
the collectibility of those amounts. Provisions for discounts and rebates
to
customers, estimated returns and allowances, and other adjustments will be
provided for in the same period and related sales are recorded.
Cash
and Cash Equivalents
The
Company considers all liquid investments with an original maturity of three
months or less at the date of purchase to be cash equivalents.
Inventories
Inventories
are stated at the lower of cost (first-in, first-out method) or market.
Inventories at December 31, 2007 consist of finished goods and raw
materials.
Debt
Issuance Costs
Debt
issuance costs are amortized over the lives of the related debt.
Property
and equipment
Property
and equipment consist of office equipment and is stated at cost less accumulated
depreciation and amortization. Depreciation and amortization is determined
by
using the straight-line method over the estimated useful lives of the related
assets, generally five to seven years.
Stock
Based Compensation
The
Company follows the provisions of Statement of Financial Accounting Standards
No. 123R, Share-Based Payment (SFAS 123R), which revised SFAS 123, Accounting
for Stock-Based Compensation and supersedes Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees (APB 25). SFAS 123R requires
that new, modified and unvested share-based payment transactions with employees,
such as stock options and restricted stock, be recognized in the financial
statements based on their fair value and recognized as compensation expense
over
the requisite service period. The Company adopted SFAS 123R effective January
1,
2006.
Prior
to
the adoptions of SFAS 123(R), stock-based compensation expense related to
employee stock options was not recognized in the statement of operations
if the
exercise price was at least equal to the market value of the common stock
on the
grant date, in accordance with Accounting Principles Board Option No. 25,
“Accounting for Stock Issued to Employees.”
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
3 -
Summary
of Significant Accounting Policies (Continued)
During
2007, options were awarded to officers, employees and consultants of the
Company. The fair value of the options at the dates of grant were calculated
using the Black -Scholes fair value based method using the following assumptions
(expected life -2-5 years; interest rate - 4.00% to 5.00%; annual rate of
dividends - 0%; and volatility - 75% to 118%).
The
Black-Scholes option-pricing model was developed for use in estimating the
fair
value of traded options that have no vesting restrictions and are fully
transferable. In addition, option-pricing models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company employee stock options have characteristics significantly different
from those of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management’s
opinion the existing models may not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Fair
Value of Financial Instruments
The
carrying amounts of cash, accounts payable, accrued liabilities and other
current liabilities approximates fair value because of the immediate or short
term maturity of these financial instruments.
Advertising
and Marketing Expenses
The
costs
of advertising and marketing expenses are expensed as incurred. Advertising
and
marketing expenses for the years December 31, 2007 and 2006 were $50,451
and
$1,000, respectively
Research
and Development
Research
and development costs are expensed as incurred. Research and development
costs
amounted to $275,222 and $658,879 for the years ended December 31, 2007 and
2006, respectively.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ form those estimates.
Significant estimates relate to ultimate revenue and costs for investments
in
research and development, design engineering, property and equipment and
intangible assets. Actual results differ from those estimates.
Reclassifications
Certain
items in these consolidated financial statements have been reclassified to
conform to the current period presentation.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
3 -
Summary
of Significant Accounting Policies (Continued)
Income
Taxes
The
Company accounts for income taxes under the asset and liability method using
the
SFAS No. 109 “Accounting for Income Taxes”. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit
carry forwards. Deferred tax assets and liabilities are measured using the
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to apply to taxable income to be
recovered or settled. The effect on deferred tax assets and liabilities of
a
change in tax rates is recognized in income in the period that includes the
enactment date.
The
tax
effects of temporary differences that gave rise to the deferred tax assets
and
deferred tax liabilities at December 31, 2007 and 2006 were primarily
attributable to net operating loss carry forwards. Since the Company has
a
history of losses a full valuation allowance has been established. In addition,
utilization of net operating loss carry-forwards are subject to a substantial
annual limitation due to the “Change in Ownership” provisions of the Internal
Revenue Code. The annual limitation may result in the expiration of net
operating loss carry-forwards before utilization.
Loss
per Share
The
Company has adopted Financial Accounting Standards Board (“FASB”) Statement
Number 128, “Earnings per Share,” (“EPS”) which requires presentation of basic
and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator
and
denominator of the basic EPS computation to the numerator and denominator
of the
diluted EPS
Basic
loss per share is computed by dividing net loss by the weighted average number
of common shares outstanding during the period.
Diluted
loss per share is computed similarly to basic loss per share except that
it
includes the potential dilution that could occur if dilutive securities were
converted. Diluted loss per common share is the same as basic loss per share,
as
the effect of potentially dilutive securities convertible debt and warrants
(9,459,432 and 7,001,495, at December 31, 2007 and 2006, respectively inclusive
of all potential convertible shares warrants and options) are
anti-dilutive.
Long
Lived Assets
The
Company has adopted SFAS No. 144. “Accounting for the Impairment or Disposal of
Long-Lived Assets” (“SFAS No. 144”). SFAS No. 144 requires that long-lived
assets and certain identifiable intangibles held and used by the Company
be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Events relating
to
recoverability may include significant unfavorable changes in business
conditions, recurring losses, or a forecasted inability to achieve break-even
operating results over an extended period. The company evaluates the
recoverability of long-lived assets based upon discounted cash flows. Should
impairment in value be indicated, the carrying value of intangible assets
will
be adjusted, based on estimates of future discounted cash flows resulting
from
the use and ultimate disposition of the asset. SFAS No.144 also requires
assets
to be disposed or be reported at the lower of the carrying amount of fair
value
less costs to sell.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
3 -
Summary
of Significant Accounting Policies (Continued)
Recently
Issued Accounting Pronouncements
.
In
June
2006, the FASB issued “Accounting for Uncertain Tax Positions - an
Interpretation of FASB Statement No. 109”, (“FIN No. 48”), which prescribes a
recognition and measurement model for uncertain tax positions taken or expected
to be taken in the Company's tax returns. FIN No. 48 provides guidance on
recognition, classification, presentation, and disclosure of unrecognized
tax
benefits. Fin No. 48 is effective for fiscal years beginning after December
15,
2006, The adoption of this statement have no material impact on the Company's
financial position, results of operations or cash flows. In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
defines fair value, establishes a framework for measuring fair value, and
expands fair value disclosures. The standard does not require any new fair
value
measurements. This standard is effective for fiscal years beginning after
November 15, 2007. The adoption of this new standard is not expected to have
a
material effect on the Company's financial position, results of operations
or
cash flows.
In
December 2006, the FASB issued FSP EITF 00-19-2, “Accounting for Registration
Payment Arrangements” ("FSP 00-19-2"), which addresses accounting for
registration payment arrangements. FSP 00-19-2 specifies that the contingent
obligation to make future payments or otherwise transfer consideration under
a
registration payment arrangement, whether issued as a separate agreement
or
included as a provision of a financial instrument or other agreement, should
be
separately recognized and measured in accordance with SFAS No. 5, “Accounting
for Contingencies”. FSP 00-19-2 further clarifies that a financial instrument
subject to a registration payment arrangement should be accounted for in
accordance with other applicable generally accepted accounting principles
without regard to the contingent obligation to transfer consideration pursuant
to the registration payment arrangement. For registration payment arrangements
and financial instruments subject to those arrangements that were entered
into
prior to the issuance of EITF 00-19-2, this guidance shall be effective for
financial statements issued for fiscal years beginning after December 15,
2006
and interim periods within those fiscal years. The Company does not expect
the
adoption of this standard will have a material impact on its financial position,
results of operations or cash flows.
In
February, 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115" ("SFAS No. 159"). This statement permits entities to choose
to measure many financial instruments and certain other items at fair value.
The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex
hedge
accounting provisions. This Statement is expected to expand the use of fair
value measurement, which is consistent with the Board's long-term measurement
objectives for accounting for financial instruments. This statement is effective
as of the beginning of an entity's first fiscal year that begins after November
15, 2007, although earlier adoption is permitted. Management has not determined
the effect the adoption of this standard will have on the Company's financial
position, results of operations or cash flows.
In
June 2007, the Accounting Standards Executive Committee issued Statement of
Position 07-1, “Clarification of the Scope of the Audit and Accounting Guide
Investment Companies and Accounting by Parent Companies and Equity Method
Investors for Investments in Investment Companies” (“SOP 07-1”). SOP 07-1
provides guidance for determining whether an entity is within the scope of
the
AICPA Audit and Accounting Guide Investment Companies (the “Audit Guide”). SOP
07-1 was originally determined to be effective for fiscal years beginning
on or
after December 15, 2007, however, on February 6, 2008, FASB issued a
final Staff Position indefinitely deferring the effective date and prohibiting
early adoption of SOP 07-1 while addressing implementation issues.
In
June
2007, the FASB ratified the consensus in EITF Issue No. 07-3,“Accounting
for Nonrefundable Advance Payments for Goods or Services to be Used in Future
Research and Development Activities”
(EITF 07-3), which requires that nonrefundable advance payments for goods
or services that will be used or rendered for future research and development
(R&D) activities be deferred and amortized over the period that the goods
are delivered or the related services are performed, subject to an assessment
of
recoverability. EITF 07-3 will be effective for fiscal years beginning
after December 15, 2007. The Company does not expect that the adoption of
EITF 07-3 will have a material impact on its financial position, results of
operations or cash flows.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
3 -
Summary
of Significant Accounting Policies (Continued)
Recently
Issued Accounting Pronouncements
.
In
December 2007, the FASB issued SFAS No. 141(R),"Business Combinations"
("SFAS No. 141(R)"), which establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest
in an
acquiree, including the recognition and measurement of goodwill acquired
in a
business combination. SFAS No. 141(R) is effective as of the beginning of
the
first fiscal year beginning on or after December 15, 2008. Earlier adoption
is prohibited and the Company is currently evaluating the effect, if any,
that
the adoption will have on its financial position, results of operations or
cash
flows.
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interest
in Consolidated Financial Statements, an amendment of ARB No. 51" ("SFAS
No. 160"), which will change the accounting and reporting for minority
interests, which will be recharacterized as noncontrolling interests and
classified as a component of equity within the consolidated balance sheets.
SFAS
No. 160 is effective as of the beginning of the first fiscal year beginning
on
or after December 15, 2008. Earlier adoption is prohibited and the Company
is currently evaluating the effect, if any, that the adoption will have on
its
financial position, results of operations or cash flows.
Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Company’s present or future
consolidated financial statements.
Note
4 - Property and Equipment
Property
and equipment at December 31, 2007 consist of the following:
|
|
Estimated
|
|
|
|
|
|
Useful
Lives
|
|
December
31, 2007
|
|
Computer
Equipment and Software
|
|
|
3-7
Years
|
|
$
|
66,724
|
|
Office
Equipment
|
|
|
3-7
Years
|
|
|
22,240
|
|
Tooling
and Dies
|
|
|
25,000
Units
|
|
|
71,639
|
|
|
|
|
|
|
|
160,603
|
|
Less:
Accumulated Depreciation
|
|
|
|
|
|
68,433
|
|
|
|
|
|
|
$
|
97,170
|
|
Depreciation
expense was $64,480 and $3,990 for the year ended December 31, 2007 and 2006,
respectively.
Note 5
-
Inventories
Inventories
as of December 31, 2007 ocnsists of the
following:
Finished
Goods
|
|
$
|
11,532
|
|
Raw
Materials
|
|
|
274,591
|
|
Inventory
Total
|
|
$
|
286,123
|
|
Note 6
- Notes Payable
Notes
payable at December 31, 2007 consist of the following:
|
|
|
|
Notes
payable to private investors; bearing interest at 10%
per annum and due March 15, 2007 (see Note 7)
|
|
$
|
800,000
|
|
|
|
|
|
|
Note
payabe - Alpha Capital
|
|
|
204,088 |
|
|
|
$
|
1,004,088
|
|
On
July
12, 2007, bioMETRX, Inc. entered into several agreements with Alpha Capital
Anstalt (“Alpha”) whereby Alpha lent the Company $750,000 to be held in escrow
pending delivery of the Company’s garage door openers. The funds will be used to
pay the manufacturer of the garage door openers once they have been completed
and inspected for shipment to fulfill certain outstanding customer purchase
orders.
In
connection with the transaction the Company executed a $750,000 secured
promissory note. The Note bears interest at the rate of 24.99% per annum,
payable on the first day of each month and on the maturity date the Note
matures
fifteen (15) days following the release of funds from the escrow account
to any
person other than the holder. The Note may be prepaid all or any portion
of the
Note without penalty or premium.
In
addition to the Note, the Company and each of its subsidiaries entered
into
Security Agreements with Alpha whereby each entity pledged all their assets
to
secure the Note. The Company also issued Alpha a warrant to purchase 375,000
shares of the Company’s common stock at an exercisable price of $1.00 per share
valued at $236,250 and charged to finance costs. The Warrant is exercisable
for
a period of five (5) years.
As
a
condition to Alpha providing the loan to the Company, the Company’s CEO Mark
Basile entered into a Guaranty with Alpha whereby Mr. Basile agreed to
guaranty
the Company’s obligations under the Note and all related documents.
In
connection with the transaction the Company paid a due diligence fee of
$10,000
to Osher Capital Partners, LLC, paid Alpha a commitment fee of $22,500
and
agreed to pay Alpha’s legal fees in connection with this transaction not to
exceed $40,000.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 7
- Convertible Notes
On
June
29, 2006, the Company entered into a Securities Purchase Agreement, with
four
investors relating to the issuance and sale, in a private placement exempt
from
the registration requirements of the Securities Act of 1933, as amended,
of
units (the “Units”) consisting of 8% Convertible Notes in the principal amount
of $950,000 (“Notes”), Series A Common Stock Purchase Warrants (“A Warrants”)
and Series B Common Stock Purchase Warrants (“B Warrants”). In addition, the
company entered into an Exchange Agreement with the two investors who purchased
$650,000 of the Preferred Stock Units, previously reported on Form 8-K dated
April 28, 2006 whereby the Company agreed to issue the Units in exchange
for the
return and cancellation of the previously issued Preferred Stock Units.
Accordingly, at closing the Company issued its 8% Convertible Notes in the
aggregate principal amount of $1,600,000, 1,600,000 A Warrants and 800,000
B
Warrants to the Investors. The Company also issued an aggregate of 128,000
shares of its common stock valued at $172,800 to the investors representing
one
year’s of prepaid interest on the Notes.
The
Notes
mature 24 months from the closing. The Notes are convertible at the option
of
the holder into the Company’s common stock at the rate of $1.00 per share. The
Notes are mandatorily convertible into the Company’s common stock if the closing
bid price of the Company’s common stock is above $2.50 per share for ten (10)
consecutive trading days and if the daily volume for the same period exceeds
100,000 shares per day. The Company may redeem the Notes for 125% of the
principal amount of the Note together with all accrued and unpaid interest
provided that (i) an event of default has not occurred, and (ii) an effective
registration statement covering the shares underlying the Note
exists.
Each
A
Warrant entitles the holder to purchase one share of the Company’s common stock
at an exercise price of $1.75 per share commencing on the date of issuance
and
expiring at the close of business on the fifth anniversary of the issuance
date.
Each B Warrant entitles the holder to purchase one share of the Company’s common
stock at an exercise price of $.10 per share commencing 181 days after issuance
and expiring at the close of business on the fifth anniversary of the initial
exercise date. Notwithstanding the foregoing if the Company provides the
holder
of a B Warrant with validation and acknowledgement, in the form of bona fide
purchase order demonstrating that at least $1,000,000 of the Company’s products
have been ordered, other than its initial order from a national retailer
in the
amount of approximately 23,000 garage door opening units, within 181 days
after
the date of the Securities Purchase Agreement, the B Warrants shall
automatically terminate. The Company did not receive this purchase order.
Both
the A and B Warrants contain provisions that protect the holder against dilution
by adjustment of the exercise price in certain circumstances including, but
not
limited to, stock dividends, stock splits, reclassifications, or
mergers.
Pursuant
to the Selling Agent Letter Agreement between the Company and the Selling
Agent,
the Selling Agent was paid a cash fee of $95,000 (10% of the aggregate purchase
price of the Units sold to the subscribers) in addition to the $75,000 it
received, inclusive of $10,000 in expenses. The Company also issued the Selling
Agent a warrant to purchase 160,000 shares of its common stock on the same
terms
as the A Warrants. Such warrant was valued at $182,716 using the Black Scholes
model. In addition, the Company paid $15,000 to the Selling Agent’s counsel and
$32,500 to its counsel.
The
Company recorded a combined debt discount in the amount of $1,215,200 to
reflect
the beneficial conversion feature of the convertible debt and the value of
the
warrants. The beneficial conversion feature, was recorded pursuant to Emerging
Issues Task Force (“ETIF”) 00-27: Application of EITF No. 98-5, “Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios,” to certain convertible instruments. In accordance
with EITF 00-27, the Company evaluated the value of the beneficial conversation
feature and recorded this amount ($207,200) as a reduction of the carrying
amount of the convertible debt and as an addition to paid-in capital.
Additionally, the fair value of the warrants ($1,008,000) was calculated
and
recorded as a further reduction to the carrying amount of the convertible
debt
and as addition to paid-in capital.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 7
- Convertible Notes (Continued)
As
part
of the Private Placement, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with each subscriber who
purchased Units in the Private Placement. Under the Registration Rights
Agreement, the Company is obligated to file a registration statement (the
“Registration Statement”) on Form SB-2, relating to the resale by the holders of
the Common Stock underlying the Notes, Warrants and Selling Agent Warrant.
If
such Registration Statement was not filed by July 14, 2006, or did not become
effective within 90 days after closing, the Company has agreed to pay to
the
investors 1.5% of the gross proceeds of the offering for each month in which
the
Company fails to comply with such requirements. The Company did not file
the
Registration Statement by July 14, 2006 and therefore was accruing 1.5%
($24,000) of the gross proceeds for each month the Company failed to file
the
Registration Statement. For the year ended December 31, 2006 the Company
recorded $144,000 as additional finance costs. In December 2006 the Company
issued to the Convertible Noteholders Forebearance Notes in the amount of
$387,437 that included the $144,000 liquidated damages.
The
Company recorded a debt discount in the amount of $387,437 to reflect the
beneficial conversion feature of the forbearance convertible debt. The
beneficial conversion feature, was recorded pursuant to Emerging Issues Task
Force ("EITF")00-27 Application of EITF No. 98-5. "Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios," to certain convertible instruments. In accordance with
EITF
00-27, the Company evaluated the value of the beneficial conversion feature
and
recorded this amount as a reduction of the carrying amount of the convertible
debt and as an addition to paid-in capital.
On
October 10, 2006 the Company amended the exercise price of the 1,600,000
Class A
Warrants relating to the above referenced Private Placement from $1.75 to
$1.00.
During 2007 the Company further reduced the exercise price to $.30. The Company
recorded additional finance costs of $385,000 in connection with these
repricings.
On
September 21, 2006, the Company issued Jay Pitlake 50,000 shares of its common
stock valued at $65,000 as a finder’s fee in connection with the sale of the
convertible debentures.
The
Company entered into a Securities Purchase Agreement dated as of December
28,
2006, with three investors relating to the issuance and sale, in a private
placement (“Private Placement”) exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”), of units (the
“Units”) consisting of Senior Convertible Debentures in the principal amount of
$1,500,000 (“Debentures”), 1,500,000 Series A Common Stock Purchase Warrants (“A
Warrants”) and 750,000 Series B Common Stock Purchase Warrants (“B Warrants”).
The closing occurred on January 5, 2007.
The
Debentures mature on June 29, 2008. The Debentures are convertible at the
option
of the holder into the Company’s common stock at the rate of $1.00 per share.
The Debentures are convertible at the option of the Company into the Company’s
common stock if the closing bid price of the Company’s common stock is above
$2.50 per share for ten (10) consecutive trading days and if the shares
underlying the Debentures are registered. The Company may redeem the Debentures
for 125% of the principal amount of the Debenture together with all accrued
and
unpaid interest provided that (i) an event of default has not occurred, (ii)
the
price of the Company’s common stock exceeds $1.50 and (ii) an effective
registration statement covering the shares underlying the Debentures exists.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 7
- Convertible Notes (Continued)
The
Company recorded a combined debt discount in the amount of $1,500,000 to reflect
the beneficial conversion feature of the convertible debt and the value of
the
warrants. The beneficial conversion feature, was recorded pursuant to Emerging
Issues Task Force (“EITF”) 00-27: Application of EITF No. 98-5, “Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios,” to certain convertible instruments. In accordance
with EITF 00-27, the Company evaluated the value of the beneficial conversion
feature and recorded this amount ($284,307) as a reduction of the carrying
amount of the convertible debt and as an addition to paid-in capital.
Additionally, the fair value of the warrants ($1,215,693) was calculated
and
recorded as a further reduction to the carrying amount of the convertible
debt
and as addition to paid-in capital.
Pursuant
to the Selling Agent Letter Agreement between the Company and First Montauk
Securities Corporation (“Selling Agent”), the Selling Agent was paid a cash fee
of $150,000 (10% of the aggregate purchase price of the Units sold to the
subscribers). The Company also issued the Selling Agent a warrant to purchase
150,000 shares of its common stock on the same terms as the A Warrants.
As
part
of the Private Placement, the Company entered into a registration rights
agreement (the “Registration Rights Agreement”) with each subscriber who
purchased Units in the Private Placement. Under the Registration Rights
Agreement, the Company is obligated to file a registration statement (the
“Registration Statement”) on Form SB-2, relating to the resale by the holders of
the Common Stock underlying the Debentures, Warrants and Selling Agent
Warrant.
Each
A
Warrant entitles the holder to purchase one share of the Company’s common stock
at an exercise price of $1.00 per share commencing on the date of issuance
and
expiring at the close of business on the fifth anniversary of the issuance
date.
Each B Warrant entitles the holder to purchase one share of the Company’s common
stock at an exercise price of $.10 per share at any time after July 1, 2007
and
expiring at the close of business on the fifth anniversary of the initial
issuance date. Notwithstanding the foregoing if the Company provides the
holder
of a B Warrant with validation and acknowledgement on or before June 30,
2007
that the Company has both received and booked revenues for its products totaling
$1,000,000, the B Warrants shall automatically terminate. Both the A and
B
Warrants contain provisions that protect the holder against dilution by
adjustment of the exercise price in certain events including, but not limited
to, stock dividends, stock splits, reclassifications, or mergers.
As
a
condition to closing, the Company obtained consents and waivers from the
investors of its private placement of $1,600,000 principal amount of Convertible
Notes (“Notes”) issued on June 29, 2006, pursuant to which each of the prior
investors agreed to waive any and all existing defaults relating to the Notes
and agreed to forebear from exercising any rights accruing upon default until
June 30, 2007. In connection therewith, the Company issued to the investors
Convertible Notes (“Forebearance Notes”) in the aggregate principal amount of
$387,437, representing liquidated damages due under the Notes. The Forebearance
Notes are convertible into the Company’s common stock at $1.00 per share.
The
Company recorded a debt discount in the amount of $387,437 to reflect the
beneficial conversion feature of the forbearance convertible debt. The
beneficial conversion fature, was recorded pursuant to Emerging Issues Task
Force (“EITF”)00-27 Application of EITF No. 98-5. “Accounting for Convertible
Securities with Benefical Conversion Features or Contingently Adjustable
Conversion Ratios,” to certain convertible instruments. In accordance with EITF
00-27, the Company evaluated the value of the benefical conversion feature
and
recorded this amount as a reduction of the carrying amount of the convertible
debt and as an addition to paid-in capital.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 7
- Convertible Notes (Continued)
The
Company is amortizing the discounts over the term of the related debt.
Amortization of the debt discount for the years ended December 31, 2007 and
2006
was $1,968,333 and $694,003, respectively, and this amortization is recorded
as
interest expense.
During
the year ended December 31, 2007 noteholders converted $1,406,500 of principal
into 1,462,662 shares
of
common stock.
Note 8
- Stockholders’ Deficit
Preferred
Stock
Our
certificate of incorporation authorizes the issuance of up to 10,000,000
shares
of $.01 par value preferred stock, with such designation rights and preferences
as may be determined from time to time by the Board of Directors. Our Board
of
Directors is empowered to, without shareholder approval, issue these shares
of
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders
of
our common stock. In the event of such issuances, the preferred stock could
be
utilized, under certain circumstances, as a method of discouraging, delaying
or
preventing a change in control of our company.
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
- Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
March
14, 2006, the Company filed an amendment to its Certificate of Incorporation
to
effect a reverse split of all of the outstanding shares of its Common Stock
at a
ratio of one-for-four and increase the number of authorized shares of its
Common
Stock to 25,000,000 shares and decrease the par value of the Company’s common
stock to $.001 per share. The Company’s amended certificate of incorporation
also authorized the issuance of up to 10,000,000 shares of $.01 par value
preferred stock, with such designation rights and preferences as may be
determined from time to time by the Board of Directors.
At
various stages in the Company’s development, shares of the Company’s common
stock and common stock purchase warrants have been issued at fair market
value
in exchange for services or property received with a corresponding charge
to
operations, property and equipment or additional paid-in capital depending
on
the nature of the services provided or property received.
During
the month of January 2006, Russell Kuhn (“Kuhn”) provided $147,000 to the
Company, and the Company agreed to issue him 183,750 shares ($.80 per share)
of
common stock. In addition, during February 2006, the Company issued to Kuhn
281,250 shares of common stock upon exercise of warrants with an exercise
price
of $.80 per share for proceeds of $225,000. In connection with this transaction,
the Company paid a finder’s fee to Harbor View of $37,200 and accrued
commissions payable to Harbor View of 102,300 shares of its common
stock.
During
February 2006, the Company entered into a one (1) year consulting agreement
with
Russell Kuhn, and issued him 250,000 shares of common stock valued at $875,000
under the Company’s 2005 Equity Incentive Plan. Pursuant to the agreement, Mr.
Kuhn is to provide the Company with consulting services in connection with
corporate finance relations and, introduce the Company to various lending
sources, investment advisors, or other members of the financial community
with
whom he has established relationships.
On
February 27, 2006, the Company issued 25,000 restricted shares of its common
stock valued at $150,000 to Empire Relations Group, Inc. pursuant to a
consulting agreement between the Company and Empire Relations
Group.
On
March
21, 2006, Mr. Basile exercised 250,000 stock options at $1.00 per share pursuant
to his amended employment agreement dated February 6, 2006. Mr. Basile exercised
the options via “cash-less exercise” and was issued 179,578 shares of common
stock.
On
March
21, 2006, the Company received debt financing in the aggregate amount of
$100,000 from Jane Petri and Joseph Panico. The principal and interest of
12%
per annum was due on June 21, 2006. The note carries a default rate of 18%
per
annum. In addition, the Company issued an aggregate of 25,000 shares of
restricted common stock valued at $71,250 to Petri and Panico as debt issuance
costs.
On
July
19, 2006, the Company issued an aggregate of 20,000 restricted shares of
its
common stock valued at $38,000 to Jane Petri (10,000) and Joseph Panico (10,000)
as an incentive for them extending the maturity dates of their respective
loans.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
- Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
September 18, 2006 the Company entered into a Securities Purchase Agreement,
with Jane Petri and Joseph Panico relating to the issuance and sale, of the
Company’s 10% Promissory Notes due March 15, 2007 in the aggregate principal
amount of $400,000, In addition, the Company issued to Petri and Panico 400,000
Common Stock Purchase Warrants valued at $146,800 and 160,000 Shares of the
Company’s Common Stock valued at $174, 400 as consideration for the financing.
In connection with this transaction the two investors provided the Company
with
$300,000 and exchanged $100,000 in Notes that were previously issued by the
Company to the investors. Each Warrant entitles the holder to purchase one
share
of the Company’s Common Stock at an exercise price of $1.00 per share commencing
on the date of issuance and expiring at the close of business on September
15,
2011. As part of the Private Placement, the Company agreed to register the
400,000 shares of Common Stock underlying the Warrants and the 160,000 shares
of
the Common Stock issued as part of this Private Placement.
On
November 17, 2006, the Company entered into a Securities Purchase Agreement
with
Jane Petri and Joseph Panico relating to the issuance and sale in a private
placement of the Company’s 10% Promissory Notes due March 15, 2007 in the
aggregate principal amount of $300,000. In addition, the Company issued to
Petri
and Panico 99,000 Common Stock Purchase Warrants valued at $187,606 and 300,000
shares of the Company’s Common Stock valued at $570,000 as consideration for the
financing. Each Warrant entitles the holder to purchase one share of the
Company’s common stock at an exercise price of $1.25 per share commencing on the
date of issuance and expiring at the close of business on September 14, 2011.
As
part of the Private Placement, the Company agreed to register the 99,000
shares
of common stock underlying the Warrants and the 300,000 shares of the common
stock issued as part of this private placement.
On
May 3,
2006, the Company issued 180,000 restricted shares of its common stock valued
at
$630,000 to New Castle Consulting, LLC pursuant to a Consulting
Agreement.
On
May 4,
2006, the Company issued 20,000 restricted shares of its common stock valued
at
$71,000 to Pasadena Capital Partners, LLC pursuant to a Letter of Engagement
entered into between the parties on March 17, 2006.
On
May
11, 2006, the Company issued 125,000 restricted shares of its common stock
valued at $368,750 to Santo Santopadre as a settlement of a dispute between
Mr.
Santopadre and the Company.
On
June
5, 2006 the Company issued 54,201 restricted shares of its common stock valued
at $108,402 to Mark Basile, the Company’s CEO, in payment of indebtedness to Mr.
Basile by the Company.
On
September 29, 2006 the Company entered into a Securities Purchase Agreement,
with Dorothy Christofides ($30,000) and Barry and Marci Mainzer ($25,000)
relating to the issuance and sale, in a private placement of the Company’s 10%
Promissory Notes due March 30, 2007 in the aggregate principal amount of
$55,000. In addition, the Company issued to the Noteholders 55,000 Common
Stock
Purchase Warrants valued at $43,120 and 22,000 Shares of the Company’s Common
Stock valued at $35,200 as consideration for the financing. Each Warrant
entitles the holder to purchase one share of the Company’s Common Stock at an
exercise price of $1.00 per share commencing on the date of issuance and
expiring at the close of business on September 15, 2011. As part of the Private
Placement, the Company agreed to register the 55,000 shares of Common Stock
underlying the Warrants and the 22,000 shares of the Common Stock issued
as part
of this Private Placement.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
- Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
October 20, 2006 the Company entered into a Consulting Agreement with
Interactive Resources Group, Inc. (“IRG”). IRG was hired to provide the Company
with corporate consulting services in connection with the Company’s corporate
finance relations, investor relations to enhance the Company’s visibility in the
financial community. The term of the agreement is six months. As compensation,
the Company agreed to issue IRG an aggregate of 225,000 shares of its common
stock, payable 75,000 on November 1, 2006, 75,000 payable on January 1, 2007
and
75,000 payable on March 1, 2007. The Company has issued the first 75,000
shares
valued at $112,500 and the second 75,000 shares valued at $221,250. In addition,
the Company has issued three hundred thousand (300,000) common stock purchase
warrants valued at $101,800 which vest on or about January 20, 2007, ninety-one
(91) days from the date of the Agreement.
The
warrants are exercisable for four years at the following exercise
prices:
100,000
at $1.50 per share
100,000
at $2.00 per share
100,000
at $4.00 per share
On
October 23, 2006 the Company issued 75,000 shares of its common stock valued
at
$119,750 to Brendan Hopkins (“Hopkins”) pursuant to a consulting agreement to
provide investment advisory services. . These shares were issued under the
Company’s Equity Incentive Plan.
In
November 2006 the Company issued 18,250 common stock purchase warrants with
an
exercise price of $.01 per share and valued at $25,003 to a consultant pursuant
to the terms of a consulting agreement. The warrants expire January 31,
2012.
In
October 2006 the Company issued 40,000 shares of common stock valued at $60,000
to a consultant for providing equity research services.
During
December 2006, the Company issued an aggregate of 44,250 bonus shares of
its
common stock valued at $128,325 pursuant to the Company’s 2005 Equity Incentive
Plan. Of these shares 37,500 were issued to the Companies
executives.
During
2006, the Companies Chief Technology officer resigned and entered into a
termination agreement with the Company. In connection with the termination
agreement the officer returned 187,500 stock options valued at $2,362,500
and
62,500 shares of common stock valued at $237,500. The value of those stock
and
options were originally charged to operations in the year they were issued.
Accordingly, the Company is reporting other income in the amount of $2,600,000,
representing the value of the stock options returned. In addition, the officer
transferred 133,664 shares of common stock to various other officers and
directors. These shares were valued at $240,595 and were included in operations,
with a corresponding credit to additional paid in capital.
2005
Equity Incentive Plan
Effective
December 20, 2005, the Board of Directors approved the formation of the 2005
Equity Incentive Plan (“the Plan”) to benefit the Company’s key employees
(including its directors, officers and employees) as well as consultants
of the
Company and its affiliates.
On
January 5, 2006 the Company amended its 2005 Equity Incentive Plan by allowing
for a “cashless exercise” of stock options. When this provision is utilized, the
shareholder will return the cost of the exercise of the option in shares
back to
the Company.
The
aggregate of shares that amy be issued under the Plan is 1,250,000. The plan
permits the company to make awards of stock options, stock appreciations
rights,
warrants, stock awards and other equity awards.
Awards
under the Plan for the year ended December 31, 2007 and 2006 respectively
amounted to 22,750
and
1,006,750 shares of common stock.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
- Stockholders’ Deficit (Continued)
Common
Stock
On
January 10, 2007, Ms. Yarde exercised 250,000 stock options at $.40 per share.
Ms. Yarde exercised the options via “cash-less exercise” and was issued 217,213
shares of common stock.
On
January 16, 2007, the Company issued an aggregate of 40,000 shares of its
common
stock to Patricia Giberson (26,000) and Oceana Partners (14,000) pursuant
to a
consulting agreement between the Company and Ocean Partners.
On
January 16, 2007, the Company issued 40,000 shares of its common stock valued
at
$130,000 to Brad Schwab pursuant to a consulting agreement between the Company
and Mr. Schwab.
On
January 16, 2007, the Company issued an aggregate of 4,000 shares of its
common
stock valued at $11,600 to the owners of Vintage Filings, Inc. (Seth Farbman
2,000 and Shai Stern 2,000) for services rendered to the Company in connection
with its SEC filings. These shares were issued under the Company’s 2005 Equity
Incentive Plan.
On
January 22, 2007, the Company issued 50,000 shares of its common stock valued
at
$167,500 to Mark Basile as consideration for Mr. Basile providing the Company
his personal guarantee in connection with the opening of a Letter of Credit
in
the amount of $1,040,400.
On
January 23, 2007, the Company issued 70,000 shares of its common stock to
Mark
Basile in exchange for Mr. Basile foregoing $140,000 of his 2007 salary.
In
addition the Company issued Mr. Basile an additional 10,000 shares of common
stock as a bonus. These shares were valued at $248,000 in the aggregate.
On
January 31, 2007, the Company issued 20,000 restricted shares of its common
stock valued at $58,000 pursuant to a consulting agreement between the Company
and ICR, LLC.
On
February 13, 2007, the Company issued 75,000 restricted shares of its common
stock valued at $153,750 to Interactive Resources Group, Inc. (“IRG”) pursuant
to a consulting agreement between the Company and IRG.
On
February 14, 2007, the Company issued 25,000 restricted shares of its common
stock to Barry and Marci Mainzer upon the exercise of a warrant for a like
number of shares. The exercise price of the warrant was $1.00 per share and
was
paid for by forgiving the principal payment of a $25,000 promissory note
due to
the Mainzers.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
- Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
February 14, 2007 the Company issued 25,000 restricted shares of its common
stock to Dorothy Christofides upon conversion of a promissory note in the
principal amount of $30,000. As additional consideration for Ms. Christofides
converting her promissory note, the Company issued her 20,000 common stock
purchase warrants exercisable for a period of five years at $2.00 per
share.
On
February 8, 2007, the Company issued an aggregate of 7,000 shares of its
common
stock valued at $18,900 to the owners of Vintage Filings, Inc. (Seth Farbman
3,500 and Shai Stern 3,500) in exchange for Vintage providing one (1) year
of
filing the Company’s reports with the SEC via the Edgar filing system. These
shares were issued under the Company’s 2005 Equity Incentive plan.
On
March
6, 2007, the Company issued The Incredible Card Company 150,000 restricted
shares of its common stock valued at $330,000 as consideration for the purchase
of a patent the Company acquired in January 2007. Mr. Basile, the Company’s
Chairman and CEO, was a former officer and director of The Incredible Card
Company.
On
March
12, 2007, the Company issued Robert Jacobs 150,000 restricted shares valued
at
$334.500 of its common stock as consideration for the purchase of a
patent.
On
April
11, 2007, the Company’s Chief Operating Officer cashlessly exercised 200,000
warrants exercisable at $1.00. The market value of the Company’s common stock on
that date was $2.00. Accordingly, the Company issued 100,000 shares to Ms.
Yarde
pursuant to such cashless exercise. The stock was issued under the Company’s
2005 Employee Stock Plan.
On
April
11, 2007, the Company’s Chief Financial Officer cashlessly exercised 200,000
warrants exercisable at $1.05. The market value of the Company’s common stock on
that date was $2.00. Accordingly, the Company issued 95,000 shares to Mr.
Iler
pursuant to such cashless exercise. The stock was issued under the Company’s
Stock Incentive Plan
On
April
24, 2007, the Company issued 1,750shares of its common stock valued at $3,150
to
the partners of its legal counsel, Sommer & Schneider LLP, in consideration
for legal services rendered in the ordinary course of business. The stock
was
issued under the Company’s Stock Incentive Plan.
On
April
24, 2007, the company issued 140,000 shares of its common stock valued at
$252,000 and 140,000 5 year warrants exercisable at $1.00 per share to Mark
Basile, the Company’s President and CEO as consideration for providing the
Company a loan in the amount of $140,000.
On
May
21, 2007, the Company issued 50,000 shares of its common stock valued at
$70,000
and 50,000 warrants exercisable at $1.00 per share to Lorraine Yarde, the
Company’s Chief Operating Officer as consideration for providing the Company a
loan in the amount of $50,000.
On
June
1, 2007, the Company issued 300,000 shares of its common stock valued at
$258,750 and 200,000 warrants exercisable at $1.50 per share to IRG as
consideration for performing shareholder relations and other financial advisory
services for a six month period. The aggregate value of such services based
upon
valuations of the Company’s stock at this time was $340,550.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
- Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
June
11, 2007, the Company issued 100,000 shares of its common stock to Nite Capital
upon the conversion of $100,000 principal amount of a convertible note issued
to
Nite Capital in the aggregate principal amount of $150,000. The convertible
note
converts into the Company’s common stock at $1.00 per share. Seventy-five
thousand (75,000) of these shares were registered pursuant to a Registration
Statement.
On
June
15, 2007, the Company issued 45,000 shares of its common stock valued at
$74,250
and 45,000 warrants exercisable at $1.00 per share to Lorraine Yarde, the
Company’s Chief Operating Officer as consideration for providing the Company a
loan in the amount of $45,000.
On
June
16, 2007, the Company issued an aggregate amount of 125,000 shares of its
common
stock to Peter Thompson upon the conversion of $125,000 principal amount
of a
convertible note issued to Mr. Thompson in that amount. The convertible note
converted into the Company’s common stock at $1.00 per share. Sixty-two
thousand-five hundred (62,500) of these shares were registered pursuant to
a
Registration Statement on Form SB-2.
On
June
16, 2007, the Company issued an aggregate of 125,000 shares of its common
stock
to Lighthouse Capital upon the conversion of $125,000 principal amount of
a
convertible note issued to Lighthouse Capital Insurance in that amount. The
convertible note converted into the Company’s common stock at $1.00 per share.
Sixty-two thousand-five hundred (62,500) of these shares were registered
pursuant to a Registration Statement on Form SB-2.
On
June
18, 2007, the Company awarded Lorraine Yarde 150,000 shares of its common
stock
valued at $240,000 as a bonus for securing an increased purchase order from
Home
Depot and an additional purchase order from MasterLOCK.
On
June
18, 2007,, the Company issued 20,000 shares valued at $32,000 to Rodger Michell,
an accountant as consideration of accounting services in connection with
the
Company’s upgrading its accounting system and electronic data
interchange.
On
June
18, 2007, the Company issued 75,000 shares of its common stock valued at
$120,000 and 75,000 warrants exercisable at $1.00 per share to The Naples
Trust,
of which the Company’s Chief Executive Officer is a related party as
consideration for providing the Company a loan in the amount of $75,000.
On
June
21, 2007, the Company issued 20,000 shares of its Common stock valued at
$40,000
to Black Dog Communications as consideration for public relations services
to
the Company.
On
June
26, 2007, the Company issued an aggregate of 300,000 shares of its common
stock
to Linden Growth Partners upon the conversion of $300,000 principal amount
of a
convertible note issued to Linden Growth Partners in that amount. The
convertible note converted into the Company’s common stock at $1.00 per share.
One hundred and fifty thousand 150,000 of these shares were registered pursuant
to a Registration Statement on Form SB-2.
On
June
26, 2007, the Company issued an aggregate of 450,000 shares of its common
stock
to Linden Growth Master Fund upon the conversion of $450,000 principal amount
of
a convertible debenture issued to Linden Growth Master Fund in that amount.
The
convertible debenture converted into the Company’s common stock at $1.00 per
share. Two hundred and twenty five thousand (225,000) of those shares were
registered pursuant to a Registration Statement on Form SB-2.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
- Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
June
27, the Company issued 5,000 shares of its common stock valued at $6,500
to the
partners of its legal counsel, Sommer and Schneider LLP in consideration
of
$6,000 in legal services rendered to the Company. The stock was issued under
the
Company’s Equity Incentive Plan.
On
June
28, 2007, the Company issued 75,000 shares of its common stock valued at
$75,000
and 75,000 warrants exercisable at $1.00 per share to J. Richard Iler, the
Company’s Chief Financial Officer as consideration for providing the Company a
loan in the amount of $75,000.
On
July
11, 2007 the Company granted 375,000 warrants exercisable at $1.00 to Alpha
Capital in consideration of its loan to the Company to be expressly used
for
manufacturing of the Company’s MasterLOCK™ smartTouch Garage Door Opener. The
proceeds from receivable financing will be used to repay this loan.
On
July
13, 2007, the Company issued 50,000 shares of its common stock to BridgePointe
Master Fund Ltd. upon the conversion of $50,000 principal amount of a
convertible debenture issued to BridgePointe Master Fund in the aggregate
principal amount of $1,000,000. The convertible debenture converts into the
Company’s common stock at $1.00 per share. These shares were registered pursuant
to a Registration Statement on Form SB-2.
On
July
13, 2007, the Company issued 50,000 shares of its common stock to Alpha Capital
AG. upon the conversion of $25,000 principal amount of a convertible note
issued
to Alpha Capital in the aggregate principal amount of $400,000. The convertible
note converts into the Company’s common stock at $1.00 per share. These shares
were registered pursuant to a Registration Statement on Form SB-2.
On
July
13, 2007, the Company issued Nite Capital 75,000 shares of its common stock
issuable upon the exercise of a like number of warrants exercisable at $0.10
per
share.
On
July
24th, 2007, the Company issued 20,222 shares as payment in kind for interest
payment due to Bridgepointe Master Fund, LTD on a $1,000,000 convertible
note
issued to the Company. on January 5, 2007.
On
July
25th, 2007, the Company issued 50,000 shares as payment in kind for fees
related
to a factoring commitment to BLX, Funding.
On
July
25th, 2007, the Company issued 25,000 shares of its common stock valued at
$11,000 and 25,000 warrants exercisable at $1.00 per share to Mark Basile,
the
Company’s Chief Executive Officer as consideration for providing the Company a
loan in the amount of $25,000.
On
July
25th, 2007, the Company issued 150,000 shares of its common stock valued
at
$150,000 to Mark Basile as consideration for Mr. Basile providing the Company
his personal guarantee in connection with the opening of an escrow agreement
with Alpha in the amount of $750,000.
On
August
1, 2007, the Company issued 8,365 of its common stock to A2E Technologies
as
payment of $9,535.75 due A2E Technologies pursuant to a Service Level Agreement
dated March 16, 2007.
On
August
15, 2007, the Company issued 150,000 shares of its common stock to Linden
Growth
Partners L.P. upon the exercise of a like number of warrants exercisable
at
$0.10 per share.
On
August
15, 2007, the Company issued 225,000 shares of its common stock to Linden
Growth
Partners Master Fund L.P. upon the exercise of a like number of warrants
exercisable at $0.10 per share.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
- Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
August
16, 2007 the Company issued 22,269 shares of its common stock to Osher Capital
Partners LLC upon the cashless exercise of 25,000 warrants exercisable at
$0.10
per share.
On
August
24, 2007 the Company issued 178,152 shares of its common stock to Alpha Capital
AG upon the cashless conversion of 200,000 warrants exercisable at $0.10
per
share.
On
August
30, 2007 the Company issued 87,500 shares of its common stock and 87,500
warrants exercisable at $1.00 each to Joe Panico and Jane Petri respectively
as
an inducement to renew with an extension to maturity to May 15th, 2008 and
increase a loan to the Company in the amount of $800,000.
On
August
31, 2007 the Company issued 62,500 shares of its common stock upon the exercise
of 62,500 warrants exercisable at $0.10 to Lighthouse Capital Insurance
Company.
On
August
31, 2007 the Company issued 62,500 shares of its common stock upon the exercise
of 62,500 warrants exercisable at $0.10 to Peter Thomson.
On
September 7, 2007, the Company issued to Bridgepointe Master Fund, Ltd. 435,342
shares of its common stock upon the cashless exercise of 500,000 warrants
exercisable at $0.10 per share.
On
September 7, 2007, the Company issued 6,647 shares as payment in kind for
interest payment due to Bridgepointe Master Fund, Ltd. on a $1,000,000
convertible note issued to the Company. on January 5, 2007.
On
September 11, 2007, the Company issued an aggregate of 50,000 shares of its
common stock to Bridgepointe Master Fund, Ltd. upon the conversion of $50,000
principal amount of a convertible note issued to Bridgepointe Master Fund,
Ltd.
in that amount. The convertible note converted into the Company’s common stock
at $1.00 per share
On
September 12, 2007, the Company issued an aggregate of 81,193 shares of its
common stock to Whalehaven Capital Fund Limited upon the conversion of $81,193
of principal and interest amount of a convertible note issued to Whalehaven
Capital Fund Ltd. The convertible note converted into the Company’s common stock
at $1.00 per share.
On
September 12, 2007 the Company issued 250,000 shares of its common stock
upon
the exercise of 250,000 warrants exercisable at $0.10 to Whalehaven Capital
Fund, Ltd.
On
September 27th, 2007, the Company issued an aggregate of 14,761 shares of
its
common stock to Whalehaven Capital Fund Limited upon the conversion of $14,761
of principal and interest due under a convertible note issued to Whalehaven
Capital Fund Ltd. The convertible note is convertible into the Company’s common
stock at the rate of $1.00 per share. These shares were registered pursuant
to a
Registration Statement on Form SB-2.
On
October 10, 2007, the Company issued 16,823 shares of its common stock to
Whalehaven Capital Fund Ltd. upon the conversion of $16,823 of principal
and
interest due under a convertible note issued to Whalehaven Capital Fund Ltd.
The
convertible note is convertible into the Company’s common stock at the rate of
$1.00 per share. These shares were registered pursuant to a Registration
Statement on Form SB-2.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
- Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
October 11, 2007, the Company issued an aggregate of 218,500 shares of its
common stock valued at $185,725 to employees (150,000) and executive officers
(68,500).
On
October 15, 2007, the Company issued an aggregate of 100,000 shares of its
common stock valued at $80,000 to Richard Quintana (50,000 shares) and Michael
Niccole (50,000) in connection with the acquisition of a Patent.
On
October 17, 2007, the Company issued 10,000 shares of its common stock valued
at
$8,000 to the partners of Sommer & Schneider LLP, the Company’s securities
counsel as partial payment of legal services rendered to the
Company.
On
November 6, 2007, the Company issued 114,545 shares of its common stock to
Mark
Basile, the Company’s CEO upon the cashless exercise of 140,000 warrants,
exercisable at $.10 per share.
On
November 6, 2007, the Company issued 20,000 shares of its common stock valued
at
$11,000 to the partners of Sommer & Schneider LLP.
On
November 6, 2007, the Company issued an aggregate of 150,000 shares of its
common stock valued at $82,500 to the members of its board of directors Mark
Basile (50,000) Lorraine Yarde (50,000) and J. Richard Iler (50,000) as
consideration for services rendered in the performance of their duties as
directors of the Company.
On
November 15th, 2007, the Company issued 17,507 shares of its common stock
valued
at $10,505 to A2E Technologies
as
partial consideration toward engineering services performed on behalf of
the
Company.
On
November 16th, 2007, the Company escrowed 500,000 shares of its stock as
collateral for extending the maturity of loans given by Joseph Panico and
Jane
Petri to the Company.
On
November 16th, 2007, the Company granted 50,000 shares of common stock valued
at
$30,000 to Wendy Borow-Johnson as consideration for serving on the Board
of the
Company.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
- Stockholders’ Deficit (Continued)
Common
Stock (Continued)
On
December 4th, 2007 the Company issued 125,000 shares to Lighthouse Capital
Insurance Company upon exercise of 125,000 warrants exercisable at
$.30.
On
December 4th, 2007 the Company issued 125,000 shares to Peter Thompson upon
exercise of 125,000 warrants exercisable at $.30.
On
December 4th, 2007 the Company issued 12,500 shares to Robert Casolaro upon
exercise of 12,500 warrants exercisable at $.30.
On
December 6th, 2007 the Company issued 9,135 shares to Fort Mason Partners
LP
upon exercise of 9,135 warrants exercisable at $.30. These warrants were
assigned by Nite Capital to the benefit of Fort Mason Partners LP.
On
December 6th, 2007 the Company issued 140,865 shares to Fort Mason Master
LP
upon exercise of 140,865 warrants exercisable at $.30. These warrants were
assigned by Nite Capital to the benefit of Fort Mason Master LP.
On
December 18th, 2007, the Company issued 67,857 shares of its common stock
to The
Naples Trust a related party upon the cashless exercise of 75,000 warrants,
exercisable at $.10 per share.
On
December 18th, the Company issued 100,000 shares of its common stock valued
at
$86,600 to Interactive Resources Group in accordance with a consulting agreement
of like date.
On
December 19th, 2007, the Company authorized the issuance of 100,000 shares
of
its common stock to BridgePointe Master Fund, Ltd as part of the conversion
and
Forebearance Agreement dated as of December 19, 2007. The shares were issued
on
January 28, 2008.
On
December 20th, 2007, the Company issued 85,952 shares of its common stock
to the
company’s Chief Operating Officer upon the cashless exercise of 95,000 warrants,
exercisable at $.10 per share.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
- Stockholders’ Deficit (Continued)
Common
Stock (Continued)
Stock
Options
Stock
option share activity and weighted average exercise prices for the years
ended
December 31, 2007 and 2006 were as follows:
|
|
|
2007
|
|
|
2006
|
|
2005
Equity Incentive Plan |
|
|
Number of Options
|
|
|
Weighted Average
Exercise
Price
|
|
|
Number of Options
|
|
|
Weighted Average
Exercise
Price
|
|
Balance
- January 1,
|
|
|
287,500
|
|
$
|
1.65
|
|
|
375,000
|
|
$
|
2.00
|
|
Options
Granted
|
|
|
-
|
|
$
|
-
|
|
|
350,000
|
|
$
|
1.00
|
|
Options
Cancelled
|
|
|
-
|
|
|
|
|
|
(187,500
|
)
|
|
2.00
|
|
Options
Exercised
|
|
|
(100,000
|
)
|
$
|
1.00
|
|
|
(250,000
|
)
|
|
1.00
|
|
Outstanding
- December 31,
|
|
|
187,500
|
|
$
|
2.00
|
|
|
287,500
|
|
$
|
1.65
|
|
Exercisable
|
|
|
187,500
|
|
$
|
2.00
|
|
|
287,500
|
|
$
|
1.65
|
|
|
|
2007
|
|
2006
|
|
Other
Options |
|
Number
of Options
|
|
Weighted Average
Exercise
Price
|
|
Number
of Options |
|
Weighted Average
Exercise
Price
|
|
Balance
- January 1,
|
|
|
2,150,000
|
|
$
|
2.66
|
|
|
25,000
|
|
$
|
.40
|
|
Options
Granted
|
|
|
-
|
|
|
-
|
|
|
2,150,000
|
|
|
2.18
|
|
Options
Exercised
|
|
|
(550,000
|
)
|
|
.75
|
|
|
(25,000
|
)
|
|
.40.
|
|
Outstanding
- December 31,
|
|
|
1,600,000
|
|
$
|
2.66
|
|
|
2,150,000
|
|
|
2.18
|
|
Exercisable
|
|
|
1,600,000
|
|
$
|
2.66
|
|
|
1,850,000
|
|
|
2.35
|
|
The
following table summarized information about stock options
at December 31,
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
Outstanding
|
|
|
|
Options
Exercisable
|
|
|
|
Number
Outstanding
|
|
Weighted
Average Remaining Contractual Life (Years)
|
|
Weighted
Average Exercise Price
|
|
|
|
|
|
$1.00
- $1.99
|
|
|
600,000
|
|
|
3.70
|
|
$
|
1.28
|
|
|
600,000
|
|
$
|
1.28
|
|
$2.00
|
|
|
437,500
|
|
|
2.50
|
|
$
|
2.00
|
|
|
437,500
|
|
$
|
2.00
|
|
$3.00
|
|
|
250,000
|
|
|
2.50
|
|
$
|
3.00
|
|
|
250,000
|
|
$
|
3.00
|
|
$4.00
|
|
|
250,000
|
|
|
2.50
|
|
$
|
4.00
|
|
|
250,000
|
|
$
|
4.00
|
|
$5.00
|
|
|
250,000
|
|
|
2.50
|
|
$
|
5.00
|
|
|
250,000
|
|
$
|
5.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.00
- $5.00
|
|
|
1,787,500
|
|
|
2.95
|
|
$
|
2.67
|
|
|
1,787,500
|
|
$
|
2.67
|
|
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 8
- Stockholders’ Deficit (Continued)
Stock
Options (Continued)
Warrants
|
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
Range
of Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
.01-.1.99
|
|
|
43,250
|
|
|
4.10
|
|
$
|
.06
|
|
|
43,250
|
|
$
|
.06
|
|
$1.00-1.99
|
|
|
4,333,500
|
|
|
4.13
|
|
$
|
1.06
|
|
|
4,333,500
|
|
$
|
1.06
|
|
$2.00
|
|
|
235,198
|
|
|
3.69
|
|
$
|
2.13
|
|
|
235,198
|
|
$
|
2.13
|
|
$3.00
|
|
|
52,698
|
|
|
2.75
|
|
$
|
3.40
|
|
|
52,698
|
|
$
|
3.40
|
|
$4.00
|
|
|
126,349
|
|
|
3.19
|
|
$
|
4.00
|
|
|
126,349
|
|
$
|
4.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,790,995
|
|
|
4.07
|
|
$
|
1.21
|
|
|
4,790,995
|
|
$
|
1.21
|
|
A
summary
of warrant activity for the year ended December 31, 2007 and 2006 is as
follows:
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Number
of Warrants
|
|
|
Weighted Average
Exercise
Price
|
|
|
Number
of
Warrants
|
|
|
Weighted Average
Exercise
Price
|
|
Balance
- January 1,
|
|
|
3,626,495
|
|
$
|
1.17
|
|
|
475,495
|
|
$
|
1.62
|
|
Warrants
Granted
|
|
|
4,270,000
|
|
$
|
.90
|
|
|
3,432,250
|
|
$
|
1.27
|
|
Warrants
Exercised
|
|
|
(3,105,500
|
)
|
$
|
.28
|
|
|
(281,250
|
)
|
|
.80
|
|
Balance
- December 31,
|
|
|
4,790,995
|
|
$
|
1.21
|
|
|
3,626,495
|
|
$
|
$1.17
|
|
Note 9
- Commitments and Contingencies
Employment
Contracts
We
have
employment agreements with three of our executive officers, Mark Basile,
Rick
Iler and Lorraine Yarde.
Mr.
Basile’s employment agreement, originally entered into in February 2002, and
amended on February 6, 2006 has an initial term of five years from the date
of
the Amendment and a base salary of:
$360,000
for Calendar Year 2006
$500,000
for Calendar Year 2007
$560,000
for Calendar Year 2008
$620,000
for Calendar Year 2009
$700,000
for Calendar Year 2010
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Stock
Options (Continued)
Mr.
Basile also receives a $1,500 per month car allowance and a five million
dollar
($5,000,000) term life insurance policy naming Mr. Basile’s family as the
beneficiary thereof.
After
the
initial term, Mr. Basile’s agreement automatically renews for additional
one-year periods. Under the terms of this agreement, any accrued compensation
may be converted into shares of the Company’s common stock at $2.00 per share.
Bonuses, if any, are to be paid at the sole discretion of the Board of
Directors. On November 6, 2007, the Company issued 114,545 shares of its
common
stock to Mark Basile, the Company’s CEO upon the cashless exercise of 140,000
warrants, exercisable at $.10 per share.
Upon
signing the Amendment, Mr. Basile also received options to purchase up to
1,250,000 shares of the Company’s common stock valued at $4,788,813. The options
are exercisable at the following prices:
Employment
Contracts (Continued)
Number
of Shares
|
|
Exercise
Price
|
|
*250,000
|
|
$
|
1.25
|
|
250,000
|
|
$
|
2.00
|
|
250,000
|
|
$
|
3.00
|
|
250,000
|
|
$
|
4.00
|
|
250,000
|
|
$
|
5.00
|
|
*Options
were issued under the Company’s 2005 Equity Incentive Plan and subsequently
exercised on a cashless basis.
The
Company originally entered into an employment agreement with Ms. Lorraine
Yarde
in August 2005, and amended in January 2006, in the capacity of Chief Operating
Officer. It has an initial term of three years commencing on the date of
the
Amendment.
On
August
14, 2006, the Company entered into an amended three-year employment agreement
with Lorraine Yarde with a base annual salary of $175,000 for calendar year
2007
$200,000,000 for the remainder of the term of the agreement. This was
subsequently modified and effective as of August 17, 2007 to increase her
salary
to $215,000.
Ms.
Yarde
also receives a $750 per month car allowance.
Upon
signing the employment agreement, Ms. Yarde also received immediately vested
options to purchase up to 600,000 shares of the Company’s common stock valued at
$77,000. The options are exercisable at the following prices:
Number
of Options
|
|
Exercise
Price
|
|
200,000
|
|
$
|
1.00
|
|
200,000
|
|
$
|
1.25
|
|
200,000
|
|
$
|
1.50
|
|
On
January 9, 2007, Ms. Yarde exercised 250,000 stock options at $.40 per share.
Ms. Yarde exercised the options via “cash-less exercise” and was issued 217,213
shares of common stock.
On
August
4 , 2006, the Company entered into a three-year employment agreement with
J.
Richard Iler with a base salary of:
$180,000
for the first year of the agreement
$207,000
for the second year of the agreement
$238,050
for the third year of the agreement
Mr.
Iler
also receives $500 per month car allowance.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 9
- Commitments and Contingencies (Continued)
Employment
Contracts (Continued)
Upon
signing the employment agreement, Mr. Iler also received options to purchase
up
to 400,000 shares of the Company’s common stock valued at $76,800. The options
are exercisable at the following prices and subject to the vesting schedule
set
forth below.
Number
of Options
|
|
Exercise
Price
|
|
Vesting
|
|
200,000
|
|
$
|
1.05
|
|
|
Immediately
|
|
100,000
|
|
$
|
1.10
|
|
|
1
year from date of agreement
|
|
100,000
|
|
$
|
1.00
|
|
|
2
years from date of agreement
|
|
Upon
signing Mr. Iler also received 100,000 shares of the Company’s common stock
valued at $85,000.
On
April
11, 2007, the Company’s Chief Financial Officer cashlessly exercised 200,000
warrants exercisable at $1.05. The market value of the Company’s common stock on
that date was $2.00.
Lease
Obligations
The
Company operates its business in leased facilities. The Company currently
leases
approximately 3719 square feet for its corporate office facilities located
at
500 North Broadway, Jericho, New York for $8,523 with increases annually
on
January 31. The lease expires January 31, 2010.
Approximate
future minimum commitments under these leases are as follows:
January
1, 2008 - December 31, 2008
|
|
|
109,249
|
|
January
1, 2009 - December 31, 2009
|
|
|
113,073
|
|
January
1, 2010 - January 31, 2010
|
|
|
9,449
|
|
|
|
$
|
231,771
|
|
Rent
expense under the office leases was approximately $125,565 and $99,623 for
the
years ended December 31, 2007 and 2006, respectively.
Legal
Proceedings
On
November 16, 2006, the Company was the subject of a complaint filed by
Intellicon seeking a final payment of $20,000 plus accrued interest for
engineering design services performed for the Company. The Company
answered and counter-claimed on January 5, 2007 asserting damages of $25,000
incurred then and continuing to incur to remedy design defects performed
by
Intellicon. The Company intends to vigorously defend its position in this
claim.
On
March
7, 2007 the Company’s subsidiary, bioMETRX Technologies Inc. became the subject
of a complaint filed by two individuals, a former officer and a consultant
with
whom it had previously severed its business relationship. The plaintiffs
allege
damages arising from certain inducements which were relied upon to their
detriment.
The
Company considers these complaints to be baseless and without merit and expects
to file a Motion to Dismiss both claims of both plaintiffs and intends to
vigorously pursue damages in the course of its defense of this complaint
and
other previous acts of the plaintiffs.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 9
- Commitments and Contingencies (Continued)
Legal
Proceedings
On
March
10, 2008, the Company became the subject of a complaint entitle Arrow
Electronics, Inc. v. bioMETRX Technologies, Inc. etal. The complaint was
filed
in the Supreme Court of the State of New York County of Nassau (Index No.
08-4900). The compliant alleges breach of contract and the plaintiff is seeking
damages of $194,139.15. The Company intends to vigorously defend this
action.
The
Company is a defendant in a lawsuit titled Worldwide Electronic Solutions,
L.L.C. v. Biometrx, Inc. etal. The action was filed in the Superior Court
of the
State of Arizona for the Country of Maricopa. The complaint alleged breach
of
contract and sought damages of approximately $190,000, the Company did not
answer the complaint in that it believes that the Court had no jurisdiction.
The
Plaintiff obtained a default judgment and has filed and Application for Entry
of
Default. The Company intends on filing a motion to vacate the Default Judgment
and has been in negotiations with the Plaintiff to settle this
matter.
Note 10
- Income Taxes
At
December 31, 2007 the Company had net operating loss carry forwards for Federal
tax purposes of approximately $21,000,000 which are available to offset future
taxable income, if any, from 2008 through 2028. Under Federal Tax Law IRC
Section 382, certain significant changes including the reverse merger
transaction of 2005, may restrict the utilization of these loss carry
forwards.
At
December 31, 2007, the Company had a deferred tax asset of approximately
$9,000,000 representing the benefit of its net operating loss carry forwards.
The Company has not recognized the tax benefit because realization of the
tax
benefit is uncertain and thus a valuation allowance has been fully provided
against the deferred tax asset. The difference between the Federal Statutory
Rate of 34% and the Company’s effective tax rate of 0% is due to an increase in
the valuation of allowance of approximately $3,400,000.
Note
11 - Subsequent Events
Common
Stock
On
January 22, 2008, the Company issued 36,450 shares of its common stock to
Whalehaven Capital Fund Ltd. upon the conversion of $36,450 of principal
and
interest due under a convertible note issued to Whalehaven Capital Fund Ltd.
The
convertible note is convertible into the Company’s common stock at the rate of
$1.00 per share. These shares were registered pursuant to a Registration
Statement on Form SB-2 (SEC File No. 333-140628) which was declared effective
by
the SEC on June 25, 2007.
On
January 28th,
2008,
the Company issued 75,000 to Nite Capital for the conversion of $37,500 in
principal and interest under a forebearance note issued to Nite Capital.
The
note was convertible into the Company’s common stock at the rate of $.50 per
share.
On
January 28th,
2008
the company issued 39,200 shares and 19,200 shares to Nite Capital for the
conversion of principal of $19,600 and further principal of $12,500 and $7,100
in interest respectively due under a convertible note issued to Nite Capital.
The convertible note is convertible into the Company’s common stock at the rate
of $.50 per share.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
11 - Subsequent Events (Continued)
Common
Stock (Continued)
On
January 29th
and
30th, 2008, the Company issued 143,590 shares and 100,773 shares of its common
stock to Whalehaven Capital Fund Ltd. upon the conversion of $119, 427 of
principal and $2,754.41 in interest due under convertible and forebearance
notes
issued to Whalehaven Capital Fund Ltd. The convertible note is convertible
into
the Company’s common stock at the rate of $.50 per share. 100.773 shares were
registered pursuant to a Registration Statement on Form SB-2 (SEC File No.
333-140628) which was declared effective by the SEC on June 25,
2007
On
January 30, 2008 the Company amended our Certificate of Incorporation to
increase the number of shares of Common Stock the Company is authorized to
issue
to 100,000,000 shares.
On
January 31st,
2008
the Company issued 82,873 shares of its common stock to BridgePointe Master
Fund, Ltd. upon the conversion of $50,000 in principal due under a convertible
note to BridgePointe Master Fund, Ltd. The convertible note was converted
into
common stock at the rate $.603 per share.
On
February 14th,
2008
the Company issued 833,000 shares to various upon the exercise of 833,000
warrants to various individuals. The warrants were exercisable originally
at
$1.00, but the exercise price was subsequently offered to be lowered to $.30
in
order to induce the parties to exercise these warrants.
The
833,000 shares were distributed to :
Joseph
Panico
|
|
200,000
shares
|
Jane
Peti
|
|
200,000
shares
|
Bruce
Loewy
|
|
300,000
shares
|
Harborview
Capital
|
|
100,000
shares
|
Gary
Brinster
|
|
33,000
shares
|
On
February 15th,
2008
the Company issued 25,000 shares to First Montauk and its designees in lieu
of
cash compensation pursuant to the Placement Agent Agreement.
On
February 15th,
2008
the Company issued 750,000 shares upon the exercise of 750,000 warrants.
The
warrants were exercisable originally at $1.00, but the exercise price was
subsequently lowered to $.30 in order to induce the parties to exercise these
warrants.
On
December 31, 2007, the
Companies Board of Directors voted to increase the authorized common stock
to
100,000,000 shares effective March 18, 2008.
On
March
28th,
2008,
the Company filed a Form S-8 Registration Statement under the Securities
Act of
1933, as amended, with the Securities and Exchange Commission, registering
shares of Common Stock issuable pursuant to the2008 Professional/Consultant
Stock Compensation Plan. The S-8 will provide for the registration of 7,500,000
shares while limiting the number of shares which may be issued in any year
to no
more than 2,500,000 shares.
BIOMETRX,
INC. AND SUBSIDIARIES
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
11 - Subsequent Events (Continued)
Acquisition
Agreement
On
March
19, 2008, the Company entered into a agreement with Biometric Investors,
LLC.
(“BIL”) whereby the Company will seek to acquire the assets of Sequiam
Corporation (‘Sequiam”). BIL is Sequiam’s secured creditor.
The
agreement is subject to BIL’s ability to secure the timely possession of
Sequiam’s assets and the lawful authority to transfer those assets to the
Company, free and clear of all liens.
Marketing
Agreement
On
March
24th,
2008,
bioMETRX and MasterLOCK agreed to amend the Cooperative Development and
,Marketing Agreement dated March 26, 2007. The agreement will now include
an
additional nine (9) products under this agreement.
ITEM
8A.
CONTROLS AND PROCEDURES .
Evaluation
of Disclosure Controls and Procedures
The
Company's management carried out an evaluation, under the supervision and with
the participation of the Company's Chairman of the Board of Directors and Chief
Financial Officer, its principal executive officer and principal financial
officer, respectively of the effectiveness of the design and operation of the
Company's disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2007,
pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures
are designed to ensure that information required to be disclosed by the Company
is accumulated and communicated to the appropriate management on a basis that
permits timely decisions regarding disclosure. Based upon that evaluation,
the
Company's Chairman of the Board of Directors and Chief Financial Officer
concluded that the Company's disclosure controls and procedures as of December
31, 2007 are effective.
Management's
Report on Internal Control Over Financial Reporting
Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. The Company's internal control over financial reporting
is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). The Company's internal control over financial
reporting includes those policies and procedures that:
|
·
|
pertain
to the maintenance of records that, in reasonable detail, accurately
and
fairly reflect the transactions and dispositions of the assets of
the
Company;
|
|
·
|
provide
reasonable assurance that transactions are recorded as necessary
to permit
preparation of financial statements in accordance with GAAP, and
that
receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company; and
|
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company's assets
that
could have a material effect on the financial statements.
|
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
As
required by Section 404 of the Sarbanes-Oxley Act of 2002, management assessed
the effectiveness of the Company's internal control over financial reporting
as
of December 31, 2007. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") in Internal Control-Integrated Framework.
Based
on
our assessment and those criteria, management concluded that the Company
maintained effective internal control over financial reporting as of December
31, 2007.
Changes
in Internal Control Over Financial Reporting
No
changes in the Company's internal control over financial reporting have come
to
management's attention during the fourth quarter ended December 31, 2007 that
have materially affected, or are reasonably likely to materially affect the
Company's internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act.)
ITEM
9.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT .
Directors
and Executive Officers
The members of the Board of Directors serve until the next annual meeting
of shareholders, or until their successors have been elected. The officers
serve
at the pleasure of the Board of Directors. The following are the directors
and
executive officers of the Company:
Name
|
|
Age
|
|
Position
|
|
Held
Position Since
|
Mark
Basile
|
|
48
|
|
Chief
Executive Officer and Chairman
|
|
2002
|
|
|
|
|
|
|
|
J.
Richard Iler
|
|
54
|
|
Chief
Financial Officer and Director
|
|
2006
|
|
|
|
|
|
|
|
Lorraine
Yarde
|
|
37
|
|
Chief
Operating Officer and Director
|
|
2005
|
|
|
|
|
|
|
|
Wendy
Borow-Johnson
|
|
53
|
|
Director
|
|
2007
|
Mark
R. Basile
is the
Company's founder, Chairman of the Board and CEO. Since founding the Company
in
2001, Mr. Basile has been responsible for its overall strategic direction,
capital transactions, business development, executive hires, and the management
of its overall operations. Mr. Basile has assembled a highly qualified team,
completed the introduction of the first products, and developed strong
relationships with prospective industry partners. In 1999, Mr. Basile founded
and became CEO of Sickbay Health Media, Inc., a publicly owned company. During
his tenure at Sickbay, Mr. Basile led several diverse initiatives and operations
including the repositioning of the company to reflect the internet marketplace
in which it competed directly with WebMD, the acquisition of publisher
Healthline Publications and expanded the company’s health information content
and distribution. Mr. Basile left Sickbay in April 2001. Mr. Basile is also
one
of the co-founding members of the eHI - e-Health
Initiative
, the
single largest not-for-profit trade organization that promotes awareness and
develops platforms for electronic health through interactivity of its
membership. Mr. Basile began his career as a private practice attorney in 1988.
Mr. Basile received a BS in Economics and BA in Political Science from Hofstra
University in 1985, and a Juris Doctorate from Touro Law School in
1988.
Lorraine
Yarde
is Chief
Operating Officer for bioMETRX Inc., and President of smartTOUCH Consumer
Products, Inc. Ms. Yarde is currently responsible for the day to day operations
of bioMETRX and the sales direction, focus and the complete concept to market
life cycle for new product development for smartTOUCH Consumer Products. Ms.
Yarde has over 15 years experience in Sales/Sales Management, Marketing and
Business Development, predominantly in the fields of software, engineering
and
computer consulting, holding various senior management positions with complete
operational accountability for a number of computer consulting organizations.
At
those entities, Ms. Yarde had been responsible for providing direction, driving
revenue, and securing and maintaining successful business relationships with
prestigious companies, such as Estee Lauder, Pfizer, Schering Plough and Henry
Schein. As an entrepreneur, Ms. Yarde owned and operated a successful family
run
Commercial Flooring organization, which at its peak, employed over 20 installers
and performed work for major construction firms such as Turner Construction.
Notable installation accounts included Home Depot, Circuit City and Toys r
Us.
Wendy
Borow-Johnson
was
named to the Company’s Board of Directors on November 14, 2007. In connection
with this election the Company issued Ms. Borow-Johnson fifty-thousand (50,000)
shares of its common stock. MS Borow-Johnson was formally a consultant to the
Company and briefly served as President of the Company’s wholly owned subsidiary
smartTOUCH Medical, Inc. Ms. Borow-Johnson just completed serving as the
President of Healthy Living Channel and as the Senior Vice President of the
Networks Group of Turner Media Group, Inc. The Networks Group includes Healthy
Living Channel, iShop, Beauty and Fashion, Men's Channel, Mall TV, Resorts
and
Residence TV, iDrive and America's Preview Network. She was responsible for
overseeing programming, network development, and distribution and cross media
marketing of lifestyle transactional networks. Prior to joining Turner Media
Group, Inc., Ms. Borow-Johnson served on the Board of Directors of Brands
Shopping Network, Inc. and was President of Television, securing 30 million
cable and satellite homes and 25 name brand retailers for Brands Shopping
Network. She was the President and Chief Executive Officer of RnetHealth Inc.,
a
publicly traded company, and was the President and Chief Executive Officer
of
Recovery Television Network. She was the first woman Vice President of the
American Medial Association. Ms. Borow-Johnson has been a consultant to over
15
major on line and media companies including ATT, Insight Digital Cable and
AOL
and has worked on Direct to Consumer advertising campaigns on more than 25
pharmaceutical and consumer packaged good products. She is a consultant to
investment banking groups on media and emerging technology. She is a frequent
speaker, talk show guest and expert on integrated advertising, transaction
based
media and communications. Ms. Borow-Johnson is a Phi Beta Kappa Magna Cum Laude
graduate of Goucher College and was named alumni of the decade for the 1970’s.
She has a Masters Degree in Counseling from Goddard College and a certificate
in
psychotherapy from Harvard’s Judge Baker Guidance Center.
The
Company has not established an Audit Committee of the Board of Directors, or
any
other committee of the Board, but is actively seeking directors to serve in
this
capacity.
Compensation
of Directors
The
Company has no established compensation plan for its Board of Directors.
However, on November 6, 2007 the Company issued an aggregate of 150,000 shares
of its common stock to the members of its Board of Directors Mark Basile
(50,000), Lorraine Yarde (50,000) and J. Richard Iler (50,000) as consideration
for their services in the performance of their duties as directors of the
Company.
On
November 16, 2007, the Company issued 50,000 shares of its common stock to
Wendy
Borow-Johnson as consideration for joining the Company’s Board of
Directors.
COMPLIANCE
WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires directors
and
certain officers of the Company, as well as persons who own more than 10% of
a
registered class of the Company’s equity securities (“Reporting Persons”), to
file reports with the Securities and Exchange Commission. During fiscal 2007,
each of J. Richard Iler the Company’s Chief Financial Officer, Mark Basile the
Company’s Chief Executive Officer and Lorraine Yarde the Company’s Chief
Operating Officer each filed one late Form 4. The Company believes with the
exception of the of the foregoing, all Reporting Persons timely complied with
all filing requirements applicable to them furing fiscal 2007.
To
the
Company’s knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports
were
required, during the fiscal year ended December 31, 2006 all Section 16(a)
filing requirements applicable to its officers, directors and greater than
ten
percent shareholders were complied with.
Code
of Ethics
We
have
adopted a Code of Ethics and Business Conduct for Officers and Directors and
a
Code of Ethics for Financial Executives that applies to all of our executive
officers, directors and financial executives.
Item
10.
Executive Compensation
Summary
Compensation Table
The
table
below shows certain compensation information for services rendered in all
capacities for the fiscal years ended December 31, 2005, 2006 and 2007. Other
than as set forth herein, no executive officer’s salary and bonus exceeded
$100,000 in any of the applicable years. The following information includes
the
dollar value of base salaries, bonus awards, the number of stock options granted
and certain other compensation, if any, whether paid or deferred.
SUMMARY
COMPENSATION TABLE
|
|
Annual
Compensation
|
|
Long
Term Compensation
|
|
Name
and
Principal
Position
|
|
Fiscal
Year End
|
|
Salary
($)
|
|
Bonus
($)
|
|
All
other and annual Compensa-tion and LTIP Payouts ($)
|
|
Securities
under Options/ SARS
Granted (#)
|
|
Restricted
Shares or Restricted Share Units (#)
|
|
Mark
Basile
|
|
|
2007
|
|
$
|
373,461
|
|
$ |
|
|
$
|
|
|
|
|
|
|
|
|
President,
CEO and
|
|
|
2006
|
|
$
|
370,384
|
|
|
80,000
|
|
|
18,000
|
|
|
1,250,000
|
|
|
—
|
|
Chairman
|
|
|
2005
|
|
$
|
360,000
|
|
|
—
|
|
|
—
|
|
|
187,500
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lorraine
Yarde
|
|
|
2007
|
|
$
|
191,186
|
|
|
|
|
$
|
|
|
|
|
|
|
250,000
|
|
Chief
Operating Officer
|
|
|
2006
|
|
$
|
150,577
|
|
|
—
|
|
|
7,500
|
|
|
850,000
|
|
|
150,000
|
|
|
|
|
2005
|
|
|
33,334
|
|
|
—
|
|
|
—
|
|
|
25,000
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Richard Iler
|
|
|
2007
|
|
$ |
196,923
|
|
|
|
|
$
|
|
|
|
|
|
|
100,000
|
|
Chief
Financial Officer
|
|
|
2006
|
|
|
49,538
|
|
|
—
|
|
|
9,500
|
|
|
400,000
|
|
|
100,000
|
|
|
|
|
2005
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Employment
Contracts
We
have
full-time employment agreements with our three executive officers, Mark Basile,
J. Richard Iler and Lorraine Yarde.
Mr.
Basile’s employment agreement, originally entered into in December 2002, and
amended on February 6, 2006 has an initial term of five years from the date
of
the Amendment and a base salary of:
$360,000
for Calendar Year 2006
$500,000
for Calendar Year 2007
$560,000
for Calendar Year 2008
$620,000
for Calendar Year 2009
$700,000
for Calendar Year 2010
In
addition to the base salary of 2006, Mr. Basile also received an $80,000 bonus
upon execution of his amended contract. The $80,000 will have to be returned
to
the Company on a pro rata basis should Mr. Basile terminate his employment
with
the Company prior to the first anniversary of his amended employment agreement.
Mr. Basile also receives a $1,500 per month car allowance and a five million
dollar ($5,000,000) term life insurance policy naming Mr. Basile’s family as the
beneficiary thereof.
Upon
signing the Amendment, Mr. Basile also received options to purchase up to
1,250,000 shares of the Company’s common stock at the following
prices:
Number
of Shares
|
|
Exercise
Price
|
|
*250,000
|
|
$
|
1.25
|
|
250,000
|
|
$
|
2.00
|
|
250,000
|
|
$
|
3.00
|
|
250,000
|
|
$
|
4.00
|
|
250,000
|
|
$
|
5.00
|
|
(*These
options are included in the Company’s 2005 Equity Incentive Plan and were
exercised cashlessly )
After
the
initial term, Mr. Basile’s agreement automatically renews for additional
one-year periods. Under the terms of this agreement, any accrued compensation
may be converted into shares of the Company’s common stock at $2.00 per share.
Bonuses, if any, are to be paid at the sole discretion of the Board of
Directors.
On
January 23, 2007, the Company issued 80,000 shares of its common stock to Mark
Basile in exchange for Mr. basile foregoing 140,000 of his 2007
salary.
On
August
14, 2006, the Company entered into a three-year employment agreement with
Lorraine Yarde with a base annual salary of $175,000, on August 14, 2007 the
Company agreed to raise her annual compensation to $215,000 effective
immediately and to $300,000 beginning August 2008.
Ms.
Yarde
also receives a $750 per month car allowance.
Upon
signing the employment agreement, Ms. Yarde also received immediately vested
options to purchase up to 600,000 shares of the Company’s common stock at the
following prices:
|
|
Exercise
Price
|
|
200,000
|
|
$
|
1.00
|
|
200,000
|
|
$
|
1.25
|
|
200,000
|
|
$
|
1.50
|
|
On
August
4, 2006, the Company entered into a three-year employment agreement with J.
Richard Iler with a base salary of:
$180,000
for the first year of the agreement
$207,000
for the second year of the agreement
$238,050
for the third year of the agreement
Mr.
Iler
also receives $500 per month car allowance.
Upon
signing the employment agreement, Mr. Iler also received options to purchase
up
to 400,000 shares of the Company’s common stock at the following prices and
subject to the vesting schedule set forth below.
Number
of Options
|
|
Exercise
Price
|
|
Vesting
|
|
200,000
|
|
$
|
1.05
|
|
|
Immediately
|
|
100,000
|
|
$
|
1.10
|
|
|
1
year from date of agreement
|
|
100,000
|
|
$
|
1.00
|
|
|
2
years form date of agreement
|
|
Upon
signing Mr. Iler also received 100,000 shares of the Company’s common
stock.
Stock
Options
OPTIONS/SAR
GRANTS TABLE
Option/SAR
Grants in the Last Fiscal Year
Individual
Grants
Name
and
Principal
Position
|
|
Number
of Securities Underlying
Options/SARs
Granted (#)
|
|
%
of Total Options/SARs Granted to Employees in Fiscal Year
|
|
|
Exercise
or Base Price ($/Sh)
|
|
Expiration
Date
|
|
Market
Price on Date of Grant ($/Sh)
|
|
Mark
Basile
|
|
|
1,250,000
|
|
|
|
|
|
$
|
3.50
|
|
|
01/31/2010
|
|
$
|
1.50
|
|
President,
CEO, Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lorraine
Yarde
|
|
|
850,000
|
|
|
75
|
%
|
|
$
|
1.25
|
|
|
08/14/2011
|
|
$
|
1.25
|
|
Chief
Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Richard Iler
|
|
|
400,000
|
|
|
25
|
%
|
|
$
|
1.05
|
|
|
08/14/2011
|
|
$
|
1.05
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
Incentive Stock Option Plan
The
Company, in 2005, adopted a 2005 Equity Incentive Plan (the “Plan”). The Plan
designates and authorizes the Board of Directors to grant or award to eligible
participants of the Company and its subsidiaries and affiliates, until December
2015, stock options, stock appreciation rights, restricted stock performance
stock awards and Bonus Stock awards for up to 1,250,000 shares of common stock
of the Company. The Company issued _______ options and/or bonus shares under
the
plan.
The
following is a general description of certain features of the Plan:
1.
Eligibility.
Officers, directors and other key employees and consultants of the Company,
its
subsidiaries and its affiliates who are responsible for the management, growth
and profitability of the business of the Company, its subsidiaries and its
affiliates are eligible to be granted stock options, stock appreciation rights,
and restricted or deferred stock awards under the Plan. Directors are eligible
to receive Stock Options.
2.
Administration.
The
Incentive Plan is administered by the Stock Option Committee of the Company.
The
Board, in the absence of the establishment of this Committee, acts in the
capacity of this Committee. The Stock Option Committee has full power to select,
from among the persons eligible for awards, the individuals to whom awards
will
be granted, to make any combination of awards to any participants and to
determine the specific terms of each grant, subject to the provisions of the
Incentive Plan.
3.
Stock
Options.
The Plan
permits the granting of non-transferable stock options that are intended to
qualify as incentive stock options (“ISO’s”) under section 422 of the Internal
Revenue Code of 1986 and stock options that do not so qualify (“Non-Qualified
Stock Options”). The option exercise price for each share covered by an option
shall be determined by the Board of Directors, but shall not be less than 100%
of the fair market value of a share on the date of grant. The term of each
option will be fixed by the Stock Option Committee, but may not exceed 10 years
from the date of the grant in the case of an ISO or 10 years and two days from
the date of the grant in the case of a Non-Qualified Stock Option. In the case
of 10% stockholders, no ISO shall be exercisable after the expiration of five
(5) years from the date the ISO is granted.
4.
Stock
Appreciation Rights.
Non-transferable stock appreciation rights (“SAR’s”) may be granted in
conjunction with options, entitling the holder upon exercise to receive an
amount in any combination of cash or unrestricted common stock of the Company
(as determined by the Stock Option Committee), not greater in value than the
increase since the date of grant in the value of the shares covered by such
right. Each SAR will terminate upon the termination of the related
option.
5.
Restricted
Stock.
Restricted shares of the common stock may be awarded by the Stock Option
Committee subject to such conditions and restrictions as they may determine.
The
Stock Option Committee shall also determine whether a recipient of restricted
shares will pay a purchase price per share or will receive such restricted
shares without, any payment in cash or property. No Restricted Stock Award
may
provide for restrictions beyond ten (10) years from the date of
grant.
6.
Performance
Stock.
Performance shares of Common Stock may be awarded without any payment for such
shares by the Stock Option Committee if specified performance goals established
by the Committee are satisfied. The designation of an employee eligible for
a
specific Performance Stock Award shall be made by the Committee in writing
prior
to the beginning of the period for which the performance is based. The Committee
shall establish the maximum number of shares to stock to be issued to a
designated Employee if the performance goal or goals are met. The committee
reserves the right to make downward adjustments in the maximum amount of an
Award if, in it discretion unforeseen events make such adjustment appropriate.
The Committee must certify in writing that a performance goal has been attained
prior to issuance of any certificate for a Performance Stock Award to any
Employee.
7.
Bonus
Stock.
The
committee may award shares of Common Stock to Eligible Persons, without any
payment for such shares and without any specified performance goals. The
Employees eligible for bonus Stock Awards are senior officers and consultants
of
the Company and such other employees designated by the Committee.
8.
Transfer
Restrictions.
Grants
under the Plan are not transferable except, in the event of death, by will
or by
the laws of descent and distribution.
9.
Termination
of Benefits.
In
certain circumstances such as death, disability, and termination without cause,
beneficiaries in the Plan may exercise Options, SAR’s and receive the benefits
of restricted stock grants following their termination or their employment
or
tenure as a Director as the case may be.
10.
Change
of Control.
The Plan
provides that (a) in the event of a “Change of Control” (as defined in the
Plan), unless otherwise determined by the Stock Option Committee prior to such
Change of Control, or (b) to the extent expressly provided by the Stock Option
Committee at or after the time of grant, in the event of a “Potential Change of
Control” (as defined in the Plan), (i) all stock options and related SAR’s (to
the extent outstanding for at least six months) will become immediately
exercisable: (ii) the restrictions and deferral limitations applicable to
outstanding restricted stock awards and deferred stock awards will lapse and
the
shares in question will be fully vested: and (iii) the value of such options
and
awards, to the extent determined by the Stock Option Committee, will be cashed
out on the basis of the highest price paid (or offered) during the preceding
60-day period, as determined by the Stock Option Committee. The Change of
Control and Potential Change of Control provisions may serve as a disincentive
or impediment to a prospective acquirer of the Company and, therefore, may
adversely affect the market price of the common stock of the
Company.
11.
Amendment
of the Plan.
The Plan
may be amended from time to time by majority vote of the Board of Directors
provided as such amendment may affect outstanding options without the consent
of
an option holder nor may the plan be amended to increase the number of shares
of
common stock subject to the Plan without stockholder approval.
12.
2008
Professional/Consultant Stock
Compensation Plan. Effective March 13th, 2008, the Company’s
Board of Directors registered with the SEC, a Form S-8 Registration, provide
compensation in the form of Common Stock of the Company to eligible consultants
that have previously rendered services or that will render services during
the
term of this 2008 Professional/Consultant Stock Compensation Plan.
Item
11.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The
following table sets forth, as of March 30, 2007, the number and percentage
of
shares of Common Stock of the Company, owned of record and beneficially, by
each
person known by the Company to own 5% or more of such stock, each director
of
the Company, and by all executive officers and directors of the Company, as
a
group:
|
|
Number
of Shares
|
|
|
Percentage
|
|
Mark
Basile
|
|
|
3,824,955
|
(1)(2
)
|
|
|
18.25
|
%
|
500
N. Broadway
|
|
|
|
|
|
|
|
|
Jericho,
NY 11753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Richard Iler
|
|
|
512,500
|
(3)
|
|
|
2.6
|
%
|
500
N. Broadway
|
|
|
|
|
|
|
|
|
Jericho,
NY 11753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lorraine
Yarde
|
|
|
1,068,545
|
(4)
|
|
|
5.3
|
%
|
500
N. Broadway
|
|
|
|
|
|
|
|
|
Jericho,
NY 11753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Naples Trust (5)
|
|
|
1,178,457
|
|
|
|
6.3
|
%
|
736
Carlisle Road
|
|
|
|
|
|
|
|
|
Jericho,
NY 11753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wendy
Borow-Johnson
|
|
|
50,000
|
|
|
|
.3
|
|
500
N. Broadway
|
|
|
|
|
|
|
|
|
Jericho,
NY 11753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell
Kuhn
|
|
|
1,614,307
|
(6)
|
|
|
8.2
|
%
|
8680
Greenback Lane
|
|
|
|
|
|
|
|
|
Orangevale,
CA 95662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BridgePointe
Master Fund Ltd.
|
|
|
1,100,000
|
(7)
|
|
|
5.3
|
%
|
c/o
Roswell Capital Partners, LLC
|
|
|
|
|
|
|
|
|
1125
Sanctuary Parkway, Suite 725
|
|
|
|
|
|
|
|
|
Alpharetta,
GA 30004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linden
Growth Partners Master Fund, LP
|
|
|
1,149,000
|
|
|
|
5.8
|
%
|
718
South State Street
|
|
|
|
|
|
|
|
|
Clarks
Summit, PA 18411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers
and directors as a group
4
persons) (1)(2)(3)(4)(5)
|
|
|
5,456,000
|
|
|
|
32.75
|
%
|
(1)
|
|
Includes
1,178,457 shares held by The Naples Trust. Mr. Basile’s mother-in-law is
the trustee for The Naples Trust and Mr. Basile’s wife is the
beneficiary.
|
|
|
|
(2)
|
|
Includes
1,215,000 shares of common stock issuable upon the exercise of stock
options and warrants to purchase a like number of
shares.
|
|
|
|
(3)
|
|
Includes
275,000 shares of common stock issuable upon the exercise of stock
options
and warrants to purchase a like number of shares.
|
|
|
|
(4)
|
|
Includes
295,000 shares of common stock issuable upon the exercise of stock
options
and warrants to purchase a like number of shares.
|
|
|
|
(5)
|
|
Mr.
Basile’s mother-in-law is the trustee for The Naples Trust and Mr.
Basile’s wife is the beneficiary.
|
|
|
|
(6)
|
|
Includes
29,511 shares of common stock issuable upon the exercise of warrants
to
purchase a like number of shares.
|
|
|
|
(7)
|
|
Includes
stock underlying a warrant to purchase 1,000,000 shares of common
stock at
an exercise price of $1.00 per share. Does not include shares underlying
a
convertible debenture in the principal amount of $700,000 as of March
25,
2009 in that these shares would not be deemed beneficially owned
within
the meaning of Sections 13(d) and 13(g) of the Exchange Act before
their
acquisition by BridgePointe Master Fund Ltd. Eric Swartz, who hold
voting
and dispositive power with respect to the securities held by BridgePointe
Master Fund Ltd., disclaims beneficial ownership of such securities.
The
debenture and warrant contain language restricting the shareholder
from
owning in excess of 4.99% of the Company’s common stock at any given
time.
|
As
ownership of shares of the Common Stock by each of the Company’s directors and
executive officers is included within the foregoing table, and as the Company
currently employs no additional executive officers, no separate table has been
provided to identify Company stock ownership by management
personnel.
ITEM
12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On
March
6, 2008, the Company issued The Incredible Card Company 150,000 restricted
shares of its common stock as consideration for the purchase of a patent. Mark
Basile, the Company’s Chairman and Chief Executive Officer, is a former officer
and director of he Incredible Card Company.
On
January 22, 2007, the Company issued 50,000 shares of its common stock to Mark
Basile as consideration for Mr. Basile providing the Company his personal
guarantee in connection with the opening of a Letter of Credit in the amount
of
$1,040,000.
On
January 23, 2007, the Company issued 80,000 shares of its common stock in
exchange for Mr. Basile foregoing $140,000 of his 2007 salary.
On
April
24, 2007, the Company issued 140,000 shares of its common stock and 140,000
warrants exercisable at $1.00 per share to Mark Basile as consideration for
providing the Company a loan in the principal amount of $130,000.
On
May
21, 2007 the Company issued 50,000 shares of its common stock and 50,000
warrants exercisable at $1.00 per share to Lorraine Yarde, the Company’s Chief
Operating Officer as consideration for providing the Company a loan in the
principal amount of $50,000.
On
June
15, 2007, the Company issued 45,000 shares of its common stock and 45,000
warrants exercisable at $1.00 per share to Lorraine Yarde as consideration
for
providing the Company a loan in the principal amount of $45,000.
On
June
18, 2007, the Company awarded Lorraine Yarde 150,000 shares of common stock
as a
bonus for securing an increased purchase order form The Home Depot and an
additional purchase order from MasterLOCK.
On
June
18, 2007, the Company issued 75,000 shares of its common stock and 75,000
warrants exercisable at $1.00 per share to The Naples Trust, of which Mark
Basile is a related party, as consideration for providing the Company a loan
in
the principal amount of $75,000.
On
June
28, 2007, the Company issued 75,000 shares of its common stock and 75,000
warrants exercisable at $1.00 per share to J. Richard Iler , the Company’s Chief
Financial Officer as consideration for providing the Company a loan in the
principal amount of $75,000.
On
July
25, 2007, the Company issued 25,000 shares of its common stock and 25,000
warrants exercisable at $1.00 per share to Mark Basile as consideration for
providing the Company a loan in the principal amount of $25,000.
On
July
25, 2007 the Company issued 150,000 shares of its common stock to Mark Basile
as
consideration for Mr. Basile providing the Company his personal guarantee in
connection with the opening of an escrow agreement in the amount of
$750,000.
ITEM
13.
EXHIBITS
Exhibit
No.
|
|
Description
of Exhibit
|
|
If
Incorporated by Reference, Document with which Exhibit was Previously
Filed with SEC
|
3.1
|
|
Certificate
of Incorporation
|
|
Annual
Report on Form 10-K for the year ended December 31, 1987, filed March
30,
1988
|
|
|
|
|
|
3.1
|
|
Certificate
of Amendment to Certificate of Incorporation filed May 2,
1988
|
|
Annual
Report on Form 10-K for the year ended December 31, 1988 filed December
28, 1989
|
|
|
|
|
|
3.1
|
|
Certificate
of Amendment to Certificate of Incorporation filed September 12,
1990
|
|
Annual
Report on Form 10-K for the year ended December 31, 1990 filed April
15,
1991
|
|
|
|
|
|
3.1.1
|
|
Certificate
of Amendment to Certificate of Incorporation filed August 26,
2003
|
|
Annual
Report on Form 10-K for the year ended December 31,
2003
|
|
|
|
|
|
3.1.2
|
|
Certificate
of Amendment to Certificate
of
Incorporation filed August 28, 2003
|
|
Annual
Report on Form 10-K for the year ended December 31,
2003
|
|
|
|
|
|
3.1.3
|
|
Certificate
of Amendment to Certificate of Incorporation filed December 14,
2004
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
3.1.4
|
|
Certificate
of Amendment to Certificate of Incorporation filed September 23,
2005
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
3.1.5
|
|
Certificate
of Amendment to Certificate of Incorporation filed March 10,
2006
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
3.2
|
|
Bylaws
|
|
Annual
Report on Form 10-K for the year ended December 31,
2003
|
|
|
|
|
|
4
|
|
Designation
of Preference with respect to Series A Preferred Stock, filed August
23,
2000
|
|
Annual
Report on Form 10-KSB for the year ended December 31, 2000, filed
April 2,
2001
|
|
|
|
|
|
4.1
|
|
Amended
Designation of Preference with respect to Series A Preferred Stock,
filed
August 23, 2000
|
|
Current
Report on Form 8-K, filed July 18, 2003
|
|
|
|
|
|
10.1
|
|
Asset
Purchase Agreement dated October 7, 2004 between the Registrant and
Palomar Enterprises, Inc.
|
|
Current
Report on Form 8-K, filed October 13,
2004
|
10.2
|
|
Capital
Stock Purchase Agreement dated October 7, 2004 between shareholders
of the
Registrant and Palomar Enterprises, Inc.
|
|
Current
Report on Form 8-K, filed October 13, 2004
|
|
|
|
|
|
10.3
|
|
Agreement
and Plan of Merger dated as of April 27, 2005 between the Registrant,
its
Merger Subsidiary and bioMETRX Technologies, Inc.
|
|
Current
Report on Form 8-K, filed May 3, 2005
|
|
|
|
|
|
10.4
|
|
Subscription
Agreement dated July 5, 2005 between the Registrant and Russell
Kuhn
|
|
Current
Report on Form 8-K, filed July 8, 2005
|
|
|
|
|
|
10.5
|
|
Common
Stock Purchase Warrant issued to Russell Kuhn on July 5,
2005
|
|
Current
Report on Form 8-K, filed July 8, 2005
|
|
|
|
|
|
10.6
|
|
Employment
Agreement dated December 12, 2002 between Mark Basile and bioMetrx
Technologies, Inc.
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
10.7
|
|
Amendment
to Employment Agreement dated February 6, 2006 between the Registrant
and
Mark Basile
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
10.8
|
|
Employment
Agreement dated January 1, 2004 between Steven Kang and bioMetrx
Technologies, Inc.
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
10.9
|
|
Employment
Agreement dated August 5, 2005 between Lorraine Yarde and bioMetrx
Technologies, Inc.
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
10.10
|
|
Amendment
to Employment Agreement dated January 26, 2006 between the Registrant
and
Lorraine Yarde
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
10.11
|
|
Finder’s
Fee Agreement dated November 28, 2005 between the Registrant and
Harbor
View Group, Inc.
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
10.12
|
|
Finder’s
Fee Agreement dated February 8, 2006 between the Registrant and Harbor
View Group, Inc.
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
10.13
|
|
Subscription
Agreement dated October 28, 2005 between the Registrant and Russell
Kuhn
|
|
Current
Report on Form 8-K, filed November 1, 2005
|
|
|
|
|
|
10.14
|
|
Common
Stock Purchase Warrant issued to Russell Kuhn on October 28,
2005
|
|
Current
Report on Form 8-K, filed November 1,
2005
|
10.15
|
|
Settlement
Agreement dated January 12, 2006 between the Registrant and Adam
Laufer,
Esq.
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
10.16
|
|
Consulting
agreement dated November 7, 2005 between the Registrant and Wendy
Borow-Johnson
|
|
Quarterly
Report on Form 10-QSB for the quarter ended September 30, 2005, filed
November 18, 2005
|
|
|
|
|
|
10.17
|
|
2005
Equity Incentive Plan
|
|
Registration
Statement on Form S-8 filed December 23, 2005
|
|
|
|
|
|
10.18
|
|
Form
of Stock Option issued pursuant to 2005 Equity Incentive
Plan
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
10.19
|
|
Form
of Stock Option issued outside of plan
|
|
Annual
Report on Form 10-K for the year ended December 31,
2005
|
|
|
|
|
|
10.20
|
|
Letter
of Engagement dated March 17, 2006 between the Registrant and Pasadena
Capital Partners, LLC
|
|
Quarterly
Report on From 10-QSB for the quarter ended March 31, 2006, filed
May 15,
2006
|
|
|
|
|
|
10.21
|
|
Consulting
Agreement dated April 20, 2006 between the Registrant and New Castle
Consulting, Inc.
|
|
Quarterly
Report on From 10-QSB for the quarter ended March 31, 2006, filed
May 15,
2006
|
|
|
|
|
|
10.22
|
|
Form
of Securities Purchase Agreement
|
|
Current
Report on Form 8-K filed May 2, 2006
|
|
|
|
|
|
10.23
|
|
Form
of Series A Common Stock Purchase Warrant
|
|
Current
Report on Form 8-K filed May 2, 2006
|
|
|
|
|
|
10.24
|
|
Form
of Series B Common Stock Purchase Warrant
|
|
Current
Report on Form 8-K filed May 2, 2006
|
|
|
|
|
|
10.25
|
|
Form
of Registration Rights Agreement
|
|
Current
Report on Form 8-K filed May 2, 2006
|
|
|
|
|
|
10.26
|
|
Form
of Escrow Agreement
|
|
Current
Report on Form 8-K filed May 2, 2006
|
|
|
|
|
|
10.27
|
|
Termination
Agreement dated July 11, 2006 between the Registrant and Steven
Kang
|
|
Current
Report on Form 8-K filed July 14, 2006
|
|
|
|
|
|
10.28
|
|
Consulting
Agreement dated October 20, 2006 between the Registrant and Interactive
Resources Group, Inc.
|
|
Quarterly
Report on Form 10-QSB for the quarter ended September 30,
2006
|
10.29
|
|
Consulting
Agreement dated October 23, 2006 between the Registrant and Brendan
Hopkins
|
|
Quarterly
Report on Form 10-QSB for the quarter ended September 30,
2006
|
|
|
|
|
|
10.30
|
|
Form
of Warrant issued to Interactive Resources Group, Inc.
|
|
Quarterly
Report on Form 10-QSB for the quarter ended September 30,
2006
|
|
|
|
|
|
10.31
|
|
Form
of Warrant issued to Investors
|
|
Quarterly
Report on Form 10-QSB for the quarter ended September 30,
2006
|
|
|
|
|
|
10.32
|
|
Form
of Securities Purchase Agreement entered into between the Registrant
and
Investors
|
|
Quarterly
Report on Form 10-QSB for the quarter ended September 30,
2006
|
|
|
|
|
|
10.33
|
|
Form
of Note issued by the Registrant to Investors
|
|
Quarterly
Report on Form 10-QSB for the quarter ended September 30,
2006
|
|
|
|
|
|
10.34
|
|
Form
of Securities Purchase Agreement
|
|
Current
Report on Form 8-K filed January 8, 2007
|
|
|
|
|
|
10.35
|
|
Form
of Series A Common Stock Purchase Warrant
|
|
Current
Report on Form 8-K filed January 8, 2007
|
|
|
|
|
|
10.36
|
|
Form
of Series B Common Stock Purchase Warrants
|
|
Current
Report on Form 8-K filed January 8, 2007
|
|
|
|
|
|
10.37
|
|
Form
of Registration Rights Agreement
|
|
Current
Report on Form 8-K filed January 8, 2007
|
|
|
|
|
|
10.38
|
|
Form
of Convertible Debenture
|
|
Current
Report on Form 8-K filed January 8, 2007
|
|
|
|
|
|
10.39
|
|
Form
of Consent and Waiver
|
|
Current
Report on Form 8-K filed January 8, 2007
|
|
|
|
|
|
10.40
|
|
Form
of Forebearance Note
|
|
Current
Report on Form 8-K filed January 8, 2007
|
|
|
|
|
|
10.41
|
|
Employment
Agreement dated August 4, 2006 between the Registrant and J. Richard
Iler
|
|
Current
Report on Form 8-K filed August 9,
2006
|
|
|
|
|
|
10.42
|
|
Consulting
Agreement dated as of January 15, 2007 between the Registrant and
ICR,
LLC
|
|
Filed
herewith
|
|
|
|
|
|
10.43
|
|
Factoring
Agreement between BLX Funding LLC and the Registrant effective January
17,
2007
|
|
Current
Report on Form 8-K filed January 22, 2007
|
|
|
|
|
|
10.44
|
|
Funding
Agreement between BLX Funding LLC and the Registrant effective January
17,
2007
|
|
Current
Report on Form 8-K filed January 22, 2007
|
|
|
|
|
|
10.45
|
|
Letter
Amending Factoring Agreement dated January 17, 2007 between BLX Funding
LLC and the Registrant
|
|
Current
Report on Form 8-K filed January 22, 2007
|
|
|
|
|
|
10.46
|
|
Performance
Guaranty between BLX Funding LLC and Mark Basile
|
|
Current
Report on Form 8-K filed January 22, 2007
|
|
|
|
|
|
10.47
|
|
Purchase
and Sale Agreement between BLX Funding LLC and Registrant effective
January 17, 2007
|
|
Current
Report on Form 8-K filed January 22, 2007
|
|
|
|
|
|
10.48
|
|
Right
of Set-Off Letter dated January 17, 2007
|
|
Current
Report on Form 8-K filed January 22, 2007
|
|
|
|
|
|
10.49
|
|
Security
Agreement between BLX Funding LLC and the Registrant effective January
17,
2007
|
|
Current
Report on Form 8-K filed January 22, 2007
|
|
|
|
|
|
10.50
|
|
Assignment
of Intellectual Property Technology Purchase Agreement dated as of
March
16, 2007
|
|
Current
Report on Form 8-K filed March 16, 2007
|
|
|
|
|
|
10.51
|
|
Service
Level Agreement between A2E Technologies and the Registrant dated
March
16, 2007
|
|
Current
Report on Form 8-K filed March 17, 2007
|
|
|
|
|
|
16
|
|
Letter
on Change In Certifying Accountants
|
|
Current
Report on Form 8K, filed August 20, 2003 and an amendment thereto
on Form
8K/a filed March 5, 2004.
|
|
|
|
|
|
16.1
|
|
Letter
on Change In Certifying Accountants
|
|
Current
Report on Form 8K, filed April 25,
2005
|
21
|
|
List
of Subsidiaries
|
|
Contained
herein.
|
|
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14a
and
Rule 15d-14(a).
|
|
Contained
herein.
|
|
|
|
|
|
31.2
|
|
Certification
of Principal Financial Officer of Periodic Report pursuant to Rule
13a-14a
and Rule 15d-14(a).
|
|
Contained
herein.
|
|
|
|
|
|
32.1
|
|
Certification
pursuant to 18 U.S.C. Section 1350.
|
|
Contained
herein.
|
|
|
|
|
|
32.2
|
|
Certification
pursuant to 18 U.S.C. Section 1350.
|
|
Contained
herein.
|
|
|
|
|
|
99.2
|
|
Code
of Ethics, as Adopted by the Board of Directors
|
|
Annual
Report on Form 10-K for the year ended December 31,
2003
|
Item
14.
Principal Accountant Fees and Services.
Audit
Fee
The aggregate fees billed for the most recent fiscal year for
professional services rendered by the principal accountant for the audit of
bioMETRX, Inc. and Subsidiary’s annual financial statement and review of
financial statements included in bioMETRX, Inc. and Subsidiary’s 10-QSB reports
and services normally provided by the accountant in connection with statutory
and regulatory filings or engagements were $________ and $84,000 for years
ended
2007 and 2006, respectively.
Audit-Related
Fees
There
were no audit related fees for the fiscal year ended 2007.
Tax
Fees
Fees for tax compliance, tax advice and tax planning for the years 2007
and 2006 was $-0-.
All
Other Fees
There were no other aggregate fees billed in either of the last two
fiscal years for products and services provided by the principal accountant,
other than the services reported above.
We do not have an audit committee currently serving and as a result our
board of directors performs the duties of an audit committee. Our board of
directors will evaluate and approve in advance, the scope and cost of the
engagement of an auditor before the auditor renders audit and non-audit
services. We do not rely on pre-approval policies and procedures.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
|
bioMETRX,
INC.
|
|
|
|
Dated:
April 15, 2007
|
By: |
/s/ Mark
Basile
|
|
Mark
Basile, Chief Executive Officer
|
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the
dates indicated.
|
|
|
Dated:
April 15, 2007
|
By: |
/s/ Mark
Basile
|
|
Mark
Basile, Chief Executive Officer
(Principal
Executive Officer)
|
|
|
|
Dated:
April 15, 2007
|
By: |
|
|
J.
Richard Iler, Chief Financial Officer
and
Director (Principal Accounting
Officer)
|
|
|
|
Dated:
April 15, 2007
|
By: |
|
|
Lorraine
Yarde, Chief Operating Officer and
Director
|