UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-KSB
(Mark
One)
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ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the
fiscal year ended December
31, 2005
o |
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the
transition period from ______________ to________________
Commission
file number 0-15807
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BIOMETRX,
INC.
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(Name
of small business issuer in its
charter)
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DELAWARE
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31-1190725
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(State
or other jurisdiction of
incorporation or organization)
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(I.R.S.
Employer Identification
No.)
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500
North Broadway, Suite 204, Jericho,
New York
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11753
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(Address
of principal executive offices)
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(Zip Code)
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(516)
937-2828
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Issuer’s
telephone number
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Securities
registered under Section 12(b) of the Exchange Act:
Title
of each class
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Name
of each exchange on which registered
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None
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Securities
registered under Section 12(g)
of
the Exchange Act:
Common
Stock Par Value
$.001
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(Title
of class)
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(Title
of
class)
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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. $0
The
aggregate market value of the Company’s common stock held by non-affiliates was
approximately $8,555,619.50 based upon the average bid and asked price of $2.95
as reported by the OTC Bulletin Board as of April 6, 2006.
The
Company has 5,985,999 shares of common stock outstanding, as of April 14,
2006.
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.
Background
The
Company was incorporated on March 13, 1985, under the laws of the State of
Utah
with the name Univenture Capital Corp. The Company was organized to engage
in
any lawful business and had no specific business plan except the investigation,
analysis, and possible acquisition of business opportunities.
On
August
29, 1986, the Company acquired all of the outstanding stock of Health &
Leisure Inc., a Delaware corporation which subsequently changed its name to
Entre Vest, Inc. (“Entre Vest”), in a transaction in which a subsidiary of the
Company merged with and into Entre Vest and the former stockholders of Entre
Vest obtained a controlling interest in the Company. The Company subsequently
changed its own name from Univenture Capital Corp. to Health & Leisure, Inc.
and changed its state of incorporation from Utah to Delaware.
Entre
Vest was incorporated on June 6, 1985, under the laws of the State of Delaware.
Pursuant
to an Acquisition Agreement and Plan of Merger dated June 13, 2003 (the “Merger
Agreement”), by and among Health & Leisure, Inc (the “Registrant”); Venture
Sum, Inc., a Delaware corporation and a wholly owned subsidiary of Registrant
(“Mergerco”); and MarketShare Recovery, Inc., a New York corporation, (“MKSR”),
Mergerco merged with and into MKSR, and MKSR became a wholly-owned subsidiary
of
the Registrant. The merger became effective June 13, 2003, (the “Effective
Date,”) however closing of the Agreement occurred on July 15, 2003.
Subsequently, Health & Leisure, Inc. filed an amendment to its certificate
of incorporation and thereby changed its name to MarketShare Recovery, Inc.
Our
former subsidiary similarly named MarketShare Recovery, Inc. was incorporated
in
New York in November 2000. The subsidiary, MarketShare Recovery, Inc. was a
provider of online direct marketing solutions for enterprises. The solutions
enabled corporations to create and deliver online direct marketing programs
that
drive revenue, influence behavior and deepen customer relationships. Our
solutions provided customer insight and powerful program execution through
a
combination of hosted applications and technology infrastructure. As a result
of
new technology, the Company found it harder to maintain and grow this business
and at the end of 2004 this business was discontinued.
On
October 7, 2004, we entered into an Asset Purchase Agreement with Palomar
Enterprises, Inc. (the “Agreement”). Pursuant to the Agreement, we agreed to
purchase certain assets, including certain automotive notes and contracts,
a
business plan and model for an automotive financial services company and a
data
base of potential customers and $150,000 in cash from Palomar in exchange for
a
controlling interest in us.
On
November 2, 2004, by mutual agreement, Palomar and us terminated the Agreement.
In
2004,
we entered into a database license agreement with 110 Media Group to use and
to
sublicense the use of its database for a term of ten years for a total license
fee of $45,567. For financial reporting, revenue is recognized using the
straight-line method, based upon the economic useful life of three years. At
December 31, 2004, our remaining deferred revenue of $30,378 was recognized
as
revenue due to the Company completing its obligations under the agreement and
we
are no longer required to perform any further services nor incur any costs
related to this agreement.
On
May
27, 2005, we completed a merger (“Merger”) of MarketShare Merger Sub, Inc. a
wholly owned subsidiary of the Company (“Merger Sub”) 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, a development stage company, 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 (the “Effective Date”), Merger Sub filed a Merger Certificate completing
the acquisition of bioMetrx Technologies. The consideration for the Merger
was
3,554,606 restricted shares of our common stock and the issuance of 45,507
Common Stock Purchase Warrants to the holders of corresponding instruments
of
bioMetrx Technologies. The Merger was completed according to the terms of the
Merger Agreement. Simultaneously with the Merger, certain stockholders of the
Company surrendered 552,130 shares of the Company’s common stock which was
cancelled and returned to the status of authorized and unissued. In addition,
75,000 shares of the Company’s common stock were deposited by these stockholders
into escrow to cover contingent liabilities, if any. As a result of the Merger,
bioMetrx Technologies was merged into the Merger Sub and became our wholly
owned
subsidiary.
Since
the
Company had no meaningful operations immediately prior to the Merger, the Merger
is being treated as a reorganization of bioMetrx Technologies via a reverse
merger with the Company for accounting purposes.
The
3,554,606 shares and the shares issuable upon the exercise of 45,507 warrants
issued as part of Merger to the former bioMetrx Technologies stockholders
represented approximately 90% of the total outstanding post-merger
stock.
On
October 10, 2005, the Company amended its Certificate of Incorporation to change
its name to bioMETRX, Inc., as a result, the Company’s trading symbol was
changed to “BMTX”.
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. Our certificate of incorporation amendment 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. The Company’s trading symbol was changed to “BMRX.”
The combined companies are hereinafter referred to as the “Company” or
“bioMETRX.”
Operations
The
Company, through its wholly owned subsidiaries, designs, develops, engineers
and
markets biometrics-based products for the consumer home security, consumer
electronics, medical records and medical products markets. The Company’s
executive offices are located in Jericho, New York.
Originally
founded in 2001, bioMETRX is focused on developing simple-to-use,
cost-efficient, finger-activated, lifestyle products under the trade name
SmartTOUCHÔ.
The
Company’s product line includes biometrically enabled residential locks, central
station alarm keypads, thermostats, garage/gate openers, medical crash carts
and
industrial medicine cabinets. Our products utilize finger recognition technology
designed to augment or replace conventional security methods such as keys,
keypads, and PIN numbers.
The
Company operates its business through three (3) wholly owned subsidiaries,
bioMETRX Technologies Inc., which conducts the product engineering and design,
smartTOUCH Consumer Products, Inc., the consumer-based marketing and sales
group
and smartTOUCH Medical, Inc. which is designing and will market medical industry
products.
The
home
security industry consists of garage door manufacturers, key and lock
manufacturers and central station alarm monitoring companies, representing
a $25
billion global market. bioMETRX develops market-specific products in this area
which are being sold through retailers, dealers and direct to consumers in
the
Unites States. The company’s first product, the Garage Door Opener, also known
as the smartTOUCH GDO, will be available through the Home Depot this
summer.
The
Company also developed a finger-activated thermostat (smartSTAT) that will
be
marketed to
the
general public as well as small box retailers, restaurant chains and small
business owners. The Company’s smartSTAT product will allow consumers and small
business owners the ability to prevent unwanted tampering of their heating
and
cooling settings and hence control the temperature within their homes or
business establishments, as the case may be, without having to install a
cumbersome security box around the thermostat. The Company’s smartSTAT
thermostat allows homeowners and small business owner’s complete control and
security over their costly HVAC systems.
The
Company is also developing technology for the medical products market.
Currently, devices such as medical crash carts, rolling medicine drawers and
cabinets and medical tool supply bins are either accessible in a hallway of
a
hospital or require medical personnel to enter a 4-digit PIN code to unlock
these products. The Company is developing technology to secure these items
while
simplifying the procedure so that the proper medical personnel can access them
quickly when necessary.
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. To
date, activities have been limited to organizational matters, development of
its
products and services and capital raising.
Management’s
plan of operations for the next twelve months is to raise additional capital,
complete further development of its product line and commence marketing the
Company’s products and services. The Company expects it will require $6,000,000
over the next 12 months to accomplish these goals 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. 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.
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 efficient, finger activated consumer
electronics products principally under the trade name “smartTOUCHÔ”.
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
smartTOUCHÔ
products
allow a person to open a door, or set an alarm or thermostat simply by placing
a
finger upon a sensor chip, the size of a postage stamp. smartTOUCHÔ
products
are designed to simplify access, while substantially increasing the security
level of the systems used for such purposes. Our smartTOUCHÔ
products
use one-to-one biometrics matching authenticated systems embodied in its
products. The bioMETRX patent-pending system includes a hand held universal
programmer designed to control access to the administrative functions of each
smartTOUCHÔ
device.
All smartTOUCHÔ
products
are designed to work with this universal programmer, and permit up to fifteen
(15) authorized users to be enrolled. Our system allows two types of users,
an
access user who can only operate the smartTOUCHÔ
device,
and an administrative user who can operate and also add or delete other users.
Consumer
Products
smartTOUCHÔ
Garage Door Opener
The
smartTOUCHÔ
Garage
Door Opener (GDO) is a weatherproof, shockproof, tamper resistant garage door
opener that allows a homeowner to control the opening of a garage door with
a
touch of a finger. The garage door opener currently comes as a hardwired unit,
designed specifically to withstand the elements for years of reliable service
and dependability. The homeowner’s finger is used to activate the garage door
opening mechanism.
The
GDO
unit is programmed using a handheld universal programmer that was designed
by
the Company to program the complete range of smartTOUCH products. The programmer
simply plugs into the main Sensor Unit and initiates a series of simple prompts
on the menu screen, allowing the Sensor to be programmed quickly and easily.
We
are
also developing a wireless biometric version of the smartTOUCH GDO unit which
removes the need for a hard-wired connection between the Sensor unit and Relay
for easier installation. The wireless version will allow the unit to communicate
with a device such as a cell phone or other alternative wireless remote. This
will eliminate the possibility of a criminal wirelessly using
a
frequency descrambler to open the garage door. Our wireless technology is being
designed to actually transmit the user’s information that is authenticated at
the remote device first, then transmitted to the receiver located on the garage
door frame for re-authentication. We call this feature our “Failsafe
Authentication Process” (“FAP”).
Although
market data on the use of automatic garage door openers is limited, management
estimates that there are 30 million homes in the United States equipped with
automatic garage doors. For many families, the automatic garage door opener
has
made the garage door the most frequently used door for entering and exiting
the
home. Consequently, there is a large potential market for the
smartTOUCHÔ
Garage
Door Opener which meets the consumer need for security and convenience combined.
We have filed our initial patent for this device with the United States Patents
and Trademark Office in March 2004 and have been assigned a “Patent Pending”
number.
During
the quarter ended March 31, 2006 we received an initial purchase order for
our
smartTOUCHÔ
Garage
Door Opener in the amount of 23,000 units from The Home Depot. Delivery of
the
order is scheduled for summer 2006. The company has received numerous inquiries
from other home improvement and consumer electronic retailers and is making
every effort to meet with these other retailers.
We
are
also negotiating with several large retailers to private-label the Garage Door
Opener unit under their brand name. In addition, the Company has had discussions
with garage door manufacturers with the objective of providing the Company’s
product as an additional option to their standard garage door openers. In
addition, following numerous inquiries, we have begun to establish a National
Dealer Network, with the introduction of our proTOUCH Dealer Program. Our
products are also available on the Company’s website. To date, the Company has
received approximately 1,100 on-line orders for its garage door opener
unit.
We
are
currently initiating manufacturing of the garage door opener unit with a third
party contract manufacturer located in the United States, who will be providing
turn-key manufacturing services. We have also established a credit facility
with
our major component supplier.
smartSTATÔ
Thermostat
Every
residential, commercial and industrial building is equipped with at least one
thermostat. Typically, thermostats can be adjusted by children, housekeepers,
employees, guests and even strangers, which can cost the homeowner or business
owner hundreds, if not thousands, of dollars per year in lost energy costs
due
to unauthorized operations. Currently, the only security device available for
thermostats is a clear plastic “lockbox” that fits over the thermostat. These
boxes are used in a number of different buildings, including, but not limited
to, shopping malls, apartment buildings office buildings, restaurants and
factories. They are cumbersome and ineffective deterrents. In fact, these
lockboxes are usually broken or simply ripped off the wall.
The
smartSTATÔ
Thermostat allows business owners/homeowners complete and secure control of
the
facility’s heating and cooling system without having to invest tens of thousands
of dollars in computer-based HVAC systems. By programming the
smartSTATÔ
Thermostat, only those individuals with authority to change the temperature
can
access the thermostat menus and functions.
smartSTATÔ
Thermostats are designed to the same operational standards as currently
available electronic programmable thermostats. The smartSTATÔ
Thermostat is the Company’s second product to market. The smartSTATÔ
Thermostat will have a suggested retail price of $189.00.
Management
estimates that approximately 10 million thermostats are sold in the United
States annually, 45% of which are electronic models, either programmable or
non-programmable. Management expects that there will be an increase in the
sale
of electronic thermostats as several states enact laws addressing the sale
and
disposal of mercury-based thermostats, some are even offering rebate programs
to
consumers that replace mercury thermostats with new energy-efficient
programmable models.
The
Company intends to manufacture approximately one thousand (1,000) thermostat
units for two programs. One program will be designed for commercial applications
and the Company has had several discussions with a number of restaurant chains
who have expressed interest in participating in the program. The second program
will be designed for residential use. The Company anticipates that these
programs will commence within the next three to six months.
smartGATEÔ
Automatic Gate Opener
The
smartGATEÔ
Automatic Gate Opener serves a similar function as our garage door opener,
as it
allows homeowners and employees who gain access to their premises or place
of
business through either drive-through or walk-through security gates, easy,
simple to use access with just a touch of a finger. Automatic gates work on
the
same principles as mechanized overhead garage door units. Many residences and
businesses that use security gates use some sort of digital keypad, or universal
“clicker” to open the gate from outside the premises.
The
smartGATEÔ
Automatic Gate Opener is designed similarly to our garage door opener, except
that it is housed in a weatherproof box that is usually an aftermarket product,
purchased through gate installation companies. Our automatic gate opener is
designed to fit conveniently into most vendors weatherproof containers designed
for automatic gate opener units. While presently targeted for high-end
residential installations, this unit is being re-engineered to meet the
prospective needs of gated communities and moderate traffic commercial
users.
Although
market data is not readily available for this product, our own market analysis
and information gathered through membership in industry organizations indicates
large potential for the sale of this product for both residential and commercial
use. These products will be marketed through traditional retail channels, as
well as through contractor/installer channels.
Other
smartTOUCHÔ
Consumer Products
The
smartTOUCHÔ
line of
products under development includes a biometric deadbolt, smartLOCKÔ
for use
on residential doors and a biometrically enabled home alarm/central station
alarm keypad smartALARMÔ
that
will be designed to communicate directly with home monitoring
systems.
smartTOUCH™
Medical
We
are
also developing products for the healthcare industry. Government legislation
surrounding the integrity, confidentiality and privacy of patient data was
enacted under HIPAA. HIPAA requires the healthcare industry to restructure
current information technology (“IT”) infrastructures and methods. We are
developing biometrics products and solutions for end users, as well as enabling
biometric technology for original equipment manufacturers (“OEMs”) and
application developers to incorporate into their offerings, to assist healthcare
organizations working towards meeting these legislative demands, while
increasing efficiencies and user convenience and lowering overall administrative
costs and risks associated with passwords, PINs and keys. To that end, the
Company is working on a number of prospective medical products that are expected
to be available by 2007. These products include a series of medical crash carts,
rolling medicine carts, fixed medicine and supply cabinets and a portable
patient medical record system that integrates digital medical records with
biometrics-based technology.
Intellectual
Property
We
currently have two patents pending, both utility and mechanical for our
products. The Company is seeking patents on its system that combines software
and hardware that off load all administrative functionality of a biometric
device. By off loading all administrative functionality, the Company’s products
can be smaller and hence more compatible with multiple consumer applications.
In
addition, this function enables the products to comply with and connect to
any
OEM’s equipment specifications.
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.
Manufacturing
We
do not
own any manufacturing facilities and have been negotiating with, and expect
a
third party contract manufacturer located in the United States to manufacture
our garage door opening units. As the need arises, we plan to either contract
additional contract manufacturers or license our technology to third party
manufacturers to incorporate into their products. Each decision will depend
on
demand, our available cash resources and our ability to access
expertise.
Marketing
The
primary target market for our marketing effort of our home security products
will be consumers and hardware security and device manufacturers. bioMETRX
has
established marketing initiatives by developing channel distribution through
retailers, development partner's, authorized dealers and original equipment
manufacturers and solutions-based companies.
An
initial pilot program was implemented to test the consumer market for response
as to the acceptance and use of the smartTOUCH™ line of home security
products. Feedback from the “test” families demonstrates that our products
are consumer friendly and competitively priced. The first product tested was
our
garage door opener. The reports indicate that most every family member enrolled
into the devices now use the garage as their main access point to their homes.
The families seem to end up relying on our product since it is easy to operate.
The units have had no material operational problems and have been subjected
to
temperatures well below zero and various snow and ice storms with no
problems.
The
Company will market its products through three (3) distinct sales channels,
(i)
vendors/installers, (ii) Retailers, and (iii) direct internet sales. The
Company’s first product to be introduced to the pubic will be its garage door
opener. The Company, through its membership in the Door Access Systems
Manufacturing Association (“DASMA”) and the International Door Association (IDA)
has access to most garage door vendors/installers. The Company has commenced
an
e-mail campaign to recruit these installers, has begun taking pre-orders and
in
the near future will begin a training program for each vendor/installer. The
Company offers three levels of participation in this program, corresponding
to
the level of sales volume generated by each vendor/installer.
The
Company will also market its products to large do-it-yourself retail chains.
To
date, the Company has received an initial purchase order from The Home Depot
for
23,000 units. The Company also intends on private labeling its products for
large retail chains.
The
Company also offers its products through direct Internet sales. The Company’s
garage door opener was recently featured on a home improvement television show,
which has generated approximately 1,100 Internet orders. The Company will seek
other forms of media coverage to market its products directly to the
consumer.
Competition
The
markets for our products and solutions are extremely competitive and are
characterized by rapid technological change as a result of technical
developments exploited by competitors, the changing technical needs of the
customers, and frequent introductions of new features. We expect competition
to
increase as other companies introduce products that are competitively priced,
that may 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. 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
March 31, 2006, the Company has 7 full time employees and 3 part time employees.
The Company expects that it will hire at least 4 more key people over the next
4
months. We believe our employee relations are satisfactory.
RISK
FACTORS
This
report on Form 10-KSB contains forward-looking statements that involve
risks and uncertainties. The Company’s business, operating results, financial
performance and share price may be materially adversely affected by a number
of
factors, including but not limited to the following risk factors, any one of
which could cause actual results to vary materially from anticipated results
or
from those expressed in any forward-looking statements made by the Company
in
this annual report on Form 10-KSB or in other reports, press releases or
other statements issued from time to time. Additional factors that may cause
our
results to vary are set forth elsewhere in this annual report on
Form 10-KSB.
Our
business will not grow unless the market for biometric products and services
expands both domestically and internationally.
Our
revenues are derived from the sale of biometric products and services. Biometric
products have not gained widespread commercial acceptance. We cannot accurately
predict the future growth rate, if any, or the ultimate size of the biometric
technology market. The expansion of the market for our products depends on
a
number of factors including without limitation:
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•
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national
or international events which may affect the need for or interest
in
biometric products or services;
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•
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the
cost, performance and reliability of our products and services and
those
of our competitors;
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•
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customers’
perception of the perceived benefit of biometric products and services
and
their satisfaction with our products and services;
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public
perceptions of the intrusiveness of these products and services and
the
manner in which firms are using the information
collected;
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•
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public
perceptions regarding the confidentiality of private
information;
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•
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proposed
or enacted legislation related to privacy of
information; and
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•
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marketing
efforts and publicity regarding these products and
services.
|
Certain
groups have publicly objected to the use of biometric products for some
applications on civil liberties grounds and legislation has been proposed to
regulate the use of biometric security products. From time to time, biometrics
technologies have been the focus of organizations and individuals seeking to
curtail or eliminate such technologies on the grounds that they may be used
to
diminish personal privacy rights. If such initiatives result in restrictive
legislation, the market for biometric solutions may be adversely affected.
Even
if biometric solutions gain wide market acceptance, our products and services
may not adequately address the requirements of the market and may not gain
wide
market acceptance.
We
may face intense competition from other biometric solution providers as well
as
identification and security systems providers.
A
significant number of established and startup companies are marketing or
developing software and hardware for facial and/or fingerprint biometric
products and applications that may eventually compete with our current
offerings.
The
biometric security market is a rapidly evolving and intensely competitive,
and
we believe that additional significant long-term competitors will continue
to
enter the market. We expect competition in the biometrics markets to increase
and intensify in the near term. Companies competing with us may introduce
products that are targeted at our target markets and competitively priced,
have
increased performance or functionality or incorporate technological advances
we
have not yet developed or implemented. Some present and potential competitors
have financial, marketing, research, and manufacturing resources substantially
greater than ours. Other players in the biometric do have the potential to
directly compete with us. Among these companies are Sagem Morpho, Inc., Cogent,
NEC, Printrak International, Inc., (a Motorola company), and Saflink. However,
these companies primarily focus on networked-based, or computer based systems
that require a sophisticated computer-based infrastructure to operate. Our
company’s products are embedded and self contained and do not require a computer
to operate.
The
biometrics industry is characterized by rapid technological change and requires
introduction of new and enhanced products at competitive
prices.
In
order
to compete effectively in the biometrics market, we must continually design,
develop and market new and enhanced products at competitive prices and we must
have the resources available to invest in significant research and development
activities. Our future success will depend upon our ability to address the
changing and sophisticated needs of the marketplace. Frequently, technical
development programs in the biometric industry require assessments to be made
of
the future directions of technology and technology markets generally, which
are
inherently risky and difficult to predict. Delays in introducing new products,
services and enhancements, the failure to choose correctly among technical
alternatives or the failure to offer innovative products and services at
competitive prices may cause customers to forego purchases of our products
and
services and purchase those of our competitors, and could adversely affect
our
business operations, financial results and stock price.
Our
financial and operating results often vary significantly from quarter to quarter
and may be negatively affected by a number of factors.
Our financial and operating results may fluctuate from quarter to quarter
because of the following reasons:
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•
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unavailability
or delays in authorization of government funding or cancellations,
delays
or contract amendments by government agency
customers;
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•
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reduced
demand for products and services caused, for example, by product
offerings
from new competitors;
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•
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the
inability to timely and successfully (i) complete development of
complex designs, components and products, (ii) complete new product
introductions that may result in improved gross margins,
(iii) manufacture in volume or
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install
certain of our complex products or (iv) obtain relevant government
agency certifications for newly introduced products on a timely
basis;
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•
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changes
in the mix of products and services we or our distributors
sell;
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•
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the
readiness of customers to accept delivery of new products on a timely
basis;
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•
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protests
of federal, state or local government contract awards by
competitors;
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•
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unforeseen
legal expenses, including litigation and/or administrative protest
costs;
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•
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expenses
related to acquisitions or mergers;
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•
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impairment
charges arising out of our assessments of goodwill and
intangibles;
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•
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other
one-time financial charges;
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•
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the
lack of availability or increase in cost of key components and
subassemblies;
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•
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competitive
pricing pressures; and
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•
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unpredictable
product installation schedules
|
Particularly
important is the need to invest in planned technical development programs to
maintain and enhance our competitiveness, and to successfully develop and launch
new products and services on a timely basis. Managing and improving the
likelihood of success of such programs requires the development of budgets,
plans and schedules for the execution of these programs and the adherence to
such budgets, plans and schedules. The majority of such program costs are
payroll and related staff expenses, and secondarily materials, subcontractors
and promotional expenses. These costs are very difficult to adjust in response
to short-term fluctuations in our revenues, compounding the difficulty of
achieving profitability in the event of a revenue downturn.
A
security breach or failure in systems that we sell could result in the
disclosure of private personal information that could harm our business by
adversely affecting the market’s perception of our products and
services.
Many of the systems we sell are designed to secure or manage private personal
information or information maintained by governmental agencies. In addition
to
being costly to repair and causing delays and other difficulties, a security
breach or failure in one of these systems could cause serious harm to our
business as a result of negative publicity or decisions by governmental clients
to limit our access or involvement with this information.
The
terrorist attacks of September 11, 2001, and the continuing threat of
global terrorism, have increased financial expectations that may not
materialize.
The
September 11, 2001 terrorist attacks, and continuing concerns about global
terrorism, may have created an increase in awareness for biometric security
solutions generally. However, it is uncertain whether the actual level of demand
for our biometric products and services will grow as a result of such increased
awareness. Increased demand may not result in an actual increase in our
revenues. In addition, it is uncertain which security solutions, if any, will
be
adopted as a result of terrorism and whether our products will be a part of
those solutions.. These factors may adversely impact us and create
unpredictability in revenues and operating results.
We
may need to raise additional equity or debt financing in the
future.
We
believe existing working capital will not be adequate to fund our operating
cash
requirements for the next 12 months, we will need to raise additional debt
or equity financing in the future, which may not be available to us. Even if
we
are successful in raising additional financing, we may not be able to do so
on
terms that are not excessively dilutive to existing stockholders or less costly
than existing sources of financing. Failure to secure additional financing
in a
timely manner and on favorable terms could have a material adverse effect on
our
financial performance and stock price and require us to implement certain cost
reduction initiatives resulting in the curtailment of our operations.
Our
lengthy and variable sales cycle will make it difficult to predict operating
results.
Certain
of our products often have a lengthy sales cycle while the customer evaluates
and receives approvals for purchase. If, after expending significant funds
and
effort, we fail to receive an order, a negative impact on our financial results
and stock price could result. It is difficult to predict accurately the sales
cycle of any large order for any of our products. If we do not ship and or
install one or more large orders as forecast for a fiscal quarter, our total
revenues and operating results for that quarter could be materially and
adversely affected.
The
substantial lead-time required for ordering parts and materials may lead to
inventory problems.
The
lead-time for ordering parts and materials and building many of our products
can
be many months. As a result, we must order parts and materials and build our
products based on forecasted demand. If demand for our products lags
significantly behind our forecasts, we may produce more products than we can
sell, which can result in cash flow problems and write-offs or write-downs
of
obsolete inventory.
We
will rely in part upon original equipment manufacturers (“OEM”) and distribution
partners to distribute our products, and we may be adversely affected if those
parties do not actively promote our products or pursue installations that use
our equipment.
We
estimate that a significant portion of our revenue will come from sales to
partners including OEMs, systems integrators, distributors and resellers. Some
of these relationships have not been formalized in a detailed contract, and
may
be subject to termination at any time. Even where these relationships are
formalized in a detailed contract, the agreements are often terminable with
little or no notice and subject to periodic amendment. We cannot control the
amount and timing of resources that our partners devote to activities on our
behalf.
We
intend
to continue to seek strategic relationships to distribute, license and sell
certain of our products. We, however, may not be able to negotiate acceptable
relationships in the future and cannot predict whether current or future
relationships will be successful.
Loss
of sole or limited source suppliers may result in delays or additional
expenses.
We
obtain
certain hardware components and complete products, as well as software
applications, from a single source or a limited group of suppliers. We do not
have long-term agreements with any of our suppliers. We will experience
significant delays in manufacturing and shipping of products to customers if
we
lose these sources or if supplies from these sources are delayed.
As
a
result, we may be required to incur additional development, manufacturing and
other costs to establish alternative sources of supply. It may take several
months to locate alternative suppliers, if required, or to re-tool our products
to accommodate components from different suppliers. We cannot predict if we
will
be able to obtain replacement components within the time frames we require
at an
affordable cost, or at all. Any delays resulting from suppliers failing to
deliver components or products on a timely basis in sufficient quantities and
of
sufficient quality or any significant increase in the price of components from
existing or alternative suppliers could have a severe negative impact on our
financial results and stock price.
We
may be subject to loss in market share and market acceptance as a result of
performance failures, manufacturing errors, delays or
shortages.
Performance
failure in our products may cause loss of market share, delay in or loss of
market acceptance, additional warranty expense or product recall, or other
contractual liabilities. The complexity of certain of our fingerscanners makes
the manufacturing and assembly process of such products, especially in volume,
complex. This may in turn lead to delays or shortages in the availability of
certain products, or, in some cases, the unavailability of certain products.
The
negative effects of any delay or failure could be exacerbated if the delay
or
failure occurs in products that provide personal security, secure sensitive
computer data, authorize significant financial transactions or perform other
functions where a security breach could have significant consequences. If a
product launch is delayed or is the subject of an availability shortage because
of problems with our ability to manufacture or assemble the product successfully
on a timely basis, or if a product or service otherwise fails to meet
performance criteria, we may lose revenue opportunities entirely and/or
experience delays in revenue recognition associated with a product or service
in
addition to incurring higher operating expenses during the period required
to
correct the defects. There is a risk that for unforeseen reasons we may be
required to repair or replace a substantial number of products in use or to
reimburse customers for products that fail to work or meet strict performance
criteria. We carry product liability insurance, but existing coverage may not
be
adequate to cover potential claims.
We
may be subject to repair, replacement, reimbursement and liability claims as
a
result of products that fail to work or to meet applicable performance
criteria.
There
is
a risk that for unforeseen reasons we may be required to repair or replace
a
substantial number of products in use or to reimburse customers for products
that fail to work or meet strict performance criteria. We attempt to limit
remedies for product failure to the repair or replacement of malfunctioning
or
noncompliant products or services, and also attempt to exclude or minimize
exposure to product and related liabilities by including in our standard
agreements warranty disclaimers and disclaimers for consequential and related
damages as well as limitations on our aggregate liability. From time to time,
in
certain complex sale or licensing transactions, we may negotiate liability
provisions that vary from such standard forms. There is a risk that our
contractual provisions may not adequately minimize our product and related
liabilities or that such provisions may be unenforceable. We carry product
liability insurance, but existing coverage may not be adequate to cover
potential claims. We maintain warranty reserves as deemed adequate by
management.
Failure
by us to maintain the proprietary nature of our technology, intellectual
property and manufacturing processes could have a material adverse effect on
our
business, operating results, financial condition, stock price, and on our
ability to compete effectively.
We
principally rely upon patent, trademark, copyright, trade secret and contract
law to establish and protect our proprietary rights. There is a risk that claims
allowed on any patents or trademarks we hold may not be broad enough to protect
our technology. In addition, our patents or trademarks may be challenged,
invalidated or circumvented and we cannot be certain that the rights granted
thereunder will provide competitive advantages to us. Moreover, any current
or
future issued or licensed patents, or trademarks, or currently existing or
future developed trade secrets or know-how may not afford sufficient protection
against competitors with similar technologies or processes, and the possibility
exists that certain of our already issued patents or trademarks may infringe
upon third party patents or trademarks or be designed around by others. In
addition, there is a risk that others may independently develop proprietary
technologies and processes, which are the same as, substantially equivalent
or
superior to ours, or become available in the market at a lower
price.
In
addition, foreign laws treat the protection of proprietary rights differently
from laws in the United States and may not protect our proprietary rights to
the
same extent as U.S. laws. The failure of foreign laws or judicial systems
to adequately protect our proprietary rights or intellectual property, including
intellectual property developed on our behalf by foreign contractors or
subcontractors may have a material adverse effect on our business, operations,
financial results and stock price.
There
is
a risk that we have infringed or in the future will infringe patents or
trademarks owned by others, that we will need to acquire licenses under patents
or trademarks belonging to others for technology potentially useful or necessary
to us, and that licenses will not be available to us on acceptable terms, if
at
all.
We
may
have to litigate to enforce our patents or trademarks or to determine the scope
and validity of other parties’ proprietary rights. Litigation could be very
costly and divert management’s attention. An adverse outcome in any litigation
may have a severe negative effect on our financial results and stock price.
To
determine the priority of inventions, we may have to participate in interference
proceedings declared by the United States Patent and Trademark Office or
oppositions in foreign patent and trademark offices, which could result in
substantial cost and limitations on the scope or validity of our patents or
trademarks.
We
also
rely on trade secrets and proprietary know-how, which we seek to protect by
confidentiality agreements with our employees, consultants, service providers
and third parties. There is a risk that these agreements may be breached, and
that the remedies available to us may not be adequate. In addition, our trade
secrets and proprietary know-how may otherwise become known to or be
independently discovered by others.
Compliance
with changing regulation of corporate governance and public disclosure may
result in additional expenses.
Changing
laws, regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and
NASDAQ National Market rules, are creating uncertainty for companies such as
ours. These new or changed laws, regulations and standards are subject to
varying interpretations in many cases due to their lack of specificity, and
as a
result, their application in practice may evolve over time as new guidance
is
provided by regulatory and governing bodies, which could result in continuing
uncertainty regarding compliance matters and higher costs necessitated by
ongoing revisions to disclosure and governance practices. We are committed
to
maintaining high standards of corporate governance and public disclosure. As
a
result, we intend to invest resources to comply with evolving laws, regulations
and standards, and this investment may result in increased general and
administrative expenses and a diversion of management time and attention from
revenue-generating activities to compliance activities. If our efforts to comply
with new or changed laws, regulations and standards differ from the activities
intended by regulatory or governing bodies due to ambiguities related to
practice, our reputation may be harmed.
If
we fail to adequately manage the size of our business, it could have a severe
negative effect on our financial results or stock price.
Our
management believes that in order to be successful we must appropriately manage
the size of our business. This may mean reducing costs and overhead in certain
economic periods, and selectively growing in periods of economic expansion.
In
addition, we will be required to implement operational, financial and management
information procedures and controls that are efficient and appropriate for
the
size and scope of our operations. The management skills and systems currently
in
place may not be adequate and we may not be able to manage any significant
cost
reductions or effectively provide for our growth.
If
we fail to attract and retain qualified senior executive and key technical
personnel, our business will not be able to expand.
We
are
dependent on the continued availability of the services of our employees, many
of whom are individually key to our future success, and the availability of
new
employees to implement our business plans. The market for skilled employees
is
highly competitive, especially for employees in technical fields. Although
our
compensation programs are intended to attract and retain the employees required
for us to be successful, there can be no assurance that we will be able to
retain the services of all our key employees or a sufficient number to execute
our plans, nor can there be any assurance we will be able to continue to attract
new employees as required.
Our
personnel may voluntarily terminate their relationship with us at any time,
and
competition for qualified personnel, especially engineers, is intense. The
process of locating additional personnel with the combination of skills and
attributes required to carry out our strategy could be lengthy, costly and
disruptive.
If
we
lose the services of key personnel, or fail to replace the services of key
personnel who depart, we could experience a severe negative effect on our
financial results and stock price. In addition, there is intense competition
for
highly qualified engineering and marketing personnel in the locations where
we
principally operate. The loss of the services of any key engineering, marketing
or other personnel or our failure to attract, integrate, motivate and retain
additional key employees could have a material adverse effect on our business,
operating and financial results and stock price.
The
following risks relate principally to our common stock and its market
value:
Trading
on the OTC Bulletin Board may be volatile and sporadic, which could depress
the
market price of our common stock and make it difficult for our stockholders
to
resell their shares.
Trading
in stock quoted on the OTC Bulletin Board is often thin and characterized by
wide fluctuations in trading prices, due to many factors that may have little
to
do with a company’s operations or business prospects. This volatility could
depress the market price of our common stock for reasons unrelated to our
business or operating performance. Moreover, the OTC Bulletin Board is not
a
stock exchange, and trading of securities on the OTC Bulletin Board is often
more sporadic than the trading of securities listed on a quotation system like
NASDAQ or a stock exchange like the American Stock Exchange. Accordingly,
stockholders may have difficulty reselling any of their shares of common
stock.
Our
Common Stock price may be volatile and could fluctuate widely in price, which
could result in substantial losses for investors.
The
market price of our common stock is likely to be highly volatile and could
fluctuate widely in price in response to various factors, many of which are
beyond our control, including:
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technological
innovations or new
products and services by us or our
competitors;
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· |
government
regulation of our products
and services;
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· |
the
establishment of partnerships
with other technology
companies;
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· |
intellectual
property
disputes;
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· |
additions
or departures of key
personnel;
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· |
sales
of our common
stock
|
|
· |
our
ability to integrate operations,
technology, products and services;
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|
· |
our
ability to execute our business
plan;
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|
· |
operating
results below expectations;
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· |
loss
of any strategic
relationship;
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· |
economic
and other external factors;
and
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· |
period-to-period
fluctuations in our
financial results.
|
Because
we are a development stage company with no revenues to date, you should consider
any one of these factors to be material. Our stock price may fluctuate widely
as
a result of any of the above.
In
addition, the securities markets have from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance
of
particular companies. These market fluctuations may also materially and
adversely affect the market price of our common stock.
We
have not paid cash dividends in the past and do not expect to pay cash dividends
in the future on our common stock. Any return on investment may be limited
to
the value of our common stock.
We
have
never paid cash dividends on our common stock and do not anticipate paying
cash
dividends in the foreseeable future. The payment of cash dividends on our common
stock will depend on earnings, financial condition and other business and
economic factors at such time as the board of directors may consider relevant.
If we do not pay cash dividends, our common stock may be less valuable because
a
return on your investment will only occur if its stock price appreciates.
Penny
stock regulations may impose certain restrictions on marketability of our
stock.
Our
common stock is currently listed for trading on the OTC Bulletin Board which
is
generally considered to be a less efficient market than markets such as NASDAQ
or other national exchanges, and which may cause difficulty in conducting trades
and difficulty in obtaining future financing. Further, our securities are
subject to the "penny stock rules" adopted pursuant to Section 15 (g) of the
Securities Exchange Act of 1934, as amended, or Exchange Act. The penny stock
rules apply to non-NASDAQ companies whose common stock trades at less than
$5.00
per share or which have tangible net worth of less than $5,000,000 ($2,000,000
if the company has been operating for three or more years). Such rules require,
among other things, that brokers who trade "penny stock" to persons other than
"established customers" complete certain documentation, make suitability
inquiries of investors and provide investors with certain information concerning
trading in the security, including a risk disclosure document and quote
information under certain circumstances. Many brokers have decided not to trade
"penny stock" because of the requirements of the penny stock rules and, as
a
result, the number of broker-dealers willing to act as market makers in such
securities is limited. In the event that we remain subject to the "penny stock
rules" for any significant period, there may develop an adverse impact on the
market, if any, for our securities. Because our securities are subject to the
"penny stock rules," investors will find it more difficult to dispose of our
securities. Further, for companies whose securities are traded in the OTC
Bulletin Board, it is more difficult: (i) to obtain accurate quotations, (ii)
to
obtain coverage for significant news events because major wire services, such
as
the Dow Jones News Service, generally do not publish press releases about such
companies, and (iii) to obtain needed capital.
Our
Board of Directors may issue and fix the terms of shares of our preferred stock
without stockholder approval, which could adversely affect the voting power
of
holders of our common stock or any change in control of our
company.
Our
certificate of incorporation authorizes the issuance of up to 10,000,000 shares
of "blank check" 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, without shareholder approval, to issue additional 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.
A
sale of a substantial number of shares of our common stock may cause the price
of our common stock to decline.
The
market price of our common stock could decline as a result of sales of
substantial amounts of our common stock in the public market, or the perception
that these sales could occur. In addition, these factors could make it more
difficult for us to raise funds through future offerings of common stock. All
of
the shares of our common stock covered by this prospectus will be freely
transferable without restriction or further registration under the Securities
Act.
Item
2.
Description of Property
We
operate our business in leased facilities. We occupy approximately 2,000 square
feet in an office building in Jericho, New York. Our rent for this space is
$4,500, plus utilities, per month. The Company’s lease for this space expires on
January 31, 2009. The Company believes this space is adequate for its needs.
The
Company also leases two executive offices in Jericho, New York for $3,400 per
month. The lease for these offices expires July, 2006, and the Company intends
on moving out of this space at that time.
Item
3.
Legal Proceedings
We
are
not a party to any pending legal proceedings.
Item
4.
Submission of Matters to a Vote of Security Holders
Pursuant
to a written consent of a majority of the Company’s shareholders, the Company
approved an amendment to its Certificate of Incorporation which (a) reverse
split the outstanding shares of the Company’s common stock one-for-four on
January 16, 2006; and (b) increased the number of shares of common stock the
Company is authorized to issue to 25,000,000 and (c) decreased the par value
to
$.001.
PART
II
Item
5.
Market for Common Equity and Related Stockholder Matters.
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:
COMMON
STOCK |
|
|
|
|
|
|
|
First
quarter
|
|
$
|
12.00
|
|
$
|
3.36
|
|
Second
quarter
|
|
$
|
9.60
|
|
$
|
1.49
|
|
Third
quarter
|
|
$
|
2.64
|
|
$
|
1.20
|
|
Fourth
quarter
|
|
$
|
1.39
|
|
$
|
0.06
|
|
COMMON
STOCK |
|
|
|
|
|
|
|
First
quarter
|
|
$
|
1.28
|
|
$
|
0.60
|
|
Second
quarter
|
|
$
|
15.40
|
|
$
|
0.60
|
|
Third
quarter
|
|
$
|
15.80
|
|
$
|
2.20
|
|
Fourth
quarter
|
|
$
|
8.00
|
|
$
|
2.40
|
|
All
prices for fiscal 2004 and 2005 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
4, 2006, the last sale price of our common stock reported by the OTCBB was
$2.00
per share.
As
of
April 4, 2006, the approximate number of common stockholders of record was
approximately 784.
As
of
April 14, 2006 we had 5,985,999 outstanding shares of common stock, $.001 par
value.
The
Company has never declared or paid any cash dividends on its capital stock
and
currently intends to retain its future earnings, if any, to fund the development
and growth of its business and, therefore, does not anticipate paying any cash
dividends in the foreseeable future.
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
June
2, 2005 we filed a merger certificate completing the acquisition of bioMetrx
Technologies, Inc., a previously unaffiliated Delaware corporation. In
connection with the merger, we issued an aggregate of 3,554,606 restricted
shares of our common stock and 45,507 warrants to the holders of corresponding
instruments in bioMetrx Technologies, Inc. The Shares were issued in reliance
upon Section 4(2) and 4(6) of the Securities Act of 1933, as amended (the
“Act”).
On
July
5, 2005, the Company consummated the private sale of its Securities to Russell
Kuhn. The securities sold were 233,334 shares of the Company’s common stock and
warrants to purchase an additional 46,667 shares of the Company’s common stock.
The aggregate purchase price for the securities was $700,000 or $3.00 per share
without allocating any part of the purchase price for the warrants. At the
closing the Registrant delivered 233,334 shares and 46,667 warrants to
Kuhn.
The
warrants entitle Kuhn to purchase shares of the Company’s common stock reserved
for issuance thereunder for a period of five years from the date of issuance.
Twenty percent the warrants are exercisable per year on a cumulative basis
at
varying prices as set forth below:
|
Date(s)
of Exercise
|
|
Amount
|
|
Exercise
Price
|
|
|
|
|
|
|
|
|
|
7/5/05
- Expiration Date
|
|
9,333
|
|
$2.40
|
|
|
7/5/06
- Expiration Date
|
|
9,333
|
|
$2.80
|
|
|
7/5/07
- Expiration Date
|
|
9,333
|
|
$3.20
|
|
|
7/5/08
- Expiration Date
|
|
9,334
|
|
$3.60
|
|
|
7/5/09
- Expiration Date
|
|
9,334
|
|
$4.00
|
|
|
TOTAL:
|
|
46,667
|
|
|
|
Pursuant
to the Subscription Agreement, the Company agreed to file with the Securities
and Exchange Commission (“SEC”) a Registration Statement covering the Shares.
Such Registration Statement has not been filed by the Company and the Company
has delivered to Kuhn an additional 75,000 shares and the Company has recorded
an additional 50,000 shares penalty which have yet to be issued of Company’s
Common Stock.
The
Company will utilize the proceeds from this offering for general working
capital.
In
April
2005 the Company entered into a consulting agreement with Steven Horowitz and
Arnold Kling, for general financial consulting services in connection with
potential merger and fund raising activities. In connection with this agreement,
the Company issued 125,000 shares of common stock valued at $4.00 per
share.
On
July
5, 2005 the Company issued to Mr. Steven Kang, the Company’s Chief Technology
Officer and Secretary, 125,000 shares of its common stock as compensation.
In
addition, the Company agreed to issue Mr. Kang an additional 62,500 shares
on
the second anniversary of his employment agreement (January 1,
2006).
On
July
5, 2005, the Company issued an aggregate of 375,000 stock options to Mark Basile
(187,500), the Company’s President and CEO, and Steven Kang (187,500), the
Company’s Chief Technology Officer and Secretary. Each option is exercisable for
a term of five years at $2.00 per share.
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.
On
October 28, 2005 the Company consummated the private sale of its securities
to
Kuhn. The securities sold were 562,500 shares of the Registrant’s common stock
and warrants to purchase an additional 562,500 shares at an aggregate purchase
price of $450,000 or $.80 per share without allocating any part of the purchase
price for the warrants.
The
warrant entitled the holder to purchase shares of the Company’s common stock
reserved for issuance thereunder for a period commencing on the date of issuance
and expiring on December 15, 2005 at an exercise price of $.80 per
share.
Pursuant
to the Subscription Agreement between the Company and Kuhn, the Company
represented that it intends to file a Registration Statement with the Securities
and Exchange Commission within 45 days from the closing date and granted Kuhn
“piggy-back” registration rights for the Shares with respect to such
Registration Statement.
The
Company will utilize the proceeds from this offering for general working
capital.
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.
On
November 7, 2005, the Company issued 62,500 shares of its common stock to Ms.
Wendy Borow-Johnson pursuant to a consulting agreement. In addition, upon the
one (1) year anniversary of the consulting agreement, bioMetrx will issue Ms.
Borow-Johnson an additional 62,500 shares of its common stock. These shares
were
issued in reliance upon exemptions form registration requirements pursuant
to
Section 4(2) of the Act.
On
November 23, 2005, in connection with the funding transactions in July and
October 2005 between the Company and Russell Kuhn, the Company issued as a
finder’s fee an aggregate of 164,925 shares to the Harbor View Group, Inc.
(“Harbor View”).
On
November 30, 2005, the Company issued 6,250 restricted shares of its common
stock to Mr. Clifford Zsevc in connection with the exercise of a stock option
in
such amount. The exercise price of the option was $.40 per share.
On
November 30, 2005, the Company issued 6,250 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
November 30, 2005, the Company issued 6,250 restricted shares of its common
stock to Mr. Frank Giannuzzi in connection with the exercise of a stock option
in such amount. The exercise price of the option was $.40 per
share.
On
December 22, 2005, the Company issued 17,500 restricted shares of its common
stock to Mr. Jerome Schwartz for services rendered on behalf of the
Company.
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.
In
December 2005, the Company issued 100,000 to US Security & Protection
Systems, Inc. (“US Security”) in connection with the termination of an exclusive
distribution and sales agreement between the Company and US. Security.
From
December 2005 to February 2006, the Company sold an aggregate of 746,250 shares
to Kuhn for an aggregate purchase price of $597,000 or $.80 per share. As part
of this transaction, Kuhn exercised 562,500 warrants, which were issued to
him
on October 28, 2005 in connection with a previously reported financing. In
addition to the exercise of the warrants, Kuhn provided the Company with an
additional $147,000 and the Company agreed to issue him the shares at the same
purchase price ($.80 per share) as the warrants.
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.
The
Company will utilize the proceeds from this transaction for general working
capital.
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 Hane 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 will issue an aggregate of 25,000 restricted
common stock to Petri and Panico as debt issuance costs.
The
securities discussed above were offered and sold in reliance upon exemptions
from the registration requirements of Section 5 of the Securities Act of 1933,
as amended (the “Act”), pursuant to Section 4(2) of the Act and Rule 506
promulgated thereunder. Such securities were sold exclusively to accredited
investors as defined by Rule 501(a) under the Act.
Item
6.
Management’s Discussion and Analysis or Plan of Operation.
On
January 13, 2005 we entered into a letter of intent, which was amended on March
11, 2005 for the acquisition of bioMetrx Technologies, Inc., a development
stage
company engaged in the development of biometrics-based products for the homes
security and electronics market, including biometrically enabled residential
door locks, central station alarm keypads, thermostats and garage/gate openers.
On
May
27, 2005, we completed the merger (“Merger”) of MarketShare Merger Sub, Inc. a
wholly owned subsidiary of the Company (“Merger Sub”) 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”).
On
June
1, 2005 (the “Effective Date”), Merger Sub filed a Merger Certificate completing
the acquisition of bioMetrx Technologies. The consideration for the Merger
was
3,554,606 restricted shares of our common stock and the issuance of 45,507
Common Stock Purchase Warrants to the holders of corresponding instruments
of
bioMetrx Technologies. The Merger was completed according to the terms of the
Merger Agreement. Simultaneously with the Merger, certain stockholders of the
Company surrendered 552,130 shares of the Company’s common stock which was
cancelled and returned to the status of authorized and unissued. In addition,
75,000 shares of the Company’s common stock were deposited by these stockholders
into escrow to cover contingent liabilities, if any. As a result of the Merger,
bioMetrx Technologies was merged into the Merger Sub and became our wholly
owned
subsidiary.
Since
the
Company had no meaningful operations immediately prior to the Merger, the Merger
will be treated as a reorganization of bioMetrx Technologies via a reverse
merger with the Company for accounting purposes.
The
3,554,606 shares and the shares issuable upon the exercise of 45,507 warrants
issued as part of Merger to the former bioMetrx Technologies stockholders
represent approximately 90% of the total outstanding post-merger
stock.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Our
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires us to make significant estimates and judgments
that affect the reported amounts of assets, liabilities, revenues, expenses
and
related disclosure of contingent assets and liabilities. We evaluate our
estimates, including those related to contingencies, on an ongoing basis. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of
which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may
differ from these estimates under different assumptions or
conditions.
We
believe the following critical accounting policy, among others; involve the
more
significant judgments and estimates used in the preparation of our consolidated
financial statements:
The
Company accounts for compensation costs associated with stock options and
warrants issued to non-employees using the fair-value based method prescribed
by
Financial Accounting Standard No. 123 - Accounting for Stock-Based Compensation.
The Company uses the Black-Scholes options-pricing model to determine the fair
value of these instruments as well as to determine the values of options granted
to certain lenders by the principal stockholder. The following estimates are
used for grants in 2005: Expected future volatility over the expected lives
of
these instruments is estimated to mirror historical experience, measured by
a
weighted average of closing share prices prior to each measurement date.
Expected lives are estimated based on management’s judgment of the time period
by which these instruments will be exercised.
Plan
of Operations
bioMETRX
is a developer of proprietary biometrics-based products for the home security
and electronics market, located on Long Island, New York.
Founded
in 2001, bioMETRX is focused on developing a line of home security and
electronics products branded under the name smartTOUCHtm
which
includes biomedical enabled residential door locks, central station alarm
keypads, thermostats and garage/gate openers. Our products utilize fingerprint
recognition technology designed to augment or replace conventional security
methods such as keys, keypads, and PIN numbers.
The
home
security industry consists of garage door manufacturers, key and lock
manufacturers and central station alarm monitoring companies, representing
a $25
billion global market. bioMETRX develops market- specific products in this
area
which will either be licensed or sold through manufacturers/ retailers worldwide
when deemed commercially viable. bioMETRX, to date, has not introduced its
products and services commercially and is considered a development stage
enterprise. bioMETRX has limited assets, significant liabilities and limited
business operations. To date, activities have been limited to organizational
matters, development of its products and services and capital
raising.
Management’s
plan of operations for the next twelve months is to raise additional capital,
complete development of its product line and commence marketing the Company’s
products and services. The Company expects it will require $6,000,000 over
the
next 12 months to accomplish these goals and expects to be financed by the
private sale of its securities. 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.
From
inception (February 1, 2001) through December 31, 2005, bioMETRX has not
generated any revenues. During the period from inception (February 1, 2001)
through December 31, 2005, bioMETRX had net losses totaling $12,531,088.
During
the year ended December 31, 2005, net losses totaled $10,953,719. From inception
through December 31, 2005, bioMETRX’ general and administrative expenses totaled
$2,157,338 or 17.2% of total expenses, while for the year ended December
31,
2005 general and administrative expenses totaled $1,156,395 or 10.6% of total
expenses. From inception through December 31, 2005, bioMETRX incurred
stock-based compensation of $9,047,501 or 72.2% of expenses, of which $8,735,001
or 79.7% of total expenses was incurred during the year ended December 31,
2005.
Research and development costs were $519,166 or 4.1% of total expenses incurred
in the period from inception through December 31, 2005, while research and
development costs during the year ended December 31, 2005 totaled $361,490
or
3.3% of total expenses.
Liquidity
and Capital Resources
Since
inception, bioMetrx Technologies has financed its activities from the private
sales of its securities. 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).
In
2003,
bioMETRX sold 231,250 shares of its common stock for gross proceeds of $231,250
or $1.00 per share. During 2003, bioMETRX issued 75,000 shares of its common
stock, valued at $150,000 ($2.00 per share), for services rendered to it
pursuant to consulting agreements. During 2003, bioMETRX issued 129,500 shares
of its common stock, valued at $518,000 ($4.00 per share), as commission on
sales of its stock. Also in 2003 bioMETRX issued 378,000 shares of its common
stock, valued at $94,500 ($.25 per share), as commission on sales of its common
stock.
In
2004,
bioMETRX sold 27,000 shares of its common stock for aggregate gross proceeds
of
$27,000 ($1.00 per share). During that same year, bioMETRX sold 83,750 shares
of
its common stock for aggregate gross proceeds of $335,000 ($4.00 per share).
Also in 2004, bioMETRX issued 50,000 and 8,750 shares of its common stock valued
at $200,000 and $8,750, respectively, as commissions on sales of its common
stock.
In
July
2005, the Company sold Two Hundred and Thirty Three Thousand Three Hundred
and
Thirty-Four (233,334) shares of its common stock and Forty Six Thousand Six
Hundred and Sixty-Seven (46,667) warrants for an aggregate purchase price of
$700,000 or $3.00 per share without allocating any part of the purchase price
for the warrants.
On
October 28, 2005 the Company sold 562,500 shares and 562,500 warrants for an
aggregate purchase price of $450,000 or $.80 per share without allocating any
part of the purchase price for the warrants.
The
warrants entitle the holder to purchase shares of the Company’s common stock for
a period commencing on the date of issuance and expiring on December 15, 2005
at
an exercise price of $.80 per share.
As
of
December 31, 2005 bioMETRX had total assets of $531,291 and total current assets
of $514,755. At December 31, 2005 bioMETRX had total liabilities of $793,669
and
total current liabilities of $793,667 bioMETRX’ working capital deficit at
December 31, 2005 was $278,914 and an equity deficiency of
$262,378.
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, 2005, 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.
Item
7.
Financial Statements.
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 (A Development Stage Company) (“the Company”) as of December 31,
2005, and the related consolidated statements of operations, changes
in
stockholders’ deficit and cash flows for the years ended December 31, 2005 and
2004 and for the period February 1, 2001 (inception) to December 31,
2005. 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, 2005 and the results of their operations
and
their cash flows for the years ended December 31, 2005 and 2004 and for
the
period February 1, 2001 (inception) to December 31, 2005 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 is a development stage
company
whose operations have generated recurring losses and cash flow deficiencies
for
the years ended December 31, 2005 and 2004. In addition, as of December
31, 2005
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
7,
2006
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
CONSOLIDATED
BALANCE SHEET
December
31, 2005
ASSETS
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
Cash
|
|
$
|
184,116
|
|
Restricted
Cash
|
|
|
66,427
|
|
Marketable
Securities
|
|
|
461
|
|
Loans
Receivable- Stockholder/ Officer
|
|
|
201,598
|
|
Loans
Receivable- Employee
|
|
|
3,000
|
|
Prepaid
Expenses
|
|
|
59,153
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
514,755
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
Security
Deposit
|
|
|
16,536
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
531,291
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts
Payable
|
|
$
|
221,883
|
|
Accrued
Taxes Payable
|
|
|
37,003
|
|
Accrued
Payroll - Related Parties
|
|
|
310,000
|
|
Commissions
Payable
|
|
|
224,783
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
793,669
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
793,669
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
Stockholders'
Deficit:
|
|
|
|
|
Preferred
Stock, $.01 par value; 10,000,000 shares authorized
no
shares issued and outstanding
|
|
|
-
|
|
Common
Stock, $.001 par value; 25,000,000 shares authorized
5,947,914
shares issued and outstanding
|
|
|
5,948
|
|
Additional
Paid-In-Capital
|
|
|
12,679,776
|
|
Deferred
Compensation
|
|
|
(417,014
|
)
|
Deficit
Accumulated in the Development Stage
|
|
|
(12,531,088
|
)
|
|
|
|
|
|
Total
Stockholders' Deficit
|
|
|
(262,378
|
)
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
531,291
|
|
The
accompanying notes are an integral part of these financial
statements.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
YEAR
ENDED
DECEMBER
31, 2005
|
|
YEAR
ENDED
DECEMBER
31, 2004
|
|
FOR
THE PERIOD
FEBRUARY
1, 2001
(INCEPTION)
TO
DECEMBER
31, 2005
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and Expenses:
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses
|
|
|
1,156,395
|
|
|
581,306
|
|
|
2,157,338
|
|
Research
and Development Expenses
|
|
|
361,490
|
|
|
128,575
|
|
|
519,166
|
|
Contract
Buyouts Issued In Stock
|
|
|
356,000
|
|
|
0
|
|
|
356,000
|
|
Amortization
of Deferred Compensation
|
|
|
331,736
|
|
|
58,333
|
|
|
437,986
|
|
Compensatory
Element of Stock and Option Issuances
|
|
|
8,735,001
|
|
|
0
|
|
|
9,047,501
|
|
Total
Costs and Expenses
|
|
|
10,940,622
|
|
|
768,214
|
|
|
12,517,991
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before Other Income (Expense)
|
|
|
(10,940,622
|
)
|
|
(768,214
|
)
|
|
(12,517,991
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
(7,012
|
)
|
|
-
|
|
|
(7,012
|
)
|
Unrealized
Loss on Marketable Securities
|
|
|
(6,085
|
)
|
|
-
|
|
|
(6,085
|
)
|
Total
Other Income (Expense)
|
|
|
(13,097
|
)
|
|
-
|
|
|
(13,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(10,953,719
|
)
|
$
|
(768,214
|
)
|
$
|
(12,531,088
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Common Shares Outstanding
|
|
|
4,026,446
|
|
|
2,973,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss per Common Share (Basic and Diluted)
|
|
$
|
(2.72
|
)
|
$
|
(0.26
|
)
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
BIOMETRX
TECHNOLOGIES, INC.
(A
Development Stage Company)
STATEMENT
OF CASH FLOWS
|
|
FOR
THE YEAR
ENDED
DECEMBER
31, 2005
|
|
FOR
THE YEAR
ENDED
DECEMBER
31, 2004
|
|
FOR
THE PERIOD
FEBRUARY
1, 2001
(INCEPTION)
TO
DECEMBER
31, 2005
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(10,953,719
|
)
|
$
|
(768,214
|
)
|
$
|
(12,531,088
|
)
|
Adjustment
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensatory
Element of Stock and Warrant Issuances
|
|
|
9,091,001
|
|
|
-
|
|
|
9,403,501
|
|
Amortization
of Deferred Compensation
|
|
|
331,736
|
|
|
58,333
|
|
|
437,986
|
|
Unrealized
Loss on Marketable Securities
|
|
|
6,085
|
|
|
-
|
|
|
6,085
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
|
(Increase)
in Security Deposits
|
|
|
(16,536
|
)
|
|
-
|
|
|
(16,536
|
)
|
(Increase)
in Prepaid Expenses
|
|
|
(59,150
|
)
|
|
-
|
|
|
(59,150
|
)
|
Increase
in Accrued Taxes Payable
|
|
|
10,369
|
|
|
16,206
|
|
|
37,003
|
|
Increase
(Decrease) in Accrued Expenses
|
|
|
(49,298
|
)
|
|
85,374
|
|
|
36,076
|
|
Increase
in Accrued Payroll - Related Parties
|
|
|
180,000
|
|
|
420,000
|
|
|
960,000
|
|
Net
Cash Used in Operating Activities
|
|
|
(1,459,512
|
)
|
|
(188,301
|
)
|
|
(1,726,123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Restricted
Cash
|
|
|
(96,427
|
)
|
|
-
|
|
|
(96,427
|
)
|
Proceeds
of Loans
|
|
|
|
|
|
25,000
|
|
|
25,000
|
|
Advances
to Stockholder/Officer
|
|
|
(79,570
|
)
|
|
(142,704
|
)
|
|
(381,598
|
)
|
Repayment
of Related Party Loans
|
|
|
(109,736
|
)
|
|
|
|
|
(109,736
|
)
|
Advances
to Employee
|
|
|
(3,000
|
)
|
|
-
|
|
|
(3,000
|
)
|
Repayments
of Loans
|
|
|
-
|
|
|
(25,000
|
)
|
|
(25,000
|
)
|
Proceeds
from Issuances of Common Stock
|
|
|
2,125,000
|
|
|
362,000
|
|
|
2,724,750
|
|
Commissions
Paid on Sales of Common Stock
|
|
|
(223,750
|
)
|
|
-
|
|
|
(223,750
|
)
|
Net
Cash Provided by Investing Activities
|
|
|
1,612,517
|
|
|
219,296
|
|
|
1,910,239
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Increase in Cash
|
|
|
153,005
|
|
|
30,995
|
|
|
184,116
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
Beginning
|
|
|
31,111
|
|
|
116
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
Ending
|
|
$
|
184,116
|
|
$
|
31,111
|
|
$
|
184,116
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
Cash
Paid During the Period for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
7,012
|
|
$
|
-
|
|
$
|
7,012
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Taxes
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
Non
Cash Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued as Commissions
on
|
|
|
|
|
|
|
|
|
|
|
Sale
of Common Stock
|
|
$
|
725,668
|
|
$
|
208,750
|
|
$
|
1,168,918
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
Commissions on Sales of
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
224,783
|
|
$
|
-
|
|
$
|
224,783
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction
of Loans Receivable - Officer Against
|
|
|
|
|
|
|
|
|
|
|
Accrued
Compensation
|
|
$
|
650,000
|
|
$
|
-
|
|
$
|
650,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued as Penalty Shares for
|
|
|
|
|
|
|
|
|
|
|
Non-Registration
|
|
$
|
629,000
|
|
$
|
-
|
|
$
|
629,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock - Deferred Compensation
|
|
$
|
742,500
|
|
$
|
-
|
|
$
|
855,000
|
|
The accompanying notes are an integral part of these
financial
statements.
BIOMETRX
TECHNOLOGIES, INC.
(A
Development Stage Company)
STATEMENT
OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR
THE PERIOD FEBRUARY 1, 2001 (INCEPTION) TO DECEMBER 31,
2005
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid
In Capital
|
|
Deficit
Accumulated
During
the
Development
Stage
|
|
Deferred
Compensation
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
FEBRUARY 1, 2001
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued at December 31, 2001 persuant
to
initial capitalization
|
|
|
1,500,000
|
|
|
1,500
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,500
|
|
Common
Stock issued for services
valued
at $1.00 per share.
|
|
|
275,000
|
|
|
275
|
|
|
274,725
|
|
|
-
|
|
|
-
|
|
|
275,000
|
|
Net
loss for the period ended December 31, 2002
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(275,046
|
)
|
|
-
|
|
|
(275,046
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2001
|
|
|
1,775,000
|
|
|
1,775
|
|
|
274,725
|
|
|
(275,046
|
)
|
|
-
|
|
|
1,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued at $1.00 per share.
|
|
|
5,000
|
|
|
5
|
|
|
4,995
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
Net
loss for the period ended December 31, 2003
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(7,573
|
)
|
|
-
|
|
|
(7,573
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2002
|
|
|
1,780,000
|
|
|
1,780
|
|
|
279,720
|
|
|
(282,619
|
)
|
|
-
|
|
|
(1,119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued at $1.00 per share.
|
|
|
231,250
|
|
|
231
|
|
|
231,019
|
|
|
-
|
|
|
-
|
|
|
231,250
|
|
Common
Stock issued for services.
|
|
|
75,000
|
|
|
75
|
|
|
149,925
|
|
|
-
|
|
|
(112,500
|
)
|
|
37,500
|
|
Common
Stock issued as commissions
on
sales of common stock.
|
|
|
129,500
|
|
|
130
|
|
|
129,370
|
|
|
-
|
|
|
-
|
|
|
129,500
|
|
|
|
|
|
|
|
|
|
|
(129,500
|
)
|
|
|
|
|
|
|
|
(129,500
|
)
|
Amortization
of deferred compensation.
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
47,917
|
|
|
47,917
|
|
Net
loss for the period ended December 31, 2003
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(526,536
|
)
|
|
-
|
|
|
(526,536
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2003
|
|
|
2,215,750
|
|
|
2,216
|
|
|
660,534
|
|
|
(809,155
|
)
|
|
(64,583
|
)
|
|
(210,988
|
)
|
The accompanying notes are an integral part of these
financial
statements.
BIOMETRX
TECHNOLOGIES, INC.
(A
Development Stage Company)
STATEMENT
OF STOCKHOLDERS' EQUITY (DEFICIT) - (continued)
FOR
THE PERIOD FEBRUARY 1, 2001 (INCEPTION) TO DECEMBER 31,
2005
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid
In Capital
|
|
Deficit
Accumulated
During
the
Development
Stage
|
|
Deferred
Compensation
|
|
Total
|
|
Common
Stock issued $1.00 per share.
|
|
|
27,000
|
|
$
|
27
|
|
$
|
26,974
|
|
$
|
-
|
|
$
|
-
|
|
$
|
27,001
|
|
Common
Stock issued $4.00 per share.
|
|
|
83,750
|
|
|
84
|
|
|
334,916
|
|
|
-
|
|
|
-
|
|
|
335,000
|
|
Common
Stock issued as commissions on sales of common stock valued at
$1.00 per
share
|
|
|
8,750
|
|
|
9
|
|
|
8,741
|
|
|
|
|
|
|
|
|
8,750
|
|
|
|
|
|
|
|
|
|
|
(8,750
|
)
|
|
|
|
|
|
|
|
(8,750
|
)
|
Common
Stock issued as commissions on sales of common stock valued at
$4.00 per
share
|
|
|
50,000
|
|
|
50
|
|
|
199,950
|
|
|
-
|
|
|
-
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
(200,000
|
)
|
|
|
|
|
|
|
|
(200,000
|
)
|
Amortization
of deferred compensation.
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
58,333
|
|
|
58,333
|
|
Net
loss for the period ended December 31, 2004
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(768,214
|
)
|
|
|
|
|
(768,214
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2004
|
|
|
2,385,250
|
|
|
2,386
|
|
|
1,022,365
|
|
|
(1,577,369
|
)
|
|
(6,250
|
)
|
|
(558,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued $.40 per share upon exercise of stock
options.
|
|
|
18,750
|
|
|
19
|
|
|
7,481
|
|
|
|
|
|
|
|
|
7,500
|
|
Common
Stock issued $1.60 per share.
|
|
|
125,000
|
|
|
125
|
|
|
199,875
|
|
|
-
|
|
|
-
|
|
|
200,000
|
|
Common
Stock issued $2.00 per share.
|
|
|
37,500
|
|
|
37
|
|
|
74,963
|
|
|
-
|
|
|
-
|
|
|
75,000
|
|
Common
Stock issued $4.00 per share.
|
|
|
26,250
|
|
|
26
|
|
|
104,974
|
|
|
-
|
|
|
-
|
|
|
105,000
|
|
Common
Stock issued for Services valued at $4.00 per share
|
|
|
25,000
|
|
|
25
|
|
|
99,975
|
|
|
|
|
|
|
|
|
100,000
|
|
Common
Stock issued for Services valued at $4.00 per share
|
|
|
125,000
|
|
|
125
|
|
|
499,875
|
|
|
|
|
|
|
|
|
500,000
|
|
Common
Stock issued for Services valued at $4.00 per share
|
|
|
17,500
|
|
|
18
|
|
|
69,982
|
|
|
|
|
|
|
|
|
70,000
|
|
Common
Stock issued for Services valued at $4.00 per share
|
|
|
28,125
|
|
|
28
|
|
|
112,472
|
|
|
|
|
|
|
|
|
112,500
|
|
Common
Stock issued for Services valued at $1.00 per share
|
|
|
10,000
|
|
|
10
|
|
|
9,990
|
|
|
|
|
|
|
|
|
10,000
|
|
Common
Stock issued for Services valued at $3.56 per share
|
|
|
100,000
|
|
|
100
|
|
|
355,900
|
|
|
|
|
|
|
|
|
356,000
|
|
Common
Stock issued for Services valued at $5.20 per share
|
|
|
62,500
|
|
|
63
|
|
|
324,937
|
|
|
|
|
|
|
|
|
325,000
|
|
Issuance
of Common Stock purchase options for services - Related
Party
|
|
|
-
|
|
|
-
|
|
|
4,725,000
|
|
|
|
|
|
|
|
|
4,725,000
|
|
Common
Stock issued $.40 per share upon exercise of stock options -
Related
Party
|
|
|
31,250
|
|
|
31
|
|
|
12,469
|
|
|
-
|
|
|
-
|
|
|
12,500
|
|
Common
Stock issued $.80 per share - Related Party
|
|
|
562,500
|
|
|
563
|
|
|
449,437
|
|
|
-
|
|
|
-
|
|
|
450,000
|
|
Common
Stock issued $.80 per share upon exercise of stock warrants -
Related
Party
|
|
|
281,250
|
|
|
281
|
|
|
224,719
|
|
|
|
|
|
|
|
|
225,000
|
|
Common
Stock issued $2.00 per share - Related Party
|
|
|
175,000
|
|
|
175
|
|
|
349,825
|
|
|
-
|
|
|
-
|
|
|
350,000
|
|
Common
Stock issued $3.00 per share - Related Party
|
|
|
233,334
|
|
|
233
|
|
|
699,767
|
|
|
-
|
|
|
-
|
|
|
700,000
|
|
Common
Stock issued for Services valued at $11.00 per share - Related
Party
|
|
|
187,500
|
|
|
187
|
|
|
2,062,313
|
|
|
-
|
|
|
|
|
|
2,062,500
|
|
Common
Stock issued for Services valued at $4.00 per share - Related
Party
|
|
|
181,250
|
|
|
181
|
|
|
724,819
|
|
|
|
|
|
|
|
|
725,000
|
|
Common
Stock issued as consideration for Accrued Salaries valued at
$2.00 per
share - Related Party
|
|
|
235,000
|
|
|
235
|
|
|
469,765
|
|
|
|
|
|
|
|
|
470,000
|
|
The accompanying notes are an integral part of these
financial
statements.
BIOMETRX
TECHNOLOGIES, INC.
(A
Development Stage Company)
STATEMENT
OF STOCKHOLDERS' EQUITY (DEFICIT) - (continued)
FOR
THE PERIOD FEBRUARY 1, 2001 (INCEPTION) TO DECEMBER 31,
2005
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid
In Capital
|
|
Deficit
Accumulated
During
the
Development
Stage
|
|
Deferred
Compensation
|
|
Total
|
|
Common
Stock issued as commissions
on
sales of common stock valued at $4.40 per share
|
|
|
164,924
|
|
|
165
|
|
|
725,500
|
|
|
-
|
|
|
-
|
|
|
725,665
|
|
|
|
|
|
|
|
- |
|
|
(725,665
|
)
|
|
-
|
|
|
-
|
|
|
(725,665
|
)
|
Effect
of recapitalization due to reverse merger
|
|
|
810,031
|
|
|
810
|
|
|
(319,804
|
)
|
|
|
|
|
|
|
|
(318,994
|
)
|
Penalty
shares issued to Related Party in connection
with
non-registration valued at $4.80 per share
|
|
|
25,000
|
|
|
25
|
|
|
119,975
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
(120,000
|
)
|
|
|
|
|
|
|
|
(120,000
|
)
|
Penalty
shares issued to Related Party in connection
with
non-registration valued at $4.80 per share
|
|
|
25,000
|
|
|
25
|
|
|
119,975
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
(120,000
|
)
|
|
|
|
|
|
|
|
(120,000
|
)
|
Penalty
shares issued to Related Party in connection
with
non-registration valued at $3.20 per share
|
|
|
25,000
|
|
|
25
|
|
|
79,975
|
|
|
|
|
|
|
|
|
80,000
|
|
|
|
|
|
|
|
|
|
|
(80,000
|
)
|
|
|
|
|
|
|
|
(80,000
|
)
|
Penalty
shares issued to Related Party in connection
with
non-registration valued at $7.96 per share
|
|
|
25,000
|
|
|
25
|
|
|
198,975
|
|
|
|
|
|
|
|
|
199,000
|
|
|
|
|
|
|
|
|
|
|
(199,000
|
)
|
|
|
|
|
|
|
|
(199,000
|
)
|
Penalty
shares issued to Related Party in connection
with
non-registration valued at $4.40 per share
|
|
|
25,000
|
|
|
25
|
|
|
109,975
|
|
|
|
|
|
|
|
|
110,000
|
|
|
|
|
|
|
|
|
|
|
(110,000
|
)
|
|
|
|
|
|
|
|
(110,000
|
)
|
Issuance
of 25,000 Common Stock purchase options for services - Related
Party
|
|
|
|
|
|
|
|
|
180,000
|
|
|
|
|
|
(180,000
|
)
|
|
-
|
|
Issuance
of 18,750 Common Stock purchase options for services - Related
Party
|
|
|
|
|
|
|
|
|
157,500
|
|
|
|
|
|
(105,000
|
)
|
|
52,500
|
|
Issuance
of 18,750 Common Stock purchase options for services - Related
Party
|
|
|
|
|
|
|
|
|
157,500
|
|
|
|
|
|
(105,000
|
)
|
|
52,500
|
|
Issuance
of 62,500 Common Stock purchase options for services
|
|
|
|
|
|
|
|
|
252,500
|
|
|
|
|
|
(252,500
|
)
|
|
-
|
|
Issuance
of 25,000 Common Stock purchase options for services - Related
Party
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
(100,000
|
)
|
|
-
|
|
Amortization
of deferred compensation.
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
331,736
|
|
|
331,736
|
|
Commissions
paid on sales of common stock.
|
|
|
-
|
|
|
-
|
|
|
(223,750
|
)
|
|
-
|
|
|
-
|
|
|
(223,750
|
)
|
Commissions
accrued on sale of Common Stock
|
|
|
|
|
|
|
|
|
(224,783
|
)
|
|
|
|
|
|
|
|
(224,783
|
)
|
Net
loss for the period ended December 31, 2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(10,953,719
|
)
|
|
-
|
|
|
(10,953,719
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
December 31, 2005
|
|
|
5,947,914
|
|
$
|
5,948
|
|
$
|
12,679,776
|
|
$
|
(12,531,088
|
)
|
$
|
(417,014
|
)
|
$
|
(262,378
|
)
|
The accompanying notes are an integral part of these
financial
statements.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
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
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
1. Description of Business and Nature of Operations
(Continued)
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”.
Nature
of Operations
Founded
in 2001, the Company is focused on developing simple-to-use, cost-efficient
finger print activation products under the trade name SmartTOUCHÔ.
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 is a development stage company with no revenues and has incurred
net
losses of $10,953,719
and
$768,214 during the years ended December 31. 2005 and 2004 respectively.
In
addition, the Company has a working capital deficiency of $278,914 and
a
stockholders’ deficiency of $262,378 at December 31, 2005 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.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
2 - Basis of Presentation (Continued)
The
company is attempting to address its lack of liquidity by raising additional
funds, either in the form of debt or equity, or some combination thereof.
There
can
be no assurances that the Company will be able to raise the additional
funds it
requires.
The
accompanying consolidated financial statements do not include 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.
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.
Revenue
Recognition
Revenues
will be recognized at the time our products are shipped.
Cash
and Cash Equivalents
The
company considers all highly-liquid investments purchased with a maturity
of
three months or less to be cash equivalents.
Investments
The
Company classifies its marketable securities as trading securities. Management
determines the appropriate classification of our investments at the time
of
acquisition and reevaluates such determination at each balance sheet
date.
Trading securities are carried at fair value, with unrealized holding
gains and
losses and are included in other income. Realized gains and losses are
determined using the specific identification method based on the trade
date of
the transaction.
Fair
Value of Financial Instruments
The
carrying amounts of cash, loans receivable, accounts payable, accrued
liabilities and other current liabilities approximates fair value because
of the
immediate or short term maturity of these financial instruments.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
3 - Summary
of Significant Accounting Policies (Continued)
Advertising
and Marketing Expenses
The
costs
of advertising and marketing expenses are expensed as incurred. Advertising
and
marketing expenses for the years December 31, 2005 and 2004 were $30,133
and
$8,749 respectively
Research
and Development
Research
and development costs are expensed as incurred. Research and development
costs
amounted to $361,490 and $128,575 for the years ended December 31, 2005
and
2004, 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.
Stock
Based Compensation
The
Company follows the provisions of Statement of Financial Accounting Standards
(“SFAS”) No.123, “Accounting for Stock Based Compensation” and SFAS 148
“Accounting for Stock Based Compensation, Transition and Disclosure.” The
provisions of SFAS 123 allow companies either to expense the estimated
fair
value stock options or to continue to follow the intrinsic value method
set
forth in Accounting Principles Board Opinion No. 25 - “Accounting for Stock
Issued to Employees” (APB 25), but disclose the pro forma effects on net income
(loss) had the fair value of the options been expensed. The Company has
elected
to apply APB 25 in accounting for its stock option incentive plans. The
provisions of SFAS 148 require that disclosures of the pro forma effect
of using
the fair value method of accounting for stock-based employee compensation
be
displayed prominently and in tabular format. All outstanding employee
options
vested prior to December 31, 2005, therefore there would be no impact
on
compensation cost for the Company’s stock option plans during the years
presented utilizing the fair value method set forth in SFAS 123,.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
3 - Summary
of Significant Accounting Policies (Continued)
Stock
Based Compensation (Continued)
In
accordance with APB 25 and related interpretations, compensation expense
for
stock options is recognized in income based on the excess, if any, of
the quoted
market price of the stock at the grant date of the award or other measurement
date over the amount an employee must pay to acquire the stock. For awards
that
generate compensation expense as defined under the APB 25, the Company
calculates the amount of compensation expense and recognizes the expense
over
the contractual period of the award.
|
|
For
the Year Ended December
31,
|
|
|
|
2005
|
|
2004
|
|
Net
Loss Applicable to Common Stockholders, as reported
|
|
$
|
(10,953,719
|
)
|
$
|
(768,214
|
)
|
Add:
stock-based employee compensation expense included in reported
net loss
applicable to common stockholders
|
|
|
5,220,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Less:
total stock-based employee compensation expense determined
under the fair
value-based method of all awards
|
|
|
5,280,938
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Proforma
Net Loss Applicable to Common Stockholders
|
|
$
|
(11,014,657
|
)
|
$
|
(768,214
|
)
|
|
|
|
|
|
|
|
|
Basic
and Diluted Net Loss Applicable to Common Stockholders:
|
|
|
|
|
|
|
|
As
reported
|
|
$
|
(2.72
|
)
|
|
(.26
|
)
|
Proforma
|
|
$
|
(2.74
|
)
|
|
(.26
|
)
|
The
fair
value during the year ended December 31, 2005 was estimated at the date
of grant
using the Black-Scholes option-pricing using the following weighted-average
assumptions:
|
Assumptions |
|
2005
|
|
|
Risk-free
rate
|
|
3.1%
|
|
|
Annual
rate of dividends
|
|
0
|
|
|
Volatility
|
|
62.17%
|
|
|
Average
Life
|
|
1.86
years
|
|
The
Black-Scholes option valuation model was developed for use in estimating
the
fair value of traded options, which have no vesting restrictions and
are fully
transferable. In addition, option valuation models require the input
of highly
subjective assumptions including the expected stock price volatility.
Our
employee stock options have characteristics significantly different from
those
of traded options and changes in the subjective input assumptions can
materially
affect the fair value estimate. During 2005, the estimated fair value
of the
options granted to employees was $3.02 per unit.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
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, 2005 and 2004 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
Loss
per
common share is based upon the weighted average number of common shares
outstanding during the year. Diluted loss per common share is the same
as basic
loss per share, as the effect of potentially diluted securities are
anti-dilutive.
Recently
Issued Accounting Pronouncements.
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement No 123R (“SFAS 123R”). “Share-Based Payment.” SFAS 123(R) revises SFAS
No 123 and eliminates the alternative to use the intrinsic method of
accounting
under the APB No 25. SFAS 123(R) requires all public companies accounting
for
share based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise or
(b)
liabilities that are based on the fair value of the enterprise’s equity
instruments or that may be settled by the issuance of such equity instruments
to
account for these types of transactions using a fair value-based method
as set
forth in APB No. 25 “Accounting for Stock Issued to Employees”. As such the
Company generally recognizes no compensation cost for employee stock
options.
SFAS No 123 (R) eliminates the alternative to use APB No 25’s intrinsic value
method of accounting. Accordingly, the adoption of SFAS No 123(R)’s fair value
method will have an impact on our results of operations, although it
will have
no impact on our overall financial position. The impact of adoption of
SFAS No.
123 (R) cannot be predicted at this time because it will depend on levels
of
share-based payments granted in the future. This statement will be effective
for
the Company with the quarter beginning January 1, 2006.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
3 - Summary
of Significant Accounting Policies (Continued)
Recently
Issued Accounting Pronouncements (Continued)
In
December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-monetary
Assets,"
("SFAS 153"). SFAS 153 amends Accounting Principles Board ("APB") Opinion
No.
29, "Accounting for Non-monetary Transactions," to require exchanges
of
non-monetary assets be accounted for at fair value, rather than carryover
basis.
Non-monetary exchanges that lack commercial substance are exempt from
this
requirement. SFAS 153 is effective for non-monetary exchanges entered
into in
fiscal years beginning after June 15, 2005. The Company does not routinely
enter
into exchanges that could be considered non-monetary; accordingly the
Company
does not expect adoption of SFAS 153 to have a material impact on the
Company's
financial statements.
In
May
2005, the FASB issued Statement of Financial Accounting Standards No.
154,
“Accounting Changes and Error Corrections--a replacement of APB Opinion
No. 20
and FASB Statement No. 3” (“SFAS 154”). This Statement replaces APB Opinion No.
20, “Accounting Changes,” and FASB Statement No. 3, “Reporting Accounting
Changes in Interim Financial Statements,” and changes the requirements for the
accounting for and reporting of a change in accounting principle. This
Statement
applies to all voluntary changes in accounting principle. It also applies
to
changes required by an accounting pronouncement in the unusual instance
that the
pronouncement does not include specific transition provisions. When a
pronouncement includes specific transition provisions, those provisions
should
be followed. SFAS 154 is effective for accounting changes and corrections
of
errors made in fiscal years beginning after December 15, 2005. Consequently,
the
Company will adopt the provisions of SFAS 154 for its fiscal year beginning
January 1, 2006. Management currently believes that adoption of the provisions
of SFAS No. 154 will not have a material impact on the Company’s consolidated
financial statements.
Note
4 - Restricted Cash
Restricted
cash represents cash held in escrow by corporate counsel to satisfy pre-merger
liabilities. Such restricted cash will be released after satisfaction
of certain
requirements of the Merger Agreement (see Note 1).
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
5 - Stockholders’ Deficit
Preferred
Stock
Our
certificate of incorporation authorizes the issuance of up to 10,000,000
shares
of $.01 par value preferred stock, with such designation rights and preferences
as may be determined from time to time by the Board of Directors. Our
Board of
Directors is empowered to, without shareholder approval, issue these
shares of
preferred stock with dividend, liquidation, conversion, voting or other
rights
which could adversely affect the voting power or other rights of the
holders of
our common stock. In the event of such issuances, the preferred stock
could be
utilized, under certain circumstances, as a method of discouraging, delaying
or
preventing a change in control of our company.
Common
Stock
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 its name to “Biostat
Technologies S.P.A., Inc.” and 1,500,000 shares of no par common voting stock
was issued to the sole shareholder for $.001 per share.
On
April
1, 2002 the certificate of Incorporation was amended to:
|
1) |
Change the corporation’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
$.001.
|
|
3) |
Authorize
a 4000 to 1 split of then outstanding common
shares.
|
During
December 2004, the Board of Directors authorized an increase of bioMETRX’s
common stock from 10,000,000 to 20,000,000 shares, each having a par
value of
$.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.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
5 - Stockholders’ Deficit (Continued)
Common
Stock (Continued)
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
consideration for the Merger was 3,554,606 restricted shares of MarketShare’s
common stock and the issuance of 45,507 Common Stock Purchase Warrants
to the
holders of corresponding instruments of bioMetrx Technologies. Simultaneously
with the Merger, certain stockholders of MarketShare surrendered 552,130
shares
of MarketShare’s common stock which was cancelled and returned to the status of
authorized and unissued. In addition, 75,000 shares of the MarketShare’s common
stock were deposited by these stockholders into escrow to cover contingent
liabilities, if any. 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
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.
All
share
and per share data have been retrospectively restated to reflect these
recapitalizations.
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
November 2001 the Company issued 275,000 shares of common stock valued
at
$275,000 ($1.00 per share) for services rendered.
During
December 2002 the Company sold 5,000 shares of common stock for $5,000
($1.00
per share).
During
2003 the Company sold 231,250 shares of common stock for $231,250 ($1.00
per
share).
During
2003 the Company issued 75,000 shares of common stock valued at $150,000
($2.00
per share) for services pursuant to consulting agreements.
During
2003 the Company issued 129,500 shares of common stock valued at $129,500($1.00
per share) as commissions on sales of common stock.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
5 - Stockholders’ Deficit (Continued)
Common
Stock (Continued)
During
2004 the Company sold 27,000 shares of common stock for $27,000 ($1.00per
share).
During
2004 the Company sold 83,750 shares of common stock for $335,000 ($4.00
per
share).
During
2004 the Company issued 8,750 shares of common stock valued at $8,750
($1.00 per
share) as commissions on sales of common stock.
In
April
2005 the Company entered into a consulting agreement with Steven Horowitz
and
Arnold Kling, for general financial consulting services in connection
with
potential merger and fund raising activities. In connection with this
agreement
the Company issued 125,000 shares of common stock valued at $4.00 per
share. The
Company recognized charges amounting to $500,000 in the year ended December
31,
2005.
In
2005
the Company issued 175,000 shares of common stock valued at $2.00 cents
per
share to Mark Basile/CEO for accrued payroll owed him. The Company issued
60,000
shares of common stock valued at $2.00 cents per share to Steven Kang
for
accrued payroll owed him.
During
2005, the Company issued 18,750 shares of common stock for $7,500, ($.40
per
share) upon exercise of stock options.
During
2005, the Company sold 125,000 shares of common stock for $200,000, ($1.60
per
share).
During
2005, the Company sold 37,500 shares of common stock for $75,000, ($2.00
per
share).
During
2005, the Company sold 26,250 shares of common stock for $105,000, ($4.00
per
share).
During
2005, the Company issued 31,250 shares of common stock for $12,500, ($.40
per
share) to a related party upon exercise of stock options.
In
December 2005, the Company issued 281,250 shares of common stock for
$225,000,
($.80 per share) to a related party upon exercise of stock
warrants.
During
2005, the Company sold 410,000 shares of common stock for $820,000, ($2.00
per
share) to a related party.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
5 - Stockholders’ Deficit (Continued)
Common
Stock (Continued)
In
July
2005, the Company sold 233,334 shares of common stock and 46,667 common
stock
purchase warrants, exercise price $.75 per share, for $700,000 ($3.00
per share)
to Russell Kuhn, a related party. Pursuant to the Subscription Agreement,
the
Company agreed to file with the Securities and Exchange Commission (“SEC”) a
Registration Statement covering the Shares. Such Registration Statement
has not
been filed by the Company and accordingly the Company has recorded 125,000
penalty shares. These penalty shares will continue to be issued at the
rate of
25,000 shares per month until a Registration Statement has been filed
with the
SEC.
During
2005, the Company issued 164,924 shares of common stock valued at $725,665
($4.40 per share) as commissions on sales of common stock pursuant to
a finder’s
fee agreement (see Note 7).
In
September 2005, the Company entered into two one year consulting contracts
with
Steven Horowitz and Arnold Kling to provide general corporate services,
and in
connection therewith the Company issued 62,500 common stock purchase
warrants
valued at $252,500 using the Black-Scholes pricing model. The warrants
have an
exercise price of $2 and a term of 7 years. Amortization of deferred
compensation amounted to $84,168 for the year ended December 31,
2005.
In
October 2005, in conjunction with the issuance of 562,500 shares of common
stock
valued at $450,000 ($.80 per share) to Russell Kuhn, a related party,
the
Company also issued to Mr. Kuhn, 60-day common stock purchase warrants
to
purchase an additional 562,500 shares at $.80 per share. As of December
31,
2005, Mr. Kuhn exercised 281,250 options for gross proceeds of $225,000
to the
Company. In addition, the Board of Directors voted to extend the remaining
options for another 30 days.
During
2005, the Company issued 125,000 shares of common stock valued at $629,000
to a
related party as a penalty for non registration of shares.
On
July
5, 2005 the Company’s Board of Directors resolved to the following common stock
and stock option issuances:
|
· |
187,500
shares of common stock to an officer valued at
$2,062,500.
|
|
· |
187,500
common stock purchase options, exercise price $2.00 per share,
to an
officer valued at
$2,362,500.
|
|
· |
187,500
common stock purchase options, exercise price $2.00 per share,
to the
Company’s CEO valued at
$2,362,500.
|
In
2005
the Company issued 70,625 shares of common stock valued at $282,500 ($4
per
share) for services.
In
2005
the Company issued 10,000 shares of common stock valued at $10,000 ($1
per
share) for services.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
5 - Stockholders’ Deficit (Continued)
Common
Stock (Continued)
In
December 2005 the Company issued 100,000 shares of common stock valued
at
$356,000 ($3.56 per share) for contract buyout.
In
November 2005 the Company issued 62,500 shares of common stock valued
at
$325,000 ($5.20 per share) for services.
During
2005 the Company sold 175,000 shares of common stock valued at $350,000
($2 per
share) to a related party to a consultant.
During
2005 the Company issued 181,250 shares of common stock valued at $725,000
($4
per share) for services to a related party.
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.
The
aggregate number of shares that may be issued under the Plan is 1,250,000.
The
Plan permits the Company to make awards of stock options, stock appreciations
rights, warrants, stock awards and other equity awards. Awards under
the Plan
for the year ended December 31, 2005 amounted to 209,375 shares of common
stock.
Stock
Options
The
Company has issued stock options to employees and consultants which are
fully
vested.
Stock
option share activity and weighted average exercise price for the years
ended
December 31, 2005 and 2004 were as follows:
|
|
2005
|
|
2004
|
|
2005
Equity Incentive Plan |
|
Number
of Options
|
|
Weighted Average Exercise
Price
|
|
Number
of Options
|
|
Weighted Average Exercise
Price
|
|
Balance
- January 1, |
|
|
- |
|
$ |
- |
|
|
- |
|
$ |
- |
|
Options
Granted
|
|
|
375,000 |
|
|
2 |
|
|
- |
|
|
- |
|
Options
Cancelled
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Options
Exercised
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Balance
- December 31, |
|
|
375,000 |
|
$ |
2 |
|
|
- |
|
$ |
- |
|
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
5 - Stockholders’ Deficit (Continued)
Stock
Options (Continued)
Options
Outstanding
|
|
Options
Exercisable
|
Exercise
Price
|
|
Shares
|
|
Weighted Average
Exercise
Price
|
|
Weighted
Average Remaining Life in
Years
|
|
Shares
|
|
Weighted Average
Exercise
Price
|
$
2.00
|
|
375,000
|
|
$
2.00
|
|
4.50
|
|
375,000
|
|
$
2.00
|
|
|
2005
|
|
2004
|
|
Other
Options |
|
Number
of Options
|
|
Weighted Average Exercise
Price
|
|
Number
of Options
|
|
Weighted Average Exercise
Price
|
|
Balance
- January 1, |
|
|
- |
|
$ |
- |
|
|
- |
|
$ |
- |
|
Options
Granted
|
|
|
75,000 |
|
|
.40 |
|
|
- |
|
|
- |
|
Options
Cancelled
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Options
Exercised
|
|
|
(50,000 |
) |
|
- |
|
|
- |
|
|
- |
|
Balance
- December 31, |
|
|
25,000 |
|
$ |
.40 |
|
|
- |
|
$ |
- |
|
Options
Outstanding
|
|
Options
Exercisable
|
Exercise
Price
|
|
Shares
|
|
Weighted Average
Exercise
Price
|
|
Weighted
Average Remaining Life in
Years
|
|
Shares
|
|
Weighted Average
Exercise
Price
|
$
0.40
|
|
25,000
|
|
$
0.40
|
|
-
|
|
-
|
|
$
-
|
Warrants
At
December 31, 2005 the Company had warrants outstanding as follows:
|
Exercise
Price
|
|
Shares
|
|
Expiration
Date
|
|
|
$
.80
|
|
281,250
|
|
January
27, 2006
|
|
|
$
2.00
|
|
62,500
|
|
September
7, 2012
|
|
|
$
2.40
|
|
26,349
|
|
July
5, 2010
|
|
|
$
2.80
|
|
26,349
|
|
July
5, 2010
|
|
|
$
3.20
|
|
26,349
|
|
July
5, 2010
|
|
|
$
3.60
|
|
26,348
|
|
July
5, 2010
|
|
|
$
4.00
|
|
26,349
|
|
July
5, 2010
|
|
|
|
|
475,494
|
|
|
|
At
December 31, 2005, the weighted average exercisable price of the outstanding
warrants was $3.97 and the weighted average remaining contractual life
of the
warrants was 5.32 years.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
6- Related Party Transactions
Loans
Receivable - Stockholder/Officer
These
advances are non-interest bearing, unsecured, and payable on demand.
These
advances were made to the Company’s CEO and majority stockholder prior the
reverse merger by bioMetrx Technologies. At December 31, 2005 the advances
amounted to $201,598.
Note
7 - Commitments and Contingencies
Employment
Contracts
We
have
full-time employment agreements with three of our four executive officers,
Mark
Basile Steven Kang and Lorraine Yarde. Frank Giannuzzi has a part-time
employment agreement.
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
In
addition to the base salary for 2006, Mr. Basile received a $80,000 bonus
upon
exectiion 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
|
|
$1.00
|
|
|
250,000
|
|
$2.00
|
|
|
250,000
|
|
$3.00
|
|
|
250,000
|
|
$4.00
|
|
|
250,000
|
|
$5.00
|
|
*Shares
are included under the Company’s 2005 Equity Incentive Plan
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
7 - Commitments and Contingencies (Continued)
Employment
Contracts (Continued)
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.
In
January 2004, the Company entered into a four-year employment agreement
with
Steven Kang. The annual base salary is $120,000 per year. 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. After the initial term, Mr. Kang’s
agreement automatically renews for additional one-year periods. Mr. Kang
received 62,500 shares of common stock on the second anniversary of his
employment contract. Bonuses, if any, are to be paid at the sole discretion
of
the Board of Directors.
Ms.
Yarde’s employment agreement, originally entered into in August 2005, and
amended in January 2006, in the capacity of Chief Operating Officer,
has an
initial term of three years commencing on the date of the Amendment.
Mr. Yarde’s
annual base salary is $150,000 per year. Upon signing the Amendment Ms.
Yarde
was granted 250,000 options to purchase the Company’s common stock at $.40 per
share. After the initial term, Ms. Yarde’s agreement automatically renews for
additional one-year periods. Bonuses, if any, are to be paid at the sole
discretion of the Board of Directors.
On
June
1, 2005 the Company entered into employment agreements with a new Chief
Financial Officer and the former Chief Operating Officer. Each agreement
calls a
for base salary of $18,000 for services on a part-time basis. If after
the
initial term the Company elects to continue the officer on a full time
basis,
the annual salaries will increase to $80,000 for the Chief Financial
Officer and
$90,000 for the former Chief Operating Officer. The employment agreements
also
provide for discretionary bonuses and other employment related benefits.
Both
agreements also call for the granting of stock options to purchase 25,000
shares
at $.40 per share of the Company’s common stock at various times through the
term of the agreement. Both agreements have an initial term of one year
with an
additional one year extension.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
7 - Commitments and Contingencies (Continued)
Finder’s
Fee Agreement
The
Company entered into a Finder’s Fee Agreement with Harbor View Capital Group,
Inc. (“Harbor View”) on March 11, 2005 whereby the Company will compensate the
Finder 15% cash for funds raised by Finder and shares of the Company’s common
stock equal to 15% of the amount of the financing attained by the Finder.
Subsequently, this arrangement was amended by the two parties, to allow
the
Finder’s Fee to be paid at the rates of 10% and 22% of the Company’s common
stock.
Consulting
Agreements
In
November, 2005 bioMetrx and its wholly owned subsidiary SmartTOUCH Medical,
Inc.
entered into a consulting agreement with Wendy Borow-Johnson. Pursuant
to the
agreement, bioMetrx issued to Ms. Borow-Johnson Two Hundred and Fifty
Thousand
(250,000) shares of its common stock. In addition, upon the one (1) year
anniversary of the consulting agreement, bioMetrx will issue to Ms.
Borow-Johnson an additional Two Hundred and Fifty Thousand (250,000)
shares of
its common stock. Ms.Borow-Johnson shall be paid a monthly retainer of
$2,500
per month in addition to reimbursement of travel and other related expenses
incurred. The consulting agreement also provides that in the event the
Company
spins off SmartTOUCH Medical, Ms. Borow-Johnson shall have the right
to acquire
a 20% stake in such company for an aggregate purchase price of $10,000.
Ms.Borow-Johnson shall provide services to SmartTOUCH Medical, Inc. those
functions commonly associated with the role of President of the
subsidiary.
In
April
2005, the Company entered into two short term research and development
agreements aggregating $220,000.
Lease
Obligations
The
Company operates its business in leased facilities. The Company currently
leases
approximately 1800 square feet for its corporate office facilities located
at
500 North Broadway, Jericho, New York. The lease expires January 31,
2009. The
Company also leases two executive offices at 33 South Service Road, Jericho,
New
York for $3,400 per month. The lease for these offices expires July 31,
2006.
Approximate
future minimum commitments under these leases are as follows:
|
Year
Ending December 31,
|
|
|
|
|
|
2006
|
|
$
|
64,000
|
|
|
2007
|
|
|
46,000
|
|
|
2008
|
|
|
52,000
|
|
|
2009
|
|
|
4,000
|
|
|
|
|
$
|
166,000
|
|
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
7 - Commitments and Contingencies (Continued)
Lease
Obligations (Continued)
Rent
expense under the office leases was approximately $29,000 and $0 for
the years
ended December 31, 2005 and 2004, respectively.
Legal
Proceedings
From
time
to time, the Company is named in legal actions in the normal course of
business.
In the opinion of management, the outcome of these matters, if any, will
not
have a material impact on the financial condition or results of operations
of
the Company.
Note
8 - Income Taxes
At
December 31, 2005 the Company had net operating loss carry forwards for
Federal
tax purposes of approximately $5,000,000 which are available to offset
future
taxable income, if any, through 2025. 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, 2005, the Company had a deferred tax asset of approximately
$2,100,000 representing the benefit of its net operating 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 $1,500,000.
Note
9 - Subsequent Events
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.
On
February 8, 2006, the Company sold an aggregate of 183,750 shares of
common
stock to Mr. Russell Kuhn for aggregate proceeds of $147,000 or $.80
per share.
In addition, Kuhn exercised 281,250 warrants, at 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 $33,750 and issued to Harbor View 102,300
shares of its common stock.
BIOMETRX,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note
9 - Subsequent Events (Continued)
The
Company entered into a one (1) year consulting agreement with Kuhn, and
issued
him 250,000 shares of common stock 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
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. All share and
per share
data have been retrospectively restated to reflect this recapitalization.
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 Hane Petri and Jospeh 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 will issue an aggregate of 25,000 restricted
common stock to Petri and Panico as debt issuance costs.
Item
8.
Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure.
On
April
18, 2005, based upon the recommendation of and approval by our board of
directors, the “Company dismissed Marcum & Kliegman LLP (“M&K”) as its
independent auditor and engaged Wolinetz Lafazan & Co., P.C. to serve as its
independent auditor for the fiscal year ending December 31, 2005.
M&K’s
reports on the Company’s consolidated financial statements for each of the
fiscal years ended December 31, 2004 and 2003 did not contain an adverse opinion
or disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles. However, M&K’s reports each contained
an explanatory paragraph about the Company’s ability to continue as a going
concern.
During
the years ended December 31, 2004 and 2003 and through April 18, 2005, there
were no disagreements with M&K on any matter of accounting principle or
practice, financial statement disclosure or auditing scope or procedure which,
if not resolved to M&K’s satisfaction, would have caused them to make
references to the subject matter in connection with their reports of the
Company’s consolidated financial statements for such years.
In
addition, the Company believes there were no reportable events as defined in
Item 304(a)(1)(iv)(B) of Regulation S-B.
The
Company provided M&K with a copy of the foregoing statements and requested
that M&K provide it with a letter addressed to the Securities and Exchange
Commission stating whether it agrees with the foregoing statements. A copy
of
M&K’s letter, dated April 25, 2005, was filed as Exhibit 16.1 to Current
Report on Form 8-K filed with the SEC on April 25, 2005.
Item
8A.
Controls and Procedures.
As
of the
end of the period covered by this report, an evaluation was performed under
the
supervision and with the participation of our management, including our chief
executive officer and our chief financial officer, of the effectiveness of
the
design and operation of our disclosure controls and procedures as defined in
Rule 12a-15(e) under the Securities and Exchange Act of 1934, as amended. Based
on that evaluation, our management including the chief executive officer and
the
chief financial officer, concluded that as of the date of the evaluation our
disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed in the Company’s periodic
filings under the Securities Exchange Act of 1934 is accumulated and
communicated to our management, including those officer, to allow timely
decisions regarding required disclosure. There have been no significant changes
in our internal control over financial reporting that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting during the period covered by this report.
PART
III
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
|
|
47
|
|
Chief
Executive Officer and Chairman
|
|
2002
|
|
|
|
|
|
|
|
Steven
Kang
|
|
41
|
|
Chief
Technical Officer and Director
|
|
2004
|
|
|
|
|
|
|
|
Frank
Giannuzzi
|
|
26
|
|
Chief
Financial Officer and Director
|
|
2005
|
|
|
|
|
|
|
|
Lorraine
Yarde
|
|
36
|
|
Chief
Operating Officer and President of smartTOUCH Consumer Products,
Inc.
|
|
2005
|
|
|
|
|
|
|
|
Wendy
Borow-Johnson
|
|
50
|
|
President
of smartTOUCH Medical, Inc.
|
|
2005
|
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.
Steven
Kang is
bioMETRX Chief Technical Officer and President of bioMETRX Technologies, Inc.,
and a director of bioMETRX, Inc. Mr. Kang has been employed in the computer
field for over 16 years. He has been involved with bioMETRX from the inception
of bioMETRX Technologies, initially as a part-time consultant in the development
of the Company’s products. He has been CTO since the Company’s inception and
President of Technologies since October of 2005. Prior to 2001, Mr. Kang served
as a consultant specializing in architecting and developing mission-critical
systems for companies including AOL Time Warner, St. Vincent’s Hospital, Simon
& Schuster, Toys R Us, and Columbia Artists Management, Inc. Prior thereto,
Mr. Kang was the Director of Software Development at Brave New Consultants,
a
small computer consulting firm in New York, New York, where Mr. Kang helped
to
develop the first modern system for the New York Stock Exchange to monitor
the
financials activities of its member firms. He also helped develop a large claims
processing system which the international accounting firm of Peat Marwick used
to settle claims for highly publicized class actions litigations. Mr. Kang
is an
advisor to venture capital firms on new and emerging technologies and conducted
“technical” audits of startup companies for due diligence purposes. Mr. Kang is
an Oracle partner and a certified Database expert who regularly teaches, trains,
and hires skilled professionals for his clients. Mr. Kang holds a Bachelors
of
Science and Masters Degree in Computer Science from New York University where
he
studied database design, artificial intelligence, and robotics.
Frank
Giannuzzi currently
serves on a part-time basis as the Company’s Chief Financial Officer and a
member of the Board of Directors. Mr. Giannuzzi oversees the Company’s finances
and its accounting in compliance with Sarbanes Oxley Rules and Regulations.
Frank Giannuzzi has seven years of experience directing the financial structure,
financial and accounting operations for other entities. He is the co-founder
and
co-owner of GTC Capital Corp., and National Land Services, LLC, and continues
to
serve as Chief Financial Officer for these organizations, where he is actively
involved in operations including managing the accounting and financial aspects
of the businesses in compliance with the New York State Banking Department
regulations. Mr. Giannuzzi began his financial career with tenure as Director
of
Finance of an international import/export company GIA Brothers. His
responsibilities there included monitoring currency trades, cash-flows,
inventories, account receivables and payables, budgets and projections.
Mr.
Giannuzzi holds a Bachelor of Science Degree in Finance from Villanova
University, and has also studied international finance at The John Cabot
International School of Business in Rome. It is intended that Mr. Giannuzzi
will
join the Company full-time during the second quarter of 2006.
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
is
President of smartTOUCH Medical, Inc. Wendy Borow-Johnson currently is the
Senior Vice President of Networks Group Turner Media Group, Inc. Healthy Living
Channel. She was previously chairperson and principal owner of the consulting
firm CMSA Inc., in Chicago, specializing in transactional media. Previously,
she
was the President and CEO of Recovery Television Network, the only media outlet
dedicated to “Recovery” reaching over 16 million cable households. Ms.
Borow-Johnson is the founding Chairman of the Board of eHI - e-Health
Initiative.
She was
the e-healthcare expert and co-host of Alexander Haig’s World Business Review:
Special Reports on Health. She has consulted with and for over 15 major on-line
and media companies including ATT, Insight Digital Cable and AOL, and many
investments banking groups, on media and emerging technology. She has been
a
frequent speaker, talk show guest and expert on integrated advertising,
transaction based media, healthcare policy and communications. Her background
included extensive advertising agency, media and public service experience.
She
was the first woman Vice President of the American Medial Association. Ms.
Borow-Johnson is a Phi Beta Kappa Magna Cum Lude 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. Ms. Borow-Johnson has agreed to “head-up”
smartTOUCH Medical.
The
Company has not established an Audit Committee of the Board of Directors, or
any
other committee of the Board.
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. The Company believes
that during fiscal 2005, all Reporting Persons timely complied with all filing
requirements applicable to them.
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, 2005 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, 2003, 2004 and 2005. Other
than as set forth herein, no executive officer’s salary and bonus exceeded
$100,000 in any of the applicable years. The following information includes
the
dollar value of base salaries, bonus awards, the number of stock options granted
and certain other compensation, if any, whether paid or deferred.
SUMMARY
COMPENSATION TABLE
|
|
Annual
Compensation
|
|
Long
Term Compensation
|
Name
and Principal Position
|
|
Fiscal
Year
Ended
December
31
|
|
Salary
($)
|
|
Bonus
($)
|
|
Options/SARS
(#)
|
|
|
|
|
|
|
|
|
|
Mark
Basile
|
|
2005
|
|
$
360,000
|
|
-
|
|
187,500
|
President,
CEO and Chairman
|
|
2004
|
|
$
360,000
|
|
-
|
|
-
|
|
|
2003
|
|
$
360,000
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
Steven
Kang
|
|
2005
|
|
$
120,000
|
|
$12,000
|
|
187,500
|
Chief
Technology Officer;
|
|
2004
|
|
$
120,000
|
|
-
|
|
-
|
Director
|
|
2003
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
Lorraine
Yarde
|
|
2005
|
|
$
33,334
|
|
-
|
|
25,000
|
Chief
Operating Officer
|
|
2004
|
|
-
|
|
-
|
|
-
|
|
|
2003
|
|
-
|
|
-
|
|
-
|
Employment
Contracts
We
have
full-time employment agreements with three of our four executive officers,
Mark
Basile Steven Kang and Lorraine Yarde. Frank Giannuzzi has a part-time
employment agreement.
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)
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.
In
January 2004, the Company entered into a four-year employment agreement with
Steven Kang. The annual base salary is $120,000 per year. 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. After the initial term, Mr. Kang’s
agreement automatically renews for additional one-year periods. Mr. Kang
received 62,500 shares of common stock on the second anniversary of his
employment contract. Bonuses, if any, are to be paid at the sole discretion
of
the Board of Directors.
Ms.
Yarde’s employment agreement, originally entered into in August 2005, and
amended in January 2006, has an initial term of three years commencing on the
date of the Amendment. Mr. Yarde’s annual base salary is $150,000 per year. Upon
signing the Amendment Ms. Yarde was granted 250,000 options to purchase our
common stock at $.40 per share. After the initial term, Ms. Yarde’s agreement
automatically renews for additional one-year periods. Bonuses, if any, are
to be
paid at the sole discretion of the Board of Directors.
Stock
Options
OPTIONS/SAR
GRANTS TABLE
Option/SAR
Grants in the Last Fiscal Year
Individual
Grants
Name
and Principal Position
|
|
Fiscal
Year
|
|
Options/SARs
Granted
(#)
|
|
%
of Total Options/SARs Granted to Employees in Fiscal
Year
|
|
Exercise
or Base Price ($/Sh)
|
|
Expiration
Date
|
|
|
|
|
|
|
|
|
|
|
|
Mark
Basile
|
|
2005
|
|
187,500
|
|
41.7%
|
|
$2.00
|
|
7/1/10
|
President,
CEO and Chairman of the Board
|
|
2004
|
|
-0-
|
|
0.0%
|
|
-0-
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Kang
|
|
2005
|
|
187,500
|
|
41.7%
|
|
$2.00
|
|
7/1/10
|
Chief
Technology Officer and Director
|
|
2004
|
|
-0-
|
|
0.0%
|
|
-0-
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
Lorraine
Yarde
|
|
2005
|
|
25,000
|
|
.06%
|
|
$.40
|
|
1-26-09
|
Chief
Operating Officer
|
|
2004
|
|
-0-
|
|
0.0%
|
|
-0-
|
|
--
|
OPTIONS/SAR
EXERCISES AND YEAR-END VALUE TABLE
Aggregated
Options/SAR Exercises in Last Fiscal Year and FY-End Options/SAR
Value
Name
and Principal Position
|
|
Fiscal
Year
|
|
Shares
Acquired on Exercise (#)
|
|
Value
Realized
($)
|
|
Number
of Unexercised Options/SARs at FY-End (#) Exercisable / Unexercisable
|
|
Value
of Unexercised In-the-money Options/SARs at FY-End ($) Exercisable
/
Unexercisable
|
|
|
|
|
|
|
|
|
|
|
|
Mark
Basile
|
|
2005
|
|
-0-
|
|
-0-
|
|
(E)187,500
|
|
(E)
697,500
|
President,
CEO and Chairman of the Board
|
|
2004
|
|
-0-
|
|
-0-
|
|
(E)-0-
/ (U)-0-
|
|
(E)$0
/(U)$0
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Kang
|
|
2005
|
|
-0-
|
|
-0-
|
|
(E)187,500
|
|
(E)
697,500
|
Chief
Technology Officer and Director
|
|
2004
|
|
-0-
|
|
-0-
|
|
(E)-0-
/ (U)-0-
|
|
(E)$0
/(U)$0
|
|
|
|
|
|
|
|
|
|
|
|
Lorraine
Yarde
|
|
2005
|
|
12,500
|
|
$62,500
|
|
(U)12,500
|
|
(U)$46,500
|
Chief
Operating Officer
|
|
2004
|
|
-0-
|
|
-0-
|
|
(E)-0-
/ (U)-0-
|
|
(E)$0
/(U)$0
|
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 646,875 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.
Item
11.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The
following table sets forth, as of April 4, 2006, 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:
Name
and Address
|
|
Number
of Shares
|
|
Percentage
|
|
|
|
|
|
Mark
Basile
|
|
2,986,098
(1)(2)
|
|
41.67%
|
500
N. Broadway
|
|
|
|
|
Jericho,
NY 11753
|
|
|
|
|
|
|
|
|
|
Steven
Kang
|
|
709,161
(3)
|
|
11.16%
|
500
N. Broadway
|
|
|
|
|
Jericho,
NY 11753
|
|
|
|
|
|
|
|
|
|
Lorraine
Yarde
|
|
262,500
(4)
|
|
4.21%
|
500
N. Broadway
|
|
|
|
|
Jericho,
NY 11753
|
|
|
|
|
|
|
|
|
|
Frank
Giannuzzi
|
|
20,870
(5)
|
|
0.3%
|
500
N. Broadway
|
|
|
|
|
Jericho,
NY 11753
|
|
|
|
|
|
|
|
|
|
The
Naples Trust (6)
|
|
1,130,600
|
|
18.9%
|
736
Carlisle Road
|
|
|
|
|
Jericho,
NY 11753
|
|
|
|
|
|
|
|
|
|
Russell
Kuhn
|
|
1,184,094
(7)
|
|
19.52%
|
8680
Greenback Lane
|
|
|
|
|
Orangevale,
CA 95662
|
|
|
|
|
|
|
|
|
|
Officers
and directors as a group
(4
persons) (1)(2)(3)(4)(5)
|
|
3,978,629
|
|
57.34%
|
___________
(1)
|
Includes
1,130,600 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
1,375,000 shares of common stock issuable upon the exercise of stock
options to purchase a like number of
shares.
|
(3)
|
Includes
375,000 shares of common stock issuable upon the exercise of stock
options
to purchase a like number of
shares.
|
(4)
|
Includes
250,000 shares of common stock issuable upon the exercise of stock
options
to purchase a like number of
shares.
|
(5)
|
Includes
6,250 shares of common stock issuable upon the exercise of stock
options
to purchase a like number of
shares.
|
(6)
|
Mr.
Basile’s mother-in-law is the trustee for The Naples Trust and Mr.
Basile’s wife is the beneficiary.
|
(7)
|
Includes
86,238 shares of common stock issuable upon the exercise of stock
options
to purchase a like number of
shares.
|
Item
12.
Certain Relationships and Related Transactions.
None.
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
|
|
Contained
herein.
|
|
|
|
|
|
3.1.4
|
|
Certificate
of Amendment to Certificate of Incorporation filed September 23,
2005
|
|
Contained
herein.
|
|
|
|
|
|
3.1.5
|
|
Certificate
of Amendment to Certificate of Incorporation filed March 10,
2006
|
|
Contained
herein.
|
|
|
|
|
|
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.
|
|
Contained
herein.
|
|
|
|
|
|
10.7
|
|
Amendment
to Employment Agreement dated February 6, 2006 between the Registrant
and
Mark Basile
|
|
Contained
herein.
|
|
|
|
|
|
10.8
|
|
Employment
Agreement dated January 1, 2004 between Steven Kang and bioMetrx
Technologies, Inc.
|
|
Contained
herein
|
|
|
|
|
|
10.9
|
|
Employment
Agreement dated August 5, 2005 between Lorraine Yarde and bioMetrx
Technologies, Inc.
|
|
Contained
herein
|
|
|
|
|
|
10.10
|
|
Amendment
to Employment Agreement dated January 26, 2006 between the Registrant
and
Lorraine Yarde
|
|
Contained
herein.
|
|
|
|
|
|
10.11
|
|
Finder’s
Fee Agreement dated November 28, 2005 between the Registrant and
Harbor
View Group, Inc.
|
|
Contained
herein.
|
|
|
|
|
|
10.12
|
|
Finder’s
Fee Agreement dated February 8, 2006 between the Registrant and Harbor
View Group, Inc.
|
|
Contained
herein.
|
|
|
|
|
|
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.
|
|
Contained
herein.
|
|
|
|
|
|
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
|
|
Contained
herein.
|
|
|
|
|
|
10.19
|
|
Form
of Stock Option issued outside of plan
|
|
Contained
herein.
|
|
|
|
|
|
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 $25,000 and $27,000 for years ended 2005 and 2004,
respectively.
Audit-Related
Fees
Audit
related fees for the fiscal year ended 2005 were $900. This fee was in
connection with the Registration Statement filed on form S-8.
Tax
Fees
Fees
for
tax compliance, tax advice and tax planning for the years 2005 and 2004 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 19, 2006 |
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 19, 2006 |
By: |
/s/ Mark
Basile |
|
Mark
Basile, Chief Executive Officer |
|
(Principal
Executive Officer) |
|
|
|
|
|
|
Dated:
April 19, 2006 |
By: |
/s/ Frank
Giannuzzi |
|
Frank
Giannuzzi, Chief Financial Officer |
|
and
Director (Principal Accounting Officer) |
|
|
|
|
|
|
Dated:
April 19, 2006 |
By: |
/s/ Steven
Kang |
|
Steven
Kang, Director |
|
|