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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-QSB/A
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Period Ended
September 30, 2005 Commission File No. 0-15807
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BIOMETRX, INC.
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(Exact name of Registrant as specified in its Charter)
Delaware 31-1190725
------------------------- ---------------------------------
(State or jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
500 North Broadway, Suite 204, Jericho, NY 11753
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (516) 937-2828
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N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for a 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 |_|
The number of shares outstanding of the Registrant's Common Stock, $.001 par
value, as of November 16, 2005 was 16,430,986.
================================================================================
EXPLANATORY NOTE
bioMETRX, Inc. (the "Company") is filing this Form 10-QSB/A to amend
certain parts of the cover page, Part 1, Items 1, 2 and 3 of the Form 10-QSB for
the quarter ended September 30, 2005, which was previously filed with the
Securities and Exchange Commission (the "SEC") on November 18, 2005. This
amendment is being filed to restate the financial statements for the quarter
ended September 30, 2005 to reflect the impact of the following changes during
this period (i) penalty shares issued and valued at $230,000 that was originally
charged to additional paid-in capital have been charged to operations; and (ii)
common stock purchase options and warrants that were originally deferred have
been charged to operations during this period for a net change of $298,125.
Except for the amendments described above, this Form 10-QSB/A does not
modify or update the disclosures in, or exhibits to, the Form 10-QSB.
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheet 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5-6
Notes to the Condensed Consolidated Financial Statements 7-14
2
MARKETSHARE RECOVERY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2005
(Unaudited)
MARKETSHARE RECOVERY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2005
(Unaudited)
Current Assets:
Cash $ 59,507
Restricted Cash 69,126
Marketable Securities 819
Loans Receivable- Stockholder/Officer 201,598
-Employee 3,000
Prepaid Expenses 27,669
------------
Total Current Assets 361,719
Other Current Assets:
Security Deposit 5,860
------------
TOTAL ASSETS $ 367,579
============
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities:
Accrued Taxes Payable and Accrued Expenses $ 200,637
Payroll Taxes Payable 37,003
Commissions Payable 52,500
Accrued Compensation- Stockholder/Officer 264,000
------------
Total Current Liabilities 554,140
------------
TOTAL LIABILITIES 554,140
------------
Commitments and Contingencies
Stockholders' Deficit:
Preferred Stock, $.10 par value; 10,000,000 share
authorized, 0 issued and outstanding
Common Stock, $.001 par value; 17,459
50,000,000 shares authorized,
17,458,999 shares issued and
outstanding
Additional Paid-In-Capital 10,480,657
Deferred Compensation (140,000)
Deficit Accumulated During the Development Stage (10,544,677)
------------
Total Stockholders' Deficit (186,561)
------------
TOTAL LIABILITIES &
STOCKHOLDERS DEFICIT $ 367,579
============
The accompanying notes are an integral part of these financial statements.
3
MARKETSHARE RECOVERY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
THREE THREE NINE NINE FOR THE PERIOD
MONTHS MONTHS MONTHS MONTHS FEBRUARY 1, 2001
ENDED ENDED ENDED ENDED (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004 2005
------------ ------------ ------------ ------------ ------------
REVENUES -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Expenses:
General and Administrative Expenses 845,124 144,766 8,686,806 451,934 10,106,499
Research and Development Expenses 71,658 44,817 259,928 76,514 417,604
Unrealized Loss on
Marketable Securities 16,211 -- 20,574 -- 20,574
------------ ------------ ------------ ------------ ------------
TOTAL EXPENSES 932,993 189,583 8,967,308 528,448 10,544,677
------------ ------------ ------------ ------------ ------------
NET LOSS $ (932,993) $ (189,583) $ (8,967,308) $ (528,448) $(10,544,677)
============ ============ ============ ============ ============
Weighted Average Shares
Outstanding 17,298,480 12,058,188 14,840,808 14,840,808
============ ============ ============ ============
Net Loss per Share
(Basic and Diluted) $ (0.05) $ (0.02) $ (0.60) $ (0.04)
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
4
MARKETSHARE RECOVERY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
FOR THE PERIOD
NINE MONTHS NINE MONTHS FEBRUARY 1, 2001
ENDED ENDED (INCEPTION) TO
SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005
---------------- ---------------- ----------------
Cash Flows from Operating Activities:
Net Loss $ (8,967,308) $ (528,448) $ (10,544,677)
Adjustment to reconcile net loss
to net cash used in operating activities:
Compensatory Element of Stock and 6,093,750 43,750 6,512,500
Option Issuances
Unrealized Loss on Marketable Securities 5,726 0 5,726
Increase (Decrease) in operating
assets and liabilities:
Employee Loan Receivable (3,000) -- (3,000)
Prepaid Expenses (27,669) -- (27,669)
Security Deposit (5,860) -- (5,860)
Accounts Payable and Accrued Expenses 1,759,320 -- 1,844,694
Payroll Taxes Payable 10,369 5,220 37,003
Accrued Compensation- Stockholder/Officers 134,000 315,000 914,000
---------------- ---------------- ----------------
Net Cash Used in Operating Activities (1,000,672) (164,478) (1,267,283)
---------------- ---------------- ----------------
Financing Activities
Repayment of Loans from Officer (107,490) -- (107,490)
Restricted Cash (24,126) -- (24,126)
Proceeds of loans -- -- --
Loan Payments to stockholder (81,816) (146,840) (383,844)
Proceeds from Sales of Common Stock 1,440,000 327,500 2,039,750
Merger Related Advances (75,000) -- (75,000)
Expenses on Sales of Common Stock (122,500) -- (122,500)
---------------- ---------------- ----------------
Net Cash provided by Financing Activities 1,029,068 180,660 1,326,790
---------------- ---------------- ----------------
Net Increase (Decrease) in Cash 28,396 16,182 59,507
Cash, Beginning 31,111 116 --
---------------- ---------------- ----------------
Cash, End $ 59,507 $ 16,298 $ 59,507
================ ================ ================
The accompanying notes are an integral part of these financial statements.
5
MARKETSHARE RECOVERY, INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
(Unaudited)
FOR THE PERIOD
NINE MONTHS NINE MONTHS FEBRUARY 1, 2001
ENDED ENDED (INCEPTION) TO
SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005
----------------- ----------------- -----------------
Supplemental Cash Flow Information:
Cash Paid During the Period for:
Interest $ -- $ -- $ --
================= ================= =================
Income Taxes $ -- $ -- $ --
================= ================= =================
Supplemental Disclosure of Cash Flow Information:
Non-Cash Financing Activities:
Common Stock issued as Commissions on
Sale of Common Stock $ 10,000 $ -- $ 443,250
================= ================= =================
Accrued Commissions on Sales of
Common Stock $ 52,500 $ -- $ 52,500
================= ================= =================
Issuance of Common Stock as Payment of
Accrued Officers' Salaries $ 470,000 $ -- $ 470,000
================= ================= =================
Issuance of Common Stock for Services-
Deferred Compensation $ 390,000 $ -- $ 390,000
================= ================= =================
Application of Loans Receivable- Officer
Against Accrued Compensation $ 180,000 $ -- $ 180,000
================= ================= =================
s
Issuance of Common Stock in Payment of
Accrued Expenses $ 1,825,000 $ -- $ 1,825,000
================= ================= =================
The accompanying notes are an integral part of these financial statements.
6
BIOMETRX, INC. AND SUBSIDIARIES
(FORMERLY MARKETSHARE RECOVERY, INC. AND SUBSIDIARIES)
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of bioMetrx, Inc. and its wholly owned subsidiaries ("the
Company"). All significant inter-company accounts and transactions have been
eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles for
interim financial information and with instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by U.S.
generally accepted accounting principles for complete financial statements. In
the opinion of the Company's management, the accompanying condensed consolidated
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the consolidated financial
position and results of operations and cash flows for the periods presented.
Results of operations for interim periods are not necessarily indicative of the
results of operations for a full year.
Certain items in these condensed consolidated financial statements have been
reclassified to conform to the current period presentation.
The condensed consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company is a development stage
company and has incurred recurring losses from operations and operating cash
constraints that 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 inability to generate
cash flow from operations or to raise capital from external sources would force
the Company to substantially curtail or cease operations and would, therefore,
have a material adverse effect on its business. Furthermore, there can be no
assurance that any such required funds, if available, will be available on
attractive terms or that they will not have a significant dilutive effect on the
Company's existing stockholders.
NOTE 2- ORGANIZATION AND NATURE OF OPERATIONS
REVERSE ACQUISITION - On May 27, 2005, Marketshare Recovery, Inc.
("Marketshare") completed the merger ("Merger") of Marketshare Merger Sub, Inc.
a wholly owned subsidiary of Marketshare ("Merger Sub") with bioMetrx
Technologies, Inc. a Delaware corporation ("bioMetrx") pursuant to the Agreement
and Plan of Merger dated April 27, 2005, by and among Marketshare, Merger Sub
and bioMetrx ("Merger Agreement").
7
BIOMETRX, INC. AND SUBSIDIARIES
(FORMERLY MARKETSHARE RECOVERY, INC. AND SUBSIDIARIES)
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2- ORGANIZATION AND NATURE OF OPERATIONS (CONTINUED)
REVERSE ACQUISITION (CONTINUED) - On June 1, 2005 (the Effective Date"), Merger
Sub filed a Merger Certificate completing the acquisition of bioMetrx. The
consideration for the Merger was 14,218,424 restricted shares of the Company's
common stock and the issuance of 182,029 Common Stock Purchase Warrants to the
holders of corresponding instruments of bioMetrx. The Merger was completed
according to the terms of the Merger Agreement. Simultaneously with the Merger,
certain stockholders of the Company surrendered 2,208,521 shares of the
Company's common stock which was cancelled and returned to the status of
authorized and unissued. In addition, 300,000 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 was merged into the
Merger Sub and became a wholly owned subsidiary of the Company.
Since the Company had no meaningful operations immediately prior to the Merger,
the Merger will be treated as a reorganization of bioMetrx via a reverse merger
with the Company for accounting purposes.
The 14,218,424 shares and the shares issuable upon the exercise of 182,029
warrants issued as part of Merger to the former bioMetrx stockholders represent
approximately 91% of the total outstanding post-merger stock.
ORGANIZATION - bioMetrx was incorporated with the name "M2 Extreme Sports
Centers, Inc." in the State of Delaware on February 1, 2001. On November 8, 2001
the bioMetrx's certificate of incorporation was amended to change its name to
"Biostat Technologies S.P.A., Inc." and 1500 shares of no par common voting
stock was issued to the sole shareholder for $1.00 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
In 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 September 30, 2005 the Company formed two subsidiary companies, smartTOUCH
Medical, Inc. and smartTOUCH Security Inc. The two subsidiaries were
incorporated in the State of Delaware. smartTOUCH Security, Inc. tests and
markets the Company's biometrically secured garage door openers, thermostats,
deadbolts and home alarm keypads. smartTOUCH Medical, Inc. designs, tests and
markets biometrically secured medical crash carts, rolling medicine carts,
portable patient medical information devices and, security and retrieval systems
for electronic medical records.
8
BIOMETRX, INC. AND SUBSIDIARIES
(FORMERLY MARKETSHARE RECOVERY, INC. AND SUBSIDIARIES)
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2- ORGANIZATION AND NATURE OF OPERATIONS (CONTINUED)
ORGANIZATION (Continued) - On October 10, 2005 the Company changed its name to
bioMETRX, Inc., and was also assigned a new ticker symbol (BMTX.ob). The name
change to bioMETRX, Inc., will help the Company establish brand and company name
recognition as one of the most diverse biometrics-based holding company in the
United States.
NATURE OF OPERATIONS- The Company is a developer of proprietary biometrics-based
products for the home security and electronics market, located on Long Island,
New York.
The Company is focused on developing a line of home security products called
smartTouchtm which includes biomedical enabled residential door locks, central
station alarm keypads, thermostats and garage/ gate openers. Its products
utilize fingerprints recognition technology designed to augment or replace
conventional security methods such as keys, keypads, and PIN numbers. The
Company develops market- specific products in home security which it plans
either be licensed or sold through manufacturers/ retailers worldwide when
deemed commercially viable.
NOTE 3 - RESTRICTED CASH
Restricted cash represents cash held in escrow by corporate counsel in
connection with the sale of common stock and in contemplation of the proposed
merger. Such restricted cash should be released after satisfaction of certain
requirements of the merger agreement (see Note 2).
NOTE 4 - STOCKHOLDERS' DEFICIT
bioMetrx was incorporated with the name "M2 Extreme Sports Centers, Inc." in the
State of Delaware on February 1, 2001. On November 8, 2001 the bioMetrx's
certificate of incorporation was amended to change its name to "Biostat
Technologies S.P.A., Inc." and 1500 shares of no par common voting stock was
issued to the sole shareholder for $1.00 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
In 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.
During the quarter ended March 31, 2005 the Company sold 500,000 shares of
common stock for $200,000 ($.40 per share).
9
BIOMETRX, INC. AND SUBSIDIARIES
(FORMERLY MARKETSHARE RECOVERY, INC. AND SUBSIDIARIES)
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)
During the quarter ended March 31, 2005 the Company sold 850,000 shares of
common stock for $425,000 ($.50 per share).
During the quarter ended March 31, 2005 the Company sold 80,000 shares of common
stock for $80,000 ($1 per share).
During the quarter ended March 31, 2005 the Company issued 100,000 shares of
common stock valued at $100,000 ($1 per share) for services pursuant to
consulting agreements.
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 500,000 shares of common stock valued at $1
per share.
The Company issued 700,000 shares of common stock valued at $.50 cents per share
to Mark Basile/CEO for accrued payroll owed him. The Company issued 240,000
shares of common stock valued at $.50 cents per share to Steven Kang for accrued
payroll owed him.
On July 5, 2005 the Company's Board of Directors resolved to the following
common stock and stock option issuances:
o 750,000 shares of common stock to an employee; 500,000 shares
immediately and 250,000 shares on the second anniversary of his four
year employment contract (see Note 7).
o 750,000 common stock purchase options, exercise price $.50 per
share, to an employee (see above).
o 750,000 common stock purchase options, exercise price $.50 per
share, to the Company's CEO.
During the quarter ended September 30, 2005 the Company issued 10,000 shares of
common stock upon exercise of options by its Chief Financial Officer and its
Chief Operating Officer.
During the quarter ended September 30, 2005 the Company issued 500,000 shares of
common stock to Stephen Kang, valued at $1,825,000, pursuant to his employment
contract (see above).
During the quarter ended September 30, 2005 the Company issued 200,000 shares of
common stock valued at $230,000 as a penalty for non registration of shares (see
Note 8).
During the quarter ended September 30, 2005 the Company entered into a one year
consulting contract with Steven Horowitz and Arnold Kling to provide general
corporate services, and in connection therewith the Company issued 250,000
common stock purchase warrants valued at $252,500.
10
BIOMETRX, INC. AND SUBSIDIARIES
(FORMERLY MARKETSHARE RECOVERY, INC. AND SUBSIDIARIES)
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - STOCKHOLDERS' DEFICIT (CONTINUED)
At September 30, 2005 the Company had warrants outstanding as follows:
Exercise Price Shares Expiration Date
-------------- ------- -----------------
$ 0.50 250,000 September 7, 2012
$ 0.60 37,333 July 5, 2010
$ 0.70 36,406 July 5, 2006
$ 0.70 37,333 July 5, 2010
$ 0.80 36,406 July 5, 2007
$ 0.80 37,333 July 5, 2010
$ 0.90 36,405 July 5, 2008
$ 0.90 37,333 July 5, 2010
$ 1.00 36,404 July 5, 2009
$ 1.00 37,334 July 5, 2010
-------
582,287
At September 30, 2005 the Company had options outstanding as follows:
Exercise Price Shares Expiration Date
-------------- --------- -----------------
$ 0.10 50,000 December 1, 2005
$ 0.10 50,000 June 1, 2006
$ 0.50 1,500,000 July 1, 2010
---------
1,600,000
=========
NOTE 5 - LOSS PER SHARE
Loss per common share is based upon the weighted average number of common shares
outstanding during the periods.
The common stock issued and outstanding with respect to the pre-merger
Marketshare stockholders has been included since January 1, 2004.
Diluted loss per common share is the same as basic loss per share, as the effect
of potentially dilutive securities (options and warrants) are anti-dilutive.
NOTE 6- RELATED PARTY TRANSACTIONS
OFFICER/SHAREHOLDER ADVANCES - These advances are non-interest bearing,
unsecured, and payable on demand. These advances were made to the Company's CEO
and majority stockholder.
11
BIOMETRX, INC. AND SUBSIDIARIES
(FORMERLY MARKETSHARE RECOVERY, INC. AND SUBSIDIARIES)
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6- RELATED PARTY TRANSACTIONS (CONTINUED)
DUE FROM RELATED PARTY - This amount represents funds advanced in connection
with the Company's reverse merger (see Note 2).
NOTE 7 - COMMITMENTS AND CONTINGENCIES
In December 2002 the Company entered into a five year employment agreement with
Mark Basile (CEO and a significant stockholder) for a base annual salary of
$360,000 per year. Accrual of compensation may be converted into shares of the
Company's common stock at $.50 cents per share, which can be exercised at
anytime after each twelve months of service, but in no event, shall cash
compensation be less than $60,000 per annum. For the nine months ended September
30, 2005 and 2004 there was $316,000 and $45,000 of salary paid.
In January 2004, the Company entered into a four year employment agreement with
Steven Kang (Engineer and a stockholder) for a base annual salary of $120,000
per year. The agreement has the same terms as the above, except, that in no
event, shall cash compensation be less than $20,000 per annum. For the nine
months ended September 30, 2005 and 2004 there was $114,000 and $0 salary paid.
The Company entered into a Finder's Fee Agreement on March 11, 2005 whereby the
Company will compensate the Finder 15% cash for funds raised by the Finder and
shares of the Company's common stock equal to 15% of the amount of the financing
attained by the Finder.
In April 2005 the Company entered into two short term research and development
agreements aggregating $220,000.
On June 1, 2005 the Company entered into employment agreements with a new Chief
Financial Officer and a new 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 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 100,000 shares at $.10
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.
On September 21, 2005 the Company entered into two twelve month consulting
agreements with STEVEN A. HOROWITZ and ARNOLD P. KLING (the "Consultants"). The
Consultants will aid the Company's management with its business plan and
operational tasks; assisting management with identifying potential strategic
partnerships and licensing and joint venture opportunities for the Company's
products and services. As compensation, the Company issued, to each Consultant,
Warrants to purchase a total of 125,000 shares of the Company's common stock,
exercisable during the seven year period following issuance at an exercise price
of $.50 per share.
12
BIOMETRX, INC. AND SUBSIDIARIES
(FORMERLY MARKETSHARE RECOVERY, INC. AND SUBSIDIARIES)
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 - SUBSEQUENT EVENTS
On October 10, 2005 the Company changed its name to bioMETRX, Inc., and was also
assigned a new ticker symbol (BMTX.ob). The name change to bioMETRX, Inc., will
help the company establish brand and company name recognition as one of the most
diverse biometrics-based holding company in the United States.
On October 28, 2005 the Company entered into a subscription agreement with
Russell Kuhn (the "Purchaser") for the private sale of its securities to the
Purchaser as well as granting the Purchaser "piggy-back" registration rights.
The securities sold were Two Million Two Hundred Fifty Thousand (2,250,000)
shares of the Registrant's common stock (the "Shares") and warrants (the
"Warrants") to purchase an additional Two Million Two Hundred Fifty Thousand
(2,250,000) shares at an aggregate purchase price of $450,000 or $.20 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
reserved for issuance thereunder (the "Warrant Shares") for a period commencing
on the date of issuance and expiring on December 15, 2005 at an exercise price
of $.20 per share.
Pursuant to a previous Subscription Agreement between the Company and the
Purchaser, 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 the Purchaser "piggy-back" registration rights for the
Shares with respect to such Registration Statement.
Simultaneously herewith the Company issued an additional 300,000 shares of its
common stock to the Purchaser. These shares represent penalty shares as a result
of the Company's failure to register certain shares previously purchased by the
Purchaser in other financing transactions between the Purchaser and the Company.
As a result of these transactions, the Purchaser owns approximately 21.7% of the
issued and outstanding shares of the Company's common stock. This amount does
not reflect an additional 2,250,000 shares which may be obtained by the
Purchaser from the exercise of the Warrants described above, plus an additional
503,234 warrants owned by the Purchaser prior to the consummation of this
transaction.
The Company will utilize the proceeds from this offering for general working
capital.
On November 7, 2005 the Company entered into a two year consulting agreement
with a consultant. The agreement calls for the issuance of 250,000 shares of the
Company's common stock upon execution of the agreement and an additional 250,000
shares of common stock upon the one year anniversary of this agreement. The
consultant 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 contains a clause that in the event the Company spins off its newly
formed subsidiary, smartTOUCH Medical, Inc. (see Note 2), the consultant shall
have the right to acquire a 20% stake in such subsidiary for an aggregate
purchase price of $10,000.
NOTE 9 - RESTATEMENT
The Company has amended this Quarterly Report on Form 10-QSB for the
quarter ended September 30, 2005 to reflect the impact of the following current
period changes: (i) penalty shares issued and valued at $230,000 that were
originally charged to additional paid-in capital have been charged to
operations; and (ii) common stock purchase options and warrants that were
originally deferred have been charged to operations for a net charge of
$298,125. The following schedule provides disclosure of the effects of the
restatement.
September 30, 2005 September 30,
as previously 2005
reported as corrected Change
------------ ------------ ------------
Total Assets $ 367,579 $ 367,579 $ --
------------ ------------ ------------
Total Liabilities $ 554,140 $ 554,140 $ --
------------ ------------ ------------
Total Stockholders' Deficit $ (186,561) $ (186,561) $ --
------------ ------------ ------------
For the For the
Nine Months Ended Nine Months Ended
September 30, 2005 September 30,
as previously 2005
reported as corrected Change
------------- ------------- -------------
Net Loss $ (8,439,183) $ (8,967,308) $ (528,125)
------------- ------------- -------------
Loss Per Common Share $ (.56) $ (.60) $ (.04)
------------- ------------- -------------
13
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BACKGROUND
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 NewYork
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
MarketShareRecovery, Inc.
MarketShare Recovery, the parent company's operating 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.
We had derived our revenues from the sale of solutions that enable
businesses to proactively communicate with their customers online. Primarily,
these services have consisted of the design and execution of online direct
marketing campaigns and additional services provided by our Professional
Services organization, including the development and execution of Customer
Acquisition programs. Revenue for direct marketing and acquisition campaigns
were recognized when persuasive evidence of an arrangement exists, the campaign
has been sent, the fee was fixed or determinable and collection of the resulting
receivables is reasonably assured. Revenue generated by our professional service
organization was typically recognized as the service is provided.
Our ability to grow and operate that business was constrained by new
technologies and e-mail filtering devices installed at internet service
providers and on consumer's personal computers. These programs blocked our
emails from reaching their final destination, which in turn affected our ability
to effectively market our services. These technological obstacles were put in
place to combat spam, however, their effect has been more widespread and has
adversely affected our ability to deliver our clients messages to our opt-in
database of users. As a result, we found it harder to maintain and grow our
business as we were not able to deliver as many advertisements for our clients
and in turn had having difficulty in recruiting new sales persons as well as
retaining members of our existing sales force. As a result of the foregoing, we
decided to discontinue that business and sought out new business opportunities.
14
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") pursuant to the Agreement
and Plan of Merger dated April 27, 2005, by and among the Company, Merger Sub
and bioMetrx ("Merger Agreement"). bioMetrx is 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 June 1, 2005 (the "Effective Date"), Merger Sub filed a Merger
Certificate completing the acquisition of bioMetrx. The consideration for the
Merger was 14,218,424 restricted shares of our common stock and the issuance of
182,027 Common Stock Purchase Warrants to the holders of corresponding
instruments of bioMetrx. The Merger was completed according to the terms of the
Merger Agreement. Simultaneously with the Merger, certain stockholders of the
Company surrendered 2,208,521 shares of the Company's common stock which was
cancelled and returned to the status of authorized and unissued. In addition,
300,000 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 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 via a
reverse merger with the Company for accounting purposes.
The 14,218,424 shares and the shares issuable upon the exercise of 182,027
warrants issued as part of Merger to the former bioMetrx stockholders represent
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
changed to "BMTX".
PLAN OF OPERATIONS
The Company, through its wholly owned subsidiaries, designs, develops,
engineers and produces 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.
Founded in 2001, bioMetrx is focused on developing simple-to-use,
cost-efficient finger print activation products under the trade name
SmartTOUCH(TM). The Company's products include biometrically enabled and secured
residential door locks, central station alarm keypads, thermostats, garage/gate
openers, medical crash carts, industrial medicine cabinets and portable
electronic medical records. Our products utilize fingerprints 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 Security, Inc., the consumer-based marketing
and sales group and smartTOUCH Medical, Inc. which will market medical
information and products.
15
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.
The Company is developing a finger-activated thermostat that it intends to
market to the general public as well as the small business owner. The Company's
product will allow consumers and small business owners the ability to control
the temperature within their homes or business establishments, as the case may
be, without having to install a cage around the thermostat. The Company's
smartTOUCH thermostat allows homeowners and small business owners complete
control and security over their costly HVAC systems.
The medical records market represents another entry point for the
Company's products. In 2001, the federal government created HIPPA laws regarding
privacy and non-disclosure of patients' medical records. The medical records
industry has progressed dramatically over the last few years and the practice of
medicine has turned to the digital/electronics markets to streamline patient
medical records. While this progress is more efficient for the medical provider,
the rules developed to safeguard this information has become more complicated
and burdensome. The Company is developing a product that will allow patients,
doctors and emergency hospital personnel to access complete patient records by
simply touching a sensor. The Company's product will also allow the patient to
carry their own medical records on a digital card that is also completely
secured.
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 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.
16
In December 2002, bioMetrx entered into a five-year employment agreement
with its CEO, Mark Basile. The employment agreement has an annual base salary of
$360,000. Accrual of compensation may be converted into shares of the Company's
common stock at $.50 per share, which can be converted at any time after each
twelve (12) months of service, but in no event shall cash compensation be less
than $60,000 per annum. For the years ended December 31, 2004 and 2003, Sixty
Thousand Dollars ($60,000) and $0, respectively, was paid under this employment
agreement. For the three and nine months ended September 30, 2005, $136,000 and
$316,000, respectively, was paid under this employment agreement.
In January 2004, bioMetrx entered into a four (4) year employment
agreement with Steven Kang for a base annual salary of $120,000. The agreement
has the same accrual and conversion terms as Mr. Basile's agreement, except that
in no event, shall cash compensation be less than $20,000 per annum. For the
year ended December 31, 2004 there was no cash paid under this employment
agreement. For the three and nine months ended September 30, 2005, $79,500 and
$114,000, respectively, was paid under this employment agreement.
In April 2005 bioMetrx entered into two short-term research and
development agreements aggregating $220,000.
On November 10, 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.
RESULTS OF OPERATIONS
From inception (February 1, 2001) through September 30, 2005,
bioMetrx has not generated any revenues. During the period from inception
(February 1, 2001) through September 30, 2005, bioMetrx had net losses totaling
$10,544,677. During the three months ended September 30, 2005, net losses
totaled $932,993. From inception through September 30, 2005, bioMetrx' general
and administrative expenses totaled $10,106,499 or 95.8% of total expenses,
while for the three months ended September 30, 2005 general and administrative
expenses totaled $845,124 or 90.6% of total expenses. From inception through
September 30, 2005, bioMetrx stock-based compensation of $6,512,500 or 61.8% of
expenses, of which $129,625 or 13.9% of total expenses was incurred during the
three months ended September 30, 2005. Research and development costs were
$417,604 or 3.9% of total expenses incurred in the period from inception through
September 30, 2005, while research and development costs during the three months
ended September 30, 2005 totaled $71,658 or 7.7% of total expenses.
17
During the quarter ended September 30, 2005, the Company had $0 revenues.
The Company has beta-tested its garage/gate door opener and will begin marketing
this product in the near future. this represents the first product the Company
intends to commercially market.
During the three and nine months ended September 30, 2005, net
losses totaled $932,993 and $8,967,308, respectively. For the three and nine
months ending September 30, 2005, bioMETRX' general and administrative expenses
totaled $845,124 and $8,686,806, respectively, or 90.6% and 95.8% of total
operating expenses. During the same three and nine month periods in 2004,
general and administrative expenses totaled $144,766 and $451,934 respectively,
or 76.3% and 85.5% of total operating expenses. The increase was mostly
attributable to an increase in professional expenses relating to general
corporate matters. For the three and nine months ending September 30, 2005 we
incurred salaries of $134,000 and $378,833, respectively, or 14.3% and 4.2% of
total operating expenses as compared to the three and nine months ended
September 30, 2004 of $120,000 and $360,000, or 63.3% and 68.1% of total
operating expenses. The increase was due to the addition of additional personnel
necessary to continue the growth goals of the Company.
For the three and nine months ending September 30, 2005, interest expense
was $0 and $6,425, respectively, as compared to $0 and $0 for the three and nine
months ending September 30, 2004.
Research and development expenses for the three and nine months ending
September 30, 2005 was $71,658 and $259,928, respectively, or 7.7% and 2.9% of
total operating expenses, compared to $44,817 and $76,514, respectively, or
23.7% and 14.5% of total operating expenses for the same periods in 2004.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, bioMetrx has financed its activities from the private
sales of its securities. In November 2001 bioMetrx issued 1,099,999 shares of
its common stock, valued at $275,000 ($.25 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 925,000 shares of its common stock for gross
proceeds of $231,250 or $.25 per share. During 2003, bioMetrx issued 300,000
shares of its common stock, valued at $150,000 ($.50 per share), for services
rendered to it pursuant to consulting agreements. During 2003, bioMetrx issued
140,000 shares of its common stock, valued at $140,000 ($1.00 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 108,000 shares of its common stock for aggregate
gross proceeds of $27,000 ($.25 per share). During that same year, bioMetrx sold
335,000 shares of its common stock for aggregate gross proceeds of $335,000
($1.00 per share). Also in 2004, bioMetrx issued 200,000 and 35,000 shares of
its common stock valued at $200,000 and $8,750, respectively, as commissions on
sales of its common stock.
18
In July 2005, the Company sold Nine Hundred and Thirty Three Thousand
Three Hundred and Thirty-Four (933,334) shares of its common stock and One
Hundred and Eighty Six Thousand Six Hundred and Sixty-Six warrants for an
aggregate purchase price of $700,000 or $.75 per share without allocating any
part of the purchase price for the warrants.
On October 28, 2005 the Company sold Two Million Two Hundred Fifty
Thousand (2,250,000) shares and Two Million Two Hundred Fifty Thousand
(2,250,000) warrants for an aggregate purchase price of $450,000 or $.20 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 $.20 per share.
As of September 30, 2005, bioMetrx had total assets of $367,579 and total
current assets of $361,719. At September 30, 2005 bioMetrx had total liabilities
of $554,140 and total current liabilities of $554,140. bioMetrx' working capital
deficit at September 30, 2005 was $192,421 and an equity deficiency of $186,561.
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, 2004, 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 available going concern.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES:
The preparation of financial statements in conformity in conformity with
accounting principles generally accepted in the United States of America require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
When used in this Report on Form 10-QSB, the words "may," "will,"
"expect," "anticipate," "continue," "estimate," "intend," "plans", and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 regarding events, conditions and financial
trends which may affect the Company's future plans of operations, business
strategy, operating results and financial position. Such statements are not
guarantees of future performance and are subject to risks and uncertainties and
actual results may differ materially from those included within the
forward-looking statements as a result of various factors.
19
Such factors include, among others: (i) the Company's ability to obtain
additional sources of capital to fund continuing operations; in the event it is
unable to timely generate revenues (ii) the Company's ability to retain existing
or obtain additional licensees who will act as distributors of its products;
(iii) the Company's ability to obtain additional patent protection for its
technology; and (iv) other economic, competitive and governmental factors
affecting the Company's operations, market, products and services. Additional
factors are described in the Company's other public reports and filings with the
Securities and Exchange Commission. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
made. The Company undertakes no obligation to publicly release the result of any
revision of these forward-looking statements to reflect events or circumstances
after the date they are made or to reflect the occurrence of unanticipated
events.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities", SFAS No. 147,
"Acquisitions of Certain Financial Institutions - an Amendment of FASB
Statements No. 72 and 144 and FASB Interpretation No. 9", SFAS No. 148, "
Accounting for Stock-Based Compensation - Transition and Disclosure - an
Amendment of FASB Statement No. 123", SFAS No. 149, "Amendment of Statement 33
on Derivative Instruments and Hedging Activities", and SFAS No. 150, "Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and
Equity", were recently issued. SFAS No. 146, 147, 148, 149 and 150 have no
current applicability to the Company or their effect on the financial statements
would not have been significant.
In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement No. 123R)"SFAS 123R") "Share Based Payment, "a revision of Statement
No. 123, "Accounting for Stock Based Compensation." This standard requires the
Company to measure the cost of employee services received in exchange for equity
awards based on grant date fair value of the awards. The Company is required to
adopt SFAS 123R effective January 1, 2006. The standard provides for a
prospective application. Under this method, the Company will begin recognizing
compensation cost for equity based compensation for all new or modified grants
after the date of adoption.
In addition, the Company will recognize the unvested portion of the grant
date fair value of awards issued prior to the adoption based on the fair values
previously calculated for disclosure purposes. At December 31, 2004, the Company
had no unvested options.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-monetary
Assets," ("SFAS 153"). SFAS 153 amends Accounting Principles Board ("APB")
Opinion No. 29, Accounting for Non-monetary Transactions," to require exchanges
of non-monetary assets are accounted for at fair value, rather than carryover
basis. Non-monetary exchanges that lack commercial substance are exempt from
this requirement.
20
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 January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities - an Interpretation of Accounting Research Bulletin
No. 51" (FIN No. 46"). This interpretation provides guidance related to
identifying variable interest entities (previously known generally as special
purpose entities or SPEs) and determining whether such entities should be
consolidated. Certain disclosures are required when FIN No. 46 becomes effective
if it is reasonably possible that a company will consolidate or disclose
information about a variable interest entity when it initially applies FIN No.
46. This interpretation must be applied immediately to variable interest
entities created or obtained after January 31, 2003. For those variable interest
entities created or obtained on or before January 31, 2003, the Company must
apply the provisions of FIN No. 46 for the year ended December 31, 2003. FIN No.
46 did not apply to the Company's financial position or results of operations.
COMMITMENTS
We do not have any commitments that are required to be disclosed in
tabular form as of December 31, 2004 and as of September 30, 2005.
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements.
ITEM 3: CONTROLS AND PROCEDURES
Pursuant to provisions of the Securities Exchange Act of 1934, the
Company's Chief Executive Officer and Chief Financial Officer are responsible
for establishing and maintaining disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under their supervision,
for the Company. They have designed such disclosure controls and procedures to
ensure that material information relating to the Company, is made known to them
by others within the Company, particularly during the periods when the Company's
quarterly and annual reports are being prepared.
Changes in Internal Controls. During the third quarter of fiscal year
2005, there were no changes in our internal control over financial reporting
that materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting. However, we intend to continue to
refine our internal controls on an ongoing basis. Our management and our
independent auditors have reported to our board of directors certain matters
involving internal controls that our independent auditors considered to be
material weaknesses, under standards established by the American Institute of
Certified Public Accountants. The material weakness relates to the December 31,
2004 financial closing process. Certain adjustments were identified in the
annual audit process, related to the accounting for stocks received by
customers, payment of commissions with marketable securities, as well as the
lack of segregation of duties in the process of cash receipts and disbursements.
In addition, there were instances where accounting analyses did not include
evidence of a timely review. The adjustments related to these matters were made
by the Company in connection with the preparation of the audited financial
statements for the year ended December 31, 2004.
21
Given these material weaknesses, management devoted additional
resources to resolving questions that arose during our year-end audit. As a
result, we were confident that our consolidated financial statements for the
year ended December 31, 2004 and for the quarter ended September 30, 2005 fairly
presented, in all material respects, our financial condition and results of
operations. However, as a result of reviewing the Company's consolidated
financial statements for the year ended December 31, 2005 it was discovered that
the Company had deferred certain charges related to the issuance of stock
options and compensation based warrants that should have been charged in this
quarter resulting in a net charge during this quarter of $298,125 and classified
the issuance of approximately $230,000 worth of the Company's common stock
issued as penalty shares as additional paid-in capital that should have been
charged to operations. As a result, the Company is reporting an additional loss
of $528,125.
The material weaknesses have been discussed in detail among
management, our board of directors and our independent auditors, and we are
committed to addressing and resolving these matters fully and promptly, by
putting in place the personnel, processes, technology and other resources
appropriate to support our revenue recognition and financial close processes. In
that regard we will contract a CPA who will assist our CFO in the preparation of
our financial statements, 10-QSB's and 10-KSB's. We have completed a full review
of our revenue recognition policy and practices and have implemented a number of
process improvements. We completed a review of our financial disclosure process
and we will continue to make the needed improvements.
22
ITEM 6.: EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
31.1 Certification of Chief Executive Officer of Periodic Report
Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
31.2 Certification of Chief Financial Officer of Periodic Report
Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: February 9, 2005 BIOMETRX, INC.
By: /s/ Mark Basile
-----------------------
Mark Basile
Chief Executive Officer
By: /s/ J.Richard Iler
-----------------------
J.Richard Iler
Chief Financial Officer
24