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NEVADA | 8999 | 88-0380546 | ||
(State or jurisdiction of incorporation or organization) | (Primary Industrial Classification Code Number) | (I.R.S Employer Identification Number) |
W. PRESTON TOLLINGER, JR., ESQ. MORGAN, LEWIS & BOCKIUS LLP 101 PARK AVENUE NEW YORK, NY 10178 TEL:212-309-6000 FAX:212-309-6001 | MICHAEL I. STOLZAR, ESQ. KARLEN & STOLZAR, LLP WHITE PLAINS PLAZA ONE NORTH BROADWAY — SUITE 800 WHITE PLAINS, NEW YORK 10601 TEL: 914-949-4600 FAX: 914-682-0387 |
Proposed maximum | Proposed Maximum | Amount of | ||||||||||||||||||
Title of Each Class of | Amount | Offering | Aggregate | Registration | ||||||||||||||||
Securities to be Registered | to be Registered(1) | Price per Share | Offering Price(2) | Fee(3) | ||||||||||||||||
Common Stock, par value $0.00001 per share | 67,386,486 | $ | 0.050 | $ | 21,000,000 | $ | 644.70 | |||||||||||||
Total | 67,386,486 | $ | 0.050 | $ | 21,000,000 | $ | 644.70 | |||||||||||||
(1) | Represents 417,386,486 shares, the maximum number of shares of common stock, par value $0.00001 per share, of JAG Media Holdings, Inc. (“JAG Media”) estimated to be issuable by JAG Media upon consummation of the acquisition of Cryptometrics, Inc. (“Cryptometrics”) by JAG Media, including shares to be issued with respect to Cryptometrics options, warrants and exchangeable shares of a Cryptometrics subsidiary, minus the 350,000,000 shares of Jag Media common stock previously registered on Registration StatementNo. 333-131047, filed with the United States Securities and Exchange Commission on January 13, 2006 and offered pursuant to the prospectus contained herein. |
(2) | Calculated in accordance with Rules 457(c) and 457(f) under the Securities Act of 1933, as amended, the proposed maximum offering price is computed by multiplying (A) the book value of Cryptometrics common stock on October 31, 2006 ($1.40) by 15,000,000 (the maximum number of shares of Cryptometrics common stock to be exchanged for the common stock being registered, including shares to be registered with respect to Cryptometrics options, warrants and exchangeable shares of a Cryptometrics subsidiary). |
(3) | $1,972.04 was previously paid in connection with Registration StatementNo. 333-131047 with respect to the 15,000,000 maximum amount of Cryptometrics shares to be exchanged upon consummation of the acquisition. Accordingly, no fee is due with this filing. |
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• | approximately 10.3375% by the current stockholders of JAG Media; and | |
• | approximately 89.6625% by the stockholders of Cryptometrics immediately prior to the consummation of the Merger. |
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HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF JAG MEDIA HOLDINGS, INC. AND SUBSIDIARIES | F-1 | |||
F-28 |
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Appendix A | Amendment to Article Fourth of the Articles of Incorporation of JAG Media Holdings, Inc. | |||
Appendix B | Amendment to Article First of the Articles of Incorporation of JAG Media Holdings, Inc. | |||
Appendix C-1 | Merger Agreement dated as of December 27, 2005 by and among JAG Media Holdings, Inc., Cryptometrics Acquisition, Inc. and Cryptometrics, Inc. | |||
Exhibit A — Company Voting andLock-Up Agreement | ||||
Exhibit B — Certificate of Merger | ||||
Exhibit C — Affiliate Agreement | ||||
Appendix C-2 | Amendment to Merger Agreement, dated as of January 24, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer | |||
Appendix C-3 | Amendment to Merger Agreement, dated as of February 26, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer | |||
Appendix D | Section 262 of the Delaware General Corporation Law (Appraisal Rights) | |||
Appendix E | Form of Employment Agreement | |||
Exhibit A — Option Agreement | ||||
Exhibit B — Release of Claims Agreement |
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Q: | WHY HAS CRYPTOMETRICS NOT SCHEDULED A STOCKHOLDERS’ MEETING? | |
A: | As permitted under Delaware law, Cryptometrics stockholders holding a majority of the outstanding shares of Cryptometrics Common Stock have approved the proposed Merger without the need for a meeting by providing their written consents. Such stockholder approval followed the adoption of a resolution by the Board of Directors of Cryptometrics approving the Merger Agreement and declaring its advisability. | |
Q: | WHAT WILL CRYPTOMETRICS STOCKHOLDERS RECEIVE IN THE MERGER? | |
A: | Holders of shares of Cryptometrics Common Stock issued and outstanding immediately prior to the time the Certificate of Merger is filed with the Delaware Secretary of State, including as outstanding for this purpose the total number of shares of Cryptometrics Common Stock (the “Cryptometrics Exchange Shares”) for which outstanding exchangeable shares of Cryptometrics’ Canadian subsidiary, Cryptometrics Canada, Inc. (the “Exchangeable Shares”), can be exchanged, will be entitled to receive 394,700,016 shares of fully paid and nonassessable JAG Media Common Stock (the “Merger Consideration”). | |
The number of shares of JAG Media Common Stock to be issued in connection with the Merger is fixed and will not be adjusted based upon changes in the value of those shares. | ||
Holders of Cryptometrics Common Stock will in general receive shares of JAG Media Common Stock in proportion to their holdings of Cryptometrics Common Stock compared to all outstanding shares of Cryptometrics Common Stock (including as outstanding the Cryptometrics Exchange Shares) at the time of the Merger, subject to certain adjustments. A limited number of Cryptometrics stockholders holding 787,050 shares of Cryptometrics Common Stock, by virtue of subscription agreements with Cryptometrics, will receive a greater or lesser number of JAG Media shares. They will be entitled to own shares of JAG Media Common Stock with an aggregate value following the effectiveness of the Merger (in most cases, based on the post-Merger opening price on the OTC Bulletin Board) equal to twice the original aggregate purchase price of their shares of Cryptometrics Common Stock under their subscription agreements ($10.00 per share). The aggregate number of shares of JAG Media Common Stock available to other stockholders of Cryptometrics will be increased or decreased accordingly, and then shared by such other stockholders pro rata to the number of shares held by each compared to the aggregate number shares of Cryptometrics Common Stock (including the Cryptometrics Exchange Shares) held by all of such other stockholders (including the holders of the Exchangeable Shares). | ||
No fractional shares of JAG Media Common Stock shall be issued in connection with the Merger. | ||
Q: | SHOULD I SEND IN MY STOCK CERTIFICATES NOW? | |
A: | No. You do not need to do so, and should not send in your stock certificates, whether or not the Merger is completed, until you are notified. | |
In order to expedite the necessary share exchange, Cryptometrics is arranging with JAG Media’s transfer agent for a new Direct Registration System to be established. It will reflect the number of shares of JAG Media Common Stock to which each Cryptometrics stockholder is entitled, including an indication of which shares can be sold immediately (35%) and which cannot be sold for one year from Closing (65%). If the Merger is completed, a statement of holdings with such information will be mailed to each stockholder. This statement can be provided to a broker who can then request electronic delivery of free trading positions. | ||
Alternatively, Cryptometrics stockholders can be sent written instructions for exchanging their stock certificates to obtain physical stock certificates for the JAG Media shares of Common Stock to which they are entitled. Cryptometrics stockholders should note that this will be a more time consuming procedure than utilizing the Direct Registration System. | ||
Q: | WILL CRYPTOMETRICS STOCKHOLDERS BE SUBJECT TO TAXATION? | |
A: | Cryptometrics and JAG Media have agreed that it is a condition to the Closing of the Merger that Cryptometrics and JAG Media receive an opinion of counsel to the effect that the Merger (together with certain related transactions) will qualify as a “reorganization” under Section 368 of the Internal Revenue Code |
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of 1986, as amended (the “Code”), for U.S. federal income tax purposes. Such opinion will be based on certain assumptions and will rely upon the accuracy of certain representations made by officers of JAG Media and Cryptometrics. If the Merger is treated as a “reorganization” for U.S. federal income tax purposes, Cryptometrics stockholders will generally not recognize any gain or loss for U.S. federal income tax purposes on the exchange of their Cryptometrics Common Stock for JAG Media Common Stock in the Merger. Cryptometrics stockholders should refer to the discussion below in “Material U.S. Federal Income Tax Consequences of the Merger”. | ||
Q: | WHEN IS THE MERGER GOING TO BE COMPLETED? | |
A: | JAG Media will complete the Merger upon satisfaction or waiver of the closing conditions set forth in the Merger Agreement, but not before March 30, 2007, the currently scheduled closing date. | |
Q: | ARE CRYPTOMETRICS STOCKHOLDERS ENTITLED TO APPRAISAL RIGHTS? | |
A: | Yes. Under Delaware law, holders of Cryptometrics Common Stock will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the Merger is completed, but only if they submit a written demand for an appraisal within 20 days after the date of the mailing of this Information Statement /Prospectus and they comply with the Delaware law procedures explained herein. In the event that holders of more than 100,000 shares of Cryptometrics Common Stock choose to exercise their appraisal rights, Cryptometrics will be under no obligation to consummate the Merger. | |
Q: | WHO CAN HELP ANSWER YOUR QUESTIONS? | |
A: | If you have more questions about the Merger, please contact: |
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• | the JAGNotes (Upgrade/Downgrade) Report, a daily consolidated investment report that summarizes newly issued research, analyst opinions, upgrades, downgrades and analyst coverage changes from various investment banks and brokerage houses; and | |
• | the JAG Media Rumor Report where JAG Media posts rumors that have been heard on the street about various stocks. |
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• | Merger Sub will be merged with and into Cryptometrics; | |
• | Cryptometrics will become the wholly-owned subsidiary of JAG Media; and | |
• | JAG Media’s name will be changed to “Cryptometrics, Inc.” |
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• | there is no law or court order prohibiting the Merger; | |
• | the representations and warranties of JAG Media, Merger Sub and Cryptometrics remain accurate in all respects, with permitted exceptions; | |
• | each of JAG Media, Merger Sub and Cryptometrics has performed, in all material respects, all of its respective obligations under the Merger Agreement; and | |
• | the holders of no more than 100,000 shares of Cryptometrics common stock exercise appraisal rights in connection with the Merger. |
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OCTOBER 31, 2006 AND 2005
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | 3 Months Ended | 3 Months Ended | ||||||||||||||||||||||
July 31, | July 31, | July 31, | July 31, | July 31, | October 31, | October 31, | ||||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | 2006 | 2005 | ||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||
STATEMENT ON OPERATIONS DATA: | ||||||||||||||||||||||||||||
Revenues | $ | 166,692 | $ | 239,651 | $ | 253,256 | $ | 385,881 | $ | 624,674 | $ | 43,331 | $ | 40,023 | ||||||||||||||
Operating loss | (2,347,319 | ) | (1,701,616 | ) | (1,984,479 | ) | (2,539,917 | ) | (4,017,257 | ) | (245,268 | ) | (521,886 | ) | ||||||||||||||
Net loss | (3,636,856 | ) | (1,889,165 | ) | (2,005,637 | ) | (2,578,735 | ) | 4,020,853 | (354,352 | ) | (594,554 | ) | |||||||||||||||
Net loss | (3,636,856 | ) | (1,889,165 | ) | (2,005,637 | ) | (2,578,735 | ) | (4,020,853 | ) | (354,352 | ) | (594,554 | ) | ||||||||||||||
Net loss per common share | (0.08 | ) | (0.04 | ) | (0.05 | ) | (0.07 | ) | (0.15 | ) | (0.01 | ) | (0.01 | ) | ||||||||||||||
Weighted average number of common shares | 42,891,017 | 44,510,641 | 42,696,349 | 37,709,338 | 26,644,860 | 43,972,608 | 44,747,799 | |||||||||||||||||||||
BALANCE SHEET: | ||||||||||||||||||||||||||||
Total assets | $ | 578,233 | $ | 838,102 | $ | 507,373 | $ | 537,654 | $ | 149,915 | $ | 278,423 | $ | 407,003 | ||||||||||||||
Total liabilities | $ | 5,073,969 | $ | 2,169,570 | $ | 104,695 | $ | 599,458 | $ | 1,393,883 | $ | 4,919,278 | $ | 2,420,568 | ||||||||||||||
Working capital (deficit) | (2,545,349 | ) | 500,203 | 367,392 | (87,296 | ) | (1,298,666 | ) | (2,527,882 | ) | (72,539 | ) | ||||||||||||||||
Stockholders’ equity (deficiency) | (4,495,740 | ) | (1,331,472 | ) | 402,674 | (61,808 | ) | (1,243,968 | ) | (4,640,859 | ) | (1,914,593 | ) | |||||||||||||||
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Six Months | ||||||||||||||||
Year Ended | Year Ended | Ended | Six Months Ended | |||||||||||||
30-Apr-06 | 30-Apr-05 | 31-0ct-06 | 31-Oct-05 | |||||||||||||
Statement of Operations Data: | ||||||||||||||||
Revenues | 215,661.00 | 681,854.00 | 979,127.00 | 63,086.00 | ||||||||||||
Operating loss | 7,336,817.00 | 5,604,090.00 | 4,229,068.00 | 3,275,983.00 | ||||||||||||
Net loss available to common stockholders | 6,929,981.00 | 5,501,379.00 | 4,149,677.00 | 3,098,669.00 | ||||||||||||
Weighted Average Shares Outstanding | 11,439,026.00 | 9,514,345.00 | 11,971,353.00 | 11,202,103.00 | ||||||||||||
Net loss per common share: | 2.58 | 0.49 | 0.35 | 0.28 | �� |
Balance Sheet | 30-Apr-06 | 30-Apr-05 | 31-Oct-06 | 31-Oct-05 | ||||||||||||
Total assets | 22,879,787.00 | 23,254,571.00 | 31,084,839.00 | 19,850,567.00 | ||||||||||||
Total liabilities | 1,368,435.00 | 1,819,947.00 | 11,089,257.00 | 1,420,257.00 | ||||||||||||
Working capital | 9,837,211.00 | 10,069,216.00 | 16,940,414.00 | 6,902,053.00 | ||||||||||||
Stockholders’ equity | 21,511,352.00 | 21,434,624.00 | 19,995,582.00 | 18,430,310.00 |
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• | the historical net loss and book value per share of JAG Media Common Stock for the fiscal years ended July 31, 2006, 2005, 2004, 2003 and 2002 and for the fiscal quarter ended October 31, 2006; | |
• | the historical net loss and book value per share of Cryptometrics Common Stock for the fiscal years ended April 30, 2006 and 2005 and for the six months ended October 31, 2006; | |
• | pro forma historical net loss and book value per share of JAG Media (to be renamed Cryptometrics, Inc.) as the holding company continuing after the Merger, as accounted for as a purchase by Cryptometrics of JAG Media, for the period presented. |
Year Ended | Year Ended | Year Ended | Year Ended | 3 Months Ended | ||||||||||||||||||||||||
July 31, | July 31, | July 31, | July 31, | Year Ended | October 31, | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | July 31, 2002 | 2006 | |||||||||||||||||||||||
Net loss per Common Share | $ | (0.01 | ) | $ | (0.04 | ) | $ | (0.05 | ) | $ | (0.07 | ) | $ | (0.15 | ) | $ | (0.01 | ) | ||||||||||
Cash dividends paid per Common Share | — | — | — | — | — | — | ||||||||||||||||||||||
Book value per Common Share | $ | (0.10 | ) | $ | (.03 | ) | $ | 0.01 | — | $ | (0.04 | ) | $ | (0.04 | ) |
Year Ended | 3 Months Ended | |||||||
July 31, | October 31, | |||||||
2006 | 2006 | |||||||
Net loss per Common Share | $ | (0.03 | ) | $ | (0.01 | ) | ||
Cash dividends paid per Common Share | ||||||||
Book value per Common Share | 0.07 | $ | 0.06 |
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• | revenues of both JAG Media and Cryptometrics after the Merger may be lower than currently expected for a variety of reasons including loss of personnel, changes in market conditions and responses by competitors; | |
• | conducting the JAG Media and Cryptometrics businesses in the future may be more time consuming, costly and difficult than anticipated; | |
• | competition in Cryptometrics’ industry is extremely intense and may increase; | |
• | third parties may infringe Cryptometrics’ proprietary intellectual property rights; | |
• | issues and difficulties that are faced in connection with the continued development and improvement of software; | |
• | issues and difficulties that are faced in connection with rapid growth; | |
• | litigation involving matters such as intellectual property, securities, employees and customer issues may adversely affect the businesses of Cryptometrics and JAG Media; | |
• | general economic conditions in the U.S. or abroad may change or be worse than currently expected; and | |
• | changes may occur with respect to JAG Media’s stock price or in the securities markets in general. |
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• | Online financial news and information providers including Yahoo Finance, Marketwatch, TheStreet.com, Briefing.com, America Online Personal Finance, Reuters and MotleyFool.com; | |
• | Internet portals and search engines such as America Online, MSN and Yahoo; | |
• | Traditional media sources such as The Wall Street Journal, Investor’s Business Daily, The Financial Times, Barrons, CNN/Money, and MSN Money/CNBC, all of whom also have an Internet presence; | |
• | Terminal-based financial news providers including Bloomberg, Reuters and Dow Jones; and | |
• | Online brokerage firms such as TD Ameritrade, E*Trade Financial, Charles Schwab and Fidelity. |
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Number of Shares | ||||||||
Issuable on | ||||||||
Conversion of | Percentage of | |||||||
Convertible | Issued and | |||||||
Conversion Price | Debentures(1) | Outstanding(2) | ||||||
$0.40 | 8,800,000 | 19 | % | |||||
$0.30 | 11,733,333 | 26 | % | |||||
$0.20 | 17,600,000 | 39 | % | |||||
$0.15 | 23,466,667 | 52 | % | |||||
$0.10 | 35,200,000 | 77 | % | |||||
$0.05 | 70,400,000 | 155 | % |
(1) | Represents the number of shares issuable if all principal amounts of all of the secured convertible debentures were converted at the corresponding conversion price without regard to any contractual or other restriction on the number of securities the selling stockholder may own at any point in time. | |
(2) | Represents the percentage of JAG Media total outstanding common stock prior to conversion, based on 45,506,370 shares issued and outstanding (excluding shares of JAG Media prior classes of common stock exchangeable on presentation for shares of JAG Media current common stock) on February 14, 2007, represented by the shares issuable on conversion of all the secured convertible debentures as shown in the prior column. |
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• | Merger Sub (Cryptometrics Acquisition, Inc.) will be merged into Cryptometrics; | |
• | Cryptometrics, as the surviving corporation after the Merger, will become a wholly-owned subsidiary of JAG Media; |
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• | JAG Media will change its name to “Cryptometrics, Inc.”; and | |
• | each holder of Cryptometrics Common Stock will have the right to receive shares of JAG Media Common Stock in the amount described herein for each share of Cryptometrics Common Stock held. |
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• | The shares of JAG Media Common Stock offered as the Merger consideration would effectively create a public trading market for Cryptometrics Common Stock and permit the unrestricted trading in stock of the |
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combined company by the current or non-affiliated stockholders of Cryptometrics (subject to not being permitted to sell 65% of the shares of JAG Media held by them for one year after the effectiveness of the Merger) instead of their current position as holders of common stock of a private company; |
• | The terms and conditions of the Merger Agreement, including the fact that Cryptometrics may terminate the Merger Agreement at any time or for any reason; | |
• | The percentage of the combined company to be owned by the current Cryptometrics stockholders following the Merger; and | |
• | Historical financial information concerning Cryptometrics and JAG Media, which generally informed the Board of Directors of Cryptometrics’ determination as to the relative values of the two companies. |
• | the risk that, despite the efforts of Cryptometrics, key personnel might choose not to remain employed by Cryptometrics, as the surviving corporation, after the Merger; | |
• | the risk that the potential benefits sought in the Merger might not be realized fully, or within the time frame contemplated, if at all; | |
• | the possibility that the Merger would not be completed and the effect of the abandonment of the Merger on Cryptometrics’ ability to attract and retain key management, sales, marketing and technical personnel; | |
• | the substantial charges to be incurred, including transaction expenses arising from the Merger; and | |
• | the other risks associated with each company’s business, the Merger and the combination of the companies described under the section entitled “Risk Factors” beginning on page 10. |
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• | Cryptometrics stockholders will not recognize any gain or loss upon their receipt of JAG Media Common Stock for their shares of Cryptometrics Common Stock exchanged in the Merger, except to the extent they receive cash for fractional shares. | |
• | The aggregate tax basis of the JAG Media stockholder that a holder of Cryptometrics stockholder receives in the Merger will be the same as the aggregate tax basis of the Cryptometrics Common Stock surrendered by such holder in exchange for JAG Media Common Stock, adjusted to take into account the receipt of cash for fractional shares. | |
• | The holding period of the JAG Media Common Stock that Cryptometrics stockholders receive in the Merger will include the period for which the Cryptometrics Common Stock surrendered in exchange for the JAG Media Common Stock was considered to be held, if the surrendered Cryptometrics Common Stock is held as a capital asset at the time of the Merger. |
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• | is a dealer in securities; | |
• | is a trader in securities that elects to use amark-to-market method of accounting for its securities holdings; | |
• | is a bank; | |
• | is a life insurance company; | |
• | is a tax-exempt organization; | |
• | owns Cryptometrics Common Stock as part of a straddle or conversion transaction for tax purposes; | |
• | is subject to the alternative minimum tax provisions of the Code; | |
• | is a foreign person; | |
• | does not hold Cryptometrics Common Stock as a capital asset; | |
• | owns Cryptometrics stock other than Cryptometrics Common Stock; or | |
• | acquired Cryptometrics stock in connection with stock option or stock purchase plans or in other compensatory transactions. |
• | the tax consequences of the Merger under foreign, state or local tax laws; | |
• | the tax consequences of the assumption by JAG Media of Cryptometrics stock warrants or the tax consequences of the receipt of rights to acquire JAG Media Common Stock; | |
• | the tax consequences of the Merger arising as a result of the adjustments to the number of shares of JAG Media Common Stock to be received by a holder of Cryptometrics Common Stock as a result of subscription agreements that have been entered into with Cryptometrics; or | |
• | the tax consequences of the Merger to holders of exchangeable shares of Cryptometrics Canada, Inc. |
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• | corporate organization, power and authority; | |
• | corporate authorization; | |
• | non-contravention; | |
• | third party consents; | |
• | authorized and issued capital stock, options and warrants; | |
• | subsidiaries; | |
• | SEC filings and NASDAQ Capital Market listing (in the case of JAG Media only); | |
• | financial statements; | |
• | no undisclosed liabilities; | |
• | absence of certain changes; | |
• | personal property, including title to and condition of personal property; | |
• | real property, including title to or leaseholder interests in real property as well as condition of real property and environmental matters; | |
• | intellectual property; | |
• | licenses, permits and other authorizations; | |
• | contracts; | |
• | insurance; |
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• | related party transactions; | |
• | investigation and litigation; | |
• | brokers and finders; | |
• | compliance with applicable laws; | |
• | tax matters; | |
• | employee benefits; | |
• | anti-take over statutes |
• | no illegal payments | |
• | labor and employment law matters; and | |
• | adequacy of disclosure. |
• | authority to enter into the Merger Agreement, the Voting Agreement and the Lock Up Agreement; | |
• | execution and enforceability of the Merger Agreement, the Voting Agreement and the Lock Up Agreement; | |
• | title to their securities held in Cryptometrics; | |
• | no conflicts with respect to the execution and enforceability of the Merger Agreement, the Voting Agreement and theLock-Up Agreement; | |
• | government approvals and necessary filings; | |
• | legal proceedings; and | |
• | brokers and finders. |
• | carry on its business in the usual, regular and ordinary course in a manner consistent with past practice; | |
• | use its reasonable best efforts consistent with past practices and policies to preserve intact its present business organization, keep available the services of its present employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it; and |
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• | use its reasonable best efforts to conduct its business in such a manner that on the closing date the representations and warranties of Cryptometrics contained in the Merger Agreement shall be true and correct, as though such representations and warranties were made on and as of such date, and Cryptometrics shall use its reasonable best efforts to cause all of the conditions to the obligations of JAG Media and Merger Sub under the Merger Agreement to be satisfied as soon as practicable following the closing date. |
• | adopt or propose any amendment to the charter documents of Cryptometrics or any of its subsidiaries; | |
• | declare, set aside or pay any dividend or other distribution (whether in cash, stock or other property) with respect to any securities; | |
• | issue or authorize for issuance any stock dividends or engage in any subdivision, reclassification, split, combination or exchange of shares or any similar event with respect to Cryptometrics Common Stock between the closing date and the Effective Time; | |
• | make any change in any issued and outstanding securities, or redeem, purchase or otherwise acquire any securities other than the repurchase at cost from employees of shares of Cryptometrics Common Stock in connection with the termination of their employment pursuant to the Cryptometrics standard form of option/restricted shares agreement; | |
• | other than pursuant to a written agreement or the Cryptometrics Benefit Plan disclosed on Cryptometrics’ disclosure schedule (the “Cryptometrics Disclosure Schedule”) to the Merger Agreement in the amount required under the Cryptometrics Benefit Plan and other than payment of bonuses and increases in salaries or wage rates or fringe benefits to non-officer employees, contractors or consultants in the ordinary course of business consistent with past practice, (i) modify the compensation or benefits payable or to become payable by Cryptometrics or any of its subsidiaries to any of its current or former directors, officers, employees, contractors or consultants, or (ii) modify any bonus, severance, termination, pension, insurance or other employee benefit plan, payment or arrangement made to, for or with any current or former directors, employees, contractors or consultants of Cryptometrics or any of its subsidiaries; | |
• | enter into any employment (other than offer letters and letter agreements entered into in the ordinary course of business consistent with past practice with employees who are terminable “at-will”), severance or termination agreement; | |
• | establish, adopt, enter into, amend or terminate any Cryptometrics Benefit Plan or any collective bargaining, thrift, compensation or other plan, agreement, trust, fund, policy or arrangement for the benefit of any current or former directors, employees, contractors or consultants of Cryptometrics or any of its subsidiaries; | |
• | other than (i) sales of inventory, (i) the grant of Cryptometrics Out-Bound Licenses on a non-exclusive basis and (iii) other dispositions of property and assets that are not material, individually or in the aggregate, to Cryptometrics and its subsidiaries, taken as a whole, in each case in the ordinary course of business consistent with past practice, sell, lease, transfer or assign any property or assets of Cryptometrics or any of its subsidiaries; | |
• | other than borrowings in the ordinary course of business consistent with past practice pursuant to credit facilities existing on the closing date or the financing of ordinary course trade payables consistent with past practice, (i) assume, incur or guarantee any indebtedness, other than endorsements for collection in the ordinary course of business or (ii) modify the terms of any existing indebtedness in any material respect; | |
• | other than liens granted pursuant to credit facilities existing on the closing date in connection with borrowings permitted under the previous bullet point, pledge or permit to become subject to liens any properties or assets of Cryptometrics or any of its subsidiaries; |
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• | other than travel loans or advances in the ordinary course of business consistent with past practice, make any loans, advances or capital contributions to, or investments in, any other person; | |
• | not cancel any debts or waive any claims or rights of substantial value; | |
• | other than in the ordinary course of business consistent with past practice, (i) amend, modify or terminate, or waive, release or assign any rights under, any of Cryptometrics’ material contracts, or (ii) enter into any contracts which, if entered into prior to closing date, would have been required to be set forth in the list of materials contracts set forth on the Cryptometrics Disclosure Schedule to the Merger Agreement; | |
• | acquire, or agree to acquire, from any person any assets, operations, business or securities or engage in, or agree to engage in, any Merger, consolidation or other business combination with any person, except in connection with (i) capital expenditures permitted under the Merger Agreement or (ii) acquisitions of inventory and other tangible assets in the ordinary course of business consistent with past practice; | |
• | not settle or compromise any litigation other than settlements or compromises of litigation where the settlement is limited solely to the release of claims and the monetary payment by Cryptometrics or its subsidiaries does not exceed $50,000 in the aggregate or $10,000 in any individual case; | |
• | amend any Cryptometrics Stock Option, Cryptometrics Warrant or other documentation evidencing a right to purchase Cryptometrics securities or authorize cash payments in exchange for any of the foregoing; | |
• | make any filings or registrations, with any governmental entity, except routine filings and registrations made in the ordinary course of business; | |
• | take any actions outside the ordinary course of business; | |
• | other than as required by GAAP (as advised by its regular independent accountants), make any changes in its accounting methods, principles or practices; | |
• | make any tax election, change its method of tax accounting or settle any claim relating to taxes; | |
• | take any action or omit to do any act within its reasonable control which action or omission which is reasonably likely to result in any of the conditions to the Merger not being satisfied, except as may be required by applicable law; or | |
• | agree, whether in writing or otherwise, to do any of the foregoing. |
• | carry on its business in the usual, regular and ordinary course in a manner consistent with past practice; | |
• | use its reasonable best efforts consistent with past practices and policies to preserve intact its present business organization, keep available the services of its present employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it; and | |
• | use its reasonable best efforts to conduct its business in such a manner that on the closing date the representations and warranties of JAG Media contained in the Merger Agreement shall be true and correct, as though such representations and warranties were made on and as of such date, and JAG Media shall use its reasonable best efforts to cause all of the conditions to the obligations of Cryptometrics under the Merger Agreement to be satisfied as soon as practicable following the closing date. |
• | adopt or propose any amendment to the charter documents of JAG Media or any of its subsidiaries; |
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• | declare, set aside or pay any dividend or other distribution (whether in cash, stock or other property) with respect to any securities; | |
• | issue any stock dividends or engage in any subdivision, reclassification, recapitalization, split, combination or exchange of shares or any similar event with respect to JAG Media Common Stock between the closing date and the Effective Time; | |
• | make any change in any issued and outstanding securities, or redeem, purchase or otherwise acquire any securities other than the repurchase at cost from employees of shares of JAG Media Common Stock in connection with the termination of their employment pursuant to JAG Media’s standard form of option/restricted shares agreement or a cancellation of issued shares at no cost to JAG Media; | |
• | other than pursuant to a written agreement in the amount required thereunder and other than payment of bonuses and increases in salaries or wage rates or fringe benefits to non-officer employees, contractors or consultants in the ordinary course of business consistent with past practice, (i) modify the compensation or benefits payable or to become payable by JAG Media or any of its subsidiaries to any of its current or former directors, officers, employees, contractors or consultants, (ii) modify any bonus, severance, termination, pension, insurance or other employee benefit plan, payment or arrangement made to, for or with any current or former directors, employees, contractors or consultants of JAG Media or any of its subsidiaries or (iii) enter into any employment (other than offer letters and letter agreements entered into in the ordinary course of business consistent with past practice with employees who are terminable “at-will”), severance or termination agreement; | |
• | establish, adopt, enter into, amend or terminate any employee benefit plan or any collective bargaining, thrift, compensation or other plan, agreement, trust, fund, policy or arrangement for the benefit of any current or former directors, employees, contractors or consultants of JAG Media or any of its subsidiaries; | |
• | other than (i) sales of inventory, (ii) the grant of licenses, sublicenses and other contracts pursuant to which JAG Media or any of its subsidiaries authorizes a third party to use or practice any rights under, or grant sublicenses with respect to, intellectual property owned by JAG Media on a non-exclusive basis and (iii) other dispositions of property and assets that are not material, individually or in the aggregate, to JAG Media and its subsidiaries, taken as a whole, in each case in the ordinary course of business consistent with past practice, sell, lease, transfer or assign any property or assets of JAG Media or any of its subsidiaries; | |
• | other than borrowings in the ordinary course of business consistent with past practice pursuant to credit facilities existing on the date of this Agreement or the financing of ordinary course trade payables consistent with past practice, (i) assume, incur or guarantee any indebtedness, other than endorsements for collection in the ordinary course of business or (ii) modify the terms of any existing indebtedness in any material respect; | |
• | other than liens granted pursuant to credit facilities existing on the date of closing date in connection with borrowings permitted under the previous bullet point, pledge or permit to become subject to liens any properties or assets of JAG Media or any of its subsidiaries; | |
• | other than travel loans or advances in the ordinary course of business consistent with past practice, make any loans, advances or capital contributions to, or investments in, any other person (other than its subsidiaries); | |
• | not cancel any debts or waive any claims or rights of substantial value; | |
• | other than in the ordinary course of business consistent with past practice, amend, modify or terminate, or waive, release or assign any rights under, any material contract; | |
• | acquire, or agree to acquire, from any person any assets, operations, business or securities or engage in, or agree to engage in, any Merger, consolidation or other business combination with any person, except in connection with (i) capital expenditures permitted under the Merger Agreement or (ii) acquisitions of inventory and other tangible assets in the ordinary course of business consistent with past practice; | |
• | not settle or compromise any litigation other than settlements or compromises of litigation where the settlement is limited solely to the release of claims and the monetary payment by JAG Media or any of its subsidiaries does not exceed $50,000 in the aggregate or $10,000 in any individual case; |
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• | amend any stock option, warrant or other purchase right to acquire shares of JAG Media Common Stock or authorize cash payments in exchange for any of the foregoing; | |
• | make any filings or registrations, with any governmental entity, except routine filings and registrations made in the ordinary course of business; | |
• | take any actions outside the ordinary course of business; | |
• | other than as required by GAAP (as advised by its regular independent accountants), make any changes in its accounting methods, principles or practices; | |
• | make any tax election, change its method of tax accounting or settle any claim relating to Taxes; | |
• | take any action or omit to do any act within its reasonable control which action or omission which is reasonably likely to result in any of the conditions to the Merger not being satisfied, except as may be required by applicable law; or | |
• | agree, whether in writing or otherwise, to do any of the foregoing except that JAG Media may, with Cryptometrics’ prior consent and notification to Cryptometrics within two (2) business days thereafter spin-off various assets to its shareholders as a dividend. |
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• | initiate, solicit, encourage or seek, directly or indirectly, any inquiries relating to or the making or implementation of any proposal initiated by a third party (including any proposal or offer to the stockholders of Cryptometrics or JAG Media, as the case may be) with respect to Cryptometrics or JAG Media, which involves any of the following transactions, such transactions constituting a “Third Party Proposal”: |
• | engage in any negotiations concerning, or provide any information or data to, or have any substantive discussions with, any person relating to a Third Party Proposal; | |
• | otherwise cooperate in or facilitate any effort or attempt to make, implement or accept a Third Party Proposal; | |
• | enter into contract with any person relating to a Third Party Proposal; or | |
• | release any third party from, or waive any provision of, any confidentiality or standstill agreement to which it is a party. |
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• | a Superior Proposal is made to JAG Media or Cryptometrics and is not withdrawn; | |
• | the Annual Meeting of the Stockholders of JAG Media has not occurred and the written consent of the stockholders of Cryptometrics has not been obtained; | |
• | JAG Media or Cryptometrics, as the case may be, shall have provided at least 3 business days prior written notice (the “Notice Period”) to the other stating (A) that it has received a Superior Proposal, (B) the terms and conditions of such Superior Proposal and the identity the person making such Superior Proposal and (C) that it intends to effect a Change of Recommendation and the manner in which it intends to so; | |
• | Cryptometrics shall not have, within the Notice Period, made an offer that the Board of Directors of JAG Media by a majority vote determines in its good faith judgment to be at least as favorable to such party and its stockholders as such Superior Proposal (it being agreed that the Board of Directors of such party shall convene a meeting to consider any such offer by the other party promptly following the receipt thereof); | |
• | JAG Media shall not have, within the Notice Period, made an offer that the Board of Directors of Cryptometrics by a majority vote determines in its good faith judgment to be at least as favorable to such party and its stockholders as such Superior Proposal (it being agreed that the Board of Directors of such party shall convene a meeting to consider any such offer by the other party promptly following the receipt thereof); | |
• | the Board of Directors of JAG Media or Cryptometrics, as the case may be, concludes in good faith, after receiving the advice of its outside legal counsel, that, in light of such Superior Proposal, the failure of it to effect a Change of Recommendation would result in a breach of its fiduciary obligations to its stockholders under applicable law; and | |
• | Neither JAG Media nor Cryptometrics shall have breached any of the provisions set forth with respect to the consideration and acceptance of a Superior Proposal set forth in the Merger Agreement. |
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• | The approval of the JAG Media Common Stockholders shall have been obtained to the foregoing amendments of the Articles of Incorporation, which condition has been met. | |
• | Other than the filings of the Proxy Statement andForm S-4 of JAG Media and such items as may be required pursuant to the Cryptometrics Disclosure Schedule, all authorizations and orders of, declarations and filings with, and notices to any governmental entity required to permit the consummation of the Merger shall have been obtained or made and shall be in full force and effect. | |
• | No temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Merger shall be in effect. | |
• | No law shall have been enacted or shall be deemed applicable to the Merger which makes the consummation of the Merger illegal. |
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• | AnForm S-4 Registration Statement shall have become effective under the Securities Act prior to the mailing of the Proxy Statement / Information Statement by each of Cryptometrics and JAG Media to their respective stockholders, and shall not be the subject of any stop order or proceedings seeking a stop order. | |
• | The shares of JAG Media Common Stock shall have been authorized for trading on the OTC Pink Sheets whether or not such authorization shall have been cancelled, which condition has been met. | |
• | No action shall be pending or threatened before any court or other governmental entity or before any other person wherein an unfavorable order would (i) prevent consummation of the Merger, (ii) affect adversely the right of JAG Media to control Cryptometrics and the subsidiaries of Cryptometrics or (iii) restrain or prohibit JAG Media’s ownership or operation (or that of its subsidiaries or affiliates) of all or any material portion of the business or assets of Cryptometrics and its subsidiaries, taken as a whole, or compel JAG Media or any of subsidiaries or affiliates to dispose of or hold separate all or any material portion of the business or assets of Cryptometrics and its subsidiaries, taken as a whole, or of JAG Media and its subsidiaries, taken as a whole, and no such order shall be in effect. |
• | Each of the representations and warranties of Cryptometrics set forth in the Merger Agreement, shall be true and correct at and as of the closing date as if made at and as of the closing date, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date. | |
• | Each of the representations and warranties of the Principal Stockholders set forth in the Merger Agreement, shall be true and correct at and as of the closing date as if made at and as of the closing date, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date. | |
• | Cryptometrics shall have performed, or complied with, in all material respects all obligations required to be performed or complied with by it under the Merger Agreement at or prior to the closing date. JAG Media shall have received a certificate signed on behalf of the Cryptometrics by the Co-Chief Executive Officer of Cryptometrics to such effect. | |
• | There shall not have occurred any event, occurrence or change that has had, or could reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Cryptometrics. |
• | Each of the representations and warranties of JAG Media set forth in the Merger Agreement, shall be true and correct, subject to any materiality provision, at and as of the closing date as if made at and as of the closing date, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date. | |
• | JAG Media and Merger Sub shall have performed or complied with in all material respects all obligations required to be performed or complied with by them under the Merger Agreement at or prior to the closing date. Cryptometrics shall have received a certificate signed on behalf of JAG Media by the Chief Executive Officer of JAG Media to such effect. | |
• | There shall not have occurred any event, occurrence or change that has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on JAG Media and its subsidiaries taken as a whole. |
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• | Cryptometrics shall have received releases from the current executive officers of JAG Media under any and all agreements they may have with JAG Media or any of its Subsidiaries, except that JAG Media shall remain contractually obligated to carry out its obligations to fulfill any exercise of options under existing employment agreements with the current executive officers of JAG Media and shall continue to provide such officers such medical coverage as it provides to its own employees and those of JAG Media (to be renamed Cryptometrics, Inc.) and except for any and all rights of indemnification. | |
• | The holders of no more than 100,000 shares of Cryptometrics Common Stock shall have given notice of exercise of their appraisal rights and be in a position to perfect such rights under Delaware Law as determined just prior to the Effective Time. |
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• | directly attributable to the acquisition; | |
• | factually supportable; and | |
• | with respect to the statements of operations, expected to have a continuing impact on the combined results. |
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• | neither JAG Media nor Cryptometrics having terminated the Merger Agreement, which either may do, with or without any reason at any time by either of them with no liability except that JAG Media must issue 500,000 shares of its Common Stock to Cryptometrics if it unilaterally terminates the Merger Agreement; | |
• | there is no law or court order prohibiting the Merger; | |
• | the representations and warranties of JAG Media, Merger Sub and Cryptometrics remain accurate in all respects, with permitted exceptions; | |
• | each of JAG Media, Merger Sub and Cryptometrics has performed, in all material respects, all of its respective obligations under the Merger Agreement; | |
• | the holders of no more than 100,000 shares of Cryptometrics common stock exercise appraisal rights in connection with the Merger; and | |
• | JAG Media not having outstanding indebtedness for borrowed money in excess of the principal amount of $4,350,000. |
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AS OF OCTOBER 31, 2006
JAG | Pro Forma | Pro Forma | ||||||||||||||
MEDIA | Cryptometrics | Adjustments | Combined | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 35,501 | $ | 15,122,548 | $ | 15,158,049 | ||||||||||
Short-term investments | 2,528,133 | 2,528,133 | ||||||||||||||
Accounts receivable, net | 20,960 | 929,026 | 949,986 | |||||||||||||
Inventories | 281,207 | 281,207 | ||||||||||||||
Income tax recoverable | 292,942 | 292,942 | ||||||||||||||
Other current assets | 138,748 | 74,672 | (59,068 | ) | 154,352 | |||||||||||
Total current assets | 195,209 | 19,228,528 | (59,068 | ) | 19,364,669 | |||||||||||
Equipment, net | 83,214 | 801,280 | 884,494 | |||||||||||||
Other Assets: | ||||||||||||||||
Unallocated excess purchase price | 12,684,744 | 12,684,744 | ||||||||||||||
Goodwill | 10,700,000 | 10,700,000 | ||||||||||||||
Patents | 355,031 | 355,031 | ||||||||||||||
Total Other Assets | — | 11,055,031 | 12,684,744 | 23,739,775 | ||||||||||||
Total | $ | 278,423 | $ | 31,084,839 | $ | 12,625,676 | $ | 43,988,938 | ||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable and accrued expenses | $ | 236,987 | $ | 2,037,554 | $ | 2,274,541 | ||||||||||
Accrued compensation | 250,560 | 250,560 | ||||||||||||||
Deferred revenues | 19,444 | 19,444 | ||||||||||||||
Derivative liability | 2,466,660 | 2,466,660 | ||||||||||||||
Total current liabilities | 2,723,091 | 2,288,114 | 5,011,205 | |||||||||||||
Long term liabilities: | ||||||||||||||||
Convertible debentures payable, net | 2,196,187 | 8801143 | 10,997,330 | |||||||||||||
Total liabilities | 4,919,278 | 11,089,257 | 16,008,535 | |||||||||||||
Mandatorily redeemable Class B common stock; par value $.00001 per share: 400,000 shares designated as Series 2; 381,014 shares issued and outstanding | 4 | 4 | ||||||||||||||
40,000 shares designated as Series 3; 21,500 shares issued and outstanding | — | — | ||||||||||||||
4 | 4 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||
Stockholders’ equity (deficiency): | ||||||||||||||||
Preferred stock; par value $.00001 per share; 50,000,000 shares authorized, none issued | ||||||||||||||||
Common stock; par value $.00001 per share; 50,000,000 shares authorized; 44,579,589 shares issued and outstanding; 439,279,605 shares to be outstanding | 446 | 119,714 | (115,767 | ) | 4,393 | |||||||||||
Additional paid-in capital | 44,383,563 | 41,492,967 | (36,224,357 | ) | 49,652,173 | |||||||||||
Accumulated deficit | (49,024,868 | ) | (20,952,507 | ) | 48,965,800 | (21,011,575 | ) | |||||||||
Accumulated other comprehensive income | (664,592 | ) | (664,592 | ) | ||||||||||||
Total stockholders’ equity (deficiency) | (4,640,859 | ) | 19,995,582 | 12,625,676 | 27,980,399 | |||||||||||
Total | $ | 278,423 | $ | 31,084,839 | $ | 12,625,676 | $ | 43,988,938 | ||||||||
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Pro Forma | ||||||||||||||||
JAG Media | Cryptometrics | Adjustments | Combined | |||||||||||||
Revenues | $ | 43,331 | $ | 372,835 | $ | 416,166 | ||||||||||
Operating expenses: | ||||||||||||||||
Cost of revenues | 24,650 | 213,339 | 237,989 | |||||||||||||
Research and development | 779,720 | 779,720 | ||||||||||||||
Marketing and selling expenses | 24,262 | 617,689 | 641,951 | |||||||||||||
General and administrative expenses | 239,689 | 786,287 | 465,050 | 1,491,026 | ||||||||||||
Totals | 288,601 | 2,397,035 | 465,050 | 3,150,686 | ||||||||||||
Loss from operations | (245,270 | ) | (2,024,200 | ) | (465,050 | ) | (2,734,520 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Gain on change in value of derivative liability | 359,090 | 359,090 | ||||||||||||||
Interest income | 77 | 105,444 | 105,521 | |||||||||||||
Interest expense | (468,249 | ) | (468,249 | ) | ||||||||||||
Net loss | $ | (354,352 | ) | $ | (1,918,756 | ) | $ | (465,050 | ) | $ | (2,730,882 | ) | ||||
Basic and diluted net loss per share | (0.01 | ) | (0.01 | ) | ||||||||||||
Basic weighted average common shares outstanding | 43,972,608 | 438,672,624 | ||||||||||||||
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Pro Forma | ||||||||||||||||
JAG Media | Cryptometrics(1) | Adjustments | Combined | |||||||||||||
Revenues | $ | 166,692 | $ | 215,661 | $ | 382,353 | ||||||||||
Operating expenses: | ||||||||||||||||
Cost of revenues | 85,585 | 59,278 | 144,863 | |||||||||||||
Research and development | 2,181,936 | 2,181,936 | ||||||||||||||
Marketing and selling expenses | 46,637 | 2,706,796 | 2,753,433 | |||||||||||||
General and administrative expenses | 2,381,789 | 2,604,468 | 1,743,800 | 6,730,057 | ||||||||||||
Totals | 2,514,011 | 7,552,478 | 1,743,800 | 11,810,289 | ||||||||||||
Loss from operations | (2,347,319 | ) | (7,336,817 | ) | (1,743,800 | ) | (11,427,936 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Gain on change in value of derivative liability | 1,094,246 | 1,094,246 | ||||||||||||||
Loss on extinguishment of prommissory notes | (77,373 | ) | (77,373 | ) | ||||||||||||
Interest income | 2,573 | 406,836 | 409,409 | |||||||||||||
Finance charge for derivative liability in excess of proceeds from convertible debentures | (1,795,005 | ) | (1,795,005 | ) | ||||||||||||
Other interest expense | (513,978 | ) | (513,978 | ) | ||||||||||||
Net loss | $ | (3,636,856 | ) | $ | (6,929,981 | ) | $ | (1,743,800 | ) | $ | (12,417,613 | ) | ||||
Basic and diluted net loss per share | (0.08 | ) | (0.03 | ) | ||||||||||||
Basic weighted average common shares outstanding | 42,891,017 | 437,591,033 | ||||||||||||||
(1) | Cryptometrics information is for the twelve months ended April 30, 2006. |
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PRO FORMA FINANCIAL STATEMENTS
Note 1: | Estimated Purchase Price and Shares to be Issued |
Purchase Price Calculation: all numbers in thousands except for per share amount | ||||
Number of shares of Cryptometrics Common Stock outstanding at date of announcement | 11,314 | |||
Stock price of Cryptometrics based on per share price of recent private placement | $ | 7.00 | ||
Total value of Cryptometrics | $ | 79,198 | ||
Multiplied by percentage of stock to be retained by JAG Media stockholders | 10.34 | % | ||
Estimated purchase price | $ | 8,189 | ||
Unallocated Excess Purchase Price Calculation: | ||||
Estimated purchase price | $ | 8,189 | ||
Stockholders’ deficiency as of July 31, 2006 | 4,496 | |||
Unallocated excess purchase price | $ | 12,685 | ||
Shares of JAG Media Common Stock to be issued to Cryptometrics: | ||||
Number of Shares of JAG Media Common Stock outstanding at date of announcement | 44,748 | |||
Shares to be issued for each outstanding share (amount issued to equal 89.66% ownership) | ||||
Total shares to be issued | 437,597 | |||
Note 2: | Pro Forma Financial Statement Adjustments |
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• | An adjustment to record the excess of purchase price over the carrying value of net assets acquired which has been recorded as “unallocated excess purchase price” on the balance sheet; | |
• | an adjustment to record the issuance of 394,700,016 shares of JAG Media Common Stock in conjunction with the reverse acquisition representing 89.66% of JAG Media Common Stock reserved to be owned initially by the Cryptometrics stockholders; | |
• | the elimination of JAG Media’s accumulated deficit; | |
• | an adjustment to conform Cryptometrics’s treatment of previously issued options to employees valued at $38,800 with JAG Media’s treatment of stock options under SFAS 123; | |
• | an adjustment for Cryptometrics’ treatment of options to purchase an estimated 4,853,000 shares of JAG Media stock, effective upon the reverse acquistion of JAG Media by Crytometrics stock, with JAG Media’s treatment of stock options under SFAS 123; and | |
• | an adjustment to increase the salaries of two Cryptometrics’ officers based on a compensation agreement that is effective upon the reverse acquistion of JAG Media by Cryptometrics from $160,000 annually, each, to $525,000 annually, each. |
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• | not engage in any stabilization activity in connection with any of the shares; | |
• | not bid for or purchase any of the shares or any rights or acquire the shares, or attempt to induce any person to purchase any of the shares or rights to acquire the shares other than as permitted under the Securities Exchange Act; | |
• | not effect any sale or distribution of the shares until after the prospectus shall have been appropriately amended or supplemented, if required, to describe the terms of the sale or distribution; and | |
• | effect all sales of shares in broker’s transactions through broker-dealers acting as agents, in transactions directly with market makers, or in privately negotiated transactions where no broker or other third party, other than the purchaser, is involved. |
Name | Age | Position | ||||
Robert Barra | 53 | Co-Chief Executive Officer and Director | ||||
Michael A. Vitale | 45 | Co-Chief Executive Officer and Director | ||||
Joel Shaw | 60 | Chief Strategy Officer |
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• | Messrs. Barra and Vitale shall be the Co-Chief Executive Officers of the surviving corporation. | |
• | Messrs. Barra and Vitale shall be “at will” employees and each of Messrs. Barra, Vitale and the surviving corporation may terminate the employment relationship, at any time, upon written notice to the other party with or without good cause or reason or no cause or reason. | |
• | During the first calendar year of their employment pursuant to this agreement, Messrs. Barra and Vitale shall receive a base salary of $175,000 with a potential bonus of up to $350,000. | |
• | During the second calendar year of their employment pursuant to this agreement, Messrs. Barra and Vitale shall receive a base salary of $225,000 with a potential bonus of up to $450,000. | |
• | At the Effective Time of the Merger, Messrs. Barra and Vitale shall each receive non-qualified stock options to purchase a total of 325,000 shares of common stock of Cryptometrics, Inc. for $1.00 per share, subject to adjustment in number of shares and purchase price to an option to purchase shares of stock of JAG Media (to be renamed Cryptometrics, Inc.) for a number of shares of JAG Media Common Stock equal to 325,000 times the Exchange Multiple at a set purchase price of $1.00 divided by the Exchange Multiple. | |
• | The agreements have provisions providing immediate exercisability of outstanding options and payment of approximately three times their salary and bonuses to Messrs Barra and Vitale in the case of a future takeover of JAG Media. |
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2004 | 2005 | 2006 | 2007 | |||||||||||||
Spending ($ Millions) | $ | 31.5 | $ | 76.5 | $ | 177.7 | $ | 405.6 | ||||||||
YTY Growth Rate | N/A | 142 | % | 132 | % | 128 | % |
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• | reverse the current downward trend of its revenues; | |
• | curtail costs to correspond with its revenues; and | |
• | pursue merger and other expansion opportunities. |
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• | Online financial news and information providers including Yahoo Finance, Marketwatch, TheStreet.com, Forbes.com, Briefing.com, America Online Personal Finance, Reuters and MotleyFool.com; | |
• | Internet portals and search engines such as AOL, MSN and Yahoo; | |
• | Traditional media sources such as The Wall Street Journal, Investor’s Business Daily, The Financial Times, Barrons, CNN/Money, and MSN Money/CNBC, all of which also have an Internet presence; | |
• | Terminal-based financial news providers including Bloomberg, Reuters and Dow Jones; and | |
• | Online brokerage firms such as TD Ameritrade, E*Trade Financial, Charles Schwab and Fidelity. |
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Number of Shares | ||||||||
Name & Address of Beneficial Owner | Beneficiary Owned | Percentage of Class | ||||||
Thomas Mazzarisi | 610,000 | (1) (2) | 1.3 | % | ||||
(Chairman of the Board | ||||||||
Chief Executive Officer and General Counsel) | ||||||||
6865 SW 18th Street, Suite B13, | ||||||||
Boca Raton, Florida 33433 | ||||||||
Stephen Schoepfer | 325,000 | (1) (3) | * | |||||
(President, Chief Operating Officer, | ||||||||
Chief Financial Officer and Director) | ||||||||
6865 SW 18th Street, Suite B13, | ||||||||
Boca Raton, Florida 33433 | ||||||||
All executive officers and directors as a group (2 persons) | 935,000 | (1) (2) (3) | 2.1 | % |
* | Less than one percent | |
(1) | Based on 45,506,370 shares of Common Stock issued and outstanding as of February 14, 2007 (excluding shares of prior classes exchangeable for shares of Common Stock pursuant to its recapitalizations, plus the number of shares of Common Stock which the beneficial owner has the right to acquire within 60 days, if any). | |
(2) | Includes 500,000 shares of Common Stock issuable upon the exercise of stock options. | |
(3) | Includes 250,000 shares of Common Stock issuable upon the exercise of stock options. |
AND RELATED MATTERS
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High | Low | |||||||
Fiscal Year 2005 | ||||||||
First Quarter, ending October 31, 2004 | 1.10 | 0.15 | ||||||
Second Quarter, ending January 31, 2005 | 0.65 | 0.15 | ||||||
Third Quarter, ending April 30, 2005 | 0.52 | 0.11 | ||||||
Fourth Quarter, ending July 31, 2005 | 0.30 | 0.001 | ||||||
Fiscal Year 2006 | ||||||||
First Quarter, ending October 31, 2005 | 0.30 | 0.02 | ||||||
Second Quarter, ending January 31, 2006 | 0.46 | 0.14 | ||||||
Third Quarter, ending April 30, 2006 | 0.41 | 0.19 | ||||||
Fourth Quarter, ending July 31, 2006 | 0.33 | 0.20 | ||||||
Fiscal Year 2007 | ||||||||
First Quarter, ending October 31, 2006 | 0.30 | 0.05 | ||||||
Second Quarter, ending January 31, 2007 | 0.45 | 0.12 |
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Common | ||||||||||||||||||||||||||||
Shares | ||||||||||||||||||||||||||||
Subject to | ||||||||||||||||||||||||||||
Fiscal | Other Annual | Long-Term | Options | All other | ||||||||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus | Compensation | Compensation | Granted | Compensation | |||||||||||||||||||||
Thomas J. Mazzarisi, | 2006 | $ | 150,000 | — | — | — | — | — | ||||||||||||||||||||
Chairman of the Board, Chief | 2005 | $ | 150,000 | — | — | — | — | — | ||||||||||||||||||||
Executive Officer and | 2004 | $ | 150,000 | — | — | — | — | — | ||||||||||||||||||||
General Counsel | ||||||||||||||||||||||||||||
Stephen J.Schoepfer, | 2006 | $ | 150,000 | — | — | — | — | — | ||||||||||||||||||||
President, Chief Operating | 2005 | $ | 150,000 | — | — | — | — | — | ||||||||||||||||||||
Officer, Chief Financial Officer | 2004 | $ | 150,000 | — | — | — | — | — | ||||||||||||||||||||
and Secretary |
Percentage | ||||||||||||||||||||
of Total | ||||||||||||||||||||
Options Granted | ||||||||||||||||||||
to Employees in | ||||||||||||||||||||
the Period | ||||||||||||||||||||
Number of | Beginning | Market | ||||||||||||||||||
Securities | August 1, | Exercise | Price | |||||||||||||||||
Underlying | 2005 and | or Base | on the | |||||||||||||||||
Options | Ended July 31, | Price per | Date of | Expiration | ||||||||||||||||
Name | Granted | 2006 | ($/Share) | Grant | Date | |||||||||||||||
Thomas J. Mazzarisi | 0 | * | * | * | * | |||||||||||||||
Stephen J. Schoepfer | 0 | * | * | * | * |
* | Not Applicable |
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Number of Securities | ||||||||||||
Number of Securities | Remaining Available | |||||||||||
to be Issued | Weighted Average | for Future Issuance | ||||||||||
Upon Exercise of | Exercise Price of | Under Equity Compensation | ||||||||||
Outstanding Options, | Outstanding Options, | Plans (Excluding Securities | ||||||||||
warrants and Rights(a) | Warrants and Rights(b) | Reflected in Column(a))(c) | ||||||||||
Equity compensation plans approved by security holders | Not applicable | Not applicable | Not applicable | |||||||||
1999 Long-Term Incentive Plan (not approved by security holders) | 1,420,000 | $ | .12 | 4,580,000 | ||||||||
Individual Compensation Arrangements (not approved by security holders) | Not applicable | Not Applicable | Not Applicable | |||||||||
TOTAL | 1,420,000 | (2) | 4,580,000 | (1) |
(1) | The maximum number of shares that may be subject to outstanding awards under JAG Media’s 1999 Long-Term Incentive Plan is 6,000,000 shares of Common Stock. Because this limitation applies only to outstanding awards under the plan, as the outstanding options included in column (a) are either exercised, forfeited or expire pursuant to their terms, the number of shares remaining available for future issuance in column (c) shall be increased by the number of shares subject to such option so exercised, forfeited or expired. | |
(2) | See Note 6 to Financial Statements. |
FISCAL YEAR-END OPTION VALUES
Number of Shares Underlying | Value of Unexercised | |||||||||||||||||||||||
Shares | Unexercised Options at | In-the-Money Options at | ||||||||||||||||||||||
Acquired on | Value | July 31, 2006 | July 31, 2006 | |||||||||||||||||||||
Name | Exercise | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Thomas J. Mazzarisi | 0 | 0 | 500,000 | 0 | $ | 90,000 | 0 | |||||||||||||||||
Stephen J. Schoepfer | 0 | 0 | 250,000 | 0 | $ | 45,000 | 0 |
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• | either incentive stock options or non-qualified stock options; | |
• | stock appreciation rights; | |
• | restricted or deferred stock; | |
• | dividend equivalents; | |
• | bonus shares and awards in lieu of JAG Media’s obligations to pay cash compensation; and | |
• | other awards, the value of which is based in whole or in part upon the value of the Common Stock. |
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OR PLAN OF OPERATION OF JAG MEDIA
FOR THE FISCAL YEARS ENDING JULY 31, 2006 AND 2005 AND
FOR THE THREE MONTHS ENDED OCTOBER 31, 2006 AND 2005
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Equipment | $ | 11,000 | ||
Other Assets | 100 | |||
Goodwill | 50,400 | |||
Total | $ | 61,500 | ||
Year Ending | Amount | |||
July 31, 2007 | $ | 160,000 | ||
July 31, 2008 | $ | 53,000 | ||
Total | $ | 213,000 | ||
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• | User verification with the touch of a finger; | |
• | Integration with Microsoft Active Directory — all user management is through centralized control; | |
• | File and folder encryption/decryption using RC4 128-bit encryption; | |
• | Session-based encryption — communication through client/server is a secure tunnel; | |
• | Record retention of who gains access when and where for internal audits; | |
• | Provision of simple system and Internet access with the touch of a finger; | |
• | Protection of sensitive data stored on systems, including work in progress; |
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• | Provision superior network security; | |
• | Support of unlimited users; | |
• | Support of single sign-on; | |
• | Management of an unlimited amount of secure websites and Internet portals; and | |
• | Preservation of personal desktop settings. |
• | User verification with the touch of a finger; | |
• | Fast, effortless logins; | |
• | Protection of sensitive data stored on systems, including work in progress; | |
• | Provision of superior network security; | |
• | Support of unlimited users; | |
• | Support of single sign-on; | |
• | Management of an unlimited amount of secure websites and Internet portals; | |
• | Record retention of who gains access when and where for internal audits; and | |
• | Preservation of personal desktop settings. |
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• | More secure issuance of passports, visas and identification documents | |
• | Secure facilitation of persons seeking entry at border entry points | |
• | Protection of critical infrastructures and key assets of the nation | |
• | Improved aviation security | |
• | Improved levels of law enforcement | |
• | Improved facilitation and greater security for customer service delivery and customer relationship management |
• | New technology and solutions designed to realize better and more pre-emptive law enforcement and protection of citizens |
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• | New technology and solutions designed to realize better protection of customers and staff | |
• | Improved facilitation and greater security for customer service delivery and customer relationship management |
• | Capturing and enrolling the most effective face biometric sample(s), whether that be derived from a photograph or captured live; | |
• | Ensuring that all capture devices continuously operate at maximum performance; and | |
• | Ensuring that all captured face biometric samples meet the special needs of their intended use, whether that be the encoding of the Contactless Chip in a new ePassport, creation of a master photo/facial image database or printing of a portrait in a passport or on another form of travel or identification document. |
• | SecurIDenttm Face Biometric Enrolment Application Tools — Software Development Kit and Run License versions allow software developers to implement all of the critical functions required to successfully capture the facial image and biometric using their own application software. An inherent feature of the Tools is Auto Eye Landmark Determination (finding) logic. |
• | SecurIDenttm Face Biometric Quality Management Software represents a fully automated facial image and face biometric quality assessment and assurance software tool. It evaluates such key quality influencers as: | |
• | Key image quality characteristics; | |
• | Position of the head; | |
• | Resolution across the face; | |
• | Position of face; | |
• | Tilt of the head; and | |
• | Rotation of the head. |
• | SecurIDenttm Live Enrolment Cameras overcome the many operational and quality problems associated with the use of standard cameras for face biometric capture by: | |
• | Automatically capturing the image/sample at prescribed resolutions offering best face recognition performance; | |
• | Automatically compensating for lighting effects using software driven face area exposure control; | |
• | Automatically isolating the best pose to use in face recognition; and |
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• | Automatically cropping the captured image to meet predefined specifications for size and location of the facial region. |
• | SecurIDenttm Photo Enrolment Unit overcomes the numerous operational and quality problems associated with the use of page scanners for face biometric capture (i.e. derivation) from photographs by: | |
• | Automatically locating the face within the photograph and adjusting the image capture using superior optical techniques — as versus digital manipulation — to standardize the overall size of the facial region; | |
• | Automatically capturing the image at prescribed resolutions offering best face recognition performance; | |
• | Automatically compensating for exposure effects using software driven face area exposure control; and | |
• | Automatically cropping the image to meet predefined specifications for size and location of the facial region. |
• | SecurIDenttm Identity Management Controller is a fully scalable, computerized appliance capable of working with many different software platforms and comprising the necessary hardware and software components to support a variety of key face matching tasks. A Controller can be configured to accommodate the volume, performance and processing requirements of a given client. Each Controller houses the mandatory face recognition software on a SecurIDenttm Face Rec Manager, which hosts one or more, commercialoff-the-shelf face recognition software packages to create the comparative face recognition findings. The Manager also houses software logic developed by Cryptometrics to raise the performance of the core face recognition software beyond that which it can achieve operating on its own. |
• | SecurIDenttm Lookout Engine, carries Lookout (Watch List) Checks. The Lookout Engine works in cooperation with the SecurIDenttm Face Recognition Manager to deliver a strong Lookout Check based solely on the facial biometric. Only the face biometric can be used to carry out a lookout check. |
• | SecurIDenttm Fraud Detection Engine is designed to check large photo/facial image databases to determine if the person being enrolled is already enrolled, but under a different identity. Cryptometrics has created a design in which the entire master database is checked. |
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• | SecurIDenttm Live/Photo Capture Solutions automate the capture of live facial imagesand/or photographs (passport photos and the like), realizing high quality facial images, as well as globally interoperable face biometric samples; the latter specifically designed to enable and enhance a wide range of face recognition supported applications. |
• | SecurIDenttm Applicant Identification Solutions are fully integrated hardware and software solutions designed to support a client application by managing all those activities associated with confirming the identity of the person being enrolled. |
• | Face match check(s) against any on-file image(s) of the same person (a.k.a. verification); | |
• | Face match check(s) against a Watch List to isolate those persons that should be checked in greater detail; | |
• | Fraud check(s) against the entire on-file database to ensure the same person is not already in the database under a different name; | |
• | Construction and maintenance of a face biometric based Watch List; | |
• | Configuration of system response when performing a Watch List check; | |
• | Construction of a optimized stored facial image representation that ensures: (i) optimum facial recognition performance; (ii) the ability to successfully derive a new facial recognition template in the future; (iii) the ability to exchange the facial image with other face recognition processing systems and allow direct use (global interoperability); and (iv) the ability to display the image so that a person seeing the image could reasonably confirm the identify of the live person. | |
• | SecurIDenttm Watch List Check Solutions are fully integrated hardware and software solutions designed to support a face based Watch List Check for a client application; for example passport issuance: travel/identification document issuance, drivers license issuance, etc. |
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• | Developing person detection technology which is used to detect and track multiple persons in a 60 (degree) degrees by 22.9 meters 75 feet field of view in front of the camera; | |
• | Developing a family of over the counter face biometric capture devices that are 100% solid state and locate and capture facial images simultaneously; | |
• | Developing an array of critical software technology; e.g. logic for person detection, face finding, eye finding, simultaneous face detection; and | |
• | Developing an array of advanced software technology capable of detecting an exaggerated pose or expression and normalizing each to create a full frontal, expression free pose, critical for optimum face recognition. |
• | SecurIDent BioFACEtm Capture System captures images of persons within a close to near range location. It represents the capture system for use at primary inspection in border clearance for confirming the identity of a person presenting a new globally standardized ePassport or other form of emerging electronic travel documents. | |
• | Systems that rely on standard video cameras: (i) require a person to be cooperative and pose at a specific optimal location in front of the camera; (ii) allow only one person at a time to be processed; and (iii) often require the inspection officer to manually position the camera. BioFACEtm overcomes those limiting characteristics with an extensive array of features: |
• | Detects and tracks multiple persons simultaneously within the defined capture area; | |
• | Persons do not need to be corralled or forced to position themselves or pose before the camera; | |
• | Permits unrestricted movement even through high-volume areas; | |
• | Automatically adjusts to compensate for varying lighting conditions; | |
• | Automatically selects the most optimum pose and stores a prescribed number of best pose images for use during face recognition; | |
• | Displays results on the control workstation; | |
• | Works with all facial recognition algorithms; | |
• | Secures transfer of cropped, resolution specific images of the face to a SecurIDenttm Identity Management Controller via standard LAN or WAN (wire or wireless). |
• | Cryptometrics believes that Vitalerttm is one of the most advanced camera systems on the market today for performing face recognition at a distance, as well as, advanced warning lookout detection in support of border clearance, high-volume traveler screening at airports, and protection of critical infrastructures and key assets — such as mass transit systems, key public buildings, etc. |
• | Person detection technology detects and tracks multiple persons, stationary or moving within a large target area (60 degrees by 22.9 meters [75 feet]). |
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• | Logic steered high-speed pan, tilt and zoom Camera for fast acquisition of close up images of subjects face at a prescribed resolution, regardless of person’s height or movements within a large target area (45(degree) [degrees] by 22.9 meters [75 feet]) | |
• | Pose detection logic automatically selects the best pose for face recognition. | |
• | Lighting compensation logic automatically adjusts the camera to ensure captured images are of the best quality to confirm identity. | |
• | Scene analysis subs-system to enable immediate identification of areas within the overall field of view to target. | |
• | Face recognition software: works with all facial recognition algorithms. | |
• | Secure transfer of cropped face images to SecurIDenttm Identity Management Controller via standard LAN or WAN (wire or wireless). | |
• | Transmits cropped, resolution specific images of the face to ensure fastest recognition and maximum availability of face recognition software for other matching tasks. | |
• | Passengers, travelers and other subjects do not need to be corralled or forced to position themselves or pose directly in front of the camera. Permits unrestricted movement even through high-volume areas. | |
• | Enhanced Service Delivery Kiosks, developed by Cryptometrics use the facial biometric to deliver improved levels of facilitation. Not only is the identity of the person confirmed and used to activate and deliver the kiosk based service, but where approved by the service provide is also used to carry out Watch List (Lookout) Checks for immediate detection of those persons that would attempt to abuse the kiosk based service. |
• | Ergonomically designed, high durability enclosure; | |
• | Touch Sensitive Display; | |
• | Integrated SecurIDenttm BIOFACE Camera with infill lighting; and | |
• | Controller with remote communications. |
• | ID(2)PASS SecurBordertm Solutions represents a comprehensive border clearance solution with fully integrated face biometric capture and processing. Relying on the confirming of two personal forms of identification, one being the person’s valid identification document and the other their biometric identity, |
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ID(2)PASS SecurBordertm Solutions enable governments to immediately strengthen border security, while at the same time introduce reading and processing of the new biometrically empowered, globally standardized ePassport. |
• | Computer assisted workflow based on the internationally standardized Primary and Secondary inspection process; | |
• | Dynamic system architecture supporting LAN, WAN and portable functionality and affordable redundancy; | |
• | Fully compatible with standardized machine-readable documents conforming to the United Nation’s International Civil Aviation Organization specifications and ISO Standards; | |
• | Built-in document security feature(s) analysis and reporting; | |
• | High-speed biographical and document-based Lookout search functionality; | |
• | Full compatibility with existing Lookout databases, including the retention of existing Lookout databases as the definitive repository; | |
• | Fully integrated machine-assisted identity confirmation based on the face biometric; | |
• | Highly reliable Verification and Identification face biometric confirmation; | |
• | Electronic transfer of referral information to Secondary; and | |
• | Controlled access to databases held by other Ministries and Agencies. |
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• | Automatically detects and locates faces in live video or in digitized images; | |
• | Automatically identifies and locates the key landmarks of the human face, such as center of the eye sockets, tip of the nose and corners of the mouth; | |
• | Automatically assesses the overall quality of a digital image of the face for suitability with commercialoff-the-shelf face recognition software; | |
• | Automatically crops the face to realize the best orientation of the image of the face for use with face recognition software; | |
• | Automatically locates the key facial landmarks and turns (rotates) the face with limited distortion to a full frontal (forward looking) pose; | |
• | Automatically simulates muscle movement and jaw rotation to realize an expression neutral pose of the face; for example close an open mouth; | |
• | Uses sensor derived data such as range to target and angular location of target to automatically steer a pan, tilt and zoom camera to capture facial images of a targeted person; | |
• | Uses face detection to locate and then track a person who’s facial image is being captured by a stationary camera; | |
• | Preprocesses images of the face to improve, where possible, the performance of commercialoff-the-shelf face recognition software; and | |
• | Automates the business process of capturing and confirming ones facial biometric via face recognition software in such activities as issuing a official travel document, identification document, seeking entry to a country at a border check point. |
• | Derives samples of facial images from photographs for use with face recognition software; | |
• | Utilizes smart camera systems designed to automatically capture facial images suitable for face recognition from persons in a defined field of view; | |
• | Utilizes smart camera systems designed to automatically capture facial images simultaneously in a prescribed field of view; | |
• | Utilizes self-service kiosks that incorporate face biometric capture and processing; and | |
• | Utilizes computerized appliances that match a captured facial biometric against a database of biometric samples for the purpose of isolating those person(s) that look most like that person, or for the purpose of confirming that the person is who they claim to be. |
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• | Health Insurance Portability and Accountability Act. Purpose: To improve the portability while maintaining the privacy and security of patient information. | |
• | Gramm-Leach-Bliley Act. Purpose: To protect the information financial institutions collect about customers. | |
• | California Senate Bill 1386. Purpose: To give California consumers immediate notice of security compromises in computer systems so they can take action before identity theft occurs. | |
• | Sarbanes-Oxley Act of 2002. Purpose: To restore investor confidence in the financial reporting of public companies and hold a company’s officers personally responsible for misrepresentation. Under the law, public companies must employ a third party to audit not only their financial statements, but also to verify the reasoning, policies and controls behind those statements. This means information technology departments must store and create access to all information including structured data like spreadsheets and databases, and unstructured data such ase-mail and instant messages relating to the company’s financial statement. Any public company is affected by the Sarbanes-Oxley Act of 2002 and experts recommend private companies hoping to go public or be acquired by a public company also should abide by the rules. | |
• | The National Strategy to Secure Cyberspace. Purpose: To suggest best practices to the private sector for protecting critical infrastructures and businesses from cyber attacks. |
• | USA Patriot Act. Purpose: To boost the government’s ability to track and prosecute terrorist activity through increased use of surveillance, information sharing and other means. | |
• | U.S. Public Law107-173 — Enhanced Border Security and Visa Entry Reform Act. Purpose: Use of biometrics (face being designated as the mandatory, globally interoperable biometric) in travel documents to support more secure border clearance. It states that not later than October 26, 2006, the government of each country that is designated to participate in the visa waiver program established under Section 217 of the Immigration and Nationality Act shall certify, as a condition for designation or continuation of that designation, that it has a program to issue to its nationals machine readable passports that are tamper resistant and incorporate biometric and document authentication identifiers that comply with applicable biometric and document identifying standards established by the United Nations International Civil Aviation Organization. | |
• | European Union Regulation — Council Regulation 15152/04. Purpose: Update the standards governing passport security features for all twenty five (25) European Union member countries to include the integration of biometric identifiers into European Union passports and travel documents. The regulation sets out that at a minimum, all new European Union passports will have a storage medium containing a full |
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facial image and fingerprints in interoperable formats, along with standardized biographical data. The purpose of the biometric identifiers is to offer protection against falsification of passports and better identification of passport holders. The Regulation sets a compliance date of 28 August 2006 for countries to commence issuance of the new European Union passport with facial image. Fingerprints are to be added within 18 months following that date. |
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• | Technology to detect the3-D orientation of the face from a photograph or image and use this information to digitally turn the face without distortion to the more optimum face recognition preferred “full frontal pose”. The technology can also be used to create a series of “derivative images “capable of forming a3-D facial profile. | |
• | Technology capable of digitally replicating muscle and jaw movement in the face to allow a facial image to be cleared of performance reducing gestures (e.g. smile, frown and mouth open), thereby assuming the more optimum, face recognition preferred “gesture neutral pose”. The technology can also be used to create “derivative images containing specific gestures” to improve match checks. |
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• | New Zealand Passport Office — Cryptometrics (i) carried out an investigation into the potential of using their 2.5 million record passport photo database with face recognition technology; (ii) successfully converted the existing database and pilot tested using a number of key face recognition software packages; (iii) developed and pilot tested a prototype passport applicant identity confirmation system for supporting passport issuance; (iv) designed and delivered a photo image quality assessment system for live passport issuance; and (v) designed and delivered a facial image Lookout system for live passport issuance. | |
• | UK passport Agency — Cryptometrics was retained on several occasions to assist the UK passport Agency as it moves towards issuance of the new British ePassport. To date Cryptometrics has (i) evaluated existing scanning equipment used to digitize passport photos to determine overall suitability for use in issuing the ePassport; (ii) recommended replacement scanning equipment and evaluated overall suitability for use in issuing the ePassport; (iii) evaluated the historical database of passport photos to determine potential suitability for use in confirming identity of applicants using face recognition; and (iv) assisted in the evaluation of vendors of passport photos and providing recommendations on suitability for use with face recognition technology. |
• | Foreign and Commonwealth Office — Cryptometrics has assessed alternate facial image processing and capture processes to meet the requirements for optimal face recognition in the foreign missions. These are used for both passports and visas. | |
• | German Federal Criminal Police — Cryptometrics has delivered turnkey systems used to test face recognition to confirm the identity of a travel document presenter for potential use in Germany’s border control. | |
• | Netherlands Ministry of the Interior and Kingdom Relations — Cryptometrics has delivered turnkey systems used to test face recognition and fingerprint matching for confirming the identity of a travel document presenter. In addition to countertop placement configurations, Cryptometrics created and delivered self-service kiosk based units. | |
• | US ARMY/Special Operations Command Cryptometrics has delivered facial biometric systems that include smart biometric cameras, photo enrollment stations and face recognition controllers. | |
• | US DEPARTMENT OF HOMELAND SECURITY — Cryptometrics designed, developed and delivered a prototype face biometric capture and processing system for Baltimore-Washington Airport. | |
• | Australia — Cryptometrics participated in a trial for a police force organization (unnamed under non-disclosure understanding) to determine the effectiveness of face recognition for identification in surveillance applications. This was a trial involving the leading biometric provider and integrator companies’ world-wide. The conclusion of this trial independently proved that Cryptometrics performance for indoorr surveillance applications was found to be the best in the world. |
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• | African Country: National Information and Security System — Cryptometrics conducted a photo image quality evaluation and duplicate check (1 to Many Fraud check) test on 150,000 image subset of their existing passport image database. The objective of this effort was to determine the suitability of face recognition technology when using existing legacy databases. Cryptometrics technology was found to be the best performing technology system and accurate enough to be used with the existing national database set of facial images. | |
• | Portugal — SEF (Passport Issuance Authority) — Cryptometrics designed, developed and provided the biometric capture subsystems used in free-standing kiosks that captured face image, two fingerprints (two index fingers), signature and biographical information. | |
• | Portugal — MFA (Ministry of Foreign Affairs) — Cryptometrics designed, developed and provided the biometric capture subsystems used in free-standing kiosks that captured face image, all ten fingerprints of both hands, signature and biographical information. | |
• | LifeTouch National School Studios Inc. — Cryptometrics licenses products to this customer for facial biometric face finding, and eye location and landmark detection and coordinates for further processing millions of portrait and group photos. This provides greater accuracy and efficiencies to a manual labor intensive process. | |
• | New York, Westchester County Government — The County Government requires greater security and controls of sensitive documentation that is provided to the Government, processed internally and shuttled within its infrastructure. The Cryptometrics FingerSure Enterprise product along with a completely integrated and portable biometric capture device has been licensed and deployed to support these needs. | |
• | Cryptometrics has deployed face recognition based verification and identification systems for police, military and security organizations in Thailand, Poland, Czech Republic, Japan, Singapore, Malaysia, Philippines, Australia and the US including the Department of Defense. |
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FOR THE SIX MONTHS ENDED OCTOBER 31, 2006
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2007 | $ | 80,095 | ||
2008 | 142,795 | |||
2009 | 147,626 | |||
2010 | 152,457 | |||
2011 | 12,738 | |||
$ | 535,711 | |||
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AND RESULTS OF OPERATIONS OF CRYPTOMETRICS FOR THE FISCAL YEARS
ENDED APRIL 30, 2006 AND 2005
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Year Ended April 30, 2006 | Year Ended April 30, 2005 | |||||||
(Audited) | (Audited) | |||||||
Cash flows used in operating activities | $ | (6,970,870 | ) | $ | (5,104,345 | ) | ||
Cash flows used in investing activities | $ | (3,697,930 | ) | $ | (486,759 | ) | ||
Cash flows from financing activities | $ | 6,908,800 | $ | 15,632,168 | ||||
Net change in cash and cash equivalents | (3,662,091 | ) | 10,040,118 |
Operating Lease Obligations | ||||
2007 | $ | 160,189 | ||
2008 | 142,795 | |||
2009 | 147,626 | |||
2010 | 152,457 | |||
2011 | 12,738 | |||
$ | 615,805 |
Number of Shares of | ||||||||
Name | Common Stock | Percent of Common Stock(3) | ||||||
Robert Barra | 2,975,000 | (1) | 24.2 | % | ||||
Michael A. Vitale | 2,975,000 | (1) | 24.2 | % | ||||
Joel Shaw | 806,118 | (2) | 6.5 | % |
127
Table of Contents
(1) | Does not include options to purchase 325,000 shares of Cryptometrics Common Stock pursuant to agreements which will become effective upon the effectiveness of the Merger. | |
(2) | Represents number of shares of Cryptometrics Common Stock to be received upon conversion of Exchangeable Shares of Cryptometrics Canada, Inc. held. | |
(3) | Including 1,382,957 Cryptometrics Exchange Shares as outstanding. |
128
Table of Contents
JAG MEDIA HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm | F-2 | |
Consolidated Balance Sheet July 31, 2006 | F-3 | |
Consolidated Statements of Operations Years Ended July 31, 2006 and 2005 | F-4 | |
Consolidated Statements of Changes in Stockholders, Equity (Deficiency) Years Ended July 31, 2006 and 2005 | F-5 | |
Consolidated Statements of Cash Flows Years Ended July 31, 2006 and 2005 | F-6 | |
Notes to Consolidated Financial Statements | F-7 | |
Condensed Consolidated Balance Sheet October 31, 2006 (Unaudited) | F-18 | |
Condensed Consolidated Statements of Operations Three Months Ended October 31, 2006 and 2005 (Unaudited) | F-19 | |
Condensed Consolidated Statement of Changes in Stockholders’ Deficiency Three Months Ended October 31, 2006 (Unaudited) | F-20 | |
Condensed Consolidated Statements of Cash Flows Three Months Ended October 31, 2006 and 2005 (Unaudited) | F-21 | |
Notes to Condensed Consolidated Financial Statements | F-22 |
F-1
Table of Contents
JAG Media Holdings, Inc.
/s/ J.H. Cohn LLP | ||||
February 22, 2007
F-2
Table of Contents
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ | 450,618 | ||
Accounts receivable, net of allowance for doubtful accounts of $7,500 | 15,580 | |||
Other current assets | 35,333 | |||
Total current assets | 501,531 | |||
Equipment, net of accumulated depreciation of $118,736 | 76,702 | |||
Total | $ | 578,233 | ||
Liabilities and Stockholders’ Deficiency | ||||
Current liabilities: | ||||
Accounts payable and accrued expenses | $ | 234,682 | ||
Deferred revenues | 22,448 | |||
Derivative liability | 2,789,750 | |||
Total current liabilities | 3,046,880 | |||
Convertible debentures payable, net of unamortized debt discount of $2,047,911 | 2,027,089 | |||
Total liabilities | 5,073,969 | |||
Mandatorily redeemable Class B common stock; par value $.00001 per share: | ||||
400,000 shares designated as Series 2; 372,848 shares issued and outstanding | 4 | |||
40,000 shares designated as Series 3; 21,500 shares issued and outstanding | — | |||
4 | ||||
Commitments and contingencies | ||||
Stockholders’ deficiency: | ||||
Preferred stock; par value $.00001 per share; 50,000,000 shares authorized, none issued | ||||
Common stock; par value $.00001 per share; 500,000,000 shares authorized; 42,896,506 shares issue and outstanding | 429 | |||
Additional paid-in capital | 44,209,217 | |||
Unearned compensation | (34,870 | ) | ||
Accumulated deficit | (48,670,516 | ) | ||
Total stockholders’ deficiency | (4,495,740 | ) | ||
Total | $ | 578,233 | ||
F-3
Table of Contents
2006 | 2005 | |||||||
Revenues | $ | 166,692 | $ | 239,651 | ||||
Operating expenses: | ||||||||
Cost of revenues | 85,585 | 152,371 | ||||||
Selling expenses | 46,637 | 43,441 | ||||||
General and administrative expenses | 2,381,789 | 1,745,455 | ||||||
Totals | 2,514,011 | 1,941,267 | ||||||
Loss from operations | (2,347,319 | ) | (1,701,616 | ) | ||||
Other income (expense) | ||||||||
Gain on change in value of derivative liability | 1,094,246 | — | ||||||
Loss on extinguishment of promissory notes | (77,373 | ) | — | |||||
Writeoff of goodwill | — | (50,400 | ) | |||||
Interest income | 2,573 | 8,357 | ||||||
Finance charge for derivative liability in excess of proceeds from convertible debentures | (1,795,005 | ) | — | |||||
Other interest expense | (513,978 | ) | (145,506 | ) | ||||
Net loss | $ | (3,636,856 | ) | $ | (1,889,165 | ) | ||
Basic net loss per share | $ | (0.08 | ) | $ | (0.04 | ) | ||
Basic weighted average common shares outstanding | 42,891,017 | 44,510,641 | ||||||
F-4
Table of Contents
Common Stock | ||||||||||||||||||||||||
Number of | Additional | Unearned | Accumulated | |||||||||||||||||||||
Shares | Amount | Paid-In Capital | Compensation | Deficit | Total | |||||||||||||||||||
Balance, August 1, 2004 | 44,235,299 | $ | 442 | $ | 43,570,992 | $ | (24,264 | ) | $ | (43,144,495 | ) | $ | 402,675 | |||||||||||
Effect of issuance of options in exchange for services | 51,200 | (51,200 | ) | — | ||||||||||||||||||||
Amortization of unearned compensation | 35,018 | 35,018 | ||||||||||||||||||||||
Effect of issuance of common stock for purchase of business | 250,000 | 3 | 42,497 | 42,500 | ||||||||||||||||||||
Effects of issuance of common stock in exchange for services and claim settlement | 262,500 | 3 | 77,498 | 77,501 | ||||||||||||||||||||
Net loss | (1,889,165 | ) | (1,889,165 | ) | ||||||||||||||||||||
Balance, July 31, 2005 | 44,747,799 | 448 | 43,742,187 | (40,446 | ) | (45,033,660 | ) | (1,331,471 | ) | |||||||||||||||
Effect of issuance of options in exchange for services | 56,000 | (56,000 | ) | — | ||||||||||||||||||||
Effect of return and retirement of shares | (3,506,248 | ) | (35 | ) | 35 | — | ||||||||||||||||||
Amortization of unearned compensation | 61,576 | 61,576 | ||||||||||||||||||||||
Reclassification of derivative liability for nonemployee options | (63,989 | ) | (63,989 | ) | ||||||||||||||||||||
Fair value of shares issued on conversion of promissory notes payable | 1,250,000 | 12 | 399,988 | 400,000 | ||||||||||||||||||||
Shares issued on conversion of convertible debentures | 404,955 | 4 | 74,996 | 75,000 | ||||||||||||||||||||
Net loss | (3,636,856 | ) | (3,636,856 | ) | ||||||||||||||||||||
Balance, July 31, 2006 | 42,896,506 | $ | 429 | $ | 44,209,217 | $ | (34,870 | ) | $ | (48,670,516 | ) | $ | (4,495,740 | ) | ||||||||||
F-5
Table of Contents
2006 | 2005 | |||||||
Operating activities: | ||||||||
Net loss | $ | (3,636,856 | ) | $ | (1,889,165 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 23,785 | 19,684 | ||||||
Amortization of other assets | 36,426 | 13,574 | ||||||
Amortization of unearned compensation | 61,576 | 35,018 | ||||||
Gain on change in value of derivative liability | (1,094,246 | ) | — | |||||
Loss on extinguishment of debt | 77,373 | — | ||||||
Finance charge for derivative liability in excess of debt proceeds | 1,795,005 | — | ||||||
Amortization of debt discount | 243,266 | 27,149 | ||||||
Writeoff of goodwill | — | 50,400 | ||||||
Effects of issuance of common stock in exchange for services and claim settlement | — | 77,501 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (1,070 | ) | (2,270 | ) | ||||
Other current assets | 32,123 | 6,586 | ||||||
Accounts payable and accrued expenses | 275,025 | 147,657 | ||||||
Deferred revenues | (6,783 | ) | (10,262 | ) | ||||
Net cash used in operating activities | (2,194,376 | ) | (1,524,128 | ) | ||||
Investing activities: | ||||||||
Equipment purchases | (40,871 | ) | (32,078 | ) | ||||
Cash paid for purchase of business | — | (19,212 | ) | |||||
Net cash used in investing activities | (40,871 | ) | (51,290 | ) | ||||
Financing activities: | ||||||||
Proceeds from notes and debentures | 2,025,000 | 2,000,000 | ||||||
Costs paid in connection with notes and debentures payable | — | (150,000 | ) | |||||
Net cash provided by financing activities | 2,025,000 | 1,850,000 | ||||||
Net increase (decrease) in cash and cash equivalents | (210,247 | ) | 274,582 | |||||
Cash and cash equivalents, beginning of year | 660,865 | 386,283 | ||||||
Cash and cash equivalents, end of year | $ | 450,618 | $ | 660,865 | ||||
Supplemental disclosure of noncash financing activities: | ||||||||
Noncash effect of promissory notes converted to common stock | $ | 325,000 | ||||||
Derivative liability of warrants issued equal to proceeds from debentures issued | $ | 2,025,000 | ||||||
Reclassification of fair market value of nonemployee options to derivative liability | $ | 63,990 | ||||||
Effect of issuance of common stock for purchase of business | $ | 42,500 | ||||||
F-6
Table of Contents
Notes to Consolidated Financial Statements
F-7
Table of Contents
Notes to Consolidated Financial Statements
F-8
Table of Contents
Notes to Consolidated Financial Statements
F-9
Table of Contents
Notes to Consolidated Financial Statements
Deferred revenues, net | $ | 8,000 | ||
Unearned compensation | 54,000 | |||
Net operating loss carryforwards | 12,165,000 | |||
12,227,000 | ||||
Less valuation allowance | (12,227,000 | ) | ||
Total | $ | — | ||
F-10
Table of Contents
Notes to Consolidated Financial Statements
F-11
Table of Contents
Notes to Consolidated Financial Statements
F-12
Table of Contents
Notes to Consolidated Financial Statements
Equipment | $ | 11,000 | ||
Other Assets | 100 | |||
Goodwill | 50,400 | |||
Total | $ | 61,500 | ||
F-13
Table of Contents
Notes to Consolidated Financial Statements
Number of Shares | Range of | |||||||
Common Stock | Exercise Prices | |||||||
Options outstanding, August 1, 2004 | 3,585,000 | $ | .02-$6.00 | |||||
Options issued (A) | 260,000 | $ | .50-$1.00 | |||||
Options cancelled | (1,335,000 | ) | $ | .15-$6.00 | ||||
Options outstanding, July 31, 2005 | 2,510,000 | $ | .02-$3.50 | |||||
Options issued (B) | 450,000 | $ | .02-$1.00 | |||||
Options canceled | (1,540,000 | ) | $ | .02-$3.50 | ||||
Options outstanding, July 31, 2006 (C) (D) | 1,420,000 | $ | .02-$1.00 | |||||
(A) | During 2005, the Company granted options to purchase 260,000 shares of common stock to employees of Pixaya (see Note 5). These options had per share exercise prices ranging from $.50 to $1.00, will expire in March 2015 and had an aggregate fair value of $51,200. | |
(B) | During 2006, the Company granted options to purchase 450,000 shares of common stock to employees and consultants. These options had per share exercise prices ranging from $.02 to $1.00, will expire at various dates from August 2011 through September 2015 and had an aggregate fair value of $56,000. | |
(C) | Includes options for the purchase of 1,420,000 shares of, effectively, common stock granted pursuant to the Company’s 1999 Long-term Incentive Plan (the “Incentive Plan”) which provides for individual awards to officers, employees, directors, consultants and certain other individuals that may take the form of stock options and certain other types of awards for which the value is based in whole or in part upon the fair market value of, effectively, the Company’s common stock. The number of shares of common stock that may be subject to all types of awards under the Incentive Plan as amended may not exceed 6,000,000 shares. The options typically vest upon grant but in no case later than two and one-half years after grant and expire the earlier of the tenth anniversary of the date of grant or the 90th day following termination of employment; provided that during such 90 day period the option will be exercisable only to the extent it was vested as of the date of such termination. |
F-14
Table of Contents
Notes to Consolidated Financial Statements
(D) | These options will expire at various dates from August 2011 through September 2015. |
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Average Years | Average | |||||||||||||||||||
Number | of Remaining | Exercise | Weighted Average | |||||||||||||||||
Exercise Prices | Outstanding | Contractual Life | Price | Number Exercisable | Exercise Price | |||||||||||||||
$.02 | 1,200,000 | 6.59 | $ | .02 | 1,200,000 | $ | .02 | |||||||||||||
.50 | 110,000 | 8.32 | .50 | 110,000 | .50 | |||||||||||||||
.75 | 55,000 | 8.32 | .75 | 0 | 0 | |||||||||||||||
1.00 | 55,000 | 8.32 | 1.00 | 0 | 0 | |||||||||||||||
$.02-$1.00 | 1,420,000 | 6.86 | $ | .02-$1.00 | 1,310,000 | .60 | ||||||||||||||
Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Average Years | Average | |||||||||||||||||||
Number | of Remaining | Exercise | Weighted Average | |||||||||||||||||
Exercise Prices | Outstanding | Contractual Life | Price | Number Exercisable | Exercise Price | |||||||||||||||
$.40 | 2,000,000 | 4.82 | $ | .40 | 2,000,000 | $ | .40 | |||||||||||||
.50 | 2,000,000 | 4.82 | .50 | 2,000,000 | .50 | |||||||||||||||
.60 | 2,000,000 | 4.82 | .60 | 2,000,000 | .60 | |||||||||||||||
.70 | 3,000,000 | 4.82 | .70 | 3,000,000 | .70 | |||||||||||||||
.80 | 3,000,000 | 4.82 | .80 | 3,000,000 | .80 | |||||||||||||||
$.40-$.80 | 12,000,000 | 4.82 | $ | .40-$.80 | 12,000,000 | .63 | ||||||||||||||
F-15
Table of Contents
Notes to Consolidated Financial Statements
Year ending | Amount | |||
July 31, 2007 | $ | 160,000 | ||
July 31, 2008 | 53,000 | |||
Total | $ | 213,000 | ||
F-16
Table of Contents
Notes to Consolidated Financial Statements
F-17
Table of Contents
AT OCTOBER 31, 2006
(UNAUDITED)
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ | 35,501 | ||
Accounts receivable, net of allowance for doubtful accounts of $7,500 | 20,960 | |||
Other current assets | 138,748 | |||
Total current assets | 195,209 | |||
Equipment, net of accumulated depreciation of $127,798 | 83,214 | |||
Total | $ | 278,423 | ||
Liabilities and Stockholders’ Deficiency | ||||
Current liabilities: | ||||
Accounts payable and accrued expenses | $ | 236,987 | ||
Deferred revenues | 19,444 | |||
Derivative liability | 2,466,660 | |||
Total current liabilities | 2,723,091 | |||
Convertible debentures payable, net of unamortized debt discount of $1,678,813 | 2,196,187 | |||
Total liabilities | 4,919,278 | |||
Mandatorily redeemable Class B common stock; par value $.00001 per share: | ||||
400,000 shares designated as Series 2; 381,014 shares issued and outstanding | 4 | |||
40,000 shares designated as Series 3; 21,500 shares issued and outstanding | — | |||
4 | ||||
Commitments and contingencies | ||||
Stockholders’ deficiency: | ||||
Preferred stock; par value $.00001 per share; 50,000,000 shares authorized, none issued | ||||
Common stock; par value $.00001 per share; 500,000,000 shares authorized; 44,579,589 shares issued and outstanding | 446 | |||
Additional paid-in capital | 44,383,563 | |||
Accumulated deficit | (49,024,868 | ) | ||
Total stockholders’ deficiency | (4,640,859 | ) | ||
Total | $ | 278,423 | ||
F - 18
Table of Contents
THREE MONTHS ENDED OCTOBER 31, 2006 AND 2005
(UNAUDITED)
2006 | 2005 | |||||||
Revenues | $ | 43,331 | $ | 40,023 | ||||
Operating expenses: | ||||||||
Cost of revenues | 24,650 | 25,873 | ||||||
Selling expenses | 24,262 | 9,869 | ||||||
General and administrative expenses | 239,689 | 526,167 | ||||||
Totals | 288,601 | 561,909 | ||||||
Loss from operations | (245,270 | ) | (521,886 | ) | ||||
Other income (expense): | ||||||||
Gain on change in value of derivative liability | 359,090 | — | ||||||
Interest income | 77 | 1,702 | ||||||
Interest expense | (468,249 | ) | (74,370 | ) | ||||
Net loss | $ | (354,352 | ) | $ | (594,554 | ) | ||
Basic net loss per share | $ | (0.01 | ) | $ | (0.01 | ) | ||
Basic weighted average common shares outstanding | 43,972,608 | 44,747,799 | ||||||
F - 19
Table of Contents
THREE MONTHS ENDED OCTOBER 31, 2006
(UNAUDITED)
Common Stock | Additional | |||||||||||||||||||||||
Number of | Paid-in | Unearned | Accumulated | |||||||||||||||||||||
Shares | Amount | Capital | Compensation | Deficit | Total | |||||||||||||||||||
Balance, August 1, 2006 | 42,896,506 | $ | 429 | $ | 44,209,217 | $ | (34,870 | ) | $ | (48,670,516 | ) | $ | (4,495,740 | ) | ||||||||||
Amortization of unearned compensation | 9,233 | 9,233 | ||||||||||||||||||||||
Reclassification of deferred compensation upon adoption of SFAS 123R | (34,870 | ) | 34,870 | — | ||||||||||||||||||||
Shares issued on conversion of convertible debentures | 1,683,083 | 17 | 199,983 | 200,000 | ||||||||||||||||||||
Net loss | (354,352 | ) | (354,352 | ) | ||||||||||||||||||||
Balance, October 31, 2006 | 44,579,589 | $ | 446 | $ | 44,383,563 | $ | — | $ | (49,024,868 | ) | $ | (4,640,859 | ) | |||||||||||
F - 20
Table of Contents
THREE MONTHS ENDED OCTOBER 31, 2006 AND 2005
(UNAUDITED)
2006 | 2005 | |||||||
Operating activities: | ||||||||
Net loss | $ | (354,352 | ) | $ | (594,554 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 9,018 | 5,247 | ||||||
Amortization of unearned compensation | 9,233 | 11,433 | ||||||
Gain on change in value of derivative liability | (359,090 | ) | — | |||||
Amortization of debt discount | 369,098 | 13,877 | ||||||
Amortization of other assets | — | 6,937 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (5,380 | ) | (6,009 | ) | ||||
Other current assets | (67,096 | ) | 13,589 | |||||
Accounts payable and accrued expenses | 2,001 | 229,781 | ||||||
Deferred revenues | (3,004 | ) | 3,796 | |||||
Net cash used in operating activities | (399,572 | ) | (315,903 | ) | ||||
Investing activities: | ||||||||
Equipment purchases | (15,545 | ) | (12,171 | ) | ||||
Net decrease in cash and cash equivalents | (415,117 | ) | (328,074 | ) | ||||
Cash and cash equivalents, beginning of period | 450,618 | 660,865 | ||||||
Cash and cash equivalents, end of period | $ | 35,501 | $ | 332,791 | ||||
Supplemental disclosure of noncash financing activities: | ||||||||
Noncash effect of convertible debentures converted to common stock | $ | 200,000 | ||||||
Fair value of fully—vested stock options issued to non-employee | $ | 36,000 | ||||||
F - 21
Table of Contents
Notes to Condensed Consolidated Financial Statements
F-22
Table of Contents
Notes to Condensed Consolidated Financial Statements
F-23
Table of Contents
Notes to Condensed Consolidated Financial Statements
Deferred revenues, net | $ | 7,000 | ||
Unearned compensation | 72,000 | |||
Net operating loss carryforwards | 12,356,000 | |||
12,435,000 | ||||
Less valuation allowance | (12,435,000 | ) | ||
Total | $ | — | ||
F-24
Table of Contents
Notes to Condensed Consolidated Financial Statements
F-25
Table of Contents
Notes to Condensed Consolidated Financial Statements
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Exercise | Contractual | Intrinsic | ||||||||||||||
Shares | Price | Term | Value | |||||||||||||
Options outstanding at beginning of period | 1,420,000 | $ | 0.12 | |||||||||||||
Granted | 200,000 | 0.05 | ||||||||||||||
Exercised | — | |||||||||||||||
Canceled | — | |||||||||||||||
Options outstanding at end of period | 1,620,000 | $ | 0.11 | 6.40 | $ | 246,000 | ||||||||||
Options exercisable at end of period | 1,565,000 | $ | 0.08 | 6.34 | $ | 246,000 | ||||||||||
F-26
Table of Contents
Notes to Condensed Consolidated Financial Statements
Three Months Ended | ||||
October 31, 2006 | ||||
Risk-free interest rate | 6.00 | % | ||
Dividend yield | 0 | % | ||
Expected life | 5 years | |||
Expected volatility factor | 340.64 | % |
F-27
Table of Contents
CRYPTOMETRICS, INC. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm | F-29 | |
Consolidated Balance Sheets Years Ended April 30, 2006 and 2005 | F-30 | |
Consolidated Statements of Operations Years Ended April 30, 2006 and 2005 | F-31 | |
Consolidated Statements of Shareholders Equity Years Ended April 30, 2006 and 2005 | F-32 | |
Consolidated Statements of Cash Flows Years Ended April 30, 2006 and 2005 | F-33 | |
Notes to Consolidated Financial Statements | F-34 | |
Consolidated Balance Sheets July 31, 2006 (Unaudited) | F-43 | |
Consolidated Statements of Operations Three Months Ended July 31, 2006 (Unaudited) | F-44 | |
Consolidated Statements of Cash Flows Three Months Ended July 31, 2006 (Unaudited) | F-45 | |
Consolidated Balance Sheets October 31, 2006 (Unaudited) | F-46 | |
Consolidated Statements of Operations Three Months and Six Months Ended October 31, 2006 and 2005 (Unaudited) | F-47 | |
Consolidated Statement of Cash Flows Six Months Ended October 31, 2006 and 2005 (Unaudited) | F-48 | |
Notes to Financial Statements |
F-28
Table of Contents
F - 29
Table of Contents
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
April 30, | April 30, | |||||||
2006 | 2005 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 7,520,056 | $ | 11,182,147 | ||||
Short-term Investments | 3,144,681 | — | ||||||
Accounts receivable | 60,360 | 97,534 | ||||||
Inventory | 146,715 | 143,936 | ||||||
Prepaid expenses | 117,662 | 72,767 | ||||||
Investment tax credit receivable | 216,172 | 392,779 | ||||||
TOTAL CURRENT ASSETS | 11,205,646 | 11,889,163 | ||||||
Fixed Assets, net of accumulated depreciation of $540,629 and $345,761, respectively | 785,358 | 585,068 | ||||||
Intangibles, primarily patents | 188,783 | 79,140 | ||||||
Other | — | 1,200 | ||||||
Goodwill | 10,700,000 | 10,700,000 | ||||||
TOTAL ASSETS | $ | 22,879,787 | $ | 23,254,571 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 1,118,072 | $ | 1,481,584 | ||||
Accrued compensation | 250,363 | 338,363 | ||||||
TOTAL CURRENT LIABILITIES | 1,368,435 | 1,819,947 | ||||||
Stockholders’ Equity | ||||||||
Common stock, $.001 par value, 20,000,000 shares authorized, 11,971,363 and 11,197,103 shares issued and outstanding, respectively | 119,714 | 111,971 | ||||||
Additional paid-in capital | 38,172,028 | 31,270,971 | ||||||
Accumulated deficit | ||||||||
Accumulated other comprehensive gain (loss): | (16,802,830 | ) | (9,872,849 | ) | ||||
Foreign currency translation adjustments | 22,440 | (75,469 | ) | |||||
TOTAL LIABILITIES AND | 21,511,352 | 21,434,624 | ||||||
STOCKHOLDERS’ EQUITY | $ | 22,879,787 | $ | 23,254,571 | ||||
F - 30
Table of Contents
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended | Year Ended | |||||||
April 30, 2006 | April 30, 2005 | |||||||
Revenues | $ | 215,661 | $ | 681,854 | ||||
Cost and Expenses: | ||||||||
Cost of revenues | 59,278 | 187,817 | ||||||
Research and development | 2,181,936 | 1,934,415 | ||||||
Selling and marketing | 2,706,796 | 1,804,249 | ||||||
General and administrative | 2,604,468 | 2,359,463 | ||||||
7,552,478 | 6,285,944 | |||||||
Loss from operations | (7,336,817 | ) | (5,604,090 | ) | ||||
Interest and other income, net | 406,836 | 102,711 | ||||||
Loss for the period | $ | (6,929,981 | ) | $ | (5,501,379 | ) | ||
F - 31
Table of Contents
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Accumulated | ||||||||||||||||||||
Additional | Other | |||||||||||||||||||
Common Stock | Paid-in | Accumulated | Comprehensive | |||||||||||||||||
Shares | Amount | Capital | Deficit | Gain (Loss) | ||||||||||||||||
Balance May 1, 2004 | 8,640,485 | $ | 86,405 | 515,246,937 | $ | (4,371,470 | ) | $ | (74,523 | ) | ||||||||||
Net loss | — | — | — | (5,501,379 | ) | — | ||||||||||||||
Sale of common stock by Private Placements | 2,556,618 | 25,566 | 16,024,034 | — | — | |||||||||||||||
Loss on foreign currency exchange | — | — | — | — | (946 | ) | ||||||||||||||
Balance April 30, 2005 | 11,197,103 | 111,971 | 31,270,971 | (9,872,849 | ) | (75,469 | ) | |||||||||||||
Net loss | — | — | — | (6,929,981 | ) | — | ||||||||||||||
Sale of common stock by Private Placements | 774,260 | 7,743 | 6,901,057 | — | — | |||||||||||||||
Gain on foreign currency exchange | — | — | — | — | 97,909 | |||||||||||||||
Balance April 30, 2006 | 11,971,363 | $ | 119,714 | $ | 38,172,028 | $ | (16,802,830 | ) | $ | 22,440 | ||||||||||
F - 32
Table of Contents
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended April 30, | ||||||||
2006 | 2005 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (6,929,981 | ) | $ | (5,501,379 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 244,516 | 152,227 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 37,174 | (97,534 | ) | |||||
Inventories | (2,779 | ) | (57,510 | ) | ||||
Prepaid expenses and other assets | (44,895 | ) | (69,039 | ) | ||||
Income taxes recoverable | 176,607 | (183,377 | ) | |||||
Accounts payable and accrued expenses | (451,512 | ) | 652,267 | |||||
Net cash flows from operating activities | (6,970,870 | ) | (5,104,345 | ) | ||||
Cash flows from investing activities: | ||||||||
Acquisition of fixed assets | (444,806 | ) | (424,138 | ) | ||||
Purchase of short-term investments | (3,144,681 | ) | — | |||||
Patent application costs | (108,443 | ) | (62,621 | ) | ||||
Net cash flows from investing activities | (3,697,930 | ) | (486,759 | ) | ||||
Cash flows from financing activities: | ||||||||
Sale of common stock | 6,908,800 | 16,049,600 | ||||||
Repayment of debt | — | (417,432 | ) | |||||
Net cash flows from financing activities | 6,908,800 | 15,632,168 | ||||||
Net effect of currency fluctuations | 97,909 | (946 | ) | |||||
Net change in cash and cash equivalents | (3,662,091 | ) | 10,040,118 | |||||
Cash and cash equivalents at period beginning | 11,182,147 | 1,142,029 | ||||||
Cash and cash equivalents at period end | $ | 7,520,056 | $ | 11,182,147 | ||||
Supplemental cash flow information: | ||||||||
Income taxes paid | $ | — | $ | — | ||||
Interest paid | $ | — | $ | 19,224 | ||||
F - 33
Table of Contents
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2006
Note 1. | Organization and summary of significant accounting policies |
F - 34
Table of Contents
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 1. | Organization and summary of significant accounting policies — (Continued) |
Fiscal Year Ended April 30, | ||||||||
2006 | 2006 | |||||||
Net loss | $ | (6,929,981 | ) | $ | (5,501,379 | ) | ||
Effect of stock options | (38,800 | ) | (58,234 | ) | ||||
Proforma net loss | $ | (6,968,781 | ) | $ | (5,559,613 | ) | ||
F - 35
Table of Contents
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 1. | Organization and summary of significant accounting policies — (Continued) |
Furniture | 5 to 7 years | |
Computer equipment | 3 to 5 years | |
Leasehold improvements | Remaining lease term or useful life |
F - 36
Table of Contents
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 1. | Organization and summary of significant accounting policies — (Continued) |
Year Ended | ||||
April 30, | ||||
2007 | $ | 18,878 | ||
2008 | 18,878 | |||
2009 | 18,878 | |||
2010 | 18,878 | |||
2011 | 18,878 | |||
2012 and thereafter | 94,393 | |||
$ | 188,783 | |||
F - 37
Table of Contents
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 1. | Organization and summary of significant accounting policies — (Continued) |
Note 2. | Acquisition |
F - 38
Table of Contents
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2006 | 2005 | |||||||
Purchased parts and materials | $ | 109,385 | $ | 102,333 | ||||
Finished goods, including spares | 37,330 | 41,603 | ||||||
$ | 146,715 | $ | 143,936 | |||||
Year Ended April 30, | ||||||||
2006 | 2005 | |||||||
Computer | $ | 1,074,352 | $ | 695,905 | ||||
Furniture and fixtures | 203,224 | 187,065 | ||||||
Leasehold improvements | 48,411 | 47,859 | ||||||
1,325,987 | 930,829 | |||||||
Less: accumulated depreciation | 540,629 | 345,761 | ||||||
$ | 785,358 | $ | 585,068 | |||||
2006 | 2005 | |||||||
Net loss | $ | (6,929,981 | ) | $ | (5,501,379 | ) | ||
Gain (loss) on foreign currency exchange | 97,909 | (3,938 | ) | |||||
Net comprehensive loss | $ | (6,832,072 | ) | $ | (5,505,317 | ) | ||
F - 39
Table of Contents
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2006 | 2005 | |||||||
Revenues | ||||||||
Domestic | $ | 128,688 | $ | 0 | ||||
International (primarily Canada) | 86,973 | 681,854 |
Year ending April 30, | ||||
2007 | $ | 160,189 | ||
2008 | 142,795 | |||
2009 | 147,626 | |||
2010 | 152,457 | |||
2011 | 12,738 | |||
Total | $ | 615,805 | ||
April 30, | ||||||||
2006 | 2005 | |||||||
Deferred tax assets: | ||||||||
Net operating losses | $ | 6,721,132 | $ | 3,746,677 | ||||
Salaries | 155,545 | 301,191 | ||||||
Total | 6,876,677 | 4,047,868 | ||||||
Less: valuation allowance | 6,876,677 | 4,047,868 | ||||||
$ | — | $ | — | |||||
F - 40
Table of Contents
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Year Ended | Year Ended | |||||||
April 30, | April 30, | |||||||
2006 | 2005 | |||||||
U.S. Federal income tax statutory rate | (34 | )% | (34 | )% | ||||
State income tax, net of federal income tax benefit | (6 | )% | (6 | )% | ||||
Other- primarily net operating losses | 40 | 40 | ||||||
— | % | — | % | |||||
F - 41
Table of Contents
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F - 42
Table of Contents
CONSOLIDATED BALANCE SHEETS
As at July 31, 2006
(Unaudited — All figures in United States Dollars)
Consolidated | Consolidated | |||||||
31-Jul-06 | 30-Apr-06 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 4,803,872 | $ | 7,520,056 | ||||
Short-term Investments | 3,177,144 | 3,144,681 | ||||||
Accounts receivable | 413,006 | 60,360 | ||||||
Inventory | 348,764 | 146,715 | ||||||
Prepaids | 78,502 | 117,662 | ||||||
Investment tax credit receivable | 257,061 | 216,172 | ||||||
TOTAL CURRENT ASSETS | 9,078349 | 11,205,646 | ||||||
Capital Assets | 796,797 | 785,358 | ||||||
Intangibles | 309,435 | 188,783 | ||||||
Goodwill | 10,700,000 | 10,700,000 | ||||||
TOTAL ASSETS | $ | 20,884,581 | $ | 22,879,787 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 977,872 | $ | 1,118,072 | ||||
Other current liabilities | 248,592 | 250,363 | ||||||
TOTAL CURRENT LIABILITIES | 1,226,464 | 1,368,435 | ||||||
Stockholders’ Equity | ||||||||
Common stock | 119,714 | 119,714 | ||||||
Additional paid-in capital | 38,172,028 | 38,172,028 | ||||||
Accumulated deficit | (18,721,586 | ) | (16,802,830 | ) | ||||
Accumulated other comprehensive loss | 87,961 | 22,440 | ||||||
19,658,117 | 21,511,352 | |||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 20,884,581 | $ | 22,879,787 | ||||
Table of Contents
Consolidated Statements of Operations
Three months ended July 31, 2006
(unaudited)
Three Months Ended | Three Months Ended | |||||||
31-Jul-06 | 31-Jul-05 | |||||||
(Unaudited) | (Unaudited) | |||||||
Revenues | $ | 372,835 | $ | 63,086 | ||||
Cost and Expenses: | ||||||||
Cost of revenues | 213,339 | 35,577 | ||||||
Research and development | 779,720 | 482,628 | ||||||
Selling and marketing | 617,689 | 532,936 | ||||||
General and administrative | 786,287 | 570,269 | ||||||
2,397,035 | 1,621,410 | |||||||
Loss from operations | (2,024,200 | ) | (1,558,324 | ) | ||||
Interest and other income, net | 105,444 | 81,283 | ||||||
Loss for the period | $ | (1,918,756 | ) | $ | (1,477,041 | ) | ||
Net loss per common share: | ||||||||
Basic | $ | (0.16 | ) | $ | (0.13 | ) | ||
Basic common shares outstanding | 11,971,353 | 11,202,103 |
Table of Contents
Three Months Ended | ||||||||
31-Jul | ||||||||
2006 | 2005 | |||||||
(Unaudited) | ||||||||
Cash flows from operating activities | ||||||||
Net toss | (1,918,756 | ) | (1,477,041 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 77,699 | 46,491 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (352,646 | ) | 83,671 | |||||
Inventories | (202,049 | ) | (14,699 | ) | ||||
Prepaid expenses and other assets | 39,160 | (5,303 | ) | |||||
Income tax recoverable | (40,889 | ) | 126,873 | |||||
Accounts payable and accrued expenses | (141,971 | ) | (234,065 | ) | ||||
Net cash used in operating activities | (2,539,452 | ) | (1,474,073 | ) | ||||
Cash flows from investing activities: | ||||||||
Acquisition of fixed assets | (89,138 | ) | (85,211 | ) | ||||
Short term investments | (32,463 | ) | (3,021,931 | ) | ||||
Patent application costs | (120,652 | ) | (20,779 | ) | ||||
Net cash flows from investing activities | (242,253 | ) | (3,127,921 | ) | ||||
Cash flows from financing activities: | ||||||||
Sale of common stock | — | 35,000 | ||||||
Repayment of debt | — | |||||||
Net cash provided by financing activities | — | 35,000 | ||||||
Net effect of comprehensive income | 65,521 | 3,974 | ||||||
Net (decrease) increase in cash and cash equivalents | (2,716,184 | ) | (4,563,020 | ) | ||||
Cash and cash equivalents at period beginning | 7,520,056 | 11,182,147 | ||||||
Cash and cash equivalents at period end | $ | 4,803,872 | $ | 6,619,127 | ||||
Supplemental cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest paid | $ | — | $ | 19,224,00 | ||||
Income taxes paid | $ | — | $ | — | ||||
Table of Contents
CONSOLIDATED BALANCE SHEETS
As at October 31, 2006
(Unaudited — All figures in United States Dollars)
Consolidated | Consolidated | |||||||
31-Oct-06 | 30-Apr-06 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 15,122,548 | $ | 7,520,056 | ||||
Short-term Investments | 2,528,133 | 3,144,681 | ||||||
Accounts receivable | 929,026 | 60,350 | ||||||
Inventory | 281,207 | 146,715 | ||||||
Prepaids | 74,672 | 117,662 | ||||||
Investment tax credit receivable | 292,942 | 216,172 | ||||||
TOTAL CURRENT ASSETS | 19,228,528 | 11,205,646 | ||||||
Capital Assets | 801,280 | 785,358 | ||||||
Intangibles | 355,031 | 188,783 | ||||||
Goodwill | 10,700,000 | 10,700,000 | ||||||
TOTAL ASSETS | $ | 31,084,839 | $ | 22,879,787 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 2,037,554 | $ | 1,118,072 | ||||
Other current liabilities | 250,560 | 250,363 | ||||||
TOTAL CURRENT LIABILITIES | 2,288,114 | 1,368,435 | ||||||
Convertible Debt | 8,801,143 | |||||||
Stockholders’ Equity | ||||||||
Common stock | 119,714 | 119,714 | ||||||
Additional paid-in capital | 41,492,967 | 38,172,028 | ||||||
Accumulated deficit | (20,952,507 | ) | (16,802,830 | ) | ||||
Accumulated other comprehensive loss | (664,592 | ) | 22,440 | |||||
19,995,582 | 21,511,352 | |||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 31,084,839 | $ | 22,879,787 | ||||
Table of Contents
Consolidated Statements of Operations
Three months ended October 31, 2006
(unaudited)
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||
31-Oct-06 | 31-Oct-05 | 31-Oet-06 | 31-Oct-05 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Revenues | $ | 606,292 | $ | — | $ | 979,127 | $ | 63,086 | ||||||||
Cost and Expenses: | ||||||||||||||||
Cost of revenues | 394,479 | — | 607,818 | 35,577 | ||||||||||||
Research and development | 1,053,695 | 499,260 | 1,833,415 | 981,888 | ||||||||||||
Selling and marketing | 689,113 | 654,865 | 1,306,802 | 1,187,801 | ||||||||||||
General and administrative | 673,873 | 563,564 | 1,460,160 | 1,133,803 | ||||||||||||
2,811,160 | 1,717,689 | 5,208,195 | 3,339,069 | |||||||||||||
Loss from operations | (2,204,868 | ) | (1,717,689 | ) | (4,229,068 | ) | (3,275,983 | ) | ||||||||
Finance Costs | ||||||||||||||||
Interest and other income, net | (26,053 | ) | 96,031 | 79,391 | 177,314 | |||||||||||
Loss for the period | $ | (2,230,921 | ) | $ | (1,621,658 | ) | $ | (4,149,677 | ) | $ | (3,098,669 | ) | ||||
Net loss per common share: | ||||||||||||||||
Basic | $ | 0.19 | $ | 0.14 | $ | 0.35 | $ | 0.28 | ||||||||
Basic common shares outstanding | 11,971,353 | 11,202,103 | 11,971,353 | 11,202,103 |
F - 47
Table of Contents
Consolidated Statements of Cash Flows
Six Months Ended | ||||||||
October 31, | ||||||||
2006 | 2005 | |||||||
(Unaudited) | ||||||||
Cash flows from operating activities | ||||||||
Net loss | (4,149,677 | ) | (3,098,669 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 165,169 | 98,713 | ||||||
Accrued interest | 29,834 | |||||||
Amortization of debt costs | 92,248 | — | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (868,666 | ) | 84,486 | |||||
Inventories | (134,492 | ) | (29,655 | ) | ||||
Prepaid expenses and other assets | 42,990 | (9,465 | ) | |||||
Other receivables | (76,770 | ) | 133,563 | |||||
Accounts payable and accrued expenses | 919,679 | (399,690 | ) | |||||
Net cash used in operating activities | (3,979,685 | ) | (3,220,717 | ) | ||||
Cash flows from investing activities: | ||||||||
Acquisition of fixed assets | (181,091 | ) | (210,840 | ) | ||||
Short term investments | 616,548 | (3,057,818 | ) | |||||
Patent application costs | (166,248 | ) | (50,722 | ) | ||||
Net cash flows from investing activities | 269,209 | (3,319,380 | ) | |||||
Cash flows from financing activities: | ||||||||
Sale of common stock | — | 35,000 | ||||||
Issuance of Convertible Debt | 12,000,000 | |||||||
Issuance costs | (930,931 | ) | — | |||||
Net cash provided by financing activities | 11,069,069 | 35,000 | ||||||
Net effect of foreign exchange | 243,899 | 59,355 | ||||||
Net (decrease) increase in cash and cash equivalents | 7,602,492 | (6,445,742 | ) | |||||
Cash and cash equivalents at period beginning | 7,520,056 | 11,182,147 | ||||||
Cash and cash equivalents at period end | $ | 15,122,548 | $ | 4,736,405 | ||||
Supplemental cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest paid | $ | — | $ | — | ||||
Income taxes paid | $ | — | $ | — | ||||
F - 48
Table of Contents
Appendix A | Amendment to Article Fourth of the Articles of Incorporation of JAG Media Holdings, Inc. | |||
Appendix B | Amendment to Article First of the Articles of Incorporation of JAG Media Holdings, Inc. | |||
Appendix C-1 | Merger Agreement dated as of December 27, 2005 by and among JAG Media Holdings, Inc., Cryptometrics Acquisition, Inc. and Cryptometrics, Inc. | |||
Exhibit A — Company Voting andLock-Up Agreement | ||||
Exhibit B — Certificate of Merger | ||||
Exhibit C — Affiliate Agreement | ||||
Appendix C-2 | Amendment to Merger Agreement, dated as of January 24, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer | |||
Appendix C-3 | Amendment to Merger Agreement, dated as of February 26, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer | |||
Appendix D | Section 262 of the Delaware General Corporation Law (Appraisal Rights) | |||
Appendix E | Form of Employment Agreement | |||
Exhibit A — Option Agreement | ||||
Exhibit B — Release of Claims Agreement |
Table of Contents
OF THE ARTICLES OF INCORPORATION OF JAG MEDIA
HAS BEEN AMENDED BY DELETING THE FOLLOWING LANGUAGE
Table of Contents
OF THE ARTICLES OF INCORPORATION OF JAG MEDIA
HAS BEEN AMENDED BY DELETING THE FOLLOWING LANGUAGE
Table of Contents
Table of Contents
Page | ||||||
ARTICLE I | THE MERGER | 2 | ||||
1.1 | The Merger | 2 | ||||
1.2 | Closing; Effective Time | 2 | ||||
1.3 | Effects of the Merger | 2 | ||||
1.4 | Post-Merger Actions | 3 | ||||
1.5 | Further Assurances | 3 | ||||
ARTICLE II | EFFECT ON CAPITAL STOCK; SURRENDER OF CERTIFICATES AND PAYMENT | 3 | ||||
2.1 | Effect on Capital Stock | 3 | ||||
2.2 | Exchange of Company Shares and Surrender of Stock Certificates | 5 | ||||
2.3 | Distributions with Respect to Unexchanged Company Shares | 7 | ||||
2.4 | No Further Ownership Rights in Company Common Stock | 7 | ||||
2.5 | Lost, Stolen or Destroyed Certificates | 7 | ||||
2.6 | Dissenters’ Rights | 8 | ||||
2.7 | Withholding | 8 | ||||
2.8 | Company Stock Options | 8 | ||||
2.9 | Company Warrants | 9 | ||||
2.10 | Company Exchangeable Shares | 9 | ||||
ARTICLE III | REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDERS | 10 | ||||
3.1 | Principal Stockholders’ Authority Relative to the Operative Agreements | 10 | ||||
3.2 | Execution; Enforceability | 10 | ||||
3.3 | Title to Securities of Company | 10 | ||||
3.4 | No Conflicts | 10 | ||||
3.5 | Governmental Approvals and Filings | 11 | ||||
3.6 | Legal Proceedings | 11 | ||||
3.7 | Other Negotiations; Brokers | 11 | ||||
ARTICLE IV | REPRESENTATIONS AND WARRANTIES OF COMPANY | 12 | ||||
4.1 | Organization and Good Standing | 12 | ||||
4.2 | Capitalization | 12 |
i
Table of Contents
(Continued)
Page | ||||||
4.3 | Subsidiaries of Company | 14 | ||||
4.4 | Authority and Enforceability | 15 | ||||
4.5 | No Conflict; Authorizations | 15 | ||||
4.6 | Financial Statements | 16 | ||||
4.7 | No Undisclosed Liabilities | 17 | ||||
4.8 | Taxes | 17 | ||||
4.9 | Compliance with Law | 20 | ||||
4.10 | Authorizations | 20 | ||||
4.11 | Title to Personal Properties | 21 | ||||
4.12 | Condition of Tangible Assets | 21 | ||||
4.13 | Real Property | 21 | ||||
4.14 | Intellectual Property | 22 | ||||
4.15 | Absence of Certain Changes or Events | 26 | ||||
4.16 | Contracts | 27 | ||||
4.17 | Litigation | 29 | ||||
4.18 | Employee Benefits | 29 | ||||
4.19 | Labor and Employment Matters | 32 | ||||
4.20 | Environmental | 33 | ||||
4.21 | Related Party Transactions | 36 | ||||
4.22 | Insurance | 36 | ||||
4.23 | Brokers or Finders | 36 | ||||
4.24 | No Illegal Payments | 36 | ||||
4.25 | Information Supplied | 37 | ||||
4.26 | Antitakeover Statutes | 37 | ||||
4.27 | Compliance with Securities Laws | 37 | ||||
ARTICLE V | REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB | 37 | ||||
5.1 | Organization and Good Standing | 37 | ||||
5.2 | Capitalization | 38 | ||||
5.3 | Subsidiaries of Parent | 39 |
Table of Contents
(Continued)
Page | ||||||
5.4 | Authority and Enforceability | 40 | ||||
5.5 | No Conflicts; Authorizations | 41 | ||||
5.6 | SEC Filings; Financial Statements | 41 | ||||
5.7 | Taxes | 42 | ||||
5.8 | Compliance with Law | 44 | ||||
5.9 | Authorizations | 44 | ||||
5.10 | Title to Personal Properties | 45 | ||||
5.11 | Condition of Tangible Assets | 45 | ||||
5.12 | Real Property | 45 | ||||
5.13 | Intellectual Property | 45 | ||||
5.14 | Absence of Certain Changes or Events | 48 | ||||
5.15 | Contracts | 49 | ||||
5.16 | Legal Proceedings | 51 | ||||
5.17 | Employee Benefits | 51 | ||||
5.18 | Labor and Employment Matters | 54 | ||||
5.19 | Environmental | 54 | ||||
5.20 | Interim Operations of Merger Sub | 55 | ||||
5.21 | Related Party Transactions | 56 | ||||
5.22 | Insurance | 56 | ||||
5.23 | Brokers or Finders | 56 | ||||
5.24 | No Illegal Payments | 56 | ||||
5.25 | Information Supplied | 56 | ||||
5.26 | Antitakeover Statutes | 57 | ||||
5.27 | Compliance with Securities Laws | 57 | ||||
5.28 | Inclusion of Subsidiaries | 57 | ||||
ARTICLE VI | COVENANTS RELATING TO CONDUCT OF BUSINESS | 57 | ||||
6.1 | Conduct of Business by Company | 58 | ||||
6.2 | Conduct of Business by Parent | 60 | ||||
6.3 | Exclusivity | 62 | ||||
ARTICLE VII | ADDITIONAL AGREEMENTS | 65 |
Table of Contents
(Continued)
Page | ||||||
7.1 | Proxy Statement; Registration Statement | 65 | ||||
7.2 | Other Filings and Disclosure Schedules | 67 | ||||
7.3 | Meeting of Stockholders | 67 | ||||
7.4 | Access to Information | 68 | ||||
7.5 | Consent of Company Stockholders | 68 | ||||
7.6 | Regulatory Approvals | 68 | ||||
7.7 | Public Announcements | 69 | ||||
7.8 | Indemnification | 69 | ||||
7.9 | Tax Free Reorganization | 70 | ||||
7.10 | Listing | 70 | ||||
7.11 | Affiliates | 70 | ||||
7.12 | Consents | 70 | ||||
7.13 | Notification of Certain Matters | 71 | ||||
7.14 | Conveyance Taxes | 71 | ||||
7.15 | Maintenance of Registration Statements | 71 | ||||
7.16 | Termination Prior to Effective Time | 71 | ||||
7.17 | Further Assurances | 72 | ||||
ARTICLE VIII | CONDITIONS TO MERGER | 72 | ||||
8.1 | Conditions to Each Party’s Obligation to Effect the Merger | 72 | ||||
8.2 | Conditions to Obligations of Parent and Merger Sub to Effect the | |||||
Merger | 72 | |||||
8.3 | Conditions to Obligation of Company to Effect the Merger | 73 | ||||
ARTICLE IX | TERMINATION | 74 | ||||
9.1 | Termination | 74 | ||||
9.2 | Effect of Termination | 76 | ||||
9.3 | Remedies | 76 | ||||
ARTICLE X | MISCELLANEOUS | 76 | ||||
10.1 | Notices | 76 | ||||
10.2 | Survival | 77 | ||||
10.3 | Amendments and Waivers | 77 |
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10.4 | Fees and Expenses | 78 | ||||
10.5 | Successors and Assigns | 78 | ||||
10.6 | Governing Law | 78 | ||||
10.7 | Consent to Jurisdiction | 78 | ||||
10.8 | Counterparts | 79 | ||||
10.9 | Third Party Beneficiaries | 79 | ||||
10.10 | Entire Agreement | 79 | ||||
10.11 | Captions | 79 | ||||
10.12 | Severability | 80 | ||||
10.13 | Specific Performance | 80 | ||||
ARTICLE XI | DEFINITIONS | 80 | ||||
11.1 | Definitions | 80 | ||||
11.2 | Other Defined Terms | 82 | ||||
11.3 | Interpretation | 85 | ||||
Exhibits: | ||||||
Exhibit A | Company Voting and Lock Up Agreement | |||||
Exhibit B | Certificate of Merger | |||||
Exhibit C | Affiliate Agreement | |||||
Schedules: | ||||||
Parent Disclosure Schedule | ||||||
Company Disclosure Schedule |
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6865 SW 18th Street, Suite B13
Boca Raton, Florida 33433
Attn: Thomas J. Mazzarisi
Facsimile: (561) 892-0821
101 Park Avenue
New York, New York 10178
Attn: W. Preston Tollinger, Jr., Esq.
Facsimile: (212) 309-6001
73 Main Street
Tuckahoe, NY 10707
Attn: Robert Barra
Facsimile: (914) 337-9754
1 North Broadway, Suite 800
White Plains, New York 10543
Attn: Michael Stolzar, Esq.
Facsimile: (914) 682-0387
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Acquisition Transaction | 6.3 | (a) | ||
Action | 4.17 | |||
Affiliate Agreement | 2.2 | (h) | ||
Agent | 6.3 | (a) | ||
Agreement | Preface | |||
Audited Financial Statements | 4.6 | (a) | ||
Balance Sheet | 4.6 | (b) | ||
Balance Sheet Date | 4.6 | (b) | ||
Benefit Plan | 4.18 | (a) | ||
CERCLA | 4.20(a)(iv) | |||
Certificates | 2.2 | (b) | ||
Change of Recommendation | 6.3 | (c) | ||
Charter Documents | 4.1 | |||
Closing | 1.2 | |||
Closing Date | 1.2 | |||
Code | Recitals | |||
Company | Preface | |||
Company Benefit Plan | 4.18 | (a) | ||
Company Broker Fee | 4.23 | |||
Company Common Stock | 2.1 | |||
Company Consents | 4.5 | (a) | ||
Company Disclosure Schedule | Preamble Article IV | |||
Company ERISA Affiliate | 4.18 | (a) | ||
Company Exchangeable Share | 2.10 | |||
Company Foreign Plans | 4.18 | (r) | ||
Company In-Bound Licenses | 4.14 | (c) | ||
Company Intellectual Property | 4.14 | (f) | ||
Company Lease | 4.13 | (c) | ||
Company Leased Real Property | 4.13 | (a) | ||
Company Material Contracts | 4.16 | (b) | ||
Company Minor Contracts | 4.16 | (e) | ||
Company Out-Bound Licenses | 4.14 | (d) | ||
Company Owned Intellectual Property | 4.14 | (b) | ||
Company Owned Real Property | 4.13 | (a) | ||
Company Owned Software | 4.14 | (n) | ||
Company Pension Plan | 4.18 | (b) |
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Company Policies | 4.22 | |||
Company Registered Items | 4.14(g) | |||
Company Share | 2.1(a) | |||
Company Stockholder | 2.1 | |||
Company Stockholder Approval | 4.4(a) | |||
Company Stock Option | 2.8 | |||
Company Lock-Up and Voting Agreements | Recitals | |||
Company Warrant | 2.9 | |||
Confidentiality Agreement | 7.5 | |||
Constituent Corporations | 1.1 | |||
Containment | 4.14 | (n)(v) | ||
Copyrights | 4.14 | (a)(v) | ||
DGCL | 1.1 | |||
Disabling Code | 4.14 | (n)(v) | ||
Dissenting Shares | 2.6(a) | |||
Effective Time | 1.2 | |||
Environment | 4.20(a)(i) | |||
Environmental Action | 4.20(a)(ii) | |||
Environmental Clean-Up Site | 4.20(a)(iii) | |||
Environmental Laws | 4.20(a)(iv) | |||
Environmental Liabilities | 4.20 | (a)(v) | ||
Environmental Permit | 4.20(a)(vi) | |||
ERISA | 4.18(a) | |||
Exchange Act | 5.5(b) | |||
Exchange Agent | 2.2(a) | |||
Exchange Fund | 2.2(a) | |||
Exchange Multiple | 2.1(a) | |||
Financial Statements | 4.6(a) | |||
Form S-4 Registration Statement | 3.5(b) | |||
GAAP | 4.6(b) | |||
Hazardous Substances | 4.20(a)(vii) | |||
HSR Act | 4.5(b) | |||
Indemnified Parties | 7.8 | |||
Intellectual Property | 4.14(a) | |||
Intellectual Property Rights | 4.14 | (a)(v) | ||
Interim Balance Sheet | 4.6(b) | |||
Interim Balance Sheet Date | 4.6(b) | |||
Interim Financial Statements | 4.6(a) |
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Liabilities | 4.7 | ||||
Liens | 3.3 | ||||
LTIP | 7.15 | ||||
Marks | 4.14 | (a)(v) | |||
Merger | 1.1 | ||||
Merger Consideration | 2.1(a) | ||||
Merger Sub | Preface | ||||
Merger Sub Common Stock | 5.2(b) | ||||
Notice Period | 6.3(c)(iii) | ||||
Other Antitrust Laws | 4.5(b) | ||||
Other Company Purchase Rights | 4.2(d) | ||||
Other Parent Purchase Rights | 5.2(d) | ||||
Parent | Preface | ||||
Parent Authorized Name Change | 5.4 | ||||
Parent Authorized Stock Increase | 5.4 | ||||
Parent Benefit Plan | 5.17(a) | ||||
Parent Broker | 5.23 | ||||
Parent Broker Fee | 5.23 | ||||
Parent Common Stock | 2.1 | ||||
Parent Consents | 5.5(a) | ||||
Parent Disclosure Schedule | Preamble Article V | ||||
Parent ERISA Affiliate | 5.17(a) | ||||
Parent Foreign Plans | 5.17(r) | ||||
Parent Intellectual Property | 5.13(e) | ||||
Parent In-Bound Licenses | 5.13(b) | ||||
Parent Lease | 5.12(c) | ||||
Parent and Subsidiary Leased Real Property | 5.12(a) | ||||
Parent Material Contracts | 5.15(b) | ||||
Parent Minor Contracts | 5.15(e) | ||||
Parent Out-Bound Licenses | 5.13)c) | ||||
Parent Owned Intellectual Property | 5.13(a) | ||||
Parent and Subsidiary Owned Real Property | 5.12(a) | ||||
Parent Pension Plan | 5.17(b) | ||||
Parent Policies | 5.22 | ||||
Parent Preferred Stock | 5.2(a) | ||||
Parent Registered Items | 5.13(f) | ||||
Parent SEC Reports | 5.6(a) | ||||
Parent Series 2 Class B Common Stock | 5.2(a) |
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Parent Series 3 Class B Common Stock | 5.2(a) | |||
Parent Stockholder Approval | 5.4 | |||
Parent Stockholders’ Meeting | 5.4 | |||
Parent Stock Options | 5.14(d) | |||
Patents | 4.14 | (a)(v) | ||
PCBs | 4.20(i) | |||
Permitted Liens | 4.11(a) | |||
Principal Stockholders | Recitals | |||
Proprietary Information | 4.14 | (a)(i) | ||
Proxy Statement | 5.25 | |||
Public Software | 4.14(n)(vi) | |||
RCRA | 4.20(a)(iv) | |||
Release | 4.20(a)(viii) | |||
Replacement Option | 2.8 | |||
Replacement Warrant | 2.9 | |||
Representatives | 7.4 | |||
S-8 Registration Statement | 7.15 | |||
SEC | 3.5(b) | |||
Securities Act | 2.2(h) | |||
Software | 4.14(a)(iv) | |||
Superior Proposal | 6.3(b) | |||
Surviving Corporation | 1.1 | |||
Systems | 4.14 | (n)(v) | ||
Tax | 4.8 | (a)(i) | ||
Taxing Authority | 4.8(a)(iii) | |||
Tax Returns | 4.8(a)(ii) | |||
Third Party Proposal | 6.3(a) | |||
Outstanding Company Common Stock | 2.1 | |||
Outstanding Company Common Share | 2.1 | |||
WARN Act | 4.19(d) |
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By: | /s/ Thomas J. Mazzarisi |
By: | /s/ Thomas J. Mazzarisi |
By: | /s/ Robert Barra |
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6865 SW 18th Street, Suite B13
Boca Raton, Florida 33433
73 Main Street Tuckahoe, NY 10707 Facsimile:(914) 337-9754
1 North Broadway, Suite 800
White Plains, New York 10543
Attn: Michael Stolzar, Esq.
Facsimile:914-682-0387
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By: |
Title: |
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OF
CRYPTOMETRICS, INC.
AND
CRYPTOMETRICS ACQUISITION, INC.
Name | Jurisdiction of Incorporation | |
Cryptometrics, Inc. | Delaware | |
Cryptometrics Acquisition, Inc. | Delaware |
By: |
Title: | Co-Chief Executive Officer |
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JAG Media Holdings, Inc.
6865 S.W. 18th Street, Suite B13
Boca Raton, FL 33433
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Sincerely yours, | ||
JAG MEDIA HOLDINGS, INC. | AGREED AND ACCEPTED: CRYPTOMETRICS ACQUISITION, INC. | |
By: /s/ Thomas J. Mazzarisi Name: Thomas J. Mazzarisi Title: Chairman & CEO Date: January 25, 2007 | By: /s/ Thomas J. Mazzarisi Name: Thomas J. Mazzarisi Title: President Date: January 25, 2007 | |
AGREED AND ACCEPTED: CRYPTOMETRICS, INC. | The undersigned agrees to act as ‘‘Escrow Agent” pursuant to the provisions of paragraph 10 above | |
KARLEN & STOLZAR, LLP | ||
By: /s/ Robert Barra Name: Robert Barra Title: Co-CEO Date: January 26, 2007 | By: /s/ Michael I. Stolzar Name: Michael I. Stolzar Title: Partner Date: January 26, 2007 | |
The undersigned are signing this agreement only with respect to their obligations set forth in paragraph 12 above | ||
/s/ Robert Barra Dated: January 26, 2007 | /s/ Thomas J. Mazzarisi | |
/s/ Michael Vitale Dated: January 26, 2007 | /s/ Stephen J. Schoepfer |
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Attention: | Thomas J. Mazzarisi Chairman & CEO |
Re: | Letter Agreement dated January 24, 2007 Among JAG Media Holdings, Inc. (“JAG Media”), Cryptometrics, Inc. (“Cryptometrics”), Cryptometrics Acquisition, Inc., Robert Barra, Michael Vitale and Karlen & Stolzar, LLP, as escrow agent thereunder (“Escrow Agent”), which amended various terms of the Agreement and Plan of Merger Among JAG Media, Cryptometrics and Cryptometrics Acquisition, Inc. dated December 27, 2005 (“Amendment”) |
CRYPTOMETRICS, INC.
By: |
Title: | Co-CEO |
(Fax:866.297.1072/E-Mail: steve@jagnotes.com)
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JAG MEDIA HOLDINGS, INC.
6865 S.W. 18th Street, Suite B13
Boca Raton, FL 33433
Re: | Agreement Amending Merger Agreement Among JAG Media Holdings, Inc. (“JAG Media”), Cryptometrics Acquisition, Inc. (“Cryptometrics Acquisition”), Cryptometrics, Inc. (“Cryptometrics”), Robert Barra, Michael Vitale, Karlen & Stolzar dated as of January 24, 2007 (“Merger Agreement Amendment”) |
By: | /s/ Thomas J. Mazzarisi |
Title: | Chairman & CEO |
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CRYPTOMETRICS, INC.
By: | /s/ Robert Barra |
Title: | Co-CEO |
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199 Read Avenue
Crestwood, NY 10707
Attn: Co-CEO other than Executives
the Company.
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, Optionee | ||
Attest: | Cryptometrics, Inc., Grantor | |
By: _ _ | By: _ _ | |
Secretary |
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CRYPTOMETRICS, INC. | ||
Dated: , | By an Individual | |
Dated: , |
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ITEM 20. | INDEMNIFICATION OF DIRECTORS AND OFFICERS |
ITEM 21. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
Exhibit | Description | |||
2 | .1 | Agreement and Plan of Reorganization dated March 16, 1999 between Professional Perceptions, Inc. (now known as JagNotes.com Inc.), Harold Kaufman, Jr., an officer, director and principal stockholder thereof, NewJag, Inc., and the stockholders of NewJag, Inc.(1) | ||
2 | .2 | Agreement and Plan of Merger dated as of July 29, 1999 by and among JagNotes, Inc., a New Jersey corporation, and JagNotes.com, Inc., a Nevada corporation(2) |
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Exhibit | Description | |||
3 | .1 | Composite Amended and Restated Articles of Incorporation of JAG Media Holdings, Inc.(18) | ||
3 | .2 | Bylaws of Registrant(2) | ||
3 | .3 | Amendment to Bylaws of Registrant(6) | ||
3 | .4 | Amendment to Bylaws of Registrant(12) | ||
4 | .1 | Form of Common Stock Certificate(15) | ||
4 | .2 | Form of Series 2 Class B Stock Certificate(15) | ||
4 | .3 | Promissory Note, dated January 25, 2005, by and between JAG Media Holdings, Inc. and Cornell Capital Partners, LP(11) | ||
4 | .4 | Letter Agreement, dated August 5, 2005, extending maturity date of Promissory Note dated January 25, 2005 by and between JAG Media Holdings, Inc. and Cornell Capital Partners, LP(14) | ||
4 | .5 | Securities Purchase Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and Cornell Capital Partners, LP(17) | ||
4 | .6 | $1,900,000 Secured Convertible Debenture issued to Cornell Capital Partners, LP effective May 25, 2006(17) | ||
4 | .7 | Security Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and Cornell Capital Partners, LP(17) | ||
4 | .8 | Security Agreement, effective May 25, 2006, by and between JAG Media LLC and Cornell Capital Partners, LP(17) | ||
4 | .9 | $1,250,000 Secured Convertible Debenture issued to Cornell Capital Partners, LP effective May 25, 2006(17) | ||
4 | .10 | WarrantNo. CCP-1 for 2,000,000 shares of common stock issued to Cornell Capital Partners, LP effective May 25, 2006(17) | ||
4 | .11 | WarrantNo. CCP-2 for 2,000,000 shares of common stock issued to Cornell Capital Partners, LP effective May 25, 2006(17) | ||
4 | .12 | WarrantNo. CCP-3 for 2,000,000 shares of common stock issued to Cornell Capital Partners, LP effective May 25, 2006(17) | ||
4 | .13 | WarrantNo. CCP-4 for 3,000,000 shares of common stock issued to Cornell Capital Partners, LP effective May 25, 2006(17) | ||
4 | .14 | WarrantNo. CCP-5 for 3,000,000 shares of common stock issued to Cornell Capital Partners, LP effective May 25, 2006(17) | ||
4 | .15 | $1,000,000 Secured Convertible Debenture issued to Cornell Capital Partners, LP effective May 31, 2006(17) | ||
5 | .1* | Opinion of Jones Vargas | ||
8 | .1* | Form of Tax Opinion of Morgan, Lewis & Bockius LLP | ||
10 | .1 | JAG Media Holdings, Inc. 1999 Long Term Incentive Plan, as amended(4) | ||
10 | .2 | Amended and Restated Employment Agreement, dated August 31, 2001, by and between Thomas J. Mazzarisi and Registrant(3) | ||
10 | .3 | Amended and Restated Employment Agreement, dated August 31, 2001, by and between Stephen J. Schoepfer and Registrant(3) | ||
10 | .4 | Amendment to Amended and Restated Employment Agreement, dated as of November 3, 2005, by and between Registrant and Thomas J. Mazzarisi(15) | ||
10 | .5 | Amendment to Amended and Restated Employment Agreement, dated as of November 3, 2005, by and between Registrant and Stephen J. Schoepfer(15) | ||
10 | .6 | Consulting Agreement, dated June 12, 2002, between JAG Media Holdings, Inc. and Walsh Organization, Inc.(8) | ||
10 | .7 | Power of Attorney and Contingent Fee Contract, dated June 14, 2002, among JAG Media Holdings, Inc., Gary Valinoti and the Law Firm of O’Quinn, Laminack & Pirtle(8) |
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Exhibit | Description | |||
10 | .8 | Subscription Agreement, dated December 10, 2002, between JAG Media Holdings, Inc. and Bay Point Investment Partners LLC(5) | ||
10 | .9 | Placement Agent Agreement, dated December 10, 2002, between JAG Media Holdings, Inc. and RMC 1 Capital Markets, Inc.(5) | ||
10 | .10 | Placement Agent Agreement, dated as of June 19, 2003, between JAG Media Holdings, Inc. and RMC 1 Capital Markets, Inc., as amended on August 12, 2003(7) | ||
10 | .11 | Subscription Agreement, dated as of June 19, 2003, between JAG Media Holdings, Inc. and Bay Point Investment Partners LLC, as amended on August 12, 2003(7) | ||
10 | .12 | Subscription Agreement, dated as of September 25, 2003, between JAG Media Holdings, Inc. and Kuekenhof Equity Fund L.P.(8) | ||
10 | .13 | Finder’s Fee Agreement, dated as of January 5, 2004, between JAG Media Holdings, Inc. and Flow Capital Advisors, Inc.(9) | ||
10 | .14 | Business Sale Agreement dated November 24, 2004, by and among TComm Limited, TComm (UK) Limited and JAG Media Holdings, Inc.(10) | ||
10 | .15 | Employment Agreement, dated November 24, 2004, by and between JAG Media Holdings, Inc. and Stuart McClean(10) | ||
10 | .16 | Employment Agreement, dated November 24, 2004, by and between JAG Media Holdings, Inc. and Joanne McClean(10) | ||
10 | .17 | Employment Agreement, dated November 24, 2004, by and between JAG Media Holdings, Inc. and Craig Hardcastle(10) | ||
10 | .18 | Employment Agreement, dated November 24, 2004, by and between JAG Media Holdings, Inc. and Ian Hardcastle(10) | ||
10 | .19 | Company Voting and Lock Up Agreement dated as of December 27, 2005 by and among JAG Media Holdings, Inc., Robert Barra and Michael Vitale(16) | ||
10 | .20 | Letter Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and Cornell Capital Partners, LP converting $2,000,000 Promissory Note dated January 25, 2005, as amended August 5, 2005, made by JAG Media Holdings, Inc. for the benefit of Cornell Capital Partners, LP(17) | ||
10 | .21 | Investor Registration Rights Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and Cornell Capital Partners, LP(17) | ||
10 | .22 | Letter Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and Cornell Capital Partners, LP terminating Equity Line Agreement Purchase Agreement by and between JAG Media Holdings, Inc. and Cornell Capital Partners, LP dated as of April 9, 2002, as amended on July 8, 2004 and July 21, 2004(17) | ||
10 | .23 | Irrevocable Transfer Agent Instructions, effective May 25, 2006, by and among JAG Media Holdings, Inc., Transfer Online, Inc. and Cornell Capital Partners, LP(17) | ||
10 | .24 | Letter Agreement, dated January 24, 2007, by and among JAG Media Holdings, Inc., Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(19) | ||
10 | .25 | Letter Agreement, dated February 26, 2007, by and among JAG Media Holdings, Inc., Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(20) | ||
21 | .1 | Subsidiaries of JAG Media(20) | ||
23 | .1* | Consent of J.H. Cohn LLP | ||
23 | .2* | Consent of Seligson & Giannattasio, LLP | ||
23 | .3 | Consent of Jones Vargas (Included in Opinion of Jones Vargas) | ||
23 | .4* | Consent of Morgan Lewis | ||
99 | .1 | Articles of Merger of JagNotes, Inc. into JagNotes.com, Inc. dated July 29, 1999 (including Certificate of Correction related thereto)(2) | ||
99 | .2 | Letter of Intent, dated September 9, 2005, by and among the Cryptometrics, Inc. and JAG Media Holdings, Inc.(13) |
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Exhibit | Description | |||
99 | .3 | Agreement and Plan of Merger, dated as of December 27, 2005, by and among JAG Media Holdings, Inc., Cryptometrics Acquisition, Inc., Cryptometrics, Inc. and the stockholders named therein (16) | ||
99 | .4 | Letter Agreement, dated as of January 24, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer amending Agreement and Plan of Merger,(19) | ||
99 | .5* | Letter Agreement, dated as of February 26, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Robert Barra, Michael Vitale, Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Thomas J. Mazzarisi and Stephen J. Schoepfer amending Agreement and Plan of Merger(20) |
* | Filed herewith. | |
(1) | Previously filed as an exhibit to our Registration Statement onForm SB-2 filed on July 30, 1999. | |
(2) | Previously filed as an exhibit to Amendment No. 1 to our Registration Statement onForm SB-2 filed on September 30, 1999. | |
(3) | Previously filed as an exhibit to Amendment No. 1 to our Registration Statement onForm SB-2 filed on September 26, 2001. | |
(4) | Previously filed as an exhibit to our Registration Statement onForm S-8 filed on May 1, 2002. | |
(5) | Previously filed as an exhibit to our Registration Statement onForm SB-2 filed on January 9, 2003. | |
(6) | Previously filed as an exhibit to our Current Report onForm 8-K filed on January 27, 2003. | |
(7) | Previously filed as an exhibit to our Current Report onForm 8-K filed on August 13, 2003. | |
(8) | Previously filed as an exhibit to our Annual Report onForm 10-KSB filed on November 13, 2003. | |
(9) | Previously filed as an exhibit to our Current Report onForm 8-K filed on January 20, 2004. | |
(10) | Previously filed as an exhibit to our Quarterly Report onForm 10-QSB filed on December 20, 2004. | |
(11) | Previously filed as an exhibit to our Current Report onForm 8-K filed on February 3, 2005. | |
(12) | Previously filed as an exhibit to our Current Report onForm 8-K filed on March 7, 2005. | |
(13) | Previously filed as an exhibit to our Current Report onForm 8-K filed on September 14, 2005. | |
(14) | Previously filed as an exhibit to our Current Report onForm 8-K filed on August 9, 2005. | |
(15) | Previously filed as an exhibit to our Annual Report onForm 10-KSB filed on November 8, 2005. | |
(16) | Previously filed as an exhibit to our Current Report onForm 8-K filed on December 30, 2005. | |
(17) | Previously filed as an exhibit to our Current Report onForm 8-K filed on June 1, 2006. | |
(18) | Previously filed as an exhibit to our Quarterly Report onForm 10-QSB filed on June 19, 2006. | |
(19) | Previously filed as an exhibit to our Current Report onForm 8-K filed on January 31, 2007. | |
(20) | Previously filed as an exhibit to our Annual Report onForm 10-KSB on March 5, 2007 |
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ITEM 22. | UNDERTAKINGS |
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By: | /s/ Thomas J. Mazzarisi |
Title: | Chairman of the Board and Chief |
Name | Title | Date | ||||
/s/ Thomas J. Mazzarisi Thomas J. Mazzarisi | Chairman of the Board, Chief Executive Officer & General Counsel | March 9, 2007 | ||||
/s/ Stephen J. Schoepfer Stephen J. Schoepfer | President, Chief Operating Officer, Chief Financial Officer Secretary & Director | March 9, 2007 |