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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 509 WHITE PLAINS, NEW YORK 10601 TEL: 914-949-4600 FAX: 914-931-7006 |
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• | The holders of 10,500 shares of Cryptometrics common stock with special subscription rights will be entitled to receive shares of JAG Media Common Stock with a fixed value, based on the post-merger opening price of such shares as shown on the Pink Sheets, equal to 125% of the $10 per share purchase price of their Cryptometrics common stock, for an aggregate of $131,250 fixed value of shares of JAG Media Common Stock. | |
• | The holders of 769,250 shares of Cryptometrics common stock with special subscription rights will be entitled to receive shares of JAG Media Common Stock with a fixed value, based on the post-merger opening price of such shares as shown on the Pink Sheets, equal to 200% of the $10 per share purchase price of their Cryptometrics common stock, for an aggregate of $15,385,000 fixed value of shares of JAG Media Common Stock. | |
• | All other holders of approximately 11,202,000 shares of Cryptometrics common stock including holders of exchangeable shares of its Canadian subsidiary, will be entitled to receive the remaining shares of JAG Media Common Stock pro rata to their shareholdings. Neither the value nor number of shares of JAG Media Common Stock to be received by such shareholders is determinable at this time. |
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HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF JAG MEDIA HOLDINGS, INC. AND SUBSIDIARIES | F-1 | |||||||
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF CRYPTOMETRICS, INC. AND SUBSIDARY | F-44 | |||||||
EX-23.4: CONSENT OF MORGAN,LEWIS & BOCKIUS LLP |
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Appendix A | Form of Written Consent of Stockholder(s) of Cryptometrics, Inc. in Lieu of Meeting | |||
Appendix B | Amendments to Article First and Article Fourth 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 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 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 C-4 | Amendment to Merger Agreement, dated April 2, 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-5 | Amendment to Merger Agreement, dated April 20, 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-6 | Amendment to Merger Agreement, dated May 11, 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-7 | Amendment to Merger Agreement, dated May 18, 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-8 | Amendment to Merger Agreement, dated June 15, 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-9 | Amendment to Merger Agreement, dated July 16, 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-10 | Amendment to Merger Agreement, dated August 16, 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-11 | Amendment to Merger Agreement, dated November 7, 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-12 | Amendment to Merger Agreement, dated February 6, 2008, 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, par value $0.001 per share, (“Cryptometrics Common Stock”) have agreed to approve the Merger Agreement without the need for a meeting by providing their written consents. The majority shareholders are Robert Barra and Michael A. Vitale, who each own 28.07% of the outstanding Cryptometrics Common Stock entitled to vote on the Merger Agreement. | |
Q: | IF I DECIDE NOT TO GIVE MY CONSENT TO THE MERGER, HOW WILL MY SHARES OF CRYPTOMETRICS COMMON STOCK BE AFFECTED? | |
A: | As the holders of a majority of the outstanding shares of Cryptometrics Common Stock entitled to vote have agreed to provide their written consents to authorize the Merger Agreement, the Merger may take place as scheduled regardless of whether or not you consent in writing. | |
Q: | HOW DO I PARTICIPATE IN THE CONSENT SOLICITATION? |
A: | If you are a Cryptometrics shareholder entitled to vote as of the close of business on March 4, 2008, you are requested to complete and sign the enclosed “Written Consent of Stockholder(s) of Cryptometrics, Inc. In Lieu of Meeting” as it relates to your Cryptometrics Common Stock and return it using thepre-addressed envelope provided to you. A form of such consent is also attached as Appendix A. |
Q: | WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I CONSENT TO THE MERGER? | |
A: | No. | |
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 carried out pursuant to the Merger Agreement (“Merger”) is fixed and will not be adjusted based upon changes in the value of those shares. | ||
Such shares of JAG Media Common Stock receivable by the holders of Cryptometrics Common Stock (including the Cryptometrics Exchange Shares) will represent approximately 87% of the outstanding shares of the merged companies after the Merger is consummated. | ||
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 779,750 shares of Cryptometrics Common Stock, as of April 30, 2007, by virtue of subscription agreements with Cryptometrics, will receive a greater or lesser number of a merger candidate’s shares (in this case JAG Media shares). They will be entitled to own shares of the merger candidate’s common stock (now JAG Media Common Stock) with an aggregate fixed value following the effectiveness of the Merger (based on the post-Merger opening price on the OTC Bulletin Board or Pink Sheets) of $15,516,250, equal to 200% (in the case of 769,250 shares of Cryptometrics Common Stock) or 125% (in the case of 10,500 shares of Cryptometrics Common Stock) of the original aggregate purchase price of their shares of Cryptometrics Common Stock under their subscription agreements, which in each case was $10.00 per share. The remaining number of shares of JAG Media Common Stock available to other stockholders of Cryptometrics will then be 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 |
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(including the Cryptometrics Exchange Shares) held by all of such other stockholders (including the holders of the Exchangeable Shares). Such other Cryptometrics stockholders will not know the amount or value of the JAG Media Common Stock that they will receive until after the Merger is consummated. | ||
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 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. Except as noted below, 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. It is possible that a portion of the JAG Media Common Stock received by Cryptometrics stockholders will be treated as a distribution received on their Cryptometrics shares, with such distribution being taxable as a dividend to the extent of Cryptometrics’s current or accumulated earnings and profits, as determined for United States federal income tax purposes, and thereafter as a return of basis to the extent thereof and then as gain on a deemed disposition of shares. JAG Media believes, based on information received from Cryptometrics, that Cryptometrics will not have current or accumulated earnings and profits for U.S. federal income tax purposes as of the Closing of 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. The currently scheduled closing date is March 27, 2008, but may be postponed. |
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 do not provide their written consent authorizing the Merger Agreement, do submit a written demand for an appraisal within 20 days after the date of the mailing of this Consent Solicitation/Prospectus and otherwise comply with the Delaware law procedures explained herein. Written Consents will be accepted prior to the Closing, but in any case no later than the end of such 20 day period. 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. |
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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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JULY 31, 2007, 2006, 2005, 2004 AND 2003
AND FOR THE THREE MONTHS ENDED OCTOBER 31, 2007 AND 2006
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | 3 Months Ended | 3 Months Ended | ||||||||||||||||||||||
July 31, 2007 | July 31, 2006 | July 31, 2005 | July 31, 2004 | July 31, 2003 | October 31, 2007 | October 31, 2006 | ||||||||||||||||||||||
(Restated) | ||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||
STATEMENT OF OPERATIONS DATA: | ||||||||||||||||||||||||||||
Revenues | $ | 203,286 | $ | 166,692 | $ | 239,651 | $ | 253,256 | $ | 385,881 | $ | 36,732 | $ | 43,331 | ||||||||||||||
Operating loss | $ | (1,720,875 | ) | $ | (2,347,319 | ) | $ | (1,701,616 | ) | $ | (1,984,479 | ) | $ | (2,539,917 | ) | $ | (412,412 | ) | $ | (272,431 | ) | |||||||
Net income (loss) | $ | (11,775,152 | ) | $ | (3,636,856 | ) | $ | (1,889,165 | ) | $ | (2,005,637 | ) | $ | (2,578,735 | ) | $ | 1,331,679 | $ | (247,652 | ) | ||||||||
Basic net income (loss) per common share | $ | (0.25 | ) | $ | (0.08 | ) | $ | (0.04 | ) | $ | (0.05 | ) | $ | (0.07 | ) | $ | 0.03 | $ | (0.01 | ) | ||||||||
Diluted net income (loss) per common share | $ | (0.25 | ) | $ | (0.08 | ) | $ | (0.04 | ) | $ | (0.05 | ) | $ | (0.07 | ) | $ | (0.01 | ) | $ | (0.01 | ) | |||||||
Basic weighted average number of common shares | 46,466,147 | 42,891,017 | 44,510,641 | 42,696,349 | 37,709,338 | 50,666,552 | 43,972,608 | |||||||||||||||||||||
Diluted weighted average number of common shares | 46,466,147 | 42,891,017 | 44,510,641 | 42,696,349 | 37,709,338 | 58,080,023 | 43,972,608 | |||||||||||||||||||||
BALANCE SHEET: | ||||||||||||||||||||||||||||
Total assets | $ | 134,349 | $ | 578,233 | $ | 838,102 | $ | 507,373 | $ | 537,654 | $ | 568,749 | $ | 278,423 | ||||||||||||||
Long-term obligations | $ | 2,607,180 | $ | 2,027,089 | $ | 1,927,149 | $ | — | $ | — | $ | 1,132,420 | $ | 2,196,187 | ||||||||||||||
Total liabilities | $ | 14,773,255 | $ | 5,073,969 | $ | 2,169,570 | $ | 104,695 | $ | 599,548 | $ | 11,203,510 | $ | 4,785,417 | ||||||||||||||
Working capital (deficit) | $ | (12,086,797 | ) | $ | (2,545,349 | ) | $ | 500,203 | $ | 367,392 | $ | (87,296 | ) | $ | (9,549,962 | ) | $ | (2,394,021 | ) | |||||||||
Stockholders’ equity (deficiency) | $ | (14,638,910 | ) | $ | (4,495,740 | ) | $ | (1,331,472 | ) | $ | 402,674 | $ | (61,808 | ) | $ | (10,634,765 | ) | $ | (4,506,998 | ) | ||||||||
CASH FLOWS: | ||||||||||||||||||||||||||||
Net cash used in operating activities | $ | (448,538 | ) | $ | (2,194,376 | ) | $ | (1,524,128 | ) | $ | (1,700,158 | ) | $ | (2,273,100 | ) | $ | (260,705 | ) | $ | (399,572 | ) | |||||||
Net cash used in investing activities | $ | (15,573 | ) | $ | (40,871 | ) | $ | (51,290 | ) | $ | (29,276 | ) | $ | — | $ | — | $ | (15,545 | ) | |||||||||
Net cash provided by financing activities | $ | 14,000 | $ | 2,025,000 | $ | 1,850,000 | $ | 1,692,500 | $ | 2,689,210 | $ | 398,200 | $ | — | ||||||||||||||
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Fiscal Year | October 31, | January 31, | April 30, | July 31, | ||||||||||||||||||||
Revenues | 2008 | $ | 36,732 | |||||||||||||||||||||
2007 (restated)* | $ | 43,331 | $ | 57,806 | $ | 63,171 | $ | 38,978 | ||||||||||||||||
2006 | $ | 40,023 | $ | 45,075 | $ | 58,267 | $ | 23,327 | ||||||||||||||||
Gross profit | 2008 | $ | 3,211 | |||||||||||||||||||||
2007 (restated)* | $ | 18,681 | $ | 40,324 | $ | 44,649 | $ | 26,585 | ||||||||||||||||
2006 | $ | 14,150 | $ | 26,878 | $ | 46,413 | $ | (1,856 | ) | |||||||||||||||
Operating loss | 2008 | $ | (412,412 | ) | ||||||||||||||||||||
2007 (restated)* | $ | (272,431 | ) | $ | (524,994 | ) | $ | (615,343 | ) | $ | (308,107 | ) | ||||||||||||
2006 | $ | (521,886 | ) | $ | (664,105 | ) | $ | (704,759 | ) | $ | (456,569 | ) | ||||||||||||
Net Income (loss) | 2008 | $ | 1,331,679 | |||||||||||||||||||||
2007 (restated)* | $ | (247,652 | ) | $ | (3,430,594 | ) | $ | (1,212,086 | ) | $ | (6,884,820 | ) | ||||||||||||
2006 | $ | (594,554 | ) | $ | (737,461 | ) | $ | (776,250 | ) | $ | (1,528,591 | ) | ||||||||||||
Basic income (loss) per common share | 2008 | $ | 0.03 | |||||||||||||||||||||
2007 (restated)* | $ | (0.01 | ) | $ | (0.07 | ) | $ | (0.03 | ) | $ | (0.14 | ) | ||||||||||||
2006 | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.03 | ) | ||||||||||||
Diluted loss per common share | 2008 | $ | (0.01 | ) | ||||||||||||||||||||
2007 (restated)* | $ | (0.01 | ) | $ | (0.07 | ) | $ | (0.03 | ) | $ | (0.14 | ) | ||||||||||||
2006 | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.03 | ) |
* | See Note 11 of the Notes to JAG Media’s audited consolidated financial statements. |
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Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Six Months Ended | Six Months Ended | ||||||||||||||||||||||
30-Apr-07 | 30-Apr-06 | 30-Apr-05 | 30-Apr-04 | 30-Apr-03 | 31-Oct-07 | 31-Oct-06 | ||||||||||||||||||||||
(As Restated) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||
Revenues | $ | 1,293,843 | $ | 215,661 | $ | 681,854 | $ | 242,022 | $ | — | $ | 71,742 | $ | 979,127 | ||||||||||||||
Operating loss | 9,438,016 | 7,336,817 | 5,604,090 | 1,879,598 | 838,544 | 4,574,177 | 4,229,068 | |||||||||||||||||||||
Net loss available to common stockholders | 9,593,733 | 6,929,981 | 5,501,379 | 1,853,591 | 839,502 | 5,250,396 | 4,149,677 | |||||||||||||||||||||
Weighted Average Shares Outstanding | 11,973,002 | 11,439,022 | 9,514,345 | 7,703,771 | 7,302,126 | 11,981,863 | 11,971,363 | |||||||||||||||||||||
Net loss per common share: Basic & Diluted | $ | 0.80 | $ | 0.61 | $ | 0.58 | $ | 0.24 | $ | 0.11 | $ | 0.44 | $ | 0.35 |
Balance Sheet | 30-Apr-07 | 30-Apr-06 | 30-Apr-05 | 30-Apr-04 | 30-Apr-03 | 31-Oct-07 | 31-Oct-06 | |||||||||||||||||||||
Total assets | $ | 25,347,147 | $ | 22,879,787 | $ | 23,254,571 | $ | 13,070,881 | $ | 632,695 | $ | 22,010,017 | $ | 31,084,839 | ||||||||||||||
Total liabilities | 13,204,077 | 1,368,435 | 1,819,947 | 2,183,532 | 1,286,570 | 14,875,867 | 11,089,257 | |||||||||||||||||||||
Working capital (deficiency) | (283,034 | ) | 9,837,211 | 10,069,216 | (741,848 | ) | (738,833 | ) | (8,487,933 | ) | 16,940,414 | |||||||||||||||||
Stockholders’ equity (deficiency) | 12,143,070 | 21,511,352 | 21,434,624 | 10,887,349 | (653,875 | ) | 7,134,150 | 19,995,582 |
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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, 2007, 2006, 2005, 2004 and 2003 and for the three months ended October 31, 2007; | |
• | the historical net loss and book value per share of Cryptometrics Common Stock for the fiscal years ended April 30, 2007 (as restated), 2006 and 2005 and; | |
• | pro forma loss before non-recurring charges 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 | Year Ended | Three Months Ended | |||||||||||||||||||||||
July 31, 2007 | July 31, 2006 | July 31, 2005 | July 31, 2004 | July 31, 2003 | October 31, 2007 | |||||||||||||||||||||||
Net income (loss) per Common Share | $ | (0.25 | ) | $ | (0.08 | ) | $ | (0.04 | ) | $ | (0.05 | ) | $ | (0.07 | ) | $ | 0.03 | |||||||||||
Book value per Common Share | $ | (0.30 | ) | $ | (0.10 | ) | $ | (0.03 | ) | $ | 0.01 | — | $ | (0.20 | ) |
Year Ended | Year Ended | Year Ended | Six Months Ended | Three Months Ended | ||||||||||||||||
April 30, 2007 | April 30, 2006 | April 30, 2005 | October 31, 2007 | July 31, 2007 | ||||||||||||||||
(as restated) | ||||||||||||||||||||
Net loss per Common Share | $ | (0.80 | ) | $ | (0.61 | ) | $ | (0.58 | ) | $ | (0.44 | ) | $ | (0.22 | ) | |||||
Book value per Common Share | $ | 1.01 | $ | 1.79 | $ | 2.45 | $ | 0.59 | $ | 0.79 |
Year Ended | Three Months Ended | |||||||
July 31, 2007 | October 31, 2007 | |||||||
(Unaudited) | (Unaudited) | |||||||
Loss before non-recurring charges per Common Share* | $ | (0.05 | ) | $ | (0.01 | ) | ||
Book value per Common Share | $ | (0.01 | ) | $ | (0.01 | ) |
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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; | |
• | 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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• | 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; | |
• | 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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• | a way for video generated from a variety of sources to be communicated to a centralized processing system for automated analysis; | |
• | a way to centrally manage remotely captured video, including recording the video in a variety of formats for later retrieval and playback; and |
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• | a way of viewing a single video stream or multiple streams on a single display screen, zooming in real-time to reveal greater detail and record annotations by simply drawing on the screen. |
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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 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. |
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• | 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. |
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• | 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. |
• | 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 |
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• | 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; 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; | |
• | related party transactions; | |
• | investigation and litigation; |
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• | 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 | |
• | 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 |
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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; | |
• | 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; |
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• | 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; | |
• | declare, set aside or pay any dividend or other distribution (whether in cash, stock or other property) with respect to any securities; |
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• | 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; | |
• | 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; |
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• | 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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• | AForm S-4 Registration Statement shall have become effective under the Securities Act prior to the mailing of the Proxy Statement and Consent Solicitation/Prospectus by each of JAG Media and Cryptometrics 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 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 with no liability except that JAG Media must issue 1,000,000 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, 2007
JAG | Pro Forma | |||||||||||||||
MEDIA | Cryptometrics | Adjustments | ||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 138,002 | $ | 2,541,202 | $ | 2,679,204 | ||||||||||
Short-term investments | 2,621,377 | 2,621,377 | ||||||||||||||
Accounts receivable, net | 53,600 | 185,250 | 238,850 | |||||||||||||
Inventories | 202,004 | 202,004 | ||||||||||||||
Income tax recoverable | 509,840 | 509,840 | ||||||||||||||
Deferred finance fees | 284,451 | 284,451 | ||||||||||||||
Other current assets | 329,526 | 43,810 | 373,336 | |||||||||||||
Total current assets | 521,128 | 6,387,934 | 6,909,062 | |||||||||||||
Equipment, net | 47,621 | 835,959 | 883,580 | |||||||||||||
Other assets: | ||||||||||||||||
Goodwill | 10,700,000 | 10,700,000 | ||||||||||||||
Intangible assets —in-process research and development acquired | $ | 23,283,516 | (a) | |||||||||||||
(23,283,516 | )(b) | |||||||||||||||
Investment in related party | 3,630,184 | 3,630,184 | ||||||||||||||
Patents | 455,940 | 455,940 | ||||||||||||||
Total Other Assets | — | 14,786,124 | 14,786,124 | |||||||||||||
Total | $ | 568,749 | $ | 22,010,017 | $ | — | $ | 22,578,766 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY DEFICIENCY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Credit line | $ | 1,443,883 | $ | 1,443,883 | ||||||||||||
Convertible debentures payable, net | 9,075,050 | 9,075,050 | ||||||||||||||
Accounts payable and accrued expenses | $ | 975,973 | 1,183,464 | 2,159,437 | ||||||||||||
Accrued compensation | 10,279 | 10,279 | ||||||||||||||
Deferred revenues | 25,817 | 25,817 | ||||||||||||||
Derivative liability | 9,069,300 | 3,163,191 | 396,053 | (c) | 12,628,544 | |||||||||||
Total current liabilities | 10,071,090 | 14,875,867 | 25,343,010 | |||||||||||||
Long term liabilities: | ||||||||||||||||
Convertible debentures payable, net | 1,132,420 | 1,132,420 | ||||||||||||||
Total liabilities | 11,203,510 | 14,875,867 | 396,053 | 26,475,430 | ||||||||||||
Mandatorily redeemable Class B common stock; par value $.00001 per share: | ||||||||||||||||
400,000 shares designated as Series 2; 381,749 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; 500,000,000 shares authorized; 53,103,617 shares issued and outstanding; 447,803,633 shares to be outstanding | 531 | 119,819 | $ | (115,872 | )(d) | 4,478 | ||||||||||
Additional paid-in capital | 48,478,693 | 38,276,923 | (36,110,654 | )(b)(c)(d) | 50,644,962 | |||||||||||
Accumulated deficit | (59,113,989 | ) | (31,646,959 | ) | 35,830,473 | (a)(b)(e) | (54,930,475 | ) | ||||||||
Accumulated other comprehensive income | 384,367 | 384,367 | ||||||||||||||
Total stockholders’ equity (deficiency) | (10,634,765 | ) | 7,134,150 | (396,053 | ) | (3,896,668 | ) | |||||||||
Total | $ | 568,749 | $ | 22,010,017 | $ | — | $ | 22,578,766 | ||||||||
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FOR THE THREE MONTHS ENDED OCTOBER 31, 2007
Pro Forma | ||||||||||||||||
JAG Media | Cryptometrics(2) | Adjustments | ||||||||||||||
Revenues | $ | 36,732 | $ | 34,458 | $ | 71,190 | ||||||||||
Operating expenses: | ||||||||||||||||
Cost of revenues | 4,621 | 16,372 | 20,993 | |||||||||||||
Research and development | 501,864 | 501,864 | ||||||||||||||
Marketing and selling expenses | 7,296 | 739,373 | 746,669 | |||||||||||||
General and administrative expenses | 437,227 | 1,052,989 | $ | 407,917 | (f)(g) | 1,898,133 | ||||||||||
Totals | 449,144 | 2,310,598 | 407,917 | 3,167,659 | ||||||||||||
Loss from operations | (412,412 | ) | (2,276,140 | ) | (407,917 | ) | (3,096,469 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Gain on change in value of derivative liability | 1,933,938 | 11,658 | (503,113 | )(h) | 1,442,483 | |||||||||||
Amortization of deferred finance costs | (155,155 | ) | (155,155 | ) | ||||||||||||
Other expense | (4,271 | ) | (4,271 | ) | ||||||||||||
Interest expense | (189,847 | ) | (230,404 | ) | (420,251 | ) | ||||||||||
Income (loss) before non-recurring charges(i) | $ | 1,331,679 | $ | (2,654,312 | ) | $ | (911,030 | ) | $ | (2,233,663 | ) | |||||
Basic income (loss) before non-recurring charges per share | $ | 0.03 | $ | (0.01 | ) | |||||||||||
Diluted loss before non-recurring charges per share | $ | (0.01 | ) | |||||||||||||
Basic weighted average common shares outstanding | 50,666,552 | 445,366,568 | ||||||||||||||
Diluted weighted average common shares outstanding | 58,080,023 | 445,366,568 | ||||||||||||||
(2) | Cryptometrics information is for the three months ended July 31, 2007 |
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FOR THE YEAR ENDED JULY 31, 2007
Pro Forma | ||||||||||||||||
JAG Media | Cryptometrics(2) | Adjustments | ||||||||||||||
Revenues | $ | 203,286 | $ | 1,293,843 | $ | 1,497,129 | ||||||||||
Operating expenses: | ||||||||||||||||
Cost of revenues | 73,047 | 818,808 | 891,855 | |||||||||||||
Research and development | 3,589,008 | 3,589,008 | ||||||||||||||
Marketing and selling expenses | 97,029 | 2,896,502 | 2,993,531 | |||||||||||||
General and administrative expenses | 1,754,085 | 3,427,541 | $ | 1,705,000 | (j)(k) | 6,886,626 | ||||||||||
Totals | 1,924,161 | 10,731,859 | 1,705,000 | 14,361,020 | ||||||||||||
Loss from operations | (1,720,875 | ) | (9,438,016 | ) | (1,705,000 | ) | (12,863,891 | ) | ||||||||
Other income (expense): | ||||||||||||||||
(Loss) gain on change in value of derivative liability | (8,524,813 | ) | 19,944 | 107,060 | (l) | (8,397,809 | ) | |||||||||
Amortization of deferred finance costs | (336,170 | ) | (336,170 | ) | ||||||||||||
Interest income | 54 | 177,798 | 177,852 | |||||||||||||
Other expense | (17,289 | ) | (17,289 | ) | ||||||||||||
Interest expense | (1,529,518 | ) | (1,529,518 | ) | ||||||||||||
Loss before non-recurring charges(m) | $ | (11,775,152 | ) | $ | (9,593,733 | ) | $ | (1,597,940 | ) | $ | (22,966,825 | ) | ||||
Basic and diluted loss before non-recurring charges per share | $ | (0.25 | ) | $ | (0.05 | ) | ||||||||||
Basic and diluted weighted average common shares outstanding | 46,466,147 | 441,166,163 | ||||||||||||||
(2) | Cryptometrics information is for the twelve months ended April 30, 2007 |
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PRO FORMA FINANCIAL STATEMENTS
Note 1: | Estimated Purchase Price and Shares to be Issued |
Number of shares of JAG Media Common Stock outstanding as of October 31, 2007 used as an estimate of the number of shares to be effectively purchased by Cryptometics as of the effective date of the acquisition | 53,104 | |||
Fair value per share applied to the number of shares effectively purchased by Cryptometrics — 11 day weighted average JAG Media stock price from the “Pink Sheets” for the period from September 7, 2005 to September 21, 2005, comprising the period of five trading days before and after the date of announcement of the terms of the acquisition agreement | $ | 0.23819 | ||
Estimated purchase price | $ | 12,649 | ||
Preliminary allocation of estimated excess purchase price: | ||||
Estimated purchase price | $ | 12,649 | ||
Excess of estimated fair value of the liabilities assumed over the fair value of the identifiable assets acquired (JAG Media’s stockholders’ deficiency) as of October 31, 2007 | 10,635 | |||
Excess purchase price preliminary allocated to intangible assets — in process research and development acquired | $ | 23,284 | ||
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PRO FORMA FINANCIAL STATEMENTS — (Continued)
Note 2: | Pro Forma Financial Statement Adjustments |
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PRO FORMA FINANCIAL STATEMENTS — (Continued)
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Number of | ||||||||||||||||||||||||
Shares Beneficially | Shares of JAG Media | Shares Beneficially | ||||||||||||||||||||||
Owned Before Offering | Common Stock Being Offered | Owned After Offering | ||||||||||||||||||||||
Name | Number | % | Number | % | Number | % | ||||||||||||||||||
Robert Barra | 96,687,500 | 21.8 | % | 96,687,500 | 21.8 | % | 0 | 0 | % | |||||||||||||||
Michael Vitale | 96,687,500 | 21.8 | % | 96,687,500 | 21.8 | % | 0 | 0 | % | |||||||||||||||
Joel Shaw | 26,198,835 | 5.9 | % | 26,198,835 | 5.9 | % | 0 | 0 | % |
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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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• | improve 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 | ||||||
YA Global Investments L.P. | 5,877,970 | (1) (2) | 9.99 | % | ||||
101 Hudson Street, Suite 3700 | ||||||||
Jersey City, New Jersey 0732 | ||||||||
Thomas Mazzarisi | 610,000 | (1) (3) | 1.03 | % | ||||
(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) (4) | * | |||||
(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) (3) (4) | 1.57 | % |
* | Less than one percent | |
(1) | Based on 58,508,856 shares of Common Stock issued and outstanding as of January 31, 2008 (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) | The beneficial owner owns warrants to purchase 11,300,000 shares of Common Stock, but by contract the warrants cannot be exercised if after exercise the beneficial owner would own more than 9.99% of the outstanding shares of Common Stock. Accordingly only 329,800 shares subject to such warrants are included. | |
(3) | Includes 500,000 shares of Common Stock issuable upon the exercise of stock options. | |
(4) | Includes 250,000 shares of Common Stock issuable upon the exercise of stock options. |
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AND RELATED MATTERS
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 | ||||||
Third Quarter, ending April 30, 2007 | 0.60 | 0.30 | ||||||
Fourth Quarter, ending July 31, 2007 | 1.45 | 0.44 | ||||||
Fiscal Year 2008 | ||||||||
First Quarter, ending October 31, 2007 | 1.12 | 0.32 | ||||||
Second Quarter ending January 31, 2008 | 1.12 | 0.62 |
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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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All other | ||||||||||||||||||||
Name and Principal Position | Fiscal Year | Salary | Bonus | Compensation | Total | |||||||||||||||
Thomas J. Mazzarisi, | 2007 | $ | 150,000 | — | — | $ | 150,000 | |||||||||||||
Chairman of the Board, Chief | 2006 | $ | 150,000 | — | — | $ | 150,000 | |||||||||||||
Executive Officer and General Counsel | 2005 | $ | 150,000 | — | — | $ | 150,000 | |||||||||||||
Stephen J. Schoepfer, | 2007 | $ | 150,000 | — | — | $ | 150,000 | |||||||||||||
President, Chief Operating Officer, | 2006 | $ | 150,000 | — | — | $ | 150,000 | |||||||||||||
Chief Financial Officer and Secretary | 2005 | $ | 150,000 | — | — | $ | 150,000 |
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Number of | Number of | |||||||||||||||
Securities | Securities | Option | ||||||||||||||
Underlying | Underlying | Exercise | ||||||||||||||
Unexercised | Unexercised | or Base | Option | |||||||||||||
Options | Options | Price per | Expiration | |||||||||||||
Name | Exercisable | Unexercisable | ($/Share) | Date | ||||||||||||
Thomas J. Mazzarisi | 500,000 | 0 | 0.02 | August 31, 2011 | ||||||||||||
Stephen J. Schoepfer | 250,000 | 0 | 0.02 | August 31, 2011 |
* | Not Applicable |
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) | 1,000,000 | $ | .02 | 5,000,000 | ||||||||
Individual Compensation Arrangements (not approved by security holders) | Not applicable | Not Applicable | Not Applicable | |||||||||
TOTAL | 1,000,000 | (2) | 5,000,000 | (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. |
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Year Ended July 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Revenues | $ | 203,286 | $ | 166,692 | $ | 239,651 | ||||||
Operating expenses: | ||||||||||||
Cost of revenues | 73,047 | 85,585 | 152,371 | |||||||||
Selling expenses | 97,029 | 46,637 | 43,441 | |||||||||
General and administrative expenses | 1,754,085 | 2,381,789 | 1,745,455 | |||||||||
Totals | 1,924,161 | 2,514,011 | 1,941,267 | |||||||||
Loss from operations | (1,720,875 | ) | (2,347,319 | ) | (1,701,616 | ) | ||||||
Other income (expense): | ||||||||||||
(Loss) gain on change in value of derivative liability | (8,524,813 | ) | 1,094,246 | — | ||||||||
Loss on extinguishment of promissory notes | — | (77,373 | ) | — | ||||||||
Writeoff of goodwill | — | — | (50,400 | ) | ||||||||
Interest income | 54 | 2,573 | 8,357 | |||||||||
Finance charge for derivative liability in excess of proceeds from convertible debentures | — | (1,795,005 | ) | — | ||||||||
Interest expense | (1,529,518 | ) | (513,978 | ) | (145,506 | ) | ||||||
Net loss | $ | (11,775,152 | ) | $ | (3,636,856 | ) | $ | (1,889,165 | ) | |||
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(Loss) | gain on change in value of derivative liability: |
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Three Months Ended | ||||||||||||
October 31, | ||||||||||||
2007 | 2006 | $ Change | ||||||||||
(restated) | ||||||||||||
Revenues | $ | 36,732 | $ | 43,331 | $ | (6,599 | ) | |||||
Operating expenses: | ||||||||||||
Cost of revenues | 4,621 | 24,650 | (20,029 | ) | ||||||||
Selling expenses | 7,296 | 24,262 | (16,966 | ) | ||||||||
General and administrative expenses | 437,227 | 266,850 | 170,377 | |||||||||
Totals | 449,144 | 315,762 | 133,382 | |||||||||
Loss from operations | (412,412 | ) | (272,431 | ) | (139,981 | ) | ||||||
Other income (expense) : | ||||||||||||
Gain on change in value of derivative liability | 1,933,938 | 492,951 | 1,440,987 | |||||||||
Interest income | — | 77 | (77 | ) | ||||||||
Interest expense | (189,847 | ) | (468,249 | ) | 278,402 | |||||||
Net income (loss) | $ | 1,331,679 | $ | (247,652 | ) | $ | 1,579,331 | |||||
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Equipment | $ | 11,000 | ||
Other Assets | 100 | |||
Goodwill | 50,400 | |||
Total | $ | 61,500 | ||
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2,000,000 shares | March 31, 2008 | |
2,000,000 shares | June 30, 2008 | |
3,000,000 shares | September 30, 2008 | |
3,000,000 shares | December 31, 2008 |
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Fiscal Year Ending April 30, | ||||||||||||
PRODUCT SALES REVENUES | 2005 | 2006 | 2007 | |||||||||
FingerSUREtm (finger imaging) Products | ||||||||||||
Enterprise | $ | 6,042 | $ | 31,383 | ||||||||
Professional | $ | 2,646 | $ | 1,130 | ||||||||
Devices | $ | 496,990 | ||||||||||
Software Development Kit | $ | 30,000 | ||||||||||
SecureDenttm (facial imaging) Products | ||||||||||||
Face Biometric Enrolment Application Tools | $ | 114,276 | $ | 5,208 | $ | 30,000 | ||||||
Face Biometric Quality Management | $ | 116,010 | $ | 120,000 | $ | 106,625 | ||||||
Live Enrolment Cameras | $ | 21,069 | $ | 308,574 | ||||||||
Photo Enrolment Unit | $ | 19,637 | ||||||||||
Identity Management Controller | ||||||||||||
Lookout Engine | $ | 79,989 | ||||||||||
Fraud Detection | $ | 126,416 | ||||||||||
Applicant Identification | $ | 119,256 | $ | 81,765 | $ | 209,152 | ||||||
Watchlist Check | $ | 37,366 | ||||||||||
Vitalerttm | $ | 117,824 | ||||||||||
Photofindtm | $ | 10,000 | ||||||||||
TOTAL | $ | 681,854 | $ | 215,661 | $ | 1,293,843 | ||||||
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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; | |
• | 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; |
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• | 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 |
• | 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. |
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• | 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 | |
• | 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 |
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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. |
• | 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. |
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• | 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. |
• | 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 |
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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]). | |
• | 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 |
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(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, 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; |
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• | Electronic transfer of referral information to Secondary; and | |
• | Controlled access to databases held by other Ministries and Agencies. |
• | 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; |
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• | 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. |
• | 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 |
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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 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. |
• | 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 |
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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. | |
• | 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 |
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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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AND RESULTS OF OPERATIONS OF CRYPTOMETRICS FOR THE FISCAL YEARS ENDED APRIL 30, 2007 (AS RESTATED) AND 2006 AND THE SIX MONTHS ENDED OCTOBER 31, 2007 AND 2006
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Year Ended April 30, 2007 | Year Ended April 30, 2006 | |||||||
(Audited and as Restated) | (Audited) | |||||||
Cash flows used in operating activities | $ | (9,309,336 | ) | $ | (6,970,870 | ) | ||
Cash flows used in investing activities | $ | (551,291 | ) | $ | (3,697,930 | ) | ||
Cash flows from financing activities | $ | 11,174,069 | $ | 6,908,800 | ||||
Net effect of currency fluctuations | $ | 120,451 | $ | 97,909 | ||||
Net change in cash and cash equivalents | $ | 1,433,893 | $ | (3,662,091 | ) |
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�� | ||||
Operating lease obligations | $ | |||
2008 | 150,765 | |||
2009 | 154,629 | |||
2010 | 159,690 | |||
2011 | 13,342 | |||
$ | 478,426 |
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Six Months Ended | ||||||||
October 31, 2007 | October 31, 2006 | |||||||
(Unaudited) | (Unaudited) | |||||||
Cash Flows Used in operating activities | $ | (4,716,269 | ) | $ | (3,979,685 | ) | ||
Cash flows used in investing Activities | $ | (3,381,837 | ) | $ | 269,209 | |||
Cash flows from financing activities | $ | 1,443,883 | $ | 11,069,069 | ||||
Net effect of currency fluctuations | $ | 241,476 | $ | 243,899 | ||||
Net change in cash and cash equivalents | $ | (6,412,747 | ) | $ | 7,602,492 |
Operating lease obligations | $ | |||
2008 | 75,383 | |||
2009 | 154,629 | |||
2010 | 159,690 | |||
2011 | 13,342 | |||
$ | 403,044 |
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2005 | 2006 | 2007 | ||||||||||
Robert Barra | $ | 26,667 | $ | 160,000 | $ | 196,667 | ||||||
Michael Vitale | $ | 26,667 | $ | 160,000 | $ | 196,667 | ||||||
Joel Shaw | $ | 120,000 | $ | 120,000 | $ | 123,238 |
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Number of Shares of | Percent of | |||||||
Name | Common Stock | 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% |
(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. |
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and Schedules
PAGE | ||
F-2 | ||
F-3 | ||
F-4 | ||
F-5 | ||
F-6 | ||
Notes to Consolidated Financial Statements | F-7/25 | |
Schedule II — Valuation and Qualifying Accounts | F-26 | |
F-27 | ||
F-28 | ||
F-29 | ||
F-30 | ||
Notes to Condensed Consolidated Financial Statements | F-31/43 | |
F-1
Table of Contents
JAG Media Holdings, Inc.
/s/ J.H. Cohn LLP |
November 9, 2007
F-2
Table of Contents
July 31, 2007 | July 31, 2006 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 507 | $ | 450,618 | ||||
Accounts receivable, net of allowance for doubtful accounts of $7,500 at both July 31, 2007 and 2006 | 34,345 | 15,580 | ||||||
Other current assets | 44,426 | 35,333 | ||||||
Total current assets | 79,278 | 501,531 | ||||||
Equipment, net of accumulated depreciation of $154,975 and $118,736 at July 31, 2007 and 2006, respectively | 55,071 | 76,702 | ||||||
Totals | $ | 134,349 | $ | 578,233 | ||||
Liabilities and Stockholders’ Deficiency | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 1,088,819 | $ | 234,682 | ||||
Deferred revenues | 18,695 | 22,448 | ||||||
Derivative liability | 11,058,561 | 2,789,750 | ||||||
Total current liabilities | 12,166,075 | 3,046,880 | ||||||
Convertible debentures payable, net of unamortized debt discount of $912,820 and $2,047,911 at July 31, 2007 and 2006, respectively | 2,607,180 | 2,027,089 | ||||||
Total liabilities | 14,773,255 | 5,073,969 | ||||||
Mandatorily redeemable Class B common stock; par value $.00001 per share: | ||||||||
400,000 shares designated as Series 2; 381,749 and 372,848 shares issued and outstanding at July 31, 2007 and 2006, respectively | 4 | 4 | ||||||
40,000 shares designated as Series 3; 21,500 shares issued and outstanding at both July 31, 2007 and 2006 | — | — | ||||||
4 | �� | 4 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ deficiency: | ||||||||
Preferred stock; par value $.00001 per share; 50,000,000 shares authorized, none issued at both July 31, 2007 and 2006 | ||||||||
Common stock; par value $.00001 per share; 500,000,000 shares authorized; 48,048,617 shares issued and outstanding and 42,896,506 shares issued and outstanding at July 31, 2007 and 2006,respectively | 480 | 429 | ||||||
Additional paid-in capital | 45,806,278 | 44,209,217 | ||||||
Unearned compensation | (34,870 | ) | ||||||
Accumulated deficit | (60,445,668 | ) | (48,670,516 | ) | ||||
Total stockholders’ deficiency | (14,638,910 | ) | (4,495,740 | ) | ||||
Totals | $ | 134,349 | $ | 578,233 | ||||
F-3
Table of Contents
2007 | 2006 | 2005 | ||||||||||
Revenues | $ | 203,286 | $ | 166,692 | $ | 239,651 | ||||||
Operating expenses: | ||||||||||||
Cost of revenues | 73,047 | 85,585 | 152,371 | |||||||||
Selling expenses | 97,029 | 46,637 | 43,441 | |||||||||
General and administrative expenses | 1,754,085 | 2,381,789 | 1,745,455 | |||||||||
Totals | 1,924,161 | 2,514,011 | 1,941,267 | |||||||||
Loss from operations | (1,720,875 | ) | (2,347,319 | ) | (1,701,616 | ) | ||||||
Other income (expense) | ||||||||||||
(Loss) gain on change in value of derivative liability | (8,524,813 | ) | 1,094,246 | — | ||||||||
Loss on extinguishment of promissory note | — | (77,373 | ) | — | ||||||||
Writeoff of goodwill | — | — | (50,400 | ) | ||||||||
Interest income | 54 | 2,573 | 8,357 | |||||||||
Finance charge for derivative liability in excess of proceeds from convertible debentures | — | (1,795,005 | ) | — | ||||||||
Interest expense | (1,529,518 | ) | (513,978 | ) | (145,506 | ) | ||||||
Net loss | $ | (11,775,152 | ) | $ | (3,636,856 | ) | $ | (1,889,165 | ) | |||
Basic and diluted net loss per share | $ | (0.25 | ) | $ | (0.08 | ) | $ | (0.04 | ) | |||
Basic and diluted weighted average common shares outstanding | 46,466,147 | 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, stock-based compensation | 35,018 | 35,018 | ||||||||||||||||||||||
Effect of issuance of common stock for purchase of business | 250,000 | 3 | 42,497 | 42,500 | ||||||||||||||||||||
Effect 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 stock-based 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 | ) | |||||||||||||||
Amortization of unearned, stock-based compensation | 28,167 | 28,167 | ||||||||||||||||||||||
Reclassification of deferred compensation upon adoption of SFAS 123R | (34,870 | ) | 34,870 | — | ||||||||||||||||||||
Effect of issuance of common stock in exchange for services | 180,000 | 2 | 62,198 | 62,200 | ||||||||||||||||||||
Effect of repricing of employee options | 70,946 | 70,946 | ||||||||||||||||||||||
Shares issued on conversion of convertible debentures | 4,432,111 | 44 | 554,956 | 555,000 | ||||||||||||||||||||
Shares issued on exercise of options | 540,000 | 5 | 43,395 | 43,400 | ||||||||||||||||||||
Capital contribution from payment by prospective merger partner of the Company’s costs related to merger | 580,269 | 580,269 | ||||||||||||||||||||||
Reclassification of derivative liability upon exercise of options for 340,000 shares | 292,000 | 292,000 | ||||||||||||||||||||||
Net loss | (11,775,152 | ) | (11,775,152 | ) | ||||||||||||||||||||
Balance, July 31, 2007 | 48,048,617 | $ | 480 | $ | 45,806,278 | $ | — | $ | (60,445,668 | ) | $ | (14,638,910 | ) | |||||||||||
F-5
Table of Contents
2007 | 2006 | 2005 | ||||||||||
Operating activities: | ||||||||||||
Net loss | $ | (11,775,152 | ) | $ | (3,636,856 | ) | $ | (1,889,165 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Depreciation | 35,707 | 23,785 | 19,684 | |||||||||
Amortization of other assets | 36,426 | 13,574 | ||||||||||
Amortization of unearned, stock based compensation | 28,167 | 61,576 | 35,018 | |||||||||
Loss (gain) on change in value of derivative liability | 8,524,813 | (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 | 1,135,091 | 243,266 | 27,149 | |||||||||
Writeoff of goodwill | — | — | 50,400 | |||||||||
Costs of the Company paid by potential merger partner | 580,269 | — | — | |||||||||
Effects of issuance of common stock in exchange for services | 62,200 | 0 | 77,501 | |||||||||
Effects of repricing employee options of common stock for services | 70,946 | — | — | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (18,765 | ) | (1,070 | ) | (2,270 | ) | ||||||
Other current assets | 55,418 | 32,123 | 6,586 | |||||||||
Accounts payable and accrued expenses | 856,521 | 275,025 | 147,657 | |||||||||
Deferred revenues | (3,753 | ) | (6,783 | ) | (10,262 | ) | ||||||
Net cash used in operating activities | (448,538 | ) | (2,194,376 | ) | (1,524,128 | ) | ||||||
Investing activities: | ||||||||||||
Equipment purchases | (15,573 | ) | (40,871 | ) | (32,078 | ) | ||||||
Cash paid for purchase of business | — | — | (19,212 | ) | ||||||||
Net cash used in investing activities | (15,573 | ) | (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 | ) | ||||||||||
Proceeds from issuance of common stock upon exercise of stock options, net of receivable from employee | 14,000 | — | — | |||||||||
Net cash provided by financing activities | 14,000 | 2,025,000 | 1,850,000 | |||||||||
Net increase (decrease) in cash and cash equivalents | (450,111 | ) | (210,247 | ) | 274,582 | |||||||
Cash and cash equivalents, beginning of year | 450,618 | 660,865 | 386,283 | |||||||||
Cash and cash equivalents, end of year | $ | 507 | $ | 450,618 | $ | 660,865 | ||||||
Supplemental disclosure of noncash financing activities: | ||||||||||||
Noncash effects of convertible debentures and promissory notes converted to common stock | $ | 555,000 | $ | 325,000 | ||||||||
Receivable from employees for exercise of options | $ | 29,400 | $ | — | ||||||||
Reclassification of derivative liability | $ | 292,000 | ||||||||||
Derivative liability of warrants issued equal to proceeds from debentures issued | $ | 2,025,000 | ||||||||||
Reclassification fair market value of nonemployee options to derivative liability | $ | 63,990 | ||||||||||
Effect of issuance of common stock for purchase of business | $ | 42,500 | ||||||||||
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Note 1 - | Organization : | |
JAG Media Holdings, Inc., a Nevada corporation, and its subsidiaries (the “Company”) gather and compile financial and investment information from contacts with financial institutions, experienced journalists, money managers, analysts and other Wall Street professionals and generate revenues by releasing such information to subscribers on a timely basis through facsimile transmissions and a web site, www.jagnotes.com. Subscribers receive, among other things, a daily early-morning investment report that summarizes newly issued research, analyst opinions, upgrades, downgrades and analyst coverage changes from various investment banks and brokerage houses and alerts, during the trading day, of rumors circulating on Wall Street. The Company is also in the business of developing related software focused on streaming video solutions, including the delivery of services already provided by the Company. Management considers all of its activities to be within the same business segment. | ||
The Company commenced operations in 1989 and its subscribers were initially limited primarily to institutional investors. During the year ended July 31, 2000, the Company opened its web site and began targeting retail subscribers in an effort to expand its subscriber base. | ||
On November 24, 2004, a newly established subsidiary of the Company, Pixaya (UK) Limited (“Pixaya”) (formerly known as TComm (UK) Limited), a company organized in the United Kingdom, acquired the business and assets of TComm Limited, a development stage company, also organized in the United Kingdom, that was developing various mobile video streaming products. The Company is continuing to develop certain of these products although such development has been limited as a result of the Company’s lack of financial resources and has added a new service to this product line (See Note 5). However, the business acquired had not generated any significant revenue as of the date of the acquisition or through July 31, 2007. | ||
The Company is actively pursuing potential mergers. As further discussed in Note 10 herein, on December 27, 2005, the Company entered into an agreement and plan of merger that was amended on various dates through September 18, 2007 (the “Merger Agreement”) with, among others, Cryptometrics, Inc., a Delaware corporation (“Cryptometrics”), pursuant to which Cryptometrics would merge with a newly created subsidiary of the Company. In consideration of the merger, the stockholders of Cryptometrics would acquire shares of common stock of the Company, which would, upon issuance, represent approximately 88% of the outstanding shares of the Company’s common stock, in exchange for all of the issued and outstanding capital stock of Cryptometrics. There is no assurance that the proposed transaction will be consummated. | ||
Note 2 - | Basis of presentation and summary of significant accounting policies: | |
Basis of presentation: | ||
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. However, as shown in the accompanying consolidated financial statements, the Company only generated revenues of approximately $203,000, $167,000 and $240,000 and it incurred net losses of approximately $11,775,000, $3,637,000 and $1,889,000 and negative cash flows from operating activities of approximately $449,000, $2,194,000 and $1,524,000 for the years ended July 31, 2007, 2006 and 2005, respectively. In addition, as of July 31, 2007 the Company only had cash and cash equivalents available of approximately $500 and a working capital deficiency of $12,087,000. These matters raise substantial doubt about the Company’s ability to continue as a going concern. | ||
Management believes that in the absence of a substantial increase in subscription revenues, it is probable that the Company will continue to incur losses and negative cash flows from operating activities through at least July 31, 2008 and that the Company will need to obtain additional equity or debt financing to sustain its operations. | ||
Management believes that the Company will be able to obtain sufficient financing directly through the consummation of the merger with Cryptometrics or through the consummation of a merger with another appropriate merger candidate that has such financing, to enable it to continue as a going concern through at least July 31, 2008. However, if the Company cannot obtain sufficient additional financing by that date, the Company may be forced thereafter to restructure its operations, file for bankruptcy or entirely cease its operations. |
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F-8
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F-9
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July 31 | ||||||||
2007 | 2006 | |||||||
Deferred revenues, net | $ | 6,000 | $ | 8,000 | ||||
Unearned compensation | 31,000 | 54,000 | ||||||
Net operating loss carryforwards | 13,262,000 | 12,165,000 | ||||||
13,299,000 | 12,227,000 | |||||||
Less valuation allowance | (13,299,000 | ) | (12,227,000 | ) | ||||
Total | $ | — | $ | — | ||||
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F-11
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F-12
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Equipment | $ | 11,000 | ||
Other Assets | 100 | |||
Goodwill | 50,400 | |||
Total | $ | 61,500 | ||
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F-14
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F-15
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Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Exercise | Contractual | Intrinsic | ||||||||||||||
Shares | Prices | Term | Value | |||||||||||||
Options outstanding, August 1, 2005 | 2,510,000 | |||||||||||||||
Granted | 450,000 | $ | .02 | |||||||||||||
Canceled | (1,540,000 | ) | $ | 1.17 | ||||||||||||
Options outstanding, July 31, 2006 | 1,420,000 | $ | .12 | |||||||||||||
Granted | 200,000 | $ | .05 | |||||||||||||
Exercised | (540,000 | ) | $ | .08 | ||||||||||||
Canceled | (80,000 | ) | $ | .69 | ||||||||||||
Options outstanding, July 31, 2007 | 1,000,000 | $ | .02 | 5.08 | $ | 930,000 | ||||||||||
Options exercisable, July 31, 2007 | 1,000,000 | $ | .02 | 5.08 | $ | 930,000 | ||||||||||
Year Ended | Year Ended | Year Ended | ||||
July 31, 2007 | July 31, 2006 | July 31, 2005 | ||||
Risk free interest rate | 6.00% | 6.00% | 4.50% | |||
Dividend yield | 0% | 0% | 0% | |||
Expected life | 5 years | 5 years | 5 years | |||
Expected volatility factor | 216.543% | 270.79% to 279.14% | 157.42% to 171.16% |
Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||||||
Weighted | ||||||||||||||||||||||||
Average Years | Weighted | |||||||||||||||||||||||
of Remaining | Average | |||||||||||||||||||||||
Number | Contractual | Exercise | Number | Weighted Average | ||||||||||||||||||||
Exercise Prices | Outstanding | Life | Price | Exercisable | Exercise Price | |||||||||||||||||||
$ | .40 | 2,000,000 | 3.82 | $ | .40 | 2,000,000 | $ | .40 | ||||||||||||||||
.50 | 2,000,000 | 3.82 | .50 | 2,000,000 | .50 | |||||||||||||||||||
.60 | 2,000,000 | 3.82 | .60 | 2,000,000 | .60 | |||||||||||||||||||
.70 | 3,000,000 | 3.82 | .70 | 3,000,000 | .70 | |||||||||||||||||||
.80 | 3,000,000 | 3.82 | .80 | 3,000,000 | .80 | |||||||||||||||||||
$ | .40-$.80 | 12,000,000 | 3.82 | $ | .40-$.80 | 12,000,000 | .63 | |||||||||||||||||
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Other Equity Transactions | ||
As explained in Notes 1 and 10, the Company entered into the Merger Agreement with, among others, Cryptometrics, pursuant to which Cryptometrics would merge with a newly created subsidiary of the Company. Pursuant to the terms of the Merger Agreement, Cryptometrics has paid various legal and accounting costs, totaling approximately $580,000 on behalf of the Company, that will not have to be repaid by the Company to Cryptometrics in the event that the merger is not successfully completed. The costs paid by Cryptometrics have been charged to operating expenses and the amounts received by the Company have been recorded as a capital contribution and included in additional paid-in capital. | ||
Note 7 - | Employee benefit plans: | |
The Company maintains a profit-sharing plan and a money purchase plan for the benefit of all eligible employees. The Company’s contributions to these defined contribution plans are made on a discretionary basis. The Company made no contributions to the plans in 2007, 2006 and 2005. | ||
Note 8 - | Commitments and contingencies: | |
Concentrations of credit risk: | ||
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. From time to time the Company’s cash account balances exceed the Federal insurance limit of $100,000. The Company reduces its exposure to credit risk by maintaining its cash deposits with major financial institutions and monitoring their credit ratings. Accordingly, management does not believe that the Company was exposed to significant credit risk at July 31, 2007. | ||
In addition, the Company routinely assesses the financial strength of its customers and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. | ||
Employment agreements: | ||
In connection with the acquisition of Pixaya, Pixaya entered into employment agreements on November 24, 2004 with four individuals, all of whom were previously employed by Pixaya. The employment agreements have a term of three years and automatically renew unless terminated by either party. As a result, the Company’s obligations for cash payments under the employment agreements subsequent to July 31, 2007 are as follows: |
Year ending | Amount | ||||
July 31, 2008 | $ | 53,000 | |||
Leases: | ||
During 2007, 2006, and 2005, the Company had been leasing office space under month-to-month leases and noncancelable leases. Rent expense under all such leases, which were classified as operating leases, totaled approximately $26,000, $29,000 and $15,000 for 2007, 2006 and 2005, respectively. As of July 31, 2007, the Company was not subject to any significant noncancelable office leases. | ||
Litigation: | ||
The Company is a party to various claims and lawsuits incidental to its business. In the opinion of management, it is probable that the resolution of such contingencies will not materially affect the consolidated financial position or results of operations of the Company in subsequent years. | ||
Bay Point Investment Partners, LLC (“Bay Point”) had threatened to commence litigation against the Company, certain of its officers and directors and others. The Bay Point claim related to its purchase of shares of the Company’s stock in private placements on December 10, 2002 and June 19, 2003. Bay Point alleged, among other things, various disclosure failings as well as the Company’s failure to register the shares it purchased in the June 19, 2003 private placement by the date provided in the placement agreement and to use the proceeds as Bay Point claims they were intended to be used. In May 2006, the Company settled its dispute with Bay Point by the payment of $250,000 for which it has received releases from Bay Point and other claimants. The cost of the settlement has been included in results of operations for the year ended July 31, 2006. | ||
Note 9 - | Fair value of financial instruments: | |
The Company’s material financial instruments at July 31, 2007 for which disclosure of estimated fair value is required by certain accounting standards consisted of cash and cash equivalents, accounts receivable, accounts payable, and the loan payable to YA |
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Global. In the opinion of management, the financial instruments other than the loan payable were carried at values that approximated their fair values at July 31, 2007 because of their liquidity and/or their short-term maturities. | ||
Note 10 - | Cryptometrics merger: | |
As explained in Note 1, the Company entered into the Merger Agreement on December 27, 2005, that has been amended on various dates through September 18, 2007, with, among others, Cryptometrics pursuant to which Cryptometrics would merge with a newly created subsidiary of the Company. In consideration of the merger, the stockholders of Cryptometrics would acquire shares of common stock of the Company, which would, upon issuance, represent approximately 89.66% of the combined companies’ outstanding shares of common stock, in exchange for all of the issued and outstanding shares of common stock of Cryptometrics. The shares of common stock to be received by the stockholders of Cryptometrics are being registered under the U.S. Securities Act of 1933, as amended. If consummated, the proposed transaction would be accounted for as a reverse acquisition in which Cryptometrics would be the acquirer for accounting purposes. | ||
At the closing of the proposed transaction, the Company’s current directors would resign as directors of the Company and would also resign as officers and executives of the Company. The Company’s board of directors would be replaced with designees of Cryptometrics. | ||
Until the Company and Cryptometrics agree otherwise, the Merger Agreement, notwithstanding approval by the Cryptometrics’ stockholders may be cancelled with or without any reason at any time by either of them with no liability. | ||
In addition, the proposed transaction is still subject to various conditions being satisfied prior to closing, including, among others, (i) the representations and warranties of the parties being true and correct, (ii) the Company’s common stock having been authorized for trading on the OTC Bulletin Board or the OTC Pink Sheets, on the Nasdaq Capital Market, and (iii) the Company’s indebtedness not exceeding $4,350,000. | ||
There is no assurance that the Company or Cryptometrics will not cancel the Merger Agreement, that the conditions of the proposed transaction will be fulfilled and that the proposed transaction between the Company and Cryptometrics will be consummated. The Merger Agreement has an automatic termination date which the parties to it have extended from time to time, but they are under no obligation to do so. As explained in Notes 1 and 6, pursuant to the terms of the Merger Agreement, Cryptometrics has paid various legal and accounting costs on behalf of the Company that will not have to be repaid by the Company to Cryptometrics in the event that the merger is not successfully completed. The costs paid by Cryptometrics have been charged to operating expenses and the amounts received by the Company have been recorded as a capital contribution and included in additional paid-in capital. Pursuant to various amendments to the Merger Agreement, if the transaction is terminated by the Company or for certain other reasons, under certain conditions the Company has agreed to issue Cryptometrics up to 1,000,000 shares of its common stock in consideration for various costs aggregating $580,000 advanced and to be advanced by Cryptometrics for the account of the Company. In addition, in consideration of $167,660 of such advances, the Company granted a non-exclusive, perpetual, royalty free license to Cryptometrics to use certain of the intellectual property of Pixaya. | ||
In connection with the proposed merger, on various dates from January 24, 2007 through September 18, 2007, the secured convertible debentures and warrants issued to YA Global were amended. As a result, on the date the proposed merger between the Company and Cryptometrics closes and becomes effective, (i) Cryptometrics will assume all of the rights and obligations under those amended agreements on behalf of the post-merger, combined company, and (ii) the secured convertible debentures would become convertible at a discount of 5% to the lowest volume weighted average price of the Company’s common stock during the 30 trading days prior to the conversion date and the warrants issued to YA Global would become convertible at a discount of 12% to the average of the volume weighted average price of the Company’s common stock during the 30 trading days prior to the exercise date. | ||
Note 11 - | Restatement of Unaudited Interim Financial Statements | |
In connection with the preparation of the Annual Report on Form 10-K of the Company for the fiscal year ended July 31, 2007, the Company's independent registered public accounting firm brought to the attention of the management of the Company that certain of the Company’s legal and accounting costs which, pursuant to the terms of the Merger Agreement with Cryptometrics were paid for by Cryptometrics, should have been charged to operating expenses and the amounts received by the Company should have been recorded as capital contributions and included in additional paid-in capital in the periods in which the costs were incurred (see Note 6). As a result, management completed an investigation focused on the Company’s accounting for all expenses paid for by Cryptometrics during the term of the Merger Agreement and determined that certain of the expenses should have been recorded in each of the quarters ended October 31, 2006, January 31, 2007 and April 30, 2007. |
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In addition, the Company’s independent registered public accounting firm brought to the attention of the management of the Company that the expected volatility factors used to determine the fair value of the derivative liabilities that were valued based on the Black-Scholes options pricing model were overstated during each of the first three quarters of the year ended July 31, 2007. As a result, management completed an investigation and determined that the volatility factors should have ranged from 223.697% to 229.281% instead of the 340.64% to 370.96% and, accordingly, the derivative liabilities recorded at the end of each of the quarters ended October 31, 2006, January 31, 2007 and April 30, 2007 were overstated and the gain or loss on change in derivative liability for each of the quarters then ended was understated or overstated. | ||
Upon completion of these investigations, management has identified certain adjustments related to the costs paid by Cryptometrics on behalf of the Company and the overstatement of the volatility factors that necessitate the restatement of the Company’s financial statements for each of the first three quarters of fiscal 2007. Previously issued financial statements for those quarters should not be relied upon. The following tables reflect the impact of the restatements on each of the first three quarters in the fiscal year ended July 31, 2007. |
F-19
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Restated Condensed Consolidated Balance Sheet (Unaudited)
October 31, 2006
As Previously | Restatement | |||||||||||
Reported | Adjustment | As Restated | ||||||||||
10/31/2006 | 10/31/2006 | 10/31/2006 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 35,501 | $ | — | $ | 35,501 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $7,500 | 20,960 | 20,960 | ||||||||||
Other current assets | 138,748 | 138,748 | ||||||||||
Total current assets | 195,209 | — | 195,209 | |||||||||
Equipment, net of accumulated depreciation of $127,798 | 83,214 | 83,214 | ||||||||||
Total | $ | 278,423 | $ | — | $ | 278,423 | ||||||
Liabilities and Stockholders’ Deficiency | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable and accrued expenses | $ | 236,987 | $ | — | $ | 236,987 | ||||||
Deferred revenues | 19,444 | 19,444 | ||||||||||
Derivative liability | 2,466,660 | (133,861 | ) | 2,332,799 | ||||||||
Total current liabilities | 2,723,091 | (133,861 | ) | 2,589,230 | ||||||||
Convertible debentures payable, net of unamortized debt discount of $1,678,813 | 2,196,187 | 2,196,187 | ||||||||||
Total liabilities | 4,919,278 | (133,861 | ) | 4,785,417 | ||||||||
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’ 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 | 446 | ||||||||||
Additional paid-in capital | 44,383,563 | 27,161 | 44,410,724 | |||||||||
Accumulated deficit | (49,024,868 | ) | 106,700 | (48,918,168 | ) | |||||||
Total stockholders’ deficiency | (4,640,859 | ) | 133,861 | (4,506,998 | ) | |||||||
Total | $ | 278,423 | $ | — | $ | 278,423 | ||||||
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Restated Condensed Consolidated Statements of Operations (Unaudited )
Three Months Ended October 31, 2006
As | ||||||||||||
Previously | Restatement | As | ||||||||||
Reported | Adjustment | Restated | ||||||||||
Revenues | $ | 43,331 | $ | — | $ | 43,331 | ||||||
Operating expenses: | ||||||||||||
Cost of revenues | 24,650 | 24,650 | ||||||||||
Selling expenses | 24,262 | 24,262 | ||||||||||
General and administrative expenses | 239,689 | 27,161 | 266,850 | |||||||||
Totals | 288,601 | 27,161 | 315,762 | |||||||||
Loss from operations | (245,270 | ) | (27,161 | ) | (272,431 | ) | ||||||
Other income (expense): | ||||||||||||
Gain on change in value of derivative liability | 359,090 | 133,861 | 492,951 | |||||||||
Interest income | 77 | 77 | ||||||||||
Interest expense | (468,249 | ) | (468,249 | ) | ||||||||
Net loss | $ | (354,352 | ) | $ | 106,700 | $ | (247,652 | ) | ||||
Basic and diluted net loss per share | $ | (0.01 | ) | $ | (0.01 | ) | ||||||
Basic and diluted weighted average common shares outstanding | 43,972,608 | 43,972,608 | ||||||||||
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Restated Condensed Consolidated Balance Sheet (Unaudited)
January 31, 2007
As Previously | Restatement | |||||||||||
Reported | Adjustment | As Restated | ||||||||||
1/31/2007 | 1/31/2007 | 1/31/2007 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 21,617 | $ | — | $ | 21,617 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $7,500 | 17,120 | 17,120 | ||||||||||
Other current assets | 61,730 | 61,730 | ||||||||||
Total current assets | 100,467 | — | 100,467 | |||||||||
Equipment, net of accumulated depreciation of $136,988 | 73,058 | 73,058 | ||||||||||
Total | $ | 173,525 | $ | — | $ | 173,525 | ||||||
Liabilities and Stockholders’ Deficiency | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable and accrued expenses | $ | 466,229 | $ | — | $ | 466,229 | ||||||
Deferred revenues | 21,520 | 21,520 | ||||||||||
Derivative liability | 4,823,317 | (192,532 | ) | 4,630,785 | ||||||||
Total current liabilities | 5,311,066 | (192,532 | ) | 5,118,534 | ||||||||
Convertible debentures payable, net of unamortized debt discount of $1,163,300 | 2,356,700 | 2,356,700 | ||||||||||
Total liabilities | 7,667,766 | (192,532 | ) | 7,475,234 | ||||||||
Mandatorily redeemable Class B common stock; par value $.00001 per share: 400,000 shares designated as Series 2: 381,741 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’ 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; 47,508,617 shares issued and outstanding | 475 | 475 | ||||||||||
Additional paid-in capital | 44,807,468 | 239,106 | 45,046,574 | |||||||||
Accumulated deficit | (52,302,188 | ) | (46,574 | ) | (52,348,762 | ) | ||||||
Total stockholders’ deficiency | (7,494,245 | ) | 192,532 | (7,301,713 | ) | |||||||
Total | $ | 173,525 | $ | — | $ | 173,525 | ||||||
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Restated Condensed Consolidated Statements of Operations (Unaudited)
Six and Three Months Ended January 31, 2007
Six Months Ended January 31, 2007 | Three Months Ended January 31, 2007 | |||||||||||||||||||||||
As | As | |||||||||||||||||||||||
Previously | Restatement | As | Previously | Restatement | As | |||||||||||||||||||
Reported | Adjustment | Restated | Reported | Adjustment | Restated | |||||||||||||||||||
Revenues | $ | 101,137 | $ | — | $ | 101,137 | $ | 57,806 | $ | — | $ | 57,806 | ||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Cost of revenues | 42,132 | 42,132 | 17,482 | 17,482 | ||||||||||||||||||||
Selling expenses | 59,816 | 59,816 | 35,554 | 35,554 | ||||||||||||||||||||
General and administrative expenses | 557,508 | 239,106 | 796,614 | 317,819 | 211,945 | 529,764 | ||||||||||||||||||
Totals | 659,456 | 239,106 | 898,562 | 370,855 | 211,945 | 582,800 | ||||||||||||||||||
Loss from operations | (558,319 | ) | (239,106 | ) | (797,425 | ) | (313,049 | ) | (211,945 | ) | (524,994 | ) | ||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Loss on change in value of derivative liability | (1,997,567 | ) | 192,532 | (1,805,035 | ) | (2,356,659 | ) | 58,671 | (2,297,988 | ) | ||||||||||||||
Interest income | 95 | 95 | 20 | 20 | ||||||||||||||||||||
Interest expense | (1,075,881 | ) | (1,075,881 | ) | (607,632 | ) | (607,632 | ) | ||||||||||||||||
Net loss | $ | (3,631,672 | ) | $ | (46,574 | ) | $ | (3,678,246 | ) | $ | (3,277,320 | ) | $ | (153,274 | ) | $ | (3,430,594 | ) | ||||||
Basic and diluted net loss per share | $ | (0.08 | ) | $ | (0.08 | ) | $ | (0.07 | ) | $ | (0.07 | ) | ||||||||||||
Basic and diluted weighted average common shares outstanding | 45,198,064 | 45,198,064 | 46,423,522 | 46,423,522 | ||||||||||||||||||||
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Restated Condensed Consolidated Balance Sheet (Unaudited)
April 30, 2007
As Previously | Restatement | |||||||||||
Reported | Adjustment | As Restated | ||||||||||
4/30/2007 | 4/30/2007 | 4/30/2007 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 5,598 | $ | — | $ | 5,598 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $7,500 | 30,959 | 30,959 | ||||||||||
Other current assets | 26,042 | 26,042 | ||||||||||
Total current assets | 62,599 | — | 62,599 | |||||||||
Equipment, net of accumulated depreciation of $146,127 | 63,919 | 63,919 | ||||||||||
Total | $ | 126,518 | $ | — | $ | 126,518 | ||||||
Liabilities and Stockholders’ Deficiency | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable and accrued expenses | $ | 936,102 | $ | — | $ | 936,102 | ||||||
Deferred revenues | 21,630 | 21,630 | ||||||||||
Derivative liability | 5,114,349 | (213,891 | ) | 4,900,458 | ||||||||
Total current liabilities | 6,072,081 | (213,891 | ) | 5,858,190 | ||||||||
Convertible debentures payable, net of unamortized debt discount of $1,038,060 | 2,481,940 | 2,481,940 | ||||||||||
Total liabilities | 8,554,021 | (213,891 | ) | 8,340,130 | ||||||||
Mandatorily redeemable Class B common stock; par value $.00001 per share: 400,000 shares designated as Series 2: 381,741 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’ 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; 47,708,617 shares issued and outstanding | 477 | 477 | ||||||||||
Additional paid-in capital | 44,934,199 | 412,606 | 45,346,805 | |||||||||
Accumulated deficit | (53,362,183 | ) | (198,715 | ) | (53,560,898 | ) | ||||||
Total stockholders’ deficiency | (8,427,507 | ) | 213,891 | (8,213,616 | ) | |||||||
Total | $ | 126,518 | $ | — | $ | 126,518 | ||||||
F-24
Table of Contents
Restated Condensed Consolidated Statements of Operations (Unaudited)
Nine and Three Months Ended April 30, 2007
Nine Months Ended April 30, 2007 | Three Months Ended April 30, 2007 | |||||||||||||||||||||||
As | As | |||||||||||||||||||||||
Previously | Restatement | As | Previously | Restatement | As | |||||||||||||||||||
Reported | Adjustment | Restated | Reported | Adjustment | Restated | |||||||||||||||||||
Revenues | $ | 164,308 | $ | — | $ | 164,308 | $ | 63,171 | $ | — | $ | 63,171 | ||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Cost of revenues | 60,654 | 60,654 | 18,522 | 18,522 | ||||||||||||||||||||
Selling expenses | 71,241 | 71,241 | 11,425 | 11,425 | ||||||||||||||||||||
General and administrative expenses | 1,032,575 | 412,606 | 1,445,181 | 475,067 | 173,500 | 648,567 | ||||||||||||||||||
Totals | 1,164,470 | 412,606 | 1,577,076 | 505,014 | 173,500 | 678,514 | ||||||||||||||||||
Loss from operations | (1,000,162 | ) | (412,606 | ) | (1,412,768 | ) | (441,843 | ) | (173,500 | ) | (615,343 | ) | ||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Loss on change in value of derivative liability | (2,404,601 | ) | 213,891 | (2,190,710 | ) | (407,032 | ) | 21,359 | (385,673 | ) | ||||||||||||||
Interest income | 97 | 97 | — | — | ||||||||||||||||||||
Interest expense | (1,287,001 | ) | (1,287,001 | ) | (211,070 | ) | (211,070 | ) | ||||||||||||||||
Net loss | $ | (4,691,667 | ) | $ | (198,715 | ) | $ | (4,890,382 | ) | $ | (1,059,945 | ) | $ | (152,141) | $ | (1,212,086 | ) | |||||||
Basic and diluted net loss per share | $ | (0.10 | ) | $ | (0.11 | ) | $ | (0.02 | ) | $ | (0.03 | ) | ||||||||||||
Basic and diluted weighted average common shares outstanding | 46,001,871 | 46,001,871 | 47,663,673 | 47,663,673 | ||||||||||||||||||||
F-25
Table of Contents
Years Ended July 31, 2007, 2006 and 2005
Balance at | Charged to | Write-offs | Loss on | |||||||||||||||||
Beginning of | Cost and | and | Foreign | Balance at End | ||||||||||||||||
Period | Expense | Recoveries | Exchange | of Period | ||||||||||||||||
Allowance for doubtful accounts | ||||||||||||||||||||
July 31, 2007 | $ | 7,500 | $ | — | $ | — | $ | — | $ | 7,500 | ||||||||||
June 31, 2006 | $ | 7,500 | $ | — | $ | — | $ | — | $ | 7,500 | ||||||||||
June 31, 2005 | $ | 7,500 | $ | — | $ | — | $ | — | $ | 7,500 | ||||||||||
Deferred tax asset valuation allowance | ||||||||||||||||||||
July 31, 2007 | $ | 12,227,000 | $ | 1,072,000 | (1) | $ | — | $ | — | $ | 13,299,000 | |||||||||
July 31, 2006 | $ | 11,843,000 | $ | 384,000 | (1) | $ | — | $ | — | $ | 12,227,000 | |||||||||
July 31, 2005 | $ | 12,372,000 | $ | (529,000 | )(2) | $ | — | $ | — | $ | 11,843,000 |
(1) | Reflects the increase in the valuation allowance associated with net operating losses of the Company. | |
(2) | Reflects the increase in the valuation allowance associated with net operating losses of the Company reduced by the effect of the decrease in the valuation allowance associated with the expiration of options and warrants. |
F-26
Table of Contents
OCTOBER 31, 2007 AND JULY 31, 2007
(UNAUDITED)
October 31, | July 31, | |||||||
2007 | 2007 | |||||||
(unaudited) | (see note 1) | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 138,002 | $ | 507 | ||||
Accounts receivable, net of allowance for doubtful accounts of $7,500 | 53,600 | 34,345 | ||||||
Other current assets | 329,526 | 44,426 | ||||||
Total current assets | 521,128 | 79,278 | ||||||
Equipment, net of accumulated depreciation of $162,425 and$154,975 | 47,621 | 55,071 | ||||||
Totals | $ | 568,749 | $ | 134,349 | ||||
Liabilities and Stockholders’ Deficiency | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 975,973 | $ | 1,088,819 | ||||
Deferred revenues | 25,817 | 18,695 | ||||||
Derivative liability | 9,069,300 | 11,058,561 | ||||||
Total current liabilities | 10,071,090 | 12,166,075 | ||||||
Convertible debentures payable, net of unamortized debt discount of $787,580 and $912,820 | 1,132,420 | 2,607,180 | ||||||
Total liabilities | 11,203,510 | 14,773,255 | ||||||
Mandatorily redeemable Class B common stock; par value $.00001 per share: | ||||||||
400,000 shares designated as Series 2; 381,749 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’ 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; 53,103,617 and 48,048,617 shares issued and outstanding | 531 | 480 | ||||||
Additional paid-in capital | 48,478,693 | 45,806,278 | ||||||
Accumulated deficit | (59,113,989 | ) | (60,445,668 | ) | ||||
Total stockholders’ deficiency | (10,634,765 | ) | (14,638,910 | ) | ||||
Totals | $ | 568,749 | $ | 134,349 | ||||
F-27
Table of Contents
THREE MONTHS ENDED OCTOBER 31, 2007 AND 2006
(UNAUDITED)
Three Months | ||||||||
Ended October 31, | ||||||||
2007 | 2006 (restated) | |||||||
Revenues | $ | 36,732 | $ | 43,331 | ||||
Operating expenses: | ||||||||
Cost of revenues | 4,621 | 24,650 | ||||||
Selling expenses | 7,296 | 24,262 | ||||||
General and administrative expenses | 437,227 | 266,850 | ||||||
Totals | 449,144 | 315,762 | ||||||
Loss from operations | (412,412 | ) | (272,431 | ) | ||||
Other income (expense): | ||||||||
Gain on change in value of derivative liability | 1,933,938 | 492,951 | ||||||
Interest income | — | 77 | ||||||
Interest expense | (189,847 | ) | (468,249 | ) | ||||
Net income (loss) | $ | 1,331,679 | $ | (247,652 | ) | |||
Basic net income (loss) per share | $ | 0.03 | $ | (0.01 | ) | |||
Diluted net income (loss) per share | $ | (0.01 | ) | $ | (0.01 | ) | ||
Basic weighted average common shares outstanding | 50,666,552 | 43,972,608 | ||||||
Diluted weighted average common shares outstanding | 58,080,023 | 43,972,608 | ||||||
F-28
Table of Contents
THREE MONTHS ENDED OCTOBER 31, 2007
(UNAUDITED)
Common Stock | Additional Paid-in | Accumulated | ||||||||||||||||||
Number of Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
Balance, August 1, 2007 | 48,048,617 | $ | 480 | $ | 45,806,278 | $ | (60,445,668 | ) | $ | (14,638,910 | ) | |||||||||
Amortization of unearned stock-based compensation | 3,300 | 3,300 | ||||||||||||||||||
Effect of issuance of common stock in exchange for services | 150,000 | 2 | 95,998 | 96,000 | ||||||||||||||||
Shares issued on conversion of convertible debentures | 4,000,000 | 40 | 1,599,960 | 1,600,000 | ||||||||||||||||
Shares issued on exercise of options | 905,000 | 9 | 447,542 | 447,551 | ||||||||||||||||
Capital contribution from payment by prospective merger partner of the Company’s costs | 230,113 | 230,113 | ||||||||||||||||||
Reclassification of derivative liability upon exercise of options for 655,000 shares | 295,502 | 295,502 | ||||||||||||||||||
Net income | 1,331,679 | 1,331,679 | ||||||||||||||||||
Balance, October 31, 2007 | 53,103,617 | $ | 531 | $ | 48,478,693 | $ | (59,113,989 | ) | $ | (10,634,765 | ) | |||||||||
F-29
Table of Contents
THREE MONTHS ENDED OCTOBER 31, 2007 AND 2006
(UNAUDITED)
2007 | 2006 (restated) | |||||||
Operating activities: | ||||||||
Net income (loss) | $ | 1,331,679 | $ | (247,652 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation | 7,321 | 9,018 | ||||||
Amortization of unearned stock-based compensation | 3,300 | 9,233 | ||||||
Gain on change in value of derivative liability | (1,933,938 | ) | (492,951 | ) | ||||
Amortization of debt discount | 125,240 | 369,098 | ||||||
Costs of the Company paid by potential merger partner | 230,113 | 27,161 | ||||||
Effect of issuance of common stock in exchange for services | 25,600 | — | ||||||
Amortization of deferred consulting costs | 65,631 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (19,255 | ) | (5,380 | ) | ||||
Other current assets | 9,313 | (67,096 | ) | |||||
Accounts payable and accrued expenses | (112,831 | ) | 2,001 | |||||
Deferred revenues | 7,122 | (3,004 | ) | |||||
Net cash used in operating activities | (260,705 | ) | (399,572 | ) | ||||
Investing activities: | ||||||||
Equipment purchases | — | (15,545 | ) | |||||
Net cash used in investing activities | — | (15,545 | ) | |||||
Financing activities: | ||||||||
Issuance of common stock upon exercise of stock options | 398,200 | — | ||||||
Net cash provided by financing activities | 398,200 | — | ||||||
Net increase (decrease) in cash and cash equivalents | 137,495 | (415,117 | ) | |||||
Cash and cash equivalents, beginning of period | 507 | 450,618 | ||||||
Cash and cash equivalents, end of period | $ | 138,002 | $ | 35,501 | ||||
Supplemental disclosure of noncash financing activities: | ||||||||
Noncash effect of convertible debentures converted to common stock | $ | 1,600,000 | $ | 200,000 | ||||
Receivable from consultant for options exercised | $ | 78,750 | ||||||
Fair value of fully-vested shares issued to consultant in exchange for services | $ | 70,400 | ||||||
Reclassification of derivative liability | $ | 55,323 | ||||||
Fair value of options issued for future services | $ | 240,179 | ||||||
F-30
Table of Contents
F-31
Table of Contents
Three Months Ended | ||||
October 31, 2007 | ||||
Numerator: | ||||
Net income | $ | 1,331,679 | ||
Denominator: | ||||
Basic weighted average common shares outstanding | 50,666,552 | |||
Basic net income per share | $ | 0.03 | ||
F-32
Table of Contents
Three Months Ended | ||||
October 31, 2007 | ||||
Numerator: | ||||
Net income as reported | $ | 1,331,679 | ||
Add: Interest expense on convertible debentures | 64,868 | |||
Debt discount on convertible debentures | 125,240 | |||
Deduct: Gain on change in value of derivative liability attributable to options and warrants issued to non-employees assumed to have been exercised at the beginning of period | (1,933,938 | ) | ||
Net loss, as adjusted | $ | (412,151 | ) | |
Denominator: | ||||
Basic weighted average common shares outstanding | 50,666,552 | |||
Incremental shares from assumed conversion: | ||||
Exercise of stock options | 731,264 | |||
Exercise of warrants | 2,632,207 | |||
Conversion of convertible debt | 4,050,000 | |||
Diluted weighted average common shares | 58,080,023 | |||
Diluted net loss per share | $ | (0.01 | ) | |
Deferred revenues, net | $ | 9,000 | ||
Unearned compensation | 20,000 | |||
Net operating loss carryforwards | 13,443,000 | |||
13,472,000 | ||||
Less valuation allowance | (13,472,000 | ) | ||
Total | $ | — | ||
F-33
Table of Contents
F-34
Table of Contents
F-35
Table of Contents
F-36
Table of Contents
F-37
Table of Contents
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Exercise | Contractual | Intrinsic | ||||||||||||||
Shares | Price | Term | Value | |||||||||||||
Options outstanding August 1, 2007 | 1,000,000 | $ | 0.02 | |||||||||||||
Granted | 655,000 | $ | 0.68 | |||||||||||||
Exercised | (905,000 | ) | $ | 0.49 | ||||||||||||
Options outstanding at end of period | 750,000 | $ | 0.02 | 3.84 | $ | 600,000 | ||||||||||
Options exercisable at end of period | 750,000 | $ | 0.02 | 3.84 | $ | 600,000 | ||||||||||
Three Months Ended | Three Months Ended | |||||||
October 31, 2007 | October 31, 2006 | |||||||
Risk-free interest rate | 6.00 | % | 6.00 | % | ||||
Dividend yield | 0 | % | 0 | % | ||||
Expected life | 3 months | 5 years | ||||||
Expected volatility factor | 210.949% to 216.543% | 231.079 | % |
F-38
Table of Contents
F-39
Table of Contents
F-40
Table of Contents
As Previously | Restatement | |||||||||||
Reported | Adjustment | As Restated | ||||||||||
10/31/2006 | 10/31/2006 | 10/31/2006 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 35,501 | $ | — | $ | 35,501 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $7,500 | 20,960 | 20,960 | ||||||||||
Other current assets | 138,748 | 138,748 | ||||||||||
Total current assets | 195,209 | — | 195,209 | |||||||||
Equipment, net of accumulated depreciation of $127,798 | 83,214 | 83,214 | ||||||||||
Total | $ | 278,423 | $ | — | $ | 278,423 | ||||||
Liabilities and Stockholders’ Deficiency | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable and accrued expenses | $ | 236,987 | $ | — | $ | 236,987 | ||||||
Deferred revenues | 19,444 | 19,444 | ||||||||||
Derivative liability | 2,466,660 | (133,861 | ) | 2,332,799 | ||||||||
Total current liabilities | 2,723,091 | (133,861 | ) | 2,589,230 | ||||||||
Convertible debentures payable, net of unamortized debt discount of $1,678,813 | 2,196,187 | 2,196,187 | ||||||||||
Total liabilities | 4,919,278 | (133,861 | ) | 4,785,417 | ||||||||
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’ 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 | 446 | ||||||||||
Additional paid-in capital | 44,383,563 | 27,161 | 44,410,724 | |||||||||
Accumulated deficit | (49,024,868 | ) | 106,700 | (48,918,168 | ) | |||||||
Total stockholders’ deficiency | (4,640,859 | ) | 133,861 | (4,506,998 | ) | |||||||
Total | $ | 278,423 | $ | — | $ | 278,423 | ||||||
F-41
Table of Contents
Restated Condensed Consolidated Statements of Operations
Three Months Ended October 31, 2006
As | ||||||||||||
Previously | Restatement | As | ||||||||||
Reported | Adjustment | Restated | ||||||||||
Revenues | $ | 43,331 | $ | — | $ | 43,331 | ||||||
Operating expenses: | ||||||||||||
Cost of revenues | 24,650 | 24,650 | ||||||||||
Selling expenses | 24,262 | 24,262 | ||||||||||
General and administrative expenses | 239,689 | 27,161 | 266,850 | |||||||||
Totals | 288,601 | 27,161 | 315,762 | |||||||||
Loss from operations | (245,270 | ) | (27,161 | ) | (272,431 | ) | ||||||
Other income (expense): | ||||||||||||
Gain on change in value of derivative liability | 359,090 | 133,861 | 492,951 | |||||||||
Interest income | 77 | 77 | ||||||||||
Interest expense | (468,249 | ) | (468,249 | ) | ||||||||
Net loss | $ | (354,352 | ) | $ | 106,700 | $ | (247,652 | ) | ||||
Basic and diluted net loss per share | $ | (0.01 | ) | $ | (0.01 | ) | ||||||
Basic and diluted weighted average common shares outstanding | 43,972,608 | 43,972,608 | ||||||||||
F-42
Table of Contents
Report of the Independent Registered Public Accounting Firm | F - 44 | |||
Consolidated Balance Sheets — as of April 30, 2007 (restated) and April 30, 2006 | F - 45 | |||
Consolidated Statements of Operations — For the years ending April 30, 2007 (restated) and 2006 | F - 47 | |||
Consolidated Statements of Stockholders’ Equity for the years ending April 30, 2007 (restated) and 2006 | F - 48 | |||
Consolidated Statements of Cash Flows — For the years ending April 30, 2007 (restated) and 2006 | F - 49 | |||
Notes to Consolidated Financial Statements | F - 50/66 | |||
Consolidated Balance Sheets — as of October 31, 2007 and April 30, 2007 (restated) | F - 67 | |||
Consolidated Statements of Operation — For the six months ending October 31, 2007 and 2006 | F - 68 | |||
Consolidated Statements of Cash Flows — For the six months ending October 31, 2007 and 2006 | F - 69 | |||
Notes to Consolidated Financial Statements | F - 70/76 |
F-43
Table of Contents
Board of Directors
Cryptometrics, Inc & subsidiary
White Plains, NY
August 17, 2007, except for notes 2 and 12
which dates are October 17, 2007 and March 3, 2008, respectively
F-44
Table of Contents
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
April 30, 2007 | April 30, 2006 | |||||||
(as restated) | ||||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 8,953,949 | $ | 7,520,056 | ||||
Short-term Investments | 2,621,666 | 3,144,681 | ||||||
Accounts receivable | 142,978 | 60,360 | ||||||
Inventory | 187,339 | 146,715 | ||||||
Prepaid expenses | 55,625 | 117,662 | ||||||
Deferred finance fees | 594,761 | |||||||
Investment tax credit receivable | 364,725 | 216,172 | ||||||
TOTAL CURRENT ASSETS | 12,921,043 | 11,205,646 | ||||||
Fixed Assets, net of accumulated depreciation of $812,796 and $540,629, respectively | 786,864 | 785,358 | ||||||
Patents and trademarks | 364,240 | 188,783 | ||||||
Investment in related party | 575,000 | — | ||||||
Goodwill | 10,700,000 | 10,700,000 | ||||||
TOTAL ASSETS | $ | 25,347,147 | $ | 22,879,787 | ||||
F-45
Table of Contents
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
April 30, 2007 | April 30, 2006 | |||||||
(as restated) | ||||||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Convertible debt | $ | 8,790,050 | $ | — | ||||
Derivative liability | 3,190,006 | — | ||||||
Accounts payable and accrued liabilities | 1,199,936 | 1,118,072 | ||||||
Accrued compensation | 24,085 | 250,363 | ||||||
TOTAL CURRENT LIABILITIES | 13,204,077 | 1,368,435 | ||||||
Stockholders’ Equity | ||||||||
Common stock, $.001 par value, 20,000,000 shares authorized, 11,981,863 and 11,971,363 shares issued and outstanding, respectively | 119,819 | 119,714 | ||||||
Additional paid-in capital | 38,276,923 | 38,172,028 | ||||||
Accumulated deficit | (26,396,563 | ) | (16,802,830 | ) | ||||
Accumulated other comprehensive gain: | ||||||||
Foreign currency translation adjustments | 142,891 | 22,440 | ||||||
12,143,070 | 21,511,352 | |||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 25,347,147 | $ | 22,879,787 | ||||
F-46
Table of Contents
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended | Year Ended | |||||||
April 30, 2007 | April 30, 2006 | |||||||
(as restated) | ||||||||
Revenues | $ | 1,293,843 | $ | 215,661 | ||||
Cost and Expenses: | ||||||||
Cost of revenues | 818,808 | 59,278 | ||||||
Research and development | 3,589,008 | 2,181,936 | ||||||
Selling and marketing | 2,896,502 | 2,706,796 | ||||||
General and administrative | 3,427,541 | 2,604,468 | ||||||
10,731,859 | 7,552,478 | |||||||
Loss from operations | (9,438,016 | ) | (7,336,817 | ) | ||||
Amortization of intangibles | (17,289 | ) | ||||||
Amortization of deferred finance costs | (336,170 | ) | ||||||
Gain on change in value of derivative liability | 19,944 | |||||||
Interest and other income, net | 177,798 | 406,836 | ||||||
Net loss | $ | (9,593,733 | ) | $ | (6,929,981 | ) | ||
Basic and diluted weighted shares outstanding | 11,973,002 | 11,439,022 | ||||||
Basic and diluted loss per share | $ | (.80 | ) | $ | (.61 | ) | ||
F-47
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, 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 currency exchange | — | — | — | — | 97,909 | |||||||||||||||
Balance April 30, 2006 | 11,971,363 | 119,714 | 38,172,028 | (16,802,830 | ) | 22,440 | ||||||||||||||
Net loss | — | — | — | (9,593,733 | ) | — | ||||||||||||||
Sale of common stock by Private Placements | 10,500 | 105 | 104,895 | — | — | |||||||||||||||
Gain on currency exchange | — | — | — | — | 120,451 | |||||||||||||||
Balance April 30, 2007 (as restated) | 11,981,863 | $ | 119,819 | $ | 38,276,923 | $ | (26,396,563 | ) | $ | 142,891 | ||||||||||
F-48
Table of Contents
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended | Year Ended | |||||||
April 30, 2007 | April 30, 2006 | |||||||
(as restated) | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (9,593,733 | ) | $ | (6,929,981 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 322,343 | 244,516 | ||||||
Gain on change in derivative liability | (19,944 | ) | ||||||
Amortization of deferred finance fees | 336,170 | |||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (82,618 | ) | 37,174 | |||||
Inventories | (40,624 | ) | (2,779 | ) | ||||
Prepaid expenses and other assets | 62,037 | (44,895 | ) | |||||
Investment tax credits recoverable | (148,553 | ) | 176,607 | |||||
Accounts payable and accrued expenses | (144,414 | ) | (451,512 | ) | ||||
Net cash flows used in operating activities | (9,309,336 | ) | (6,970,870 | ) | ||||
Cash flows from investing activities: | ||||||||
Acquisition of fixed assets | (306,560 | ) | (444,806 | ) | ||||
Investment in related party | (575,000 | ) | ||||||
Sale (Purchase) of short-term investments | 523,015 | (3,144,681 | ) | |||||
Patent application costs | (192,746 | ) | (108,443 | ) | ||||
Net cash flows from investing activities | (551,291 | ) | (3,697,930 | ) | ||||
Cash flows from financing activities: | ||||||||
Sale of common stock | 105,000 | 6,908,800 | ||||||
Issuance of Convertible debt | 12,000,000 | — | ||||||
Issuance costs | (930,931 | ) | — | |||||
Net cash flows from financing activities | 11,174,069 | 6,908,800 | ||||||
Net effect of currency fluctuations | 120,451 | 97,909 | ||||||
Net change in cash and cash equivalents | 1,433,893 | (3,662,091 | ) | |||||
Cash and cash equivalents at period beginning | 7,520,056 | 11,182,147 | ||||||
Cash and cash equivalents at period end | $ | 8,953,949 | $ | 7,520,056 | ||||
Supplemental cash flow information: | ||||||||
Income taxes paid | $ | — | $ | — | ||||
Interest paid | $ | 443,564 | $ | — | ||||
F-49
Table of Contents
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
2007 | 2006 | |||||||
Billed | $ | 92,978 | $ | 60,360 | ||||
Unbilled | 50,000 | — | ||||||
$ | 142,978 | $ | 60,360 | |||||
F-50
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
F-51
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
Fiscal year ended April 30, | ||||||||
2007 | 2006 | |||||||
Net loss | $ | (9,593,733 | ) | $ | (6,929,981 | ) | ||
Effect of stock options | — | (38,800 | ) | |||||
Proforma net loss | $ | (9,593,733 | ) | $ | (6,968,781 | ) | ||
Proforma net loss per share | $ | (.80 | ) | $ | (.61 | ) | ||
F-52
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
Furniture | 5 to 7 years | |
Computer equipment | 3 to 5 years | |
Leasehold improvements | Remaining lease term or useful life |
F-53
Table of Contents
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
Year Ended | ||||
April 30, | ||||
2008 | $ | 17,630 | ||
2009 | 17,630 | |||
2010 | 17,630 | |||
2011 | 17,630 | |||
2012 and thereafter | 293,720 | |||
$ | 364,240 | |||
F-54
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange
F-55
Table of Contents
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
a. | Permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation | |
b. | Clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133 | |
c. | Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation | |
d. | Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives | |
e. | Amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. |
F-56
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
F-57
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
F-58
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
Year ended April 30, 2007
As Previously | ||||||||
Reported | As Restated | |||||||
Revenues | $ | 1,293,843 | $ | 1,293,843 | ||||
Cost and expenses | ||||||||
Cost of revenues | 818,808 | 818,808 | ||||||
Research and development | 3,589,008 | 3,589,008 | ||||||
Selling and marketing | 2,896,502 | 2,896,502 | ||||||
General and administrative | 3,427,541 | 3,427,541 | ||||||
Total costs and expenses | 10,731,859 | 10,731,859 | ||||||
Loss from operations | (9,438,016 | ) | (9,438,016 | ) | ||||
Amortization of intangibles | (17,289 | ) | (17,289 | ) | ||||
Amortization of deferred finance cost | (336,170 | ) | (336,170 | ) | ||||
Discount on convertible debt | (1,417,737 | ) | — | |||||
Gain on change in value of derivative liability— | — | 19,944 | ||||||
Interest and other income, net | 96,012 | 177,798 | ||||||
Net loss | $ | (11,113,200 | ) | $ | (9,593,733 | ) | ||
Basic and diluted loss per share | $ | (.93 | ) | $ | (.80 | ) | ||
F-59
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
Year ended April 30, 2007
As Previously | ||||||||
Reported | As Restated | |||||||
Assets: | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 8,953,949 | $ | 8,953,949 | ||||
Short term investments | 2,621,666 | 2,621,666 | ||||||
Accounts Receivable | 142,978 | 142,978 | ||||||
Inventory | 187,339 | 187,339 | ||||||
Prepaid expenses | 55,625 | 55,625 | ||||||
Deferred finance fees | 594,761 | 594,761 | ||||||
Investment tax credit receivable | 364,725 | 364,725 | ||||||
Total current assets | 12,921,043 | 12,921,043 | ||||||
Fixed assets | 786,864 | 786,864 | ||||||
Other assets | 11,639,240 | 11,639,240 | ||||||
Total assets | $ | 25,347,147 | $ | 25,347,147 | ||||
Liabilities and stockholders equity: | ||||||||
Current liabilities | ||||||||
Convertible debt | $ | 10,178,584 | $ | 8,790,050 | ||||
Derivative liability | — | 3,190,006 | ||||||
Accounts payable and accrued liabilities | 1,199,936 | 1,199,936 | ||||||
Accrued compensations | 24,085 | 24,085 | ||||||
Total current liabilities | 11,402,605 | 13,204,077 | ||||||
Stockholders’ equity | ||||||||
Common stock | 119,819 | 119,819 | ||||||
Additional paid in capital | 41,597,862 | 38,276,923 | ||||||
Accumulated deficit | (27,916,030 | ) | (26,396,563 | ) | ||||
Accumulated other comprehensive gain | 142,891 | 142,891 | ||||||
Total stockholders’ equity | 13,944,542 | 12,143,070 | ||||||
Total liabilities and stockholders’ equity | $ | 25,347,147 | $ | 25,347,147 | ||||
F-60
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
2007 | 2006 | |||||||
Purchased parts and materials | $ | 172,528 | $ | 109,385 | ||||
Finished goods, including spares | 14,811 | 37,330 | ||||||
$ | 187,339 | $ | 146,715 | |||||
Year ended April 30, | ||||||||
2007 | 2006 | |||||||
Computer | $ | 1,348,827 | $ | 1,074,352 | ||||
Furniture and fixtures | 200,749 | 203,224 | ||||||
Leasehold improvements | 50,084 | 48,411 | ||||||
1,599,660 | 1,325,987 | |||||||
Less: accumulated depreciation | 812,796 | 540,629 | ||||||
$ | 786,864 | $ | 785,358 | |||||
F-61
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
2007 | 2006 | |||||||
Net loss | $ | (9,593,733 | ) | $ | (6,929,981 | ) | ||
Gain on foreign currency exchange | 120,451 | 97,909 | ||||||
Net comprehensive loss | $ | (9,473,282 | ) | $ | (6,832,072 | ) | ||
2007 | 2006 | |||||||
Revenues | ||||||||
Domestic | $ | 69,549 | $ | 128,688 | ||||
International (primarily Canada) | 1,224,294 | 86,973 | ||||||
$ | 1,293,843 | $ | 215,661 | |||||
2007 | 2006 | |||||||
Total assets | $ | 1,721,282 | $ | 1,370,777 | ||||
Total liabilities | $ | 867,962 | $ | 708,183 | ||||
Net sales | $ | 1,224,294 | $ | 86,973 | ||||
Net loss | $ | 5,179,408 | $ | 4,465,917 | ||||
F-62
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
Year ending | ||||
April 30, | ||||
2008 | $ | 150,765 | ||
2009 | 154,629 | |||
2010 | 159,690 | |||
2011 | 13,342 | |||
Total | $ | 478,426 | ||
April 30, | ||||||||
2007 | 2006 | |||||||
Deferred tax assets: | ||||||||
Net operating losses | $ | 10,501,134 | $ | 6,721,132 | ||||
Salaries | 9,634 | 155,545 | ||||||
Total | 10,501,768 | 6,876,677 | ||||||
Less: valuation allowance | 10,501,768 | 6,876,677 | ||||||
$ | — | $ | — | |||||
F-63
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
Year ended | Year ended | |||||||
April 30, | April 30, | |||||||
2007 | 2006 | |||||||
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% | ||||||
—% | —% | |||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
F-65
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2007
F-66
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CONSOLIDATED BALANCE SHEETS
As at October 31, 2007
(All figures in United States Dollars)
CONSOLIDATED | CONSOLIDATED | |||||||
31-Oct-07 | 30-Apr-07 | |||||||
(unaudited) | (as restated) | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 2,541,202 | $ | 8,953,949 | ||||
Short-term Investments | 2,621,377 | 2,621,666 | ||||||
Accounts receivable | 185,250 | 142,978 | ||||||
Inventory | 202,004 | 187,339 | ||||||
Prepaids | 43,810 | 55,625 | ||||||
Deferred finance fees | 284,451 | 594,761 | ||||||
Investment tax credit receivable | 509,840 | 364,725 | ||||||
TOTAL CURRENT ASSETS | 6,387,934 | 12,921,043 | ||||||
Capital Assets | 835,959 | 786,864 | ||||||
Loans to related party | 3,630,184 | 575,000 | ||||||
Intangibles | 455,940 | 364,240 | ||||||
Goodwill | 10,700,000 | 10,700,000 | ||||||
TOTAL ASSETS | $ | 22,010,017 | $ | 25,347,147 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Credit Line | $ | 1,443,883 | ||||||
Convertible debt | 9,075,050 | $ | 8,790,050 | |||||
Derivative liability | 3,163,191 | 3,190,006 | ||||||
Accounts payable and accrued liabilities | 1,183,464 | 1,199,936 | ||||||
Other current liabilities | 10,279 | 24,085 | ||||||
TOTAL CURRENT LIABILITIES | 14,875,867 | �� | 13,204,077 | |||||
Stockholders’ Equity Common stock | 119,819 | 119,819 | ||||||
Additional paid-in capital | 38,276,923 | 38,276,923 | ||||||
Accumulated deficit | (31,646,959 | ) | (26,396,563 | ) | ||||
Accumulated gain from foreign currency | 384,367 | 142,891 | ||||||
7,134,150 | 12,143,070 | |||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 22,010,017 | $ | 25,347,147 | ||||
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Consolidated Statements of Operations
Quarter ended October 31, 2007
(unaudited)
Quarter Ended | Quarter Ended | Six Months Ended | Six Months Ended | |||||||||||||
31-Oct-07 | 31-Oct-06 | 31-Oct-07 | 31-Oct-06 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Revenues | $ | 37,284 | $ | 606,292 | $ | 71,742 | $ | 979,127 | ||||||||
Cost and Expenses: | ||||||||||||||||
Cost of revenues | 28,258 | 394,479 | 44,630 | 607,818 | ||||||||||||
Research and development | 684,770 | 1,053,695 | 1,186,634 | 1,833,415 | ||||||||||||
Selling and marketing | 1,003,715 | 689,113 | 1,743,088 | 1,306,802 | ||||||||||||
General and administrative | 618,578 | 673,873 | 1,671,567 | 1,460,160 | ||||||||||||
2,335,321 | 2,811,160 | 4,645,919 | 5,208,195 | |||||||||||||
Loss from operations | (2,298,037 | ) | (2,204,868 | ) | (4,574,177 | ) | (4,229,068 | ) | ||||||||
Amortization of intangibles | (4,558 | ) | (8,829 | ) | ||||||||||||
Amortization of deferred finance costs | (155,155 | ) | (310,310 | ) | ||||||||||||
Gain on derivative liability | 15,157 | 26,815 | ||||||||||||||
Interest and other income, net | (153,491 | ) | (26,053 | ) | (383,895 | ) | 79,391 | |||||||||
Net loss for the period | $ | (2,596,084 | ) | $ | (2,230,921 | ) | $ | (5,250,396 | ) | $ | (4,149,677 | ) | ||||
Weighted Basic and diluted shares outstanding | 11,981,863 | 11,971,363 | 11,981,863 | 11,971,363 | ||||||||||||
Basic and diluted loss per share | $ | (0.22 | ) | $ | (0.19 | ) | $ | (0.44 | ) | $ | (0.35 | ) | ||||
Unaudited statements are subject to final year end adjustments |
F-68
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Consolidated Statements of Cash Flows
Six Months ended October 31, 2007
(unaudited)
Six Months Ended | ||||||||
31-Oct | ||||||||
2007 | 2006 | |||||||
Cash flows from operating activities | ||||||||
Net loss | (5,250,396 | ) | (4,149,677 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 185,858 | 165,169 | ||||||
Gain on derivative liability | (26,815 | ) | ||||||
Amortization of deferred finance fees | 310,310 | |||||||
Changes in assests and liabilities: | ||||||||
Accounts receivable | (42,272 | ) | (868,666 | ) | ||||
Inventories | (14,665 | ) | (134,492 | ) | ||||
Prepaid expenses and other assets | 12,104 | 42,990 | ||||||
Income tax recoverable | (145,115 | ) | (76,770 | ) | ||||
Accounts payable and accrued expenses | 254,722 | 1,041,761 | ||||||
Net cash used in operating activities | (4,716,269 | ) | (3,979,685 | ) | ||||
Cash flows from investing activities: | ||||||||
Acquisition of fixed assets | (226,124 | ) | (181,091 | ) | ||||
Loans to related party | (3,055,184 | ) | ||||||
Short term investments | 616,548 | |||||||
Patent application costs | (100,529 | ) | (166,248 | ) | ||||
Net cash flows from investing activites | (3,381,837 | ) | 269,209 | |||||
Cash flows from financing activites: | ||||||||
Net borrowings from note payable | 1,443,883 | |||||||
Issuance of Convertible Debt | 12,000,000 | |||||||
Issuance costs | (930,931 | ) | ||||||
Net cash provided by financing activities | 1,443,883 | 11,069,069 | ||||||
Net effect of currency translation | 241,476 | 243,899 | ||||||
Net increase (decrease) in cash and cash equivalents | (6,412,747 | ) | 7,602,492 | |||||
Cash and cash equivalents at period beginning | 8,953,949 | 7,520,056 | ||||||
Cash and cash equivalents at period end | $ | 2,541,202 | $ | 15,122,548 | ||||
Supplemental cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest paid | ||||||||
Income taxes paid | ||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007
F-70
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007
F-71
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007
Furniture | 5 to 7 years | |
Computer equipment | 3 to 5 years | |
Leasehold improvements | Remaining lease term or useful life |
F-72
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007
F-73
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007
F-74
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007
QUARTER ENDED | SIX MONTHS ENDED | ||||||||||||||||||||
OCT 31, 2007 | OCT 31, 2006 | OCT 31, 2007 | OCT 31, 2006 | ||||||||||||||||||
Net loss | <2,596,084> | <2,230,921> | <5,250,396> | <4,149,677> | |||||||||||||||||
Gain on foreign currency exchange | 173,692 | 178,197 | 241,476 | 243,899 | |||||||||||||||||
Net comprehensive loss | <2,422,392> | <2,052,724> | <5,008,920> | <3,905,778> |
F-75
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AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2007
F-76
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Appendix A | Form of Written Consent of Stockholder(s) of Cryptometrics, Inc. in Lieu of Meeting | |||
Appendix B | Amendments to Article First and Article Fourth 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 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 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 C-4 | Amendment to Merger Agreement, dated April 2, 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-5 | Amendment to Merger Agreement, dated April 20, 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-6 | Amendment to Merger Agreement, dated May 11, 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-7 | Amendment to Merger Agreement, dated May 18, 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-8 | Amendment to Merger Agreement, dated June 15, 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-9 | Amendment to Merger Agreement, dated July 16, 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-10 | Amendment to Merger Agreement, dated August 16, 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-11 | Amendment to Merger Agreement, dated November 7, 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-12 | Amendment to Merger Agreement, dated February 6, 2008, 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
STOCKHOLDER(S)
OF
CRYPTOMETRICS, INC.
IN LIEU OF MEETING
Table of Contents
OF THE ARTICLES OF INCORPORATION OF JAG MEDIA
HAS BEEN AMENDED BY DELETING THE FOLLOWING LANGUAGE
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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Page | ||||||
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
5
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By: |
Title: |
6
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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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1
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Title: |
By: |
Title: |
2
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6865 S.W. 18th Street, Suite B13
Boca Raton, FL 33433
1
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2
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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 Dated: January 25, 2007 | |
/s/ Michael Vitale Dated: January 26, 2007 | /s/ Stephen J. Schoepfer Dated: January 25, 2007 |
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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: |
(Fax:866.297.1072/E-Mail: steve@jagnotes.com)
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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 |
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CRYPTOMETRICS, INC.
By: | /s/ Robert Barra |
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73 Main Street
Tuckahoe, NY 10707
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, Thomas J. Mazzarisi and Stephen J. Schoepfer dated as of January 24, 2007, as amended (“Merger Agreement Amendment”) |
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April 2, 2007
Page -2-
Sincerely yours, JAG MEDIA HOLDINGS, INC. | ||||
By: | /s/ Thomas J. Mazzarisi | |||
Name: | Thomas J. Mazzarisi | |||
Title: | Chairman & CEO | |||
Date: | April 2, 2007 | |||
AGREED AND ACCEPTED: CRYPTOMETRICS, INC. | ||||
By: | /s/ Robert Barra | |||
Name: | Robert Barra | |||
Title: | Co-CEO | |||
Date: | April 4, 2007 | |||
/s/ Robert Barra | ||||
Robert Barra | ||||
Dated: April 4, 2007 | ||||
/s/ Michael Vitale | ||||
Michael Vitale | ||||
Dated: April 4, 2007 | ||||
AGREED AND ACCEPTED: CRYPTOMETRICS ACQUISITION, INC. | ||||
By: | /s/ Thomas J. Mazzarisi | |||
Name: | Thomas J. Mazzarisi | |||
Title: | President | |||
Date: | April 2, 2007 | |||
KARLEN & STOLZAR, LLP | ||||
By: | /s/ Michael Stolzar | |||
Name: | Michael I. Stolzar | |||
Title: | Partner | |||
Date: | April 2, 2007 | |||
/s/ Thomas J. Mazzarisi | ||||
Thomas J. Mazzarisi | ||||
Dated: April 2, 2007 | ||||
/s/ Stephen J. Schoepfer | ||||
Stephen J. Schoepfer | ||||
Dated: April 2, 2007 | ||||
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6865 S.W. 18th Street, Suite B13
Boca Raton, FL 33433
73 Main Street
Tuckahoe, NY 10707
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April 20, 2007
Page -2-
Sincerely yours, | AGREED AND ACCEPTED: | |||||||||
JAG MEDIA HOLDINGS, INC. | CRYPTOMETRICS ACQUISITION, INC. | |||||||||
By: | /s/ Thomas J. Mazzarisi | |||||||||
Name: Thomas J. Mazzarisi | By: | /s/ Thomas J. Mazzarisi | ||||||||
Title: Chairman & CEO | Name: Thomas J. Mazzarisi | |||||||||
Date: April 20, 2007 | Title: President | |||||||||
Date: April 20, 2007 | ||||||||||
AGREED AND ACCEPTED: CRYPTOMETRICS, INC. | The undersigned is signing this agreement solely in its capacity as “Escrow Agent” pursuant to the provisions of paragraph 10 of the Merger Agreement Amendment | |||||||||
KARLEN & STOLZAR, LLP | ||||||||||
By: | /s/ Robert Barra | |||||||||
Title: Co-CEO | ||||||||||
Date: April 20, 2007 | By: | /s/ Michael I. Stolzar | ||||||||
Name: Michael I. Stolzar | ||||||||||
Title: Partner | ||||||||||
Date: April 20, 2007 |
/s/ Robert Barra | The undersigned are signing this agreement only with respect to their obligations set forth in paragraph 12 of the Merger Agreement Amendment | |||||||
Robert | Barra | |||||||
Dated: | April 20, 2007 | |||||||
/s/ Thomas J. Mazzarisi | ||||||||
Thomas J. Mazzarisi | ||||||||
Dated: April 20, 2007 | ||||||||
/s/ Michael Vitale | /s/ Stephen J. Schoepfer | |||||||
Michael | Vitale | Stephen J. Schoepfer | ||||||
Dated: | April 20, 2007 | Dated: April 20, 2007 |
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6865 S.W. 18th Street, Suite B13
Boca Raton, FL 33433
73 Main Street
Tuckahoe, NY 10707
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, Thomas J. Mazzarisi and Stephen J. Schoepfer (collectively, the “Parties”) dated as of January 24, 2007, as Further Amended by those Certain Agreements Among the Parties dated as of February 26, 2007, April 2, 2007 and April 20, 2007 (“Merger Agreement Amendment”) |
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May 11,2007
Page -2-
Sincerely yours, | AGREED AND ACCEPTED: | |||||||
JAG MEDIA HOLDINGS, INC. | CRYPTOMETRICS ACQUISITION, INC. | |||||||
By: | /s/ Thomas J. Mazzarisi | By: | /s/ Thomas J. Mazzarisi | |||||
Name: Thomas J. Mazzarisi | Name: Thomas J. Mazzarisi | |||||||
Title: Chairman & CEO | Title: President | |||||||
Date: May 9, 2007 | Date: May 9, 2007 |
AGREED AND ACCEPTED: CRYPTOMETRICS, INC. | The undersigned is signing this agreement solely in its capacity as “Escrow Agent” pursuant to the provisions of paragraph 10 of the Merger Agreement Amendment | |||||||
By: | /s/ Robert Barra | KARLEN & STOLZAR, LLP | ||||||
Name: Robert Barra | ||||||||
Title: Co-CEO | By: | /s/ Michael I. Stolzar | ||||||
Date: May 10, 2007 | Name: Michael I. Stolzar | |||||||
Title: Partner | ||||||||
Date: May 10, 2007 |
/s/ Robert Barra Dated: May 10, 2007 | The undersigned are signing this agreement only with respect to their obligations set forth in paragraph 12 of the Merger Agreement Amendment | |||||||
/s/ Thomas J. Mazzarisi | ||||||||
/s/ Michael Vitale | Thomas J. Mazzarisi | |||||||
Michael Vitale | Dated: May 9, 2007 | |||||||
Dated: May 10, 2007 | ||||||||
/s/ Stephen J. Schoepfer | ||||||||
Stephen J. Schoepfer | ||||||||
Dated: May 9, 2007 |
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Appendix C-7
JAG MEDIA HOLDINGS, INC.
6865 S.W. 18th Street, Suite B13
Boca Raton, FL 33433
May 18, 2007
Cryptometrics, Inc.
73 Main Street
Tuckahoe, NY 10707
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, Thomas J. Mazzarisi and Stephen J. Schoepfer
(collectively, the “Parties”) dated as of January 24, 2007, as Further
Amended by those Certain Agreements Among the Parties dated as of February
26, 2007, April 2, 2007, April 20, 2007 and May 11, 2007 (“Merger
Agreement Amendment”)
Gentlemen:
This will confirm our understanding regarding the following changes to the Merger Agreement Amendment, which have been authorized by the directors of JAG Media, Cryptometrics Acquisition and Cryptometrics:
1. The Automatic Termination Date of May 18, 2007 set forth in the first sentence of paragraph 9 of the Merger Agreement Amendment is hereby changed to June 15, 2007.
2. Contemporaneously with the execution of this agreement, Cryptometrics shall pay $167,659.84 in additional transaction costs, which amount shall be paid on behalf of JAG Media, to the relevant legal and accounting firms providing services to JAG Media in connection with the transaction. Such payments shall be made by Cryptometrics via wire transfer directly to such parties, in accordance with wire transfer instructions to be provided by JAG Media.
3. Cryptometrics also agrees to pay on behalf of JAG Media up to $150,000 of various remaining transaction costs, not covered by the payments in paragraph 2 above, incurred prior to any termination of the Merger Agreement, required to close the transaction as and when those payments become due and payable, which costs are currently estimated to be approximately $150,000.
4. In consideration of the payments agreed to be made in paragraph 2 above, JAG Media hereby grants (and shall, within five business days after payment of the amounts in paragraph 2 above, cause to be granted by Pixaya (UK) Limited (“Pixaya”)) to Cryptometrics a non-exclusive, royalty free, perpetual, with rights of survivorship,
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personal license to use all of its source codes and related design and development documents and other intellectual property (excluding the SurvayaCam and Pixaya names and marks) related to all of its current Pixaya products including its Pixaya SurvayaCam product (collectively, the “Licensed Property”) solely for the purpose of allowing Cryptometrics and its subsidiaries to develop and exploit their own lines of products (“Licensed Products”) by incorporating Licensed Property therein; but not for use in any stand-alone product that competes directly with a current product of Pixaya other than facial recognition, access control, critical infrastructure protection or intelligent video analysis products/systems, and Cryptometrics and its subsidiaries shall not disclose to any third party such source codes or any other trade secret information included within the Licensed Property. Except as expressly set forth in this paragraph 4, nothing herein contained shall be construed as a grant of any rights or licenses to any JAG Media or Pixaya technology or intellectual property. JAG Media, on behalf of itself and Pixaya, disclaims any and all warranties, express or implied, including without limitation any warranty of merchantability, fitness for any particular use or purpose, or of non-infringement of any third party rights. Cryptometrics shall indemnify, defend and hold harmless JAG Media, Pixaya and their respective officers, directors, employees and representatives, of and from any and all claims and liability arising out of or in connection with the commercialization of any Licensed Product or use pursuant to this paragraph 4 of any Licensed Property. JAG Media represents and warrants to CryptoMetrics that Pixaya is its wholly owned subsidiary and that JAG Media has the power to cause it to grant the license referred to herein.
5. If the Merger Agreement is terminated by JAG Media or Cornell Capital for any reason, JAG Media shall issue to Cryptometrics 500,000 shares of Parent Common Stock (in addition to the 500,000 shares previously agreed upon in the amendment to the Merger Agreement dated January 24, 2007), Notwithstanding the foregoing, if Cryptometrics fails to pay any amounts pursuant to paragraph 3 above and/or if the S-4 registration statement is declared effective and Cryptometrics fails to close the transaction and file the certificate of merger by the Automatic Termination Date then in effect, Cryptometrics shall not be entitled to receive the 500,000 shares of Parent Common Stock referenced above.
All defined terms used in this agreement, which are not otherwise defined herein shall have the meaning ascribed to them in the Merger Agreement Amendment. Except as otherwise set forth in this agreement, the Merger Agreement Amendment and the Merger Agreement shall remain unchanged and in full force and effect.
If the foregoing accurately reflects your understanding of our agreement regarding the above matter, please indicate your agreement and acceptance by signing in the appropriate space below and returning a fully executed and dated copy of this agreement to the undersigned
[SIGNATURES APPEAR ON NEXT PAGE]
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Sincerely yours, | AGREED AND ACCEPTED: | |||||||
JAG MEDIA HOLDINGS, INC. | CRYPTOMETRICS ACQUISITION, INC. | |||||||
By: /s/ Thomas J. Mazzarisi Name: Thomas J. Mazzarisi Title: Chairman & CEO Date: May 18, 2007 | By: /s/ Thomas J. Mazzarisi Name: Thomas J. Mazzarisi Title: President Date: May 18, 2007 | |||||||
AGREED AND ACCEPTED: | The undersigned is signing this | |||||||
CRYPTOMETRICS, INC. | agreement solely in its capacity as | |||||||
“Escrow Agent“ pursuant to the | ||||||||
provisions of paragraph 10 | ||||||||
of the Merger Agreement Amendment | ||||||||
By: /s/ Robert Barra Name: Robert Barra Title: Co-CEO Date: May 18, 2007 | KARLEN & STOLZAR, LLP By: /s/ Michael I.Stolzar Name: Michael I.Stolzar Title: Partner Dated: May 18, 2007 | |||||||
The undersigned are signing this | ||||||||
agreement only with respect to their | ||||||||
obligations set forth | ||||||||
/s/ Robert Barra | in paragraph 12 of the Merger Agreement Amendment | |||||||
Robert Barra Dated: May 18, 2007 | ||||||||
/s/ Thomas J. Mazzarisi Thomas J. Mazzarisi Dated: May 18, 2007 | ||||||||
By: /s/ Michael Vitale Michael Vitale Dated: May 18, 2007 | By: /s/ Stephen J. Schoepfer Stephen J. Schoepfer Dated: May 18, 2007 |
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6865 S.W. I8th Street, SuiteB13
Boca Raton, FL 33433
73 Main Street
Tuckahoe, NY 10707
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, Thomas J. Mazzarisi and Stephen J. Schoepfer (collectively, the “Parties”) dated as of January 24, 2007, as Further Amended by those Certain Agreements Among the Parties dated as of February 26, 2007, April 2, 2007, April 20, 2007, May 11, 2007 and May 18, 2007 (“Merger Agreement Amendment”) |
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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: June 15, 2007 | By: /s/ Thomas J. Mazzarisi Name: Thomas J. Mazzarisi Title: President Date: June 15, 2007 | |
AGREED AND ACCEPTED: CRYPTOMETRICS, INC. | The undersigned is signing this agreement solely in its capacity as “Escrow Agent” pursuant to the provisions of paragraph 10 of the Merger Agreement Amendment | |
KARLEN & STOLZAR, LLP | ||
By: /s/ Robert Barra Name: Robert Barra Title: Co-CEO Date: June 15, 2007 | By: /s/ Michael I. Stolzar Name: Michael I. Stolzar Title: Partner Date: June 15, 2007 | |
The undersigned are signing this agreement only with respect to their obligations set forth in paragraph 12 of the Merger Agreement Amendment | ||
/s/ Robert Barra Dated: June 15, 2007 | /s/ Thomas J. Mazzarisi Dated: June 15, 2007 | |
/s/ Michael Vitale Dated: June 15, 2007 | /s/ Stephen J. Schoepfer Dated: June 15, 2007 |
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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, Thomas J. Mazzarisi and Stephen J. Schoepfer (collectively, the “Parties”) dated as of January 24, 2007, as Further Amended by those Certain Agreements Among the Parties dated as of February 26, 2007, April 2, 2007, April 20, 2007, May 11, 2007, May 18, 2007, June 15, 2007 and July 16, 2007 (“Merger Agreement Amendment”) |
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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: September 12, 2007 | By: /s/ Thomas J. Mazzarisi Name: Thomas J. Mazzarisi Title: President Date: September 12, 2007 | |
AGREED AND ACCEPTED: CRYPTOMETRICS, INC. | The undersigned is signing this agreement solely in its capacity as “Escrow Agent” pursuant to the provisions of paragraph 10 of the Merger Agreement Amendment | |
By: /s/ Robert Barra Name: Robert Barra Title: Co-CEO Date: September 12, 2007 | KARLEN & STOLZAR, LLP | |
By: /s/ Michael Stolzar Name: Michael I. Stolzar Title: Partner Date: September 12, 2007 | ||
/s/ Robert Barra Robert Barra Dated: September 12, 2007 | The undersigned are signing this agreement only with respect to their obligations set forth in paragraph 12 of the Merger Agreement Amendment | |
/s/ Thomas J. Mazzarisi Thomas J. Mazzarisi Dated: September 12, 2007 | ||
/s/ Michael Vitale Michael Vitale Dated: September 12, 2007 | /s/ Stephen J. Schoepfer Stephen J. Schoepfer Dated: September 12, 2007 |
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Boca Raton, FL 33433
73 Main Street
Tuckahoe, NY 10707
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, Thomas J. Mazzarisi and Stephen J. Schoepfer (collectively, the “Parties”) dated as of January 24, 2007, as Further Amended by those Certain Agreements Among the Parties dated as of February 26, 2007, April 2, 2007, April 20, 2007, May 11, 2007, May 18, 2007, June 15, 2007, July 16, 2007 and August 16, 2007 (“Merger Agreement Amendment”) |
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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: November 7, 2007 | By: /s/ Thomas J. Mazzarisi Name: Thomas J. Mazzarisi Title: President Date: November 7, 2007 | |||
AGREED AND ACCEPTED: CRYPTOMETRICS, INC. | The undersigned is signing this agreement solely in its capacity as “Escrow Agent” pursuant to the provisions of paragraph 10 of the Merger Agreement Amendment | |||
By: /s/ Robert Barra Name: Robert Barra Title: Co-CEO Date: November 12, 2007 | KARLEN & STOLZAR, LLP | |||
By: /s/ Michael I. Stolzar Name: Michael I. Stolzar Title: Partner Date: November 12, 2007 | ||||
/s/ Robert Barra Robert Barra Dated: November 12, 2007 | The undersigned are signing this agreement only with respect to their obligations set forth in paragraph 12 of the Merger Agreement Amendment | |||
/s/ Thomas J. Mazzarisi Thomas J. Mazzarisi Dated: November 7, 2007 | ||||
/s/ Michael Vitale Michael Vitale Dated: November 12, 2007 | /s/ Stephen J. Schoepfer Stephen J. Schoepfer Dated: November 7, 2007 |
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73 Main Street
Tuckahoe, NY 10707
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, Thomas J. Mazzarisi and Stephen J. Schoepfer (collectively, the “Parties”) dated as of January 24, 2007, as Further Amended by those Certain Agreements Among the Parties dated as of February 26, 2007, April 2, 2007, April 20, 2007, May 11, 2007, May 18, 2007, June 15, 2007, July 16, 2007, August 16, 2007 and November 7, 2007 (“Merger Agreement Amendment”) |
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February 6, 2008
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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: February 6, 2008 | By: /s/ Thomas J. Mazzarisi Name: Thomas J. Mazzarisi Title: President Date: February 6, 2008 | |||
AGREED AND ACCEPTED: CRYPTOMETRICS, INC. | The undersigned is signing this agreement solely in its capacity as “Escrow Agent” pursuant to the provisions of paragraph 10 of the Merger Agreement Amendment | |||
By: /s/ Robert Barra Name: Robert Barra Title: Co-CEO Date: February 6, 2008 | KARLEN & STOLZAR, LLP | |||
By: /s/ Michael I. Stolzar Name: Michael I. Stolzar Title: Partner Date: February 6, 2008 | ||||
/s/ Robert Barra Robert Barra Dated: February 6, 2008 | The undersigned are signing this agreement only with respect to their obligations set forth in paragraph 12 of the Merger Agreement Amendment | |||
/s/ Thomas J. Mazzarisi Thomas J. Mazzarisi Dated: February 6, 2008 | ||||
/s/ Michael Vitale Michael Vitale Dated: February 6, 2008 | /s/ Stephen J. Schoepfer Stephen J. Schoepfer Dated: February 6, 2008 |
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199 Read Avenue
Crestwood, NY 10707
Attn: Co-CEO other than Executives
the Company.
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By: |
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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 YA Global Investments, L.P., formerly known as 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 YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(14) | ||
4 | .5 | Securities Purchase Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(17) | ||
4 | .6 | $1,900,000 Secured Convertible Debenture issued to YA Global Investments, L.P., formerly known as 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 YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(17) | ||
4 | .8 | Security Agreement, effective May 25, 2006, by and between JAG Media LLC and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(17) | ||
4 | .9 | $1,250,000 Secured Convertible Debenture issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17) | ||
4 | .10 | WarrantNo. CCP-1 for 2,000,000 shares of common stock issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17) | ||
4 | .11 | WarrantNo. CCP-2 for 2,000,000 shares of common stock issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17) | ||
4 | .12 | WarrantNo. CCP-3 for 2,000,000 shares of common stock issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17) | ||
4 | .13 | WarrantNo. CCP-4 for 3,000,000 shares of common stock issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17) | ||
4 | .14 | WarrantNo. CCP-5 for 3,000,000 shares of common stock issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 25, 2006(17) | ||
4 | .15 | $1,000,000 Secured Convertible Debenture issued to YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, effective May 31, 2006(17) | ||
5 | .1** | Opinion of Jones Vargas | ||
8 | .1** | 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 | Amendment to Amended and Restated Employment Agreement, dated as of November 12, 2007, by and between Registrant and Thomas J. Mazzarisi(29) | ||
10 | .7 | Amendment to Amended and Restated Employment Agreement, dated as of November 12, 2007, by and between Registrant and Stephen J. Schoepfer(29) |
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Exhibit | Description | |||
10 | .8 | Consulting Agreement, dated June 12, 2002, between JAG Media Holdings, Inc. and Walsh Organization, Inc.(8) | ||
10 | .9 | 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) | ||
10 | .10 | Subscription Agreement, dated December 10, 2002, between JAG Media Holdings, Inc. and Bay Point Investment Partners LLC(5) | ||
10 | .11 | Placement Agent Agreement, dated December 10, 2002, between JAG Media Holdings, Inc. and RMC 1 Capital Markets, Inc.(5) | ||
10 | .12 | 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 | .13 | 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 | .14 | Subscription Agreement, dated as of September 25, 2003, between JAG Media Holdings, Inc. and Kuekenhof Equity Fund L.P.(8) | ||
10 | .15 | Non-Circumvention/Non-Disclosure Agreement, dated as of January 1, 2004 between Flow Capital Advisors Inc. and JAG Media Holdings, Inc.(26) | ||
10 | .16 | Finder’s Fee Agreement, dated as of January 5, 2004, between JAG Media Holdings, Inc. and Flow Capital Advisors, Inc.(9) | ||
10 | .17 | Business Sale Agreement dated November 24, 2004, by and among TComm Limited, TComm (UK) Limited and JAG Media Holdings, Inc.(10) | ||
10 | .18 | Employment Agreement, dated November 24, 2004, by and between JAG Media Holdings, Inc. and Stuart McClean(10) | ||
10 | .19 | Employment Agreement, dated November 24, 2004, by and between JAG Media Holdings, Inc. and Joanne McClean(10) | ||
10 | .20 | Finder’s Fee Agreement, dated as of March 14, 2005, by and between JAG Media Holdings, Inc. and Flow Capital Advisors, Inc.(26) | ||
10 | .21 | 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 | .22 | Letter Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and YA Global Investments, L.P., formerly known as 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 | .23 | Investor Registration Rights Agreement, effective May 25, 2006, by and between JAG Media Holdings, Inc. and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(17) | ||
10 | .24 | 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 YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, dated as of April 9, 2002, as amended on July 8, 2004 and July 21, 2004(17) | ||
10 | .25 | Irrevocable Transfer Agent Instructions, effective May 25, 2006, by and among JAG Media Holdings, Inc., Transfer Online, Inc. and YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP(17) | ||
10 | .26 | Letter Agreement, dated January 24, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(19) | ||
10 | .27 | Letter Agreement, dated February 26, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(20) | ||
10 | .28 | Letter Agreement, dated April 2, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(21) |
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Exhibit | Description | |||
10 | .29 | Letter Agreement, dated April 20, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(22) | ||
10 | .30 | Letter Agreement, dated May 11, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(23) | ||
10 | .31 | Letter Agreement, dated May 18, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(24) | ||
10 | .32 | Letter Agreement, dated June 15, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(25) | ||
10 | .33 | Letter Agreement, dated July 16, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., formerly known as Cornell Capital Partners, LP, Cryptometrics, Inc., Robert Barra and Michael Vitale(26) | ||
10 | .34 | Letter Agreement, dated September 10, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., Cryptometrics, Inc., Robert Barra and Michael Vitale(28) | ||
10 | .35 | Letter Agreement, dated November 7, 2007, by and among JAG Media Holdings, Inc., YA Global Investments, L.P., Cryptometrics, Inc., Robert Barra and Michael Vitale(29) | ||
10 | .36 | Letter Agreement, dated January 31, 2008, between JAG Media Holdings, Inc. and YA Global Investments, L.P.(30) | ||
10 | .37 | Letter Agreement Amendment, dated March 11, 2008, between JAG Media Holdings, Inc. and YA Global Investments L.P.(31) | ||
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) | ||
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) | ||
99 | .6 | Amendment to Merger Agreement, dated as of April 2, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(21) | ||
99 | .7 | Amendment to Merger Agreement, dated as of April 20, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(22) | ||
99 | .8 | Amendment to Merger Agreement, dated as of May 11, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(23) |
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Exhibit | Description | |||
99 | .9 | Amendment to Merger Agreement, dated as of May 18, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale,Thomas J. Mazzarisi and Stephen J. Schoepfer(24) | ||
99 | .10 | Amendment to Merger Agreement, dated June 15, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(25) | ||
99 | .11 | Amendment to Merger Agreement, dated July 16, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(26) | ||
99 | .12 | Amendment to Merger Agreement, dated August 16, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(28) | ||
99 | .13 | Amendment to Merger Agreement, dated November 7, 2007, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(29) | ||
99 | .14 | Amendment to Merger Agreement, dated February 6, 2008, by and among JAG Media Holdings, Inc., Cryptometrics, Inc., Cryptometrics Acquisition, Inc., Karlen & Stolzar, LLP, Robert Barra, Michael Vitale, Thomas J. Mazzarisi and Stephen J. Schoepfer(30) |
* | Filed herewith. | |
** | Previously filed. | |
(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 | |
(21) | Previously filed as an exhibit to our Current Report onForm 8-K filed on April 6, 2007 | |
(22) | Previously filed as an exhibit to our Current Report onForm 8-K filed on April 25, 2007 | |
(23) | Previously filed as an exhibit to our Current Report onForm 8-K filed on May 11, 2007 |
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(24) | Previously filed as an exhibit to our Current Report onForm 8-K filed on May 23, 2007 | |
(25) | Previously filed as an exhibit to our Current Report onForm 8-K filed on June 21, 2007. | |
(26) | Previously filed as an exhibit to our Current Report onForm 8-K filed on July 25, 2007. | |
(27) | Previously filed as an exhibit to our Registration Statement filed on March 12, 2007. | |
(28) | Previously filed as an exhibit to Amendment No. 2 to our Registration Statement filed on September 13, 2007. | |
(29) | Previously filed as an exhibit to our Annual Report onForm 10-K filed on November 13, 2007. | |
(30) | Previously filed as an exhibit to our Current Report on Form8-K filed on February 6, 2008. |
(31) | Previously filed as an exhibit to our Current Report on Form8-K filed on March 12, 2008. |
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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 | Chairman of the Board, Chief Executive Officer & General Counsel | March 13, 2008 | ||||
/s/ Stephen J. Schoepfer | President, Chief Operating Officer, Chief Financial Officer (Principal Accounting Officer) Secretary & Director | March 13, 2008 |
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