TraceGuard (TCGD) 10QSB/A 2007 Q1 Quarterly report (small business) (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-QSB/A

(Mark One)

x	Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
	For the quarterly period ended June 30, 2006
o	Transition report under Section 13 or 15(d) of the Exchange Act
	For the transition period from _________ to ___________
	Commission File Number: 000-50329

TRACEGUARD TECHNOLOGIES, INC.

(Exact Name of Small Business Issuer as Specified in Charter)

Nevada	98-0370398
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

330 Madison Avenue, 9th Floor, New York, New York 10017

(Address of Principal Executive Offices)

(866) 401-5969

(Issuer’s Telephone Number, Including Area Code)

(Former Address, if Changed Since Last Report)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x   No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the last practicable date:  As of August 14, 2006 there were 24,186,695 shares of common stock issued and outstanding.

Transitional Small Business Disclosure Format (check one):      Yes o   No x

EXPLANATORY NOTE

This amendment to Form 10-QSB is being filed in order to include certain comparative six-month financial information relating to TraceTrack Technology, Ltd. ("TraceTrack") in the Company's financial statements. The financial statements were included in the Company's Form 10-QSB for the quarter ended June 30, 2006, which was filed with the SEC on August 14, 2006. The Company is adding the comparative disclosure on pages 4 and 5 because it is considered the successor entity to TraceTrack as a result of certain license agreement between the Company and TraceTrack dated February 15, 2006, see note 2 (a copy of which was filed as Exhibit 10.1 to the Company's 8-K, filed with the SEC on February 16, 2006).

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

	Page
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS:
Balance Sheet	3
Statements of Operations	4
Statements of Cash Flows	5
Statements of Changes in shareholders' equity (Capital deficiency)	6
Notes to Financial Statements	7-10

2

TRACEGUARD TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

(UNAUDITED)

CONDENSED INTERIM CONSOLIDATED BALANCE SHEET

IN US DOLLAR

	June 30,			December 31,
	2006 (Unuadited)			2005 (Audited)
Assets
Current Assets
Cash and cash equivalents		1,654,296			895,693
Other receivables		213,552			24,080
Total current assets		1,867,848			919,773
Long Term Prepaid Expenses		16,696			-
Restricted deposit		16,288			15,355
Property and equipment, net		421,720			61,261
License rights		100,000			100,000
Total Assets		2,422,552			1,096,389
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable- trade and other		334,717			154,053
Other current liabilities		238,435			32,154
Total current liabilities		573,152			186,207
Commitments and contingencies
Total liabilities		573,152			186,207
Shareholders’ Equity
TraceGuard - Share capital - common shares par value $0.001; Authorized - June 30, 2006 and December 31, 2005 - 150,000,000.Issued and outstanding* - June 30, 2006 and December 31, 2005 - 24,186,695 and 22,542,859 shares, respectively		24,187			22,543
Additional paid-in capital		1,226,853			485,539
Receipt on account of shares to be allotted		1,655,799	��		686,900
Warrants		1,104,019			162,805
Deficit accumulated during the development stage		(2,161,458	)		(447,605	)
Total shareholders equity		1,849,400			910,182
Total liabilities and shareholders equity		2,422,552			1,096,389

* After giving a retroactive effect to a six-to-one stock split in the form of stock dividend of fully paid dividend shares of $0.001 par value at a rate of five shares for every one share of $0.001 par valueon September 12, 2005.

The accompanying notes are an integral part of these condensed financial statements.

3

TRACEGUARD TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

(UNAUDITED)

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

IN US DOLLAR

	Three Months Ended June 30						Six Months Ended June 30						Cumulative from March 20,2002(*) to June 30			TraceTrack
	2006			2005			2006			2005			2006			Three Months Ended June 30 ,2005			Six Months Ended June 30 ,2005
	(Unaudited)			(Unaudited)			Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Research and development expenses		574,809			-			737,437			-			767,977			34,528			60,312
Marketing, general and administrative expenses		441,874			6,527			985,810			13,814			1,401,448			14,204			19,332
Operating loss		(1,016,683	)		(6,527	)		(1,723,247	)		(13,814	)		(2,169,425	)		(48,732	)		(79,644	)
Financing expenses		(6,687	)		-			(13,184	)		-			(15,662	)		(69	)		(114	)
Financing income		14,214			-			22,578			-			23,629						-
Loss for the period		(1,009,156	)		(6,527	)		(1,713,853	)		(13,814	)		(2,161,458	)		(48,801	)		(79,758	)
Loss per share ("EPS") - basic and diluted		(0.04	)		(0.00)**			(0.08	)		(0.00)**			(0.13)**			(4.88	)		(7.98	)
Weighted average number of shares used in computation of EPS basic and diluted		22,773,213			16,440,000**			22,675,578			16,440,000**			17,112,392**			10,000			10,000

(*) Date of inception.

(**)After giving a retroactive effect to a six-to-one stock split in the form of stock dividend of fully paid dividend shares of $0.001 par value at a rate of five shares for every one share of $0.001 par valueon September 12, 2005.

The accompanying notes are an integral part of these condensed financial statements.

4

TRACEGUARD TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

(UNAUDITED)

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

IN US DOLLARS

	Six Months Ended June 30						Cumulative from March 20,2002(*) to June 30,			TraceTrack Six Months Ended June 30
	2006			2005			2006			2005
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss for the period		(1,713,853	)		(13,814	)		(2,161,458	)		(79,758	)
Adjustments to reconcile net loss for the period to net cash used in operating activities:
Income and expenses not involving cash flow:
Depreciation		14,641			-			15,083			1,460
Compensation expenses to service provider		52,200			-			52,200			-
Imputed interest on notes payable to shareholders		-			868			2,254			-
Changes in operating assets and liabilities:
Decrease (increase) in other receivables		(189,472	)		729			(213,553	)		6,762
Increase in long term prepaid expenses		(16,696	)		-			(16,696	)
Increase (decrease) in accounts payable and other current liabilities		386,945			(460	)		578,518			(13,166	)
Net cash used in operating activities		(1,466,235	)		(12,677	)		(1,743,652	)		(84,702	)
Cash Flows from Investing Activities
Restricted deposit		(933	)		-			(16,288	)		-
Advance on account of license rights		-			-			(100,000	)		-
Purchase of property and equipment		(375,100	)		-			(436,803	)		-
Net cash used in investing activities		(376,033	)		-			(553,091	)		-
Cash Flows from Financing Activities
Issuance of share capital and warrants, net of issuance expenses		945,072			-			1,578,269			-
Receipts on accounts of shares to be allotted		1,655,799			-			2,342,699			-
Receipt on account of notes from shareholder		-			13,501			30,071			-
Increase of short term bank credit, net		-			-			-			11,526
Receipt of long term loans from related parties		-			-			-			73,176
Net cash provided by financing activities		2,600,871			13,501			3,951,039			84,702
Increase in cash and cash equivalents		758,603			824			1,654,296			-
Cash and cash equivalents at the beginning of the period		895,693			1,721			-			-
Cash and cash equivalents at the end of the period		1,654,296			2,545			1,654,296			-

(*) Date of Inception.

The accompanying notes are an integral part of these condensed financial statements.

5

TRACEGUARD TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

(UNAUDITED)

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREOLDERS' EQUITY (Capital deficiency)

IN US DOLLARS

	Number of Shares*		Common Stock Amount		Receipts on Account of Shares To be Allotted			Additional Paid In Capital			Warrants		Deficit Accumulated During The Development Stage			Total
Issuance of common stock to founders on inception		15,000,000		2,500		-			-			-		-			2,500
Issuance of common stock		1,440,000		240		-			47,760			-		-			48,000
Net loss for the period		-		-		-			-			-		(76,263	)		(76,263	)
Balance March 31, 2004 (audited)		16,440,000		2,740		-			47,760			-		(76,263	)		(25,763	)
Net loss for the year		-		-		-			-			-		(13,382	)		(13,382	)
Balance March 31, 2005 (audited)		16,440,000		2,740		-			47,760			-		(89,645	)		(39,145	)
Issuance of common stock (net of issuance expense) on August 24, 2005		5,360,004		893		-			72,407			-		-			73,300
Issuance of dividend shares on September 12, 2005				18,167		-			(18,167	)		-		-			-
Issuance of common stock and warrants (net of issuance expense) on November 6, 2005 and December 5, 2005		642,855		643		-			275,949			162,805		-			439,397
Receipt on accounts of shares to be allotted		-		-		686,900			-			-		-			686,900
Issuance of shares to service providers (net of issuance expense) on August 24, 2005.		100,000		100		-			69,900			-		-			70,000
Capital surplus on account of shareholders waiver on notes payable									37,690								37,690
Net loss for the period		-		-		-			-			-		(357,960	)		(357,960	)
Balance December 31, 2005 (audited)		22,542,859		22,543		686,900			485,539			162,805		(447,605	)		910,182
Issuance of warrants in January, 2006		-		-		-			-			407,189					407,189
Issuance of common stock (net of issuance expense) on June 2006		1,607,836		1,608		(686,900	)		689,150			-		-			3,858
Issuance of Warrants on May, 2006												534,025					534,025
Receipt on accounts of shares to be allotted in May, 2006		-		-		1,655,799			-			-		-			1,655,799
Issuance of shares to service provider in January, 2006		36,000		36		-			52,164			-		-			52,200
Net loss for the period		-		-		-			-			-		(1,713,853	)		(1,713,853	)
Balance June 30, 2006 (unaudited)		24,186,695		24,187		1,655,799			1,226,853			1,104,019		(2,161,458	)		1,849,400

(*) After giving a retroactive effect to a six-to-one stock split in the form of stock dividend of fully paid dividend shares of $0.001 par value at a rate of five shares for every one share of $0.001 par value on September 12, 2005.

The accompanying notes are an integral part of these consolidated financial statements

6

TRACEGUARD TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

(UNAUDITED)

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL

a.   TraceGuard Technologies, Inc. (formerly: IBHAS Technologies Inc.) ("the Company") was incorporated in Nevada on March 20, 2002. Initially the Company's plan was to develop and market an internet based computer software program known as IBHAS software. The IBHAS computer software program was intended to automate the process of submission of Internet web page information in multiple languages to major internet search engines. Changes in the market place forced the Company to seek other technologies, specifically homeland security applications. The Company is currently developing innovative security technologies and solutions for explosives detection, a growth segment of the US and global homeland security market. The Company’s systems are designed to improve the screening and detection of explosives, narcotics, biological contaminants and other hazardous materials.

b.   On February 2, 2006, the Board of Directors of the Company approved a change in the Company’s fiscal year to December 31 from March 31.

c.   On June 20, 2006, the Company announced that it has entered into a non-binding letter of intent to acquire Laser Detect Systems Ltd., a developer of long distance, remote sensing, laser based trace detection solutions, from ITL Optronics. The consummation of the acquisition is conditional upon the performance of a due diligence review to the satisfactory of the parties, and will be subject to the negotiation of a definitive agreement.

d.   The interim statements as of June 30, 2006 and for the six and three month periods then ended (hereafter - the interim statements) were drawn up in condensed form, in accordance with generally accepted accounting principles applicable to interim statements. The accounting principles applied in preparation of the interim statements are consistent with those applied in the annual financial statements. Nevertheless, the interim statements do not include all the information and explanations required for the annual financial statements.

e.   As reflected in the accompanying interim condensed consolidated financial statements, the Company’s operations for the six and three month periods ended June 30, 2006, resulted in a net loss of $1,713,853 and $1,009,156, respectively. Shareholders’ equity as of June 30, 2005 is $ 1,849,400. The Company’s ability to continue operating as a going concern is dependent on its ability to raise sufficient additional working capital. Management plans in this regard include, among other things, raising additional cash primarily through a financing.

f.   In June, 2006 the Company entered into a 12-month joint development program with Rapiscan Systems ("Rapiscan"), a subsidiary of OSI Systems in order to develop TraceScan (using TraceGuard's Carry Safe product), an advanced combined bulk/trace detection system for interdiction of explosive devices and weapons Upon development, TraceScan will be marketed exclusively by Rapiscan primarily to the U.S. Government and also through its global direct sales and distributor network. CarrySafe is designed for carry-on luggage and is currently at an advanced stage of development.

NOTE 2 - LICENSE RIGHTS

On February 15, 2006, the company's fully owned Subsidiary, TraceGuard Technologies Ltd. (the "Subsidiary") entered into a License Agreement (the “Agreement”) with TraceTrack Technology Ltd. ("TraceTrack"), an Israeli based company. Pursuant to the Agreement, the Subsidiary, under certain terms and conditions as set forth within the Agreement, acquired an exclusive, worldwide, perpetual license to the patents and related know-how owned by TraceTrack, which involves technology being developed to be used for the collection of explosive traces. In consideration for the license granted to the Subsidiary, TraceTrack will receive royalty payments of 3% of net sales until the earlier of: five years from the first commercial sale of a product, or at the time that the aggregate total royalty payment equal $2,500,000. This is in addition to a previous payment of $100,000 made as a down payment for the license and is as license rights. As a result of the agreement, the Company is considered the successor entity of TraceTrack.

7

TRACEGUARD TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

(UNAUDITED)

NOTE 3 - SHAREHOLDERS EQUITY

a.   On January 19, 2006, the Company completed a private placement offering of 1,607,836 units, each "unit" comprising one share of our common stock, one warrant to purchase one share of common stock with an exercise price of $1.5 and an exercise period of one year and one warrant to purchase one share of common stock with an exercise price of $2.5 and an exercise period of three years. Units were issued for an aggregate purchase price of $1,125,487. Warrants were valued according to Black-Scholes valuation model at $407,189 using a risk free interest rate of 4.3%, their contractual life, an annual volatility of 100% and no expected dividend.

b.   In January 2006, the Company entered into a service agreement upon which the service provider shall provide the Company services in consideration for 36,000 shares of the Company's common stock. According to the service agreement in the event that the aggregate fair value of the shares at the end of the term of the agreement shall be at less than $25,000 the Company shall issue additional shares to compensate for such difference in value. The market value of these shares as of March 31, 2006 was $52,200.

c.   On May 7, 2006, the Company completed a private placement offering of 2,108,662 units, each "unit" comprising one share of our common stock, one warrants to purchase one share of common stock with an exercise price of $1.5 and an exercise period of one year and one warrant to purchase one share of common stock with an exercise price of $2.5 and an exercise period of three years. Units were issued for an aggregate purchase price of $1,476,064. Warrants were valued according to Black-Scholes valuation model at $534,025 using a risk free interest rate of 4.8%, their contractual life, an annual volatility of 100% and no expected dividend.

d.   Effective January 1, 2006 the Company adopted SFAS No. 123 (Revised 2004) “Share-Based Payment” (“SFAS No. 123R”) using the Modified Prospective Approach. SFAS No. 123R revises SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123) and requires the measurement and recognition of compensation of all share-based payments including grants of employee stock options, to be based on their estimated fair values at grant date, or the date of later modification, over the requisite service period. Under SFAS No. 123R, the Company required to select a valuation technique that meets the criteria as stated in the standard. At the present time the Company chose the Black-Scholes valuation model.

As of June 30, 2006 the Company did not record any stock-based compensation expenses based on the provision of SFAS 123R, as no option were granted to employees during the six month period then ended.

NOTE 4 - MATERIAL AGREEMENTS AND TRANSACTIONS WITH RELATED PARTIES

a.   On February 15, 2006 the Subsidiary entered into a consulting agreement( which was amended on July 6, 2006, see note 5b), with M.S. Materials Ltd. (“M.S.”) for a term of thirty six months. The services to be provided to the Subsidiary by M.S. shall be provided solely by Dr. Ornath, who will be engaged as the Chief Scientist of the Subsidiary. In consideration for Dr. Ornath services the Subsidiary will pay a monthly fee of $12,000 to M.S. In addition, the Company will grant M.S. options to purchase shares of common stock (par value $0.001) as follows:

1) Options to purchase of 1,200,000 shares at an exercise price of at least $0.70 or based on terms to be resolved by the Company’s Board of Directors.

2)   M.S. shall receive additional options for the purchase of 1,200,000 shares of common stock at an exercise price of $1.00 upon the receipt of an approval of the Israeli Security Agency or the US Transportation Security Administration to a Company’s product.

8

TRACEGUARD TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

(UNAUDITED)

NOTE 4 - MATERIAL AGREEMENTS AND TRANSACTIONS WITH RELATED PARTIES - (Continued)

3)   M.S. shall receive additional options for the purchase of 1,200,000 shares of common stock at an exercise price of $1.50 upon the receipt of purchase orders for equipment in an aggregate amount of $1,000,000 during one calendar year or entering into a strategic agreement.

As none of the conditions set forth within the consulting agreement have yet to materialize, none of the above options were issued to date.

b.   On May 7, 2006, the Subsidiary entered into an agreement with Dr. Ehud Ganani pursuant to which Dr. Ganani will serve as Chief Executive Officer of TraceGuard Technologies Ltd., effective February 1, 2006. Dr. Ganani shall receive a monthly salary of $15,000 and an annual bonus of up to $60,000 upon achieving certain objectives. Dr. Ganani will be granted stock options to purchase up to 2,790,000 shares of the Company's common stock. Options are exercisable at an exercise price of $0.70 per share. As none of the conditions set forth within the agreement have yet to materialize, none of the above options were issued to date. This agreement has been amended on July 6, 2006 (see also note 5c).

NOTE 5- SUBSEQUENT EVENTS

a.   On July 6, 2006, the Board of Directors of the Company adopted the 2006 Global Stock Incentive Compensation Plan (the "Plan"), pursuant to which the Company will be able to issue restricted stock awards and restricted stock units awards to its employees, consultants and independent agents. The Company reserved a total of 2,300,000 authorized but unissued shares of Common Stock of the Company, par value US$ 0.001 each, for the purposes of the Plan and the Company's other stock compensation plans, when applicable, subject to adjustments as set forth in the Plan.

b.   On July 6, 2006, the Subsidiary amended the agreement entered into on February 15, 2006 with M.S. Materials Ltd. pursuant to which the Subsidiary engaged M.S. to render it advisory and consulting services through its employee Dr. Fredy Ornath. The amendment, among other things, changed the number of options to be granted to M.S. from 1,200,000 to 1,080,000.

c.   On July 6, 2006, the Subsidiary has amended the agreement with Dr. Ehud Ganani, initially entered into on May 7, 2006. Pursuant to the amendment Dr. Ganani will forego the grant of stock options to purchase an aggregate of 990,000 shares of the Company's common stock, which were to vest based on Dr. Ganani's continued engagement with the Subsidiary, in exchange for the grant of 550,000 shares of restricted common stock in accordance with the 2006 Global Stock Incentive Compensation Plan adopted by the Company's Board of Directors, which shall be subject to the same vesting schedule as the foregone stock options.

d.   On July 6, 2006, the Subsidiary entered into employment agreements with its Officers, Gil Perlberg and David Ben-Yair effective June 1, 2006. Pursuant to the Agreement, Mr. Perlberg and Mr. Ben-Yair will serve as Officers of the Subsidiary, for which they will be paid an annual bonus, upon achieving certain objectives, and restricted shares of common stock of the Company in accordance with the 2006 Global Stock Incentive Compensation Plan, adopted by the Company.

9

TRACEGUARD TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

(UNAUDITED)

NOTE 5- SUBSEQUENT EVENTS - (Continued)

e.   On August 8, 2006 the Board of Directors approved the grant of an option for the purchase of 359,000 shares of common stock of the Company, par value $0.001 each, to M.S. Savyonim Ltd. ("M.S."), an Israeli corporation that rendered to the Corporation management services through Mr. Meir Zucker who served as the President and Chief Executive Officer of the Corporation. Such options were granted to M.S. following the termination of the engagement of M.S. in February 2006 in connection with the services rendered by it to the Corporation. In addition to such options, the Subsidiary paid to M.S. an amount equal to approximately US$ 27,000 in connection with the termination of M.S. engagement.

f.   On August 8, 2006, the Board of Directors of the Company approved the grant of 96,613 shares of common stock of the Company, par valued $0.001 each, to several service providers, in consideration for services provided.

10

PART II. OTHER INFORMATION

Item 6. Exhibits

Number	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

11

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TraceGuard Technologies, Inc.

By:

/s/ Dr. Ehud Ganani

Dr. Ehud Ganani, President, Chief Executive Officer

(Principal Executive Officer)

Date: October 22, 2006

/s/ David Ben-Yair

David Ben-Yair, Chief Financial Officer

(Principal Financial Officer)

Date: October 22, 2006

12