UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INGEN TECHNOLOGIES, INC.
(Exact Name of Small Business Issuer in its Charter)
GEORGIA 3391 88-0429044
(State of Incorporation) (Primary Standard (IRS Employer ID No.)
Classification Code)
35193 AVENUE "A," SUITE-C,
YUCIAPA, CALIFORNIA 92399
(800) 259-9622
(Address and Telephone Number of Registrant's Principal
Executive Offices and Principal Place of Business)
SCOTT R. SAND, CHIEF EXECUTIVE OFFICER
35193 AVENUE "A," SUITE-C,
YUCIAPA, CALIFORNIA 92399
(800) 259-9622
(Name, Address and Telephone Number of Agent for Service)
Copies of communications to:
RICHARD I. ANSLOW, ESQ.
ANSLOW & JACLIN, LLP
195 ROUTE 9, SUITE 204
MANALAPAN, NEW JERSEY 07726
TELEPHONE NO.: (732) 409-1212
FACSIMILE NO.: (732) 577-1188
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.|_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
Common Stock, par value 13,554,497 (2) $.05 $677,725 $79.76
$.001 per share (1)
TOTAL 13,554,497 $677,725 $79.76
(1) Represents shares of common stock issuable in connection with the conversion
of promissory notes in accordance with a Securities Purchase Agreement dated
July 25, 2006 between us and AJW Partners, LLC, AJW Offshore, Ltd., AJW
Qualified Partners, LLC and New Millennium Capital Partners II, LLC,
respectively. The price of $.05 per share is being estimated solely for the
purpose of computing the registration fee pursuant to Rule 457(c) of the
Securities Act and is based on the closing price of the shares of our common
stock as of December 6, 2006.
(2) The number of shares being registered for the conversion of the callable
secured convertible notes is 13,554,497 representing 30% of our issued and
outstanding shares OF common stock and preferred stock (our shares of preferred
stock are each convertible into one share of our common stock).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED DECEMBER __, 2006
PROSPECTUS
INGEN TECHNOLOGIES, INC.
13,554,497 SHARES OF COMMON STOCK ISSUABLE IN CONNECTION
WITH THE CONVERSION OF PROMISSORY NOTES
Our selling security holders are offering to sell 13,554,497 shares of common
stock issuable in connection with the conversion of promissory notes.
THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING "RISK FACTORS"
BEGINNING ON PAGE 3.
NEITHER THE SECURITES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is December 11, 2006
Our shares of common stock are quoted on the Pink Sheets under the symbol
"IGTG." The last reported sale price of our common stock on December 6, 2006 was
$.05.
We will receive no proceeds from the sale of the shares by the selling
stockholders. However, we will receive proceeds from the exercise of the
Warrants.
TABLE OF CONTENTS
SUMMARY INFORMATION.....................................................................1
RISK FACTORS............................................................................3
USE OF PROCEEDS........................................................................13
PENNY STOCK CONSIDERATIONS.............................................................13
SELLING STOCKHOLDERS...................................................................13
PLAN OF DISTRIBUTION...................................................................16
LEGAL PROCEEDINGS......................................................................17
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS...........................17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.........................19
DESCRIPTION OF SECURITIES..............................................................20
INTEREST OF NAMED EXPERTS AND COUNSEL..................................................21
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES....21
DESCRIPTION OF BUSINESS................................................................21
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.............................34
DESCRIPTION OF PROPERTY................................................................39
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................39
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...............................39
EXECUTIVE COMPENSATION.................................................................40
FINANCIAL STATEMENTS...................................................................41
CHANGES AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCIAL DISCLOSURE.......42
AVAILABLE INFORMATION..................................................................42
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SUMMARY INFORMATION
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. YOU
SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING, THE SECTION ENTITLED
"RISK FACTORS" BEFORE DECIDING TO INVEST IN OUR COMMON STOCK. INGEN
TECHNOLOGIES, INC. IS REFERRED TO THROUGHOUT THIS PROSPECTUS AS "INGEN," "INGEN
TECHNOLOGIES," "THE COMPANY," "WE," OR "US."
OUR COMPANY
Ingen Technologies, Inc., a Georgia corporation, was originally formed in
Georgia under the name Classic Restaurants International, Inc. The company
merged into and became known as Creative Recycling Technologies, Inc. ("CRTZ")
in 1997. The company filed periodic reporting under the Securities Exchange Act
from 1996 into 1998 and traded its common stock under the symbol "CRTZ." The
company merged into a privately held Nevada company, Ingen Technologies, Inc.
("Ingen Nevada," formed in 1999) in March of 2004 ("the Merger"). Ingen Nevada's
officers and directors took over management of the Company. Upon completion of
the merger, Creative Recycling Technologies, Inc. changed its name to Ingen
Technologies, Inc. However, Ingen Nevada remains in existence and is our wholly
owned subsidiary. We operate our business through Ingen Nevada. Our stock is
quoted on the Pink Sheets under the symbol "IGTG" (formerly "IGTN").
We made major adjustments to our capital structure at the end of 2005. We
reduced the number of authorized common shares from 500,000,000 to 100,000,000.
The number of authorized preferred shares remained unchanged at 40 million. Our
shareholders authorized a 1-for-40 reverse split of our common shares, thereby
reducing the number of issued shares from 488,037,593 to 12,201,138. We also
undertook a reverse split our preferred shares on 1-for-3 basis, thus reducing
our issued preferred shares from 39,000,000 to 13,300,000. Our preferred shares
are convertible into common shares on a 1-for-1 basis. Our preferred shares are
entitled to vote on an equal footing with common shares on all matters for which
shareholder voting input is required. Trading of our common stock under the
symbol "IGTN" ended on December 5, 2005. Trading commenced again on December 8,
2005, and continues, under our new trading symbol "IGTG."
We have not filed all of our required periodic reports under the Securities
Exchange Act of 1934. Our predecessor, CRTZ, ceased filing its periodic reports
during 1998. After the Merger, we recommenced filing of our periodic reports on
November 7, 2005. Our fiscal year is from June 1 to May 31. We have filed annual
reports on Form 10-KSB for our fiscal years 2004, 2005, and 2006 and quarterly
reports on Form 10-QSB for each quarter during fiscal years 2004 and 2005 and
the first three quarters of fiscal year 2006, as well as other documents as
contained on EDGAR. We are currently attempting to gather information from
former CRTZ officials, attorneys and accountants so that our auditors can
complete back financial statements and our legal counsel can complete and file
the remaining back reporting documents. See "RISK FACTORS."
OVERVIEW OF OUR BUSINESS
Ingen Technologies, Inc. is primarily a medical device manufacturer and service
provider for medical and consumer markets both domestic and abroad. We have four
products, one of which has had sales in at least the last two fiscal years
(Secure Balance(TM)). The others are oxygen and gas monitoring safety devices
that we have developed over the last few years. We also plan to enter the
farming industry with our Pure Produce facilities and products. Pure Produce has
pharmaceutical applications as well. We have applied for a trademark for Pure
Produce.
There are several reasons for material delay in the completion and production of
OxyView and OxyAlert. The major delay was the testing and reengineering of
OxyView. Lab tests conducted by Irvine Lab was indicating a problem with the
movement of the piston. It took several months and additional funding to
complete an SLA model of OxyView. In addition, the tooling was delayed by AMF
Engineering for reasons related to additional time needed to build and test the
sonic welder and index table. There were additional costs required to complete
the testing with AMF Engineering, and this resulted in several months delay.
There was a delay in the ordering of rubber bushings from QOSINA. We ordered
200,000 bushings and the manufacturer delayed the order several months. There
are two bushings included in the OxyView package so that the customer can easily
attach the OxyView. There were sales of OxyView effective 11/10/2006 with Koike
Medical Co. Ltd. in Japan, PO No. KM111006.
MEDICAL DEVICES AND SERVICES
Increasing revenues are being generated from the company's Secure Balance(TM)
program; a medical product line for physicians and hospitals that provides
patient services for "balance & fall prevention" programs.
The company's featured medical oxygen monitoring device is OxyAlert(TM), a
second-generation design of the Company's BAFI(TM) product line. Both of these
products have been issued two United States Patents. Both of these products are
low-oxygen safety warning devices used on remote oxygen cylinders for patients,
commercial aircraft, military transport, and fire and safety equipment.
OxyAlert(TM) technology encompasses the use of digital sensing and RF frequency
transfer so that care givers can access a hand-held remote to monitor the actual
oxygen level of any oxygen cylinder at a reasonable distance.
1
Using the same patented and proprietary technology, the company plans to
eventually offer our GasAlert(TM) product which is a device that interfaces
between any gas line and accessory, such as a water heater, dryer, stove or
heater.
Our newest product, OxyView, has a patent and trademark pending, and is a
pneumatic gauge that provides visual safety warning of oxygen flow to
hospitalized patients. This product enhances the safety, assurance and accuracy
of hospitalized patients being administered oxygen from any source. OxyView is a
lightweight pneumatic gauge that is attached to the oxygen tubing just below the
neck. It informs the nursing staff of oxygen flow rate near the patient. It
could quickly inform the hospital staff of any leak or inaccuracy between the
delivery source and the patient.
PURE PRODUCE - A DEVELOPING LINE OF AGRICULTURAL PRODUCTS AND FACILITIES
Pure Produce is a continuing research & development program currently under
design. This program uses hydroponics (plants grown in water) and areoponics
(roots suspended in air) technology to grow various plants without the use of
soil, fertilizer and pesticides. This technology is sometimes referred to as
"molecular farming." As funding allows, the company anticipates entering the
nutriceutical and pharmaceutical markets within the next two years.
If we are able to raise necessary financing, our Pure Produce facilities will be
designed to offer vegetable and herb growth efficiency. The Agro-facility will
offer what we believe to be the most efficient use of water and energy
conservation technologically available to us.
The main competitive advantage of the facilities would be to deliver off-season,
high profit margin gourmet vegetables, herbs and edible flowers. The produce
selected for planting can be customized for local consumption. We plan to locate
the facilities within major populated areas, reducing the cost of transportation
as a result (compared to the cost and logistics involved in shipping
agricultural products from rural growers to urban consumers).
GOING CONCERN
As noted in Note 3 to the Financial Statements which accompany this prospectus,
our consolidated financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and liabilities and
commitments in the normal course of business. In the near term, we expect
operating costs to continue to exceed funds generated from operations. As a
result, we expect to continue to incur operating losses and we may not have
sufficient funds to grow our business in the future. We can give no assurance
that we will achieve profitability or be capable of sustaining profitable
operations. As a result, operations in the near future are expected to continue
to use working capital.
To successfully grow the individual segments of the business, we must decrease
our cash burn rate, improve our cash position and the revenue base of each
segment, and succeed in our ability to raise additional capital through a
combination of primarily public or private equity offering or strategic
alliances. We also depend on certain contractors, and our sole employee, the
CEO, and the loss of any of those contractors or the employee, may harm the
Company's business.
We incurred a loss of $1,602,827 and $307,255 for the years ended May 31, 2006
and 2005, and as of those dates, had an accumulated deficit of $8,168,218 and
$6,565,391, respectively.
We incurred a loss of $2,766,114 and $113,762 for the quarter ended August 31,
2006 and 2005, and as of those dates, had an accumulated deficit of $10,934,322
for the quarter ending August 31, 2006.
OUR WEBSITE
We invite you to visit our website at www.ingen-tech.com for information about
our company and products. Our address is provided as an inactive textual
reference only.
OUR CONTACT INFORMATION
We can be reached by calling (909) 790-7180. Our fax number is (909) 790-7185.
Our email address is Info@ingen-tech.com. As noted above, our website address is
www.ingen-tech.com. Our office address is 35193 Avenue "A," Suite-C, Yucaipa, CA
92399.
2
THE OFFERING
Common stock offered by
selling stockholders Up to 13,554,497 shares, including the
following:
- up to 13,554,497 shares of common stock
which is part of the amount underlying
secured convertible notes in the principal
amount of $1,300,000 (includes a good
faith estimate of the shares underlying
secured convertible notes to account for
market fluctuations and antidilution
protection adjustments, respectively). We
have registered 30% of Ingen's issued and
outstanding shares of common stock
issuable upon conversion of the secured
notes, based upon current market prices.
We have received $1,300,000 of such
proceeds and will receive an additional
$200,000 upon the filing of this
registration statement
- 13,554,497 represents 30% of our current
shares of outstanding common stock and
preferred stock (each share of preferred
stock converts into one share of common
stock).
Common stock to be outstanding
after the offering. Up to 44,564,107 shares
Use of proceeds We will not receive any proceeds from the
sale of the common stock.
Pink Sheets Symbol IGTG
RISK FACTORS
AN INVESTMENT IN OUR SHARES INVOLVES A HIGH DEGREE OF RISK. BEFORE MAKING AN
INVESTMENT DECISION, YOU SHOULD CAREFULLY CONSIDER ALL OF THE RISKS DESCRIBED IN
THIS PROSPECTUS. EACH OF THE FOLLOWING RISKS COULD MATERIALLY ADVERSELY AFFECT
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS, WHICH COULD CAUSE
THE PRICE OF OUR SHARES TO DECLINE SIGNIFICANTLY AND YOU MAY LOSE ALL OR A PART
OF YOUR INVESTMENT. OUR FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS ARE
SUBJECT TO THE FOLLOWING RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE ANTICIPATED BY OUR FORWARD-LOOKING STATEMENTS AS A
RESULT OF THE RISK FACTORS BELOW. SEE "FORWARD-LOOKING STATEMENTS."
THE FOLLOWING RISKS RELATE TO OUR OBLIGATION TO FILE REPORTS UNDER THE
SECURITIES EXCHANGE ACT OF 1934:
THE SEC HAS THREATENED TO SUSPEND TRADING OF OUR STOCK
On October 13, 2005, we received a letter from the Division of Corporate Finance
of the Securities and Exchange Commission ("SEC") in connection with our failure
to file periodic reports as required by the Securities Exchange Act of 1934.
Specifically, as of the date of the SEC's letter, our predecessor failed to file
periodic reports dating to fiscal year ended 1998. After the Merger, we
recommenced filing of our periodic reports on November 7, 2005. Based on same,
we are required to file all reports not previously filed or we may face an SEC
administrative hearing pursuant to which the trading of our stock could be
suspended until such time as our filings become current. Our counsel has
contacted the SEC in connection with this matter and has communicated progress
we have made to date in bringing our filings current. To date, the SEC has not
scheduled such an administrative hearing.
Our fiscal year is from June 1 to May 31. We have filed annual reports on Form
10-KSB for our fiscal years 2004, 2005, and 2006 and quarterly reports on Form
10-QSB for each quarter during fiscal years 2004 and 2005 and the first three
quarters of fiscal year 2006, as well as other documents as contained on EDGAR.
We are currently attempting to gather information from former CRTZ officials,
attorneys and accountants so that our auditors can complete back financial
statements and our legal counsel can complete and file the remaining back
reporting documents. Our counsel is keeping the SEC abreast of our efforts on a
continuing basis. However, there is no guarantee that we will be able to
complete our back filings in a manner and within a period of time acceptable to
the SEC. There is no guarantee that we will be able to maintain an uninterrupted
public market for our securities.
3
THERE IS CONSIDERABLE EFFORT AND EXPENSE INVOLVED IN OUR EFFORT TO CATCH UP ON
THE DELINQUENT FILINGS
We have expended considerable administrative time on our effort to bring our
reporting obligation up to date and will continue to do so until we are able to
catch up on all the back periodic reporting filings. We have expended a
considerable amount of money in fees to our auditor and counsel to commence
periodic reporting, and to go back in time to research and prepare the filings
we have done since November of 2005. We plan to continue to expend these
administrative and financial resources until such time as we are able to file
all past-due reporting on EDGAR (and keep abreast of deadlines for prospective
filings). Given the circumstances, this is a necessary drain on the company's
resources and until we complete and file all required back reporting, this
administrative effort and financial expense may adversely affect our ability to
operate and finance our business operations.
WE MAY BE SUBJECT TO DISCIPLINE PURSUANT TO SECTION 14 OF THE SECURITIES
EXCHANGE ACT OF 1934 BASED ON OUR FAILURE TO FILE A PROXY STATEMENT WITH THE SEC
IN CONNECTION WITH THE EFFECTUATION OF OUR REVERSE STOCK SPLITS AND AMENDMENTS
TO OUR ARTICLES OF INCORPORATION.
Pursuant to Section 14 of the Securities Exchange Act of 1934, we are required
to furnish a publicly-filed preliminary and/or definitive written proxy
statement to any shareholder whose vote shall be solicited in connection with
any proposed corporate action requiring a shareholder vote. We are also required
to file such proxy statements with the Securities and Exchange Commission.
Certain exemptions may apply which allow us to furnish shareholders with an
information statement, as opposed to a proxy statement, which must also be filed
with the Securities and Exchange Commission. Additionally, the Georgia Business
Corporation Code requires us to provide shareholder notice within a reasonable
time from the date shareholder approval was acquired.
Based upon same, we were required to notify our shareholders and file an
information statement prior to filing amendments to our Articles of
Incorporation pursuant to which we reduced the number of authorized shares of
our common stock from 500,000,000 to 100,000,000 with the State of Georgia, as
well as prior to the effectuation of the 1-for-40 reverse split of all of our
common shares and the 1-for-3 reverse stock split of our preferred shares.
Although such actions were approved by the holders of the majority of our
outstanding shares entitled to vote thereon and although notice was sent to the
shareholders as required under Georgia state law, such actions should not have
been effectuated without the filing of the information statement with the SEC.
Because we failed to file such information statement in a timely manner and
provide our shareholders with proper notice, we may be subject to discipline by
the Securities and Exchange Commission in violation of Section 14 of the
Securities and Exchange Act.
THE FOLLOWING RISKS RELATE PRIMARILY TO THE OPERATION OF OUR BUSINESS:
NEW BUSINESS VENTURES OR ACQUISITIONS THAT WE MAY UNDERTAKE WOULD INVOLVE A
NUMBER OF INHERENT RISKS, ANY OF WHICH COULD CAUSE US NOT TO REALIZE THE
BENEFITS ANTICIPATED TO RESULT.
We continually seek to expand our operations through acquisitions of businesses
and assets, including Pure Produce. These transactions involve various inherent
risks, such as:
- - uncertainties in assessing the value, strengths, weaknesses, contingent
and other liabilities and potential profitability of acquisition or other
transaction candidates;
- - the potential loss of key personnel of an acquired business;
- - the ability to achieve identified operating and financial synergies
anticipated to result from an acquisition or other transaction;
- - problems that could arise from the integration of the acquired or new
business;
- - unanticipated changes in business, industry or general economic conditions
that affect the assumptions underlying the acquisition or other
transaction rationale; and
- - unexpected development costs that adversely affect our profitability.
Any one or more of these factors could cause us not to realize the benefits
anticipated to result from the acquisition of businesses or assets or the
commencement of a new business venture.
4
WE HAVE A HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT, AND WE MAY NOT
ACHIEVE OR MAINTAIN PROFITABILITY IN THE FUTURE.
We have experienced significant operating losses in each period since our
inception. As of May 31, 2006, we have incurred total accumulated losses of
$8,168,218. We expect these losses to continue and it is uncertain when, if
ever, we will become profitable. These losses have resulted principally from
costs incurred in research and development and from general and administrative
costs associated with operations. We expect to incur increasing operating losses
in the future as a result of expenses associated with research and product
development as well as general and administrative costs. Even if we do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis.
WE WILL NEED ADDITIONAL CAPITAL IN THE FUTURE TO SUPPORT OUR GROWTH, AND RAISING
SUCH CAPITAL WILL LIKELY CAUSE SUBSTANTIAL DILUTION TO EXISTING STOCKHOLDERS. IF
ADDITIONAL CAPITAL IS NOT AVAILABLE, WE MAY HAVE TO CURTAIL OR CEASE OPERATIONS.
Our current plans indicate we will need significant additional capital for
research and development and market penetration before we have any anticipated
revenue generated from our BAFI(TM) product line or Pure Produce.. The actual
amount of funds that we will need will be determined by many factors, some of
which are beyond our control, and we may need funds sooner than currently
anticipated. These factors include:
- - the extent to which we enter into licensing arrangements, collaborations
or joint ventures;
- - our progress with research and development;
- - the costs and timing of obtaining new patent rights (if any);
- - cost of continuing operations and sales;
- - the extent to which we acquire or license other technologies; and
- - regulatory changes and competition and technological developments in the
market.
We may rely on future equity or debt offerings to enable us to grow and reach
profitability. There is no guarantee we will be able obtain such financing in
order to fund these endeavors.
WE HAVE RELIED ON CAPITAL CONTRIBUTED BY RELATED PARTIES, AND SUCH CAPITAL MAY
NOT BE AVAILABLE IN THE FUTURE.
We financed our operations in fiscal year 2006 through $846,783 of sales of
Secure Balance and private placement common stock sales totaling $1,661,950. We
utilized $144,000 in stock sales and $794,314 in sales during our fiscal year
2005. In years past, prior to the commencement of Secure Balance(TM) sales, we
relied on loans and deferments from our CEO and Chairman Scott R. Sand and the
aforementioned approximate $300,000 investment of Mr. Gleckman. From June 10,
1999 to March 31, 2004, Mr. Sand provided "Ingen Nevada," and then "Ingen
Georgia" (after our reverse merger; for a short period of time) with a total of
$72,000 in cash loans and $360,000 in deferred executive compensation.
Our future cash requirements will depend on many factors, including finishing
our research and development programs for our BAFI(TM) product line, the costs
involved in filing, prosecuting and enforcing patents, competing technological
and market developments and the cost of product commercialization for OxyView in
particular, and OxyAlert, as well as our ongoing Secure Balance(TM) sales
effort. We do not expect to generate a positive cash flow from operations until
our anticipated commercial launch of our BAFI(TM) product line and possibly
later given the expected cost of commercializing our products. We intend to seek
additional funding through public or private financing transactions. Successful
future operations are subject to a number of technical and business risks,
including our continued ability to obtain future funding, satisfactory product
development and market acceptance for our products.
Although we have paid much of these loans from Mr. Sand back, we may be unable
to repay the remainder as planned and may have to look again to Mr. Sand for
assistance in financing if we are unable to obtain future financing. There is no
guarantee that Mr. Sand will have financial resources available to assist in our
funding.
WE ARE SUBJECT TO NEW CORPORATE GOVERNANCE AND INTERNAL CONTROLS REPORTING
REQUIREMENTS, AND OUR COSTS RELATED TO COMPLIANCE WITH, OR OUR FAILURE TO COMPLY
WITH EXISTING AND FUTURE REQUIREMENTS COULD ADVERSELY AFFECT OUR BUSINESS.
5
We face new corporate governance requirements under the Sarbanes-Oxley Act of
2002, as well as new rules and regulations subsequently adopted by the SEC.
These laws, rules and regulations continue to evolve and may become increasingly
stringent in the future. In particular, we will be required to include
management and auditor reports on internal controls as part of our annual report
for the year ended May 31, 2006 pursuant to Section 404 of the Sarbanes-Oxley
Act. We cannot assure you that we will be able to fully comply with these laws,
rules and regulations that address corporate governance, internal control
reporting and similar matters. Failure to comply with these laws, rules and
regulations could materially adversely affect our reputation, financial
condition and the value of our securities.
OUR PRODUCTS MAY NOT BE SUCCESSFULLY DEVELOPED OR COMMERCIALIZED, WHICH WOULD
HARM US AND FORCE US TO CURTAIL OR CEASE OPERATIONS.
We are a relatively new company and our BAFI(TM) product line in particular is
still in the late stages of development. We have manufacturing prototypes for
OxyView, but still need manufacturing prototypes for OxyAlert(TM) and
GasAlert(TM). These products, once marketing commences, may not be successfully
commercialized on a timely basis, or at all. If we are unable, for technological
or other reasons, to complete the development, introduction or scale-up of
manufacturing of these products or other potential products, or if our products
do not achieve a significant level of market acceptance, we would be forced to
curtail or cease operations. Even if we develop our products for commercial use,
we may not be able to develop products that:
- - are accepted by, and marketed successfully to, the medical marketplace;
- - are safe and effective;
- - are protected from competition by others;
- - do not infringe the intellectual property rights of others;
- - are developed prior to the successful marketing of similar products by
competitors; or
- - can be manufactured in sufficient quantities or at a reasonable cost.
WE MAY NOT BE ABLE TO FORM AND MAINTAIN THE COLLABORATIVE RELATIONSHIPS THAT OUR
BUSINESS STRATEGY REQUIRES, AND IF WE CANNOT DO SO, OUR ABILITY TO DEVELOP
PRODUCTS AND REVENUE WILL SUFFER.
We must form research collaborations and licensing arrangements with several
partners at the same time to operate our business successfully. To succeed, we
will have to maintain our existing relationships and establish additional
collaborations. We cannot be sure that we will be able to establish any
additional research collaborations or licensing arrangements necessary to
develop and commercialize products using our technology or that we can do so on
terms favorable to us. If our collaborations are not successful or we are not
able to manage multiple collaborations successfully, our programs may suffer.
Collaborative agreements generally pose the following risks:
- - collaborators may not pursue further development and commercialization of
products resulting from collaborations or may elect not to continue or
renew research and development programs;
- - collaborators may delay clinical trials, under-fund a clinical trial
program, stop a clinical trial or abandon a product, repeat or conduct new
clinical trials or require a new formulation of a product for clinical
testing;
- - collaborators could independently develop, or develop with third parties,
products that could compete with our future products;
- - the terms of our agreements with our current or future collaborators may
not be favorable to us;
- - a collaborator with marketing and distribution rights to one or more
products may not commit enough resources to the marketing and distribution
of our products, limiting our potential revenues from the
commercialization of a product;
- - disputes may arise delaying or terminating the research, development or
commercialization of our products, or result in significant litigation or
arbitration; and
- - collaborations may be terminated and, if terminated, we would experience
increased capital requirements if we elected to pursue further development
of the product.
SECURE BALANCE(TM) IS A PRIVATE LABEL PRODUCT THAT IS NOT EXCLUSIVE TO US.
6
We provide education, training and services related to the SportKat product
lines that constitute what we call "Secure Balance(TM)." (See "Description of
Business" below) However, the devices themselves are provided to us on a
non-exclusive basis, meaning that other companies are marketing the same devices
under other names (or using the SportKat name). Only time will tell if the
non-exclusive nature of the provision of the devices themselves to us negatively
impacts our ability to capture a meaningful market share. If our sales of Secure
Balance(TM) suffer because of this non-exclusive relationship, our financial
prospects and operational results will be negatively impacted. Currently, our
only source of sales revenues is Secure Balance(TM).
ALTHOUGH WE DO NOT HAVE DIRECT COMPETITION IN RELATION TO OUR BAFI(TM) PRODUCT
LINE, WE EXPECT IT IN THE FUTURE.
Although we are unaware of any current competition for our BAFI(TM) product
line, we expect competition to develop after we begin marketing our products. It
is unknown at this time what impact any such competition could have on us.
However, we are a "going concern" enterprise and it is certainly foreseeable
that more than one competitor could emerge that is much stronger financially
than we are and/or could already have significant marketing relationships for
other medical devices.
WE DO NOT HAVE INTERNATIONAL PATENTS.
Although we have stated that we intend to apply for international patents for
our BAFI(TM) product line, we have not as yet done so, except for Chinese and
Japanese patents for OxyView. We do not know when, and if, we will apply for
such other patents. If we do not apply for these patents, or if there are delays
in obtaining the patents, or if we are unable to obtain the patents, we may not
be able to adequately protect our technologies in foreign markets.
IF WE ARE UNABLE TO PROTECT EFFECTIVELY OUR INTELLECTUAL PROPERTY, THIRD PARTIES
MAY USE OUR TECHNOLOGY, WHICH COULD IMPAIR OUR ABILITY TO COMPETE IN OUR
MARKETS.
Our success will depend on our ability to obtain and protect patents on our
technology and to protect our trade secrets. The patents we currently own may
not afford meaningful protection for our technology and products. Others may
challenge our patents and, as a result, our patents could be narrowed,
invalidated or unenforceable. In addition, our current and future patent
applications may not result in the issuance of patents in the United States or
foreign countries. Competitors might develop products similar to ours that do
not infringe on our patents. In order to protect or enforce our patent rights,
we may initiate interference proceedings, oppositions, or patent litigation
against third parties, such as infringement suits. These lawsuits could be
expensive, take significant time and divert management's attention from other
business concerns. The patent position of medical firms generally is highly
uncertain, involves complex legal and factual questions, and has recently been
the subject of much litigation. No consistent policy has emerged from the U.S.
Patent and Trademark Office or the courts regarding the breadth of claims
allowed or the degree of protection afforded under biotechnology patents. In
addition, there is a substantial backlog of applications at the U.S. Patent and
Trademark Office, and the approval or rejection of patent applications may take
several years.
We cannot guarantee that our management and others associated with us will not
improperly use our patents, trademarks and trade secrets. Further, others may
gain access to our trade secrets or independently develop substantially
equivalent proprietary information and techniques.
OUR SUCCESS WILL DEPEND PARTLY ON OUR ABILITY TO OPERATE WITHOUT INFRINGING ON
OR MISAPPROPRIATING THE PROPRIETARY RIGHTS OF OTHERS.
We may be sued for infringing on the patent rights or misappropriating the
proprietary rights of others. Intellectual property litigation is costly, and,
even if we prevail, the cost of such litigation could adversely affect our
business, financial condition and results of operations. In addition, litigation
is time consuming and could divert management attention and resources away from
our business. If we do not prevail in any litigation, we could be required to
stop the infringing activity and/or pay substantial damages. Under some
circumstances in the United States, these damages could be triple the actual
damages the patent holder incurs. If we have supplied infringing products to
third parties for marketing or licensed third parties to manufacture, use or
market infringing products, we may be obligated to indemnify these third parties
for any damages they may be required to pay to the patent holder and for any
losses the third parties may sustain themselves as the result of lost sales or
damages paid to the patent holder.
7
If a third party holding rights under a patent successfully asserts an
infringement claim with respect to any of our products, we may be prevented from
manufacturing or marketing our infringing product in the country or countries
covered by the patent we infringe, unless we can obtain a license from the
patent holder. Any required license may not be available to us on acceptable
terms, or at all. Some licenses may be non-exclusive, and therefore, our
competitors may have access to the same technology licensed to us. If we fail to
obtain a required license or are unable to design around a patent, we may be
unable to market some of our anticipated products, which could have a material
adverse effect on our business, financial condition and results of operations.
IF WE LOSE OUR KEY MANAGEMENT PERSONNEL, OUR PRODUCT DEVELOPMENT AND
COMMERCIALIZATION EFFORTS WOULD SUFFER.
Our performance is substantially dependent on the performance of our current
senior management, Board of Directors and key scientific and technical personnel
and advisers. The loss of the services of any member of our senior management,
in particular Mr. Sand, our CEO and Chairman, Board of Directors, scientific or
technical staff or advisory board may significantly delay or prevent the
achievement of product development and other business objectives and could have
a material adverse effect on our business, operating results and financial
condition. We do not have "key person" life insurance policies. We do not have
any written employment agreements with any of our key management personnel.
WE HAVE NO COMMERCIAL PRODUCTION CAPABILITY YET FOR OUR BAFI(TM) PRODUCT LINE
AND WE MAY ENCOUNTER PRODUCTION PROBLEMS OR DELAYS, WHICH COULD RESULT IN LOWER
REVENUE.
To date, we have not produced a BAFI(TM) product line product for sale. We have
entered received a quote from our manufacturer for the production of OxyView. We
plan to submit a purchase order for same during second quarter 2006. We will
also likely outsource the manufacture of OxyAlert(TM) and GasAlert(TM). We have
not obtained a quote for production of these products.
Customers for any potential products and regulatory agencies will require that
we, in conjunction with our manufacturers, comply with current good
manufacturing practices that we, or our manufacturers, may not be able to meet.
In addition, we may not be able to maintain acceptable quality standards if we
ramp up production. To achieve anticipated customer demand levels, we will need
to scale-up our production capability and maintain adequate levels of inventory.
We may not be able to produce sufficient quantities to meet market demand.
To the extent that neither we nor our current manufacturers can achieve the
required level and quality of production, we may need to further outsource
production or rely on licensing and other arrangements with additional third
parties. This further reliance on outsourcing the manufacture of the BAFI(TM)
product line could further reduce our gross margins and further expose us to the
risks inherent in relying on others. In addition, we may not be able to
successfully outsource our production or enter into licensing or other
arrangements under acceptable terms with these third parties, which could
adversely affect our business.
THE "PURE PRODUCE" PRODUCT LINE REPRESENTS A SHIFT FROM OUR PAST OPERATIONS IN
THE MEDICAL TECHNOLOGY INDUSTRY AND THERE CAN BE NO GUARANTEE THAT WE WILL BE
SUCCESSFUL IN PRODUCING, MARKETING, AND SELLING THESE PRODUCTS.
Our business development and operation to date has been in the medical
technology industry. One of our directors, Mr. Christopher Wirth, has
agricultural business experience. If the Pure Produce portion of our business
plan is funded, we will be relying primarily on Mr. Wirth and the employees we
hire to oversee the design, construction and operation of our initial Pure
Produce facility. There can be no guarantee that Mr. Wirth and the employees we
hire will be able to place Pure Produce into production in a timely and
efficient manner, or that Pure Produce will be a commercially successful farming
venture. There is no guarantee that we will be able to produce agricultural
products in sufficient quality and quantity to sell to willing purchasers (if
any) in such a manner as to ultimately be able to continue our Pure Produce
operations and/or to expand our facilities and commercial potential. There is no
guarantee that we will select, grow and harvest products that will be attractive
to, and be purchased by, our contemplated consumers. The food and herb market in
the United States is tremendously large, however, there is no guarantee that
Pure Produce will be able to compete with farmers growing produce and herbs
utilizing traditional farming methodology or with others growing crops utilizing
molecular farming methodology.
WE HAVE NO MARKETING OR SALES STAFF, AND IF WE ARE UNABLE TO ENTER INTO
COLLABORATIONS WITH MARKETING PARTNERS OR IF WE ARE UNABLE TO DEVELOP OUR OWN
SALES AND MARKETING CAPABILITY, WE MAY NOT BE SUCCESSFUL IN COMMERCIALIZING OUR
PRODUCTS.
8
We currently have no in-house sales, marketing or distribution capability. As a
result, we will depend on collaborations with third parties that have
established distribution systems and direct sales forces. To the extent that we
enter into co-promotion or other licensing arrangements, our revenues will
depend upon the efforts of third parties, over which we may have little or no
control.
If we are unable to reach and maintain agreement with one or more distribution
entities or collaborators under acceptable terms, we may be required to market
our products directly (direct marketing is one component of our marketing
strategy). We may elect to establish our own specialized sales force and
marketing organization to market our products. In order to do this, we would
have to develop a marketing and sales force with technical expertise and with
supporting distribution capability. Developing a marketing and sales force is
expensive and time consuming and could delay a product launch. We may not be
able to develop this capacity, which would make us unable to commercialize our
products.
IF WE ARE SUBJECT TO PRODUCT LIABILITY CLAIMS AND HAVE NOT OBTAINED ADEQUATE
INSURANCE TO PROTECT AGAINST THESE CLAIMS, OUR FINANCIAL CONDITION WOULD SUFFER.
If we are able to launch our BAFI(TM) and Pure Produce product lines, we will
face exposure to product liability claims. We have exposure selling Secure
Balance(TM)). We have limited product liability insurance coverage, but there is
no guarantee that it is adequate coverage. There is also a risk that third
parties for which we have agreed to indemnify could incur liability.
We will also have products liability exposure as a grower and seller of
ingestible food and herb products. There is no guarantee that our insurance
coverage (once obtained for these particular risks) or other resources will be
adequate to satisfy a claim or lawsuit that might be filed against us for
alleged deficiencies or problems caused by our agricultural products.
We cannot predict all of the possible harms or side effects that may result and,
therefore, the amount of insurance coverage we obtain may not be adequate to
protect us from all liabilities. We may not have sufficient resources to pay for
any liabilities resulting from a claim beyond the limit of, or excluded from,
our insurance coverage.
SHAREHOLDERS MUST RELY ON MANAGEMENT FOR THE OPERATION OF THE COMPANY
All decisions with respect to the operation of Ingen and development, production
and marketing of our products, will be made exclusively by management. Our
success will, to a large extent, depend on the quality of the management of the
company. In particular, we will depend on the services of our board members and
officers. Management believes that these individuals have the necessary business
experience to supervise the management of the company and production and
commercial exploitation of our products, however, there can be no assurance that
they will perform adequately or that our operations will be successful.
Shareholders will have no right or power to take part in the management of the
company, for the most part, except to the extent of voting for the members of
the Board of Directors each year. Accordingly, no person should purchase any of
the stock offered hereby unless such prospective purchaser is willing to entrust
all aspects of the management of the company to management and has evaluated
management's capabilities to perform such functions.
OUR QUARTERLY OPERATING RESULTS WILL FLUCTUATE
Our quarterly operating results will fluctuate for many reasons, including:
- - our ability to retain existing customers, attract new customers and
satisfy our customers' demands,
- - our ability to acquire merchandise, manage our inventory and fulfill
orders,
- - changes in gross margins of our current and future products, services, and
markets
- - introduction of our new sites, services and products or those of
competitors
- - changes in usage of the Internet and online services and consumer
acceptance of the Internet and online commerce
- - timing of upgrades and developments in our systems and infrastructure
- - the level of traffic on our Web site
- - the effects of acquisitions and other business combinations, and related
integration
- - technical difficulties, system downtime or Internet brownouts
- - our ability to properly anticipate demand,
- - our ability to prevent fraud perpetrated by third parties through credit
card transactions, and payments transactions
9
- - our level of merchandise returns
- - disruptions in service by common shipping carriers due to strikes or
otherwise
- - disruption of our ongoing business
- - problems retaining key technical and managerial personnel
- - expenses associated with amortization of goodwill and other purchased
intangible assets
- - additional operating losses and expenses of acquired businesses, if any
- - impairment of relationships with existing employees, customers and
business partners
RISKS RELATED TO FRAUD
Although we have developed systems and processes to mitigate fraudulent credit
card transactions, failure to prevent such fraud may impact our financial
results and may create liability for us in the sale of our products. In
addition, the steps we take to protect our proprietary rights may not be
adequate and third parties may infringe or misappropriate our copyrights,
trademarks, trade dress, patents and similar proprietary rights. Other parties
may claim that we infringed their proprietary rights. Such claims, whether or
not meritorious, may result in the expenditure of significant financial and
managerial resources.
THE FOLLOWING RISKS RELATE PRINCIPALLY TO OUR COMMON STOCK AND ITS MARKET VALUE:
A SUBSTANTIAL NUMBER OF SHARES WE HAVE ISSUED IN EXEMPT TRANSACTIONS ARE, OR ARE
BEING MADE, AVAILABLE FOR SALE ON THE OPEN MARKET. THE RESALE OF THESE
SECURITIES MIGHT ADVERSELY AFFECT OUR STOCK PRICE.
Most of our common shares have been held by our shareholders for periods of one
or two years or longer. Many of these shares have had restrictions lifted, in
fact, as of August 25, 2006, we have 18,504,452 unrestricted shares issued. We
will undoubtedly have unrestricted shares issued in the future. There is no way
to control the sale of these shares on the secondary market. Shares of our
common stock currently trade on the Pink Sheets and we plan to submit an
application for the quotation of our common stock on the Over-the-counter
Bulletin Board once we become current in our periodic filing requirements. The
resale of these unrestricted shares might adversely affect our stock price. The
resale of these unrestricted shares, and/or sale of shares registered in this
offering, might adversely affect our stock price.
OUR STOCK IS THINLY TRADED, WHICH CAN LEAD TO PRICE VOLATILITY AND DIFFICULTY
LIQUIDATING YOUR INVESTMENT.
The trading volume of our stock has been low, which can cause the trading price
of our stock to change substantially in response to relatively small orders. In
addition, during the last two fiscal years and interim quarters, our common
stock has traded as low as .002 (pre-split) and as high as .44 (post-split).
Both volume and price could also be subject to wide fluctuations in response to
various factors, many of which are beyond our control, including:
- - actual or anticipated variations in quarterly and annual operating
results;
- - announcements of technological innovations by us or our competitors;
- - developments or disputes concerning patent or proprietary rights; and
- - general market perception of medical device and provider companies.
IF THE OWNERSHIP OF OUR COMMON STOCK CONTINUES TO BE SOMEWHAT CONCENTRATED IN
SHARES OWNED BY OUR MANAGEMENT, IT MAY PREVENT YOU AND OTHER STOCKHOLDERS FROM
INFLUENCING SIGNIFICANT CORPORATE DECISIONS AND MAY RESULT IN CONFLICTS OF
INTEREST THAT COULD CAUSE OUR STOCK PRICE TO DECLINE.
As of August 25, 2006, our executive officers, directors and their affiliates,
other than Scott Sand, beneficially own or control approximately 1.8% of the
outstanding shares of our common stock and preferred shares (our common and
preferred shares vote on a one vote per share basis). Mr. Sand owns 22.4% of our
issued voting shares. Accordingly, our current executive officers, directors and
their affiliates will have some control over the outcome of corporate actions
requiring stockholder approval, including the election of directors, any merger,
consolidation or sale of all or substantially all of our assets or any other
significant corporate transactions. These stockholders may also delay or prevent
a change of control of us, even if such a change of control would benefit our
other stockholders. The concentration of stock ownership may adversely affect
the trading price of our common stock due to investors' perception that
conflicts of interest may exist or arise.
10
WE MAY ISSUE PREFERRED STOCK IN THE FUTURE, AND THE TERMS OF THE PREFERRED STOCK
MAY REDUCE THE VALUE OF YOUR COMMON STOCK.
We are authorized to issue up to 40,000,000 shares of preferred stock in one or
more series. Our Board of Directors will be able to determine the terms of
preferred stock without further action by our stockholders. We have issued
14,134,547 shares of Class A preferred stock as of August 25, 2006. To the
extent we issue preferred stock, it could affect your rights or reduce the value
of your common stock. In particular, specific rights granted to future holders
of preferred stock could be used to restrict our ability to merge with or sell
our assets to a third party. These terms may include voting rights, and may
include preferences as to dividends and liquidation, conversion and redemption
rights, and sinking fund provisions.
WE HAVE NOT, AND CURRENTLY DO NOT ANTICIPATE, PAYING DIVIDENDS ON OUR COMMON
STOCK.
We have never paid any dividend on our common stock and do not plan to pay
dividends on our common stock for the foreseeable future. We currently intend to
retain future earnings, if any, to finance operations, capital expenditures and
the expansion of our business.
THERE IS A LIMITED MARKET FOR OUR COMMON STOCK WHICH MAKES IT DIFFICULT FOR
INVESTORS TO ENGAGE IN TRANSACTIONS IN OUR SECURITIES.
Our common stock is quoted on the Pink Sheets under the symbol "IGTG." There is
a limited trading market for our common stock. If public trading of our common
stock does not increase, a liquid market will not develop for our common stock.
The potential effects of this include difficulties for the holders of our common
shares to sell our common stock at prices they find attractive. If liquidity in
the market for our common stock does not increase, investors in our company may
never realize a profit on their investment.
OUR STOCK PRICE IS VOLATILE WHICH MAY MAKE IT DIFFICULT FOR INVESTORS TO SELL
OUR SECURITIES FOR A PROFIT.
The market price of our common stock is likely to be highly volatile and Could
fluctuate widely in price in response to various factors, many of which are
beyond our control, including:
- - technological innovations or new products and services by us or our
competitors;
- - additions or departures of key personnel;
- - sales of our common stock
- - our ability to integrate operations, technology, products and services;
- - our ability to execute our business plan;
- - operating results below expectations;
- - loss of any strategic relationship;
- - industry developments;
- - economic and other external factors; and
- - period-to-period fluctuations in our financial results.
Because we have a limited operating history with little revenues to date, you
may consider any one of these factors to be material. Our stock price may
fluctuate widely as a result of any of the above.
In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. These market fluctuations may also
materially and adversely affect the market price of our common stock.
OUR COMMON STOCK IS DEEMED A "PENNY STOCK" UNDER THE RULES OF THE SEC, WHICH
MAKES TRANSACTIONS IN OUR STOCK CUMBERSOME.
11
Our common stock is currently listed for trading on the Pink Sheets which is
generally considered to be a less efficient market than markets such as NASDAQ
or other national exchanges, and which may cause difficulty in conducting trades
and difficulty in obtaining future financing. Further, our securities are
subject to the "penny stock rules" adopted pursuant to Section 15 (g) of the
Securities Exchange Act of 1934, as amended, or Exchange Act. The penny stock
rules apply to non-NASDAQ companies whose common stock trades at less than $5.00
per share or which have tangible net worth of less than $5,000,000 ($2,000,000
if the company has been operating for three or more years). Such rules require,
among other things, that brokers who trade "penny stock" to persons other than
"established customers" complete certain documentation, make suitability
inquiries of investors and provide investors with certain information concerning
trading in the security, including a risk disclosure document and quote
information under certain circumstances. Many brokers have decided not to trade
"penny stocks" because of the requirements of the penny stock rules and, as a
result, the number of broker-dealers willing to act as market makers in such
securities is limited. In the event that we remain subject to the "penny stock
rules" for any significant period, there may develop an adverse impact on the
market, if any, for our securities. Because our securities are subject to the
"penny stock rules," investors will find it more difficult to dispose of our
securities. Further, for companies whose securities are traded on the Pink
Sheets, it is more difficult: (i) to obtain accurate quotations, (ii) to obtain
coverage for significant news events because major wire services, such as the
Dow Jones News Service, generally do not publish press releases about such
companies, and (iii) to obtain needed capital.
A SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE THE PRICE
OF OUR COMMON STOCK TO DECLINE.
If our shareholders sell substantial amounts of our common stock in the public
market, including shares issued upon the exercise of outstanding options or
warrants, the market price of our common stock could fall. These sales also may
make it more difficult for us to sell equity or equity-related securities in the
future at a time and price that we deem reasonable or appropriate.
OUR RECENT FINANCING REQUIRES THIS REGISTRATION STATEMENT TO BECOME EFFECTIVE
WITHIN 120 DAYS AFTER THE INITIAL CLOSING DATE OF JULY 26, 2006 AND IF THIS
FAILS TO HAPPEN WE WILL INCUR LIQUIDATED DAMAGES.
We recently received financing from the selling security holders listed in this
document. Such financing requires us to file this registration statement and
have the registration statement declared effective by the SEC within 120 days of
the closing of the financing, which occurred on July 26, 2006. If this
registration statement is not declared effective by November 23, 2006, we begin
incurring liquidated damages equal to 2% of the principal of the promissory
notes issued for each 30 day period that this registration statement is not
declared effective after November 23, 2006.
THE CONVERSION OF THE PROMISSORY NOTES BASED ON OUR RECENT FINANCING IS BASED ON
AN AVERAGE OF OUR CLOSING BID PRICE OF OUR INTRA DAY TRADING PRICES OF OUR
COMMON STOCK OVER A CERTAIN PERIOD OF TIME PRIOR TO CONVERSION AND THE DECREASE
OF THE INTRA DAY TRADING PRICE WILL RESULT IN ISSUANCE OF A SIGNIFICANT INCREASE
OF SHARES RESULTING IN DILUTION TO OUR SHAREHOLDERS.
The conversion of the promissory notes in our recent financing is based on the
applicable percentage of the average of the lowest three (3) Trading Prices for
the Common Stock during the twenty (20) Trading Day period prior to conversion.
The "Applicable Percentage" means 50%; provided, however, that the Applicable
Percentage shall be increased to (i) 55% in the event that a Registration
Statement is filed within thirty days of the closing and (ii) 60% in the event
that the Registration Statement becomes effective within one hundred and twenty
days from the Closing. The price of our common shares may fluctuate and the
lower intra-day trading price in the future, will result in a conversion ratio
resulting in issuance of a significant amount of our common shares to the
promissory note holders. This will result in our present shareholders being
diluted.
SELLING SHAREHOLDERS MAY IMPACT OUR STOCK VALUE THROUGH THE EXECUTION OF SHORT
SALES WHICH MAY DECREASE THE VALUE OF OUR COMMON STOCK
12
Short sales are transactions in which a selling shareholder sells a security it
does not own. To complete the transaction, a selling shareholder must borrow the
security to make delivery to the buyer. The selling shareholder is then
obligated to replace the security borrowed by purchasing the security at the
market price at the time of replacement. The price at such time may be higher or
lower than the price at which the security was sold by the selling shareholder.
If the underlying security goes down in price between the time the selling
shareholder sells our security and buys it back, the selling shareholder will
realize a gain on the transaction. Conversely, if the underlying security goes
up in price during the period, the selling shareholder will realize a loss on
the transaction. The risk of such price increases is the principal risk of
engaging in short sales. The selling shareholders in this registration statement
could short the stock by borrowing and then selling our securities in the
market, and then converting the stock through either the Note or Warrants at a
discount to replace the security borrowed. Because the selling shareholders
control a large portion of our common stock, the selling shareholders could have
a large impact on the value of our stock if they were to engage in short selling
of our stock. Such short selling could impact the value of our stock in an
extreme and volatile manner to the detriment of other shareholders.
SHARES ELIGIBLE FOR PUBLIC SALE IN THE FUTURE COULD DECREASE THE PRICE OF OUR
SHARES OF COMMON STOCK AND REDUCE OUR FUTURE ABILITY TO RAISE CAPITAL
Sales of substantial amounts of shares of our common stock in the public market
could decrease the prevailing market price of our common stock. If this is the
case, investors in our shares of common stock may be forced to sell such shares
at prices below the price they paid for their shares, or in the case of the
investors in the July 2006 financing, prices below the price they converted
their notes and warrants into shares. In addition, a decreased market price may
result in potential future investors losing confidence in us and failing to
provide needed funding. This will have a negative effect on our ability to raise
equity capital in the future.
USE OF PROCEEDS
The selling stockholders are selling shares of common stock covered by this
prospectus for their own account. We will not receive any of the proceeds from
the resale of these shares. We have agreed to bear the expenses relating to the
registration of the shares for the selling security holders.
PENNY STOCK CONSIDERATIONS
Broker-dealer practices in connection with transactions in "penny stocks" are
regulated by certain penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks generally are equity securities with a price of less
than $5.00 (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system). Penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. The
broker-dealer must also make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These requirements may have the effect of
reducing the level of trading activity, if any, in the secondary market for a
security that becomes subject to the penny stock rules.
SELLING STOCKHOLDERS
On July 25, 2006, we entered into a Securities Purchase Agreement for a total
subscription amount of $2,000,000 that included Stock Purchase Warrants and
Callable Secured Convertible Notes with AJW Capital Partners, LLC, AJW Offshore,
Ltd., AJW Qualified Partners, LLC and New Millennium Capital Partners II, LLC.
The initial funding of $700,000 (we received net proceeds of $640,000) was
completed on July 26, 2006 with the following parties and evidenced by callable
secured convertible notes: AJW Capital Partners, LLC invested $67,900; AJW
Offshore, Ltd. invested $413,000; AJW Qualified Partners, LLC invested $210,000;
and New Millennium Capital Partners II, LLC invested $9,100.
The second funding of $600,000 (we received net proceeds of $600,000) was
completed on August 29, 2006 with the following parties and evidenced by
callable secured convertible notes: AJW Capital Partners, LLC invested $58,200;
AJW Offshore, Ltd. invested $354,000; AJW Qualified Partners, LLC invested
$180,000; and New Millennium Capital Partners II, LLC invested $7,800.
On November 21, 2006, the Securities Purchase Agreement and Registration Rights
Agreement were amended to reduce the total financing amount to $1,500,000 from
$2,000,000, with the final $200,000 to be funded after we receive our initial
set of comments from the SEC from the filing of this registration statement.
13
The callable secured convertible notes are convertible into shares of our common
stock at a variable conversion price based upon the applicable percentage of the
average of the lowest three (3) Trading Prices for the Common Stock during the
twenty (20) Trading Day period prior to conversion. The "Applicable Percentage"
means 50%; provided, however, that the Applicable Percentage shall be increased
to (i) 55% in the event that a Registration Statement is filed within thirty
days of the closing and (ii) 60% in the event that the Registration Statement
becomes effective within one hundred and twenty days from the Closing. Under the
terms of the callable secured convertible note and the related warrants, the
callable secured convertible note and the warrants are exercisable by any holder
only to the extent that the number of shares of common stock issuable pursuant
to such securities, together with the number of shares of common stock owned by
such holder and its affiliates (but not including shares of common stock
underlying unconverted shares of callable secured convertible notes or
unexercised portions of the warrants) would not exceed 4.99% of the then
outstanding common stock as determined in accordance with Section 13(d) of the
Exchange Act.
The parties received the following seven year warrants to purchase shares of our
common stock, exercisable at $.10 per share: AJW Capital Partners, LLC -
1,940,000 warrants; AJW Offshore, Ltd. - 11,800,000 warrants; AJW Qualified
Partners, LLC - 6,000,000 warrants; and New Millennium Capital Partners II, LLC
- - 260,000 warrants (the "Warrants"). The Warrants are not subject to
registration rights.
We are presently registering 13,554,497 as follows: (i) AJW Capital Partners,
LLC - 1,314,786 shares of common stock issuable in connection with the
conversion of the callable secured convertible note; (ii) AJW Offshore, Ltd. -
7,997,154 shares of common stock issuable in connection with the conversion of
the callable secured convertible note;; (iii) AJW Qualified Partners, LLC -
4,066,349 shares of common stock issuable in connection with the conversion of
the callable secured convertible note; and (iv) New Millennium Capital Partners
II, LLC - 176,208 shares of common stock issuable in connection with the
conversion of the callable secured convertible note.
The following table sets forth the name of the selling stockholders, the number
of shares of common stock beneficially owned by each of the selling stockholders
as of December 5, 2006 and the number of shares of common stock being offered by
the selling stockholders. The shares being offered hereby are being registered
to permit public secondary trading, and the selling stockholders may offer all
or part of the shares for resale from time to time. However, the selling
stockholders are under no obligation to sell all or any portion of such shares
nor are the selling stockholders obligated to sell any shares immediately upon
effectiveness of this prospectus. All information with respect to share
ownership has been furnished by the selling stockholders.
14
PERCENT OF
SHARES OF COMMON
COMMON STOCK SHARES NUMBER OF
OWNED PRIOR OWNED PRIOR SHARES OF COMMON SHARES OWNED PERCENT OF
TO THE TO THE STOCK TO BE SOLD IN AFTER THE SHARES OWNED
NAME OF SELLING STOCKHOLDER (11) OFFERING (1) OFFERING THE OFFERING (12) OFFERING AFTER OFFERING
AJW Capital Partners, LLC (7) 0 0 1,314,786 (2)(3) 0 0%
AJW Offshore, Ltd. (8) 0 0 7,997,154 (2)(4) 0 0%
AJW Qualified Partners, LLC (9) 0 0 4,066,349 (2)(5) 0 0%
New Millennium Capital Partners II, LLC (10) 0 0 176,208 (2)(6) 0 0%
* Less than 1%
(1) Based on 31,009,610 shares of common stock issued and outstanding
as of December 5, 2006.
(2) The conversion has been calculated based on the maximum number of
shares the investors can receive in accordance with the 6% Callable
Secured Convertible Notes. The number of shares set forth in the
table for the selling stockholders represents an estimate of the
number of shares of common stock to be offered by the selling
stockholders. The actual number of shares of common stock issuable
upon conversion of the notes and exercise of the warrants is
indeterminate, is subject to adjustment and could be materially less
or more than such estimated number depending on factors which cannot
be predicted by us at this time including, among other factors, the
future market price of the common stock. The actual number of shares
of common stock offered in this prospectus, and included in the
registration statement of which this prospectus is a part, includes
such additional number of shares of common stock as may be issued or
issuable upon conversion of the notes and exercise of the related
warrants by reason of any stock split, stock dividend or similar
transaction involving the common stock, in accordance with Rule 416
under the Securities Act of 1933. Under the terms of the debentures,
if the debentures had actually been converted on July 26, 2006, the
conversion price would have been $.042. Under the terms of the
debentures and the related warrants, the debentures are convertible
and the warrants are exercisable by any holder only to the extent
that the number of shares of common stock issuable pursuant to such
securities, together with the number of shares of common stock owned
by such holder and its affiliates (but not including shares of
common stock underlying unconverted shares of debentures or
unexercised portions of the warrants) would not exceed 4.99% of the
then outstanding common stock as determined in accordance with
Section 13(d) of the Exchange Act. Accordingly, the number of shares
of common stock set forth in the table for the selling stockholder
exceeds the number of shares of common stock that the selling
stockholder could own beneficially at any given time through their
ownership of the debentures and the warrants.
(3) Consists of 1,314,786 shares of our common stock issuable in
connection with the conversion of the callable secured convertible
note.
(4) Consists of 7,997,154 shares of our common stock issuable in
connection with the conversion of the callable secured convertible
note.
(5) Consists of 4,066,349 shares of our common stock issuable in
connection with the conversion of the callable secured convertible
note.
(6) Consists of 176,208 shares of our common stock issuable in
connection with the conversion of the callable secured convertible
note.
(7) AJW Partners, LLC is a private investment fund that is owned by its
investors and managed by SMS Group, LLC. SMS Group, LLC of which Mr.
Corey S. Ribotsky is the fund manager, has voting and investment
control over the shares listed below owned by AJW Partners, LLC.
(8) AJW Offshore, Ltd. is a private investment fund that is owned by its
investors and managed by First Street Manager II, LLC. First Street
Manager II, LLC, of which Corey S. Ribotsky is the fund manager, has
voting and investment control over the shares listed below owned by
AJW Offshore Ltd.
15
(9) AJW Qualified Partners, LLC is a private investment fund that is
owned by its investors and managed by AJW Manager, LLC of which
Corey S. Ribotsky and Lloyd A. Groveman are the fund managers, have
voting and investment control over the shares listed below owned by
AJW Qualified Partners, LLC.
(10) New Millennium Capital Partners II, LLC is a private investment fund
that is owned by its investors and managed by First Street Manager
II, LLC. First Street Manager II LLC of which Corey S. Ribotsky is
the fund manager, has voting and investment control over the shares
listed below owned by New Millennium Capital Partners, LLC.
(11) None of the selling stockholders are broker-dealers or affiliates of
broker-dealers.
(12) The number of shares being registered for the conversion of the
callable secured convertible notes is 13,554,497 representing 30% of
our issued and outstanding shares.
PLAN OF DISTRIBUTION
All of the stock owned by the selling security holders will be registered by the
registration statement of which this prospectus is a part. The selling security
holders may sell some or all of their shares immediately after they are
registered. The selling security holders shares may be sold or distributed from
time to time by the selling stockholders or by pledgees, donees or transferees
of, or successors in interest to, the selling stockholders, directly to one or
more purchasers (including pledgees) or through brokers, dealers or underwriters
who may act solely as agents or may acquire shares as principals, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at negotiated prices or at fixed prices, which may be changed.
The distribution of the shares may be effected in one or more of the following
methods:
- - ordinary brokers transactions, which may include long or short sales,
- - transactions involving cross or block trades on any securities or market
where our common stock is trading,
- - purchases by brokers, dealers or underwriters as principal and resale by
such purchasers for their own accounts pursuant to this prospectus, "at
the market" to or through market makers or into an existing market for the
common stock,
- - in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents,
- - any combination of the foregoing, or by any other legally available means.
In addition, the selling stockholders may enter into hedging transactions with
broker-dealers who may engage in short sales, if short sales were permitted, of
shares in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders may also enter into option or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares, which shares may be resold thereafter pursuant to
this prospectus.
Brokers, dealers, underwriters or agents participating in the distribution of
the shares may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders and/or the purchasers of shares for
whom such broker-dealers may act as agent or to whom they may sell as principal,
or both (which compensation as to a particular broker-dealer may be in excess of
customary commissions). The selling stockholders and any broker-dealers acting
in connection with the sale of the shares hereunder may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act of 1933,
and any commissions received by them and any profit realized by them on the
resale of shares as principals may be deemed underwriting compensation under the
Securities Act of 1933. Neither the selling stockholders nor we can presently
estimate the amount of such compensation. We know of no existing arrangements
between the selling stockholders and any other stockholder, broker, dealer,
underwriter or agent relating to the sale or distribution of the shares.
We will not receive any proceeds from the sale of the shares of the selling
security holders pursuant to this prospectus. We have agreed to bear the
expenses of the registration of the shares, including legal and accounting fees,
and such expenses are estimated to be approximately $100,000.
The selling stockholders named in this prospectus must comply with the
requirements of the Securities Act and the Exchange Act in the offer and sale of
the common stock. The selling stockholders and any broker-dealers who execute
sales for the selling stockholders may be deemed to be an "underwriter" within
the meaning of the Securities Act in connection with such sales. In particular,
during such times as the selling stockholders may be deemed to be engaged in a
distribution of the common stock, and therefore be considered to be an
underwriter, they must comply with applicable laws and may among other things:
16
1. Not engage in any stabilization activities in connection with our common
stock;
2. Furnish each broker or dealer through which common stock may be offered,
such copies of this prospectus from time to time, as may be required by
such broker or dealer, and
3. Not bid for or purchase any of our securities or attempt to induce any
person to purchase any of our securities permitted under the Exchange Act.
REGULATION M
We have informed the Selling Shareholders that Regulation M promulgated under
the Securities Exchange Act of 1934 may be applicable to them with respect to
any purchase or sale of our common stock. In general, Rule 102 under Regulation
M prohibits any person connected with a distribution of our common stock from
directly or indirectly bidding for, or purchasing for any account in which it
has a beneficial interest, any of the Shares or any right to purchase the
Shares, for a period of one business day before and after completion of its
participation in the distribution.
During any distribution period, Regulation M prohibits the Selling Shareholders
and any other persons engaged in the distribution from engaging in any
stabilizing bid or purchasing our common stock except for the purpose of
preventing or retarding a decline in the open market price of the common stock.
None of these persons may effect any stabilizing transaction to facilitate any
offering at the market. As the Selling Shareholders will be offering and selling
our common stock at the market, Regulation M will prohibit them from effecting
any stabilizing transaction in contravention of Regulation M with respect to the
shares.
We also have advised the Selling Shareholders that they should be aware that the
anti-manipulation provisions of Regulation M under the Exchange Act will apply
to purchases and sales of shares of common stock by the Selling Shareholders,
and that there are restrictions on market-making activities by persons engaged
in the distribution of the shares. Under Regulation M, the Selling Shareholders
or their agents may not bid for, purchase, or attempt to induce any person to
bid for or purchase, shares of our common stock while such Selling Shareholders
are distributing shares covered by this prospectus. Regulation M may prohibit
the Selling Shareholders from covering short sales by purchasing shares while
the distribution is taking place, despite any contractual rights to do so under
the Agreement. We have advised the Selling Shareholders that they should consult
with their own legal counsel to ensure compliance with Regulation M.
LEGAL PROCEEDINGS
There are no legal proceedings pending or threatened legal actions against us.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names and ages as of management, and business
experience of the directors, executive officers and certain other significant
employees of our company. Our directors hold their offices for a term of one
year or until their successors are elected and qualified. Our officers serve at
the discretion of the Board of Directors. Each officer devotes as much of his
working time to our business as is required.
NAME AGE POSITION
- --------------------------------------------------------------------------------
Scott R. Sand 48 Chairman, Chief Executive Officer, and Director
Thomas J. Neavitt 75 Secretary and Chief Financial Officer
Yong Sin Khoo 42 Director
Christopher A. Wirth 51 Director
Curt A. Miedema 49 Director
Stephen O'Hara 53 Director
John Finazzo 41 Director
17
OUR OFFICERS AND DIRECTORS
SCOTT SAND, CEO & CHAIRMAN: Scott Sand has a diversity of experience in the
health care industry both domestic and abroad which spans more than 25 years.
His contributions and accomplishments have been published in the Los Angeles
Times and the Sacramento Tribune. He has been the recipient of recognition
awards by high honored factions such as the United States Congress and the State
Assembly, receiving the highest Commendation in the County of Los Angeles for
his contributions to health care. Mr. Sand served as the CEO of Medcentrex, Inc.
for 10 years in the 1990's, a medical service provider to more than 600
physicians nationwide. He served as the Director of Sales & Marketing for Eye
Dynamics, Inc. for 7 years, a public company and manufacture of Video ENG
systems; assisting in their technology upgrades and design for VNG and
increasing their sales each quarter during that time. He resigned from Eye
Dynamics, Inc. to accept the full-time position as CEO & Chairman of Ingen
Technologies, Inc. in 2004. Mr. Sand received a Bachelor of Science Degree in
Computer Science from California State University and a MBA from California
State University.
THOMAS J. NEAVITT, SECRETARY AND CHAIRMAN: Thomas J. Neavitt has held a variety
of executive level positions for product and service based corporations over the
last 40 years. Mr. Neavitt's experience includes finance, marketing, business
development, sales, and collections. Additionally, Mr. Neavitt has experience in
real estate as both a broker and developer. Mr. Neavitt served in the U.S. Navy.
Mr. Neavitt left the Navy and became President and CEO of Penn-Akron Corporation
and its wholly owned subsidiary Eagle Lock Corporation. He was instrumental in
the successful acquisition of this company. Mr. Neavitt also served as President
of TR-3 Chemical Corporation for nearly 20 years who sold products throughout
the U.S. and some foreign countries. Tom now serves as a consultant to various
corporations throughout the country. Mr. Neavitt has been President of AmTech
Corporation, which manufactures stabilizing systems, for the past 5 years.
YONG SIN KHOO, DIRECTOR: Yong Sin Khoo lives in Singapore. Since 2001, Mr. Khoo
has been employed by Singapore Power Ltd. as a Deputy Director of its Strategic
Investments Division. As Deputy Director, Mr. Khoo focuses on business
development and assets portfolio management with a focus on disposal of
non-performing and non-core investments. In addition to his position as Deputy
Director, Mr. Khoo presently serves as acting general manager of SPI Seosan
Cogen Ltd/SPI Seosan Water Ltd. located in Singapore and Korea respectively
where he is responsible for management of cogeneration and water treatment
plants. Furthermore, Mr. Khoo is presently the acting general manager of
Singapower Development Pte Ltd in Singapore where his responsibilities include
the recovery of funds from disposed China investments. He is also executive vice
president of the China and USA International Cultural Communications Foundation;
China Indonesia International United Association; China Hong Kong International
Daoji Stroke Treatment Association. In addition, Mr. Khoo serves as a member of
the Board of Directors of Carbon Recovery (Asia) Pte Ltd in Singapore. Prior to
2001, he gained extensive experience as a logistics systems engineer in the
military and in retail engineering with the oil major, Shell. In the area of
information technology, he was responsible for managing Shell Singapore's y2k
project for the marketing function. Another IT pioneering effort was the use of
artificial intelligence to develop diagnostic tools for maintenance support for
the Army's radar systems. His current business interests are focused in the
areas of biomedical and environmental technologies. In 1984, he was awarded a
scholarship by the Singapore government to pursue electrical engineering at the
University of Queensland, Australia. He has a Bachelor's Degree in Electrical
Engineering from the University of Queensland.
CHRISTOPHER A. WIRTH, DIRECTOR: Christopher A. Wirth has over 20 years of
business consulting, finance, construction and real estate development
experience. He brings a working knowledge of finance and the mechanics of
syndication's, construction planning and startup business expansion skills. Mr.
Wirth has knowledge and experience in SEC, HUD, SBA, USDA, banking and
businesses. He attended San Bernardino Valley College and takes continuing
education courses. He continues to consult to environmental and renewable energy
firms, and has worked as a HUD YouthBuild construction instructor. Mr. Wirth has
previous medical background training through his service in the U.S. Navy, from
1973 to 1977, as a Hospital Corpsman. Mr. Wirth has been a director and spokes
person for AgriHouse an urban agricultural technology company, since 2000.
CURT A. MIEDEMA, DIRECTOR: For the last 5 years, Mr. Miedema has been
self-employed with his own investment company called Miedema Investments. Mr.
Miedema graduated from Unity Christian High School in 1975 and attended
Davenport College for 1 year thereafter.
STEPHEN O'HARA, MD, DIRECTOR: The Consumer's Research Council of America, an
independent organization based in Washington, D.C. recently ranked Dr. Stephen
O'Hara among the top two percent of clinical neurologists nationwide. He
attended Stanford University and graduated in 1975 with a Bachelor's of Science
degree in biology and performed honors research in the laboratory of Dr. Donald
Kennedy, who subsequently served as President of Stanford University. Dr. O'Hara
obtained his M.D. from Northwestern University in 1979, where he became
president of the Northwestern chapter of the American Medical Student
Association, then proceeded to complete his residency in neurology at UCLA in
1983. Dr. O'Hara is board-certified in neurology through the American Board of
Psychiatry and Neurology. Since completing his residency, Dr. O'Hara has
continued to teach the residents in the neurology program at UCLA while
maintaining a private practice in Century City, California for the past 16 years
with an emphasis on geriatric neurology and disorders of balance.
18
JOHN J. FINAZZO, MD, DIRECTOR: Dr. Finazzo graduated from the University of
California, Riverside in 1986 with a degree in Bio-Medical Sciences. He received
his MD degree from the UCLA School of Medicine in 1989. He completed a two-year
Surgical Internship at UCLA Center for Health Science in 1991. He then completed
residency in Otolaryngology - Head and Neck Surgery at the State University of
New York Health Science Center, Brooklyn in 1995. He is Board Certified in
Otolaryngology (since 1996). Dr. Finazzo has been in private practice in the
Palm Springs area for eight years. He is also on the surgical staffs at the
Desert Regional Medical Center, the John F. Kennedy Medical Center and the
Eisenhower Medical Center. Dr. Finazzo is also Section Chief - Division of
Otolaryngology at Eisenhower Medical Center. He resides in Palm Springs with his
wife of 15 years. He is active in clinical research for the treatment of acute
sinusitis.
SIGNIFICANT EMPLOYEES
None.
FAMILY RELATIONSHIPS
No family relationships exist among our directors, executive officers, or
persons nominated or chosen by us to become directors or executive officers.
CERTAIN LEGAL PROCEEDINGS
No director, nominee for director, or executive officer of the Company has
appeared as a party in any legal proceeding material to an evaluation of his
ability or integrity during the past five years.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of
our common stock as of December 5, 2006, by: (i) each director; (ii) each person
who is known to us to be the beneficial owner of more than five percent of our
outstanding common stock; (iii) each of our executive officers named in the
Summary Compensation Table; and (iv) all our current executive officers and
directors of as a group. Except as otherwise indicated in the footnotes, all
information with respect to share ownership and voting and investment power has
been furnished to us by the persons listed. Except as otherwise indicated in the
footnotes, each person listed has sole voting power with respect to the shares
shown as beneficially owned.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
TITLE OF CLASS BENEFICIAL OWNER (1) BENEFICIAL OWNER PERCENT OF CLASS (2)
- ---------------------------------------------------------------------------------------------------------------------
Common Stock Scott R. Sand (1) 325,000 *
Common Stock Salvatore Amato 4,583,333 14.78%
4 Debbie Court
Manalapan, NJ 07726
Common Stock Thomas Neavitt (1) 218,750 *
Common Stock Khoo Yong Sin (1) 105,000 *
Common Stock Christopher A. Wirth (1) 130,000 *
Common Stock Curt A. Miedema (1) 121,500 *
Common Stock Stephen O'Hara (1) 115,000 *
Common Stock John Finazzo (1) 100,000 *
Common Stock All officers and directors as 1,115,000 3.59%
a group (7 in number)
Class A Preferred Stock (3) Scott R. Sand 9,498,183 67.0%
Class A Preferred Stock (3) Jeffrey Gleckman 4,000,000 28.2%
Class A Preferred Stock (3) All officers and directors as 9,498,183 67.0%
a group (1 in number)
19
* Less than one percent.
(1) The address for each beneficial owner is 35193 Avenue "A", Suite-C Yucaipa,
California 92399.
(2) Unless otherwise indicated in the footnotes to this table and subject to
community property laws where applicable, we believe that each of the
stockholders named in this table has sole voting and investment power with
respect to the shares indicated as beneficially owned. Applicable percentages
are based on the following outstanding shares for each class of stock:
31,009,610 common shares and 14,172,047 preferred shares outstanding on December
5, 2006, adjusted as required by rules promulgated by the Commission
(3) Shares of our Class A preferred stock are entitled to one vote per share and
are convertible into common shares on a one-to-one basis at any time at the
option of the holder.
CHANGES IN CONTROL
No arrangements exist which may result in a change in control of us.
DESCRIPTION OF SECURITIES
The following description of our capital stock and provisions of our articles of
incorporation and bylaws, each as amended, is only a summary. Our authorized
capital stock consists of 100,000,000 shares of common stock, no par value per
share and 40,000,000 preferred shares, no par value per share. As of December 5,
2006, there were 31,009,610 shares of common stock issued and outstanding and
14,172,047 Class A preferred shares issued and outstanding. Only common stock is
offered in this prospectus.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share held on all
matters submitted to a vote of our shareholders. Holders of our common stock are
entitled to receive dividends ratably, if any, as may be declared by the board
of directors out of legally available funds, subject to any preferential
dividend rights of any outstanding preferred stock (there are none currently).
Upon our liquidation, dissolution or winding up, the holders of our common stock
are entitled to receive ratably our net assets available after the payment of
all debts and other liabilities and subject to the prior rights of any
outstanding preferred stock. Holders of our common stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of common
stock are fully paid and non-assessable. The rights, preferences and privileges
of holders of our common stock are subject to, and may be adversely affected by,
the rights of holders of shares of any series of preferred stock which we may
designate and issue in the future without further shareholder approval.
PREFERRED STOCK
All of our authorized preferred shares are Class A preferred shares. Class A
preferred shareholders have a priority over common stockholders upon
liquidation, dissolution or winding up. Class A preferred shareholders are
entitled to vote on all matters upon which common shareholders can vote, with
one vote per share. Preferred shares are not entitled to dividends. We have the
right to redeem each share of Series A preferred stock for $1 per share.
However, there is no obligation for this redemption. Each share of Series A
preferred stock is convertible, at the option of the holder and subject to a 65
day written notice to the Company, at any time after the date of the issuance
into one share of fully paid and non-assessable share of common stock. In the
event of any voluntary or involuntary liquidation, dissolution or winding up,
the holders of Series A preferred stock shall be entitle to be paid $1 per share
before any payments or distribution of assets to the holders of the common stock
or any other equity securities of the company. The outstanding shares of
preferred stock are fully paid and non-assessable.
20
INTEREST OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified
any part of this prospectus or having given an opinion upon the validity of the
securities being registered or upon other legal matters in connection with the
registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial
interest, direct or indirect, in the registrant or any of its parents or
subsidiaries. Nor was any such person connected with the registrant or any of
its parents or subsidiaries as a promoter, managing or principal underwriter,
voting trustee, director, officer, or employee. Anslow & Jaclin, LLP, our
independent legal counsel, has provided an opinion on the validity of our common
stock. Anslow & Jaclin, LLP has been our legal counsel since inception.
The financial statements included in this prospectus and the registration
statement have been audited by Spector & Wong, LLP certified public accountants,
to the extent and for the periods set forth in their report appearing elsewhere
herein and in the registration statement, and are included in reliance upon such
report given upon the authority of said firm as experts in auditing and
accounting.
DISCLOSURE OF COMMISSION POSITION OF
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Articles of Incorporation provide that, to the fullest extent permitted by
law, none of our directors or officers shall be personally liable to us or our
shareholders for damages for breach of any duty owed to our shareholders or us.
In addition, we have the power, by our by-laws or in any resolution of our
shareholders or directors, to undertake to indemnify the officers and directors
of ours against any contingency or peril as may be determined to be in our best
interest and in conjunction therewith, to procure, at our expense, policies of
insurance. At this time, no statute or provision of the by-laws, any contract or
other arrangement provides for insurance of any of our controlling persons,
directors or officers that would affect his or her liability in that capacity.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities, other than the payment by us of
expenses incurred or paid by our directors, officers or controlling persons in
the successful defense of any action, suit or proceedings, is asserted by such
director, officer, or controlling person in connection with any securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issues.
DESCRIPTION OF BUSINESS
Our Company was incorporated under the laws of the state of Georgia in 1995
under the name Classic Restaurants International, Inc. We changed our name in
1998 to Creative Recycling Technologies, Inc ("CRTZ"). Our business plan changed
from the restaurant business to recycling along with our name change. We had
little business activity and no sales. Our business was dormant from the late
1990's into the first calendar quarter of 2004.
In March of 2004, we merged with (purchased all the stock of) a Nevada company,
Ingen Technologies, Inc. Ingen Technologies, Inc. survived as a Nevada company
for the sole purpose of operating our new business. However, we remained a
Georgia company, with completely new management and an active business plan in
the medical devices industry (operated by the Nevada company with the same
name). Shortly thereafter, we changed our name to Ingen Technologies, Inc.
Ingen Technologies, Inc., the Nevada company, was founded by Scott R. Sand in
1999. Upon the merger with our Georgia company, Mr. Sand came on board as Chief
Executive Officer and Chairman of the Board of Directors, positions he maintains
today. Mr. Sand owns a small portion of our outstanding common shares (325,000
shares; slightly more than 1% of the 29,709,601 common shares outstanding as of
August 25, 2006). However, he owns 67% of our issued preferred shares (9,498,183
of 14,134,547 shares) which vote on a one-vote-per-share basis along with our
common shares. As of August 25, 2006, Mr. Sand owns 22.4% of our outstanding
voting shares.
21
Prior to the merger in March of 2004, Mr. Sand financed the research and
development of our product lines and operation of the business within Ingen
Technologies, Inc, of Nevada. From its inception in 1999 up through and into our
fiscal year 2004, Mr. Sand supplied cash loans of $72,000 and deferred
management compensation of $306,000. Mr. Jeffrey Gleckman, another of our
preferred shareholder, contributed approximately $300,000 to the company in
exchange for his preferred shares.
We have not filed all of our required periodic reports under the Securities
Exchange Act of 1934. Our predecessor, CRTZ, ceased filing its periodic reports
during 1998. After the Merger, we recommenced filing of our periodic reports on
November 7, 2005. Our fiscal year is from June 1 to May 31. We have filed annual
reports on Form 10-KSB for our fiscal years 2004, 2005, and 2006 and quarterly
reports on Form 10-QSB for each quarter during fiscal years 2004 and 2005 and
the first three quarters of fiscal year 2006, as well as other documents as
contained on EDGAR. We are currently attempting to gather information from
former CRTZ officials, attorneys and accountants so that our auditors can
complete back financial statements and our legal counsel can complete and file
the remaining back reporting documents.
On July 11, 2005, we entered into an agreement with the inventor of the
technology, Francis McDermott, underlying our BAFI and OxyAlert product lines.
Mr. McDermott conveyed all of his interest in 2 United States patents; No.
6,326,896 B1 and No. 6,137,417 to Ingen. The consideration for the transfer of
the patents was $10,000, 2 million shares of our restricted common stock and 4%
of the gross profit from sales of products utilizing the patented technology.
The agreement was recently amended to change the 4% gross profit indicator to 4%
of gross revenues.
We made major adjustments to our capital structure toward the end of 2005. We
reduced the number of authorized common shares from 500,000,000 to 100,000,000.
The number of authorized preferred shares remained unchanged at 40 million. Our
shareholders authorized a 1-for-40 reverse split of our common shares, thereby
reducing the number of issued shares from 488,037,593 to 12,201,138. We also
undertook a reverse split our preferred shares on 1-for-3 basis, thus reducing
our issued preferred shares from 39,000,000 to 13,300,000. Our preferred shares
are convertible into common shares on a 1-for-1 basis. Our preferred shares are
entitled to vote on an equal footing with common shares on all matters for which
shareholder voting input is required. Trading of our common stock under the
symbol "IGTN" ended on December 5, 2005. Trading commenced again on December 8,
2005, and continues, under our new trading symbol "IGTG."
OVERVIEW
Ingen Technologies, Inc. is a medical device manufacturer and service provider
for medical and consumer markets both domestic and abroad. We have four
products, one of which has had sales in at least the last two fiscal years
(Secure Balance(TM)). The others are oxygen and gas monitoring safety devices
that we have developed over the last few years.
Increasing revenues are being generated from the Company's Secure Balance(TM)
program; a medical product line for physicians and hospitals that provides
patient services for "balance & fall prevention" programs. We had $846,783 in
sales during this fiscal year ending May 31, 2006 and $794,314 in sales during
our 2005 fiscal year.
We have an oxygen monitoring device known as OxyAlert(TM), a second-generation
design of the Company's BAFI(TM) product line. Both of these products have been
issued two US Patents: Patent No. 6,137,417 issued on October 24, 2000 and
Patent No. 6,326,896 B1 issued on December 4, 2001. Both of these products are
low-oxygen safety warning devices used on remote oxygen cylinders for patients,
commercial aircraft, military transport, and fire and safety equipment.
OxyAlert(TM) technology encompasses the use of digital sensing and RF frequency
transfer so that care givers can access a hand-held remote to monitor the actual
oxygen level of any oxygen cylinder at a reasonable distance.
Using the same patented and proprietary technology, the Company also plans to
offer our GasAlert(TM) product; a device that interfaces between any gas line
and accessory, such as a water heater, dryer, stove or heater, to detect leaks.
This is a mass consumer item. We do not have an anticipated market date for
GasAlert(TM).
The newest product we've developed, OxyView, has a U.S. (as well as China and
Japan) patent and trademark pending, and is a pneumatic gauge that provides
visual safety warning of oxygen flow to hospitalized patients. This product is
designed to enhance the safety, assurance and accuracy of hospitalized patients
being administered oxygen from any source. OxyView is a lightweight pneumatic
gauge that is attached to the oxygen tubing just below the neck. It informs the
nursing staff of oxygen flow rate near the patient. It is designed to quickly
inform the hospital staff of any leak or inaccuracy between the delivery source
and the patient.
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We invite you to check out our website at www.ingen-tech.com for information
about our company and products. At the present time, there is considerable
information on Secure Balance and we plan to add more information concerning our
BAFI(TM) product line in the future.
I. SECURE BALANCE(TM)
The Secure Balance(TM) product is a private-label product that includes a
vestibular function testing system and balance therapy system. The vestibular
(referencing organs in the inner ear) function testing system is manufactured by
Interacoustics LTD. in Denmark and is referred to as the VNG. The balance
therapy system is manufactured by SportKAT(R), Inc. in San Diego, California.
SportKAT provides private-label testing and balance therapy systems to others.
However, we have our own trademark - Secure Balance(TM). Our Secure Balance(TM)
program provides equipment, education and training about balance and fall
prevention to physicians and clinicians worldwide. All of our company's sales in
fiscal year 2005 ($794,314)and 2006 ($846,783) were sales of Secure Balance(TM).
SECURE BALANCE(TM) THERAPY TRAINER
Secure Balance(TM) Therapy Trainer is designed to sell to physicians, clinics
and hospitals for use with patients suffering from balance problems. It is a
patented Kinesthetic Ability Trainer (called "SPORTKAT"), an innovative tool for
the evaluation and rehabilitation of neurosensory (or balance) deficits.
SportKat focuses on the development of dynamic balance, strength, muscle
control, proprioceptive (i.e., the sensation of position of all body parts in
relation to the head and brain and it's relationship to the immediately
surrounding environment), and vestibular (i.e., the inner ear balance system)
improvement and offers a practically infinite range of adjustable settings to
accommodate people with varied body weights and physical activity levels.
- Secure Balance(TM) Therapy Trainer provides a way to test and train
the nerves that control the muscles of the body that enable us to
stand, run, jump and otherwise perform day to day functions. These
nerves are called proprioceptors. They are an integral part of a
complicated system that the body uses to interpret all of the
sensory input that it receives from external and internal sources--
including vestibular input from the inner ear, visual input from the
eyes and proprioceptive input in order to maintain posture and
mobility. Proprioception enables the body to know where it is in
space. Performing an oculomotor test and examples of included
patterns for the visual stimulus system for oculomotor testing and
calibration.
SportKat is an advanced Balance Training system primarily for Senior "fall
prevention" Programs, correcting vertigo in Pilots and improving the quality of
life with those that have severe motor skill diseases. The SportKat system
differentiates itself from anything else (known to management) because it
applies the Visual, Vestibular and Proprioceptive systems to leverage the
redundancies in the brain--thereby improving balance. It is much safer than a
"wobble board" for seniors because the air "bladder" can be inflated to match
all levels of ability, weight, etc. This product is currently used in Medical
Centers, Hospitals, Universities, and Professional Sports Teams. SportKat is
effective with those that have the following severe motor skill
diseases/challenges:
- Post Acoustic Neuroma Resection (Brain Tumors)
- Head Trauma
- Post Concussion
- Meniere's Disease
- Vertiginous Migraines
- Vestibular Neuronitis
- Presbystasis (A disorder of loss of balance generically attributed
to old age)
- MS
- Parkinson's
- Ataxia (improper gait or walking)
The SportKat 4000 is our most advanced balance assessment and training
equipment. The SportKat software includes provisions for both static and dynamic
balance training and assessment through the availability of diversified types of
tests, test patterns and difficulty levels. Users may use the built-in training
modes with a great deal of ease and flexibility. In addition, the system enables
the user (or doctor, trainer, etc.) to design unique, individual training
protocols to overcome specific deficits identified during the assessment phase.
Designed for multiple applications within the medical and athletic environments,
the SportKat 4000 features:
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- 19" Monitor
- Wireless Mouse & keyboard
- Printer (Ability to Generate Printed Reports)
- Handrails for additional safety
- Larger Base for increased stability
- Microprocessor-based Pump Control which allows for automated
inflation and deflation of the pressure bladder to quickly and
easily adjust the pressure based on the user's weight and level of
difficulty
- Computer Assisted Data System featuring the SPORTKAT WIN software
(see Technology below)
- Thermal Accelerometer
- Provisions for Both Static and Dynamic Balance Assessment
- Multiple Built-in Training Programs
- Diversified Difficulty Levels for Testing and Training
- Automatically Stored Test Data for each user by date, time and type
of test, allowing for progress analysis
- Tracking Software capable of maintaining data for multiple users,
including personal data, medical data and a test editor
- Ability to Transfer Files for Additional Analysis such as
statistical studies using Microsoft's Excel software
The SportKat operates using a patented inflatable bladder support system and
centrally pivoted platform. Attached to the platform is a thermal accelerometer,
which measures the user's displacement from center (balancing ability),
producing a quantifiable measurement or balance index score at the conclusion of
a balance assessment or training session. This measurement provides a basis on
which the user can track improvements by completing increasingly difficult
levels of training.
The modular nature of the SportKat design allows the company to offer a variety
of SportKat models to meet the needs (and budgets) of each customer/user group.
In addition, the modular design allows users to upgrade a SportKat machine to
meet changing needs, add new features or incorporate increased levels of
technology. As discussed below, each SportKat model may be classified into one
of three categories: portable, standard or computer assisted. However, every
version of the SportKat incorporates the company's technology as well as the
following standard features:
- Sturdy Construction using a combination of injection molded glass
polymers, plastic and steel
- Inflatable Support Bladder capable of holding between 0 to 15 PSI of
pressure, allowing for a seemingly infinite range of difficulty
levels for both testing and training
- Easy Stability Adjustment using either a hand held or automated pump
system to inflate the support bladder
- Centrally Pivoted Platform with up to 20 degrees of deflection in
any direction (360 degree range)
- Optional Support Harness for increased safety
In addition to these basic structural features, the SportKat system is be
equipped with the following technological components:
Computer Assisted Data System to allow the SportKat to become interactive and
facilitate advanced testing and training. This system features:
- Thermal Accelerometer to measure the users balancing ability and
compute a score between 0 and 5000, with 0 being perfect balance at
any given PSI or level of difficulty.
- SPORTKAT WIN Interactive Software enabling Static and Dynamic
Testing and Training Capabilities to assess and improve angular
displacement skills as well as the time and distance from the
target. (Static testing measures the ability to maintain balance in
a stationary position and dynamic testing measures the ability to
maintain balance while in motion.)
- Desktop Computer with Monitor, featuring the Company's proprietary
SportKat WIN interactive software (factory installed)
- Optional Computer Stand
- Ability to Create Original Training Programs to accommodate unique
or specific training goals. For instance, if the user has a
balancing deficiency on the left side of the body, he/she can create
a program or draw a picture directly on the monitor with an erasable
marker; select a dynamic (tracing) mode; and move the cursor back
within the picture until it is filled in with the trace.
- Increased Performance Analysis including multiple levels of training
difficulty and a variety of scoring calculations that will enable
performance to be tracked and reported using both raw numbers and
various charts.
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SECURE BALANCE(TM) VIDEO ENG VESTIBULAR FUNCTION TESTING
The Secure Balance(TM) VNG Modules offer complete function analysis that is easy
to administer and comfortable for the patient. The lightweight goggle is
designed with patient comfort in mind and versatility in fitting on a variety of
patient populations.
Video images of the eyes are obtained without direct contact using high
resolution cameras with infrared illumination. The eyes are visualized, enabling
simultaneous subjective evaluation, while eye position is analyzed by digital
image processing to obtain vertical and horizontal eye position.
The Examination Designer program within the goggle allows the creation of a
patient's own test protocol. During the examination the test view provides the
patient with graphical data and immediate analysis while simultaneously
displaying the eye images for subjective control during the exam. The examiner
can even type in comments while the test is in progress. These features greatly
reduce the number of time consuming steps often involved in generating test
data.
The Secure Balance(TM) can produce clear and detailed color reports suitable for
hardcopy storage. Reports collate patient details, traces, analysis and display
diagrams in an easy-to-read-format.
The integrated extensive database provides a practically unlimited storage
capability. The database works with both the Secure Balance(TM)/Alternate
Systems.
The Secure Balance(TM) / Alternate Systems are integrated into the
Interacoustics Medical PC platform. This is designed for convenient
transportation around a clinic and the amount of extraneous equipment required
is kept to a minimum.
Included Parts:
- Combi Mask or Goggle
- One Camera module for Combi Mask
- Two Camera modules for Combi Mask and 2-channel software
- Installation CD
- Computer System with Tracking Interface Controller
- Footswitch
- Full-Field Projector (dimensions 2"X6"x6": Weight 1.2lbs)
- Null-modem cable
- VisualLab Operation Disk
- Flashcard Mobile Storage
- Operational Manual
HEALTHCARE COMPLIANCE SERVICES
Ingen Technologies, Inc. has contracted Total Healthcare Compliance (see terms
of the agreement below) to provide services for Secure Balance(TM) customers who
purchase the Balance & Fall Prevention program. The Secure Balance(TM) customer
receives 5 hours of professional assistance from Total Healthcare Compliance to
incorporate accurate information regarding vestibular function testing and
therapy. These services include, but are not limited to, the following:
- CPT-Billing and ICD-9 Coding
- Proper and effective use of modifiers to ensure appropriate payment
- Audit requirements and Claims processing
- Testing qualifications and supervision requirements
- Strategies to minimize post-payment risk
- Documentation strategies to improve profitability
We entered into an agreement with Bryant Goldman, DBA Total Healthcare
Compliance, LLC ("Total Healthcare") on December 9, 2004. Under the terms of the
agreement, Total Healthcare received 200,000 shares of Ingen's restricted common
stock to provide consulting services to Secure Balance(TM) physician customers.
The consulting services include medical billing compliance and other
professional services related to the operation of the Secure Balance(TM) system.
Total Healthcare is also to be compensated at a rate of $4,000 for each Secure
Balance(TM) product sold by Ingen based on leads received from Total Healthcare
and an additional $500 if the client accepts Total Healthcare's services in the
sale package.
Total Healthcare Compliance, Inc. ("THC") is a full-service medical consulting
firm comprised of attorneys, business management experts, coding specialists and
physicians from different specialties. The company works with each customer's
staff and advisors to design and implement solutions for the customer's needs
within that particular medical practice.
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THC has identified six key areas of a health care facility management that are
crucial to your practice's success.
- Physical Plant- THC looks for cost effective ways to improve the
customer's facility's appearance, patient flow and utilization of
space, while reducing cancellations/no-show rate. They can suggest
new, up-to-date diagnostic equipment that can help provide better
patient care and make it easier to demonstrate medical necessity.
- Personnel- They interview the customer's office personnel to help
take the fullest advantage of the employees' talents and abilities
and to identify any weak spots in the day-to-day operations. If the
customer is having trouble finding key personnel, THC can help with
that too, because of its affiliation with several nationwide medical
personnel services. THC can also perform background checks on
current employees and potential new hires to weed out those with a
history of legal, licensure and financial problems.
- Provider Agreements- THC reviews each policy and provides the
customer with a written, abridged version of what is and is not
covered. They also outline how billing is to be performed for each
provider.
- Billing, coding, and collections procedures- Coding and billing
criteria vary from carrier to carrier. Medicare and Medicaid have
their own sets of requirements. Through regional seminars, intensive
workshops and/or in-office training, THC instructs the customer's
personnel in billing and coding procedures. THC also offers a full
range of forms to assist the customer's billing, collection and
coding department. Or, THC will handle the customers coding and
billing.
- Patient charts- THC reviews patient charts to make sure the customer
is properly documenting medical necessity.
- Utilization of Services- A thorough utilization review can pinpoint
areas where the customer's practice is above or below the norm as
compared to similar practices.
THC offers an on-site review of the customer's practice that includes a thorough
assessment of all six key practice management areas.
THC takes a comprehensive approach to compliance with federal and state
regulatory agencies. They examine the customer's organization's day-to-day
operations and identify any potential areas of exposure. Based on these
findings, THC assists the customer to develop and implement a corporate
compliance program that meets the requirements of the entire alphabet soup of
federal and state regulatory agencies.
The line between mainstream and "alternative" medicine narrows each year, while
the amount of money spent on chiropractic, homeopathy, naropathy and
nutriceuticals increase by the billions of dollars. The rapid growth of
alternative medicine can have positive repercussions for the traditional and
non-traditional physicians alike. "Physician supervised" forms of alternative
medicine ensures that the patients get professional care while offering health
care providers the opportunity to explore new areas of practice. THC helps
integrate new, complimentary areas of "alternative" medicine into the customer
physician's practice. THC can also assist in forming entities that include
alternative medical practices and in developing and implementing protocols for
alternative medicine practitioners.
When it comes to marketing and advertising medical practices, health care
providers are subject to a slew of state and federal restrictions. THC reviews
advertising and marketing materials to ensure they comply with state and federal
regulations. Or, they can handle the design and production for the customer.
THC offers seminars, in-office training and video programs tailored to the needs
of the customer in:
- Coding, billing, and collections
- Compliance with state and federal regulations
- Marketing
- Practice management
- Testifying at depositions and in court
- Integrated alternative medicine practices
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EDUCATIONAL SERVICES AND SEMINARS
As part of our ongoing provision of services for Secure Balance purchasers, we
offer periodic seminars and classes in all aspects of the operation of Secure
Balance. These seminars feature nationally recognized experts in our field.
II. BAFI(TM); OXYALERT(TM); OXYVIEW; GASALERT(TM)
The company invented, patented, and produced the world's first (as known to
management) wireless, digital, low gas warning system for pressurized gas
cylinders, known as BAFI(TM). Applicable markets include medical, safety &
protection (Fire & Police), aircraft (commercial & private), recreation vehicle
& outdoor (propane), home & residential, construction (welding), military & many
others.
The company's first planned product, a medical low oxygen warning system for
pressurized oxygen cylinders referred to as BAFI(TM), has been issued 2 United
States patents. The BAFI(TM) planned product met or exceeded regulatory
compliance of this type of product. We built 200 BAFI(TM) prototypes. Our
prototypes were used in clinical trials administered by Richard Shelton, MD, of
Loma Linda (California) University Medical Center during 2002. The tests proved
out the viability BAFI(TM) and enabled us to determine the design of
OxyAlert(TM).
We are now developing our new product lines, OxyAlert(TM), OxyView and
GasAlert(TM), based on our patented BAFI(TM) technology. OxyAlert(TM)'s
application will continue BAFI(TM)'s mission of providing a medical low- oxygen
warning system for oxygen cylinders. OxyView provides a visual safety warning.
GasAlert(TM) will have a broader application to many industries and businesses
desiring to monitor pressurized gas cylinders.
BAFI(TM) (and its progeny OxyAlert(TM), OxyView and GasAlert(TM); referred to
hereinafter as our "BAFI(TM) product line") is a product that offers
technological innovations for various types of applications. Portable
pressurized gas systems are categorized as Diameter Index Safety Systems
(D.I.S.S.) and are used for various applications. For example, oxygen gas is
provided to patients for use in remote locations. This delivery system is a
standard medical application used in providing oxygen to patients suffering from
various respiratory and pulmonary diseases that result in oxygen deficiency
within their blood stream. Oxygen systems are prescribed by physicians and made
available through various manufacturers and oxygen suppliers.
We believe our clinical tests have shown that BAFI(TM) is reliable,
user-friendly and interfaces with most of the regulators available in the market
today. The BAFI(TM) interfaced with all oxygen cylinders.
The BAFI(TM) product line is unique in its ability to interface with most of the
regulators and all of the pressurized gas cylinders. The use of BAFI(TM) product
line provides reliability and safety for the patients and other users. The user
is periodically unaware of the pressure levels and for the first time they can
experience assurance through this real-time audio and visual warning system.
BUSINESS OPPORTUNITY
The Company intends to market OxyAlert(TM) and OxyView within the Medical
Industry. According to the American Academy of Pulmonology and the New England
Journal of Medicine, Pulmonology Publication, the patient market alone is vast
and includes 8,000,000 patients in the United States and 22,000,000 world wide,
who use oxygen. There are multiple oxygen cylinders used per patient.
With the elderly population doubling in 7 years and tripling in 15 years, the
market continues to substantially increase. Other markets for GasAlert(TM)
include millions of homes, barbeques, recreation vehicles, construction,
military bases, commercial and private aircraft's, and government facilities.
There is no recognized competition.
PROFESSIONAL PRODUCTS
The Company has ceased the production stage of BAFI(TM) itself (after conducting
the aforementioned clinical trials), but will soon have the ability to deliver
our BAFI(TM) product line to our various markets. The Company has established
direct sales and marketing programs with manufacturer reps, and medical product
distributors. Our direct marketing efforts will focus on a direct marketing
campaign, infomercials, television advertising and Internet marketing. We have
an agreement in place with MedOx Corporation ("MedOx"), a California company, to
distribute our BAFI(TM) product line on a worldwide basis. MedOx is currently
expanding its contacts to include global sales capability. Initially, MedOx is
selling OxyView(TM). We have agreed to pay MedOx 4% of all OxyView(TM) revenues,
less MedOx's selling price to the customer. If MedOx sells 1 million OxyView(TM)
units, we will issue 2,000,000 shares of of our restricted common stock to
MedOx. MedOx will also receive a cash payment of $10,000 per month for the six
months commencing in December of 2006. MedOx determines the customer price and
receives 4% of the price and 100% of the difference between the price it pays to
us and the customer price.
27
The Company is prepared to promote sales of our product in certain international
markets. The BAFI(TM) product line has been issued United States Patents (except
OxyView, which has a patent pending). We do not have international patents (but
have applied for patents in China and Japan for OxyView). Company management
will prepare for an international market research report on the potential of its
product lines overseas. With this report, the Company can evaluate its position
to pursue compliance of ISO-9000 and CE certification for European countries. In
order to sell our products in Europe, we need to comply with the "ISO" standards
which all United States manufacturers must adhere to. The CE certification is
given upon the meeting the applicable ISO standard. It is anticipated that the
overseas market represents 50% of the world market for pressurized gas
cylinders.
Our clinical trials with Dr. Sheldon's patients have shown (in our opinion) that
the BAFI(TM) system is an accurate and cost effective, real-time, pressurized
gas warning system that will alert the user when the gas levels are approaching
empty. It offers a convenient method in warning users before the cylinders are
empty without the physical need to view the gauge. The BAFI(TM) components are
water resistant, salt spray resistant, heat resistant, durable and FDA approved.
INDUSTRY AND MARKETPLACE
The Company's BAFI(TM) product line falls into several categories including the
health care industry, building supplies industry, recreation vehicles industry
and aircraft industry. We are establishing distribution avenues in the medical
device industry, hospital and medical supplies, and the consumer and
institutional health care supplies market.
THE HEALTH CARE INDUSTRY
Since the mid-1960's, the costs of health care have risen in gross disproportion
to the general cost of living index. The United States alone spends almost $1
trillion annually on health care (from the United States Department of Health
and Human services web site). These expenditures are forecast to increase into
the foreseeable future, posing a serious threat to the economy as well as
financial health of families across the United States. A general consensus
exists that decisive action needs to be taken to strengthen existing control
measures and implement effective new proposals. It is our mission to provide
these solutions for today by developing a cost effective product line for all
applicable markets.
A significant contributing factor to the health care crisis has been the
escalating costs of new medical technologies and the resulting higher costs of
in-hospital patient care. One cost containment strategy that is clearly gaining
momentum is a reduction of technology costs, as well as an increase in
outpatient services. We believe our BAFI(TM) product line will contribute to
safety and cost containment within the medical market and further that our
BAFI(TM) product line will provide convenience and assurance while traveling
with the patient.
The prohibitive costs of medical facilities have engendered the appearance of a
wide spectrum of consumer based home health care products and managed care
services. Such consumer activity reduces the economic burden of necessary health
care. The managed care industry has structured its primary care providers to act
as the "gate keeper". The BAFI(TM) product line will be targeted for the oxygen
supplier with referrals from a primary care provider and pulmonary specialist
through a manufacturing representative distribution network.
Government agencies and employer insurance liability carriers have incentive to
reduce bottom-line expenditures, thereby creating huge target markets for the
BAFI(TM) product line. We believe the BAFI(TM) product line will offer a more
cost-effective approach to decreasing the number of empty tanks as compared to
costs associated with accidental injuries from oxygen depletion and/or having to
re-prime empty tanks.
THE MARKET
THE GAS INDUSTRY IN GENERAL
According to discussions our management has had with officials of Allied Health
and Puritan Bennett, among the largest suppliers/manufacturers of gas regulators
and cylinders, the gas supply business represents annual revenues of $30 billion
and is mainly comprised of tank manufacturers, gauge & regulator manufacturers,
and gas suppliers. The Company's research has shown that the identified markets
would be interested in acquiring the BAFI(TM) system for their applications. The
physician market continues to have an interest in providing BAFI(TM) units to
their patients by means of assurance and safety.
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The BAFI(TM) technology was designed as a compliment to the current method of
monitoring the pressure within gas cylinders. The BAFI(TM) unit is adjustable
and calibrated at 500PSI (pounds per square inch) in order to warn the user of
pressure levels that fall below 500 PSI. Most pressurized oxygen cylinders can
hold 3000 PSI of gas. The BAFI(TM) will not be activated until the pressure
reaches 500 PSI. This calibrated setting is coherent with the existing gauges
that are red-lined at 500PSI and is the current method for reading pressure.
BAFI(TM) works simultaneously with the gauge and provides the additional warning
system that is now necessary in today's market. There are many instances when
the user is not attentive to the pressure reading. There are both cost factors
and safety issues that result from having an empty cylinder. When tanks are
returned empty there are additional costs for priming the tank and replacing
parts. The assurance BAFI(TM) provides for the user is greatly enhanced.
OxyAlert(TM) improves the BAFI(TM) gauge methodology by allowing a digital
read-out with remote data transmission to other caregivers, as well as a safety
gauge, with additional visual and audio aids, that warns the user of low oxygen
levels. GasAlert(TM) applies the OxyAlert(TM)/BAFI(TM) technology to other types
of pressurized gas containers.
PRICING
The company plans to price the medical devices so that a 45-50% gross margin is
generated. The distributor price may likely be discounted from time to time
depending upon high volume commitments. We anticipate the retail cost of
OxyAlert(TM) will be in the $300-$400 range. GasAlert(TM)'s price has yet to be
determined, but will be considerably lower. OxyView is planned (to start)with a
retail price of under $20.
SALES AND MARKETING
Company management believes that the sales & marketing for these systems could
be achieved with a direct factory sales force. However, with the implementation
of our sales & marketing program, the increase of sales will decrease production
costs. The goal is to reduce the system manufacturing cost and maintain margins.
The Company has established relationships and contracts with distribution and
sales of its products and services through various experienced distribution and
marketing channels, including primarily medical device marketing, government
marketing and supplier outlets. The Company has recently introduced the BAFI(TM)
product line through the medium of direct Internet marketing and advertising,
which is gaining wide recognition as an effective method of introducing products
and driving customers to retail distribution channels. We have an agreement in
place with MedOx Corporation ("MedOx"), a California company, to distribute our
BAFI(TM) product line on a worldwide basis. MedOx is currently expanding its
contacts to include global sales capability. Initially, MedOx is selling
OxyView(TM). We have agreed to pay MedOx 4% of all OxyView(TM) revenues, less
MedOx's selling price to the customer. If MedOx sells 1 million OxyView(TM)
units, we will issue 2,000,000 shares of of our restricted common stock to
MedOx. MedOx will also receive a cash payment of $10,000 per month for the six
months commencing in December of 2006. MedOx determines the customer price and
receives 4% of the price and 100% of the difference between the price it pays to
us and the customer price.
An integral part of the Company's marketing strategy, and a common theme to the
marketing plan, is its complete proprietary product offering. By offering a
proprietary line of products and services, and promoting cost-effective and
leading-edge identity, the Company can establish permanent residency in major
national and international medical supply outlets. This could afford the Company
less resistance to new products in the future.
BAFI(TM) PRODUCT LINE MARKETING PROGRAM
The Company will have an initial national distribution plan. The plan will
entail the expansion of development and distribution of its products and
services, and the development of wholesale and retail distribution through an
experienced marketing network, medical supply outlets, government agencies and
managed care organizations. The plan will also seek to garner the support of the
medical community through the sponsorship of ongoing research of oxygen delivery
programs and devices. The Company continues to negotiate distribution programs
with large and experienced distributors.
1. Institutional Health Care Distribution
The Company's management has developed active relationships with physicians,
hospitals and various suppliers in the United States and has established a
direct sales channel designed to build a network of health care institutional
distribution to actively purchase the BAFI(TM) product line.
The Company is preparing to significantly expand its direct sales program to
government agencies, institutions, health care providers, hospitals, managed
care organizations, urgent care centers, skilled nursing facilities and private
industry. In doing so, management intends to appoint regional sales managers in
target regions throughout the United States. These regional sales managers will
be charged with executing the Company's direct sales efforts in their respective
territories, specifically establishing new, active accounts. The Company has
focused the early thrust of its expanded marketing program within the United
States. Management believes that this is the best current practical opportunity.
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2. Retail Distribution
The Company has appointed independent representatives to represent its products
on a regional basis throughout the United States. Management will continue to
appoint other firms that have extensive physician/medical penetration and
experience with medical products and continue to gain distribution through the
vast and growing network of independent medical device chain outlets.
3. International Marketing Program
The Company intends to expand its product line in certain international markets.
Management believes that the product is expected to be issued various Foreign
Patents and the regulatory approval to market in other countries. Currently the
company has engaged Kimihira, Shimada & Taylor, located in Torrance, California,
to seek distribution rights within Asia and the Pacific Rim.
4. Direct Response Marketing Program
An integral part of the Company's sales and marketing strategy is the use of
direct medical response advertising ("infomercials") within physician waiting
rooms and internet web site exposure, to introduce our products to the
marketplace, achieve significant sales, and develop brand name recognition. An
infomercial can be described simply as a televised commercial or web site of up
to 6 minutes in length, which demonstrates a product or services and attempts to
motivate the viewer to call a toll free telephone number and order the product
or service. We are utilizing an infomercial for our Secure Balance(TM) products
and services and intend to produce infomercials for OxyAlert(TM), OxyView and
GasAlert(TM) as soon as we can.
The infomercial has proven itself to be capable of literally revitalizing entire
product categories. Because of its unique ability to provide for live
demonstration of a product to (up to) millions of people simultaneously; the
infomercial has transformed several previously small, sleepy product categories
into industry leading growth segments.
Unique to the infomercial marketing technique, products can generally be sold at
relatively high prices (compared to traditional retail) because the product's
usefulness and value can be established through demonstration. The higher price
of an infomercial product actually pays for the higher selling costs associated
with the purchase of media time.
Through our sales & marketing division, the Company has established a
relationship with several web site developers to establish a joint infomercial
marketing venture for the BAFI(TM) product line and services. The Company
intends to explore the advisability of establishing such an arrangement
regarding future products, as well as the prospects of developing our own
infomercial marketing program.
5. Independent Representative Network
A principal component of the BAFI(TM) marketing strategy involves distribution
of our product line through major national and regional medical marketing
networks. Company management, together with key senior consultants, has
extensive contacts and relationships with independent representative firms
throughout the United States. Ultimately, management intends to secure
distribution contracts with 400 or more brokers, marketing consultants, and
special instrument dealers (SID's) to spearhead the Company's sales campaign in
acceptable market areas in the United States. At such time as BAFI(TM) has
achieved adequate market penetration in the initial markets, and as production,
logistics, financing, and operational capabilities increase, the Company intends
to expand our market representation and continue to expand in new markets.
The Company has allocated a substantial portion of our distribution network,
advertising and promotion, including the production of 10 minute (and longer)
infomercials, and web sites designed to promote viewer ship of the infomercial
and product lines.
The Company has approached major medical supplies direct mail catalog houses,
and other magazine supply catalog operators for representation and sales through
such publications. The Company may choose to market through catalogs under a
special brand name.
6. Advertising & Promotion
The primary objective of the Company's planned advertising and promotional
endeavors is to establish the BAFI(TM) product line name and image as the top
manufacturer of leading-edge & cost effective gas warning alert system products
and services within the industry.
30
The Company's initial architecture for our advertising campaign is being built
around the perceived cost advantages of the BAFI(TM) product lines' systems,
including its applications and importance. The message will also seek to project
the preparedness and peace of mind that comes from owning the product dedicated
to their clinical and corporate liabilities.
Concurrently, management is of the opinion that these same efforts will
reinforce the Company's wholesale program by increasing brand name awareness
among chain and independent buyers. To accomplish these objectives, the Company
will employ a variety of proven marketing communications techniques, to include
but not be limited to, on-site demonstrations of the product, national &
regional exhibits, regional and local institutional advertising, and co-op
advertising and promotions.
COMPETITION
The BAFI(TM) product line constitutes unique warning devices. The audio and
visual warning system enhances the safety and assurance of all portable
pressurized gas delivery systems and continues to be compatible with all
portable pressurized gas cylinders as a compliment to their existing paradigm.
Our competition, as outlined in our patent search, comprises basically two
United States companies. However, neither company currently has a product for
the pressurized gas tank market, nor have they been able to deliver the designed
product they have claimed in an expired patent. Therefore, management believes
there are currently no competitors and that the market is wide open.
BAFI(TM) PRODUCT LINE PATENTS AND TRADEMARKS
The Company was notified by the US Patents and Trademarks Office that the patent
was issued on 10/24/2000 (Patent Number 6,137,417) and that the examiner had
approved all 20 claims. A second patent has been filed and approved. The name
BAFI(TM) has been trademarked.
The patent search revealed that there are no similar devices like BAFI(TM) for
portable oxygen gas cylinders. As end of this fiscal year, we are still not
aware of similar devices in the marketplace.
PRODUCT LIABILITY
Beginning with the design phase of product development, the Company has
incorporated preventive measures aimed at reducing its potential exposure to
liability risk. The Company's product development and manufacturing program
includes high product reliability standards meant to result in high mean times
between failures (MTBF). The company plans to achieve a high MTBF factor by
pursuing strict quality control procedures and by holding its manufacturing
partners to such high standards by written contract. By designing and
manufacturing a reliable, high quality product, the Company will minimize, but
not eliminate, the possibility and occurrence of defective products.
The manufacturing and marketing of the Company's products, incorporating new and
unproved technology, has inherent risk. No one can be sure how each product will
operate over time and under various conditions of actual use. Even if the
products are successfully manufactured and marketed, the occurrence of warranty
or product liability, or retraction of market acceptance due to product failure
or failure of the product to meet expectations could prevent the Company from
ever becoming profitable. Development of new technologies for manufacture is
frequently subject to unforeseen expenses, difficulties and complications, and
in some cases such development cannot be accomplished. In the opinion of
management, the products, and services, as designed, has many positive
attributes, but such attributes must be balanced against limited field operating
experience and unknown technological changes.
GOVERNMENT REGULATION
MEDICAL DEVICE APPROVAL PROCESS. Medical devices are regulated by the Food and
Drug Administration ("FDA") according to their classification. The FDA
classifies a medical device into one of three categories based on the device's
risk and what is known about the device. The three categories are as follows:
- Class I devices are generally lower risk products for which
sufficient information exists establishing that general regulatory
controls provide reasonable assurance of safety and effectiveness.
Most class I devices are exempt from the requirement for pre-market
notification under section 510(k) of the Federal Food, Drug, and
Cosmetic Act. FDA clearance of a pre-market notification is
necessary prior to marketing a non-exempt class I device in the
United States.
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- Class II devices are devices for which general regulatory controls
are insufficient to provide a reasonable assurance of safety and
effectiveness and for which there is sufficient information to
establish special controls, such as guidance documents or
performance standards, to provide a reasonable assurance of safety
and effectiveness. A 510(k) clearance is necessary prior to
marketing a non-exempt class II device in the United States.
- Class III devices are devices for which there is insufficient
information demonstrating that general and special controls will
provide a reasonable assurance of safety and effectiveness and which
are life-sustaining, life-supporting or implantable devices, or
devices posing substantial risk. Unless a device is a preamendments
device that is not subject to a regulation requiring a Premarket
Approval ("PMA"), the FDA generally must approve a PMA prior to the
marketing of a class III device in the United States.
The company's BAFI(TM) product line and Secure Balance(TM) are "Class-II"
devices.
OxyView has been reviewed by the FDA and as a result the FDA has issued a
Registration No. 3005686889, FDA Owner/Operator No. 9085663, FDA Product Code:
BYM and FDA Listing No. E376132. OxyAlert is under review with the FDA. Secure
Balance products have been issued FDA 510(k)'s.
LABELING AND ADVERTISING. The nature of marketing claims that the FDA will
permit us to make in the labeling and advertising of our medical devices will be
limited to those specified in our FDA 510(k)s. Should be make claims exceeding
those that are warranted, such claims will constitute a violation of the Federal
Food, Drug, and Cosmetics Act. Violations of the Federal Food, Drug, and
Cosmetics Act, Public Health Service Act, or regulatory requirements at any time
during the product development process, approval process, or after approval may
result in agency enforcement actions, including voluntary or mandatory recall,
license suspension or revocation, 510(k) withdrawal, seizure of products, fines,
injunctions and/or civil or criminal penalties. Any agency enforcement action
could have a material adverse effect on us. The advertising of our products will
also be subject to regulation by the Federal Trade Commission, under the FTC
Act. The FTC Act prohibits unfair methods of competition and unfair or deceptive
acts in or affecting commerce. Violations of the FTC Act, such as failure to
have substantiation for product claims, would subject us to a variety of
enforcement actions, including compulsory process, cease and desist orders, and
injunctions. FTC enforcement can result in orders requiring, among other things,
limits on advertising, corrective advertising, consumer redress, and
restitution. Violations of FTC enforcement orders can result in substantial
fines or other penalties.
FOREIGN REGULATION. Outside the United States, our ability to market our
products will also depend on receiving marketing authorizations from the
appropriate regulatory authorities. The foreign regulatory approval process
includes all of the risks associated with FDA procedures described above. The
requirements governing the conduct of clinical trials and marketing
authorization vary widely from country to country.
INTELLECTUAL PROPERTY
Patents, trademarks and trade secrets are essential to the profitability of our
products, and our company policy is to pursue intellectual property protection
aggressively for all our products. We have 2 patents for our BAFI(TM) product
line. We have a total of 4 trademarks for our products. A summary of the patents
and trademarks is provided in the following table:
TRADEMARKS
1. MARK: OXYALERT (BLOCK LETTERS)
Ser./App. No. 78-609846
Int'l Class 9 - Electrical and Scientific Apparatus Goods/Services
Electronic Monitoring And Alarm Systems For Pressure Levels In Gas
Cylinders
Filing date: April 15, 2005
2. MARK: GASALERT (BLOCK LETTERS)
Ser./App. No. 78-609809
Int'l Class 9 - Electrical and Scientific Apparatus Goods/Services
Electronic Monitoring And Alarm Systems For Pressure Levels In Gas
Cylinders
Filing Date: April 15, 2005
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3. MARK: SECURE BALANCE (BLOCK LETTERS)
Ser./App. No. 78-570158
Int'l Class 10 - Medical Apparatus Goods/Services
Medical Diagnostic Equipment For Vestibular Function Testing And Dynamic
Posturography And Related Software Sold As A Unit, And Installation And
Training In The Use Thereof
Filing date: February 17, 2005
4. MARK: BAFI
Ser./App. No. 75-873947
Registration No. 2406214
Int'l Class 9 - Electrical and Scientific Apparatus Goods/Services
Electronic Monitoring And Alarm Systems For Pressure Levels In Gas
Cylinders
Filing date: December 18, 1999
Registration date: November 21, 2000
UNITED STATES PATENTS ABSTRACT
Patent No. 6,137,417 A warning device configured for removable mounting in combination
with a high pressure gas cylinder and a regulator used to regulate
Date issued: October 24, 2000 the high pressure gas supplied by the cylinder. The device
compression mounts between the regulator and tank outlet on
Date expires: May 24, 2019 conventional portable oxygen and gas supply systems using a
specially configured manifold.
The device features one or a combination of alarms, from a group
including audio, visual, electronic and remotely transmitted alarms.
These alarms are activated by a pressure switch monitoring the
remaining supply in the gas cylinder through a conduit in the
manifold.
The alarm signal from the device alerts the user, or a third party
monitoring the user, of current tank pressure or will sound an alarm
when remaining high pressure gas inside the gas cylinder drops below
a predetermined level.
Patent No. 6,326,896 B1 A warning device configured for removable mounting in combination
with a high pressure gas cylinder and a regulator used to regulate
Date issued: December 4, 2001 the high pressure gas supplied by the cylinder.
Date expires: October 24, 2020 The device compression mounts between the regulator and tank outlet
on conventional portable oxygen and gas supply systems using a
specially configured manifold.
The device features one or a combination of alarms, from a group
including audio, visual, electronic and remotely transmitted alarms.
These alarms are activated by a pressure switch monitoring the
remaining supply in the gas cylinder through a conduit in the
manifold.
The alarm signal from the device alerts the user, or a third party
monitoring the user, of current tank pressure or will sound an alarm
when remaining high pressure gas inside the gas cylinder drops below
a predetermined level.
A U.S. Provisional Patent, #60/780980, has been issued for OxyView.
Additionally, a U.S. formal patent application has been submitted along with
formal applications to China and Japan. We also have U.S. trademarks pending for
both OxyView and Pure Produce.
33
MANUFACTURING
We do not manufacture our products in-house. We have or will have contracts for
the manufacture of our products (depending on the product). As of now, we have
received a price quote from our manufacturer for the production of OxyView. We
expect to place a purchase order in the second quarter of 2006.
Oxyview has commenced sales as of 11/10/2006 with Koike Medical Co. Ltd.
in Japan, PO No. KM111006.
SUMMARY OF MATERIAL AGREEMENTS
Ingen has agreements with Preferred Provider Care Inc., Secure Health Inc.,
Total Healthcare Compliance Inc., InTouch Life Sciences Inc., MedOx Corp.,
Agroworx Inc., LifeTime Controls Inc., and RC Product Development and
Engineering. The summary of the agreements is as follows:
(1) Ingen has exclusively engaged the services of Preferred Provider Care to
provide physician training and physician support services for all Secure
Balance(TM) customers. Preferred Provider Care also agreed to develop physician
markets for Secure Balance(TM) sales in the United States through their
affiliate, American Academy of Balance Medicine and the Southeastern
Neuroscience Institute. Ingen will use Preferred Provider Care as its exclusive
agent to provide those services. In consideration, Ingen agrees to pay a
consulting fee of $3,000 for each Secure Balance(TM) product sale that includes
a signed Acceptance Agreement from the customer. The said fee will be paid only
if the purchasing physician or institution agrees to and signs the Acceptance
Agreement to utilize training services. Further, Ingen agrees to advance $5,000
for each workshop/event.
(2) Ingen has engaged Secure Health to exclusively distribute Secure Balance(TM)
products in North America. In consideration, upon signing of the Agreement,
Secure Health will receive 500,000 restricted shares of common stock of Ingen
Technologies, Inc. Ingen agrees to pay a 14% commission of the list sale price,
not inclusive of taxes or freight, of all Secure Balance(TM) sales. Upon selling
their first 13 Secure Balance(TM) systems, Ingen will issue a total of 250,000
restricted shares of Ingen common stock to the Contractor according to the
following schedule: 100,000 shares issued after first 5 systems sold; 100,000
shares issued after first 10 systems sold; and 50,000 shares issued after first
13 systems sold.
(3) Ingen engaged Total Healthcare Compliance to provide professional services
in medical billing compliance and Medicare billing guidelines. These services
are offered to Ingen's clients that have purchased the Secure Balance(TM)
program. Total Healthcare Compliance ("THC") has also agreed to endorse the
Secure Balance(TM) program to their clients. Ingen will use THC as its exclusive
agent to provide these services. In consideration, Ingen agreed to issue 250,000
shares of its restricted common stock to THC upon signing of this Agreement.
Ingen will pay commissions of $4,000 for each Secure Balance(TM) VNG product
sold on leads delivered to Ingen in the form of a signed agreement between the
client and Ingen. The said transaction will be verification of acceptance and
submitted to THC. Ingen will pay THC $500 for each Secure Balance(TM) sale,
providing the client accepts THC's services. THC agrees to provide 5 hours of
services for $500. Ingen will reimburse THC for any/all travel and lodging
expenses associated with workshops that are sponsored by Ingen.
(4) Ingen engaged InTouch Life Science ("ILS") to cost effectively understand
the viable OxyView(TM) and OxyAlert(TM) business opportunities and the business
development strategy that should be pursued to secure distributor agreements. To
ensure the best terms can be negotiated with distributors, ILS will conduct a
strategic assessment of the market in North America and Europe to define current
conditions including emerging competition, competitive product features and
benefits, pricing, positioning, and promotional activities. The objectives,
methodology and deliverables are found in Attachment A ["North American (NA)
Elements of Agreement"]. The elements are the same for Europe except for the
timing of the work which the two parties will discuss after the North American
project is initiated. Compensation: the undertakings of this agreement are set
forth in greater detail in attachment A of the agreement as Parts 1A and 1B. In
consideration for the services to be provided by ILS under this agreement, Ingen
agreed to pay ILS the following payments: Phase I A & B-North America (August
through November, 2006): $44,010. Initial payment of $14,670 accompanied a
signed copy of the agreement. The remaining two installment payments of $14,670
were paid on September 15, 2006 and November 15, 2006. Compensation payments
will be considered to include personnel costs for ILS employees and affiliated
consultants, ILS' copying, postage, courier services, long distance telephone
calls and telecopy charges. ILS will bill separately for other expenses,
including video conferencing, web casts, travel, etc. only if approved in
writing in advance by Ingen.
(5) Ingen engaged the services of MedOx Corporation ("MedOx") to distribute
OxyView(TM). In consideration, Ingen agreed to pay MedOx 4% of all OxyView
revenues, less MedOx's selling price to the customer. An ongoing percentage
shall be paid to MedOx by Ingen for results of growing a global sales
organization. When MedOx sells one million OxyView(TM) units, Ingen will issue a
total of 2,000,000 restricted shares of its common stock to MedOx according to
the following schedule: This issuance is only for the first one million units
sold and does not constitute an ongoing issuance for additional sales of
OxyView(TM). MedOx will receive $60,000 for the first six months in payments of
$10,000 per month. After the first six months, these payments will cease. MedOx
34
will determine the customer price. MedOx has the right to set pricing directly
with his customer and the customer will purchase directly from Ingen. MedOx and
Ingen will negotiate pricing set for MedOx, and MedOx will receive 4% of MedOx
pricing and 100% of the difference between the MedOx price and the customer
price for each individual customer. The customer pricing may vary from customer
to customer. At no time, shall the MedOx price exceed or be greater than the
customer price. Ingen is responsible to initially discuss all customer pricing
with MedOx, and Ingen agrees not to discuss pricing with the customer until
MedOx has discussed pricing the customer. The term "customer" means that MedOx
has established a direct relationship/contact with a customer, and does not mean
that all customers are property of MedOx. Each customer that is a contact of
MedOx will be verified in writing between Ingen and MedOx. MedOx will be paid 7
days after receipt of all money received from the customer and for each
transaction, accordingly.
(6) Ingen engaged Agroworx to provide consulting services to assist in the
design of the Pure Produce(TM) program. In consideration, Ingen will issue to
Agroworx: i) 300,000 shares of restricted common stock at the time Ingen
receives initial funding for the Pure Produce(TM) program, and ii) 500,000
shares of restricted common stock 12 months after the funding of the Pure
Produce(TM) program. The definition of "Commencing" means that the first Pure
Produce(TM) facility has been built and has started operations. Upon the initial
funding of the Pure Produce(TM) program, Ingen will pay Agroworx a monthly
consulting fee of $ 3,000 to assist in the design and operations of the Pure
Produce(TM) facility(s). Ingen will pay Agrowor 2% of the net profits, before
tax, of the revenues generated from any/all of the Pure Produce(TM) facilities.
This payment will be paid annually and/or at the end of each fiscal year. Ingen
may assign other projects to Agroworx. Ingen will pay Agroworx a defined amount
pursuant to each project. Each project will include a description of the work to
be performed and the amount that Agroworx will receive. Agroworx has the right
of first refusal with each of these additional projects.
(7) Ingen engaged LifeTime Controls to build the OxyAlert(TM) engineering model
for a total cost of $69,420 commencing on August 1, 2005. The OxyAlert(TM) model
was built and is now waiting to go into production pursuant to additional
funding requirements.
(8) Ingen engaged RC Product and Engineering to design and build OxyView(TM).
The product has been designed and is in production. In consideration, Ingen paid
$30,000 and issued 1,000,000 restricted shares of its common stock.
EMPLOYEES
We have one employee, Mr. Scott Sand. Our Company is basically a holding company
(formed in Georgia) that owns or has rights to certain proprietary products and
operates our business through another company with our same name, Ingen
Technologies, Inc., a Nevada company. As of December 5, 2006, Ingen
Technologies, Inc., the Nevada company, has one full time employee, Mr. Scott R.
Sand, our CEO, Founder and Chairman.
Our Secure Balance(TM) systems (the equipment) are sold to us for re-sale on a
"private label" basis, we have no part in the design or manufacture of the
systems. We hire sales reps to sell Secure Balance(TM). These reps are paid on a
contractual basis and are not technically our employees. We will out-source the
manufacturing of our OxyAlert(TM), OxyView and GasAlert(TM) products and will
sell these products utilizing a distribution network that will not include the
use of Company employees.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
THE DISCUSSION IN THIS SECTION CONTAINS CERTAIN STATEMENTS OF A FORWARD-LOOKING
NATURE RELATING TO FUTURE EVENTS OR OUR FUTURE PERFORMANCE. WORDS SUCH AS
"ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE," "MAY" AND SIMILAR
EXPRESSIONS OR VARIATIONS OF SUCH WORDS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS, BUT ARE NOT THE ONLY MEANS OF IDENTIFYING FORWARD-LOOKING
STATEMENTS. SUCH STATEMENTS ARE ONLY PREDICTIONS AND THAT ACTUAL EVENTS OR
RESULTS MAY DIFFER MATERIALLY. IN EVALUATING SUCH STATEMENTS, YOU SHOULD
SPECIFICALLY CONSIDER VARIOUS FACTORS IDENTIFIED IN THIS REPORT, INCLUDING THE
MATTERS SET FORTH UNDER THE CAPTION "BUSINESS RISKS," WHICH COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING
STATEMENTS.
OVERVIEW
We are a medical device manufacturer and service provider for medical and
consumer markets both domestic and (planned for) abroad. We have four products
in production or planned, one of which has had sales in at least the last two
fiscal years (Secure Balance(TM)). The others are oxygen and gas monitoring
safety devices that we have developed over the last few years; one of which
(OxyView(tm)) we expect to begin selling in calendar year 2006, OxyView(tm),
OxyAlert(TM) and GasAlert(TM). GasAlert(TM) development is currently "on hold"
and we don't intend to focus on it until we have OxyView(tm) and OxyAlert(TM) in
a production and sales mode. We also have a agri-business concept known as Pure
Produce, which involves establishing soil-less indoor farming facilities near
population centers to grow food and neutriceuticals.
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We account for our Secure Balance(TM) sales on a cash basis. We had sales
revenues of $189,158 for the first quarter of our fiscal year 2007 (running from
June 1, 2006 to May 31, 2007) compared to $532,872 for the same time period in
fiscal year 2006 (all sales of Secure Balance(TM)).
Management attributes the drop in Secure Balance(tm) sales (in comparison to a
year ago) to a change in billing practices of Medicare. The government "changed"
the rules, telling physicians that they could not utilize the balance therapy
equipment in their offices without having a licensed physical therapist on hand
while the equipment was in use. Therefore, for a period of time, only physicians
willing to bring physical therapists into their offices were willing to purchase
or lease Secure Balance(tm). However, after an outcry from physicians,
Management has learned that Medicare's decision has been reversed. It is
Management's understanding that now Secure Balance(tm) can be utilized by
physicians, in their offices (without the need to have a physical therapist
present), as long as the use is "incident" to their practices. As a result,
Management expects Secure Balance(tm) sales to increase.
In addition, we have completed our prototype testing for OxyView(tm) and plan to
begin manufacturing and sales during our next fiscal quarter (that ends on
November 30, 2006).
We have had sales revenues in each of our last two fiscal years of $794,314 in
2005 and $846,783 in 2006. We have reversed the slight downward trend in our
sales figures from fiscal year 2004 to 2005, with a slightly larger figure in
2006. We expect this upswing in sales to continue for our current fiscal year
and beyond as we build our Secure Balance(TM) brand recognition in the market
and intensify our efforts for market penetration.
We have had significant losses since inception. Our net loss for the first
quarter of fiscal year 2007 is $2,627,033 compared with $113,762 during the same
time period in fiscal year 2006.Our net loss in fiscal year 2006 was $1,602,027
and in 2005 was $307,255. We anticipate that we will incur substantial
additional operating losses in our fiscal year 2007 as we wrap up our research
and development of our BAFI(TM) product line, begin manufacturing and marketing
of OxyView and OxyAlert and continue to seek an increase in Secure Balance(TM)
sales. We also have substantial legal and accounting costs as we continue our
effort to catch up on past due quarterly and annual reports with the SEC.
As of August 31, 2006, we had an accumulated deficit of $10,934,332 (up from
$6,679,153 as of the first quarter of fiscal year 2006). . We expected to narrow
the amount of increase in our accumulated deficit in 2006 or perhaps even begin
to see a slight reduction in our accumulated deficit. However, our sales did not
increase enough to do so and in addition to the legal and accounting expenses
mentioned above, we also had significant expenditures to ready OxyView for
production (planned for later of this calendar year).
Our business plan for the remainder of fiscal year 2007 (ending May 31, 2007) is
to continue our efforts to increase the market share Secure Balance(TM) and to
begin world-wide sales of one of our BAFI(TM) product lines, OxyView(tm). We
will also continue to develop Oxy Alert(tm) and Pure Produce if funds allow.
Our reverse merger was completed in March of 2004. We issued new shares of
common stock to those incoming shareholders from Ingen Technologies, Inc. of
Nevada. Immediately after the merger, there were 87,332,593 common shares
outstanding. The Nevada company remains in existence as our wholly owned
subsidiary and as previously mentioned, we operate our businesses through the
Nevada "Ingen" (meaning our operations banking accounts and federal EIN numbers
are held by our Nevada subsidiary). For accounting purposes, our audited
financial statements are consolidated and represent the results of both our
Georgia and Nevada companies of the same name.
Generally, our business plan for the next twelve months to continue our efforts
to increase the market share Secure Balance(TM) and to begin world-wide sales of
our BAFI(TM) product line. In particular, we are readying OxyView for
manufacture and sale to commence later this calendar year.
PLAN OF OPERATION FOR OXYVIEW
OxyView is a proprietary medical product with a United States, Chinese and
Japanese Patent (and U.S. Trademark) Pending that measures the accuracy of
oxygen flow-rate for patients using oxygen during surgery, hospitalization, and
outpatient oxygen therapy. OxyView is a disposable pneumatic analog gauge that
measures the oxygen flow-rate close to the patient. It allows the medical staff
and patient to quickly determine any malfunction of oxygen flow-rate between the
source and the patient. OxyView can be used with any oxygen delivery source and
has additional markets in aviation, fire fighting, and military.
According to a 2002 report of the Department of Health and Human Resources,
there are over 5,000 oxygen cannulas used every day in hospitals and surgical
rooms, and over 8 million patients using oxygen as outpatient therapy for a
variety of pulmonary diseases. The hospitals and surgical staff are required to
dispose of the units per OSHA regulations. OxyView is a product that is
clean-packaged and disposable.
36
All of our manufacturing tooling and ultimately the manufacturing process itself
will be out-sourced to an manufacturer. We have received a quote from our
manufacturer and we plan to issue a purchase order for the production of OxyView
in quarter ending February 2007. We estimate expenses of $260,000 in 2006 PLEASE
CLARIFY THE TIME PERIOD REFERRED TO HERES in connection with preparing OxyView
manufacturing equipment (called manufacturing molds) ready for production. We
have estimated budget requirements of $114,000 for product molding tooling,
$88,000 for assembly of the manufacturing unit and a sonic welder, and $58,000
for special printing around the cylinder and piston face. We will be able to
order the commencement of manufacturing of OxyView units when the manufacturing
molds are completed. We plan to order 250,000 OxyView units in our first
manufacturing run. Once manufacturing commences, we anticipate a timeframe of
approximately two weeks before the product will be ready for shipment to
customers. We do not have to file a 510(k) pre-market notification with the Food
and Drug Administration for this particular product because it is a monitoring
device.
Our retail sales effort will be through independent sales people and entities.
We do not plan to hire additional Ingen employees to sell OxyView. OxyView
retail pricing will start at $14.95/unit (per our current plan). As long as we
meet our timing goal for the commencement of manufacturing and have funds
available for advertising, the Company anticipates penetrating 10% of the
market. This is based on the fact that Oxyview has commenced sales as of
11/10/06 with Koike Medical Co. Ltd. in Japan, PO No. KM111006. If we meet these
goals, we will have $2.8 million in sales to hospitals and surgical facilities,
and another $12 million sold to oxygen suppliers/medical supply chains for
patients using outpatient oxygen therapy during the first year. There is no
guarantee that we will be able to meet our immediate goals for OxyView.
The elderly population will increase dramatically over the next 10 years. The
majority of pulmonary diseases reside within our elderly population over 55.
OxyView, once in production, will be available to all patients of any age. With
the increasing problems of medical malpractice law suits, OxyView provides
additional means to assist with the prevention of various medical malpractice
issues related to oxygen therapy and provides a means to assure proper and
accurate oxygen delivery to patients.
We do not plan to hire employees to manufacture, ship or sell OxyView. All of
these functions will be performed by companies and individuals that we will
contract with on an independent contractor, or outside sales representative,
basis.
OUR SECURE BALANCE(TM) LEASING AND FINANCING PROGRAMS
Our Secure Balance(TM) Leasing and Financing Programs are offered to allow our
physician and medical facility clients a variety of affordable leasing and
financing options. Our financing option includes a 90 day deferral program,
giving clients a chance to earn revenues from Secure Balance(TM) before payments
are due. Please see our website to see the particulars of these financing
options.
The leasing and financing program for Secure Balance is provided through MW
Leasing. As an independent leasing company in business since 1991, we have
developed the expertise in assisting dealers, vendors, manufacturers and
end-users with customized lease financing programs. We have eliminated the need
to shop from lender to lender for the program that best fits your particular
needs. Our online concept was designed to save you valuable time and money.
Unlike our competitors who are often limited by their credit requirements, we
have the ability to provide lease financing for all types of credit risks and at
very competitive rates. We are able to approve not only the strong credit risk,
but we can also approve the less than perfect credit. This includes customers
who do not credit score with their personal credit and customers whose companies
have had "issues" in the past. We work hard to gather the necessary information
to take a deal that most lenders will not consider and get it approved.
PLAN OF OPERATION FOR PURE PRODUCE
We have an agreement with AgroWorx, Inc., a company affiliated with one our
directors, Christopher A. Worth. This agreement relates to "Pure Produce," an
AgroWorx line of plant products. We will work in concert with AgroWorx to
develop production facilities and market the products grown therein. We
anticipate that we will need to raise at least $2 million to construct and
operate a production facility.
The first Ingen Technologies, Inc. Pure Produce facility will be designed to
offer vegetable growth efficiency, without pesticides. The Agro-facility will
offer the most efficient use of water and energy conservation technologically
available, while offering the best method for insulator towards food security
available to us.
The main competitive advantage of the facility, if operational, will be to
deliver off-season, high profit margin gourmet vegetables, herbs and edible
flowers. The produce grown can be customized for local consumption or be grown
for specific export markets.
37
The Pure Produce product is a continuing research & development program
currently under design. This program uses hydroponics and aeroponics technology
to grow various plants and herbs without the use of soil, fertilizer and other
chemicals. The company anticipates entering the nutriceutical and pharmaceutical
markets over the next two years.
The facilities themselves will be built with traditional construction methods
and designed for multiple uses (the better for re-sale and appraisal purposes).
We intend to lease the facility, once constructed, to Pure Produce. Our
prototype building design will be about for about 12,000 square feet, with room
for delivery truck and staff parking, on a minimum half acre of land (up to 2
acres if we build a larger facility later, perhaps double the size of our
prototype).
We anticipate hiring staff to plant and grow the produce (one person per
facility), to maintain the premises (one person per facility), to sell the
produce (one person per facility, unless the facilities are near enough to each
other or share the same immediate market area). Temporary help will be hired
when the produce is planted and harvested. We anticipate hiring 3 full-time
employees to staff our first Pure Produce facility. One of our directors,
Christopher Wirth, will be paid $3000 per month as a consultant.
We will need additional investment (equity and/or debt) and/or Pure Produce net
earnings to construct and operate more than one Pure Produce facility.
NEW EMPLOYEES
As mentioned above, we will hire new employees for Pure Produce if funding is
secured.
RESULTS OF OPERATIONS FOR FISCAL YEAR 2006 COMPARED TO FISCAL YEAR 2005
We had $846,783 in sales in fiscal year 2006. Our cost of sales was $301,118 in
2006, up from $296,565 in fiscal year 2005 when we had $794,314 in sales. As a
result, our gross profit increased to $545,6654 in 2006; up from $497,749 in
2005. Our selling, general and administrative expenses increased substantially
in 2006 to $2,143,840 (up from $770,692 in 2005 and $1,338,488 in 2004). This
can be attributed primarily to the factors mentioned in the Overview section
above; a re-dedication of funds to tool and prepare OxyView for manufacturing
and sales, more funds expended in our efforts to expand Secure Balance market
penetration, and extensive legal and accounting costs associated with our SEC
periodic reporting obligations (current and past due), as well as the filing of
our withdrawn Form SB-2 in April of 2006.
With no amortization of intangible assets and impairment loss in 2006, our
operating loss was up from $289,884 in 2005 to $1,598,175 this fiscal year. We
believe our operating costs will remain about the same in fiscal year 2007, but
expect our operating loss to decrease (if we continue our Secure Balance sales
upswing and due to sales of OxyView, as well as OxyAlert, the latter only if
funds allow), with a goal of turning a profit as soon as possible.
We have not generated profits to date and therefore have not paid any federal
income taxes since inception. We paid $800 minimum franchise tax in California
in years 2005 and 2006. As of May 31, 2005, our federal tax net operating loss
carryforward was $1,406,771 ($3,009,598 in 2006), which will begin to expire in
2019, if not utilized. Our ability to utilize our net operating loss and tax
credit carryforwards may become subject to limitation in the event of a change
in ownership.
During the fiscal year of 2006, Ingen revenues have been generated through the
sale of Secure Balance. The Secure Balance products include a Vestibular
Function Testing system referred to as Video Nystagmography and/or VNG, and
another separate piece of equipment referred to as a balance plate. The VNG
product is purchased through Interacoustics, Ltd in Denmark. The balance plate
is purchased through SportKAT, LTD in San Diego, California. The company bundles
both systems under their own Private Label referred to as Secure Balance(TM).
Interacoustics, Ltd and SportKAT, LLC determine the cost of their products to
the Company. The company purchases the VNG and balance plate at a determined
price. The company includes clinical and technical support programs to customers
that purchase the Secure Balance products. In 2006 the cost of sales have
decreased as a percent of sales as a result of the company's inability to
control the capital equipment costs with Interacoustics, Ltd and SportKAT, LLC.
In addition, the company has also discounted certain Secure Balance sales to
customers as a result of competition in the marketplace. Other factors include
the increase of commissions to Secure Health, Inc. in order for the Company to
establish a dedicated and exclusive sales & marketing consultant. During the
2006 fiscal year, the Company has increased administrative costs to support
Secure Health and afford the cost to provide customer on-site demonstrations,
demo systems and attend various trade shows.
The R&D expenses were related to the completion of our engineering prototype of
OxyAlert and the development of OxyView molds and tooling.
Any impairment loss in 2005 was related to R&D costs of OxyAlert and increased
advertising costs for Secure Balance.
38
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 31, 2006 COMPARED TO THE
THREE MONTHS ENDED AUGUST 31, 2005
We had $189,158 in sales for the first quarter of fiscal year 2007, down from
$532,872 during the same period of fiscal year 2006. Our cost of sales was
$115,547 for this period of fiscal year 2006 and $85,046 for the first quarter
of fiscal year 2005. As a result, our gross profit decreased from $447,826 in
the first quarter of fiscal year 2006 to $73,611 in the same period of fiscal
year 2007 (this quarter). Our selling, general and administrative expenses for
the first quarter of fiscal year 2007 were $329,104 ($559,246 in the same period
of fiscal year 2006).
Our operating loss increased from $111,420 for the first quarter of fiscal year
2006 to $255,493 for the first quarter of fiscal year 2007. We expect our
operating costs to fluctuate in relation to our sales results during fiscal year
2007, but still have a goal of turning a profit at some point in fiscal year
2007.
LIQUIDITY AND CAPITAL RESOURCES
Our net cash flow from financing activities was $1,002,859 in the quarter ending
August 31, 2006. We financed our operations in the first quarter of fiscal year
2007 with $189,158 of sales of Secure Balance(TM) and private placement
securities sales totaling $1,066,800.
As of August 31, 2006, we had cash on hand of $824,575 (compared to $404,432 in
the same quarter of fiscal year 2006). We had no accounts receivable during this
time period (compared to ($38,565) during same quarter of fiscal year 2006).
We financed our operations in fiscal year 2006 through net cash provided through
Operating activities of $1,486,881. Net cash flow provided through financing
Activities in 2006 were $1,604,974. During our fiscal year 2006 proceeds of the
issuance of common stock were $1,661,950. We financed our operations in fiscal
year 2005 through net cash provided through Operating activities of $12,553. Net
cash flow provided through financing Activities in 2005 were $29,379. During the
fiscal year 2005 proceeds of the issuance of common stock were $144,000.
In years past, prior to the commencement of Secure Balance(TM) sales, we relied
on loans and deferments from our CEO and Chairman Scott R. Sand and the
aforementioned approximate $300,000 investment of Mr. Gleckman. From June 10,
1999 to March 31, 2004, Mr. Sand provided "Ingen Nevada," and then "Ingen
Georgia" (after our reverse merger; for a short period of time) with a total of
$72,000 in cash loans and $360,000 in deferred executive compensation.
Our future cash requirements will depend on many factors, including finishing
our research and development programs for our BAFI(TM) product line (largely
completed, at least for OxyView), the costs involved in filing, prosecuting and
enforcing patents, competing technological and market developments and the cost
of product commercialization for OxyView in particular, and OxyAlert, as well as
our ongoing Secure Balance(TM) sales effort. We do not expect to generate a
positive cash flow from operations until our anticipated commercial launch of
our BAFI(TM) product line (planned for calendar year 2006) and possibly later
given the expected cost of commercializing our products. We intend to seek
additional funding through public or private financing transactions. Successful
future operations are subject to a number of technical and business risks,
including our continued ability to obtain future funding, satisfactory product
development and market acceptance for our products.
The consolidated financial statements for the fiscal year 2006 and 2005 present
fairly, in all material respects, the financial positions of Ingen and
subsidiary as of May 31, 2006 and 2005, and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America. The consolidated financial
statements have been prepared assuming that the Company will continue as a going
concern. As discussed in the financial statements, the Company's operating
losses and working capital deficiency raise substantial doubt about its ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
To successfully grow the individual segments of the business, the Company must
decrease its cash burn rate, improve its cash position and the revenue base of
each segment, and succeed in its ability to raise additional capital through a
combination of primarily public or private equity offering or strategic
alliances. The Company also depends on certain contractors, and its sole
employee, the CEO, and the loss of any of those contractors or the employee, may
harm the Company's business.
The Company incurred a loss of $1,602,827 and $307,255 for the years ended May
31, 2006 and 2005, and as of those dates, had an accumulated deficit of
$8,168,218 and $6,565,391, respectively.
39
The Company has completed the development of a new medical product referred to
as OxyView(TM), and as such, sales of this product commenced in November of
2006. Therefore, there will be no more cash needed to complete OxyView(TM), and
with the sales potential of OxyView(TM), the Company can begin to decrease
expenditures and increase revenues. Over the next 12 months, the Company expects
to focus on the sales of OxyView(TM), and commence production of OxyAlert(TM).
There are no further costs needed to complete the engineering design of
OxyAlert(TM). However, there are anticipated tooling costs of $300,000 to bring
OxyAlert into production. The tooling costs consist of molds, machinery and
material to produce OxyAlert. Additional OxyAlert costs would be associated in
the development of product inventory. The Company is evaluating manufacturing
contracts, and it is anticipated that the company would need $600,000 to build
5,000 units. The Company anticipates the use of equity financing for OxyAlert,
if sales from Secure Balance and OxyView cannot substantiate the financial
requirements.
To successfully grow the individual segments of the business, the Company must
decrease its cash burn rate, improve its cash position and the revenue base of
each segment, and succeed in its ability to raise additional capital through a
combination of primarily public or private equity offering or strategic
alliances. The Company also depends on certain contractors, and its
soleemployee, the CEO, and the loss of any of those contractors or the employee,
may harm the Company's business.
The company incurred a loss of $1,602,827 and $307,255 for the years ended May
31, 2006 and 2005, and as of those dates, had an accumulated deficit of
$8,168,218 and $6,565,391, respectively.
The Company's consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and liabilities and
commitments in the normal course of business. In the near term, the Company
expects operating costs to continue to exceed funds generated from operations.
As a result, the Company expects to continue to incur operating losses and may
not have sufficient funds to grow its business in the future. The Company can
give no assurance that it will achieve profitability or be capable of sustaining
profitable operations. As a result, operations in the near future are expected
to continue to use working capital.
As of May 31, 2006 and 2005, the Company has net operating loss carryforwards,
approximately, of $3,009,598 and $1,406,771, respectively, to reduce future
federal and state taxable income. To the extent not utilized, the carryforwards
will begin to expire through 2026. The Company's ability to utilize its net
operating loss carryforwards is uncertain and thus a valuation reserve has been
provided against the Company's net deferred tax assets. A valuation allowance is
recorded for the full amount of deferred tax assets of approximately $1,294,127
and $602,098, for the years ended May 31, 2006 and 2005, respectively, which
relates to these loss carryforwards, since future profits are indeterminable.
Based upon the above financial history for fiscal years ending 2006 and 2005,
respectively, the company anticipates a similar trend for the next 12 months of
operation, whereas cash flow is expected to increase with net cash provided in
operating activities, net cash flow provided in financial activities, and net
increase in cash. Specifically, the manufacturing of OxyView has been
subcontracted to Accent Plastics, Inc. located in Ontario, California. The
company has already manufactured 100,000 OxyView units, and the sales of those
units will provide adequate cash flow to cover all costs to manufacture future
OxyView units. The cost per OxyView is $0.92, and the company sells OxyView for
$14.95 direct, or $7.95 to distribution.
RECENT FINANCING
On July 25, 2006, we entered into a Securities Purchase Agreement (the
"Securities Purchase Agreement") with New Millennium Capital Partners II, LLC,
AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC
(collectively, the "Investors"). Under the terms of the Securities Purchase
Agreement, the Investors purchased an aggregate of (i) $2,000,000 in callable
convertible secured notes (the "Notes") and (ii) warrants to purchase
20,000,0000 shares of our common stock (the "Warrants").
Pursuant to the Securities Purchase Agreement, the Investors will purchase the
Notes and Warrants in three tranches as set forth below:
1. At closing on July 26, 2006 ("Closing"), the Investors
purchased Notes aggregating $700,000 and warrants to purchase
20,000,0000 shares of our common stock;
2. Upon the filing of this registration statement registering the
shares of common stock underlying the Notes ("Registration
Statement"), the Investors will purchase Notes aggregating
$600,000; and,
3. Upon effectiveness of the Registration Statement, the
Investors will purchase Notes aggregating $700,000.
40
The Notes carry an interest rate of 6% and a maturity date of July 25, 2009. The
notes are convertible into our common shares at the Applicable Percentage of the
average of the lowest three (3) trading prices for our shares of common stock
during the twenty (20) trading day period prior to conversion. The "Applicable
Percentage" means 50%; provided, however, that the Applicable Percentage shall
be increased to (i) 55% in the event that a Registration Statement is filed
within thirty days of the closing and (ii) 60% in the event that the
Registration Statement becomes effective within one hundred and twenty days from
the Closing.
At our option, we may prepay the Notes in the event that no event of default
exists, there are a sufficient number of shares available for conversion of the
Notes and the market price is at or below $.10 per share. In addition, in the
event that the average daily price of the common stock, as reported by the
reporting service, for each day of the month ending on any determination date is
below $.10, we may prepay a portion of the outstanding principal amount of the
Notes equal to 101% of the principal amount hereof divided by thirty-six (36)
plus one month's interest. Exercise of this option will stay all conversions for
the following month. The full principal amount of the Notes is due upon default
under the terms of Notes. In addition, the Company has granted the investors a
security interest in substantially all of its assets and intellectual property
as well as registration rights.
We simultaneously issued to the Investors seven year warrants to purchase
20,000,000 shares of our common stock at an exercise price of $.10.
The Investors have contractually agreed to restrict their ability to convert the
Notes and exercise the Warrants and receive shares of the Company's common stock
such that the number of shares of the Company's common stock held by them and
their affiliates after such conversion or exercise does not exceed 4.99% of the
then issued and outstanding shares of the Company's common stock.
We are committed to filing an the Registration Statement within 30 days from the
Closing Date. We will receive the second tranche of the funding when the
Registration Statement and the third and final tranche of the funding when the
Registration Statement is declared effective by the SEC. There are penalty
provisions for us should the filing not become effective within 120 days of the
Closing Date. The notes are secured by all of our assets to the extent of the
outstanding note.
WITHDRAWAL OF OUR SB-2 OF APRIL 5, 2006
On July 25, 2006, we filed a Request for Withdrawal of Registration Statement.
This filing withdrew our first SB-2 filing of April 5, 2006. This withdrawal was
necessary in order for the company to proceed with the SB-2 as filed on August
25, 2006.
TRENDS THAT MAY IMPACT OUR LIQUIDITY
POSITIVE TRENDS
The United States has an increasingly elderly population. Our Secure Balance(TM)
and BAFI(TM) product line (except GasAlert(TM) which targets the entire adult
population) are made to meet some of the challenges and circumstances
experienced by our senior citizens. As a result, we expect our sales to increase
in time in reflection of this positive trend.
Management also believes that our products provide increasing protection in
relation to medical malpractice issues. Use of our Secure Balance(TM) system and
OxyAlert(TM) and OxyView products enhance the safety of patients, and therefore,
we believe, lessen the chances of medical malpractice exposure to our physician
clients.
We have been developing our BAFI(TM) product line since 1999. Now, some 7 years
later, we still have not identified competition in the marketplace for our
BAFI(TM) product line. The lack of competition is expected to enhance our
planned marketing campaign.
We believe that Secure Balance(TM) is now among the leaders in the balance and
fall prevention industry. We expect to be able to capitalize on this notoriety
and increase our Secure Balance(TM) sales in fiscal year 2007 and beyond.
NEGATIVE TRENDS
Our product sales are impacted by Medicare, and are Medicare dependent. Adverse
economic conditions, federal budgetary concerns and politics can affect Medicare
regulations and could negatively impact our product sales.
SEASONAL ASPECTS THAT MAY IMPACT OUR MEDICAL MARKET
Traditionally, the medical market experiences an economic decrease in purchasing
during the summer months. Peak months are usually October through February,
followed by a decrease from March to May. This is the common "bell curve" that
has been consistent for several decades and will affect our sales during the
course of a year.
41
CRITICAL ACCOUNTING POLICIES
Our financial statements and related public financial information are based on
the application of accounting principles generally accepted in the United States
("GAAP"). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenue and expense amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use if estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial
statements.
Our significant accounting policies are summarized in Note 2 of our financial
statements. While all of these significant accounting policies impact our
financial condition and results of operations, we view certain of these policies
as critical. Policies determined to be critical are those policies that have the
most significant impact on our financial statements and require management to
use a greater degree of judgment and estimates. Actual results may differ from
those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would cause effect on our consolidated results of
operations, financial position or liquidity for the periods presented in this
report.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have off-balance sheet arrangements, financings, or other
relationships with unconsolidated entities or other persons, also known as
"special purpose entities" (SPEs).
NEW ACCOUNTING PRONOUNCEMENTS
The possible effect on our financial statements of new accounting pronouncements
that have been issued for future implementation is discussed in the footnotes to
our audited financial statements (see Note 2).
DESCRIPTION OF PROPERTY
We do not own real property. We lease approximately 1000 square feet of office
space in Yucaipa, California at a current rental rate of approximately $775 per
month. This written lease expires on April 1, 2008. We also rent, on an oral
month-to-month basis, a portion of Scott R. Sand's personal residence as a
second office for Mr. Sand and for storage space. The rental on this facility is
$1400 per month for about 1200 square feet of office and storage space. These
facilities are adequate for our current requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 28, 2006 and March 17, 2006, we entered into two investment
contracts with Jeffrey Gleckman, pursuant to which we issued an aggregate of
2,000,000 shares of our restricted common stock to Mr. Gleckman. Mr. Gleckman is
the President of MedOx Corporation, the contractor distributing OxyView(TM).
MedOx was originally known as Tech-Ni-Com, Inc. Our first contract with Mr.
Gleckman's company was in 2000 for distribution of the BAFI(TM) product line.
However, actual sales of OxyView(TM) did not commence until November of 2006.
Mr. Gleckman paid $300,000 consideration in the two transactions for the
above-referenced shares.
As of the end of our fiscal year (May 31, 2006), our CEO and Chairman, Scott R.
Sand, was owed $112,000 by the company. This was down from $356,000 owed by the
company to Mr. Sand at the end of fiscal year 2005. These amounts are deferred
compensation owed to Mr. Sand. We also owe Mr. Sand $70,826 in the form of a
note payable as of May 31, 2006. There are no written loan agreements,
promissory notes or debt obligations evidencing this debt and the terms of
repayment to Mr. Sand. Annual interest of 6% is paid on the outstanding loan
balance, which is due upon the availability of company funds, but no sooner than
June 1, 2006. See Note 9 of our attached audited financial statements for
information concerning the debt owed to Mr. Sand by the company.
During the fiscal year ending May 31, 2006, we issued 5,454,546 shares of Series
A preferred stock to our CEO and Chairman, Scott R. Sand, for satisfaction of
his accrued compensation of $400,000.
42
On September 15, 2005 we entered into a Contracting Agreement with Christopher
Wirth, a member of our Board of Directors, and/or Agriworx, Inc. for design
services for the Pure Produce product line. The agreement was for consulting
services with regard to the establishment and operation of Pure Produce(TM). The
agreement commenced on September 15, 2005 and is for a 2 year period. Upon the
receipt of "initial funding" for a Pure Produce(TM) facility, we will issue
300,000 shares of our restricted common stock and another 500,000 such shares 12
months after the first Pure Produce(TM) facility "has been built and has started
operations." Upon initial funding, we will also pay Mr. Wirth a fee of $3,000
per month to assist in the design and operations of the Pure Produce(TM)
facilities. AgroWorx is also entitled to 2% of the net profits generated by Pure
Produce(TM) operations.
On January 1, 2005, we entered into a contracting agreement with Bob Sand to
market Secure Balance to physicians within the United States and abroad. Bob
Sand is Scott R. Sand's father. In consideration for Bob Sand's efforts, we
agreed to issued 100,000 restricted shares of our common stock and pay
commissions of two thousand dollars ($ 2,000) for each VNG system sold, and one
thousand dollars ($1,000) for each therapy system sold. VNG Testing is defined
as Video NystaGmography Test: Under the guidelines set forth by the American
Medical Association, Vestibular Function Testing can be performed by either a
means of a diagnostic procedure provided by a VNG or ENG test platform. ENG
(Electrode NystaGmography) was replaced by VNG in the past 5 years. It is the
means in which eye movement can be recorded with use of digital cameras and
infrared diodes. The licensed physician is trained to position the patient and
create a stimulus/target in order to measure nystagmus, velocity, phase and gain
in relationship to the responses from the central nervous system and peripheral
system.
The company's product, Secure Balance, includes a VNG Diagnostic testing system
and other technology to perform the above vestibular function test and balance
therapy.
On October 15, 2004, we entered into a Financial Procurement Development
Agreement with Mr. Khoo in which certain fees are to be paid if financing is
secured by Mr. Khoo. The agreement with Mr. Khoo is a non-exclusive, best
efforts, finder's agreement in which Mr. Khoo is to be paid a fee if he
introduces financing prospects to us resulting in the procurement of financing
by us. Mr. Khoo is to be paid 5% of any such financing in shares of our
restricted common stock.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our common stock is currently traded on the Pink Sheets under the symbol "IGTG."
The following table sets forth the range of high and low bid quotations for each
quarter within the last two fiscal years. These quotations as reported by the
Pink Sheets reflect inter-dealer prices without retail mark-up, mark-down, or
commissions and may not necessarily represent actual transactions.
CLOSING BID
YEAR QUARTER HIGH LOW
- --------------------------------------------------------------------------------
2004 First (period ended August 31, 2004) .125 .06
2004 Second (period ending November 30, 2004) .0775 .037
2004 Third (period ending February 28, 2005) .046 .016
2005 Fourth (period ending May 31, 2005) .021 .0051
2005 First (period ended August 31, 2005) .041 .0026
2005 Second (period ending November 30, 2005) .055 .0034
2005 Third (period ending on February 28, 2006) (1) .40 .065
2006 Fourth (period ending May 31, 2006) (1) .43 .09
(1) During the period ended February 28, 2006, we undertook a 1-for-40 reverse
split of our common stock. The high and low closing bids reflected in the table
for this period reflect the post-split high and low closing bid prices. The
effective date of the reverse split was December 8, 2006. For the 7 days prior
to the effective date, the high and low closing bid prices were $.0045 and
$.0027 respectively. On the effective date, the high and low closing bid prices
were $.12 and $.06 respectively.
HOLDERS
As of December 5, 2006 in accordance with our transfer agent records, we had 596
shareholders of record. Such shareholders of record held 31,009,610 shares of
our common stock and 14,172,047 shares of our preferred stock.
DIVIDENDS
Historically, we have not paid dividends to the holders of our common stock and
we do not expect to pay any such dividends in the foreseeable future as we
expect to retain our future earnings for use in the operation and expansion of
our business.
43
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following summary compensation table sets forth all compensation paid by us
during the fiscal years ended May 31, 2006 and 2005 in all capacities for the
accounts of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO).
SUMMARY COMPENSATION TABLE (1)
ANNUAL LONG-TERM ALL OTHER
COMPENSATION COMPENSATION COMPENSATION
- --------------------------------------------------------------------------------
RESTRICTED
NAME YEAR (5) SALARY STOCK AWARDS ($)
- --------------------------------------------------------------------------------
Scott R. Sand 2006 $150,000 (2) - $60,000 (3)
Chairman; 2005 $150,000 (2) - $60,000 (3)
CEO 2004 -0-
Thomas J. Neavitt 2006 -0- - $2,000 (4)
CFO; 2005 -0- - -
Secretary 2004 -0- - -
(1) The columns for "Bonus", "Other Annual Compensation," "Securities
under-lying options/SARs," and "LTIP Payouts" have been omitted because there is
no compensation required to be reported.
(2) Mr. Sand is entitled to receive $150,000 in salary each year. Mr. Sand has
deferred payment of such salary until we are in a position to pay such salary
based on cash generated from operations. During the year ended May 31, 2006, we
issued 5,454,546 shares of Series A preferred for satisfaction of his accrued
compensation of $400,000. As of May 31, 2006 owe Mr. Sand $112,000.
(3) Mr. Sand received a draw of $60,000 in fiscal 2006 and 2005.
(4) Mr. Neavitt does not receive a annual compensation. Rather, he is paid a fee
per each document he reviews as CFO or Secretary.
(5) 2006 refers to our fiscal year ended May 31, 2006, and 2005 refers to our
fiscal year ended May 31, 2005.
OPTION GRANTS TABLE. There were no individual grants of stock options to
purchase our common stock made to the executive officer named in the Summary
Compensation Table during fiscal year ended May 31, 2006
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE. There were
no stock options exercised during fiscal year ending May 31, 2006, by the
executive officer named in the Summary Compensation Table.
LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE. There were no awards made to a
named executive officer in the last completed fiscal year under any LTIP
COMPENSATION OF DIRECTORS
Our Directors are paid $500 for each Directors meeting that is actually held (as
opposed to actions taken by our Board of Directors by Resolution and Waiver of
Notice and Consent to Action Taken at a special Board of Directors' meeting).
EMPLOYMENT AGREEMENTS
We do not have any employment agreements in place with any of our officers or
directors.
FINANCIAL STATEMENTS
The Financial Statements begin on page F-1 of this prospectus.
44
ITEM 1 - FINANCIAL STATEMENTS
INTERIM REVIEWED FINANCIAL STATEMENTS FOR QUARTER ENDING AUGUST 31, 2006
These interim financial statements have been reviewed but not audited by our
auditors, Spector & Wong.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
AS OF AUGUST 31, 2006 2005
------------ ------------
ASSETS
Current Assets
Cash $ 824,575 $ 404,432
Accounts receivable -- 38,565
------------ ------------
Total current assets 824,575 442,997
------------ ------------
Property and equipment, net of accumulated depreciation
of $102,984 and $84,910 for 2006 and 2005, respectively 61,542 45,136
Debt issue cost, net of accumulated amortization of $16,400 291,800 --
------------ ------------
TOTAL ASSETS $ 1,177,917 $ 488,133
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 48,186 $ --
Accrued expenses 177,655 394,771
------------ ------------
Total current liabilities 225,841 394,771
------------ ------------
Long-term Liabilities
Officers' loans 6,886 42,802
Convertible notes payable, net of unamortized discount of $1,366,929 7,290 --
Derivative liabilities 3,860,069 --
------------ ------------
Total long-term liabilities 3,874,245 42,802
------------ ------------
Stockholders' deficit
Preferred stock Series A, no par value, 40,000,000 and none
authorized in 2006 and 2005, respectively; issued and
outstanding 14,134,547 for 2006 and 3,000,000 for 2005 734,980 30,000
Preferred stock, no par value, none and 37,000,000 authorized
in 2006 and 2005, respectively; issued and outstanding none
and 36,900,000 for 2006 and 2005, respectively -- 369,000
Common stock, no par value, authorized 100,000,000 in 2006 and
500,000,000 shares in 2005; issued and outstanding 29,609,610
and 3,182,190 for 2006 and 2005, respectively 7,497,183 6,330,713
Series A preferred stock subscription (220,000) --
Accumulated deficit (10,934,332) (6,679,153)
------------ ------------
Total stockholders deficit (2,922,169) 50,560
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,177,917 $ 488,133
============ ============
See notes to interim unaudited consolidated financial statements
F-1
INGEN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED AUGUST 31, 2006 2005
------------ ------------
Sales $ 189,158 $ 532,872
Cost of sales 115,547 85,046
------------ ------------
GROSS PROFIT 73,611 447,826
Selling, general and administrative expenses 329,104 559,246
------------ ------------
OPERATING LOSS (255,493) (111,420)
Other (expenses):
Interest Expenses (3,540,915) (1,542)
Change in derivative liabilities 1,031,094 --
------------ ------------
Total Other Income (expenses) (2,509,821) (1,542)
NET LOSS BEFORE TAXES (2,765,314) (112,962)
Provision for income taxes 800 800
------------ ------------
NET LOSS $ (2,766,114) $ (113,762)
============ ============
Basic and diluted net loss per share $ (0.12) $ (0.05)
============ ============
Weighted average number of common shares 22,207,208 2,205,309
See notes to interim unaudited consolidated financial statements
F-2
INGEN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- ----------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED AUGUST 31, 2006 2005
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss (2,766,114) $ (113,762)
Adjustments to Reconcile Net Loss to Net Cash Used in Operations:
Depreciation and amortization 4,576 2,965
Amortization of debt issue cost 16,400 --
(Increase) Decrease in:
Accounts receivable -- (38,565)
Change in derivative liabilities (1,031,094) --
Noncash interest expense and financing costs 3,523,454 --
Increase (Decrease) in:
Accounts payable -- 8,241
Accrued expenses (2,138) --
Litigation reserve -- (143,500)
----------- -----------
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES (254,916) (284,621)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Addition to Fixed Assets (34,480) (23,174)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (34,480) (23,174)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Net repayments to note payable to related party (63,941) (60,000)
Repayments to notes payable -- (25,000)
Proceeds from issuance of common stock -- 779,500
Proceeds from convertible debt 1,066,800 --
----------- -----------
NET CASH FLOW PROVIDED (USED) BY FINANCING ACTIVITIES 1,002,859 694,500
----------- -----------
NET INCREASE (DECREASE) INCREASE IN CASH 713,463 386,705
Cash Balance at Beginning of Period 111,112 17,727
----------- -----------
CASH BALANCE AT END OF PERIOD $ 824,575 $ 404,432
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ -- $ --
Taxes paid $ -- $ --
Noncash Financing Activities:
Issuance warrrants in connection with convertible debt $ 1,987,478 $ --
Recorded a beneficial conversion feature $ 2,903,777 $ --
Stock subscription receivable for preferred stock $ 220,000 $ --
See notes to interim unaudited consolidated financial statements
F-3
INGEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ingen Technologies, Inc., (formerly known as Creative Recycling Technologies
Inc., the "Company" or "Ingen Technologies"), is a Public Company trading under
NASDAQ OTC: IGTG. Ingen Technologies is a growth-oriented technology company
that offers a diverse and progressive services and products.
Ingen Technologies, Inc., is a Georgia corporation ("IGTG") and owns 100% of the
capital stock of Ingen Technologies, Inc. a Nevada corporation and it has been
in business since 1999.
The Company's flagship product is its BAFI (TM), the world's first wireless
digital low gas warning system for pressurized gas cylinders. On October 24,
2000, the BAFI (TM) received a U.S. Patent with Patent No. 6,137,417. BAFI (TM),
now in its second generation, is an accurate and cost-effective, real-time
pressurized gas warning system that will alert users when gas levels are
approaching empty.
The BAFI (TM) line has multiple applications, inclusive but not limited to, the
Medical Industry, Home Consumer, Residential Development Industry, Safety &
Protection (fire and police), Aircraft Industry, and the Recreational Vehicle
Industry. BAFI (TM) meets or exceeds regulatory compliance of this type of
product and is completed and in production.
The Secure Balance (TM) product is a private-label product that includes a
vestibular function testing system and balance therapy system available to
physicians throughout the United States.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company's financial instruments consist
principally of cash, accounts receivable, accounts payable and borrowings. The
Company believes the financial instruments' recorded values approximate current
values because of their nature and respective durations. The fair value of
embedded conversion options and stock warrants are based on a Black-Scholes fair
value calculation. The fair value of convertible notes payable is based on
discounted cash flows of principal and interest payments.
PRESENTATION OF INTERIM INFORMATION: The accompanying consolidated financial
statements as of August 31, 2006 and 2005, for the three months ended August 31,
2006 and 2005 have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. However,
the Company believes that the disclosures are adequate to make the information
presented not misleading. These consolidated financial statements should be read
in conjunction with the financial statements and the notes thereto included in
the Company's Annual Report on Form 10-KSB for the year ended May 31, 2006.
In the opinion of Management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows as of August 31, 2006 and 2005, for the
three months ended August 31, 2006 and 2005 have been made. The results of
operations for the three months ended August 31, 2006 are not necessarily
indicative of the operating results for the full year.
F-4
INGEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
PRINCIPLE OF CONSOLIDATION AND PRESENTATION: The accompanying consolidated
financial statements include the accounts of Ingen Technologies, Inc. and its
subsidiaries after elimination of all inter-company accounts and transactions.
Certain prior period balances have been reclassified to conform to the current
period presentation. The accompanying consolidated financial statements have
been retroactively adjusted to reflect the one-for-forty reverse stock split on
December 7, 2005.
USE OF ESTIMATES: The preparation of the accompanying consolidated financial
statements in conformity with accounting principles generally accepted in the
United States (U.S. GAAP) requires management to make certain estimates and
assumptions that directly affect the results of reported assets, liabilities,
revenue, and expenses. Actual results may differ from these estimates.
CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES: The Company accounts for
convertible notes payable and warrants in accordance with Statement of Financial
Accounting Standards (SFAS) No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES." This standard requires the conversion feature of
convertible debt be separated from the host contract and presented as a
derivative instrument if certain conditions are met. Emerging Issue Task Force
(EITF) 00-19, "ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO AND
POTENTIALLY SETTLED IN A COMPANY'S OWN STOCK" and EITF 05-2, "THE MEANING OF
"CONVENTIONAL CONVERTIBLE DEBT INSTRUMENT" IN ISSUE NO. 00-19" were also
analyzed to determine whether the debt instrument is to be considered a
conventional convertible debt instrument and classified in stockholders' equity.
The convertible notes payable issued on July 27 and August 30, 2006 were
evaluated and determined not conventional convertible and, therefore, because of
certain terms and provisions including liquidating damages under the associated
registration rights agreement the embedded conversion option was bifurcated and
has been accounted for as a derivative liability instrument. The stock warrants
issued in conjunction with the convertible notes payable were also evaluated and
determined to be a derivative instrument and, therefore, classified as a
liability on the balance sheet. The accounting guidance also requires that the
conversion feature and warrants be recorded at fair value for each reporting
period with changes in fair value recorded in the consolidated statements of
operations.
A Black-Scholes valuation calculation was applied to both the conversion
features and warrants at issuance dates and August 31, 2006. The issuance date
valuation was used for the effective debt discount that these instruments
represent. The debt discount is amortized over the three-year life of the debts
using the effective interest method. The August 30, 2006 valuation was used to
record the fair value of these instruments at the end of the reporting period
with any difference from prior period calculations reflected in the consolidated
statement of operations.
NET INCOME (LOSS) PER SHARE: Basic net income per share includes no dilution and
is computed by dividing net income available to common stockholders by the
weighted average number of common stock outstanding for the period. Diluted net
income per share is computed by dividing net income by the weighted average
number of common shares and the dilutive potential common shares outstanding
during the period. Diluted net loss per common share is computed by dividing net
loss by the weighted average number of common shares and excludes dilutive
potential common shares outstanding, as their effective is anti-dilutive.
Dilutive potential common shares consist primarily of stock warrants and shares
issuable under convertible debt.
F-5
INGEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
STOCK-BASED COMPENSATION: The Company accounts for stock issued to non-employees
in accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 123 and the Emerging Issue Task Force (EITF) Issue No. 00-18,
"ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR
ACQUIRING, OR IN CONJUNCTION WITH SELLING, GOODS OR SERVICES." SFAS No. 123
states that equity instruments that are issued in exchange for the receipt of
goods or services should be measured at the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measurable. Under the guidance in Issue 00-18, the measurement date
occurs as of the earlier of (a) the date at which a performance commitment is
reached or (b) absent a performance commitment, the date at which the
performance necessary to earn the equity instruments is complete (that is, the
vesting date).
In June 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), "ACCOUNTING
FOR UNCERTAINTY IN INCOME TAXES, AN INTERPRETATION OF FASB STATEMENT NO. 109,"
which clarifies the accounting of uncertainty in income taxes recognized in
financial statements in accordance with FASB Statement No. 109, "ACCOUNTING OF
INCOME TAXES." FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. The provisions of this
Interpretation are effective for fiscal years beginning after December 15, 2006.
Management is currently evaluating the financial statement impact of the
adoption of FIN 48.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. In the near
term, the Company expects operating costs to continue to exceed funds generated
from operations. As a result, the Company expects to continue to incur operating
losses and may not have sufficient funds to grow its business in the near
future. The Company can give no assurance that it will achieve profitability or
be capable of sustaining profitable operations. As a result, operations in the
near future are expected to continue to use working capital.
On July 25, 2006, the Company entered into a Security Purchase Agreement for
sale of $2 million aggregate principal amount of callable secured convertible
notes. As of August 31, 2006, the Company received an aggregate of $1,066,800 in
cash from issuing convertible notes. Management of the Company is actively
increasing marketing efforts to increase revenues. The ability of the Company to
continue as a going concern is dependent on its ability to meet its financing
arrangement and the success of its future operations. The consolidated financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
The company incurred a loss of $2,766,114 and $113,762 for the three months
ended August 31, 2006 and 2005, and as of that date, had an accumulated deficit
of $10,934,332 and $6,679,153, respectively.
F-6
INGEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment as of August 31, 2006 is summarized as follow:
2006 2005
--------- ---------
Automobile $ 9,500 $ 9,500
Furniture & Fixture 27,222 27,222
Machinary & Equipment 65,900 61,277
Leasehold Improvements 32,047 32,047
Molds 29,857 --
--------- ---------
164,526 130,046
Less accumulated depreciation (102,984) (84,910)
--------- ---------
Property and Equipment, net $ 61,542 $ 45,136
========= =========
NOTE 4 - ACCRUED EXPENSES
Accrued expenses at August 31, 2006 and 2005 consist of:
2006 2005
-------- --------
Accrued officer's compensation $112,000 $363,500
Accrued Professional Fees 6,000 --
Accrued Interest Expense 33,844 30,471
Accrued taxes 25,811 800
-------- --------
Total $177,655 $394,771
======== ========
NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES
6% $2 MILLION CONVERTIBLE DEBT
- ------------------------------
On July 25, 2006, the Company entered into a Security Purchase Agreement (the
"Agreement") and agreed to issue and sell (i) callable secured convertible notes
up to $2 million, and (ii) warrants to acquire for aggregate of 20 million of
the Company's common stocks. The notes bear interest at 6% per annum, and mature
three years from the date of issuance. The notes are convertible into the
Company's common stock at the applicable percentage of the average of the lowest
three trading prices for the Company's shares of common stock during the twenty
trading day period to conversion. The applicable percentage is 50%; however, the
percentage shall be increased to: (i) 55% in the event that a Registration
Statement is filed within thirty days from July 26, 2006, and (ii) 60% in the
event that the Registration Statement becomes effective within one hundred and
twenty days from July 26, 2006.
The Company may prepay the notes in the event that no event of default exists,
there are sufficient number of shares available for conversion, and the market
price is at or below $0.10 per share. In addition, in the event that the average
daily price of the common stock, as reported by the reporting service, for each
day of the month ending on any determination date is below $0.10, the Company
may repay a portion of the outstanding principal amount of the notes equal to
101% of the principal amount thereof divided by thirty-six plus one month's
interest. The full principal amount of the notes is due upon default under the
terms of the Notes. In addition, the Company has granted the investors a
security interest in substantially all of its assets and intellectual property
as well as registration rights.
F-7
INGEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES (CONTINUED)
The Company received the first tranch of $700,000 on July 27, 2005, less
issuance costs of $295,200, the second tranch of $600,000, less issuance costs
of $13,000 on August 30, 2006, and the third and final tranch of $700,000 is to
be purchases upon effectiveness of the Registration Statement.
The Company issued seven year warrants to purchase 20,000,000 shares of our
common stock at an exercise price of $0.10.
The Company filed a, SB-2 registration statement with the SEC on August 25,
2006, regarding the agreement; however, a registration withdrawal request was
filed with the SEC on October 31, 2006.
The issuance costs incurred in connection with the convertible notes are
deferred and being amortized to interest expense over the life of each debenture
tranch.
The Company is accounting for the conversion option in the debentures and the
associated warrants as derivative liabilities in accordance with SFAS 133,
"ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," EITF 00-19,
"ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO AND POTENTIALLY
SETTLED IN A COMPANY'S OWN STOCK" and EITF No. 05-2, "THE MEANING OF
"CONVENTIONAL CONVERTIBLE DEBT INSTRUMENT" IN ISSUE NO. 00-19." The Company
attributed beneficial conversion features to the convertible debt using the
Black-Scholes Option Pricing Model. The fair value of the conversion feature has
been included as a discount to debt in the accompanying balance sheet up to the
proceeds received from each tranch, with any excess charged to operations. The
discount is being amortized over the life of each debenture tranch using the
interest method.
The following tables describe the valuation of the conversion feature of each
tranch of the convertible debenture, using the Black Scholes pricing model:
7/27/2006 8/30/2006
Tranch Tranch
-------------- -------------
Approximate risk free rate 5.01% 4.80%
Average expected life 3 years 3 years
Dividend yield 0% 0%
Volatility 202.01% 202.01%
Estimated fair value of conversion feature $ 1,328,118 $ 1,137,929
The Company recorded the fair value of the conversion feature, aggregate of
$2,466,047, as a discount to the convertible debt in the accompanying balance
sheet up to the proceeds received from each tranch, with any excess or
$1,166,047 charged to expense. Amortization expense related to the conversion
feature discount for the three months ended August 31, 2006 was $7,290.
Remaining unamortized discount as of that date was $1,292,710.
The Company also granted warrants to purchase 20,000,000 shares of
common stock in connection with the financing. The warrants are exercisable at
$0.10 per share for a period of seven years, and were fully vested. The warrants
have been valued at $1,987,478 using the Black-Scholes Option Pricing Model with
the following weighted-average assumptions used.
F-8
INGEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES (CONTINUED)
6/26/2006
--------------
Approximate risk free rate 5.23%
Average expected life 7 years
Dividend yield 0%
Volatility 202.01%
Number of warrants granted 20,000,000
Estimated fair value of total warrants granted $ 1,987,478
6% $75,000 DEBT
- ---------------
On June 7, 2006, the Company entered into an agreement with an accredited
investor to sale a convertible debenture. The Company received proceeds of
$75,000 from the sale of the convertible debenture on June 7, 2006. The
debenture is convertible at any time within a three year period into 3,750,000
shares of common stock at $0.02 per share. The debenture carries an interest
rate of 6% per annum, and payable annually. In the event that the debenture is
not converted to common stock, any unpaid balance, including interest and the
principal, becomes due on May 31, 2009.
6/7/2006
--------------
Approximate risk free rate 4.99%
Average expected life 3 years
Dividend yield 0%
Volatility 202.01%
Estimated fair value of conversion feature $ 437,730
The Company recorded the fair value of the conversion feature of $437,730, as a
discount to the convertible debt in the accompanying balance sheet up to the
proceeds received with any excess or $362,730 charged to expense.
DERIVATIVE LIABILITIES
- ----------------------
In accordance with the EITF 00-19, the conversion feature of each convertible
debenture and the stock warrants issued in conjunction with convertible
debentures have been included as long-term liabilities and were originally
valued at fair value at the date of issuance. As a liability, the convertible
features and the stock warrants are revalued each period until and unless the
debt is converted. As of August 31, 2006, the fair values of the conversion
feature and the stock warrants aggregated to $3,860,069. The Company recorded a
gain of $1,031,094 related to the change in fair value from the date of issuance
of the convertible debt to August 31, 2006. This amount is recorded as "Change
in Derivative Liabilities" a component of other income in the accompanying
consolidated statement of operations. If the debt is converted prior to
maturity, the carrying value will be transferred to equity.
F-9
INGEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6 - PREFERRED STOCKS
On December 7, 2005, the Company had a reverse stock split of 3 to 1 for all
issued and outstanding preferred shares and converted all classes of preferred
shares into Series A preferred stock. No dividends shall accrue or be payable on
the Series A preferred stocks. The Company has the right to redeem each share of
Series A preferred stock for $1; however, there is no obligation for this
redemption. Each share of Series A preferred stock is entitled to vote on all
matters with holders of the common stock; however, each Series A preferred stock
is entitled to 1 vote. Each share of Series A preferred stock is convertible, at
the option of the holder and subject to a 65 day written notice to the Company,
at any time after the date of the issuance into 1 share of fully paid and
non-assessable share of common stock. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the holders
of Series A preferred stock shall be entitled to be paid $1 per share before any
payments or distribution of assets of the Company to the holders of the common
stock or any other equity securities of the Company. The accompanying
consolidated financial statements have been retroactively adjusted to reflect
the reverse stock split.
On April 5, 2006, the Company filed an SB-2 with the SEC regarding an investment
Contract (the "Contract") providing that the Company intends to raise up to $5
million or more utilizing Replacement S-B of the SEC. Under this Contract a
subscriber agreed to purchase 3 million shares of the Company's restricted
series A preferred stock shares at a price of $0.0733 per share or $220,000.
These shares will be registered by the Company in the S-B offering. As of August
31, 2006, all of 3 million shares of restricted series A preferred shares were
issued and a subscription receivable of $220,000 was recorded against the
Company's equity.
On July 25, 2006, the Company filed a request for withdrawal of Registration
Statement with the SEC. The filing of an SB-2 is pending due to the Company's
delinquency in periodic filings with the SEC under the Securities Exchange Act
of 1934. The Company did not report from 1998 until it resumed reporting in
November 2005.
NOTE 7 - COMMON STOCK
On October 31, 2005, the Board approved on reverse split to reduce the
authorized common shares to 100 million and also approved the reverse split of
40 to 1 outstanding and issued common shares; the effective was on December 7,
2005. The accompanying consolidated financial statements have been retroactively
adjusted to reflect the reverse stock split.
NOTE 8 - NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net loss per
share:
August 31,2006 August 31, 2005
--------------- ---------------
Numerator:
Net Loss $ (2,766,114) $ (113,762)
--------------- ---------------
Denominator:
Weighted Average Number of Shares 22,207,208 7,536,098
--------------- ---------------
Net loss per share-Basic and Diluted $ (0.12) $ (0.02)
F-10
INGEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8 - NET LOSS PER SHARE (CONTINUED)
As the Company incurred net losses for the three months ended August 31, 2006,
it has excluded from the calculation of diluted net loss per share approximately
6,083,333 related to its convertible debt in accordance with EITF Issue No.
04-8, "THE EFFECT OF CONTINGENTLY CONVERTIBLE DEBT ON DILUTED EARNINGS PER
SHARE". There are no dilutive items for the three months ended August 31, 2005.
NOTE 9 - SEGMENT INFORMATION
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" requires that a publicly traded company must disclose information
about its operating segments when it presents a complete set of financial
statements. Since the Company has only one segment; accordingly, detailed
information of the reportable segment is not presented.
NOTE 10 - RELATED PARTY TRANSACTIONS
The Company had a note payable to a related party in the amounts of $6,886 and
$42,802 as of August 31, 2006 and 2005, respectively. The interest rate on the
note is 6% and due upon working capital availability. The related accrued
interest is $33,844 and $30,471 as of August 31, 2006 and 2005, respectively.
NOTE 11 - GUARANTEES
The Company from time to time enters into certain types of contracts that
contingently require the Company to indemnify parties against third-party
claims. These contracts primarily relate to: (i) divestiture agreements, under
which the Company November provide customary indemnifications to purchasers of
the Company's businesses or assets; and (ii) certain agreements with the
Company's officers, directors and employees, under which the Company November be
required to indemnify such persons for liabilities arising our of their
employment relationship.
The terms of such obligations vary. Generally, a maximum obligation is not
explicitly stated. Because the obligated amounts of these types of agreements
often are not explicitly stated, the overall maximum amount of the obligation
cannot be reasonably estimated. Historically, the Company has not been obligated
to make significant payments for these obligations, and no liabilities have been
recorded for these obligations on its balance sheet as of August 31, 2006.
F-11
INGEN TECHNOLOGIES, INC.
AUDIT REPORT
FOR THE YEARS ENDED
MAY 31, 2006 AND 2005
F-12
HAROLD Y. SPECTOR, CPA SPECTOR & WONG, LLP 80 SOUTH LAKE AVENUE
CAROL S. WONG, CPA Certified Public Accountants SUITE 723
(888) 584-5577 PASADENA, CA 91101
FAX (626) 584-644
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and stockholders
of Ingen Technologies Inc.
We have audited the accompanying consolidated balance sheets of Ingen
Technologies Inc. and subsidiary, as of May 31, 2006 and 2005, and the related
statements of operations, changes in stockholders' deficit, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial positions of Ingen Technologies
Inc. and subsidiary as of May 31, 2006 and 2005, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company's operating losses and working capital
deficiency raise substantial doubt about its ability to continue as a going
concern. Management's plans regarding those matters are also described in Note
3. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Spector and Wong, LLP
Spector and Wong, LLP
Pasadena, California
July 24, 2006
F-12
AS OF MAY 31, 2006 2005
----------- -----------
ASSETS
Current Assets
Cash $ 111,112 $ 17,727
----------- -----------
Total current assets 111,112 17,727
----------- -----------
Property and equipment, net of accumulated depreciation
of $98,408 and $80,411 for 2005 and 2004, respectively 31,638 24,927
TOTAL ASSETS $ 142,750 $ 42,654
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 48,186 $ --
Accrued expenses 179,793 386,530
----------- -----------
Total current liabilities 227,979 386,530
----------- -----------
Long-term Liabilities
Notes Payable -- 25,000
Officers' loans 70,826 102,802
----------- -----------
Total long-term liabilities 70,826 127,802
----------- -----------
Stockholders' deficit
Preferred stock Series A, no par value, 40,000,000 and none authorized
in 2006 and 2005, respectively; issued and outstanding 14,134,547
for 2006 and 1,000,000 for 2005 734,980 30,000
Preferred stock, no par value, none and 37,000,000 authorized
in 2006 and 2005, respectively; issued and outstanding none
and 12,300,000 for 2006 and 2005, respectively -- 369,000
Common stock, no par value, authorized 100,000,000 in 2006 and
500,000,000 shares in 2005; issued and outstanding 29,609,610 and
3,182,190 for 2006 and 2005, respectively 7,497,183 5,551,213
Series A preferred stock subscription (220,000) --
Accumulated deficit (8,168,218) (6,565,391)
----------- -----------
Total stockholders deficit (156,055) (615,178)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 142,750 $ (100,846)
=========== ===========
F-13
FOR THE YEARS ENDED MAY 31, 2006 2005
------------- -------------
Sales $ 846,783 $ 794,314
Cost of sales 301,118 296,565
------------- -------------
GROSS PROFIT 545,665 497,749
Selling, general and administrative expenses 2,143,840 770,692
Amortization of intangible assets -- 36
Impairment loss -- 16,905
------------- -------------
OPERATING LOSS (1,598,175) (289,884)
------------- -------------
Other (expenses):
Interest Expenses (3,852) (16,571)
------------- -------------
NET LOSS BEFORE TAXES (1,602,027) (306,455)
Provision for income taxes 800 800
------------- -------------
NET LOSS $ (1,602,827) $ (307,255)
============= =============
Basic and diluted net loss per share $ (0.01) NIL
============= =============
Weighted average number of common shares 208,100,842 2,205,309
F-14
SERIES A SERIES A,
PREFERRED STOCK PREFERRED STOCK COMMON STOCK PREFERRED
------------------------ ---------------------- ------------------------ ----------
STOCK SUB- ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SCRIPTION DEFICIT TOTAL
----------- ---------- ----------- --------- ----------- ----------- ---------- ----------- -----------
Balance at
May 31, 2004 -- -- -- -- 12,864,593 $ 5,407,213 $(6,258,136) $ (850,923)
----------- ---------- ----------- --------- ----------- ----------- ---------- ----------- -----------
Reverse
stock split
on December
7, 2005 40
to 1 common
stock (12,542,978)
Balance at
May 31, 2004
retroactively
restated -- -- -- -- 321,615 5,407,213 (6,258,136) (850,923)
----------- ---------- ----------- --------- ----------- ----------- ---------- ----------- -----------
Issuance of
preferred
stock for
Compensation
expense 12,300,000 369,000 1,000,000 30,000 399,000
Issuance of
common
stock in
cash 2,860,575 144,000 144,000
Net loss (307,255) (307,255)
----------- ---------- ----------- --------- ----------- ----------- ---------- ----------- -----------
Balance at
May 31, 2005 12,300,000 369,000 1,000,000 30,000 3,182,190 5,551,213 -- (6,565,391) (615,178)
----------- ---------- ----------- --------- ----------- ----------- ---------- ----------- -----------
Conversion of
Preferred
Stock
into Series
A preferred
stock (12,300,000) (369,000) 12,300,000 369,000
Conversion of
Preferred
Stock
Series A
into common
stock (7,619,999) (284,020) 7,619,999 284,020 --
Issuance of
preferred
stock for
accrued
compensation 5,454,546 400,000 400,000
Subscription
of Series A
preferred
stock 3,000,000 220,000 (220,000) --
Issuance of
common stock
in cash 18,807,421 1,661,950 1,661,950
Net loss (1,602,827) (1,602,827)
----------- ---------- ----------- --------- ----------- ----------- ---------- ----------- -----------
BALANCE AT
MAY 31, 2006 -- $ -- 14,134,547 $ 734,980 29,609,610 $ 7,497,183 $ (220,000) $(8,168,218) $ (156,055)
=========== ========== =========== ========= =========== =========== ========== =========== ===========
F-15
FOR THE YEARS ENDED MAY 31, 2006 2005
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss $(1,602,827) $ (307,255)
Adjustments to Reconcile Net Loss to Net Cash Used in Operations:
Stock Issued for Services -- 399,000
Depreciation and Amortization 17,997 10,533
Loss on Impairment of Patents -- 16,905
Increase (Decrease) in:
Accounts Payable 48,186 (20,000)
Accrued Expenses 193,263 (86,630)
Litigation reserve (143,500) --
----------- -----------
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES (1,486,881) 12,553
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Addition to Fixed Assets (24,708) --
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (24,708) --
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Net Repayments to Note Payable to Related Party (31,976) (173,379)
Repayments to Notes Payable (25,000) --
Proceeds from Issuance of Common Stock 1,661,950 144,000
----------- -----------
NET CASH FLOW PROVIDED (USED) BY FINANCING ACTIVITIES 1,604,974 (29,379)
----------- -----------
NET INCREASE (DECREASE) INCREASE IN CASH 93,385 (16,826)
Cash Balance at Beginning of Year 17,727 34,553
----------- -----------
CASH BALANCE AT END OF YEAR $ 111,112 $ 17,727
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ -- $ --
Taxes Paid $ 800 $ 800
Non Cash Activities:
Exchange of 7,619,999 shares of series A preferred stock
for common stock $ 284,020 $ --
Issuance of series A preferred stock for accrued compensation $ 400,000 $ --
Stock subscription receivable incurred for issuance of
series A preferred stock $ 220,000 $ --
F-16
NOTE 1 - NATURE OF BUSINESS
Ingen Technologies, Inc., (formerly known as Creative Recycling Technologies
Inc., the "Company" or "Ingen Technologies"), is a Public Company trading under
NASDAQ OTC: IGTN. Ingen Technologies is a growth-oriented technology company
that offers a diverse and progressive services and products.
Ingen Technologies, Inc., is a Georgia corporation ("IGTN") and owns 100% of the
capital stock of Ingen Technologies, Inc. a Nevada corporation and it has been
in business since 1999.
The Company's flagship product is its BAFI(TM), the world's first wireless
digital low gas warning system for pressurized gas cylinders. On October 24,
2000, the BAFI(TM) received a U.S. Patent with Patent No. 6,137,417. BAFI(TM),
now in its second generation, is an accurate and cost-effective, real-time
pressurized gas warning system that will alert users when gas levels are
approaching empty.
The BAFI(TM) line has multiple applications, inclusive but not limited to, the
Medical Industry, Home Consumer, Residential Development Industry, Safety &
Protection (fire and police), Aircraft Industry, and the Recreational Vehicle
Industry. BAFI(TM) meets or exceeds regulatory compliance of this type of
product and is completed and in production.
The Secure Balance(TM) product is a private-label product that includes a
vestibular function testing system and balance therapy system available to
physicians throughout the United States.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America (GAAP).
Principle of Consolidation and Presentation: The accompanying consolidated
financial statements include the accounts of Ingen Technologies, Inc. and its
subsidiaries after elimination of all intercompany accounts and transactions.
Certain prior period balances have been reclassified to conform to the current
period presentation
Use of estimates The preparation of the accompanying consolidated financial
statements in conformity with accounting principles generally accepted in the
United States requires management to make certain estimates and assumptions that
directly affect the results of reported assets, liabilities, revenue, and
expenses. Actual results may differ from these estimates.
Revenue Recognition The Company generally recognizes product revenue when
persuasive evidence of an arrangement exists, delivery has occurred, the fee is
fixed or determinable, and collection is probable. In instances where final
acceptance of the product is specified by the customer, revenue is deferred
until all acceptance criteria have been met. No provisions were established for
estimated product returns and allowances based on the Company's historical
experience. All orders are customized with substantial down payments. Products
are released upon receipt of the remaining funds.
F-17
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash Equivalents For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments with an original maturity of three
months or less to be cash equivalents.
Fair Value of Financial Instruments The carrying amounts of the financial
instruments have been estimated by management to approximate fair value.
Property and Equipment Property and Equipment are valued at cost. Maintenance
and repair costs are charged to expenses as incurred. Depreciation is computed
on the straight-line method based on the following estimated useful lives of the
assets: 3 to 5 years for computer, software and office equipment, and 5 to 7
years for furniture and fixtures.
Income Taxes: Income tax expense is based on pretax financial accounting income.
Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax bases of assets and
liabilities and their reported amounts.
Net Loss Per Share Basic net loss per share includes no dilution and is computed
by dividing net loss available to common stockholders by the weighted average
number of common stock outstanding for the period. Diluted net loss per share
does not differ from basic net loss per share since potential shares of common
stock are anti-dilutive for all periods presented. Potential shares consist of
series A preferred stock.
New Accounting Standards: In June 2005, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standard (SFAS) No. 154,
"Accounting Changes and Errors Corrections, a replacement of APB Opinion No. 20,
Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in
Interim Financial Statement." SFAS 154 changes the requirements for the
accounting for and reporting of a change in accounting principle. Previously,
most voluntary changes in accounting principles were required recognition via a
cumulative effective adjustment within net income of the period of the change.
SFAS 154 requires retrospective application to prior periods' financial
statements, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. SFAS 154 is effective for
accounting changes and corrections of errors made in fiscal years beginning
after December 14, 2005; however, the Statement does not change the transition
provisions of any exi sting accounting pronouncements. The Company does not
believe this pronouncement will have a material impact in its consolidated
financial position, results of operations or cash flows.
In December 2004, the FASB issued SFAS No. 153. This statement addresses the
measurement of exchanges of nonmonetary assets. The guidance in APB Opinion No.
29, "Accounting for Nonmonetary Transactions," is based on the principle that
exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged. The guidance in that opinion; however, included certain
exceptions to that principle. This statement amends Opinion 29 to eliminate the
exception for nonmonetary exchanges of similar productive assets and replaces it
with a general exception for exchanges of nonmonetary assets that do not have
commercial substance. A nonmonetary exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. This statement is effective for financial statements for fiscal
years beginning after June 15, 2005. Earlier application is permitted for
nonmonetary asset exchanges incurred during fiscal years beginning after the dat
e of this statement is issued. Management believes the adoption of this
statement will have no impact on the consolidated financial statements of the
Company.
F-18
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In December 2004, the FASB issued SFAS No. 152, which amends FASB statement No.
66, "Accounting for Sales of Real Estate," to reference the financial accounting
and reporting guidance for real estate time-sharing transactions that is
provided in AICPA Statement of Position (SOP) 04-2, "Accounting for Real Estate
Time-Sharing Transactions." This statement also amends FASB Statement No. 67,
"Accounting for Costs and Initial Rental Operations of Real Estate Projects," to
state that the guidance for (a) incidental operations and (b) costs incurred to
sell real estate projects does not apply to real estate time-sharing
transactions. The accounting for those operations and costs is subject to the
guidance in SOP 04-2. This statement is effective for financial statements for
fiscal years beginning after June 15, 2005. Management believes the adoption of
this statement will have no impact on the consolidated financial statements of
the Company.
In December 2004, the FASB issued Statement No. 123 (revised 2004), "Share-Based
Payment" ("SFAS 123(R)"), which requires the measurement and recognition of
compensation expense for all stock-based compensation payments and supersedes
the Company's current accounting under APB 25. SFAS 123(R) is effective for the
first interim or annual reporting period that begins after December 15, 2005 for
small business issuers. In March 2005, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 107 ("SAB 107") relating to the adoption of
SFAS 123(R).
The Company plans to use the modified prospective method to adopt this new
standard and will continue to evaluate the impact of SFAS 123(R) on its
operating results and financial condition. The pro forma information presented
above and in Note 10 presents the estimated compensation charges under SFAS 123,
"Accounting for Stock-Based Compensation." The Company's assessment of the
estimated compensation charges is affected by the Company's stock price as well
as assumptions regarding a number of complex and subjective variables and the
related tax impact. These variables include, but are not limited to, the
Company's stock price volatility and employee stock option exercise behaviors.
The Company will recognize the compensation cost for stock-based awards issued
after January 1, 2006 on a straight-line basis over the requisite service period
for the entire award.
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment
of ARB No. 43, Chapter 4." This statement amends the guidance in ARB No. 43,
Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts
of idle facility expense, freight, handling costs, and wasted material
(spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that ". . .
under some circumstances, items such as idle facility expense, excessive
spoilage, double freight, and rehandling costs may be so abnormal as to require
treatment as current period charges. . . ." This statement requires that those
items be recognized as current-period charges regardless of whether they meet
the criterion of "so abnormal." In addition, this statement requires that
allocation of fixed production overheads to the costs of conversion be based on
the normal capacity of the production facilities. This statement is effective
for inventory costs incurred during fiscal years beginning after June 15, 2005.
Management does no t believe the adoption of this consolidated statement will
have any immediate material impact on the Company.
NOTE 3 - GOING CONCERN
The Company's consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and liabilities and
commitments in the normal course of business. In the near term, the Company
expects operating costs to continue to exceed funds generated from operations.
As a result, the Company expects to continue to incur operating losses and may
not have sufficient funds to grow its business in the future. The Company can
give no assurance that it will achieve profitability or be capable of sustaining
profitable operations. As a result, operations in the near future are expected
to continue to use working capital.
NOTE 3 - GOING CONCERN (continued)
To successfully grow the individual segments of the business, the Company must
decrease its cash burn rate, improve its cash position and the revenue base of
each segment, and succeed in its ability to raise additional capital through a
combination of primarily public or private equity offering or strategic
alliances. The Company also depends on certain contractors, and its sole
employee, the CEO, and the loss of any of those contractors or the employee, may
harm the Company's business.
The company incurred a loss of $1,602,827 and $307,255 for the years ended May
31, 2006 and 2005, and as of those dates, had an accumulated deficit of
$8,168,218 and $6,565,391, respectively.
F-19
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment is summarized as follow:
As of May 31,
-----------------------------
2006 2005
--------- ---------
Automobile $ 9,500 $ 9,500
Furniture & Fixture 27,222 26,660
Machinary & Equipment 61,277 60,305
Leasehold Improvements 32,047 8,873
--------- ---------
130,046 105,338
Less accumulated depreciation (98,408) (80,411)
--------- ---------
Property and Equipment, net $ 31,638 $ 24,927
========= =========
NOTE 5 - ACCRUED EXPENSES
Accrued expenses at May 31, 2006 and 2005 consist of:
2006 2005
-------- --------
Accrued officer's compensation $112,000 $356,000
Accrued interest expense 32,782 28,930
Accrued professional fees 10,000 --
Accrued payroll taxes 24,211 --
Accrued taxes 800 1,600
-------- --------
Total $179,793 $386,530
======== ========
NOTE 6 - INCOME TAXES
Provision for income tax for the years ended May 31, 2006 and 2005 consisted of
$800 minimum state franchise tax per year.
As of May 31, 2006 and 2005, the Company has net operating loss carryforwards,
approximately, of $3,009,598 and $1,406,771, respectively, to reduce future
federal and state taxable income. To the extent not utilized, the carryforwards
will begin to expire through 2026. The Company's ability to utilize its net
operating loss carryforwards is uncertain and thus a valuation reserve has been
provided against the Company's net deferred tax assets. A valuation allowance is
recorded for the full amount of deferred tax assets of approximately $1,294,127
and $602,098, for the years ended May 31, 2006 and 2005, respectively, which
relates to these loss carryforwards, since future profits are indeterminable.
NOTE 7 - NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net loss per
share:
FOR YEARS ENDED MAY, 31
----------------------------------
2006 2005
------------- -------------
Numerator:
Net Loss $ (1,602,827) $ (307,255)
------------- -------------
Denominator:
Weighted Average Number of Shares 208,100,842 2,205,309
------------- -------------
Net loss per share-Basic and Diluted $ (0.01) NIL
F-20
As the Company incurred net losses for the years ended May 31, 2006 and 2005, it
has excluded from the calculation of diluted net loss per share approximately
14,134,547and no shares, respectively.
NOTE 8 - SEGMENT INFORMATION
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" requires that a publicly traded company must disclose information
about its operating segments when it presents a complete set of financial
statements. The Company has only one segment; therefore, the detail information
is not presented.
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company had notes payable to a related party in the amounts of $70,826 and
$102,802 as of May 31, 2006 and 2005, respectively. The interest rate on the
loan is 6% and due upon working capital availability. The related accrued
interest is $32,782 and $28,930 as of May 31, 2006 and 2005, respectively.
As of May 31, 2005, there was a note payable to a related party for the amount
of $25,000 with zero interest. The note was paid in August 2005.
During the fiscal year ending May 31, 2006, the CEO of the Company received
5,454,546 shares of series A preferred for satisfaction of his accrued
compensation of $400,000.
NOTE 10 - LEASE OBLIGATION
The Company leases its corporate office under an unsecured lease agreement which
expires in April 1, 2008. As of May 31, 2006, the remaining lease obligation is
as follows:
Year Ending Lease
May 31, Obligation
---------------------------------------
2007 9,300
2008 7,750
----------
$ 17,050
==========
The total rent expense for the year ended May 31, 2006 was $9,300.
NOTE 11 - INTANGIBLE ASSETS
The patents were fully impaired as of May 31, 2005 and the loss for the
impairment was $16,905.
NOTE 12 - GUARANTEES
The Company from time to time enters into certain types of contracts that
contingently require the Company to indemnify parties against third-party
claims. These contracts primarily relate to: (i) divestiture agreements, under
which the Company may provide customary indemnifications to purchasers of the
Company's businesses or assets; and (ii) certain agreements with the Company's
officers, directors and employees, under which the Company may be required to
indemnify such persons for liabilities arising our of their employment
relationship.
The terms of such obligations vary. Generally, a maximum obligation is not
explicitly stated. Because the obligated amounts of these types of agreements
often are not explicitly stated, the overall maximum amount of the obligation
cannot be reasonably estimated. Historically, the Company has not been obligated
to make significant payments for these obligations, and no liabilities have been
recorded for these obligations on its balance sheet as of May 31, 2006.
NOTE 13 - PENDING LITIGATION
The pending litigation is with the previous landlord for breaking a facility
lease by the Company. The management estimated and accrued a loss for $143,500
in the year ended May 31, 2004. The litigation regarding the breaking the
facility lease was settled for $143,000 in August 2005.
F-21
NOTE 14 - PREFERRED STOCKS
On December 7, 2005, the Company had a reverse stock split of 3 to 1 for all
issued and outstanding preferred shares and converted all classes of preferred
shares into Series A preferred stock. The Company is authorized to issue
40,000,000 shares of no par value Series A preferred stock. As of May 31, 2006
and 2005, the Company had 14,134,547 shares of preferred stocks Series A issued
and outstanding and 36,900,000 shares of preferred stock issued and outstanding.
No dividends shall accrue or be payable on the Series A preferred stocks. The
Company has the right to redeem each share of Series A preferred stock for $1;
however, there is no obligation for this redemption. Each share of Series A
preferred stock is entitled to vote on all matters with holders of the common
stock; however, each Series A preferred stock is entitled to 1 vote. Each share
of Series A preferred stock is convertible, at the option of the holder and
subject to a 65 day written notice to the Company, at any time after the date of
the issuance into 1 share of fully paid and non-assessable share of common
stock. In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of Series A preferred stock shall be
entitle to be paid $1 per share before any payments or distribution of assets of
the Company to the holders of the common stock or any other equity securities of
the Company. The accompanying consolidated financial statements have been
retroactively adjusted to reflect the reverse stock split.
During the fiscal year ending May 31, 2006, the Company authorized and converted
7,619,999 shares of Series A preferred stock to common stock.
On May 21, 2006, the Company and a subscriber entered into an Investment
Contract (the "Contract") providing that the Company intends to raise at least
$5 million utilizing Replacement S-B of the SEC which the subscriber agreed to
purchase 3million shares of the Company's restricted series A preferred shares
at a price of $0.0733 per share or $220,000. These shares will be registered by
the Company in the S-B offering. As of May 31, 2006, all of 3million shares of
restricted series A preferred shares were issued and a subscription receivable
of $220,000 was recorded against the Company's equity.
NOTE 15 - COMMON STOCK
On October 31, 2005, the Board approved on reverse split to reduce the
authorized common shares to 100 million and also approved the reverse split of
40 to 1 outstanding and issued common shares; the effective was on December 7,
2006. The accompanying consolidated financial statements have been retroactively
adjusted to reflect the reverse stock split.
F-22
CHANGES AND DISAGREEMENTS WITH ACCOUNTANT
ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have had no disagreements with our certified public accountants with respect
to accounting practices or procedures or financial disclosure.
AVAILABLE INFORMATION
We have filed a registration statement on Form SB-2 under the Securities Act of
1933 with the Securities and Exchange Commission with respect to the shares of
our common stock offered through this prospectus. This prospectus is filed as
apart of that registration statement and does not contain all of the information
contained in the registration statement and exhibits. We refer you to our
registration statement and each exhibit attached to it for a more complete
description of matters involving us. You may inspect the registration statement
and exhibits and schedules filed with the Securities and Exchange Commission at
the Commission's principal office in Washington, D.C. Copies of all or any part
of the registration statement may be obtained from the Public Reference Section
of the Securities and Exchange Commission, 100 F Street NE, Washington, D.C.
20549. Please call the Commission at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. The Securities and Exchange
Commission also maintains a web site at http://www.sec.gov that contains
reports, proxy statements and information regarding registrants that file
electronically with the Commission. In addition, we will file electronic
versions of our annual and quarterly reports on the Commission's Electronic Data
Gathering Analysis and Retrieval, or EDGAR System. Our registration statement
and the referenced exhibits can also be found on this site as well as our
quarterly and annual reports. We will not send the annual report to our
shareholders unless requested by the individual shareholders.
45
PROSPECTUS
INGEN TECHNOLOGIES, INC.
13,554,497 SHARES OF OUR COMMON STOCK ISSUABLE IN CONNECTION
WITH THE CONVERSION OF PROMISSORY NOTES
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS
PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING AN OFFER
TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
UNTIL _____________, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES
WHETHER OR NOT PARTICIPATING IN THIS OFFERING MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Georgia law permits a corporation, under specified circumstances, to indemnify
its directors, officers, employees or agents against expenses (including
attorney's fees), judgments, fines and amounts paid in settlements actually and
reasonably incurred by them in connection with any action, suit or proceeding
brought by third parties by reason of the fact that they were or are directors,
officers, employees or agents of the corporation, if these directors, officers,
employees or agents acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceedings, had no reason to believe their
conduct was unlawful. In a derivative action, i.e., one by or in the right of
the corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agent in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnify for such expenses despite such
adjudication of liability.
Our Articles of Incorporation provide that, none of our directors shall be
liable to us or our stockholders for damages for breach of fiduciary duty,
unless such breach involves a breach of duty of loyalty, acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law or involve unlawful payment of dividends or unlawful stock purchases or
redemptions, or involves a transaction from which the director derived an
improper personal benefit.
In addition, our by-laws provide that we shall indemnify our officers, directors
and agents to the fullest extent permissible under Georgia law, and in
conjunction therewith, to procure, at our expense, policies of insurance. In
addition, our by-laws provide that our directors shall have no liability for
monetary damages to the fullest extent permitted under Georgia law.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers, and controlling persons
pursuant to the foregoing provisions or otherwise, we have been advised that in
the opinion of the Securities Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by
our director, officer, or controlling person in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered hereunder,
we will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission
registration fee $ 258.94
Transfer Agent Fees (1) 1,000.00
Accounting fees and expenses (1) 10,000.00
Legal fees and expenses (1) 50,000.00
-------------
Total(1) $ 61,258.94
(1) Estimated
All amounts are estimates other than the Commission's registration fee. We are
paying all expenses of the offering listed above. No portion of these expenses
will be borne by the selling shareholders. The selling shareholders, however,
will pay any other expenses incurred in selling their common stock, including
any brokerage commissions or costs of sale.
II-1
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On June 8, 2004, we issued 3,000,000 shares of our restricted common stock to 9
investors. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. All of the above issuances of shares of our
common stock qualified for exemption under Section 4(2) of the Securities Act of
1933 since the issuance of such shares by us did not involve a public offering.
The purchasers were sophisticated investors and had access to information
normally provided in a prospectus regarding us. The offering was not a "public
offering" as defined in Section 4(2) due to the insubstantial number of persons
involved in the deal, size of the offering, manner of the offering and number of
shares offered. We did not undertake an offering in which we sold a high number
of shares to a high number of investors. In addition, The purchasers had the
necessary investment intent as required by Section 4(2) as they agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On July 9, 2004, we issued 73,408,000 shares of our restricted common stock to
118 investors.
On July 30, 2004, we issued 3,850,000 shares of our restricted common stock to 5
investors. Our shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933. No commissions were paid
for the issuance of such shares. All of the above issuances of shares of our
common stock qualified for exemption under Section 4(2) of the Securities Act of
1933 since the issuance of such shares by us did not involve a public offering.
The purchasers were sophisticated investors and had access to information
normally provided in a prospectus regarding us. The offering was not a "public
offering" as defined in Section 4(2) due to the insubstantial number of persons
involved in the deal, size of the offering, manner of the offering and number of
shares offered. We did not undertake an offering in which we sold a high number
of shares to a high number of investors. In addition, The purchasers had the
necessary investment intent as required by Section 4(2) as they agreed to and
received a share certificate bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions
ensure that these shares would not be immediately redistributed into the market
and therefore not be part of a "public offering." Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for the above transaction.
On August 3, 2004, we issued 200,000 shares of our restricted common stock to
one investor. Our shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. The purchaser was a sophisticated investors and
had access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, the purchaser had the necessary investment intent as required by
Section 4(2) as he agreed to and received a share certificate bearing a legend
stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On August 23, 2004, we issued 500,000 shares of our restricted common stock to
one investor. Our shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. The purchaser was a sophisticated investors and
had access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, the purchaser had the necessary investment intent as required by
Section 4(2) as he agreed to and received a share certificate bearing a legend
stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
II-2
On August 24, 2004, we issued 500,000 shares of our restricted common stock to
one investor. Our shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. The purchaser was a sophisticated investors and
had access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, the purchaser had the necessary investment intent as required by
Section 4(2) as he agreed to and received a share certificate bearing a legend
stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On September 10, 2004, we issued 160,000 shares of our restricted common stock
to one investor. Our shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. The purchaser was a sophisticated investors and
had access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, the purchaser had the necessary investment intent as required by
Section 4(2) as he agreed to and received a share certificate bearing a legend
stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On October 12, 2004, we issued 240,000 shares of our restricted common stock to
2 investors. Our shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. The purchasers were sophisticated investors and
had access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, The purchasers had the necessary investment intent as required by
Section 4(2) as they agreed to and received a share certificate bearing a legend
stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On October 31, 2004, we issued 500,000 shares of our restricted common stock to
one investor. Our shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. The purchaser was a sophisticated investors and
had access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, the purchaser had the necessary investment intent as required by
Section 4(2) as he agreed to and received a share certificate bearing a legend
stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
II-3
On November 1, 2004, we issued 500,000 shares of our restricted common stock to
one investor. Our shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. All of the above
issuances of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. The purchaser was a sophisticated investors and
had access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, the purchaser had the necessary investment intent as required by
Section 4(2) as he agreed to and received a share certificate bearing a legend
stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
We sold $1,090,925 of restricted shares from December of 2004 to November 30,
2005 in private transactions to accredited investors under Section 4(2) and/or
Section 4(6) of the Securities Act of 1933.
On February 13, 2006, we sold 1,666,666 of our restricted common shares to two
accredited shareholders (each shareholder purchased 833,333 shares at $0.12 per
share). These sales were pursuant to Rule 506 of Regulation D of the SEC. The
total purchase of these shares is $200,000.
We sold 1,000,000 of our restricted common shares to an accredited investor for
$150,000 on February 28, 2006 and another 1,000,000 of our restricted common
shares to the same individual for $120,000 on March 17, 2006. These sales was
pursuant to California Corporations Code section 25102(f).
On July 26, 2006, we completed a financing agreement by signing a securities
purchase agreement for a maximum of $2,000,000. The initial closing was for
financing of the principal amount of $700,000 for which we issued callable
secured convertible notes. The initial funding was undertaken as follows: AJW
Capital Partners, LLC - $67,900; AJW Offshore, Ltd. - $413,000; AJW Qualified
Partners, LLC - $210,000; and New Millennium Capital Partners II, LLC - $9,100.
Under the securities purchase agreement, we will receive the principal amount of
$600,000 when this SB-2 registration statement is filed with the SEC; and the
final principal amount of $700,000 when this registration statement is declared
effective. At both times, we will issue callable secured convertible notes for
such amounts. The note is convertible into our common shares at the lowest 3
intra-day trading prices during the 20 trading days immediately prior to the
conversion date discounted by 40%. The investors in the financing shall not be
entitled to convert the promissory note if such conversion would result in any
investor solely owning more than 4.99% of our outstanding shares of common
stock.
Based on our recent financing, we have also issued 20,000,000 warrants
convertible into shares of our common stock. Each Warrant entitles to holder to
one share of our common stock. The warrants were issued as follows: AJW Capital
Partners, LLC - 1,940,000 warrants; AJW Offshore, Ltd. - 11,800,000 warrants;
AJW Qualified Partners, LLC - 6,000,000 warrants; and New Millennium Capital
Partners II, LLC - 260,000 warrants. The exercise price is $.10 and is
exercisable for seven years from the date of issuance. The warrants have a
cashless exercise feature. For the 20,000,000 warrants issued on July 26, 2006,
the expiration date is July 26, 2013.
The convertible notes and the warrants (the "Securities") were issued in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act of 1933. No commissions were paid for the issuance of such
Securities. The above issuance of Securities qualified for exemption under
Section 4(2) of the Securities Act of 1933 since the issuance of such shares by
us did not involve a public offering. The holders set forth above were each
accredited investors and had access to information normally provided in a
prospectus regarding us. The offering was not a "public offering" as defined in
Section 4(2) due to the insubstantial number of persons involved in the deal,
size of the offering, manner of the offering and number of Securities offered.
We did not undertake an offering in which we sold a high number of Securities to
a high number of investors. In addition, the holders set forth above had the
necessary investment intent as required by Section 4(2) since they agreed to
receive a share certificate bearing a legend stating that such shares underlying
the Securities are restricted pursuant to Rule 144 of the 1933 Securities Act.
These restrictions ensure that these shares would not be immediately
redistributed into the market and therefore not be part of a "public offering."
Based on an analysis of the above factors, we have met the requirements to
qualify for exemption under Section 4(2) of the Securities Act of 1933 for the
above transaction.
II-4
On July 26, 2006 we issued warrants to representing the right to purchase up to
2,000,000 shares of our common stock at an exercise price of $.10 per share. The
exercise price is $.10 and is exercisable for seven years from the date of
issuance. The warrants have a cashless exercise feature. The warrants were
issued in reliance on the exemption from registration provided by Section 4(2)
of the Securities Act of 1933. No commissions were paid for the issuance of such
warrants. The above issuance of warrants to purchase shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance of such warrants did not involve a public offering. The
warrant-holder represented that it was an accredited investor and had access to
information normally provided in a prospectus regarding us. The offering was not
a "public offering" as defined in Section 4(2) due to the insubstantial number
of persons involved in the deal, size of the offering, manner of the offering
and number of shares offered. We did not undertake an offering in which we sold
a high number of shares to a high number of investors. In addition, the
warrant-holder had the necessary investment intent as required by Section 4(2)
and agreed to receive a share certificate upon exercise of the warrant bearing a
legend that such shares underlying the warrant are restricted pursuant to Rule
144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
All of the above issuances of shares of our common stock qualified for exemption
under Section 4(2) of the Securities Act of 1933 since the issuance of such
shares by us did not involve a public offering. Each of these shareholders was a
sophisticated investor and had access to information regarding us. The offering
was not a "public offering" as defined in Section 4(2) due to the insubstantial
number of persons involved in the deal, size of the offering, manner of the
offering and number of shares offered. We did not undertake an offering in which
we sold a high number of shares to a high number of investors. In addition,
these shareholders had the necessary investment intent as required by Section
4(2) since they agreed to and received a share certificate bearing a legend
stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transactions.
All stock numbers and prices per share have been adjusted to reflect the
1-for-40 reverse split of our common stock split effective December 8, 2005.
ITEM 27. EXHIBITS
EXHIBIT NO. DESCRIPTION
- --------------------------------------------------------------------------------
2.1 Plan And Agreement of Merger Relating to the Merger of Ingen
Technologies, Inc. into Creative Recycling, Inc., dated March
15, 2004. (incorporated by reference to registrant's Form
10-KSB/A filed March 24, 2006)
3.1 Amended and Restated Articles of Incorporation of Ingen
Technologies, Inc., as filed with the Georgia Secretary of State
on or about March 15, 2005. (incorporated by reference to
registrant's Form 10-KSB filed November 7, 2005)
3.2 Resolution 2005.6 of the Ingen Board of Directors (signed by the
preferred shareholders as well) modifying the Amended and
Restated Articles of Incorporation with respect to the
classifications and rights of our preferred shares.
(incorporated by reference to registrant's Form 10-KSB filed
November 7, 2005)
3.3 Bylaws of Ingen Technologies, Inc. (incorporated by reference to
registrant's Form 10-KSB filed November 7, 2005)
3.4 Minutes of Special Shareholder meeting of March 15, 2005
amending our Bylaws by changing the date of the annual
shareholders meeting from May 15 to March 15. (incorporated by
reference to registrant's Form 10-KSB filed November 7, 2005)
3.5 Amended and Restated Articles of Incorporation of Ingen
Technologies, Inc., as filed with the Georgia Secretary of State
on or about December 28, 2005 (incorporated by reference to
registrant's Form 8-K filed January 10, 2006)
4.1 Specimen of Ingen Technologies, Inc. common stock certificate.
(incorporated by reference to registrant's Form 10-KSB filed
November 7, 2005)
4.2 Resolution 2006.1 of the Ingen Technologies, Inc. Board of
Directors, dated January 5, 2006 (incorporated by reference to
registrant's Form 8-K filed January 10, 2006)
II-5
4.3 Securities Purchase Agreement dated July 25, 2006 by and among
Ingen Technologies, Inc. and the New Millennium Capital Partners
II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW
Partners, LLC. (incorporated by reference to registrant's Form
8-K filed August 8, 2006)
4.4 Form of Callable Convertible Secured Note by and among the Ingen
Technologies, Inc. and the New Millennium Capital Partners II,
LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW
Partners, LLC. (incorporated by reference to registrant's Form
8-K filed August 8, 2006)
4.5 Form of Stock Purchase Warrant by and among Ingen Technologies,
Inc. and the New Millennium Capital Partners II, LLC, AJW
Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners,
LLC. (incorporated by reference to registrant's Form 8-K filed
August 8, 2006)
4.6 Registration Rights Agreement by and among Ingen Technologies,
Inc. and the New Millennium Capital Partners II, LLC, AJW
Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners,
LLC. (incorporated by reference to registrant's Form 8-K filed
August 8, 2006)
4.7 Security Agreement by and among Ingen Technologies, Inc. and the
New Millennium Capital Partners II, LLC, AJW Qualified Partners,
LLC, AJW Offshore, Ltd. and AJW Partners, LLC. (incorporated by
reference to registrant's Form 8-K filed August 8, 2006)
4.8 Intellectual Property Security Agreement by and among Ingen
Technologies, Inc. and the New Millennium Capital Partners II,
LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW
Partners, LLC. (incorporated by reference to registrant's Form
8-K filed August 8, 2006)
4.9 Amendment to Securities Purchase Agreement dated November 21,
2006 by and among Ingen Technologies, Inc. and the New
Millennium Capital Partners II, LLC, AJW Qualified Partners,
LLC, AJW Offshore, Ltd. and AJW Partners, LLC
4.10 Amendment to Registration Rights Agreement dated November 21,
2006 by and among Ingen Technologies, Inc. and the New
Millennium Capital Partners II, LLC, AJW Qualified Partners,
LLC, AJW Offshore, Ltd. and AJW Partners, LLC
5.1 Opinion of legality and consent of Anslow & Jaclin, LLP, dated
August 25, 2006. *
10.1 Commercial Lease Agreement between Ingen Technologies, Inc,
Scott Sand and Abolfazl Ghias dated March 11, 2005.
(incorporated by reference to registrant's Form 10-KSB filed
November 7, 2005)
10.2 Contracting Agreement between Chris Wirth and/or Agroworx, Inc.
and Ingen Technologies, Inc. dated September 15, 2005 for design
services for Pure Produce program.
10.3 Contracting Agreement between Bob Sand and Ingen Technologies,
Inc. dated January 1, 2005 for Mr. Sand to market Secure Balance
to physicians within the United States and abroad. Bob Sand is
Scott R. Sand's father. (incorporated by reference to
registrant's Form 10- KSB filed November 7, 2005)
10.4 Contracting Agreement between David Winter and Ingen
Technologies, Inc. dated October 1, 2005 for Mr. Winter to
market Secure Balance to physicians in the United States and
abroad. (incorporated by reference to registrant's Form 10-KSB
filed November 7, 2005)
10.5 Contracting Agreement between Donna Eskwitt and Ingen
Technologies, Inc. dated November 4, 2004 for Ms. Eskwitt to
advise the company on Secure Balance. (incorporated by reference
to registrant's Form 10- KSB filed November 7, 2005)
10.6 Intentionally Omitted.
10.7 Contracting Agreement between Gary Hydrabadi, d/b/a Cardio-Med
Systems, Inc. and Ingen Technologies, Inc. dated March 22, 2005
to market Secure Balance to physicians within the United States
and abroad. (incorporated by reference to registrant's Form
10-KSB filed November 7, 2005)
10.8 Contracting Agreement between Joe Lawn and Ingen Technologies,
Inc. dated October 1, 2004 in for Mr. Lawn to market Secure
Balance to physicians within the United States and abroad.
(incorporated by reference to registrant's Form 10-KSB filed
November 7, 2005)
II-6
10.9 Consulting Agreement between Medicore and Ingen Technologies,
Inc. dated September 1, 2004 in which Medicore will market
Secure Balance to physicians in the United States and abroad.
(incorporated by reference to registrant's Form 10-KSB filed
November 7, 2005)
10.10 Consulting Agreement between Preferred Provider Care, Inc. and
Ingen Technologies, Inc. dated August 1, 2004 in which PPC is to
provide physician training. (incorporated by reference to
registrant's Form 10-KSB filed November 7, 2005)
10.11 Contracting Agreement between Randolph McKenzie and Ingen
Technologies, Inc. dated February 10, 2005 for Mr. McKenzie to
provide professional interpretations to physicians within the
United States who purchased or leased Secure Balance.
(incorporated by reference to registrant's Form 10-KSB filed
November 7, 2005)
10.12 Contracting Agreement between Rick Griffin and Ingen
Technologies, Inc. dated May 1, 2005 for Mr. Griffin to provide
installation and services of Secure Balance. (incorporated by
reference to registrant's Form 10-KSB filed November 7, 2005)
10.13 Contracting Agreement between Steve O'Hara, M.D. and Ingen
Technologies, Inc. dated May 1, 2005 to engage Dr. O'Hara to
become a member of the company's Medical Advisory Board.
(incorporated by reference to registrant's Form 10-KSB filed
November 7, 2005)
10.14 Contracting Agreement between Bryant Goldman and Ingen
Technologies, Inc. dated December 9, 2004 for Mr. Goldman to
provide medical billing and other professional services in
relation to Secure Balance. (incorporated by reference to
registrant's Form 10-KSB filed November 7, 2005)
10.15 Consulting Agreement between Vertex Diagnostics, Inc. and Ingen
Technologies, Inc. dated September 1, 2004 in which Vertex will
market Secure Balance to physicians within the United States.
(incorporated by reference to registrant's Form 10-KSB filed
November 7, 2005)
10.16 Consulting and Marketing Agreement between Xcel Associates, Inc.
and Ingen Technologies, Inc. dated February 2, 2005 in which
Xcel agrees to assist Ingen in creating market awareness in the
financial community and assist in product marketing.
(incorporated by reference to registrant's Form 10-KSB filed
November 7, 2005)
10.17 Stock Purchase Agreement between Yong Sin Khoo (a Director of
the company) and Ingen Technologies, Inc. dated October 15, 2004
for the purchase of 5,000,000 common shares. (incorporated by
reference to registrant's Form 10-KSB filed November 7, 2005)
10.18 Financial Procurement Development Agreement between Yong Sin
Khoo and Ingen Technologies, Inc. dated October 15, 2004 in
which certain fees are to be paid if financing is secured.
10.19 Agreement between Mr. Francis McDermott and Ingen Technologies,
Inc. dated July 11, 2005 for the purchase and sale of all rights
to United States Patents No. 6,137,417 and 6,326,896 B1.
(incorporated by reference to registrant's Form 10-KSB filed
November 7, 2005); Assignment of Patents from Francis McDermott;
Licensing Agreement between Francis & Bettie McDermott and Ingen
Technologies, Inc. dated June 24, 1999
10.20 Template for Regulation D Rule 504/MAIE common stock sales
during the first quarter of our fiscal year 2006. We are also
claiming exemptions under Sections 4(2) and 4(6) of the
Securities Act of 1933 (incorporated by reference to
registrant's Form 10-QSB filed January 17, 2006)
10.21 Agreement between Ingen Technologies Inc. and Siegel Performance
Systems, Inc. dated November 15, 2005 for distribution of Secure
Balance
10.22 Agreement between Ingen Technologies, Inc. and Siegal
Performance Systems, Inc. dated November 15, 2005 for
distribution of Secure Balance(TM). (incorporated by reference
to registrant's Form 10-QSB filed January 17, 2006)
10.23 Prospective Director's Agreement between Ingen Technologies,
Inc. and Stephen O'Hara, MD, dated September 21, 2005.
(incorporated by reference to registrant's Form 8-K filed
November 10, 2005)
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10.24 Template for investment contract for our restricted common stock
in offers and sales to Edward Meyer, Jr. and Salvatore Amato,
dated February 13, 2006.*
10.25 Investment contract dated February 28, 2006 in which Jeffrey
Gleckman purchased 1,000,000 restricted common shares.*
10.26 Investment contract dated March 17, 2006 in which Jeffrey
Gleckman purchased 1,000,000 restricted common shares.*
10.27 Distribution Agreement (for Secure Balance(TM)) dated February
16, 2006 between Ingen Technologies, Inc. and Secure Health,
Inc.*
10.28 Agreement for Consulting Services between Ingen Technologies,
Inc. and Anita H. Beck, d/b/a Global Regulatory Services
Associates, dated February 27, 2006.*
10.29 Advertising Service Agreement between Ingen Technologies, Inc.
and Media Mix Advertising, Inc. dated March 1, 2006.*
10.30 Distribution agreement (for Secure Balance(TM)) between Ingen
Technologies, Inc. and Michael Koch, DC, dated March 10, 2006.*
10.31 Consulting Agreement between National Financial Communications
Corp. and Ingen Technologies, Inc. dated July 24, 2006 pursuant
to which NFC will render public relations, communications,
advisory and consulting services.*
23.1 Consent of Spector & Wong, LLP*
99.1 United States Patent Number 6,137,417, issued October 24, 2000.
(incorporated by reference to registrant's Form 10-KSB filed
November 7, 2005)
99.2 United States Patent Number 6,326,896, issued December 4, 2001.
(incorporated by reference to registrant's Form 10-KSB filed
November 7, 2005)
99.3 Ingen Technologies Non-Disclosure and Confidentiality Agreement
- template. (incorporated by reference to registrant's Form
10-KSB filed November 7, 2005)
* Filed herewith
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(A) RULE 415 OFFERING:
UNDERTAKING PURSUANT TO ITEM 512(A) OF REGULATION S-B
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement, or most
recent post-effective amendment, which, individually or in the
aggregate, represent a fundamental change in the information set
forth in this registration statement; and notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation From the
low or high end of the estimated maximum offering range may be
reflected in the form of prospects filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in the
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement; and
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(c) To include any material information with respect to the plan of
distribution not previously disclosed in this registration
statement or any material change to such information in the
registration statement.
2. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered hereby which remain unsold at the
termination of the offering.
4. For determining liability of the undersigned small business issuer under
the Securities Act to any purchaser in the initial distribution of the
securities, the undersigned small business issuer undertakes that in a
primary offering of securities of the undersigned small business issuer
pursuant to this registration statement, regardless of the underwriting
method used to sell the securities to he purchaser, if the securities
are offered or sold to such purchaser by means of any of the following
communications, the undersigned small business issuer will be a seller
to the purchaser and will be considered to offer or sell such securities
to such purchaser:
(a) Any preliminary prospectus or prospectus of the undersigned
small business issuer relating to the offering required to be
filed pursuant to Rule 424 (Sec. 230. 424);
(b) Any free writing prospectus relating to the offering prepared by
or on behalf of the undersigned small business issuer or used or
referred to by the undersigned small business issuer;
(c) The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
small business issuer or its securities provided by or on behalf
of the undersigned small business issuer; and
(d) Any other communication that is an offer in the offering made by
the undersigned small business issuer to the purchaser.
(B) REQUEST FOR ACCELERATION OF EFFECTIVE DATE:
UNDERTAKING PURSUANT TO ITEM 512(E) OF REGULATION S-B
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
provisions above, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities, other than the
payment by us of expenses incurred or paid by one of our directors, officers, or
controlling persons in the successful defense of any action, suit or proceeding,
is asserted by one of our directors, officers, or controlling persons in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification is
against public policy as expressed in the Securities Act, and we will be
governed by the final adjudication of such issue.
(C) FOR PURPOSES OF DETERMINING LIABILITY UNDER THE SECURITIES ACT:
UNDERTAKING PURSUANT TO ITEM 512(G) OF REGULATION S-B
The undersigned registrant hereby undertakes that, for the purpose of
determining liability under the Securities Act to any purchaser:
Each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that
was part of the registration statement or made in any such document
immediately prior to such date of first use.
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form SB-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Yuciapa, California on this 15th day of December, 2006.
INGEN TECHNOLOGIES, INC.
By: /s/ Scott R. Sand
----------------------
Scott R. Sand
Chief Executive Officer and Chairman
By: /s/ Thomas J. Neavitt
----------------------
Thomas J. Neavitt
Secretary, Chief Financial Officer
and Controller
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
POWER OF ATTORNEY
The undersigned directors and officers of Ingen Technologies, Inc. hereby
constitute and appoint Scott R. Sand and Thomas J. Neavitt, with full power to
act without the other and with full power of substitution and resubstitution,
our true and lawful attorneys-in-fact with full power to execute in our name and
behalf in the capacities indicated below any and all amendments (including
post-effective amendments and amendments thereto) to this registration statement
under the Securities Act of 1933 and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission and hereby ratify and confirm each and every act and thing that such
attorneys- in-fact, or any them, or their substitutes, shall lawfully do or
cause to be done by virtue thereof. Pursuant to the requirements of the
Securities Act of 1933, this registration statement has been signed by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
Chairman;
Chief Executive Officer; and
/s/ Scott R. Sand Director December 15, 2006
- -------------------------
Scott R. Sand
Secretary;
/s/ Thomas J. Neavitt Chief Financial Officer December 15, 2006
- ------------------------- and Controller
Thomas J. Neavitt
/s/ Christopher A. Wirth Director December 15, 2006
- -------------------------
Christopher A. Wirth
/s/ Yong Sin Khoo Director December 15, 2006
- -------------------------
Yong Sin Khoo
/s/ Curt A. Miedema Director December 15, 2006
- -------------------------
Curt A. Miedema
/s/ Stephen O'Hara Director December 15, 2006
- -------------------------
Stephen O'Hara
/s/ John Finazzo Director December 15, 2006
- -------------------------
John Finazzo
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