================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number: 333-120506 DEEP FIELD TECHNOLOGIES, INC - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) NEW JERSEY 20-1862733 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 750 HIGHWAY 34 MATAWAN, NJ 07747 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (732) 441-7700 Securities registered under Section 12(b) of the Exchange Act: NONE. Securities registered under Section 12(g) of the Exchange Act: CLASS A COMMON STOCK, NO PAR VALUE PER SHARE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [X] NO [_] Number of shares of Class A Common Stock, no par value, outstanding as of November 10, 2006: 20,513,984 ================================================================================ TABLE OF CONTENTS ----------------- PART I. FINANCIAL INFORMATION Item 1. Condensed Financial Statements (Unaudited) Balance Sheet - September 30, 2006 .................. 2 Statements of Operations - For the nine months and three months ended September 30, 2006 and 2005 ......................... 3 Statements of Cash Flows - For the nine months ended September 30, 2006 and 2005 ............................................ 4 Notes to Condensed Financial Statements ............. 5 - 17 Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operation ............ 18 - 22 Item 3. Controls and Procedures ............................. 23 PART II. OTHER INFORMATION Item 6. Exhibits ............................................ 24 DEEP FIELD TECHNOLOGIES, INC. CONDENSED BALANCE SHEET (Unaudited) SEPTEMBER 30, 2006 ASSETS ------ CURRENT ASSETS Cash and cash equivalents $ 33,972 Prepaid expenses 6,283 ----------- Total current assets 40,255 ----------- TOTAL ASSETS $ 40,255 =========== LIABILITIES & STOCKHOLDERS' DEFICIT ----------------------------------- CURRENT LIABILITIES Accounts payable and accrued expenses $ 377,765 Due to related parties 255,678 Notes payable to related parties 190,000 Notes payable 500,000 ----------- Total current liabilities 1,323,443 ----------- STOCKHOLDERS' (DEFICIT) Preferred stock, $1.00 par value; authorized 1,000,000 shares; no shares issued and outstanding -- Common stock: Class A - no par value; authorized 10,000,000,000 shares; 20,513,984 shares issued and outstanding 387,500 Class B - $.01 par value; authorized 50,000,000 shares; no shares issued and outstanding -- Class C - $.01 par value; authorized 20,000,000 shares; no shares issued and outstanding -- Accumulated deficit (1,670,688) ----------- Total stockholders' (deficit) (1,283,188) ----------- TOTAL LIABILITIES & STOCKHOLDERS' (DEFICIT) $ 40,255 =========== The accompanying notes are an integral part of these condensed financial statements 2 DEEP FIELD TECHNOLOGIES, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) For the Nine Months Ended For the Three Months Ended September 30, September 30, ------------------------------ ------------------------------ 2006 2005 2006 2005 ------------ ------------ ------------ ------------ SALES, net $ -- $ 112 $ -- $ -- COST OF SALES -- -- -- -- ------------ ------------ ------------ ------------ GROSS PROFIT -- 112 -- -- GENERAL AND ADMINISTRATIVE EXPENSES 282,418 451,306 64,511 303,264 ------------ ------------ ------------ ------------ LOSS FROM OPERATIONS (282,418) (451,194) (64,511) (303,264) ------------ ------------ ------------ ------------ OTHER INCOME (EXPENSE) Other income 869 2,800 223 1,386 Write-off of financing costs -- (10,000) -- -- Interest expense (362,075) (40,944) (28,919) (29,369) ------------ ------------ ------------ ------------ Total other income (expense) (361,206) (48,144) (28,696) (27,983) ------------ ------------ ------------ ------------ LOSS FROM OPERATIONS BEFORE INCOME TAXES (643,624) (499,338) (93,207) (331,247) PROVISION FOR INCOME TAXES -- -- -- -- ------------ ------------ ------------ ------------ NET LOSS APPLICABLE TO COMMON SHARES $ (643,624) $ (499,338) $ (93,207) $ (331,247) ============ ============ ============ ============ NET LOSS PER COMMON SHARE Basic and diluted $ (0.03) $ (0.05) $ (0.00) $ (0.03) ============ ============ ============ ============ WEIGHTED AVERAGE SHARES OUTSTANDING Basic and diluted 20,250,248 10,013,984 20,513,984 10,013,984 ============ ============ ============ ============ The accompanying notes are an integral part of these condensed financial statements 3 DEEP FIELD TECHNOLOGIES, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 2006 2005 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (643,624) $ (499,338) Adjustments to reconcile net loss to net cash (used in) operating activities Common stock issued for legal services 73,000 -- Common stock issued for repayment of deferred compensation 314,500 -- Changes in certain assets and liabilities: Decrease in accounts receivable -- 3,000 Decrease in inventory -- 317 (Increase) in prepaid expenses (392) (6,344) Increase in accounts payable and accrued liabilities 123,239 209,556 Increase in due to related parties 40,912 150,906 (Decrease) in deferred maintenance contracts -- (112) ----------- ----------- Total cash (used in) operating activities (92,365) (142,015) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable -- 100,000 Net investment by iVoice, Inc -- (3,000) ----------- ----------- Net cash provided by financing activities -- 97,000 ----------- ----------- NET (DECREASE) IN CASH AND CASH EQUIVALENTS (92,365) (45,015) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 126,337 299,566 ----------- ----------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 33,972 $ 254,551 =========== =========== CASH PAID DURING THE PERIOD FOR: Interest expense $ -- $ -- =========== =========== Income taxes $ -- $ -- =========== =========== 4 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 2006 AND 2005 NOTE 1 - BACKGROUND - ------------------- The condensed unaudited interim financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The condensed financial statements and notes are presented as permitted on Form 10-QSB and do not contain information included in the Company's annual consolidated statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the December 31, 2005 audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year. These condensed unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the consolidated operations and cash flows for the periods presented. Deep Field Technologies, Inc. ("Deep Field Technologies" or the "Company") was incorporated under the laws of New Jersey on November 10, 2004 as a wholly owned subsidiary of iVoice, Inc. ("iVoice"). The Company received by assignment all of the interests in and rights and title to, and assumed all of the obligations of, all of the agreements, contracts, understandings and other instruments of iVoice Technology 2, Inc., a Nevada corporation and affiliate of the Company. When we refer to or describe any agreement, contract or other written instrument of the Company in these notes, we may also be referring to an agreement, contract or other written instrument that had been entered into by Deep Field Technologies 2 Inc., and thereafter assigned to the Company. On September 1, 2004, the Board of Directors of iVoice, the former parent of the Company, resolved to pursue the separation of iVoice software business into three publicly owned companies. iVoice will continue to focus on its own computerized telephony technology and related business development operations. Deep Field Technologies intends to continue to develop, market and license the Unified Messaging line of computerized telephony software. A spin-off transaction was accomplished, on August 5, 2005, by the assignment, contribution and conveyance of certain intellectual property, representing the software codes of Unified Messaging, and certain accrued liabilities and related party debt to Deep Field Technologies (the "Spin-off"). The Class A Common Stock shares of the Company were distributed to iVoice shareholders in the form of a special taxable dividend. In conjunction with the Spin-off, Deep Field Technologies entered into a temporary administrative services agreement with iVoice. This agreement will continue on a month-to-month basis until Deep Field Technologies is able to replace any or all of the services currently being provided by iVoice. 5 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005 NOTE 1 - BACKGROUND (CONTINUED) - ------------------- On August 5, 2005, Deep Field Technologies assumed $190,000 in accrued liabilities and related party debt incurred by iVoice Inc. The debt assumed is convertible into Deep Field Technologies Class B Common Stock at the option of the holder as later described in these notes. On August 4, 2005, the Company received notice from the SEC that the registration statement to effectuate the Spin-off of Deep Field Technologies from iVoice Inc. was approved and the Company immediately embarked on the process to spin off the Deep Field Technologies from iVoice Inc. On January 12, 2006, the Company entered into a Securities Exchange Agreement (the "Securities Exchange") by and among the Company, Beijing Sino-US Jinche Yingang Auto Technological Services Limited, a cooperative joint venture under the laws of The People's Republic of China ("AutoMart") and AutoMart's joint venture participants ("the JV Participants") whereby the JV Participants will transfer 95% of their interest in AutoMart to the Company in exchange for an aggregate of 116,245,399 Class A Common Stock shares, or 85% of the outstanding shares of the Company, and 2 million of the Company's Class B Common Stock shares. The closing of the Securities Exchange will occur upon the satisfaction of a number of conditions precedents: (i) shareholder approval of the Securities Exchange by the Company's shareholders, (ii) financing in the form of a convertible debenture for not less than $4 million and (iii) the requisite approvals by the People's Republic of China. As of September 30, 2006, the closing is still pending. AutoMart is a China based joint venture recently formed between Beijing Silver Harbor Car Service Center and Mayflower Auto Group, LLC. AutoMart business focuses on automobile after-sales services, including maintenance and repairs, insurance, parts sales, interior furnishings, care products, tires, and windshields in the People's Republic of China. NOTE 2 - BUSINESS OPERATIONS - ---------------------------- The Company will continue to develop, market and license the Unified Messaging line, which was developed by iVoice Inc. With Unified Messaging, e-mail, voice mail and faxes can be handled through a desktop computer or telephone. All messages can be viewed and acted upon in order of importance via Microsoft Outlook or a web browser. E-mail can also be retrieved over the phone, using text-to-speech, and responded to with a voice message that will be directed to a fax machine. NOTE 3 - GOING CONCERN - ---------------------- The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has relied on iVoice Inc. for administrative, management, research and other services. 6 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005 NOTE 3 - GOING CONCERN (CONTINUED) - ---------------------- As of September 30, 2006, the Company had a net loss, a negative cash flow from operations as well as negative working capital. These matters raise substantial doubt about the Company's ability to continue as a going concern. Therefore, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn, is dependent upon the Company's ability to raise capital and/or generate positive cash flow from operations. On January 12, 2006, the Company entered into a Securities Exchange Agreement by and among the Company, AutoMart and AutoMart's JV Participants whereby the JV Participants will transfer 95% of their interest in AutoMart to the Company in exchange for an aggregate of 116,245,399 Class A Common Stock shares, or 85% of the outstanding shares of the Company. The closing of the Securities Exchange will occur upon the satisfaction of a number of conditions precedents: (i) shareholder approval of the Securities Exchange by the Company's shareholders, (ii) financing in the form of a convertible debenture for not less than $4 million and (iii) the requisite approvals by the People's Republic of China. Management believes that should the transaction with AutoMart not be consummated, it is uncertain whether the Company will have the ability to raise sufficient capital for future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------------- a) Basis of Presentation The accompanying financial statements up through August 4, 2005, had been derived from the consolidated financial statements and accounting records of iVoice Inc. a publicly traded company, using the historical results of operations and historical basis of assets and liabilities of the Company's Interactive Voice Response business. Management believes the assumptions underlying the financial statements are reasonable. b) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 7 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - --------------------------------------------------- c) Revenue Recognition The Company derives its revenues from the licensing of its software product and optional customer support (maintenance) service. The Company's standard license agreement provides for a one-time fee for use of the Company's product in perpetuity for each computer or CPU in which the software will reside. The Company's software application is fully functional upon delivery and implementation and does not require any significant modification or alteration. The Company also offers customers an optional annual software maintenance and support agreement for the subsequent one-year periods. Such maintenance and support services are free for the first year the product is licensed and is considered the warranty period. The software maintenance and support agreement provides free software updates, if any, and technical support the customer may need in deploying or changing the configuration of the software. Generally, the Company does not license its software in multiple element arrangements whereby the customer purchases a combination of software and maintenance. In a typical arrangement, software maintenance services are sold separately from the software product, are not considered essential to the functionality of the software, and are purchased at the customer's option upon the completion of the first year licensed. The Company does not offer any special payment terms or significant discount pricing. Normal and customary payment terms require payment for the software license fees when the product is shipped. Payment for software maintenance is due prior to the commencement of the maintenance period. It is also the Company's policy to not provide customers the right to refund any portion of its license fees. With respect to the sale of software license fees, the Company recognizes revenue in accordance with Statement of Position 97-2, Software Revenue Recognition (SOP 97-2), as amended, and generally recognizes revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists generally evidenced by a signed, written purchase order from the customer, (2) delivery of the software product on Compact Disk (CD) or other means to the customer has occurred, (3) the perpetual license fee is fixed or determinable and (4) collectibility, which is assessed on a customer-by-customer basis, is probable. With respect to customer support services, upon the completion of one year from the date of sale, considered to be the warranty period, the Company offers customers an optional annual software maintenance and support agreement for subsequent one-year periods. Sales of purchased maintenance and support agreements are recorded as deferred revenue and recognized over the respective terms of the agreements. d) Product Warranties The Company estimates its warranty costs based on historical warranty claims experience in estimating potential warranty claims. Due to the limited sales of the Company's products, management has determined that warranty costs are immaterial and has not included an accrual for potential warranty claims. Presently, costs related to warranty coverage are expensed as incurred. Warranty claims are reviewed quarterly to verify that warranty liabilities properly reflect any remaining obligation based on the anticipated expenditures over the balance of the obligation period. 8 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - --------------------------------------------------- e) Research and development costs Research and development costs are charged to operations as incurred. F) Advertising Costs Advertising costs are expensed as incurred and included in selling expenses. There were no advertising costs for the nine months ended September 30, 2006 and 2005. g) Cash and Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. There were no cash equivalents at September 30, 2006. The Company maintains cash and cash equivalent balances at a financial institution that is insured by the Federal Deposit Insurance Corporation up to $100,000. There were no uninsured cash balances at September 30, 2006. h) Income Taxes The Company accounts for income taxes under the Financial Accounting Standards Board ("FASB") No. 109, "Accounting for Income Taxes" ("Statement 109"). Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. i) Loss Per Share SFAS No. 128, "Earnings Per Share" requires presentation of basic earnings per share ("basic EPS") and diluted earnings per share ("diluted EPS"). The computation of basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share gives effect to all dilutive potential Common shares outstanding during the period. The computation of diluted EPS does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings resulting from the Company's net loss position. 9 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - --------------------------------------------------- i) Loss Per Share (Continued) The weighted shares used in the computation are as follows: NINE MONTHS ENDED THREE MONTHS ENDED --------------------------- --------------------------- September 30, September 30, September 30, September 30, 2006 2005 2006 2005 ------------ ------------ ------------ ------------ Basic and Diluted EPS Purposes 20,250,248 10,013,984 20,513,984 10,013,984 The Company had no common stock equivalents at September 30, 2006. j) Recent Accounting Pronouncements On December 16, 2004, the Financial Accounting Standards Board ("FASB") published Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment ("SFAS 123R"). SFAS 123R requires that compensation cost related to share-based payment transactions be recognized in the financial statements. Share-based payment transactions within the scope of SFAS 123R include stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee share purchase plans. The provisions of SFAS 123R are effective for small business issuers as of the first interim period that begins after December 15, 2005. Accordingly, the Company has implemented the revised standard in the fourth quarter of fiscal year 2005. The adoption of FAS 123R has not had any effect on the financial statements of the company. On December 16, 2004, FASB issued Financial Accounting Standards No. 153, Exchanges of Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting for Non-monetary Transactions ("FAS 153"). This statement amends APB Opinion 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. Under FAS 153, if a non-monetary exchange of similar productive assets meets a commercial-substance criterion and fair value is determinable, the transaction must be accounted for at fair value resulting in recognition of any gain or loss. FAS 153 is effective for non-monetary transactions in fiscal periods that begin after June 15, 2005. The implementation of this standard did not have a material impact on its financial position, results of operations or cash flows. In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections." SFAS No. 154 replaces Accounting Principles Board ("APB") Opinion No. 20, "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements." SFAS No. 154 requires retrospective application to prior periods' financial statements of a voluntary change in accounting principle unless it is impracticable. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including the cumulative effect of changing to the new accounting principle in net income in 10 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - ----------------------------------------------------- j) Recent Accounting Pronouncements (Continued) the period of the change. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 did not have a material impact on the Company's financial position, results of operations, or cash flows. In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140." SFAS No. 155 resolves issues addressed in SFAS No. 133 Implementation Issue No. D1, "Application of Statement 133 to Beneficial Interests in Securitized Financial Assets," and permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives and amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of the first fiscal year that begins after September 15, 2006. The adoption of FAS 155 is not anticipated to have a material impact on the Company's financial position, results of operations, or cash flows. In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140." SFAS No. 156 requires an entity to recognize a servicing asset or liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract under a transfer of the servicer's financial assets that meets the requirements for sale accounting, a transfer of the servicer's financial assets to a qualified special-purpose entity in a guaranteed mortgage securitization in which the transferor retains all of the resulting securities and classifies them as either available-for-sale or trading securities in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" and an acquisition or assumption of an obligation to service a financial asset that does not relate to financial assets of the servicer or its consolidated affiliates. Additionally, SFAS No. 156 requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, permits an entity to choose either the use of an amortization or fair value method for subsequent measurements, permits at initial adoption a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights and requires separate presentation of servicing assets and liabilities subsequently measured at fair value and additional disclosures for all separately recognized servicing assets and liabilities. SFAS No. 156 is effective for transactions entered into after the beginning of the first fiscal year that begins after September 15, 2006. The adoption of FAS 156 is not anticipated to have a material impact on the Company's financial position or results of operations. 11 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - --------------------------------------------------- j) Recent Accounting Pronouncements (Continued) In September 2006, The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurement" ("SFAS No. 157"). This standard provides guidance for using fair value to measure assets and liabilities. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. Prior to SFAS No. 157, the methods for measuring fair value were diverse and inconsistent, especially for items that are not actively traded. The standard clarifies that for items that are not actively traded, such as certain kinds of derivatives, fair value should reflect the price in a transaction with a market participant, including an adjustment for risk, not just the company's mark-to-model value. SFAS No. 157 also requires expanded disclosure of the effect on earnings for items measured using unobservable data. SFAS No. 157 is effective for financial statements issued for fiscal years beginning afterNovember 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the impact of this statement on its financial statements and expects to adopt SFAS No.157 on December 31, 2007. In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans -- An Amendment of FASB Statements No. 87, 88, 106, and 132R." This standard requires an employer to: (a) recognize in its statement of financial position an asset for a plan'soverfunded status or a liability for a plan's underfunded status; (b) measure a plan's assets and its obligations that determine its funded status as of the end of the employer's fiscal year (with limited exceptions); and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. Those changes will be reported in comprehensive income. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006. The requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The Company is evaluating the impact of this statement on its financial statements and believes that such impact may be material. NOTE 5 - RELATED PARTY TRANSACTIONS - ----------------------------------- In conjunction with the Spin-off, the Company entered into a temporary administrative services agreement with iVoice Inc. The administrative services agreement will continue on a month-to-month basis until the Company has found replacement services for those services being provided by iVoice Inc., or until it can provide these services for itself. The Company has assumed an outstanding promissory demand note in the amount of $190,000 payable to Jerry Mahoney, President and Chief Executive Officer of iVoice and Non-Executive Chairman of the Board of the Company. This amount is related to funds loaned to iVoice and is unrelated to the operations of the 12 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005 NOTE 5 - RELATED PARTY TRANSACTIONS (CONTINUED) - ----------------------------------- Company. The note will bear interest at the rate of Prime plus 2.0% (10.25% at September 30, 2006) per annum on the unpaid balance until paid. Under the terms of the Promissory Note, at the option of the Note holder, principal and interest can be converted into either (i) one share of Class B Common Stock of the Company, par value $.01 per share, for each dollar owed, (ii) the number of shares of Class A Common Stock of the Company calculated by dividing (x) the sum of the principal and interest that the Note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this Note, or (iii) payment of the principal of this Note, before any repayment of interest. The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company. As of September 30, 2006, the outstanding balance owed Mr. Mahoney is $190,000 plus accrued interest of $25,976. The Company entered into a five-year employment agreement with Jerome Mahoney, its non-executive Chairman of the Board of Directors, effective August 3, 2004. The Company will compensate Mr. Mahoney with a base salary of $85,000 for the first year with annual increases based on the Consumer Price Index. For the twelve (12) month period starting August 3, 2006, Mr. Mahoney's salary will be increased to $90,527. In addition, if the Company achieves annual sales equal to or greater than $2,000,000, Mr. Mahoney's base annual compensation will automatically be increased to $145,000. The Company also agreed to pay Mr. Mahoney a bonus for each merger or acquisition completed by the Company equal to six percent (6%) of the gross consideration paid or received by the Company, net of any debt or other liabilities assumed by the Company. Mr. Mahoney has agreed to accept part of his compensation pursuant to this Employment Agreement in the form of Class B Common Stock, par value $.01 per share, in lieu of cash, for as long as the Board of Directors decides, in its sole discretion, that the Company does not have the financial resources to pay him in cash. The number of Class B Common Stock shares to be issued Mr. Mahoney shall be equal to one share of Class B Common Stock for every dollar of compensation due and owing the Executive. Pursuant to the terms of the Class B Common Stock, a holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price for which the Company had ever issued its Class A Common Stock. During the nine months ended September 30, 2006, Mr. Mahoney deferred $56,492 of his compensation and received 4,250,000 shares of Class A stock as a repayment of $35,685 of deferred compensation. As of September 30, 2006, the outstanding balance due to Mr. Mahoney is $103,190. The Company entered into a five-year employment agreement with Mr. Meller as of October 1, 2004. Mr. Meller will serve as the Company's President, Chief Executive Officer and Chief Financial Officer for a term of five years. As consideration, the Company agreed to pay Mr. Meller the sum of $85,000 the first year with an annual increase based on the Consumer Price Index every year thereafter. For the twelve (12) month period starting October 1, 2006, Mr. Meller's salary will be increased to $90,527. In addition if the Company achieves annual sales equal to or greater than $2,000,000, Mr. Meller's base annual salary will automatically be increased to $145,000. The Company also agreed to pay Mr. Meller a bonus for each merger or acquisition completed by the Company equal to six percent (6%) of the gross consideration paid or received by the Company, net of any debt or other liabilities assumed by the Company. This bonus would be payable in 13 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005 NOTE 5 - RELATED PARTY TRANSACTIONS (CONTINUED) - ----------------------------------- the form of cash, debt or shares of Class B Common Stock at the option of Mr. Meller. Mr. Meller also received a bonus of $50,000 earned by the completion of the Spin-off. Mr. Meller has agreed to defer the cash receipt of said sum until such time that management believes it has sufficient financing in place to fund this obligation. Pursuant to the terms of the Class B Common Stock, a holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price for which the Company had ever issued its Class A Common Stock. During the nine months ended September 30, 2006, Mr. Meller deferred $55,790 of his compensation and received 4,250,000 shares of class A stock as a repayment of $35,685 of deferred compensation. As of September 30, 2006, the outstanding balance due to Mr. Meller is $152,488. NOTE 6 - INCOME TAXES - --------------------- Deferred income taxes will be determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company's assets and liabilities. Deferred income taxes will be measured based on the tax rates expected to be in effect when the temporary differences are included in the Company's tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. At September 30, 2006, the deferred tax asset consisted of the following: Deferred tax asset $ 384,000 Less: Valuation allowance (384,000) --------- Net deferred tax asset -0- ========= At September 30, 2006, the Company had a federal net operating loss carry forward in the approximate amount of $1,128,000 available to offset future taxable income. The Company established a valuation allowance equal to the full amount of the deferred tax asset due to the uncertainty of the utilization of the operating losses in future periods. NOTE 7 - DEBT - ------------- On August 12 and November 19, 2004, the Company issued an aggregate of $400,000 in secured convertible debentures, with interest payable at 5% per annum, to Cornell Capital Partners L.P. The debentures were convertible at the option of the holder only after our Class A Common Stock has commenced trading on the Over-the-Counter Bulletin Board. On February 28, 2005, iVoice Inc., on behalf of the Company, renegotiated the terms and conditions with the holders of its convertible debentures. The holders of the convertible 14 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005 NOTE 7 - DEBT (CONTINUED) - ------------- debentures agreed to exchange the convertible debentures for various promissory notes. The promissory notes will be in the aggregate amount of $500,000, $400,000 loaned through the previously issued and exchanged convertible debentures in 2004 and $100,000 advanced on February 28, 2005. A commitment fee of 10% of the face amount of the previously issued convertible debentures and recently issued promissory note was paid at the time of each advance. The previously paid commitment fees were credited against commitment fees due and owing against the promissory note. The balance of the commitment fee owed from the recently issued promissory note was paid on February 28, 2005, at the time that such $100,000 was advanced to the Company. As of September 30, 2006, the balance on the promissory notes was $500,000 plus accrued interest of $105,858. The promissory notes bear interest at the rate of 12% per annum. Weekly principal installments of $10,000, plus interest, were to commence on September 1, 2005 and continue on the first day of each calendar month thereafter until the principal is paid in full. The promissory notes matured on September 1, 2006 with a lump sum payment due of any remaining principal and/or interest. The Company is in default of the payment schedule and therefore, the balance has been recorded as a current liability. To date, no weekly principal payments have been made. On September 9, 2005, the Company entered into a Standby Equity Distribution Agreement (the "SEDA") with Cornell Capital Partners, LP ("Cornell Capital Partners") whereby Cornell Capital Partners agrees to purchase up to $10 million of the Company's Class A Common Stock (the "Common Stock") over a two-year period. The shares issuable under the SEDA must be first registered under the Securities Act of 1933, as amended. The purchase price of the Common Stock shall be at ninety-five percent (95%) of the lowest trading price of the Company's Common Stock during the five consecutive trading day period following the notification by the Company of its request for an advance from Cornell Capital Partners under the SEDA. In connection with the SEDA, the Company entered into an Escrow Agreement, Registration Rights Agreement and Placement Agent Agreement. However, the Company intends on terminating the SEDA, as it is awaiting the closing of the Share Exchange with AutoMart and the JV Participants. NOTE 8 - CAPITAL STOCK - ---------------------- Pursuant to the Company's certificate of incorporation, as amended, the Company is authorized to issue 1,000,000 shares of Preferred Stock, par value of $1.00 per share, 10,000,000,000 shares of Class A Common Stock, no par value per share, 50,000,000 shares of Class B Common Stock, par value $0.01 per share, 20,000,000 shares of Class C Common Stock, par value $0.01 per share. Below is a description of the Company's outstanding securities, including Preferred Stock, Class A Common Stock, Class B Common Stock, and Class C Common Stock. 15 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005 NOTE 8 - CAPITAL STOCK (CONTINUED) - ---------------------- a) Preferred Stock The Company is authorized to issue 1,000,000 shares of Preferred Stock, par value $1.00 per share. As of September 30, 2006, the Company has not issued any shares of Preferred Stock. b) Class A Common Stock As of September 30, 2006, there are 10,000,000,000 shares of Class A Common Stock authorized, no par value, and 20,513,984 shares were issued and outstanding. Each holder of Class A Common Stock is entitled to receive ratably dividends, if any, as may be declared by the Board of Directors out of funds legally available for payment of dividends. The Company has never paid any dividends on its common stock and does not contemplate doing so in the foreseeable future. The Company anticipates that any earnings generated from operations will be used to finance its growth objectives. For the nine months ended September 30, 2006, the Company had the following transactions in its Class A common stock: o The Company issued 2,000,000 shares of Class A Common Stock for the repayment of accrued legal fees, valued at $20,737. The fair market value of the shares was $73,000, resulting in beneficial interest of $52,263 charged to operations. o The Company issued 8,500,000 shares of Class A common stock, with a total value of $71,370 to officers of the Company as repayment of accrued salaries. The shares had a fair market value of $314,500, resulting in a beneficial interest of $243,130 charged to operations. c) Class B Common Stock As of September 30, 2006, there are 50,000,000 shares of Class B Common Stock authorized, par value $.01 per share. Each holder of Class B Common Stock has voting rights equal to 100 shares of Class A Common Stock. A holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price for which the Company had ever issued its Class A Common Stock. Upon our liquidation, dissolution, or winding-up, holders of Class B Common Stock will be entitled to receive distributions. As of September 30, 2006, no shares were issued or outstanding. 16 DEEP FIELD TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005 NOTE 8 - CAPITAL STOCK (CONTINUED) - ---------------------- d) Class C Common Stock As of September 30, 2006, there are 20,000,000 shares of Class C Common Stock authorized, par value $.01 per share. Each holder of Class C Common Stock is entitled to 1,000 votes for each share held of record. Shares of Class C Common Stock are not convertible into Class A Common Stock. Upon liquidation, dissolution or wind-up, the holders of Class C Common Stock are not entitled to receive our net assets pro rata. As of September 30, 2006, no shares were issued or outstanding. NOTE 9 - STOCK OPTIONS - ---------------------- Stock Option Plans - ------------------ During 2005, the Company adopted the 2005 Stock Incentive Plan and the 2005 Directors' and Officers' Stock Incentive Plan ("Plan") in order to attract and retain qualified personnel. Under the Plan, the Board of Directors, in its discretion may grant stock options (either incentive or non-qualified stock options) to officers, directors and employees. The Company did not issue any stock options for the nine months ended September 30, 2006. 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION You should read the following discussion in conjunction with our audited financial statements and related notes included in the Form SB-2 previously filed with the SEC. Our fiscal year currently ends on December 31, and each of our fiscal quarters ends on the final day of a calendar quarter (each March 31, June 30 and September 30). The following discussion contains forward-looking statements. Please see "Forward Looking Statements - Cautionary Factors" for a discussion of uncertainties, risks and assumptions associated with these statements. OVERVIEW AND PLAN OF OPERATION Prior to August 5, 2005, the Company's previous financial results and operations were reflected in the consolidated financial statements and accounting records of iVoice Inc., and reflect significant assumptions and allocations. These financial statements do not necessarily reflect the financial position, results of operations and cash flows of Deep Field Technologies had it been a stand-alone entity. Deep Field Technologies seeks to leverage the value of underutilized developed technology and believes that the transition to an independent company will provide Deep Field Technologies with greater access to capital. This should provide needed financial resources to potentially penetrate the market and distribute the product. As such, the Company's business was formed from the contribution by iVoice Inc. of certain assets and related liabilities on August 5, 2005. In connection with this Spin-off by iVoice Inc., iVoice Inc., immediately prior to the Spin-Off, assigned and conveyed to Deep Field Technologies its Unified Messaging software business and related liabilities, including all intellectual property of iVoice Inc. relating to the Unified Messaging software business. The board and management of iVoice Inc. elected not to transfer any part of the working cash balance of iVoice Inc. to Deep Field Technologies. Based upon the current intention of Deep Field Technologies not to conduct any research and development or hire additional employees and instead focus on the sale of the existing Unified Messaging technology, the board has determined that, on balance, Deep Field Technologies has the ability to satisfy its working capital needs as a whole. The board and management of iVoice Inc. also determined that Deep Field Technologies has the ability to obtain financing to satisfy any addition working capital needs as a stand-alone company. The emerging nature of the unified messaging industry and unforeseen expenses from the separation from iVoice Inc., make it difficult to assess the future growth of Deep Field Technologies. The Unified Messaging software business has operated at a loss in the past for iVoice Inc., and as an independent company such losses may continue or increase. Additionally, the Company's business has relied on iVoice Inc. for financial, administrative and managerial expertise in conducting its operations. Following the Spin-off, Deep Field Technologies developed and maintains its own credit and banking relationships and performs its own financial and investor relation functions. Deep Field Technologies may not be able to successfully put in place the financial, administrative and managerial structure necessary to continue to operate as an independent public company, and the development of such structure will require a significant amount of management's time and other resources. 18 Deep Field Technologies has received a going concern opinion from its auditors. Its continuation as a going concern is dependent upon obtaining the financing necessary to operate its business. However, due to the pending Share Exchange, the Company has delayed any attempts to obtain additional financing. [See "Pending Transaction" in Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operation] SEPARATION FROM IVOICE Deep Field Technologies was incorporated under the laws of the State of New Jersey on November 10, 2004, as a wholly owned subsidiary of iVoice Inc. Deep Field Technologies had no material assets or activities until the contribution of the Unified Messaging software business from iVoice Inc. Pursuant to the Spin-Off, Deep Field Technologies is now operating as an independent public company, with iVoice Inc. having no continuing ownership interest in Deep Field Technologies. On November 11, 2004, Deep Field Technologies received by assignment all of the interests in and rights and title to, and assumed all of the obligations of, all of the agreements, contracts, understandings and other instruments of iVoice Technology 2, Inc., a Nevada corporation. These agreements, contracts, understandings and other instruments consisted of the documentation relating to the issuance of the secured convertible debentures and the SEDA, the employment agreements with Messrs. Mahoney and Meller and the administrative services agreement. Since this assignment, iVoice Technology 2 Inc. has no operating business, assets or known liabilities, and has been dissolved. When we refer to or describe any agreement, contract or other written instrument of Deep Field Technologies, may also be referring to an agreement, contract or other written instrument that had been entered into by iVoice Technology 2 Inc. and assigned to Deep Field Technologies. The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States, and reflect the historical financial position, results of operations, and cash flows of the business transferred to Deep Field Technologies from iVoice Inc. as part of the Spin-Off. The financial information included in this report, however, is not necessarily indicative of what the Company's results of operations or financial position would have been had it operated as an independent company during the periods presented, nor is it necessarily indicative of its future performance as an independent company. Deep Field Technologies will operate the Unified Messaging software business. However, management is uncertain that sufficient cash to sustain its operations will be generated in the next twelve months, or beyond, by the sales activity of Unified Messaging. Deep Field Technologies intends to use a portion of the proceeds from any financing arrangements, on sales and marketing efforts for Unified Messaging. It is unclear whether such efforts will result in a reasonably successful operating business due to iVoice Inc.'s previous lack of sales and marketing efforts on Unified Messaging, the Company's lack of operating history, the current economic environment and, more specifically, the uncertainty of the telecommunications market. As of August 5, 2005, iVoice Inc. assigned, contributed and conveyed to Deep Field corporate assets, liabilities and expenses related to the Unified Messaging software business, including the Unified Messaging software and all intellectual property of iVoice Inc. relating to the Unified Messaging software business and the assignment of iVoice Inc.'s existing agreements and arrangements with dealers and resellers. This assignment, contribution and conveyance of assets, liabilities and expenses was based on an estimate of the proportion of such amounts allocable to Deep Field Technologies, utilizing such factors as total revenues, employee headcount and other relevant factors. Deep Field Technologies believes that these allocations have 19 been made on a reasonable basis. Deep Field Technologies believes that all costs allocated to Deep Field Technologies are a reasonable representation of the costs that Deep Field Technologies would have incurred if Deep Field Technologies had performed these functions as a stand-alone company. In conjunction with the separation of the Unified Messaging software business from iVoice Inc., Deep Field Technologies entered into an administrative services agreement with iVoice Inc. for the provision of certain services by iVoice Inc. to Deep Field Technologies following the Spin-off. This agreement will continue on a month-to-month basis until Deep Field Technologies has found replacement services for those services being provided by iVoice Inc. or can provide these services for itself. Following the termination of the administrative services agreement, we expect that Deep Field Technologies will operate on a completely stand-alone basis from iVoice Inc. and there will be no business or operating relationship between iVoice Inc. and Deep Field Technologies, except that Deep Field Technologies will continue to sub-lease space from iVoice Inc. Our shares of Class A Common Stock were distributed to iVoice Inc. stockholders on August 12, 2005. LIQUIDITY AND CAPITAL RESOURCES To date, Deep Field Technologies has incurred substantial losses, and will require financing for working capital to meet its operating obligations. We anticipate that we will require financing on an ongoing basis for the foreseeable future. On August 12 and November 19, 2004, Deep Field Technologies issued an aggregate of $400,000 in secured convertible debentures, with interest payable at 5% per annum, to Cornell Capital Partners. On February 28, 2005, the Company's obligations under the secured convertible debentures were terminated and replaced with a secured promissory note of the same principal amount, which note accrues interest at rate of 12% per annum, but is not convertible into any equity security of Deep Field Technologies. On February 28, 2005, Deep Field Technologies borrowed an additional $100,000 pursuant to such promissory note. In connection with the issuances of the secured convertible debentures, Deep Field Technologies paid a fee to Cornell Capital Partners equal to 10% of the aggregate principal amount of the debentures. When the secured convertible debentures were terminated, Deep Field Technologies received a credit for fees that would otherwise have been payable upon the issuance of the $400,000 in replacement notes. Deep Field Technologies paid Cornell Capital Partners a fee of $10,000 in connection with its $100,000 borrowing. The Company's obligations under the secured promissory note issued to Cornell Capital Partners are secured by a first priority security interest in substantially all of our assets. iVoice Inc. had also guaranteed the payment of all amounts payable by Deep Field Technologies pursuant to the secured promissory note. This guaranty terminated on August 5, 2005. On September 9, 2005, the Company entered into a Standby Equity Distribution Agreement with Cornell Capital Partners, pursuant to which Deep Field Technologies may, from time to time, issue and sell to Cornell Capital Partners our Class A Common Stock for a total purchase price of up to $10.0 million. The purchase price for the shares is 95% of the market price, which is defined as the lowest closing bid price of the Class A Common Stock during the five trading days following the date that Deep Field Technologies delivers to Cornell Capital Partners a notice requiring it to advance funds to us. A cash fee equal to six percent (6%) of the cash proceeds of the draw down is also payable at the time of funding. In addition, 20 Cornell Capital Partners is entitled to receive, as additional compensation, the number of shares of Class A Common Stock equal to one and one half percent (1.5%) of the number of shares of Class A Common Stock outstanding on the date that a registration statement in respect of the shares to be distributed pursuant to the SEDA becomes effective. However, due to the pending Share Exchange, the Company has delayed any attempts to obtain additional financing. [See "Pending Transaction" in Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operation] Management believes that its going-forward expenses for the twelve months following the date of this filing will be approximately $600,000, which includes salaries for the Company's officers and employees, and, assuming Deep Field Technologies has no revenues in such period, Deep Field Technologies expects to incur liabilities of approximately $600,000 in this period. Management has no current plan to hire additional employees, perform additional research and development or purchase additional equipment or services beyond the requirements of the administrative services agreement with iVoice Inc. If there are additional deficiencies that are in excess of the proceeds of the secured promissory note, and Deep Field Technologies is unable to obtain funds from the sale of our Class A Common Stock to Cornell Capital Partners, management believes that Deep Field Technologies can limit its operations, defer payments to management and maintain its business at nominal levels until it can identify alternative sources of capital. Except for these two financing agreements, the Company currently has no other significant sources of working capital or cash commitments. However, no assurance can be given that Deep Field Technologies will raise sufficient funds from such financing arrangements, or that Deep Field Technologies will ever produce sufficient revenues to sustain its operations, or that a market will develop for its common stock for which a significant amount of the Company's financing is dependent upon. Management believes that should the transaction with AutoMart not be consummated, it is uncertain whether the Company will have the ability to raise sufficient capital for future operations. On August 5, 2005, Deep Field Technologies assumed an aggregate of $190,000 in liabilities from iVoice Inc. and iVoice Inc. assigned to Deep Field Technologies assets having an aggregate book value of $3,000. Deep Field Technologies believes that the fair value of these assets may be greater than the book value, although it has not undertaken an appraisal. The assumed obligations are described below. Deep Field Technologies assumed from iVoice Inc. an outstanding promissory note in the amount of $190,000 payable to Jerry Mahoney. This amount is related to funds that had been loaned to iVoice Inc. in July 2000 that were used to develop the unified messaging systems business. The amount of $190,000 includes approximately $32,110 for interest on the original loan from Jerry Mahoney to iVoice Inc. Pursuant to the terms of the promissory note, Deep Field Technologies, for value received, will pay to Mr. Mahoney the principal sum of $190,000 that will bear interest at the prime rate plus 2% per annum on the unpaid balance until paid or until default. Interest payments will be due annually. All accrued interest becomes due on the date of any payment of the promissory note. At the time of default (if any) the interest rate shall increase to 20% until the principal balance has been paid. Under the terms of the promissory note, at the option of the note holder, principal and interest can be converted into either (i) one share of Class B Common Stock of Deep Field Technologies, par value $0.01, for each dollar owed, (ii) the number of shares of Class A Common Stock of Deep Field Technologies calculated by dividing (x) the sum of the principal and interest that the note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this note, or (iii) payment of the principal of this note, before any repayment of interest. The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company. 21 During the nine months ended September 30, 2006, the Company had a net decrease in cash of $92,365. The Company's principal sources and uses of funds were as follows: CASH USED BY OPERATING ACTIVITIES. The Company used $92,365 in cash for operating activities in the nine months ended September 30, 2006. This was primarily the result of the cash used to fund the cash loss from current operating activities. PENDING TRANSACTION On January 12, 2006, Deep Field Technologies, Inc. (the "Company") entered into a Securities Exchange Agreement (the "Securities Exchange") by and among the Company, Beijing Sino-US Jinche Yingang Auto Technological Services Limited, a cooperative joint venture under the laws of The People's Republic of China ("AutoMart") and AutoMart's joint venture participants ("the JV Participants") whereby the JV Participants will transfer 95% of their interest in AutoMart to the Company in exchange for an aggregate of 116,245,399 Class A Common Stock shares, or 85% of the outstanding shares of the Company, and the total number of outstanding Class A Common Stock shares immediately after the consummation of the transaction shall be 136,759,293 and 2 million of the Company's Class B Common Stock shares. The closing of the Securities Exchange will occur upon the satisfaction of a number of conditions precedents: (i) shareholder approval of the Securities Exchange by the Company's shareholders, (ii) financing in the form of a convertible debenture for not less than $4 million and (iii) the requisite approvals by the People's Republic of China. It is anticipated that the closing will occur in the fourth quarter of 2006. FORWARD LOOKING STATEMENTS - CAUTIONARY FACTORS Certain information included in this Form 10-QSB and other materials filed or to be filed by us with the Securities and Exchange Commission (as well as information included in oral or written statements made by us or on our behalf), may contain forward-looking statements about our current and expected performance trends, growth plans, business goals and other matters. These statements may be contained in our filings with the Securities and Exchange Commission, in our press releases, in other written communications, and in oral statements made by or with the approval of one of our authorized officers. Information set forth in this discussion and analysis contains various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 (the "Act") provides certain "safe harbor" provisions for forward-looking statements. The reader is cautioned that such forward-looking statements are based on information available at the time and/or management's good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Forward-looking statements speak only as of the date the statement was made. We assume no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. Forward-looking statements are typically identified by the use of terms such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "might," "plan," "predict," "project," "should," "will," and similar words, although some forward-looking statements are expressed differently. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. 22 ITEM 3. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in our reports filed under the Securities Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the SEC's rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation as of the end of the time period covered by this report, our chief executive officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be included in our periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms. Our Board of Directors were advised by Bagell, Josephs, Levine and Company, LLC, our independent registered public accounting firm, that during their performance of review procedures for the period ended September 30, 2006, they have identified a material weakness as defined in Public Company Accounting Oversight Board Standard No. 2 in our internal control over financial reporting. This deficiency consisted primarily of inadequate staffing and supervision that could lead to the untimely identification and resolution of accounting and disclosure matters and failure to perform timely and effective reviews. However, our resources and size prevent us from being able to employ sufficient resources to enable us to have adequate segregation of duties within our internal control system. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible control and procedures. CHANGES IN INTERNAL CONTROLS. Management of the Company has also evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, any change in the Company's internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-QSB. There was no change in the Company's internal control over financial reporting identified in that evaluation that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-QSB that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting, other than what has been reported above. 23 PART II - OTHER INFORMATION ITEM 6. EXHIBITS 31.1 Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002 24 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Deep Field Technologies, Inc. By: /s/ Mark Meller Date: November 14, 2006 --------------------------- Mark Meller, President, Chief Executive Officer and Chief Financial Officer 25 INDEX OF EXHIBITS 31.1 Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002 26