UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004
COMMISSION FILE NO. 333-94265
LISKA BIOMETRY, INC.
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(Exact Name of small business issuer as specified in its charter)
FLORIDA 06-1562447
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
100 SUSSEX DRIVE
OTTAWA, ONTARIO, CANADA K1A 0R6
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(Address of Principal Executive Offices)
603-540-0828
(Telephone number, including area code, of agent for service)
Copies to:
VIRGINIA K. SOURLIS, ESQ.
The Galleria
2 Bridge Avenue
Red Bank, NJ 07701
(732) 530-9007
Fax (732) 530-9008
www.SourlisLaw.com
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Registrant 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 and has been
subject to such filing requirements for the past 90 days. [X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS
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AS OF SEPTEMBER 30, 2004, WE HAD 21,096,185 SHARES OF OUR COMMON
STOCK OUTSTANDING.
LISKA BIOMETRY, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-QSB/A
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheet (Unaudited) 3
Statements of Operations (Unaudited) 4
Statements of Cash Flows (Unaudited) 5
Notes to Financial Statements 6
Item 2 - Management's Discussion and Analysis or Plan of
Operations 8
Item 3 - Controls and Procedures 15
PART II - OTHER INFORMATION
Item 2 - Change in Securities 15
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 16
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2
Liska Biometry, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
September 30, 2004
(Unaudited)
Assets
Current assets:
$ 63,165
-----------
Fixed assets, net 11,300
-----------
$ 74,465
===========
Liabilities and stockholders' (deficit)
Current liabilities:
Accounts payable & accrued expenses $ 188,104
Due to investors 84,828
-----------
Total current liabilities 272,932
-----------
Stockholders' (deficit):
Preferred stock, no par value,
10,000,000 shares authorized, none outstanding --
Common stock, no par value,
100,000,000 shares authorized,
21,096,185 shares issued and outstanding 6,180,491
Additional paid in capital 1,063,203
Common stock subscriptions 238,000
Treasury Stock (50,000)
Deferred compensation (92,208)
(Deficit) accumulated during the development stage (7,537,222)
-----------
(197,736)
Other comprehensive income:
Currency translation adjustment (731)
-----------
(198,467)
-----------
$ 74,465
===========
SEE ACCOMPANYING NOTES
3
Liska Biometry, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
Three Months and Nine Months Ended September 30, 2003 and 2004: and
Inception (August 1, 2000) to September 30, 2004
(Unaudited)
Three Three Nine Nine
Months Months Months Months Inception
Ended Ended Ended Ended to
Sept 30, Sept 30, Sept 30, Sept 30, Sept 30,
2003 2004 2003 2004 2004
------------ ------------ ------------ ------------ ------------
Sales $ -- $ -- $ -- $ -- $ 8,000
Cost of goods sold -- -- -- -- 892
------------ ------------ ------------ ------------ ------------
Gross profit -- -- -- -- 7,108
------------ ------------ ------------ ------------ ------------
Operating expenses:
Impairment of license -- -- -- -- 58,812
Selling, general and administrative expenses 159,590 711,668 259,470 3,769,007 7,485,768
------------ ------------ ------------ ------------ ------------
159,590 711,668 259,470 3,769,007 7,544,580
------------ ------------ ------------ ------------ ------------
(Loss) from operations (159,590) (711,668) (259,470) (3,769,007) (7,537,472)
------------ ------------ ------------ ------------ ------------
Other income (expense):
Other income -- -- -- -- 250
------------ ------------ ------------ ------------ ------------
Net (loss) (159,590) (711,668) (259,470) (3,769,007) (7,537,222)
Other comprehensive income:
Foreign currency translation adjustment -- (2,453) -- (600) (731)
------------ ------------ ------------ ------------ ------------
Comprehensive (loss) $ (159,590) $ (714,121) $ (259,470) $ (3,768,407) $ (7,537,953)
============ ============ ============ ============ ============
Per share information - basic and fully diluted:
Weighted average shares outstanding 12,957,275 21,009,578 11,039,038 18,767,692 5,218,877
============ ============ ============ ============ ============
Net (loss) per share $ (0.01) $ (0.03) $ (0.02) $ (0.20) $ (1.44)
============ ============ ============ ============ ============
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SEE ACCOMPANYING NOTES
4
Liska Biometry, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Nine months Ended September 30, 2003 and 2004: and
Inception (August 1, 2000) to September 30, 2004
(Unaudited)
Nine Months Nine Months Inception to
Ended Sept 30, Ended Sept 30, Sept 30,
2003 2004 2004
--------- --------- ---------
Cash flows from operating activities:
Net cash used in operating activities $ (55,138) $(283,117) $(459,153)
--------- --------- ---------
Cash flows from investing activities:
Net cash provided by (used in) investing activities -- (11,300) (61,300)
--------- --------- ---------
Cash flows from financing activities:
Capital contributions -- -- 5,878
Common shares issued for cash 55,000 356,912 449,912
Purchase of treasury stock -- (50,000) (50,000)
Proceeds from investor loans -- 49,828 177,828
--------- --------- ---------
Net cash provided by financing activities 55,000 356,739 583,618
--------- --------- ---------
Net increase (decrease) in cash (138) 62,322 63,165
Beginning - cash balance 616 843 --
--------- --------- ---------
Ending - cash balance $ 478 $ 63,165 $ 63,165
========= ========= =========
Supplemental cash flow information:
Cash paid for income taxes $ -- $ -- $ --
========= ========= =========
Cash paid for interest
$ -- $ -- $ --
========= ========= =========
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SEE ACCOMPANYING NOTES
5
LISKA BIOMETRY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
(UNAUDITED)
(1) Basis Of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles (GAAP) for interim
financial information and Item 310(b) of Regulation S-B. They do not include all
of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation have
been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the financial statements of the Company as of December 31,
2003 and for the two years then ended, and the period from inception (August 1,
2000) to December 31, 2003, including notes thereto included in the Company's
Form 10-KSB.
(2) Earnings Per Share
The Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares and dilutive common stock equivalents
outstanding. During periods when they would be anti-dilutive common stock
equivalents, if any, are not considered in the computation.
(3) Commitments and Contingencies
During the periods covered by these financial statements the Company issued
shares of common stock without registration under the Securities Act of 1933.
Although the Company believes that the sales did not involve a public offering
of its securities and that the Company did comply with the "safe harbor"
exemptions from registration, it could be liable for rescission of the sales if
such exemptions were found not to apply and this could have a material negative
impact on the Company's financial position and results of operations. In
addition, the Company issued shares of common stock pursuant to Form S-8
registration statements. The Company believes that it complied with the
requirements of Form S-8 in regard to these issuances, however if it were
determined that there were violations of the provisions of Form S-8 the Company
could be subject to enforcement proceedings.
During the periods covered by these financial statements the Company entered
into several employment, consulting and other agreements with third parties.
Although the Company obtained settlement releases from a majority of the
parties, settlement releases were not entered into with some of these parties or
the settlement releases were verbal agreements. Future contingencies, which
cannot be estimated by management, may exist for the above matters including but
not limited to issuance of capital stock and other financial obligations and may
have a material negative impact on the Company's financial position and results
of operations.
6
At September 30, 2004, the Company had entered into employment contracts of
varying terms ending from April through September 2005 with four officers for
annual compensation aggregating approximately $247,000, of which one contract
for $61,000 was subsequently cancelled. In addition these officers received an
aggregate of 2,835,000 shares of common stock (see Note 4). The term of each of
the contracts commences on the date the Company receives a minimum of $100,000
in funding and terminates one year thereafter. One of these officers may also
receive options to purchase a total of 400,000 common shares depending upon
reaching certain performance targets during the contract term that ends
September 2005.
At September 30, 2004 the Company had entered into consulting contracts of
varying terms ending from January through September 2005 with various
consultants for annual fixed compensation of $36,000 plus other fees depending
upon services rendered. In addition these consultants received or will receive
an aggregate of 917,000 shares of common stock (see Note 4). Two of these
contracts provide that the consultants may also receive options to purchase a
total of 450,000 common shares depending upon reaching certain performance
targets during the contract term that ends September 2005.
(4) Stockholders' (Deficit)
During the nine months ended September 30, 2004 an affiliate of the Company
contributed services valued at $3,000 to the capital of the Company.
During the nine months ended September 30, 2004, the Company issued 719,910
shares of common stock for cash aggregating $356,911 and agreed to repurchase
shares of common stock held by a former officer for which a deposit of $50,000
was made through September 30, 2004 (see Note 6).
During the nine months ended September 30, 2004, the Company issued 4,942,000
shares of common stock and agreed to issue an additional 205,000 shares of
common stock for services including services rendered or to be rendered pursuant
to employment and consulting contracts. The shares were valued at their fair
market value of $3,574,750 of which $3,482,542 has been charged to operations
and $92,208 is recorded as deferred compensation at September 30, 2004, and will
be amortized to operations over the term of certain consulting and employment
contracts. These shares include the shares further described below and in Note
3.
During May 2004 and July 2004 the Company filed Form S-8 registration statements
registering a total of 1,457,000 shares of common stock to be issued pursuant to
employment and consulting contracts. Through September 30, 2004 an aggregate of
1,397,000 shares had been issued pursuant to these Form S-8 registration
statements and are included in the shares described above.
During September 2004 the Company issued options to purchase 200,000 shares of
its common stock for a period of ten years at a price of $.64 per share to four
directors for services rendered. These options vest one year from the date of
issuance.
SFAS 123 requires the Company to provide proforma information regarding net
income and earnings per share as if compensation cost for the Company's stock
option plans had been determined in accordance with the fair value based method
prescribed in SFAS 123. The fair value of the option grants is estimated on the
date of grant utilizing the Black-Scholes option pricing model with the
following weighted average assumptions for grants during the period ended
September 30, 2004: expected life of options of 10 years, expected volatility of
208%, risk-free interest rate of 3% and no dividend yield. The weighted average
fair value at the date of grant for options granted during the period ended
September 30, 2004 approximated $1.00 per option. These results may not be
representative of those to be expected in future years.
7
Under the provisions of SFAS 123, the Company's net (loss) and (loss) per share
would not be materially affected.
(5) Basis of Reporting
The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.
The Company has experienced a significant loss from operations as a result of
its investment necessary to achieve its operating plan, which is long-range in
nature. For the nine months ended September 30, 2004 and the period from
inception to September 30, 2004, the Company incurred net losses of $3,769,007
and $7,537,222 respectively and has working capital and stockholder deficits of
$209,767 and $198,467 at September 30, 2004. In addition, the Company currently
has no revenue generating operations.
The Company's ability to continue as a going concern is contingent upon its
ability to attain profitable operations and secure financing. In addition, the
Company's ability to continue as a going concern must be considered in light of
the problems, expenses and complications frequently encountered by entrance into
established markets and the competitive environment in which the Company
operates. The Company is pursuing equity financing for its operations. Failure
to secure such financing or to raise additional capital or borrow additional
funds may result in the Company depleting its available funds and not being able
pay its obligations.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
(6) Subsequent Events
On October 29, 2004, the Company completed an agreement to repurchase 1,871,666
common shares for a total consideration of $200,000 from a former officer that
will be held in the Company's treasury until their further disposition is
decided upon. An initial deposit for the repurchase of $50,000 was made in
September 2004 and the balance paid in October 2004. Under the agreement, the
Company also received options to repurchase 1,000,000 common shares at $1.00 per
share by April 29, 2005 and a further 1,000,000 common shares at $2.00 per share
by October 28, 2005.
During October 2004 the Company intends to file a Form S-8 registration
statements registering a total of 205,000 shares of common stock to be issued
pursuant to employment and consulting contracts (see Note 4).
During October 2004 the Company issued 601,611 shares of common stock for cash
aggregating $213,021
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8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains "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 and is subject to the safe harbor created by those sections. We intend
to identify forward-looking statements in this report by using words such as
"believes," "intends," "expects," "may," "will," "should," "plan," "projected,"
"contemplates," "anticipates," "estimates," "predicts," "potential," "continue,"
or similar terminology. These statements are based on the Company's beliefs as
well as assumptions the Company made using information currently available to
us. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise. Because these statements reflect the Company's current
views concerning future events, these statements involve risks, uncertainties,
and assumptions. Actual future results may differ significantly from the results
discussed in the forward-looking statements. These risks include changes in
demand for the Company's products, changes in the level of operating expenses,
changes in general economic conditions that impact consumer behavior and
spending, product supply, the availability, amount, and cost of capital for the
Company and the Company's use of such capital, and other risks discussed in this
report. Additional risks that may affect our performance are discussed under
"Risk Factors Associated with Our Business" in our Form 10-KSB for the fiscal
year ended December 31, 2003. Readers are cautioned not to place undue reliance
on the forward-looking statements contained in this report. We disclaim any
obligation to update forward-looking statements. All references to "we", "our",
"us", of refer to Liska Biometry, Inc., and it predecessors, operating
divisions, and subsidiaries.
CRITICAL ACCOUNTING POLICIES
There were no changes to the Company's critical accounting policies in the third
quarter of 2004. Critical accounting policies are those applications of
accounting principles or practices that require considerable judgment,
estimation, or sensitivity analysis by management.
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PLAN OF OPERATIONS
We have made significant adjustments to our Plan of Operations during the three
month period ending September 30, 2004. We plan to accomplish the following in
our Plan of Operations over a period of 12 months. At the present time we do not
have sufficient cash resources to conduct our Plan of Operations. We have not
had sufficient cash resources to conduct our Plan of Operations since we adopted
our new business plan of fingerprint encoding and authentication. Therefore, our
Plan of Operations is contingent upon receiving adequate financing to meet costs
of $1,900,000 and will not commence until we receive such financing.
OUR PLAN OF OPERATIONS TO DATE:
RESEARCH AND DEVELOPMENT
In January 2003 we developed a preliminary demonstration model of our proposed
fingerprint technology which provided only a conceptual guide for future
development. We continued our development throughout 2003 and attempted to
improve our core technology and implement changes in our core software; however,
most of our development occurred from September 2003 to December 2003, in which
we made further changes to our core software. As reflected below in our Future
Plan of Operations, we will continue to develop our core technology pending
adequate financing.
9
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OUR PLAN OF OPERATIONS TO DATE:
APPOINT EXECUTIVE MANAGEMENT TEAM
We have filled the following executive management positions:
o Chief Executive; and
o Chief Financial Officer.
We estimate that our annual salary expenditures for these positions will be
$108,000 composed of a salaries of $55,000 and $53,000 respectively for each of
the above positions.
CAPITAL EXPENDITURES
We have purchased capital equipment for our research and development and general
operations, which consists primarily of computer hardware. We expended
approximately $11,300 and estimate the remaining cost of this equipment to be
approximately $45,700.
HIRED VICE PRESIDENT OF PRODUCT OPERATIONS
We have hired one individual who will be responsible for the product operations
oversight of the Company.
The annual salary costs associated with this position is approximately $52,000
HIRED A CHIEF SOFTWARE ARCHITECT
We have hired an individual who will be responsible for leading the research and
development of the Company's intellectual property and core software algorithms
The annual salary costs associated with this position is approximately $46,000
HIRED A CHIEF ENGINEER
We have hired an individual who will be responsible for implementing the
technology integration and designing the Company's product applications.
The annual salary costs associated with this position is approximately $46,000
DEVELOPED SOFTWARE ALGORITHMS
Using third party live-scan fingerprint scanners, we can now demonstrate the
proof of concept of our proprietary software concepts, illustrating the
differentiating features of embedded software algorithms - that is, the
capability to measure the stable content of a fingerprint image and to express
it as a short numeric output. A final workable prototype model is contingent
upon us receiving financing, which we may be unable to obtain. We have expended
approximately $5,500 for the aforementioned.
10
HIRED HUMAN RESOURCE MANAGER
We have hired one individual who will be responsible for all human
resource/administrative functions of the Company.
The annual salary costs associated with this position is approximately $40,000
HIRED A FINANCIAL CONTROLLER/ SENIOR FINANCIAL ADVISOR
We have hired one individual who will be responsible for the financial
accounting, audit procedures and the internal financial controls as well as
advising the executive management on the financial management of the Company.
The annual salary costs associated with this position is approximately $36,000
OUR FUTURE PLAN OF OPERATIONS:
HIRE ENGINEERING TEAM
We plan to hire the following positions that will comprise our engineering team
that will develop our fingerprint technology:
o 1 full time Network Security Analyst;
o 1 full time Pattern Recognition Software Developer; and
o 1 full time Technical support engineer
1 full time optical device engineer
1 full time product applications engineer
2 part-time software developers
The estimated annual salary cost associated with these positions is $175,000
HIRE A VICE PRESIDENT OF SALES & MARKETING
We plan to hire an individual who will be responsible for leading the sales and
marketing, promotion and business development of the Company.
The estimated annual salary costs associated with this position is approximately
$50,000
HIRE A DIRECTOR OF BUSINESS DEVELOPMENT
We plan to hire an individual who will be responsible for implementing the US
- -based sales, marketing, and business development initiatives of the Company
The estimated annual salary costs associated with this position is approximately
$42,000
HIRE A VICE PRESIDENT OF OPERATIONS
We plan to hire an individual who will be responsible for implementing
operational strategies in concert with the CEO and CFO of the Company. This
individual will oversee the operational implementation of the Company's business
plan and manage its US-based operational units.
The estimated annual salary costs associated with this position is approximately
$42,000
11
ENGAGE BUSINESS DEVELOPMENT CONSULTANTS
We have sub-contracted our business development function to consultants who will
assist our management to identify marketing opportunities for our products and
services. The estimated annual expenditures for the business development
consultants are $75,000
HIRE AN ADMINISTRATION TEAM
We plan to hire an two individuals who will be responsible for all of the
administrative functions at the Company's head office in New Hampshire and its
R&D facilities in Ottawa, Ontario.
The estimated annual salary costs associated with these two positions is
approximately $90,000
DEVELOP AND INITIATE MARKETING EFFORT
Our vice president of sales and marketing will survey the key markets and
customers, and use systems, planning initiatives and oversight bodies to develop
a strategy for market penetration. Generally this strategy will include
targeting the following market segment verticals:
o Government Sector - national Identification programs, driver's
licenses
o Travel and Transportation - visas, travel documentation
o Financial Sector- bank account access
o Foreign Security Markets - Europe, Middle East, Africa
Marketing expenditures will focus on the broad dissemination of our test
results. We will attempt to increase our market recognition, provide promotional
sampling of our products and target key customers. We will attempt to develop
strategic partners to collaborate on our marketing and technological integration
efforts. Such strategic partners may include the following:
o Fingerprint biometrics hardware system vendors;
o Systems Integrators, defense contractors
o Original Equipment Manufacturers (OEMs), Channel Partners
o Other distribution channels that target military and commercial
security markets.
In addition, we will acquire other market information and contacts by joining
key industry group and hiring industry analysts, attending trade shows,
traveling to meet potential clients/partners and designing print media/web based
promotional strategies. The annual cost associated with this marketing effort is
approximately $405,000
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HIRE A CHIEF TECHNOLOGY OFFICER
We plan to hire an individual who will be responsible for overseeing all of the
Company's R&D functions at its facilities in Ottawa, Canada.
12
The estimated annual salary costs associated with this position is approximately
$65,000
EXPAND OUR PRODUCT APPLICATIONS INITIATIVES AND RESEARCH AND DEVELOPMENT
We intend to introduce our first product application, integrating our
proprietary software algorithms and third party live scan fingerprint
technology. This will require working in concert with well established
fingerprint biometric hardware partners and retrofitting their product offering
with our algorithms.
We will continue to develop our initial proprietary software algorithms, with
several iterations planned for 2004-2005. Our goal in this regard is to reach
the proof of concept stage, illustrating the differentiating features of these
new embedded software algorithms, focusing on real-time fingerprint biometric
database search. The annual cost associated with expanding the product
application and R&D functions is approximately $575,000
SUMMARY OF ESTIMATED COSTS
- ----------------------------------------------- --------- -----------
Executive Management $ 108,000
- ----------------------------------------------- --------- -----------
Capital Expenditures 47,500
- ----------------------------------------------- --------- -----------
VP Product Operations 52,000
- ----------------------------------------------- --------- -----------
Chief Software Architect 46,000
- ----------------------------------------------- --------- -----------
Chief Engineer 46,000
- ----------------------------------------------- --------- -----------
Develop Software Algorithms 5,500
- ----------------------------------------------- --------- -----------
Human Resource Manager 40,000
- ----------------------------------------------- --------- -----------
Financial Controller/Sr. Financial Advisor 36,000
- ----------------------------------------------- --------- -----------
Engineering Team 175,000
- ----------------------------------------------- --------- -----------
Vice President of Sales & Marketing 50,000
- ----------------------------------------------- --------- -----------
Director of Business Development 42,000
- ----------------------------------------------- --------- -----------
Vice President of Operations 42,000
- ----------------------------------------------- --------- -----------
Engage Business Development Consultants 75,000
- ----------------------------------------------- --------- -----------
Administration Team 90,000
- ----------------------------------------------- --------- -----------
Initiate Marketing Effort 405,000
- ----------------------------------------------- --------- -----------
Chief Technology Officer 65,000
- ----------------------------------------------- --------- -----------
Expand Product Apps/R&D 575,000
- ----------------------------------------------- --------- -----------
- ----------------------------------------------- --------- -----------
TOTAL $ 1,900,000
- ----------------------------------------------- --------- -----------
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REVENUES
We cannot determine whether our revenues, if any, will ever be sufficient to
produce a positive cash flow or result in net profits. You should carefully
consider the discussion appearing below under "Liquidity and Capital Resources".
We earned no revenues during Fiscal Year 2003 or our first three quarters of
2004 or in connection with our business plan of fingerprint encoding and
authentication. We do not expect to earn significant operating revenues in the
foreseeable future. Our losses are expected to continue, principally as a result
of our estimated expenditures of $1,900,000 as reflected above.
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LIQUIDITY AND CAPITAL RESOURCES
13
As of September 30, 2004, we had limited cash resources of only $63,165. We do
not have any other internal sources of working capital. We did not receive any
revenues during our Fiscal Year 2003 or in our first three quarters of 2004. We
do not anticipate earning revenues until such time that we obtain financing to
implement our Plan of Operations, if ever. Even if we complete our Plan of
Operations, there are no assurances that we will successfully develop a
marketable product.
During Fiscal Year 2003 and our first three quarters of 2004, our operating
expenses have exceeded our revenues, which has been $0. We have insufficient
working capital to fund our planned growth and ongoing operating expenses. As a
result, we expect to continue to experience significant negative operating cash
flow for the foreseeable future. Our existing working capital will not be
sufficient to fund the continued implementation of our Plan of Operations during
the next 12 months and to meet our general operating expenses. If we do not have
sufficient working capital to implement our Plan of Operations, we may have to
cease operations.
We have no alternative Plan of Operations. In the event that we do not receive
financing, if our financing is inadequate or if we do not adequately implement
an alternative Plan of Operations that enables us to conduct operations without
having received adequate financing, we may have to liquidate our business and
undertake any or all of the following actions:
o Sell or dispose of our assets, if any;
o Pay our liabilities in order of priority, if we have available cash
to pay such liabilities;
o If any cash remains after we satisfy amounts due to our creditors,
distribute any remaining cash to our shareholders in an amount equal
to the net market value of our net assets;
o File a Certificate of Dissolution with the State of Florida dissolve
our corporation and close our business; and
o Make the appropriate filings with the Securities and Exchange
Commission so that we will no longer be required to file periodic
and other required reports with the Securities and Exchange
Commission, if, in fact, we are a reporting company at that time
Based upon our current assets, however, we will not have the ability to
distribute any cash to our shareholders.
If we have any liabilities that we are unable to satisfy and we qualify for
protection under the U.S. Bankruptcy Code, we may voluntarily file for
reorganization under Chapter 11 or liquidation under Chapter 7. Our creditors
may also file a Chapter 7 or Chapter 11 bankruptcy action against us. If our
creditors or we file for Chapter 7 or Chapter 11 bankruptcy, our creditors will
take priority over our shareholders. If we fail to file for bankruptcy under
Chapter 7 or Chapter 11 and we have creditors, such creditors may institute
proceedings against us seeking forfeiture of our assets, if any.
We do not know and cannot determine which, if any, of these actions we will be
forced to take.
If any of these foregoing events occur, you could lose your entire investment in
our shares.
There is substantial doubt about our ability to continue as a going concern as
we have suffered recurring losses from operations and have no established source
of revenue. Accordingly, our independent auditors included an explanatory
paragraph in their report on our December 31, 2003 financial statements
regarding concerns about our ability to continue as a going concern. Our
financial statements contain additional note disclosures describing the
circumstances that lead to this disclosure by our independent auditors.
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ITEM 3 CONTROLS AND PROCEDURES
14
We have evaluated, with the participation of our Chief Executive Officer and
Chief Financial Officer, the effectiveness of our disclosure controls and
procedures as of September 30, 2004. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer have each concluded that our
disclosure controls and procedures are effective to ensure that we record,
process, summarize, and report information required to be disclosed by us in our
quarterly reports filed under the Securities Exchange Act within the time
periods specified by the Securities and Exchange Commission's rules and forms.
During the quarterly period covered by this report, there have not been any
changes in our internal controls over financial reporting that have materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
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PART II OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES
The following unregistered securities were issued by the Company during the
three months ended September 30, 2004:
Date of Issuance Description of Securities Number of Shares Issued Purchase Price
Issued
9/9/2004 Common Shares 100,000 $50,000
9/27/2004 Common Shares 3,963 $1,665
9/27/2004 Common Shares 3,521 $1,479
9/27/2004 Common Shares 4,985 $2,094
9/27/2004 Common Shares 5,961 $2,504
9/27/2004 Common Shares 4,964 $2,085
9/27/2004 Common Shares 6,516 $2,085
The issuance of these securities is claimed to be exempt from registration
pursuant to Regulation S under the Securities Act of 1933, as amended, as
transactions made outside the United States, and Section 4(2) of the Securities
Act of 1933, as amended, as transactions by an issuer not involving a public
offering.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
15
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
3.1 Articles of Incorporation (1)
3.2 By-Laws (2)
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a), promulgated under C the Securities Exchange Act of
1934, as amended.
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a), promulgated under C the Securities Exchange Act of
1934, as amended.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to C Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to C Section 906 of the Sarbanes-Oxley Act of
2002.
- -----------
(1) Denotes previously filed exhibits: filed on January 7, 2000 with 3045
Corporation's Form SB-2 registration statement, file # 333-94265.
(2) Denotes previously filed exhibits: filed on May 30, 2003 with Liska
Biometry, Inc.'s Form 10-KSB for the period ended December 31, 2001.
We hereby incorporate the following additional documents by reference: (a) our
Form 10-KSB for the year ended December 31, 2003 which was filed on April 7,
2004, for the year ended December 31, 2002, which was filed on July 28, 2003,
for, the year ended December 31, 2001, which was filed on May 30, 2003; and for
the year, ended November 30, 2000 which was filed on January 3, 2001; (b) our
Registration Statement on Form SB-2 and all amendments thereto which was filed
on January 7, 2000 and amended on February 8, 2000, March 1, 2000, March 14,
2000, April 3, 2000, and April 4, 2000; (c) our Forms 10-QSB for the periods
ended June 30, 2004 which was filed on August 16, 2004; March 31, 2004 which was
filed on May 17, 2004; September 30, 2003 which was filed on November 14, 2003;
June 30, 2003 which was filed on August 15, 2003; March 31, 2003 which was filed
on August 15, 2003; September 30, 2002 which was filed on July 28, 2003; June
30, 2002 which was filed on May 30, 2003; March 31, 2002 which was filed on May
30, 2002; June 30, 2001 which was filed on April 4, 2002; September 30, 2001
which was filed on April 4, 2002; March 31, 2001 which was filed on May 21,
2001; August 31, 2000 which was filed on September 15, 2000; May 31, 2000 which
was filed on June 20, 2000; and February 29, 2000 which was filed on April 14,
2000.
16
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LISKA BIOMETRY, INC.
Dated: November 15, 2004
By: /s/ Christopher J. LeClerc
-------------------------------
Christopher J. LeClerc
President and CEO
(Principal Executive Officer)
By: /s/ Manoj E. Hippola
-------------------------------
Manoj E. Hippola
Chief Financial Officer
(Principal Accounting Officer)
17