UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(MARK ONE)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934. FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM _________ TO ___________
COMMISSION FILE NUMBER: 000-50329
TRACEGUARD TECHNOLOGIES, INC.
(Exact Name of Small Business Issuer as Specified in Charter)
NEVADA 98-0370398
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
ZEEV SHERF STREET #14, JERUSALEM 97842, ISRAEL
(Address of Principal Executive Offices)
972 545-662-102
(Issuer's Telephone Number, Including Area Code)
(Former Address, if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes |X| No
|_|
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date: As of November 10, 2005, there
were 21,900,004 shares of Common Stock, par value $0.001 per share, issued and
outstanding.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TRACEGUARD TECHNOLOGIES, INC.
(FORMERLY IBHAS TECHNOLOGIES INC.)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2005
UNAUDITED
TABLE OF CONTENTS
-----------------
PAGE
----
INTERIM CONSOLIDATED INTERIM FINANCIAL STATEMENTS:
Balance Sheet 2
Statements of Operations 3
Statements of Cash Flows 4
Statements of Changes in shareholders' equity (capital deficiency) 5
Notes to Financial Statements 6-8
TRACEGUARD TECHNOLOGIES INC.
(FORMERLY IBHAS TECHNOLOGIES INC.)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED INTERIM CONSOLIDATED BALANCE SHEET
IN US DOLLARS
UNAUDITED
SEPTEMBER 30, MARCH 31,
2005 2005
------------- -------------
(UNAUDITED) (AUDITED)
------------- -------------
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents 73,576 9,259
Accounts receivables 100,000 --
-------- -------
173,576 9,259
======== =======
LIABILITIES AND SHAREHOLDERS EQUITY' (NET OF CAPITAL DEFICIENCY)
- ----------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable 63,137 16,080
Notes payable to shareholders 37,690 32,324
-------- -------
Total liabilities 100,827 48,404
-------- -------
SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY)
Share capital - ordinary shares of par value $0.001 each authorized - September
30, 2005 and March 31,2005 - 150,000,000 shares;
Issued and outstanding - September 30, 2005 and March 31, 2005 - 21,900 2,740
21,900,004 and 16,440,000 shares, respectively
Additional paid-in capital 171,900 47,760
Receipts on account's of shares to be allotted 31,500
Accumulated deficit (152,551) (89,645)
-------- -------
Total shareholders' equity (capital deficiency) 72,749 (39,145)
-------- -------
173,576 9,259
======== =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED FINANCIAL
STATEMENTS.
2
TRACEGUARD TECHNOLOGIES, INC.
(FORMERLY IBHAS TECHNOLOGIES INC.)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
IN US DOLLARS
UNAUDITED
FOR THE PERIOD
FROM MARCH 20, 2002
THREE MONTHS ENDED SIX MONTHS ENDED (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
2005 2004 2005 2004 2005
----------- ----------- ----------- ----------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
--------------------------- --------------------------- -------------
General and administrative eeeexpenses 56,402 2,053 62,906 3,151 152,551
----------- ----------- ----------- ----------- -----------
OPERATING LOSS - LOSS FOR THE
PERIOD 56,402 2,053 62,906 3,151 152,551
=========== =========== =========== =========== ===========
Loss per share ("EPS") - basic and
diluted: $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.00)
=========== =========== =========== =========== ===========
Weighted average number of shares in
computation of EPS
18,584,002 16,440,000 17,512,000 16,440,000
=========== =========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED FINANCIAL
STATEMENTS.
3
TRACEGUARD TECHNOLOGIES, INC.
(FORMERLY IBHAS TECHNOLOGIES INC.)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
IN US DOLLARS
UNAUDITED
FOR THE PERIOD FROM
MARCH 20, 2002
SIX MONTHS ENDED (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30,
-----------------------
2005 2004 2005
-------- ------- ----------------
(UNAUDITED) (UNAUDITED)
----------------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the period (62,906) (3,151) (152,551)
Adjustments to reconcile loss to net cash
used in operating activities:
Income and expenses not involving cash flow -
imputed interest on notes payable to shareholders 866 3,119
Changes in operating assets and liabilities:
Increase in accounts receivables (100,000) (100,000)
Increase (decrease) in accounts payable 47,057 (2,172) 63,137
-------- ------ --------
Net cash used in operating activities (114,983) (5,323) (186,295)
-------- ------ --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of share capital, net of issuance expenses 143,300 193,800
Receipts on account's of shares to be allotted 31,500 31,500
Receipts of notes payable to shareholder 4,500 6,701 34,571
-------- ------ --------
Net cash provided by financing activities 179,300 6,701 259,871
-------- ------ --------
INCREASE IN CASH AND CASH EQUIVALENTS 64,317 1,378 73,576
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 9,259 982
-------- ------ --------
======== ====== ========
CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 73,576 2,360 73,576
======== ====== ========
SUPPLEMENTARY INFORMATION ON FINANCING ACTIVITIES NOT INVOLVING CASH FLOWS:
1) In September 2005 the Company issued 100,000 shares for services. The fair
value of the shares was $70,000.
2) In September 2005 the Company issued 18,166,670 common shares as dividend
shares to its existing shareholders.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THEE CONDENSED FINANCIAL
STATEMENTS.
4
TRACEGUARD TECHNOLOGIES, INC.
(FORMERLY IBHAS TECHNOLOGIES INC.)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED INTERIM CONSOLIDATED STATEMENT
OF CHANGES IN SHAREOLDERS' (CAPITAL DEFICIENCY)
IN US DOLLARS
UNAUDITED
RECEIPTS
NUMBER ON ACCOUNT'S ADDITIONAL
OF SHARE OF SHARES TO PAID IN ACCUMULATED
SHARES CAPITAL BE ALLOTTED CAPITAL DEFICIT TOTAL
------------------------------------------------------------------------------------
CHANGES IN THE PERIOD FROM MARCH
20, 2002 to March 31, 2002 (audited):
Issuance of common shares to founders 2,500,000 2,500 -- -- -- 2,500
Net loss (2,007) (2,007)
---------- ------ ------ ------- -------- -------
BALANCE AT MARCH 31, 2002 (audited) 2,500,000 2,500 -- -- (2,007) 493
CHANGES DURING THE YEAR ENDED
MARCH 31, 2003 (audited):
Net loss (2,188) (2,188)
---------- ------ ------ ------- -------- -------
BALANCE AT MARCH 31, 2003 (audited) 2,500,000 2,500 -- -- (4,195) (1,695)
CHANGES DURING THE YEAR ENDED
MARCH 31, 2004 (audited):
Issuance of common shares 240,000 240 47,760 48,000
Net loss (72,068) (72,068)
---------- ------ ------ ------- -------- -------
BALANCE AT MARCH 31, 2004 (audited) 2,740,000 2,740 47,760 (76,263) (25,763)
CHANGES IN THE YEAR ENDED
MARCH 31, 2005 (audited):
Net loss (13,382) (13,382)
---------- ------ ------ ------- -------- -------
BALANCE AT MARCH 31, 2005 (audited) 2,740,000 2,740 -- 47,760 89,645 (39,145)
CHANGES DURING THE SIX MONTHS ENDED
SEPTEMBER 30, 2005 (unaudited):
Issuance of common shares (net of
issuance expenses) 893,334 893 72,407 73,300
Issuance of dividend shares 18,166,670 18,167 (18,167) --
Receipts on account's of shares to be
allotted 31,500 31,500
Issuance of shares to service providers 100,000 100 69,900 70,000
Net loss (62,906) (62,906)
---------- ------ ------ ------- -------- -------
BALANCE AT SEPTEMBER 30, 2005
(unaudited) 21,900,004 21,900 31,500 171,900 (152,551) 72,749
========== ====== ====== ======= ======== =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THEE CONDENSED FINANCIAL
STATEMENTS.
5
TRACEGUARD TECHNOLOGIES, INC.
(FORMERLY IBHAS TECHNOLOGIES INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 - GENERAL
a. TraceGuard Technologies, Inc. (formerly: IBHAS Technologies Inc.)
("the Company") was incorporated in Nevada on March 20, 2002.
Initially the Company's plan was to develop and market an internet
based computer software program known as IBHAS software. The IBHAS
computer software program was intended to automate the process of
submission of Internet web page information in multiple languages to
major internet search engines. Changes in the market place forced
the Company to seek other technologies.
b. On August 15, 2005 the Company signed a letter of intent ("the LOI")
regarding licensing from Tracetrack Technologies Ltd ("Tracetrack")
certain technologies and intellectual properties. Pursuant to the
LOI the Company and Tracetrack will enter into a definitive
licensing agreement upon satisfaction of certain conditions. The
Company paid $100,000 to Tracetrack for these rights and will pay
Tracetrack royalties at the rate of three percent (3%) of sales. The
Company's commitment to pay royalties to Tracetrack shall remain in
force until the earlier of: 1. The lapse of five years from the
first commercial sale of the product as defined in the LOI or 2. The
aggregated amount of royalty payments paid by the Company to
Tracetrack amounts to $2.5 million.
c. On August 24, 2005, the Company completed a private placement
offering of 893,334 shares of its Common shares, par value $0.001
per share, to investors for an aggregated purchase price of
approximately $160,800. The aforementioned Common shares were sold
in reliance upon exemption afforded by the provisions of Regulation
S under the 1933 Securities Act.
d. On September 12, 2005 the Company increased its authorized common
stock from 25,000,000 shares to 150,000,000 shares. In addition, the
board of Directors approved an allotment of fully paid dividend
shares, $0.001 par value to the company's shareholders such that the
holder of each share was issued 5 shares, $0.001 par value.
e. On September 12, 2005 a wholly-owned subsidiary, TraceGuard
Technologies LTD. ("the Subsidiary"), was incorporated in Israel. It
is expected that the Subsidiary will establish a research and
development center in Israel, recruit employees and carry out R&D
activities. The Subsidiary is intended to be the sole sub-licensee
under the LOI for the continued development of the Company's
product.
f. In September 2005, the Company entered into a service agreement upon
which the service provider shall provide the Company services in
consideration for shares of the Company's common stock. The Company
granted this service provider a total of 100,000 shares. The fair
value of such shares was determined to be $70,000.
g. As reflected in the accompanying interim condensed consolidated
financial statements, the Company's operations for the three and six
month period ended September 30, 2005, resulted in a net loss of
$56,402 and $62,906, respectively. Shareholders' equity as of
September 30, 2005 is $72,749. The Company's ability to continue
operating as a going concern is dependent on its ability to raise
sufficient additional working capital. Management's plans in this
regard include, among other things, raising additional cash from
current and potential shareholders.
6
TRACEGUARD TECHNOLOGIES, INC.
(FORMERLY IBHAS TECHNOLOGIES INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 2 - SIGNIFICANT ACCOUNTING POLICES
A. Basis of presentation: the accompanying unaudited interim condensed
consolidated financial statements of the Company have been prepared
in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and
Exchange Commission ("SEC"), and should be read in conjunction with
the audited financial statements and notes thereto contained in the
Company's annual statement filed with the SEC on Form 10-KSB. In the
opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim
periods presented have been reflected herein. The results of
operations for interim periods are not necessarily indicative of the
results to be expected for the full year. Notes to the financial
statements which would substantially duplicate the disclosure
contained in the audited financial statements for the most recent
fiscal year March 31, 2005 as reported in Form 10-KSB, have been
omitted.
B. The Company's fiscal year end is March 31.
C. All share-based payments to service providers are recognized in the
financial statements based on their fair value. Fair value is based
on market conditions and the Company latest private placement to
investors.
NOTE 3 - CHANGE OF CONTROL
On June 29, 2005, an investment group acquired an aggregate of
2,100,000 shares of the outstanding common stock shares the Company
from the following (then shareholders) Benjamin West, Mohanad
Shurrab and Abdellatif Anabtawi. Such shares represented
approximately 76.6% of the issued and outstanding shares of the
common stock shares of the Company (at the time of the purchase).
In connection with the sale of the Company's common stock, Mohanad
Shurrab resigned as a member of the board of directors on June 29,
2005 and Benjamin West resigned from his positions as Chief
Executive Officer, President, Secretary and Treasurer of the
Company. Subsequent to the foregoing resignations, Mr. Jacob Eluz
was appointed as a member of the board of directors of the Company
and as the Chief Executive Officer, President, Treasurer and
Secretary of the Company. Mr. Eluz was later replaced by Mr. Meir
Zucker who was appointed as the Chief Executive Officer and
President, (Mr. Jacob Eluz remained as the Treasurer and Secretary
of the Company). Dr. Ehud Ganani was elected to the board of
Directors of the company as Chairman of the Board.
7
TRACEGUARD TECHNOLOGIES, INC.
(FORMERLY IBHAS TECHNOLOGIES INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 4 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES
Dr. Fredy Ornath is the holder of 44% shares of common stock of the
Company and the holder of 99.8% shares of common stock of Material
Systems Ltd., which owns Tracetrack. Dr. Ornath fully disclosed his
relationship with Tracetrack to the Board of Directors of the
Company.
NOTE 5 - SUBSEQUENT EVENTS
a. In November 2005, a private placement was completed, offering
214,285 units, each "unit" comprising one share of common stock and
two common share purchase warrants each for a share of common stock
for an aggregate purchase price of $150,000. The aforementioned
securities were sold in reliance upon the exemption afforded by the
provisions of Regulation S, as promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended.
b. In October 2005, the Company received waivers of all rights
regarding the notes payables to shareholders in amount of $37,690.
c. In November 2005, the Company entered into several service
agreements, upon which the service providers shall provide the
Company services in consideration for the Company's shares and
warrants. The Company will grant a total of 73,000 shares and 40,000
warrants to purchase shares of the Company at a price of 70 cents
per share.
D. The Company entered into agreements with consultants and brokers in
the form of "Finder Fee Agreement" in which in return for their
services they will receive cash payment and shares of the Company
proportional to the amount invested in the Company by investors as
result of their direct efforts.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may",
"should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors that may cause our or our
industry's actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Our financial statements are stated in United States Dollars (US$) and are
prepared in conformity with generally accepted accounting principles in the
United States of America for interim financial statements. The following
discussion should be read in conjunction with our financial statements and the
related notes that appear elsewhere in this quarterly report.
As used in this quarterly report, the terms "we", "us", "our company", "the
Company" and "TraceGuard Technologies" mean TraceGuard Technologies Inc., unless
otherwise indicated. All dollar amounts refer to US dollars unless otherwise
indicated.
THE FOLLOWING DISCUSSION AND ANALYSIS PROVIDES INFORMATION WHICH OUR MANAGEMENT
BELIEVES IS RELEVANT TO AN ASSESSMENT AND UNDERSTANDING OF OUR COMPANY'S RESULTS
OF OPERATIONS AND FINANCIAL CONDITION. THIS DISCUSSION SHOULD BE READ TOGETHER
WITH OUR FINANCIAL STATEMENTS AND THE NOTES TO FINANCIAL STATEMENTS WHICH ARE
INCLUDED IN THIS REPORT, AND WITH OUR COMPANY'S FORM 10-KSB.
GENERAL
Our business plan strategy has changed and is now focusing on developing
technologies for homeland security applications. This new focus is based on an
exclusive licensing agreement with Tracetrack Technologies Ltd. which is yet to
be finalized with a definite agreement between us and Tracetrack. The technology
developed by Tracetrack is considered a breakthrough in automatic screening of
carry-on luggage at airports and other checkpoints for explosive materials. Up
until June 30, 2005 our business plan was to develop and market an Internet
computer software program that was designed to automate the process of
submission of Internet web page information in multiple languages to major
Internet search engines.
CASH REQUIREMENTS
Over the next thirty months we will require financing in the amount of
$8,500,000 to initiate the development products, based on the licensed
technology, through our wholly owned subsidiary, TraceGuard Technologies LTD,
registered in Israel, and for marketing efforts, as follows:
Estimated funding required during the next thirty months:
Development and Patents $3,300,000
Marketing and business development $1,500,000
Operating expenses $2,500,000
Initial working capital $1,200,000
----------
Total $8,500,000
----------
9
As at September 30, 2005, we had a working capital and equity of $72,749. We
plan to raise additional cash of $1,000,000 until December 31, 2005 to allow us
to commence the development of our product. We plan to raise the capital
required to meet these immediate short-term needs, and additional capital
required to meet the balance of our estimated funding requirements for the
twelve months, primarily through private placement and through public offering
of our securities. There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, we will be unable to conduct our operations as
planned, and we will not be able to meet our other obligation as they become
due. In such event, we will be forced to scale down or perhaps even cease our
operations.
The issuance of additional equity securities by us could result in a significant
dilution in the equity interests of our current stockholders.
PRODUCT RESEARCH AND DEVELOPMENT
We anticipate that our wholly owned subsidiary, TraceGuard Technologies LTD
registered in Israel will recruit several professional employees over the next
few months as part of the establishment of an R&D center in Israel.
LEASE AGREEMENTS & INVESTMENTS
The Company and our wholly owned Subsidiary, entered into agreements to lease
office space in Arlington VA, Manhattan NY and Petach-Tikva (Israel). Total
expected fees for the next 12 months are approximately $163,000.
The Company and our wholly owned Subsidiary plans to invest about $45,000 during
November and December 2005 in improvements in its new facilities. In addition,
computers and software's will be purchased to its development group, estimated
at about $30,000.
EMPLOYEES
Currently there are no full time or part-time employees of the Company (other
than our directors and officers who, at present, have not signed employment or
consulting agreements with us). We do expect to recruit number of part time and
full time developers over the next 12-month period and also enter into
employment or consulting agreements with our officers or directors.
GOING CONCERN
Due to being a development stage company and not generating any revenues, in the
consolidated financial statements for the year ended March 31, 2005 our auditors
included an explanatory paragraph regarding concerns about our ability to
continue as a going concern.
The continuation of our business is dependent upon us raising additional
financial support. The issuance of additional equity securities by us could
result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, or assuming loans would be available,
however, they will increase our liabilities and future cash commitments.
There are no assurances that we will be able to either (1) achieve a level of
revenues adequate to generate sufficient cash flow from operations; or (2)
obtain additional financing through either private placements, public offerings
and/or bank financing necessary to support our working capital requirements. To
the extent that funds generated from operations and any private placements,
public offerings and/or bank financing are insufficient, we will have to raise
additional working capital. No assurance can be given that additional financing
will be available, or if available, will be on terms acceptable to us. If
adequate working capital is not available we may not increase our operations.
These conditions raise substantial doubt about our ability to continue as a
going concern. The financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might be necessary should we be unable to
continue as a going concern.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Company does not expect that the adoption of recently issued accounting
pronouncements will have a significant impact on our results of operations,
financial position or cash flows.
10
ACCOUNTING POLICIES
The Securities and Exchange Commission ("SEC") defines "critical accounting
policies" as those that require application of management's most difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain and may change in
subsequent periods.
Not all of the accounting policies require management to make difficult,
subjective or complex judgments or estimates. However, the following policies
could be deemed to be critical within the SEC definition. We have historically
incurred losses, and through September 30, 2005 have incurred losses of
approximately $153,000.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. These
estimates and assumptions relate to recording net revenue, collectibility of
accounts receivable, and the realizability of other intangible assets, accruals,
income taxes, inventory realization and other factors. Management has exercised
reasonable judgment in deriving these estimates; however, actual results could
differ from these estimates. Consequently, change in conditions could affect our
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company considers all highly liquid interest-earning investments with a
maturity of three months or less at the date of purchase to be cash equivalents.
Investments with maturities beyond one year may be classified as short-term
based on their highly liquid nature and because such marketable securities
represent the investment of cash that is available for current operations. All
cash and short-term investments are classified as available for sale and are
recorded at market value using the specific identification method; unrealized
gains and losses (excluding other-than-temporary impairments) are reflected in
other income.
RESULTS OF OPERATIONS
Three months ended September 30, 2005 and 2004
Our company recorded losses of $56,402 and $2,053 for the three month periods
ending September 30, 2005 and 2004, respectively, and losses of $152,551 since
inception to September 30, 2005. The principal components of the losses were for
general and administrative expenses.
Operating expenses for the three months ending September 30, 2005 and 2004 were
$56,402 and 2,053, respectively.
Six months ended September 30, 2005 and 2004
Our company recorded losses of $62,906 and $3,151 for the six months ending
September 30, 2005 and 2004, respectively, and losses of $152,551 since
inception to September 30, 2005. The principal components of the losses were for
general and administrative expenses.
Operating expenses for the six months ending September 30, 2005 and 2004 were
$62,906 and $3,151, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2005, we had positive working capital of $72,749.
At September 30, 2005, our company's total assets were $173,576 which consisted
of cash and accounts receivables.
At September 30, 2005, our company's total liabilities were $100,827
We have had no revenues since inception.
11
We have no long-term debt and do not regard long-term borrowing as a good,
prospective source of financing.
RECENT ACCOUNTING PRONOUNCEMENTS
On June 7, 2005, FASB issued Statement No. 154, "Accounting Changes and Error
Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and
Statement No. 3, Reporting Accounting Changes in Interim Financial Statements"
("SFAS No. 154"). SFAS No. 154 changes the requirements for the accounting for,
and reporting of, a change in accounting principle. Previously, most voluntary
changes in accounting principles were required to be recognized by way of a
cumulative effect adjustment within net income during the period of the change.
SFAS No. 154 requires retrospective application to prior periods' financial
statements, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. SFAS No. 154 is effective for
accounting changes made in fiscal years beginning after December 15, 2005;
however, SFAS No. 154 does not change the transition provisions of any existing
accounting pronouncements. We do not believe adoption of SFAS No. 154 will have
a material effect on our consolidated financial position, results of operations
or cash flows.
In December 2004, FASB issued the revised SFAS No. 123, "Share-Based Payment"
("SFAS No. 123R"), which addresses the accounting for share-based payment
transactions in which we obtain employee services in exchange for (a) our equity
instruments or (b) liabilities that are based on the fair value of our equity
instruments or that may be settled by the issuance of such equity instruments.
SFAS No. 123R eliminates the ability to account for employee share-based payment
transactions using APB No. 25, and requires instead that such transactions be
accounted for using the grant-date fair value based method. SFAS No. 123R
provided for an effective date as of the beginning of the first interim or
annual reporting period that begins after June 15, 2005 (July 1, 2005 for us).
Early adoption of SFAS No. 123R is encouraged.
On April 15, 2005, the SEC approved a new rule, under which SFAS No. 123R is
effective for public companies at the beginning of their next fiscal year that
begins after June 15, 2005 (January 1, 2006 for us). SFAS No. 123R applies to
all awards granted or modified after the effective date of SFAS No. 123R. In
addition, compensation cost for the unvested portion of previously granted
awards that remain outstanding on the effective date of SFAS No. 123R shall be
recognized on or after the effective date, as the related services are rendered,
based on the awards' grant-date fair value as previously calculated for the pro
forma disclosure under SFAS No. 123.
We estimate that the cumulative effect of adopting SFAS No. 123R as of our
adoption date (January 1, 2006), based on the awards outstanding as of September
30, 2005, will not be material. This estimate does not include the impact of
additional awards, which may be granted, or forfeitures, which may occur after
September 30, 2005 and prior to our adoption of SFAS No. 123R. We expect that
upon the adoption of SFAS No. 123R, we will apply the modified prospective
application transition method, as permitted by SFAS No. 123R. Under such
transition method, upon the adoption of SFAS No. 123R, our financial statements
for periods prior to the effective date of SFAS No. 123R will not be restated.
The impact in the 2006 fiscal year and beyond will depend upon various factors,
among them our future compensation strategy.
In March 2005, the SEC issued Staff Accounting Bulletin 107, "Shared-Based
Payment" ("SAB 107"), which offers guidance on SFAS No. 123R. SAB 107 was issued
to assist companies by simplifying some of the implementation challenges of SFAS
No. 123R while enhancing the information that investors receive. SAB 107 creates
a framework that is premised on two overarching themes: (a) considerable
judgment will be required by companies to successfully implement SFAS No. 123R,
specifically when valuing employee stock options; and (b) reasonable
individuals, acting in good faith, may conclude differently on the fair value of
employee stock options. Key topics covered by SAB 107 include valuation models,
expected volatility and expected term. We will apply the principles of SAB 107
in conjunction with our adoption of SFAS No. 123R.
ITEM 3. CONTROLS AND PROCEDURES.
As required by Rule 13a-15 under the Exchange Act, as of the end of the period
covered by this report, being September 30, 2005, we have carried out an
evaluation of the effectiveness of the design and operation of our company's
disclosure controls and procedures. This evaluation was carried out under the
supervision and with the participation of our management, including our
principal executive and principal financial officer. Based upon that evaluation,
our principal executive and principal financial officer concluded that our
disclosure controls and procedures are effective as of the end of the period
covered by this report. There have been no significant changes in our internal
controls over financial reporting that occurred during our most recent fiscal
quarter that have materially affected, or are reasonably likely to materially
affect our internal controls over financial reporting.
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Disclosure controls and procedures are designed to ensure that information
required to be disclosed in our company's reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our president and chief executive officer as appropriate,
to allow timely decisions regarding required disclosure.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We know of no material, active or pending legal proceedings against us, nor are
we involved as a plaintiff in any material proceedings or pending litigation.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On August 24, 2005, we completed a private placement offering of 893,334 shares
our common stock, par value $0.001per share, to investors for an aggregate
purchase price of approximately $160,800 in reliance upon the exemption afforded
by the provisions of Regulation S under the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Item Number Exhibit
3.1 Certificate of Incorporation (incorporated by reference to the Company's
Registration Statement on Form SB-2, filed on June 18, 2002)
3.2 Certificate of Amendment to Certificate of Incorporation (incorporated by
reference to the Company's Form 8-K, filed on September 12, 2005)
3.3 Bylaws (incorporated by reference from our Registration Statement on Form
SB-2, filed on June 18, 2002).
10.1 Letter of Intent between Ibhas Technologies Inc. and Tracetrack
Technologies Ltd, dated August 15, 2005 (incorporated by reference to the
Company's Form 8-K, filed on August 22, 2005)
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TraceGuard Technologies, Inc.
By:
/s/ Meir Zucker
- ------------------------------------------
Meir H. Zucker, President, Chief Executive
Officer
(Principal Executive Officer)
Date: November 17, 2005
/s/ David Ben-Yair
- - --------------------------------------
David Ben-Yair, Chief Financial Officer
(Principal Financial Officer)
Date: November 17, 2005
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