U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: June 30, 2005
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: 33-22175
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Safetek International, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 75-2226896
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(State or other jurisdiction (I.R.S. Employer
or incorporation or organization) Identification No)
21 Ahavat Zion St. Tel Aviv, Israel 62153
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(Address of principal executive offices) (Zip Code)
972-3-546-3251
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(Issuer's telephone number)
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 issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
The number of shares outstanding of the Registrant's Common Stock, $0.0001
par value, as of the close of business on August 15, 2005 was 55,138,923,
SAFETEK INTERNATIONAL, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTERLY PERIOD ENDED June 30, 2005
INDEX
Page No. Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheet (Unaudited) at June 30, 2005 3
Consolidated Statements of Operations (Unaudited) for
the six and three months ended June 30, 2005 and 2004 4
Consolidated Statements of Cash Flows (Unaudited) for
the six months ended June 30, 2005 and 2004 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis or Plan of Operation 8
Item 3. Controls and Procedures 10
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits 12
SIGNATURES 13
SAFETEK INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 2005
(Unaudited)
ASSETS
Current Assets:
Cash $ 106,200
Prepaid Expenses 51,204
-------------
Total current Assets 157,404
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Total Assets $ 157,404
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses $ 205,989
Loans payable 69,646
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Total Current Liabilities 275,635
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Redeemable convertible preferred shares (4,648 shares,
par value $.0001, redeemable prior to February 21,2002
at $50 per share; 50,000,000 shares authorized) 232,400
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Total Liabilities 508,035
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Stockholders' Deficit:
Common stock, par value $.0001 per share
authorized 500,000,000 shares;
issued and outstanding 53,188,923 shares 5,319
Additional paid-in capital 3,236,805
Common Stocks Subscribed 125,000
Accumulated deficit (3,717,755)
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Total stockholders' deficit (350,631)
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Total Liabilities and Stockholders' Deficit $ 157,404
=============
See notes to consolidated financial statements
3
SAFETEK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months ended June 30, For the Three months ended June 30,
2005 2004 2005 2004
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(Restated) (Restated)
------------- ------------- ------------- -------------
Revenue $ -- $ -- $ -- $ --
------------- ------------- ------------- -------------
Operating Expenses:
Professional fees 58,725 17,700 46,725 17,700
Office & general expenses 17,445 -- 13,636 --
Payroll and related expenses 15,303 -- 15,302 --
------------- ------------- ------------- -------------
Total Operating Expenses 91,473 17,700 75,663 17,700
------------- ------------- ------------- -------------
Net (Loss) from Operations (91,473) (17,700) (75,663) (17,700)
Other Income (expenses):
Gain on debt forgiveness 268,618 -- 256,018 --
Other expense (179) -- (179) --
Finance Expense (280) -- (280) --
Interest Income 55 -- 55 --
------------- ------------- ------------- -------------
Net Income (loss) 176,741 (17,700) 179,951 (17,700)
------------- ------------- ------------- -------------
Net income (loss) per share -
Basic & diluted per
Common Shares $ 0.00 $ 0.00 $ 0.00 $ 0.00
============= ============= ============= =============
Weighted average number of
shares outstanding -
Basic and diluted 45,252,705 440,973 51,996,370 217,972
============= ============= ============= =============
See notes to consolidated financial statements
4
SAFETEK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six Months ended
June 30,
2005 2004
----------------------------
(Unaudited) (Unaudited)
(Restated)
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 176,741 $ (17,700)
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Adjustments to reconcile net loss
to net cash used in operating
activities:
Gain on Debt Forgiveness (268,618) --
Services in consideration of shares 179 17,700
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses (51,204) --
(Decrease) Increase in accounts payable
& accrued expenses 117,292 --
------------- -------------
Net cash used in operating activities $ (25,610) $ --
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 162,369 --
Payments on debenture (15,827) --
Payments on loans payable (14,732) --
------------- -------------
Net cash provided by financing activities 131,810 --
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INCREASE IN CASH 106,200 --
CASH - BEGINNING OF PERIOD -- --
------------- -------------
CASH - END OF PERIOD $ 106,200 $ --
============= =============
Cash Paid during the Quarter for:
Interest $ -- $ --
Taxes $ -- $ --
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Issuance of common stock for payment of debenture $ 119,200 $ --
============= =============
See notes to consolidated financial statements
5
SAFETEK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005
NOTE 1: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of Safetek
International, Inc. and subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles in the United States
for interim financial information and with instructions for Form 10-QSB and Item
310 of Regulation S-B. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Results of operations for the six months ended June 30, 2005
are not necessarily indicative of the results that may be expected for the
fiscal year ended December 31, 2005. The accompanying consolidated financial
statements should be read in conjunction with the consolidated financial
statements in the Company's annual report on Form 10-KSB for the fiscal year
ended December 31, 2004 and notes thereto filed with the Securities and Exchange
Commission in April 2005. The Consolidated Financial Statements are prepared in
accordance with generally accepted accounting principles in the United States of
America ("US GAAP"). These statements include the Company and its Subsidiaries.
All material intercompany balances and transactions have been eliminated.
ORGANIZATION AND DESCRIPTION OF BUSINESS
Safetek International, Inc. (the "Company") was incorporated in April 1988 under
the name Theoretics, Inc. The Company reorganized in May 2001 for the purpose of
providing embryonic companies with good concepts and promising patented ideas.
As of April 15, 2005, Dr. Goldstein was appointed as the Company's Chairman,
Chief Executive Officer and Secretary, and since then the Company focuses on
screening new technologies in the life sciences and health care fields. On May
17, 2005, the company established an Israeli wholly owned subsidiary under the
laws of the State of Israel, called "Oriens Life Sciences LTD. (the
"Subsidiary"), to serve as a platform for the Company to screen the Israeli
high-tech industry and identify, analyze, and acquire or invest in new
technologies in the life sciences and healthcare.
Subsequent to June 30, 2005, the Company signed 4 term sheets to purchase
technologies in the life science field. The Company is in a process of raising
capital to finance the obligations and the development costs that it will incur
if and when it will consummate the transactions contemplated.
As of June 30, 2005, the Company has an accumulated deficit of $3,717,755. Our
prospects must therefore be evaluated in light of the problems, expenses, delays
and complications associated with the financial situation of the Company.
The Company is in a process of raising funds through an ongoing private
placement to finance its operations, including without limitation, the
completion of the above described prospective transactions, and other potential
technology purchases. The Company requires funds in order to finance its current
activity and for commencing development until profitable results will be
achieved.
USE OF ESTIMATES
Our financial statements and accompanying notes have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires our Management to make
estimates, judgments and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. We continually evaluate the accounting
policies and estimates we use to prepare the consolidated financial statements.
We base our estimates on historical experiences and assumptions believed to be
reasonable under current facts and circumstances. Actual amounts and results
could differ from these estimates made by Management. We do not participate in,
nor have we created, any off-balance sheet special purpose entities or other
off-balance sheet financing. In addition, we do not enter into any derivative
financial instruments for speculative purposes or use derivative financial
instruments primarily for managing our exposure to changes in interest rates.
RESTATETMENT
The comparable numbers for the three and six months ended June 30, 2004 were
restated as a result of a typographical error in those periods. Accordingly, the
Statements of Operations and Cash Flows now reflect $17,700 instead of $1,700.
INCOME PER COMMON SHARE
Basic and diluted income per share of common stock for the quarter ended June
30, 2005 is based on the weighted average number of shares outstanding of
45,252,705.
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NOTE 2: CASH EQUIVALENTS
The Company and its subsidiary considers all highly liquid investments, which
include short-term bank deposits (up to three months from date of deposit) that
are not restricted as to withdrawal or use, to be cash equivalents.
NOTE 3 - PREPAID EXPENSES
Prepaid Expenses consist of prepaid insurance which is expensed ratably over the
term of the policy (12 months).
NOTE 4: ACCOUNT PAYABLE
As of June 30, 2005 the accounts payable includes $68,696 that was incurred in
the years 2001 and 2002. To the Company's knowledge no claims have been made
against the Company with respect with those debts. Management is attempting to
find out whether those debts are still in force.
As of June 30, 2005, the Company was informed by one of its vendors that it does
not owe the vendor any monies. Accordingly, the Company wrote off $100,000 of
the account payable balance.
Subsequent to June 30, 2005, the Company received waivers from the former
debentures holders whereby each of the former debenture holders acknowledged
that they had no claims against the Company, including any rights for accrued
interest. Accordingly, the Company wrote off $64,318 of accrued interest.
The balance as of June 30, 2005 includes a $10,000 consulting fee, in connection
with the Company's fund raising activities.
NOTE 5 - LOANS PAYABLE
The Company has a total of $69,646 of loan payable as of June 30, 2005 which is
due on demand and is non-interest bearing.
NOTE 6 - SUBORDINATED CONVERTIBLE REDEEMABLE DEBENTURE
The subordinated convertible redeemable debenture was in default as of March 31,
2005, but the holders of the debentures agreed to extend the due date until June
30, 2005. During the three month period ended March 31, 2005, $30,227 was paid
on this debenture in cash and issuance of 1,800,000 shares of common stock. The
balance of $104,800 was paid on April 8, 2005 with the issuance of 13,100,000
shares of common stock, when the shares were valued at $0.001 per share. As of
said date, the subordinated convertible redeemable debentures were fully paid.
As a result of the payment, the Company recognized gain on debt forgiveness for
the period ended June 30, 2005.
NOTE 7 - COMMON STOCK
During the three month period ended June 30, 2005 the Company issued 179,000
shares of its common stock valued at $0.001 per share to a consultant in
consideration for services rendered. The amount was recognized as an expense.
The Company is raising capital through an ongoing private placement of units.
During the three month period ended June 30, 2005, the Company received an
aggregate of $125,000 in consideration for the subscription of 1,250,000 units.
NOTE 8 - GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As shown in the accompanying financial
statements, the Company has a history of losses with an accumulated deficit from
inception through June 30, 2005 of $3,717,755. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's continuation as a going concern is dependent upon its ability to
ultimately attain profitable operations, generate sufficient cash flow to meet
its obligations, and obtain additional financing as may be required. The outcome
of these uncertainties cannot be assured.
NOTE 9 - SUBSEQUENT EVENTS
As part of its effort to raise funds to finance its business activity,
subsequent to June 30, 2005 the Company issued 1,950,000 units to investors
through an ongoing private placement of units (the "Units") for $0.10 per Unit.
Each Unit consists of one share of common stock, one Class A warrant giving the
holder the right to purchase one share of stock at $1.00,
7
which is exercisable for one year from the date of issuance, and one Class B
warrant giving the holder the right to purchase one share of stock for $1.50,
which is exercisable for 2 years from the date of issuance.
1,250,000 of the units were issued for a sum of $125,000 that was received by
the Company during the three months ended June 30, 2005.
Item 2. Management's Discussion and Analysis or Plan of Operations.
Forward-Looking Statements
The following discussion should be read in conjunction with the financial
statements of Safetek International, Inc. (the "Company"), which are included
elsewhere in this Form 10-QSB. This Quarterly Report on Form 10-QSB contains
forward-looking information. Forward-looking information includes statements
relating to future actions, future performance, costs and expenses, interest
rates, outcome of contingencies, financial condition, results of operations,
liquidity, business strategies, cost savings, objectives of management, and
other such matters of the Company. The Private Securities Litigation Reform Act
of 1995 provides a "safe harbor" for forward-looking information to encourage
companies to provide prospective information about themselves without fear of
litigation so long as that information is identified as forward-looking and is
accompanied by meaningful cautionary statements identifying important factors
that could cause actual results to differ materially from those projected in the
information. Forward-looking information may be included in this Quarterly
Report on Form 10-QSB or may be incorporated by reference from other documents
filed with the Securities and Exchange Commission (the "SEC") by the Company.
You can find many of these statements by looking for words including, for
example, "believes," "expects," "anticipates," "estimates" or similar
expressions in this Quarterly Report on Form 10-QSB or in documents incorporated
by reference in this Quarterly Report on Form 10-QSB. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information or future events.
The Company has based the forward-looking statements relating to the Company's
operations on management's current expectations, estimates, and projections
about the Company and the industry in which it operates. These statements are
not guarantees of future performance and involve risks, uncertainties and
assumptions that the Company cannot predict. In particular, the Company has
based many of these forward-looking statements on assumptions about future
events that may prove to be inaccurate. Accordingly, the Company's actual
results may differ materially from those contemplated by these forward-looking
statements. Any differences could result from a variety of factors, including,
but not limited to general economic and business conditions, competition, and
other factors.
Plan of Operation
As of April 15, 2005, Dr. Goldstein was appointed as the Company's Chairman,
Chief Executive Officer and Secretary, and since then the Company focuses on
screening new technologies in the life sciences and health care fields. As of
May 17, 2005, the Company established a wholly owned subsidiary under the laws
of Israel, called "Oriens Life Sciences (Israel) LTD. (the "Subsidiary"), to
serve as a platform for the Company to screen the Israeli high-tech industry and
identify, analyze, and acquire or invest in new technologies in the life
sciences and healthcare.
On July 5, 2005 the Company entered into a Term Sheet with NanoDiagnostics, Inc.
("NanoDiagnostics"), a Delaware company, and Judith Seligman ("Seligman"), who
is the principal of NanoDiagnostics.
NanoDiagnostics is engaged in developing the ability to extract from blood
samples certain cells known as Pluripotent Stem cells. The Company agreed that
at closing, it would invest in NanoDiagnostics an aggregate of $650,000 in
consideration for 70% of NanoDiagnostics' issued and outstanding shares on a
fully diluted basis. On July 6, 2005, $15,000 was paid to NanoDiagnostics. The
Company and NanoDiagnostics have mutually agreed to terminate the transaction
contemplated by the term sheet.
On August 9, 2005, the Company and Matrix Pharma, Inc., a Delaware Corporation
("Matrix"), entered into a term sheet pursuant to which Matrix would, at
closing, grant the Company an exclusive license in all of Matrix's intellectual
property rights in its Thrombin inhibition compounds. The Company and Matrix
agreed to jointly develop a research and development program for the development
of products based on the Thrombin inhibition compounds and to obtain their
approval from the U.S. Food and Drug Administration. At the closing, the Company
shall pay to Matrix $60,000 as an advance towards the funding of the first stage
of the research and development program. In further consideration for the
license grant and its services rendered to the Company in connection with the
research and development program, Matrix shall be paid certain specified amounts
if the Company successfully achieves each of certain specified milestones with
respect to the development of products based on the license granted to the
Company. Matrix agreed to an exclusivity period until September 30, 2005. It is
anticipated that the closing of such transaction will take place by September
30, 2005.
On August 10, 2005, the Company and Serapis Technologies Inc., a Delaware
corporation and Serapis Biotech Ltd., a subsidiary of Serpais ("Serapis"),
entered into a Term Sheet pursuant to which, the Company would, at closing,
purchase from Serapis its intellectual property relating to chemical compounds
designed to affect membrane receptor activity. The Company will also be granted
8
a one-year option to purchase from Serapis certain equipment. In consideration
for such assets, Serapis and certain of its principals will receive from the
Company a specified amount of cash and shares of the common stock of the
Company. Serapis agreed to an exclusivity period until September 30, 2005. It is
anticipated that the closing of such transaction will take place within sixty
days after the date of the term sheet.
On August 10, 2005, the Company, Cygnus Biotechnology Inc., a Delaware
corporation ("Cygnus"), and Cygnus Biotech Israel Ltd., a subsidiary of Cygnus
(the "Cygnus Subsidiary", and together with the "Cygnus Companies") entered into
a term sheet pursuant to which the Cygnus Companies would, at closing, grant to
the Company exclusive licenses relating to their intellectual property in their
research regarding (1) stem cells, (2) specific clinical applications or
diseases in areas of cardiovascular diseases, and (3) all other areas of
cardiovascular diseases. Such licenses shall be perpetual, except that the
license in areas of cardiovascular diseases not related to specific clinical
applications or diseases shall expire upon the occurrence of either of the
following within 12 months after the closing: (1) the Company has not committed
to finance a budget of at least $1,500,000 for a joint research and development
project between the Company and Cygnus; or (2) the Company has not issued a
specified amount of shares of its common stock to certain of Cygnus's
principals. The Company and Cygnus also agreed to enter into an agreement for
the provision of research and development services with respect to the licensed
intellectual property, with all rights in the intellectual property developed
belonging to the Company. In consideration for such licenses, Cygnus and certain
of its principals will receive from the Company a specified amount of cash and
shares of the common stock of the Company. They agreed to an exclusivity period
until September 30 2005. It is anticipated that the closing of such transaction
will take place within sixty days after the date of the Cygnus term sheet.
Each of the foregoing contemplated transactions is conditioned upon the
execution and delivery of definitive agreements between the Company and the
respective sellers or licensors, completion of due diligence to the satisfaction
of the parties, the receipt of any required approvals and the authorization by
the respective Board of Directors. The Company cannot give any assurances that
any of the contemplated transactions will close.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS AND THE SIX MONTHS ENDED JUNE 30, 2005 TO THE
THREE MONTHS AND THE SIX MONTHS ENDED JUNE 30, 2004.
Revenues
For the three months and the six months ended June, 2004 and 2005, there were no
revenues.
General and Administrative Expenses
For the six months ended June 30, 2005, our general and administrative expenses
were $91,473 as compared to $17,700 for the six months ended June, 2004. Our
expenses increased mainly as a result of our efforts to screen and to scan
technologies in the life science filed and to create a wide base for research
and development activity. The main increase is a result of professional fees.
For the three months ended June 30, 2005 our general and administrative expenses
were $75,663 as compared to $17,700 for the three months ended June, 2004.
Other Income
For the six months ended June 30, 2005, we recorded a $ 104,300 gain on debt
forgiveness on the exchange of $119,200 of debentures for shares of our common
stock. As a result of the exchange, the Company recognized a gain of $12,600 in
the period ended March 31, 2005 and a gain of $91,700 in the period ended June
30, 2005.
Also included in gain on debt forgiveness for the three and six months ended
June 30,2005, is the write off of $100,000 of accounts payable to a single
vendor who confirmed to the Company that the amount was not owed. As of June 30,
2005 the Company received waiver letters from the debentures holders stating
that they have no demand or claim related to the Debentures including the rights
for interest payments that were accrued in previous periods. Accordingly, the
Company wrote off and recognized gain of $64,318 in accrued interest.
Net Income
During the six months period ended June 30, 2005, we reported a net income of
$176,741 compared to a net loss of $17,700 for the six months period ended June
30, 2004. The difference is mainly attributable to gain on debt forgiveness.
9
Liquidity and Capital Resources
Net cash provided by financing activities for the six months ended June 30, 2005
were mainly from the receipt of $125,000 for the subscription of 1,250,000 units
and $37,369 from a stock issuance.
Net cash used in operating activities were mainly a result of increase in the
Company business activity and therefore in account payable and accrued expenses.
As of June 30, 2005 we had a stockholders' deficit of $350,631 and an
accumulated deficit of $3,717,755.
Our balance sheet as of June 30, 2005 reflects total liabilities of $508,035. We
currently have no revenues and operations, and we can not estimate whether the
funds we are raising will finance all our operations. As of August 11, 2005, we
have cash on hand of approximately $25,000 which we received for unit
subscriptions. This amount is inadequate for us to effectuate our planned
activities during the next 12 months. Accordingly, we may be unable to continue
operations in the future as a going concern. Our plans to deal with this
uncertainty include raising additional capital or entering into a strategic
arrangement with a third party. There can be no assurance that our plans can be
realized. We have not identified any potential sources of debt or equity
financing and there can be no assurance that we will be able to obtain
additional financing if and when needed or that, if available, financing will be
on acceptable terms. Additional equity financings may be dilutive to holders of
our common stock and debt financing, if available, and may involve significant
payment obligations and covenants that restrict how we operate our business.
The Company intends to finance its operations by proceeds received from an
ongoing private placement of units for $0.10 per unit, each unit consisting of
one share of common stock, one Class A warrant giving the holder the right to
purchase 1 share of stock at $1.00, which is exercisable for 1 year from the
date of issuance, and one Class B warrant giving the holder the right to
purchase 1 share of stock for $1.50, which is exercisable for 2 years. As of
June 30, 2005, the Company received an aggregate of $125,000 in advance as
consideration for the sale of 1,250,000 units. The Company had $106,200 on hand
as of June 30, 2005 and is not sure whether the proceeds received from the
private placements and additional capital that the Company is planning to raise
in the future, will be sufficient to satisfy the Company's cash requirements for
the next twelve (12) months.
Off Balance Sheet Arrangements
The Company does not have any off balance sheet arrangements that are reasonably
likely to have a current or future effect on its financial condition, revenues,
results of operations, liquidity or capital expenditures.
Going Concern
Certain conditions raise substantial doubt about the Company's ability to
continue as a going concern beyond the next twelve (12) month period. The
Company has an accumulated deficit as of June 30, 2005 of $3,717,755,. The
Company needs to obtain additional financing to fund payment of obligations and
to provide working capital for operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our financial statements and accompanying notes have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires our Management to make
estimates, judgments and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. We continually evaluate the accounting
policies and estimates we use to prepare the consolidated financial statements.
We base our estimates on historical experiences and assumptions believed to be
reasonable under current facts and circumstances. Actual amounts and results
could differ from these estimates made by Management. We do not participate in,
nor have we created, any off-balance sheet special purpose entities or other
off-balance sheet financing. In addition, we do not enter into any derivative
financial instruments for speculative purposes and use derivative financial
instruments primarily for managing our exposure to changes in interest rates.
Item 3. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the United States Securities
and Exchange Commission. Our Chief Executive Officer has reviewed the
effectiveness of our "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of the end of
the period covered by this report and has concluded that the disclosure controls
10
and procedures are effective to ensure that material information relating to the
Company is recorded, processed, summarized, and reported in a timely manner.
There were no significant changes in our internal controls or in other factors
that could significantly affect these controls subsequent to the last day they
were evaluated by our Chief Executive Officer.
Changes in Internal Controls over Financial Reporting
There have been no changes in the Company's internal control over financial
reporting during the last quarterly period covered by this report that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
Part II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
We are not a party to any material legal proceeding.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company is raising capital through a private placement of units, each unit
consisting of one share of common stock, one Class A warrant giving the holder
the right to purchase 1 share of stock at $1.00, which is exercisable for 1 year
from the date of issuance, and one Class B warrant giving the holder the right
to purchase 1 share of stock for $1.50, which is exercisable for 2 years from
the date of issuance. Each unit is being offered for $0.10 per unit. As of June
30, 2005, the Company has received subscriptions totaling an aggregate of
$125,000 representing the issuance of 1,250,000 units to investors and 100,000
units as a fee with connection with the fund raising. The units are being
offered and issued pursuant to Regulation S promulgated by the Securities and
Exchange Commission.
During the three months period ended June 30, 2005 the Company issued 179,000
shares of its common stock to a consultant in consideration for services
rendered. The issuance was in a transaction not involving a public offering and
was issued without registration in reliance upon the exemption from registration
pursuant to Regulation S promulgated by the Securities and Exchange Commission.
During the six months ended June 30, 2005, the Company issued 14,900,000 shares
in exchange for its outstanding debentures. The shares issued upon the
conversion of the debentures were sold or issued in transactions not involving
a public offering and were issued without registration in reliance upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended, and Regulation D and Regulation S Promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
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ITEM 6. EXHIBITS
31.1 Certification of Principal Executive Officer and Principal Financial
Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer and Principal Financial
Officer 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..
Signature Capacity Date
/s/ Dr. Shay Goldstein Chief Executive Officer, Chairman
- ------------------------- and Secretary August 16, 2005
13