|
As
filed with the Securities and Exchange Commission on August 5,
2013 |
Registration
No. 333- |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
LASERLOCK
TECHNOLOGIES, INC.
(Exact
name of registrant as specified in its charter)
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Nevada |
6794 |
23-3023677 |
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(State
or other jurisdiction of |
(Primary
Standard Industrial |
(I.R.S.
Employer |
incorporation
or organization) |
Classification
Code Number)
|
Identification
Number) |
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3112
M Street NW |
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Washington,
D.C. 20007 |
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(202)
400-3700 |
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(Address,
including zip code and telephone number, including area code, of
registrants principal executive
offices) |
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Neil
Alpert |
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President
and Chief Executive Officer |
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LaserLock
Technologies, Inc. |
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3112
M Street NW |
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Washington,
D.C. 20007 |
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(202)
400-3700 |
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(Name,
address, including zip code and telephone number, including area code, of
agent for service) |
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Copies
to:
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|
Justin
W. Chairman, Esq.
Morgan,
Lewis & Bockius LLP
1701
Market Street
Philadelphia,
Pennsylvania 19103
(215)
963-5000 |
Approximate
date of commencement of proposed distribution: As soon as
practicable after the effective date of this registration
statement.
If any of the securities
being registered on this form are to be offered on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933, check the following
box. o
If this Form is filed to
register additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
If this Form is a
post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. o
If this Form is a
post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated
filer o |
Accelerated
filer o |
Non-accelerated
filer o |
Smaller reporting
company x |
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(Do
not check if a smaller reporting company) |
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CALCULATION
OF REGISTRATION FEE |
Title
of Each Class of
Securities
to be Registered |
|
Amount
to be
Registered(1) |
Proposed
Maximum
Offering
Price Per
Share
(2) |
Proposed
Maximum
Aggregate
Offering
Price |
Amount
of
Registration
Fee |
Common
Stock, $0.001 par value per share |
|
44,444,444 |
$0.15 |
$6,666,667 |
$1,030.58 |
Warrants(3) |
|
87,777,777 |
-- |
-- |
(3) |
Shares
of Common Stock, $0.001 par value per share, underlying
Warrants |
|
87,777,777 |
$0.15 |
$13,166,667 |
$2,035.39 |
Total(4) |
|
132,222,221 |
$0.15 |
$19,833,333 |
$3,065.97 |
(1) |
Pursuant
to Rule 416 under the Securities Act of 1933, as amended (the Securities
Act),the number of shares of common stock registered hereby shall also
include an indeterminate number of additional shares of common stock
issuable as a result of stock splits, stock dividends, recapitalizations
or reorganizations in accordance with Rule 416. |
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|
(2) |
Estimated
solely for the purpose of calculating the registration fee pursuant to
Rule 457(c) under the Securities Act, based upon the average of the high
and low prices of the Registrants common stock on Pink
OTC Markets, Inc. on July 29, 2013. |
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|
(3) |
Pursuant
to Rule 457(g) under the Securities Act, no separate registration fee is
required for the Warrants because the Registrant is registering these
securities in the same Registration Statement as the underlying common
stock to be offered pursuant thereto. |
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|
(4) |
Excludes
warrants. |
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this preliminary prospectus is not
complete and may be changed. The distributing stockholder may not
distribute these securities until the registration statement filed with
the Securities and Exchange Commission is declared effective. This
preliminary prospectus is not an offer to sell these securities, and we
are not soliciting offers to buy these securities in any jurisdiction
where the offer or sale is not
permitted. |
SUBJECT TO COMPLETION, DATED AUGUST 5, 2013
PRELIMINARY PROSPECTUS
LaserLock
Technologies, Inc.
44,444,444 Shares of Common Stock
Warrants
to Purchase up to 87,777,777 Shares of Common Stock
87,777,777 Shares of Common Stock Underlying Warrants
This
prospectus relates to the distribution by our stockholder and warrantholder,
VerifyMe, Inc., a Texas corporation (VerifyMe) to its stockholders for no
consideration, of
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● |
44,444,444 shares of our common stock, $0.001 par value |
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warrant(s)
to purchase up to 87,777,777 shares of our common stock;
and |
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● |
up
to 87,777,777 shares of our common stock that are issuable upon the
exercise of the warrants offered
hereunder. |
We will
receive no proceeds from the distribution.
Our
common stock trades on Pink OTC Markets, Inc. under the ticker symbol LLTI.PK.
On July 29, 2013, the last reported sale price for our common stock was $0.15 per
share. The warrants being offered by this prospectus, which are
registered for sale under the registration statement of which this prospectus
forms a part, are not currently traded on the Pink OTC Markets, Inc. or
on any other exchange, and we have no present intention of causing them to be so
traded.
We are
not selling any shares of common stock or warrants in this offering and
therefore will not receive any proceeds from the distribution of common stock
and warrants hereunder.
Investing
in our common stock involves risks. See Risk Factors beginning on page
9.
No
underwriter or broker-dealer has been engaged to facilitate the distribution of
our shares of common stock and warrants in this offering.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is August 5, 2013.
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TABLE
OF CONTENTS |
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Page |
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ABOUT
THIS PROSPECTUS |
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i |
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PROSPECTUS
SUMMARY |
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2 |
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RISK
FACTORS |
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9 |
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USE
OF PROCEEDS |
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15 |
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DETERMINATION
OF OFFER PRICE |
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16 |
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DISTRIBUTING
STOCKHOLDER |
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17 |
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PLAN
OF DISTRIBUTION |
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18 |
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DESCRIPTION
OF CAPITAL STOCK |
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19 |
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DESCRIPTION
OF PROPERTY |
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22 |
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LEGAL
PROCEEDINGS |
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23 |
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MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS |
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24 |
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DIRECTORS
AND OFFICERS |
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33 |
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EXECUTIVE
COMPENSATION |
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39 |
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
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41 |
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TRANSACTIONS
WITH RELATED PERSONS |
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43 |
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LEGAL
MATTERS |
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44 |
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EXPERTS |
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45 |
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DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION |
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46 |
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SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS |
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47 |
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WHERE
YOU CAN FIND MORE INFORMATION |
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48 |
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FINANCIAL
STATEMENTS |
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F-1 |
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ABOUT
THIS PROSPECTUS
All
references in this prospectus to LaserLock, the Company, we, us, our
and similar references mean LaserLock Technologies, Inc., unless we state
otherwise or the context otherwise requires.
You
should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information that is
different. We are not making any offer to sell these securities in
any jurisdiction where the offer is not permitted. The information in
this prospectus is accurate only as of the applicable dates, regardless of the
time of delivery of this prospectus or any issuance or sale of any
securities. Our business, financial condition, results of operations
and prospects may have changed since those dates.
For
investors outside the United States: We have not taken any action to permit a
public offering of the shares of our common stock or the possession or
distribution of this prospectus in any jurisdiction where action for that
purpose is required, other than the United States. You are required
to inform yourselves about and to observe any restrictions relating to this
offering and the distribution of this prospectus.
PROSPECTUS
SUMMARY
The
following summary provides an overview of certain information about our company
and the offering and may not contain all the information that may be important
to you. This summary is qualified in its entirety by and should be read together
with the information contained in other parts of this prospectus. You should
carefully read this entire prospectus before making a decision about whether to
invest in our securities.
Company
Overview
We are a
development stage company.
Most
recently, following initial development and commercialization, we invested in
developing new proprietary color change inks that we believed would allow us to
penetrate broader markets and result in increased revenues. During the past
eight years, we have refined our technologies and their applications and now
have what we believe to be one of the most cost effective and efficient
authentication technologies available. Our most recent technology takes
advantage of the new ubiquitous energy efficient fluorescent lighting to change
the color of ink, resulting in numerous potential new applications ranging from
credit cards to drivers licenses, passports, stock certificates, clothing
labels, currency, ID cards, and tax stamps. The technologies can also be used to
protect DVDs, apparel, pharmaceuticals, and virtually any other physical
product.
Similar compact fluorescent
lighting is used in most color photocopiers and color scanners so that any
document which incorporates our technology cannot be copied and/or reproduced on
a color copier or color scanner because the fluorescent lighting in the
copier/scanner changes the color of the ink and the resulting photocopy will
therefore be different from the original.
We are a
security technology company that delivers product and document authentication.
We plan to continue to develop and market technologies in a variety of
applications in the security fields.
We
believe that the technologies we own will have applications in various aspects
of corporate security - from counterfeit identification to employee or customer
monitoring. Potential applications of our technologies are available in
different types of products and industries including gaming, apparel, tobacco,
perfume, compact discs, pharmaceuticals, event and transportation tickets,
drivers licenses, insurance cards, passports, computer software, DVDs, and
credit cards. We intend to generate sales through licenses of our technology or
through direct sales of our technology to end-users.
We have
filed a total of eight patent applications relating to our technology, five of
which have been issued, and three of which are provisional patents. These
patents seek to accomplish non-intrusive document and product authentication in
order to reduce losses caused by unpermitted document reproduction or by product
counterfeiting. The technologies involve the utilization of invisible or color
shifting/changing inks, which are compatible with todays printing machines. The
inks may be used with certain printing systems such as offset, flexographic,
silkscreen, gravure, and laser. Based upon our experience, we believe
that the ink technologies may be incorporated into various existing
manufacturing processes.
We have
a total of eight full-time employees.
Anti-Counterfeiting
Technologies and Products
Recent
developments in copying and printing technologies have made it easier to
counterfeit a wide variety of documents and products. Currency, lottery tickets,
gift certificates, credit cards, event and transportation tickets, casino slot
tickets, and travelers checks are all susceptible to counterfeiting. We believe
that losses from such counterfeiting have increased substantially with
improvements in counterfeiting technology. Counterfeiting has long caused losses
to manufacturers of brand name products, and we believe that these losses have
increased as the counterfeiting of labeling and packaging has become
easier.
We
believe that our document authentication technologies may be useful to
businesses desiring to authenticate a wide variety of printed materials and
products. Our technologies include (1) a technology utilizing invisible ink that
can be revealed by use of laser light for authentication purposes, (2) an inkjet
ink technology, which allows invisible codes to be printed, and (3) a color
shifting technology that is activated by certain types of lights. All of those
technologies are intended to be substantially different than pen systems that
are currently in the marketplace. Pen systems also rely on invisible ink that is
activated by a special marker. If the item is an original and not an invisible
print, then the ink will be activated and show a visible mark as a different
color than on an illegitimate copy. We believe that our technologies are
superior to the pen system technology because our laser and color shifting
technologies will not result in a permanent mark on the merchandise. Permanent
marks generally lead to the disposal of the merchandise or its sale as a
second rather than best-quality product. In the case of rubbed ink technology,
no special tools are required to distinguish the counterfeit from the genuine.
Other possible variations of our laser-based technology involve multiple color
responses from a common laser, visible marks of one color that turn another
color with a second laser, or visible and invisible marks that turn into a
multicolored image. These technologies provide users with the ability to
authenticate products and detect counterfeit documents. Applications include the
authentication of documents having intrinsic value, such as currency, checks,
travelers checks, gift certificates and event tickets, and the authentication
of product labeling and packaging. When applied to product labeling and
packaging, our technologies can be used to detect counterfeit products with
labels and/or in packaging that do not contain the authenticating marks
invisibly printed on the packaging or labels of legitimate products, as well as
to combat product diversion (i.e., the sale of legitimate products through
unauthorized distribution channels or in unauthorized markets). We believe that
our technologies also could be used in a manner that permits manufacturers and
distributors to track the movement of products from production to ultimate
consumption when coupled with proprietary software.
We have
focused on the widespread problem of counterfeiting in the gaming industry. We
have incorporated our technology into traditional gaming accessories such as
playing cards, casino chips, and dice as well as gaming-based machinery such as
slot machines with cashless gaming systems. This is accomplished during the
regular manufacturing and printing processes. Our products use ink that is
incorporated into dice and casino chips that can be viewed with a laser to
reveal the authenticity of the item. These covert authenticating technologies
are also intended to be marketed to manufacturers of compact discs (CDs) to
identify CDs produced by those manufacturers. We believe that this technology
can provide CD manufacturers and publishers with a tool to combat the
significant losses sustained as a result of illegal pirating and counterfeiting
of data, music and videodiscs.
Other
possible variations of our technologies involve multiple color responses from a
common laser, visible marks of one color that turn another color with a laser or
other generally available light sources or visible and invisible marks that turn
into a multicolored image. These technologies provide users with the ability to
authenticate documents and detect counterfeit products.
Industry
Background
The U.S.
is projected to remain the largest single consumer of security services and
products in the world. One of the most important new areas of expansion is in
the area of authentication, that is the act of confirming that some object--be
it currency, passports, casino chips, credit cards, stock certificates,
pharmaceuticals, stamps, identification cards or lottery tickets, to name just a
few examples--is real and not a forgery.
With the
advent of the digital age, including the color copier and other new technologies
and templates available on the web, thieves and forgers have been able to make
nearly identical copies of almost any printed item, which has resulted in major
financial losses to business and, importantly, has compromised security at
critical installations.
One
particular problem is that criminal and civil penalties for forgery, fraud, and
counterfeiting are relatively light and many of those engaging in such
activities are overseas and far from the reach of U.S. law enforcement.
Therefore, the affected industries have little choice other than to make their
products more formidable, often with multiple layers of defense, adopting what
is known as multifactor authentication strategies.
While
some currency and credit cards have introduced holograms, seals, and embedded
strips in order to add a level of protection, most such methodologies are
expensive and, in some cases, time-consuming in the production process. In other
instances, such as when printing cigarette tax stamps or hundreds of millions of
pieces used in a popular restaurant chains contest game pieces, the
authentication process must be extremely inexpensive and easy to use or it will
be rejected. There is no commercially viable way, for example, that a hologram,
costing around five cents a copy, can be introduced to verify tax stamps. More
than half the national currencies in the world, moreover, lack even one layer of
protection and can easily be counterfeited.
Authentication
Industry Overview
Currency,
passports, ID cards and other high-value documents have historically been
subject to counterfeiting and forgery and continue to be today. In the last 15
years, the counterfeiting of goods has increased significantly on a global basis
and has become a major threat to brand owners in most industries. Major brands,
whether national or multinational, are being systematically attacked by
sophisticated criminals and terrorists. Furthermore, counterfeiting and forgery
have filtered down to the level of lone criminals due to the availability of
digital scanning and copying technologies.
The
industry is segmented into four general categories:
1. |
Optical
technologies - use of light, i.e.
holograms; |
2. |
Electronic
- magnetic strips and smart cards; |
3. |
Biotechnologies
- uses characteristics of biological proteins such as antibodies, enzymes
and DNA; and |
4. |
Chemical
technologies - includes photochromic (light-reactive) and thermochromic
(heat-reactive) inks. |
We
operate in the chemical technologies and security ink sectors of the industry.
Products in this industry, when exposed to either heat or light, change color,
and when exposed again the color reverts to the original. Generally, the effect
is reversible as often as required. Inks have also been developed that are
invisible to the human eye but which can be read by bar-code scanners. These
have been used in the fragrance and pharmaceutical industries to authenticate
products. Other reactive inks change color when brought into contact with
specific substances, for example, ink from a felt-tipped pen.
In April
2010, the United States Government Accounting Office (the GAO) issued a report
to Congress entitled, INTELLECTUAL PROPERTY Observations on Efforts to Quantify
the Economic Effects of Counterfeit and Pirated Goods. In that report the GAO
estimated that the total economic value of intellectual property seizures by
Customs and Border Protection during 2004 to 2009 was $1.12 billion. This was
based only on imported goods and not goods produced in the United
States.
The
Organization for Economic Cooperation and Development estimates that the value
of counterfeiting losses to its members is approximately $250 billion per year.
They also concluded that millions of consumers are risking their lives
unknowingly by using unsafe and ineffective counterfeit products.
The
Opportunity
As
counterfeiting continues to increase and losses to manufacturers and owners
having their intellectual property rights compromised continue to escalate, we
believe that such compromised entities will seek better technologies to minimize
their exposure. These technologies, however, must also be cost
effective.
Our
Solution
In the
area of document and product authentication and serialization, we offer the
following products:
1.
RainbowSecureTM
2.
LaserXposeTM
3.
InkJetSecureTM
4.
SecurDoxTM
5.
SecureLightTM and SecureLight+TM
RainbowSecureTM Technology. This was our first technology to
be patented. It combines an invisible ink with a proprietary tuned laser to
enable counterfeit products to be exposed. It has been widely accepted in the
gaming industry where the technology is used by casinos to protect their chips,
dice, and playing cards from fraud. The technology also features a unique double
layer of security which remains entirely covert at all times and provides
licensees with additional protection. RainbowSecureTM is particularly well-suited
to closed and controlled environments, such as casinos that want to verify
transactions within a specific area, and are not interested in outside public
verification. The technology is also appropriate for anti-counterfeit protection
of tags and labels in the apparel industry, where it can be applied to a variety
of different materials.
LaserXposeTM
Technology. This is a patented technology which combines overt and covert
anti-counterfeiting technology in one printing ink. It offers customers the
ability to have two layers of security within a product while not having to
disclose the covert feature if desired. It also is easily applied on most
commercial printing presses.
InkJetSecureTM Technology. This technology involves an
innovative method for coating pigments so that they can be used in high-speed
continuous inkjet printers without clogging the submicron nozzles of the
printers. The application for InkJetSecureTM is to invisibly mark and track
individual products through the distribution chain where products are often
illegally diverted. The technology is utilized in combination with proprietary
tracking software.
SecurDoxTM. The market for Security on Demand printing
of documents with SecurDoxTM on a standard desktop inkjet printer is large and
growing. Our patent for aqueous ink, which was issued in 2004, enables the
printing of selective information invisibly on a desktop bubblejet printer,
using a water-based secure inkjet cartridge. This information can then be
activated on-demand.
SecureLightTM
Technology. Following development and commercialization we invested in
developing new proprietary color shifting inks that could penetrate broader
markets and result in far greater revenues. During the past eight years, we have
refined our technologies and their applications, and now have what we believe to
be the easiest, most cost effective and efficient authentication technologies
available in the world today. Our most recent technology, known as SecureLightTM,
takes advantage of the now ubiquitous energy efficient fluorescent lighting to
change the color of ink, resulting in hundreds of new applications ranging from
credit cards to drivers licenses, passports, stock certificates, clothing
labels, currency, ID cards, and tax stamps. The technologies can also be used to
protect DVDs, apparel, pharmaceuticals, and virtually any other physical
product.
Similar compact fluorescent lighting is used in most color
photocopiers and color scanners so that any document which incorporates
SecureLightTM ink cannot be copied and/or reproduced on a color copier or color
scanner because the fluorescent lighting in the copier/scanner changes the color
of the ink and the resulting photocopy will therefore be different from the
original. In 2013, we filed for patent protection for an enhanced version of
SecureLight technology, called SecureLight+TM.
Our
Technology
We have
attempted to achieve sufficient flexibility in our products and technologies so
as to provide cost-effective solutions to a wide variety of counterfeiting
problems. We intend to generate revenues primarily by collecting license fees
from manufacturers who incorporate our technologies into their manufacturing
processes and their products as well as through the sale of inks.
Our
Intellectual Property
Intellectual
property is important to our business. Our current patent portfolio consists of
five granted patents (one granted in 2002, two granted in 2004, one granted in
2005 and one granted in 2011). We believe that some of the patents that have
been granted may have commercial application in the future but will require
additional capital and/or a strategic partner in order to reach the potential
markets. All of the issued patents relate to the five inventions described
above.
We
continue to develop new anti-counterfeiting technologies and to apply for patent
protection for these technologies wherever possible. Since January 2013, we have
filed provisional applications for three new patents. When a new product or
process is developed, we may seek to preserve the economic benefit of the
product or process by applying for a patent in each jurisdiction in which the
product or process is likely to be exploited. Generally, for a patent to be
granted, the product or process must be new and be inventively different from
what has been previously patented or otherwise known anywhere in the world.
Patents generally have a life span of 20 years from the date of application
depending on the relevant jurisdiction, after which time any person is free to
exploit the product or process covered by a patent. A person who is the owner of
a patent has, within the jurisdiction in which the patent is granted, the
exclusive right to exclude others from practicing the subject matter defined in
the patent claims.
We intend
to extend our patent filings to other countries where doing so is economically
reasonable, considering the expense of foreign patent applications and the
increasing level of our activity. Currently, we believe that we will be filing
for patent protection in Europe, Australia and one or more countries in the Far
East and South America. The granting of a patent does not prevent a third party
from seeking a judicial determination that the patent is invalid. Such
challenges to the validity of a patent are not uncommon and are occasionally
successful. There can be no assurance that a challenge will not be filed to one
or more of our patents, if granted, and that, if filed, such a challenge will
not be successful. The granting of a U.S. patent does not ensure that patents
will be granted in other countries where protection is sought. Standards for
granting patents vary and there is a possibility that prior art not yet
discovered could arise and could prevent the grant of a foreign patent and cast
into question the validity of a U.S. patent.
Our
Revenue Model
We
believe that a primary reason for our lack of revenue is our lack of funds to
create a marketing program that effectively reaches potential customers in the
security industry. In developing our most recent marketing approach, we have
attempted to achieve sufficient flexibility in our products and technologies so
as to provide cost-effective solutions to a wide variety of counterfeiting
problems. We intend to generate revenues primarily by collecting license fees
from manufacturers who incorporate our technologies into their manufacturing
processes and their products as well as through the sale of inks.
In
January 2010, the Bureau of Engraving and Printing believed the color pigment
market was estimated to be worth $2.6 billion per year, of which the
color-shifting segment is valued between $55 million and $235 million annually,
based on a relatively limited number of products and applications. A more
realistic estimate suggests that the color-shifting pigment market will be worth
several billion dollars a year within ten years, predicated on anticipated new
security applications and demand for greater low-cost counterfeiting
protection.
As the
number of pharmaceutical drugs continues to increase, the pharmaceutical market
has the potential to be worth millions in revenue for LaserLock, as the Company
provides what is believed to be the most cost-effective anti-counterfeiting
solution in the industry.
A
hologram, by contrast, costs approximately 5 cents, or more than 17 times as
much as the Companys solution. Similarly, security threads, seals, and other
methodologies for protecting currency are all more expensive than color shifting
inks. In the U.S. there are more than 650 million credit cards as well as 488
million debit cards, many of which currently have holograms embedded in them.
Should Visa and MasterCard use the Companys product instead of a 5 cent
hologram, and a one-cent royalty were obtained by the Company, the cost to Visa
and MasterCard would be approximately $11.4 million annually.
Sales
and Marketing Strategy
We plan
to direct our sales and marketing strategy at multiple target groups as
follows:
|
|
|
|
1. |
Documents
of Value |
|
a. |
Currency, |
|
b. |
Stock
certificates and bonds, |
|
c. |
Event
tickets, and |
|
d. |
Lottery
tickets.
|
|
2. |
Homeland
Security |
|
a. |
Container
seals, |
|
b. |
Pallet
security, |
|
c. |
Passports, |
|
d. |
ID
cards, |
|
e. |
Driver
licenses, and |
|
f. |
Visas. |
|
3. |
Consumer
Product Security |
|
a. |
Tax
stamps, |
|
b. |
CDs/DVDs, |
|
c. |
Apparel
tags and labels, |
|
d. |
Pharmaceuticals, |
|
e. |
Tobacco, |
|
f. |
Alcohol, |
|
g. |
Auto
parts, |
|
h. |
Aviation
parts, and |
|
i. |
Any
other packaging requirements. |
|
4. |
Gaming |
|
a. |
Chips, |
|
b. |
Dice, |
|
c. |
Playing
cards, |
|
d. |
E-proms/critical
memory devices, and |
|
e. |
Slot
tickets. |
|
|
|
|
5. |
Product
Diversion Tracking |
|
a. |
Fragrances, |
|
b. |
Apparel/licensed
merchandise, |
|
c. |
Cosmetics, |
|
d. |
Pharmaceuticals,
and |
|
e. |
Watches
and jewelry. |
|
6. |
Financial
Services and Products |
|
a. |
Credit
cards, |
|
b. |
Bank
checks, and |
|
c. |
Financial
documents/promissory notes. |
As part
of our sales and marketing strategy, our technology will be tailored to our
clients, and we will form partnerships with authorities and merchants whose
products or audiences can be complementary to our own.
Competition
The
market for protection from counterfeiting, diversion, theft and forgery is a
mature 25-year-old industry dominated by a number of large, well-established
companies, particularly in the area of traditional overt security technologies.
This is due to the fact that security printing for currency production, for
example, began in Europe over a century ago and has resulted in the
establishment of old-line security printers who have branched out into brand and
product protection as well. In North America, brand protection products, such as
tamper-resistant packaging, security labels, and anti-theft devices, are readily
available and utilized on a widespread basis. In recent years, however, demand
has increased for more sophisticated, overt and covert, security technologies.
Competitors can be segregated into the groupings below:
|
|
|
|
1. |
Security
Ink Manufacturers. These are generally well-established companies such as
SICPA and Sun Chemical, whose core business is printing inks;
|
|
2. |
System
Integrators. These companies have often evolved from other sectors in the
printing industry, mainly security printing manufacturers, technology
providers, or packaging and label manufacturers. These companies offer a
range of security solutions, enabling them to provide a complete suite of
solutions tailored to the customers specific needs and requirements. The
companies in this space include 3M, DuPont, Honeywell, and Avery
Dennison;
|
|
3. |
System
Consultancy Groups. These companies offer a range of technologies from
several different providers and tailor specific solutions to
end-users;
|
|
4. |
Traditional
Authentication Technology Providers. These purveyors include American
Banknote Holographics, and Digimarc, which provide holograms and digital
watermarking, respectively; |
|
|
|
|
5. |
Product
Diversion Tracking Providers. Next-Generation Technology Providers LLC
falls into this group, along with several companies such as Authentix, DNA
Technologies, and Identif, which provide on-product and in-product tagging
technologies; and |
|
|
|
|
6. |
Traditional
Security Printers. Traditional security printers such as Thomas de la Rue
and Portals whose core products are printing the worlds
currencies. |
To
compete effectively, we expect that we will need to expend significant resources
in technology and marketing. Each of our competitors has substantially greater
financial, human and other resources than we have. As a result, we may not have
sufficient resources to develop and market our services to the market
effectively, if at all.
RISK
FACTORS
Our
business is subject to a number of risks of which you should be aware before
making an investment decision. These risks include the following:
Risks
related to our securities and this offering
Our
common stock trades on a limited basis.
There is
a limited active trading market for shares of our common stock and there is no
assurance that such a market will develop, or if such a market develops, that it
will be maintained. Holders of the shares may, therefore, have difficulty in
selling shares of our common stock should they desire to do so and should be
able to withstand the risk of holding their shares indefinitely.
There
is no public market for the warrants being offered in this
offering.
There is
no established public trading market for the warrants being offered in this
offering, and we do not expect a market to develop. In addition, we do not
intend to apply for listing the warrants on any securities exchange or expect
the warrants to trade on the Pink OTC Markets marketplace. Without an active
market, the liquidity of the warrants will be limited.
The
Company’s outstanding
preferred stock may be converted
at any time, from time to
time, which would result
in additional common stock
of ours possibly trading
in the market, which could
cause the price of our common
stock to decline.
The terms of the preferred stock outstanding permit the holder thereof to convert at any time. As of the
date of this prospectus, there will be 21,111,111 shares of preferred stock outstanding that may be converted for no consideration
into common stock. That additional amount of common stock in the trading market could cause the price of our common stock to decline.
The
shares registered under the registration statement of which this prospectus
forms a part constitute a significant portion of our outstanding common
stock. The resale or the availability for resale of these shares may
cause the price of our common stock to decline.
We are
registering 44,444,444 shares of our common stock, 87,777,777 of our warrants,
and 87,777,777 shares of our common stock underlying our
warrants. Once distributed by the Distributing Stockholder to its
shareholders pursuant to the registration statement of which this prospectus
forms a part, the securities so distributed will be freely tradable in the hands
of persons other than our affiliates. In addition, any shares issued
upon the future cashless exercise of our warrants will be freely tradable in the
hands of persons other than our affiliates. The resale or the
availability for resale of any of those shares depress the market price for our
common stock, a circumstance commonly referred to as overhang. The
low trading volume in our common stock is likely to contribute to this
effect. In addition, the existence of an overhang, whether or not
sales have occurred or are occurring, and whether or not warrant conversions
have occurred or are occurring, also could make more difficult our ability to
raise additional financing through the sale of equity or equity-related
securities in the future at a time and price that we deem reasonable or
appropriate.
Our
stock price has been volatile, may continue to be volatile and may decline
regardless of our financial performance resulting in substantial losses for
investors receiving our equity in this offering.
The
trading price and trading volume of our common stock has been, and in the future
may continue to be highly volatile, and could decline substantially within a
short period of time. As a result of low trading volume in our common stock, the
purchase or sale of a relatively small number of shares could result in
significant share price fluctuations and it may be difficult for investors to
sell our common stock in the market without depressing the market price for the
common stock or at all. Additionally, the market price of our common stock may
be subject to wide fluctuations in response to, among other things, the factors
described in this Risk Factors section or otherwise, and other factors beyond
our control, such as fluctuations in the valuations of companies perceived by
investors to be comparable to us.
Holders
of the warrants may have to exercise their warrants on a cashless net share
basis, rather than for cash.
The warrants being offered
hereby have a net exercise provision under which its holders may, in lieu of payment of the exercise price in cash,
surrender the warrant and receive a net amount of shares based on the fair market value of our common stock at the time of
exercise of the warrant after deduction of the aggregate exercise price. Shares may not be issued upon the exercise of the
warrants except pursuant to a cashless net share basis or otherwise pursuant to an effective registration statement or an
exemption from registration. If, in the future, we fail to keep this prospectus current, holders of the warrants
may have to opt for cashless net share exercise in order to receive the shares underlying the warrants. There can be no
assurance that we will keep this prospectus current in the future.
We
will continue to require additional capital to support and expand our business,
and cannot provide any assurance that we will be able to raise such capital when
needed on acceptable terms or at all, and if we cannot raise additional capital
and our revenues do not increase materially, we may need to curtail or cease
operations, and our equity may lose all or substantially all of its
value.
In order
to finance expansion of our business operations, patent our technologies,
and implement our business plans, we may need to raise additional
capital. Our ability to continue the business and effectively implement our
plans depends upon our ability to raise additional funds. There is no assurance
that additional funding will be obtainable in amounts or on terms favorable or
acceptable to us. The capital resources required to develop each new product are
significant. We currently have no active arrangements to raise such
additional capital.
Even if
we are successful in raising sufficient capital, our ability to continue in
business as a viable going concern can only be achieved when our revenues reach
a level that sustains our business operations. There is no assurance that the
amount of revenues, if any, that we may receive from our products will generate
revenues sufficient to fund our planned business
operations. Moreover, there can be no assurance that, even if our
technologies are marketed effectively, we will generate revenues sufficient to
fund our operations. If our technologies are not marketed effectively
and/or we do not generate sufficient revenue, we may be unable to raise capital
on terms acceptable to us, if at all. In either case, we may not be
able to continue our operations and our business might fail, which may cause our
securities to lose all or substantially all of their value.
Our business plan calls for ongoing expenses
in connection with developing and marketing our security
technology. We have not yet generated recurring revenues sufficient
to sustain our operations and our growth. Our current monthly burn
rate is approximately, $160,000. At this rate we will be able to sustain
operations for a period of approximately 18 months, if we do not raise
additional funds, or we do not increase the steady flow of recurring
income.
We
do not intend to pay dividends on our common stock so any returns will be
limited to the value of our stock.
We have
not paid any cash dividends since our inception and do not intend to pay
dividends in the foreseeable future. We intend to retain all earnings, if any,
for use in our business operations.
Our
shares of common stock are subject to the Penny Stock rules of the Securities
and Exchange Commission and the trading market by broker dealers in our
securities will be limited, which will make transactions in our stock cumbersome
and may reduce the value of our stock.
The SEC
has adopted rules that regulate broker-dealer practices in connection with
transactions in penny stocks. Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). The
penny stock rules may make it difficult to sell your shares of our common stock
through a broker dealer.
VerifyMe
owns shares of our Preferred Stock with preferential rights, that are not being
distributed hereby, but which may afford the right for VerifyMe to receive
additional securities from us, which could dilute you; and grant them other
control and other rights, that could reduce your influence over matters on which
our stockholders could vote.
VerifyMe
holds Preferred Stock of the Company, which is not the subject of the
registration rights agreement. Accordingly, we are not required to register the
preferred stock for distribution and are not registering it for distribution
under the registration statement of which this prospectus forms a part. By
virtue of the preferred stock that VerifyMe holds, it has the ability to exert
significant influence over our decisions and has the right to have antidilution
adjustments to its equity position, to the extent that we take certain actions
regarding the issuance of our securities, other than in connection with this
distribution.
If
we do not generate the necessary level of capital, we may issue additional
securities in the future, which could dilute your ownership.
If we do
not generate the necessary level of capital from operations, of which there is
no assurance, we may have to sell additional securities in order to generate the
required capital. We may seek to raise capital through offering of our common
stock, preferred stock, securities convertible into common stock, or rights to
acquire such securities or our common stock. Under our articles of
incorporation, we have additional authorized shares of common stock and
preferred stock that we can issue from time to time at the discretion of our
board of directors, without further action by the shareholders, except where
shareholder approval is required by law. The issuance of any additional shares
of common stock, preferred stock or convertible securities could be
substantially dilutive to shareholders of our common stock. Holders of our
shares of common stock have no preemptive rights that entitle them to purchase
their pro-rata share of any offering of shares of any class or series and,
therefore, our shareholders may not be permitted to invest in future issuances
of our common stock and as a result will be diluted.
Our
certificate of incorporation and bylaws may prevent a transaction you may favor
or limit growth opportunities, which could cause the market price of our common
stock to decline.
Certain
provisions of our certificate of incorporation and bylaws and applicable
provisions of Nevada or federal law and regulations may delay, inhibit or
prevent an organization or person from gaining control of us through a tender
offer, business combination, proxy contest or some other method, even though you
might be in favor of the transaction.
Shares
of our common stock held by our affiliates, as defined in Rule 144 under the
Securities Act, will be subject to certain transfer restrictions.
Shares of
our common stock and our warrants held by persons deemed to be our affiliates,
as that term is defined in Rule 144 under the Securities Act (Rule 144), will
not be freely tradable. Sales of these securities by our affiliates
will be subject to the applicable volume, manner of sale and other restrictions
set forth in Rule 144.
The
ownership of our common stock is concentrated among a small number of
shareholders, and each of these large shareholders, who, may be able to
significantly influence management and operations, which may prevent us from
taking actions that may be favorable to other
shareholders. Furthermore, concentrated ownership of our common stock
creates a risk of sudden changes in our share price.
As of
July 29, 2013, 5 shareholders own approximately 64.2% of the outstanding common
stock of the Company on a fully diluted basis. Those
shareholders are able to significantly affect the election of directors as well
as the outcome of most corporate actions requiring shareholder approval, such as
the approval of mergers or other business combinations. Such concentration may
also have the effect of delaying or preventing a change in control of the
Company. In some situations, the interests of each of these large shareholders,
may be different from that of other shareholders.
Investors who receive our
common stock may be subject to certain risks due to the concentrated ownership
of our common stock. The sale by any of our shareholders who own a large amount
of our common stock, of a significant portion of that shareholders holdings
could have a material adverse effect on the market price of our common stock.
Furthermore, the registration of any significant amount of additional shares of
our common stock may have the immediate effect of increasing the public float of
our common stock.
No
recommendation by the Distributing Shareholder.
The
holding by the Distributing Stockholder of the common stock and warrants covered
hereby is not to be construed as a recommendation by the Distributing
Stockholder of the investment quality of the Companys securities covered hereby
and furthermore, such holding does not imply that the Distributing Stockholder
shall assist in meeting any of the future financial requirements of the
Company.
Risks
relating to our business and operations
We
are subject to industrial risks that could adversely affect our results of
operations.
The
industry in which we compete is subject to the traditional risks faced by any
industry of adverse changes in general economic conditions, the availability and
expense of liability insurance, and adverse changes in local markets. However,
we will also be subject to industry specific risks such as counterfeiters
learning how to circumvent new and existing technologies; evolving consumer
preference and federal, state and local chemical processing controls; consumer
product liability claims; and risks of product tampering.
We
face significant competition in our industry, which could adversely affect our
business, financial condition and results of operations.
In the
area of document security and product authentication and serialization, we are
aware of other companies and other similar technologies, including both covert
and overt surface marking techniques, which require decoding elements or
analytical methods to reveal the relevant information. These technologies are
offered by other companies for the same anti-counterfeiting and anti-diversion
purposes for which we market our technologies.
A
significant number of companies of varying sizes, which may include divisions or
subsidiaries of larger companies, are vying for the same market segment as we
are. A number of these competitors may have substantially greater financial and
other resources available to them. There can be no assurance that we can compete
successfully with such other companies. Competitive pressures or other factors
could cause us to lose market share if it develops at all, or result in
significant price erosion, either of which would have a material adverse effect
on our results of operations.
Any
change to government regulation or administrative practices may have a negative
impact on our ability to operate and potential profitability.
Our
operations may be subject to varying degrees to federal, state or local laws and
regulations. Our operations may be subject to federal, state and local laws and
regulations controlling the development of technologies related to privacy
protection, to the protection of the environment from materials that we may use
in our inks, and advanced algorithm formulations or encryption tactics that we
may develop. Any of these regulations may have a material adverse effect upon
our operations.
Rapid
technological change could make our products obsolete.
We
believe that the market for our products is rapidly changing with evolving
industry standards. Our future success will depend in part upon our ability to
introduce new products and features to meet changing customer requirements and
emerging industry standards. There can be no assurance that we will successfully
complete the development of future products or that our current or future
products will achieve market acceptance. Any delay or failure of these products
to achieve market acceptance would adversely affect our business. In addition,
there can be no assurance that products or technologies developed by others will
not render our products or technologies non-competitive or
obsolete.
The value
of our technology and any products derived from our technology could be
substantially reduced as new or modified techniques for combating document and
product counterfeiting and product diversion are developed and become widely
accepted. We cannot guarantee that future technological developments will not
result in the obsolescence of our technologies.
Our
future success depends on our ability to retain our key executives and to
attract, retain and motivate qualified personnel.
We will
be dependent on our current management for the foreseeable future. The loss of
the services of any member of these persons would have a material adverse effect
on our operations and prospects. Our success will be dependent to a substantial
degree on our founder, Norman A. Gardner, and Neil Alpert, our President and
Chief Executive Officer. Mr. Gardners and Mr. Alperts continued involvement is
particularly critical to us. In the event Mr. Gardner or Mr. Alpert is
unavailable, it would have a material adverse effect on our operations. The
expansion of our business will be largely contingent on our ability to attract
and retain a highly qualified management team. There is no assurance that we
will be able to find suitable management personnel or that we will have the
financial resources to attract or retain such people, if found.
We
rely on the sales and marketing efforts of third parties.
We pursue
a policy of licensing our technologies for incorporation into products made and
distributed by third parties. Although we negotiate guaranteed minimum royalties
in our licensing arrangements, our revenues are substantially dependent on the
sale of products incorporating our technologies by third parties. The successful
marketing of such products and, therefore, our revenues and operating income,
depend substantially on the marketing efforts of such third parties, over which
we have little, if any, control.
Our
success will depend on, among other factors, implementing a successful marketing
strategy.
While we
believe that our products will meet unsatisfied market demand, our ability to
generate sales will depend upon developing and implementing a successful
marketing strategy. There can be no assurance that we will be able to
successfully develop, promote and maintain an active market for our
products.
We
have a limited operating history upon which to judge future
performance.
We have a
limited operating history and cannot predict if we will be successful in
pursuing our business. We have not yet generated a profit from our
business and may not be able to ever generate a profit.
We
are vulnerable to the potential difficulties associated with rapid
growth.
If we are
successful in increasing demand for our products, of which there can be no
assurance, our growth could create certain additional risks. Rapid growth can be
expected to place a substantial burden on our management resources and financial
controls. Our ability to manage growth effectively will require us to continue
to implement and refine our operational, financial and information management
systems and to train, motivate and manage our employees. Our ability to attract
and retain qualified personnel will have a significant effect on our ability to
establish and maintain our position in our various markets, and our failure to
manage our growth effectively could have material adverse effects on our results
of operations.
Our
past losses and possible future losses cast doubt on our ability to continue as
a going concern and operate profitably.
We have
limited sales, have incurred operating losses since inception and require
additional capital to continue our operations and to implement our business
plans. Although we intend to raise additional funds, implement sales, and become
profitable, if we fail to achieve any one of these goals, then it is unlikely
that we will be successful, and very likely that we will become insolvent or
otherwise forced to cease operations. If this occurs, it will have a material
adverse effect on our business and any results of operations and our equity may
lose all or substantially all of its value.
Lack
of diversification may negatively impact our operations and
profitability.
Our
operations, even if successful, will in all likelihood result in our engaging in
a business which is concentrated in only one industry. Consequently, our
activities will be limited to the anti-counterfeiting industry. Our inability to
diversify our activities into a number of areas may subject us to economic
fluctuations within a particular business or industry and, therefore, increase
the risks associated with our operations.
Concentration
of customers can adversely affect our financial health.
During the years ended 2012
and 2011 and for the three months ended March 31, 2013, we earned a
substantial portion of our revenue from one or two customers. The
loss of any one of those customers, and/or our inability to secure any
additional vendors to purchase material, would adversely affect our profits,
if any.
We
or our licensees may incur substantial costs or lose important rights as a
result of litigation or other proceedings relating to our patent and other
intellectual property rights.
We or our
collaborators may become subject to third parties claims alleging infringement
of their patents and proprietary rights or seeking to invalidate our patents or
proprietary rights, or we may need to become involved in lawsuits to protect or
enforce our patents, which could be costly, time consuming, delay or prevent the
development and commercialization of our product candidates, or put our patents
and other proprietary rights at risk.
The
Distributing Stockholder
The
Distributing Stockholder is VerifyMe, Inc. VerifyMe was incorporated
under the laws of the State of Texas in May
2012. VerifyMes business address is Nix,
Patterson &
Roach, L.L.P., 205 Linda Drive, Daingerfield, TX 75638.
Our
Corporate Information
We were
incorporated under the laws of the State of Nevada in November 1999. Our
principal executive offices are located at 3112 M Street NW, Washington, D.C.
20007, and our telephone number is (202) 400-3700. Our website address is
www.laserlocktech.com. We have included our website address in this prospectus
solely as an inactive textual reference. The information contained
on, or that can be accessed through, our website is not part of this
prospectus.
USE
OF PROCEEDS
The
Distributing Stockholder will be distributing shares of our common stock and
warrants to purchase our common stock to its stockholders for no
consideration. We will not receive any proceeds from the distribution
of our common stock or the warrants to purchase our common stock.
DETERMINATION
OF OFFER PRICE
The
Distributing Stockholder will be distributing shares of our common stock and
warrants to purchase shares of our common stock to its stockholders for no
consideration. Accordingly, there will be no determination of offer price in
connection with the distribution of our common stock and warrants to purchase
shares of our common stock.
DISTRIBUTING
STOCKHOLDER
The
Distributing Stockholder is VerifyMe, Inc., a Texas corporation. The
Distributing Stockholder acquired its shares of our stock and warrants to
purchase our stock through various private transactions taking place through
January 2013. In connection with those private transactions, the Company and
VerifyMe entered into a Registration Rights Agreement pursuant to which the
Company agreed to register the shares of our common stock and warrants held by
VerifyMe for distribution to its stockholders. Two members of the Board of
Directors of the Company have been appointed at the recommendation of
VerifyMe. VerifyMe has the right to appoint an advisor to each of the
Companys advisory committees. As of the date of the prospectus VerifyMe holds
44,444,444 shares of our common stock, 87,777,777 warrants to purchase our
common stock, and 21,111,111 shares of our preferred stock.
PLAN
OF DISTRIBUTION
We are
hereby registering the shares of our common stock, the warrants to purchase our common
stock, and the shares underlying the warrants to purchase our common stock, all
of which were previously issued to the Distributing Stockholder. We
will bear all fees and expenses incident to our obligation to register these
securities.
The Distributing
Stockholder intends to distribute our securities, for no consideration, to its stockholders of record at the time of the distribution. The Distributing
Stockholder has agreed with Continental Stock Transfer and Trust Company (Continental) that it will serve as the
Distributing Stockholders distribution agent to work with our transfer agent and directors to assist to distribute our
securities to the Distributing Stockholder’s shareholders. The Distributing Stockholder has agreed to pay Continental customary
fees plus certain expenses in connection with facilitating the distribution of the common stock and warrants being
registered hereby. We have not employed any brokers, dealers or underwriters in connection with the distribution
of the common stock and warrants. Except as described in this section, we are not paying any other commissions, underwriting
fees or discounts in connection with this distribution.
Shareholders of the Distributing
Stockholder who will be receiving our securities being registered hereby will receive new Company shares and warrants as
soon as practicable after the declaration of effectiveness of the registration statement of which this prospectus forms a
part. Unless such shareholders request a stock certificate, Company shares and warrants will be issued in book-entry form or
an account with their nominee will be credited with the shares and warrants. If the shareholders of the Distributing
Stockholder request a stock and warrant certificate, we will mail them a stock certificate as soon as practicable after
their request for one and completion of the Distributing Stockholders record keeping paperwork.
We will
pay all expenses of the registration of the securities pursuant to our
registration rights agreement with the Distributing Stockholder, estimated to be
$48,000 in total, including, without limitation, SEC filing fees and expenses of
compliance with state securities or blue sky laws. We will indemnify the
Distributing Stockholder against liabilities, including certain liabilities
under the Securities Act, in accordance with the registration rights agreements
or the Distributing Stockholder will be entitled to contribution. We may be
indemnified by the Distributing Stockholder against civil liabilities, including
liabilities under the Securities Act that may arise from any written information
furnished to us by the Distributing Stockholder specifically for use in this
prospectus, in accordance with the registration rights agreement or we may be
entitled to contribution.
Once
distributed under the registration statement of which this prospectus forms a part, the shares of our common stock and the
warrants to purchase our common stock will be freely tradable in the hands of persons other than our
affiliates. In addition, the shares of our common stock issued upon the future cashless exercise of the warrants
will be freely tradable in the hands of persons other than our affiliates. Shares may not be issued upon the
exercise of warrants except pursuant to a cashless exercise or otherwise pursuant to an effective registration statement or
an exemption from registration. The registration statement of which this prospectus forms a part currently covers the
issuance of shares upon exercise of the warrants. If, in the future, we fail to keep this prospectus current, holders of the
warrants may have to opt for cashless net share exercise in order to receive the shares underlying the
warrants.
If you
are an affiliate of the Company, any shares of our common stock or warrants that
you receive pursuant to this prospectus will not be freely
tradable. Sales of these securities by our affiliates will be subject
to the applicable volume, manner of sale and other restrictions set forth in
Rule 144.
DESCRIPTION
OF CAPITAL STOCK
The
following description of the terms of our capital stock is only a summary. This
description is subject to, and qualified in its entirety by reference to, our
amended and restated articles of incorporation, as amended, and bylaws, each of
which has previously been filed with the SEC, and which we incorporate by
reference as exhibits to the registration statement of which this prospectus is
a part, and the provisions of the laws of the State of Nevada.
Our
authorized capital stock consists of 675,000,000 shares of common stock, par
value $0.001 per share, and 75,000,000 shares of preferred stock, 33,333,333 of
which have been designated.
As of July 29, 2013, we had issued
and outstanding 275,665,112 shares of our common stock and 33,333,333 shares of our preferred stock, convertible into
33,333,333 shares of common stock. As of the date of this prospectus, we have outstanding 275,665,112 shares of our common
stock and 21,111,111 shares of our preferred stock, convertible into 21,111,111 shares of our common stock.
As of
July 29, 2013, we also had outstanding:
|
● |
Options
to purchase an aggregate of 56,400,000 shares of our common stock at a
weighted average exercise price of $0.05 per
share; |
|
● |
Warrants
to purchase an aggregate of 119,483,331 shares of our common stock at an exercise price ranging from $0.01 to $0.15 per
share, held by a total of 25 entities;
and |
|
● |
Convertible
notes convertible into 18,375,000 shares of common stock at a conversion
price of $0.005333. |
Common
Stock
Voting
Rights. Each holder of common stock is entitled to one vote per share on
all matters properly submitted to a vote of the stockholders, including the
election of directors. Our amended and restated articles of incorporation, as
amended, and our bylaws do not provide for cumulative voting rights. Because of
this, the holders of a majority of the shares of common stock entitled to vote
in any election of directors can elect all of the directors standing for
election, if they should so choose. An election of directors by our stockholders
is determined by a plurality of the votes cast by stockholders entitled to vote
on the election.
Dividends.
Subject to preferences that may be applicable to any then outstanding preferred
stock, the holders of our outstanding shares of common stock are entitled to
receive dividends, if any, as may be declared from time to time by our board of
directors out of legally available funds. We have never declared or
paid a cash dividend. At this time, we do not anticipate paying dividends in the
foreseeable future. The declaration and payment of dividends is subject to the
discretion of our board of directors and will depend upon our earnings (if any),
our financial condition, and our capital requirements.
Liquidation.
In the event of our liquidation, dissolution or winding up, holders of common
stock will be entitled to share ratably in the net assets legally available for
distribution to stockholders after the payment of all of our debts and other
liabilities, subject to the satisfaction of any liquidation preference granted
to the holders of any outstanding shares of preferred stock.
Rights
and Preferences. Holders of our common stock have no preemptive,
conversion or subscription rights, and there are no redemption or sinking fund
provisions applicable to our common stock. The rights, preferences and
privileges of the holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of our preferred
stock that we may designate and issue in the future.
Preferred
Stock
Our amended and restated articles
of incorporation, as amended, authorizes our board of directors to issue up to 75,000,000 shares of undesignated preferred
stock, 33,333,333 shares of which are designated and as of the date of this prospectus, 21,111,111 will be outstanding. The
designated and outstanding shares of our preferred stock are convertible into shares of our common stock. Our board is
authorized, without stockholder approval, to issue preferred stock in one or more series, to establish the number of shares
to be included in each such series and to fix the designation, powers, preferences and rights of such shares and any
qualifications, limitations or restrictions thereof. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying,
deferring or preventing a change in our control that may otherwise benefit holders of common stock. The issuance of
preferred stock with voting and conversion rights may adversely affect the voting power of the holders of common stock,
including the loss of voting control to others. We have no current plans to issue any additional shares of preferred
stock.
Warrants
The
following table summarizes the warrants to purchase shares of our common stock
outstanding as of July 15, 2013:
Number
of Warrants |
|
Number
of Holders |
|
Per
Share Exercise Price |
|
Expiration
Date |
119,483,331 |
|
25 |
|
$0.01-$0.15 |
|
9/30/2015
1/31/2023 |
Each of these warrants also contains provisions for the adjustment of the
exercise price and the aggregate number of shares issuable upon the exercise of the warrant in the event of stock dividends, split-ups,
reclassifications, mergers, consolidations, combinations or exchanges of shares, separations, reorganizations or liquidations. 113,033,331
of these warrants have a net exercise provision under which its holder may, in lieu of payment of the exercise price in cash,
surrender the warrant and receive a net amount of shares based on the fair market value of our common stock at the time of exercise
of the warrant after deduction of the aggregate exercise price.
Nevada
Anti-Takeover Law and Provisions of Our Amended and Restated Articles of
Incorporation, as amended, and Our Bylaws
Nevada
Anti-Takeover Law. We are subject to Section 78.438 of the Nevada Revised
Statutes (NRS). Section 78.438 generally prohibits a public Nevada corporation
from engaging in a combination with an interested stockholder for a period
of two years after the date of the transaction in which the person became an
interested stockholder, unless the interested stockholder attained such status
with the approval of our board of directors, the business combination is
approved in a prescribed manner or the interested stockholder acquired at least
60% of our outstanding voting stock in the transaction in which it became an
interested stockholder. A combination includes, among other things, a merger
or consolidation involving us and the interested stockholder and the sale of
more than 5% of our assets. In general, an interested stockholder is any
entity or person beneficially owning 10% or more of our outstanding voting stock
and any entity or person affiliated with or controlling or controlled by such
entity or person.
Amended
and Articles of Incorporation, as amended, and Bylaws. Provisions of our
amended and restated articles of incorporation, as amended, and our bylaws may
delay or discourage transactions involving an actual or potential change of
control or change in our management, including transactions in which
stockholders might otherwise receive a premium for their shares, or transactions
that our stockholders might otherwise deem to be in their best interests.
Therefore, these provisions could adversely affect the price of our common
stock.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock is Interwest Transfer Co.,
Inc.
Listing
Our
common stock is traded on Pink OTC Markets, Inc. under
the symbol LLTI.PK. On July 29, 2013, the last reported sale
price per share of our common stock was $0.15 per share.
The
following table sets forth the range of high and low bid prices of our common
stock for the periods indicated as reported by Pink OTC Markets, Inc. Until
recently, there was only sporadic and intermittent trading activity of our
common stock. The quoted prices represent only prices between dealers on each
trading day as submitted from time to time by certain of the securities dealers
wishing to trade in our common stock, do not reflect retail mark-ups, mark-downs
or commissions, and may differ substantially from prices in actual
transactions.
|
|
|
|
High |
Low |
Quarter
ended March 31, 2013 |
$0.50 |
$0.025 |
Quarter
ended June 30, 2013 |
$0.28 |
$0.14 |
Quarter
ended September 30, 2013 (through July 29) |
$0.21 |
$0.14 |
|
|
|
Fiscal
Year Ended December 31, 2012 |
High |
Low |
Quarter
ended March 31, 2012 |
$0.07 |
$0.01 |
Quarter
ended June 30, 2012 |
$0.07 |
$0.05 |
Quarter
ended September 30, 2012 |
$0.06 |
$0.02 |
Quarter
ended December 31, 2012 |
$0.05 |
$0.02 |
Fiscal
Year Ended December 31, 2011 |
High |
Low |
Quarter
ended March 31, 2011 |
$0.01 |
$0.005 |
Quarter
ended June 30, 2011 |
$0.05 |
$0.0075 |
Quarter
ended September 30, 2011 |
$0.07 |
$0.025 |
Quarter
ended December 31, 2011 |
$0.16 |
$.0299 |
Common
Stockholders
As of
July 29, 2013, our shares of Common Stock were held by 81 stockholders of
record.
Dividend
Policy
We have
never declared or paid a cash dividend. At this time, we do not anticipate
paying dividends in the foreseeable future. The declaration and payment of
dividends is subject to the discretion of our board of directors and will depend
upon our earnings (if any), our financial condition, and our capital
requirements.
DESCRIPTION
OF PROPERTY
Our
principal offices are currently leased and are located at 3112 M Street NW,
Washington, D.C.
LEGAL
PROCEEDINGS
In
October 2010, the Company filed suit in the Western District of Pennsylvania
against WS Packaging Group, Inc. (WS)
alleging that WS infringed on one of the Companys patents in the manufacture of
MONOPOLY game pieces on behalf of McDonalds Corp. On June 4, 2012,
both WS and the Company filed a stipulation to dismiss the action, without
prejudice, and enter into settlement negotiations. Settlement
negotiations are ongoing.
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
We were
incorporated in Nevada in November 1999. We are a technology development company
that delivers product and document authentication and security. We plan to
develop and market technologies in a variety of applications in the security
field.
We
believe that the technologies we own will enable businesses to reconstruct their
overall approaches to corporate security - from counterfeit identification to
employee or customer monitoring. Potential applications of our technologies are
available in different types of products and industries including gaming,
apparel, tobacco, perfume, compact disks, pharmaceuticals, event and
transportation tickets, drivers licenses, insurance cards, passports, computer
software, DVDs, and credit cards. We intend to generate sales through licenses
of our technology or through direct sales of our technology to
end-users.
We have
five issued patents and submitted three provisional applications relating
to our technology. We also acquired the VerifyMe trademark. These patents seek
to accomplish non-intrusive document and product authentication in order to
reduce losses caused by unpermitted document reproduction or by product
counterfeiting. The technologies involve the utilization of invisible or color
shifting/changing inks, which are compatible with todays printing machines. The
inks may be used with certain printing systems such as offset, flexographic,
silkscreen, gravure, and laser. Based upon the Companys experience, we believe
that the ink technologies may be incorporated into existing manufacturing
processes.
Strategic
Outlook
We
believe that the security and authentication industries will continue to grow
over time, especially as counterfeiting becomes easier with advances in
technology. Within the market, we intend to provide our products to government
bodies, and merchants in the consumer products, gaming and financial services
industries.
Sustained
spending on technology, our ability to raise additional financing, and the
continued growth of the security and authentication markets are all external
conditions that may affect our ability to execute our business plan. In
addition, certain potential customers may view our small size and limited
financial resources as a negative even if they prefer our products to those of
our competitors.
Our
primary strategic objective over the next 12-24 months is to successfully market
our products and generate revenue that is sufficient to cover our operating
expenses and support additional growth over the next several years. We plan to
achieve this objective through a targeted marketing program. As we grow, we
intend to hire additional professionals to develop new products and market our
products.
We
believe that our near-term success will depend particularly on our ability to
develop customer awareness and confidence in our products. Since we have limited
capital resources, we will need to closely manage our expenses and conserve our
cash by continually monitoring any increase in expenses and reducing or
eliminating unnecessary expenditures. Our prospects must be considered in light
of the risks, expenses and difficulties encountered by companies in the
development stage, particularly given that we operate in rapidly evolving
markets, that we have limited financial resources, and face an uncertain
economic environment. We may not be successful in addressing such risks and
difficulties.
Results
of Operations
Comparison of the Years
Ended December 31, 2012 and 2011
The following discussion
analyzes our results of operations for the years ended December 31, 2012 and
2011. The following information should be considered together with our financial
statements for such periods and the accompanying notes thereto.
Revenue/Net
Loss
We are a development stage
company and have not generated significant revenue since our inception. For the
years ended December 31, 2012 and 2011, we generated revenues of $17,029 and
$8,884. Our net loss increased $533,944 to $1,199,057 for the year ended
December 31, 2012 compared to $665,113 for the year ended December 31, 2011, as
a result of changes in expenses as further described below.
General and
Administrative Expenses
General and administrative
expenses were $129,329 for the year ended December 31, 2012 compared to $114,376
for the year ended December 31, 2011, an increase of $14,953. The increase is
primarily attributable to increases in occupancy costs of $29,741 and filing
fees of $8,592, which were offset by decreases in office expenses of $20,116 and
decreases in other expenses of $3,264.
Legal and
Accounting
Legal and accounting fees
increased $204,927 to $276,774 for the year ended December 31, 2012 from $71,847
for the year ended December 31, 2011. The professional fees were for legal,
accounting and other professional services, primarily related to preparation of
filings with the Securities and Exchange Commission (the SEC) for the years
2008 through 2011 as well as the preparation and review of the investment,
registration rights, technology and service, patent and technology license and
asset purchase agreements entered into with one investor on December 31,
2012.
Payroll
Expenses
Payroll expenses increased
to $612,721 for the year ended December 31, 2012 from $227,658 for the year
ended December 31, 2011, an increase of $385,063. The increase relates to the
hiring of the President and Chief Operating Officer of the Company.
Additionally, included in the increase was the expense of the fair market value
of options issued to the Board, the Vice Chairman and Chief Executive Officer,
and the President and Chief Operating Officer.
Research and
Development
Research and development
expenses decreased $3,661 to $5,420 for the year ended December 31, 2012 from
$9,081 for the year ended December 31, 2011. The decrease was due to the cash
conservation efforts of the Company.
Sales and
Marketing
Sales and marketing expenses
for the year ended December 31, 2012 were $66,499 as compared to $113,377 for
the year ended December 31, 2011, a decrease of $46,878. This decrease related
to cost conservation measures.
Interest
Expense
During the year ended
December 31, 2012, we incurred interest expense of $277,371, as compared to
$321,586 for the year ended December 31, 2011, a decrease of $44,215. The
decrease in interest expense relates to the conversion of notes payable into
common stock in 2012 and the negotiation of a lower interest rate on certain
debt in June 2011.
Gain on Debt
Forgiveness
During the year ended
December 31, 2012, we received a benefit of $156,110 in debt forgiveness, as
compared to $184,242 for the year ended December 31, 2011, a decrease of
$28,132. This was the result of managements negotiation with vendors to forgive
amounts due to those vendors.
Liquidity and Capital
Resources
As of March 21, 2013 we had
cash resources of approximately $3.6 million.
Net cash used in operating
activities increased $53,175 to $(367,060) for the year ended December 31, 2012
as compared to $(313,885) for the year ended December 31, 2011. The increase
related primarily to the increase in net loss from operations, gain on debt
forgiveness and prepaid expenses, which were offset by increases in the fair
value of options issued in exchange for services and accounts payable and
accrued expenses. The increase in net loss was related to increased payroll
expenses and legal and accounting expenses offset by the gain on debt
forgiveness, which discussed above. The increase in prepaid expenses and
accounts payable and accrued expenses relate primarily to the agreements with
one investor that were entered into on were December 31, 2012, discussed
below.
Net cash used in investing
activities was $(9,025) for the year ended December 31, 2012 as compared to
$(3,577) for the year ended December 31, 2011 an increase of $5,488. The
increase in cash used is attributable to patent costs associated with the five
patents and computer equipment purchases.
Net cash provided by
financing activities increased $3,023,157 to $3,316,862 for the year ended
December 31, 2012 from $293,705 for the year ended December 31, 2011. The cash
provided for the year ended December 31, 2012 consisted primarily of proceeds
from the issuance of equity securities and proceeds from the exercise of options
and warrants. The issuance of equity securities was attributable to the
agreements with one investor that were entered into on December 31, 2012,
discussed below.
Comparison
of the Three Months Ended March 31, 2013 and 2012
The
following discussion analyzes our results of operations for the three months
ended March 31, 2013 and 2012. The following information should be considered
together with our financial statements for such period and the accompanying
notes thereto.
Net
Loss for Three Months Ended March 31, 2013 and 2012
Net
Revenue/Net Loss
We are a
development stage company and have not generated significant revenue since our
inception. For the three months ended March 31, 2013 and 2012, we
generated net revenues of $3,140 and $3,740 respectively. Our net
loss increased $15,671,042 to $15,906,647 for the three months ended March 31,
2013 compared to $235,605 for the three months ended March 31, 2012, as a result
of increases in expenses primarily the valuation of warrant liability and
embedded derivative liability associated with the Investment Agreement entered
into on December 31, 2012 and the Subscription Agreement entered into on January
31, 2013 as described below.
Cost
of Sales
For the
three months ended March 31, 2013 and 2012, we incurred proprietary technology
costs of sales of $2,710 and $2,036.
General
and Administrative Expenses
General
and administrative expenses increased $71,619 to $98,309 for the three months
ended March 31, 2013 from $26,690 for the three months ended March 31,
2012. The increase is attributable to increases in filing fees,
insurance of $29,000, office expenses of $13,000, other operating expenses of
$11,000 and payroll taxes of $13,000 and rent expense of $6,000. The
increases primarily resulted from the hiring of employees and the opening of an
office in Washington D.C.
Legal
and Accounting
Legal and
accounting fees increased $22,090 to $112,437 for the three months ended March
31, 2013 from $90,347 for the three months ended March 31, 2012. The
increase in legal and accounting fees in 2013 was primarily related to matters
relating to the Subscription Agreement entered into on January 31,
2013.
Payroll
Expenses
Payroll
expenses were $536,329 for the three months ended March 31, 2013, an increase of
$491,329 from $45,000 for the three months ended March 31, 2012. The
increase relates to the hiring of seven additional employees during the three
months ended March 31, 2013, as well as stock based compensation of $333,000 for
the board of directors and the employees.
Research
and Development
Research
and development expenses were $149,156 and $1,257, respectively, for the three
months ended March 31, 2013 and 2012, an increase of $147,899. The
increase in research and development expenses was due to primarily to the
technology service agreement entered into on December 31, 2012 and the
allocation of resources to the research and development effort.
Sales
and Marketing
Sales and
marketing expenses for the three months ended March 31, 2013 were $52,304 as
compared to $12,308 for the three months ended March 31, 2012, an increase of
$39,996. The expenses consisted largely of expenses for marketing
the new technology associated with the patents and the new patent applications,
as well as a more active marketing program in 2013.
Interest
Expense
During
the three months ended March 31, 2013, the Company incurred interest expense of
$41,241, as compared to $71,707 for the three months ended March 31, 2012, a
decrease of $30,466. The decrease in interest expense directly correlates to the
notes payable that have been converted into common stock during 2012 and
2013.
Change
in fair value of warrants
During
the three months ended March 31, 2013, the Company incurred an unrealized loss
on the market value of warrants of $11,921,510 as compared to $0 for the three
months ended March 31, 2012. The increase resulted from the valuation
of warrants associated with the Investment Agreement entered into on December
31, 2012 and the Subscription Agreement entered into on January 31,
2013. The values of the warrants have increased because the stock
price has risen and the difference between the warrant exercise price and the
stock price has increased.
Fair
value of warrants in excess of consideration for convertible preferred
stock
During
the three months ended March 31, 2013, the Company incurred an unrealized loss
on the market value of warrants that were issued in excess of consideration for
convertible preferred stock of $2,995,791 as compared to $0 for the three months
ended March 31, 2012. The loss resulted from the valuation of
warrants associated with the Subscription Agreement entered into on January 31,
2013.
Liquidity
and Capital Resources
As of May 20, 2013, we had
cash on hand of $3,147,000.
Net cash
used in operating activities for the three months ended March 31, 2013 increased
to $746,162 from $33,780 for the three months ended March 31, 2012, an increase
of $712,382. The increase in net cash used in operating activities is mainly
related to the expansion of operations including hiring employees, increased
marketing efforts and opening an office in Washington, D.C.
Net cash
used in investing activities, consisting of equipment purchases and patent
costs, was $25,772 for the three months ended March 31, 2013.
Net cash
provided by financing activities was $1,262,919 and $0, respectively, for the
three months ended March 31, 2013 and 2012. The net cash provided by
financing activities for the three months ended March 31, 2013 relates to $1
million from the sale of the Companys preferred stock and a warrant, and
$262,919 in proceeds received from the issuance of common stock and exercise of
stock options.
The
Company is in the development stage. During the three months ended
March 31, 2013, the Companys operational resources were used primarily to fund
general and administrative expenses, hire employees and expand the continuing
sales and marketing program.
As we
have not realized significant revenues since our inception, we have financed our
operations through private offerings of debt and equity
securities. We do not currently maintain a line of credit or term
loan with any commercial bank or other financial institution. The
following sets forth our primary sources of capital during the previous two
years.
The
following agreements were executed on December 31, 2012 and provided the Company
with $2 million in funding.
Investment
Agreement
The Company entered into
an Investment Agreement with VerifyMe, Inc. on December 31, 2012 (the Investment
Agreement). Under the terms of the Investment Agreement,
VerifyMe purchased 22,222,222 shares of the Companys common stock as
well as a warrant to purchase 22,222,222 shares of the Companys common stock
for $1 million. In addition, a Subscription Agreement (discussed
below) was to be entered into on or before January 31, 2013.
Registration
Rights Agreement
In
connection with the Investment Agreement, the Company entered into a
Registration Rights Agreement with VerifyMe (the Registration
Rights Agreement), pursuant to which VerifyMe can demand at any
time on or after four months after December 31, 2012, that the Company file a
registration statement relative to shares owned by VerifyMe. If the
Company has not filed the demand registration statement by the later of (i) two
(2) months after the date of the request of demand registration and (ii) six (6)
months after the date of the Registration Rights Agreement (such date,
the Filing Date), then, (i) the Company shall not issue any (A) capital stock,
(B) evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for capital stock (Convertible Securities),
or (C) rights, options or warrants to subscribe for, purchase or otherwise
acquire capital stock or Convertible Securities to anyone other than the
stockholder until it files the demand registration statement, (ii) beginning on
the day following the Filing Date, the applicable exercise price shall be
reduced by $0.01, (iii) until the Company has filed the registration statement
with the SEC, on each subsequent one (1) month anniversary of the filing date,
the applicable exercise price shall be reduced by $0.01, and (iv) all common
stock held by the stockholder and all common stock held by the Company to be
granted by the Company in respect of the exercise of the warrants, shall
automatically convert into a class of preferred stock of the Company,
established by the Company on terms acceptable to the stockholder, which such
class of preferred stock shall have voting rights representing 51% of the
aggregate voting power of the Company.
Technology
and Service Agreement
In
connection with the Investment Agreement, the Company entered into a Technology
and Service Agreement with VerifyMe (the Technology
and Service Agreement ), pursuant to which VerifyMe purchased
warrants of the Company to purchase 22,222,222 shares of the Companys common
stock for $1 million. Additionally, the Company executed a services
agreement with Zaah Technologies, Inc. (Zaah) concurrently
with this agreement (the Zaah
Technology and Service Agreement). The Company is to use up
to $550,000 of the proceeds from the Technology and Service
Agreement for the purpose of the Companys hiring (i) a full-time Chief
Technology Officer or Chief Information Officer and (ii) two full-time business
developers.
Technology
and Service Agreement with Zaah
Under the
Zaah Technology and Service Agreement, Zaah will provide the Company (a)
twelve (12) months of technical support, (b) up to twelve (12) days of meetings
annually between the respective management teams of the Company and Zaah, (c)
updates to technology as agreed in writing between the Company and Zaah, and (d)
twelve (12) months of technical hosting.
The
Company is required to pay Zaah the following:
(a) |
$450,000
on the date of the agreement (December 31, 2012), consisting of $250,000
in cash and warrants to purchase 4,444,444 shares of common stock under a
cashless exercise initially at an exercise price of $0.045 on the terms
set forth under the warrants issued by the Company to Zaah, dated as
of December 31, 2012, |
|
(b) |
$100,000,
accrued in full as of the date of the agreement, but payable in
twelve (12) months from the date hereof to a designee of Zaahs
selection, with a right to convert (at Zaahs sole discretion, from
time to time at any time) to shares of common stock at the prevailing
market price per share of common stock (which, as long as the common stock
is listed, shall be the closing price on the last trading day prior to
such issuance or sale of the common stock as traded on a national
securities exchange, the NASDAQ Global Market, the NASDAQ Capital Market,
or another nationally recognized trading system (including Pink OTC
Markets, Inc.)), and |
|
(c) |
a
commission of 10% of the revenue generated by any Company transaction
originated through the efforts of Zaah, as substantiated by a written
agreement between the Company and Zaah, specifically referencing the
transaction in which Zaah is entitled to such commission, payable by
the Company to Zaah in cash. Such payment shall be made on the
earlier of (i) the date of the signing of such transaction, (ii) the date
of the closing of such transaction, or (iii) any date on which any
funds are paid to the Company in respect to such
transaction. |
Patent
and Technology License Agreement
In
connection with the Investment Agreement, the Company entered into a Patent and
Technology License Agreement with VerifyMe, pursuant to which VerifyMe
granted the Company exclusive and non-exclusive licenses relative to a specific
list of patents in return for the following:
|
(a) |
Payment
1, payable upon execution of the agreement on December 31, 2012: The sum
of One Hundred Thousand Dollars ($100,000), to be paid by issuing (i) a
number of shares of common stock, of the Company equal to (x)
$100,000 divided by (y) $0.045 (2,222,222 shares) and (ii) cashless
exercise warrants to purchase an equal number of shares exercisable at a
price of Ten Cents ($0.10) per share with a term of five (5)
years. |
|
(b) |
Payment
2, payable on January 1, 2014: The sum of Four Hundred Thousand Dollars
($400,000), to be paid by issuing (i) a number of shares equal to (x)
$400,000 divided by (y) a price which equals a 10% discount to market and
(ii) cashless exercise warrants to purchase an equal number of shares
exercisable at a price of Ten Cents ($0.10) per share with a term of five
(5) years. |
|
(c) |
Payment
3, payable on January 1, 2015: The sum of Four Million Five Hundred
Thousand Dollars ($4,500,000), to be paid by issuing (i) a number of
shares equal to (x) $4,500,000 divided by (y) a price which equals a 10%
discount to market and (ii) cashless exercise warrants to purchase an
equal number of shares exercisable at a price of Ten Cents ($0.10) per
share with a term of five (5)
years. |
|
(d) |
Future
Payments Contingent: The Companys payment of Payment 2 and Payment
3 is contingent. To the extent that VerifyMe does not develop
and license to the Company at a time subsequent to Payment 1, further
technology and/or a further patent right related to the local, mobile and
cloud based biometric security systems, then any payments not already
paid, will no longer be due to VerifyMe, this nonperformance being a
likelihood, more likely than not. |
Asset
Purchase Agreement
In
connection with the Investment Agreement, the Company entered into an Asset
Purchase Agreement with VerifyMe, pursuant to which the Company purchased
trademark rights, software and a domain name at a purchase price of $100,000 to
be paid by issuing shares equal to $100,000/0.045 (2,222,222 shares) and
cashless exercise warrants to purchase an equal number of shares at an exercise
price of ten cents per share with a term of five years.
The
warrants associated with these Agreements are subject to anti-dilution
adjustments outlined in the Agreements. In accordance with ASC 815,
the warrants were classified as a liability in the total amount of $2.4 million
at December 31, 2012. In addition, the warrants must be valued every
reporting period and adjusted to market with the increase or decrease being
adjusted through earnings. For the three months ended March 31, 2013,
the value of the warrants increased to $10,657,015 resulting in a charge to
expenses of $8,257,015.
The
following agreement was executed on January 31, 2013 and provided the Company
with $1 million in funding:
Subscription
Agreement
VerifyMe subscribed
to purchase 33,333,333 shares of the Companys preferred stock and a warrant to
purchase 33,333,333 shares of the Companys common stock for $1 million at an
exercise price of $0.12. This agreement was executed on January 31,
2013.
At any
time within two years after January 31, 2013, the subscriber has the right, but
not the obligation to require the Company to repurchase all, but not less than
all, of the capital stock of the Company and warrants exercisable for capital
stock of the Company held by subscriber in exchange for the price originally
paid by the subscriber therefor upon the occurrence of any of the following
events:(i) the consummation of any bona fide business acquisition, (ii) the
incurring of any indebtedness by the Company in an amount in excess of $2
million, (iii) the issuance or sale of any security having a preference on
liquidation senior to common stock, or (iv) the sale by the Company of capital
stock or warrants exercisable for its capital stock at a price below $0.03 per
share.
|
In
accordance with ASC 480 and 815, the Preferred Stock has been classified
as permanent equity and has been valued at
$1million. |
The
conversion feature of the Preferred Stock is an embedded derivative, which is
classified as a liability in accordance with ASC 815 and was valued in
accordance with ASC 470 as a beneficial conversion feature at a fair market
value of $1 million at January 31, 2013. This was classified as an
embedded derivative liability and a discount to Preferred
Stock. Because the Preferred Stock can be converted at any time, the
full amount was accreted and classified as a reduction to the discount on
Preferred Stock and a deemed dividend distribution in the full amount of $1
million.
The
warrants associated with the Preferred Stock were also classified as a liability
and valued at a fair market of $2,995,791 at January 31,
2013. Because this amount was in entirely in excess of the
transaction price, this amount was recorded as a charge to expenses of
$2,995,791. In addition, the warrants must be valued every reporting
period and adjusted to market with the increase or decrease being adjusted
through earnings. For the three months ended March 31, 2013, the
value of the warrants increased to $6,660,286 resulting in a charge to expenses
of $3,664,495.
During
the second quarter of 2012, the Company received $200,000 for a 10% unsecured
note payable, due April 27, 2013. In December 2012, this note payable
and accrued interest of $9,167 was converted into 4,703,711 shares of the
Companys common stock.
In
October 2012, the Company commenced private placements consisting of shares of
the Companys common stock and warrants to purchase shares of the Companys
common stock at an exercise price of $0.10 per share. The shares and
warrants were sold in units with each unit comprised of one share and one
warrant at a purchase price of $0.045 and $0.05 per unit. As of
December 31, 2012, the Company sold 21,888,889 units that raised $1,060,000 for
the Company.
On
November 13, 2012, an employee and a consultant exercised options to purchase in
the aggregate 10,490,996 shares of the Companys common stock at an exercise
price of $.00125 per share that raised $13,114 for the Company.
On
December 20, 2012, an investor exercised warrants to purchase 333,333 shares of
the Companys common stock at $0.15 per share, that raised $50,000 for the
Company.
In
January and February 2013, the Company received $185,000 from the sales of
3,700,000 units from private placements consisting of shares of the Companys
common stock and warrants to purchase shares of the Companys common stock at an
exercise price of $0.10 per share. The shares and warrants were sold
in units with each unit comprised of one share and one warrant at a purchase
price of $.05 per unit.
In
January, 2013, the Company commenced private placements consisting of shares of
the Companys common stock and warrants to purchase shares of the Companys
common stock at an exercise price of $0.12 per share. The shares and
warrants were sold in units with each unit comprised of one share and one
warrant at a purchase price of $.045 per unit. The company sold
1,111,111 units and raised $50,000 as of the date of this report.
On
February 1, 2013, an investor exercised a warrant to purchase 1 million shares
of the Companys common stock that raised $10,000 for the Company.
In
February and March 2013, four investors exercised options to purchase 3,335,000
shares of the Companys common stock that raised $17,919 for the
Company.
Since our
inception, we have focused on developing and implementing our business
plan. Our business plan is dependent on our ability to raise capital
through private placements of our common stock and/or preferred
stock, through the possible exercise of outstanding options and warrants,
through debt financing and/or through a future public offering of our
securities. There is no assurance that we will raise sufficient capital in order
to meet our goals of implementing a sales and marketing effort to
introduce our products. We believe that our existing cash
resources will be sufficient to sustain our operations during the next twelve
months, however, we may need to raise additional funds in the future. We
intend to raise such financing through private placements and/or the sale of
debt and equity securities. The issuance of additional equity would
result in dilution to our existing shareholders. If we are unable to
obtain additional funds when they are needed or if such funds cannot be obtained
on terms favorable to us, we may be unable to execute our business plan or pay
our costs and expenses as they are incurred, which could have a material,
adverse effect on our business, financial condition and results of
operations.
Even if
we are successful in raising sufficient capital, our ability to
continue in business as a viable going concern can only be achieved when our
revenues reach a level that sustains our business operations. While it is
impossible to predict the amount of revenues, if any, that we may receive from
our products, we presently believe, based solely on our internal projections,
that we will generate revenues sufficient to fund our planned business
operations if the products are marketed effectively in accordance with our
plans. There can be no assurance that we will raise sufficient
proceeds, or any proceeds, for us to implement fully our proposed business
plan. Moreover, there can be no assurance that even if our products
are marketed effectively, that we will generate revenues sufficient to fund our
operations. In either situation, we may not be able to continue our
operations and our business might fail.
Off-Balance
Sheet Arrangements
As of March 31, 2013, we
did not have any relationships with unconsolidated entities or financial
partners, such as entities often referred to as structured finance or special
purpose entities, established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes. As
such, we are not materially exposed to any financing, liquidity, market or
credit risk that could arise if we had engaged in such relationships.
Critical
Accounting Policies
Our
financial statements are impacted by the accounting policies used and the
estimates and assumptions made by management during their preparation. We have
identified below the accounting policies that are of particular importance in
the presentation of our financial position, results of operations and cash flows
and which require the application of significant judgment by
management.
Stock-based
Compensation
We
account for stock-based compensation under the provisions of FASB ASC Topic
718, CompensationStock Compensation (ASC
718), which requires the measurement and recognition of compensation
expense for all stock-based awards made to employees and directors based on
estimated fair values on the grant date. We estimate the fair value of
stock-based awards on the date of grant using the Black-Scholes
model. The value of the portion of the award that is ultimately
expected to vest is recognized as expense over the requisite service periods
using the straight-line method.
We
account for stock-based compensation awards to non-employees in accordance with
FASB ASC Topic 505-50, Equity-Based Payments to
Non-Employees (ASC
505-50). Under ASC 505-50, we determine the fair value of the warrants
or stock-based compensation awards granted as either the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable.
All
issuances of stock options or other equity instruments to non-employees as
consideration for goods or services received by the Company are accounted for
based on the fair value of the equity instruments issued. Any stock options
issued to non-employees are recorded as an expense and additional paid-in
capital in stockholders equity over the applicable service periods using
variable accounting through the vesting dates based on the fair value of the
options at the end of each period.
Revenue
Recognition
In
accordance with Securities and Exchange Commission (SEC)
Staff Accounting Bulletin No. 104, Revenue Recognition (Codified in FASB ASC
605), we recognize revenue when (i) persuasive evidence of a customer or
distributor arrangement exists, (ii) a retailer, distributor or wholesaler
receives the goods and acceptance occurs, (iii) the price is fixed or
determinable, and (iv) collectability of the sales revenues is reasonably
assured. Subject to these criteria, the Company recognizes revenue from product
sales, consisting mainly of pigments and penlights, upon shipment to the
customer. Royalty revenue is recognized upon receipt of notification from
a customer that the Companys product has been used in the customers production
process.
Recently
Issued Accounting Pronouncements
Recently
issued accounting pronouncements are discussed in Note 1 of the Notes to
Consolidated Financial Statements contained elsewhere in this
prospectus.
DIRECTORS
AND EXECUTIVE OFFICERS
The
current members of our Board and executive officers of the Company are as
follows:
|
|
|
|
|
|
|
Name |
|
|
Age |
|
Position
with Company |
|
Michael
R. Sonnenreich |
|
74 |
|
Chairman
of the Board of Directors |
Norman
A. Gardner |
|
70 |
|
Vice
Chairman of the Board of Directors and Chief Operating
Officer |
Neil
Alpert |
|
35 |
|
Director,
President and Chief Executive Officer |
Constance
Harriman |
|
64 |
|
Director |
General
Peter Pace |
|
67 |
|
Director |
Paul
Wolfowitz |
|
68 |
|
Director |
Jonathan
Weinberger |
|
36 |
|
Director |
Claudio
R. Ballard |
|
54 |
|
Director |
Michael
Chertoff |
|
59 |
|
Director |
Scott
A. McPherson |
|
52 |
|
Chief
Financial Officer |
Board
of Directors
We
believe that our Board should be composed of individuals with sophistication and
experience in many substantive areas that impact our business. We
believe that experience, qualifications, or skills in the following areas are
most important: security industry experience; accounting and finance; strategic
planning; human resources and development practices; and board practices of
other corporations. These areas are in addition to the personal
qualifications described in this section. We believe that all of our
current Board members possess the professional and personal qualifications
necessary for board service and have highlighted particularly noteworthy
attributes for each Board member in the individual biographies
below. The principal occupation and business experience, for at least
the past five years, of each current director is as follows:
MICHAEL
R. SONNENREICH
Michael
R. Sonnenreich has vast experience in the global pharmaceutical industry. He is
a graduate of the University of Wisconsin, the University of Madrid, Spain, and
Harvard University Law School. He is currently Chairman of The Board of Kikaku
America International and Vice Chairman of PharMa International Corporation of
Tokyo, Japan. He is also Chairman and CEO of Williams Creek
Explorations, Vancouver, British Columbia, Canada. He is a Director of Wi2Wi,
Palo Alto, California, Tyhee Development Corp. Ltd., Vancouver, British
Columbia, Canada, and Amorfix Life Sciences Ltd., Toronto,
Canada. Mr. Sonnenreich has in the past been a Board member and
Trustee of numerous important companies and universities, such as Les Aliments
SoYummi, Inc., Montreal, Canada, the ABD American Capital Market Funds, the
Integra Fund, Continental Steel Inc., Scientific American, Medical Tribune
International, and has long-term involvements with many nonprofit institutions
such as the Washington National Opera (President 1996-98; 2002-2006), D.C. Jazz
Festival (Chairman, 2010-present), Sackler/Freer Galleries of Art (Smithsonian
Institution), D.C. Commission on the Arts and Humanities (Mayoral Appointment as
Commissioner, 2008-2011), the Johns Hopkins University School of Advanced
International Studies, the New England Conservatory of Music, the North Carolina
Museum of Art Foundation, the University of Virginia Art Museum, Clark
University, the Maret School, the Richard Tucker Music Foundation,
and served as President of the National Coordinating Council on Drug
Education. In 2008, he was named Distinguished Washingtonian by the
University Club of Washington, D.C.
Mr.
Sonnenreich previously served in government in the Department of Justice and was
appointed Executive Director of the National Commission on Marijuana and Drug
Abuse.
As a
result of these and other professional experiences, the Company believes that Mr. Sonnenreich possesses
particular knowledge and experience that strengthen the Boards collective
qualifications, skills and experience. Mr. Sonnenreich was elected to the Board
on November 21, 2012.
NORMAN
A. GARDNER
Norman A.
Gardner served as our president since inception on November 11, 1999 through
October 8, 2012, when he became the Vice Chairman of the Company. From 1974 to
1985 Mr. Gardner served as president of Polymark Management, Ltd., a Canadian
public relations firm. In 1982, Mr. Gardner founded NoCopi Technologies, Inc. of
West Conshohocken, Pennsylvania, a publicly traded company. He served as
president and chief executive officer of NoCopi Technologies, Inc. from
1985 until 1997 and as chairman of its board until March 1998. Mr. Gardner
received his B.A. in English from McGill University in 1963.
As a
result of these and other professional experiences, the Company believes that Mr. Gardner possesses
particular knowledge and experience that strengthen the Boards collective
qualifications, skills and experience.
NEIL
ALPERT
Neil
Alpert became the President of the Company on October 8,
2012. In his capacity as President and Chief Executive Officer, Mr.
Alpert is responsible for overseeing the day-to-day operations of the Company as
well as its vision for the future. His background spans over a decade
of management experience in the political, non-profit and business
sectors.
From 2011
to 2012, Mr. Alpert served as President of The Kiawah Group, a boutique
government relations and development firm specializing in fundraising, advocacy,
non-profit consulting and global representation.
Prior to
2011, Mr. Alpert served as Special Assistant to the Chairman of the Republican
National Committee. In his role as Special Assistant, Mr. Alpert
orchestrated a nationwide political outreach campaign targeting over 100
congressional districts. In addition, the campaign helped inspire the largest
Congressional seat change since 1948 and the largest for any midterm election
since the 1938 midterm elections.
Prior to
joining the Republican National Committee, Mr. Alpert served in a number of
capacities in the non-profit world ranging from National Campaign Director at
the American Israel Public Affairs Committee (AIPAC) to working with Plácido
Domingo and the Washington National Opera. He also worked with health-focused
organizations such as the Red Cross and the American Cancer
Society.
Mr.
Alperts management experience ranges from managing small teams of just four
employees to teams as large as 100+. In each situation, Mr. Alperts
leadership and vision has led to significant increases in productivity and
output.
Mr.
Alpert is involved with a number of charities and most recently served on the
Board of Directors for the Armed Forces Foundation, a non-profit organization
dedicated to providing comfort and solace to members of the
military. He also sits on the Board of Advisors for the Institute of
World Politics, a graduate school focused on supplying professional education in
statecraft, national security and international affairs.
As a
result of these and other professional experiences, the Company believes that Mr. Alpert possesses
particular knowledge and experience that strengthen the Boards collective
qualifications, skills and experience. Mr. Alpert was elected to the Board on
November 21, 2012.
CONSTANCE
HARRIMAN
Constance B. Harriman has
helped formulate U.S. trade, natural resource and legal policy in executive
positions at three U.S. government agencies: the U.S. Export-Import Bank and the
U.S. Department of Justice and Interior. During her over twenty-five
years of legal, public policy, and management experience, Ms. Harriman has
worked extensively with Congress, federal agencies, the media, and special
interest groups. She has given speeches throughout the United States
and abroad on issues related to finance, natural resources, and environmental
technology.
During
the Bush and Clinton administrations, she was one of five full-time members of
the Board of Directors of the Export-Import Bank. She served on the
boards Audit Committee and chaired the banks taskforce on environmental
guidelines. Previously, Ms. Harriman was Assistant Secretary for Fish
and Wildlife and Parks at the U.S. Department of the Interior. She
had policy, budget and administration responsibility for the National Park
Service and the Fish and Wildlife Service: 25,000 employees, 170 million acres
of land, and a budget of $2 billion. Ms. Harriman played a key role
in several inter-agency and international organizations. She served
as U.S. Commissioner to the Great Lakes Fishery Commission and as a member of
the Presidents Advisory Council on Historic Preservation.
Ms.
Harrimans other government experience includes high-level legal positions at
the U.S. Department of Justice and the U.S. Department of the
Interior. She also worked with the California law firm of Sheppard,
Mullin, Richter & Hampton, where she practiced corporate and securities law
and commercial and anti-trust litigation.
Ms.
Harriman is a member of numerous organizations, and her work in the public and
private sectors has earned her admission in the Marquis Whos Who in
America.
A Phi
Beta Kappa graduate of Stanford University, she holds Bachelor and Masters
degrees from Stanford, a Masters degree in international Law from Georgetown
University, and a Juris Doctor degree from the University of California at Los
Angeles.
As a
result of these and other professional experiences, the Company believes that Ms. Harriman possesses
particular knowledge and experience that strengthen the Boards collective
qualifications, skills and experience. Ms. Harriman was elected to the Board on
November 21, 2012.
GENERAL
PETER PACE
General
Peter Pace served as the sixteenth Chairman of the Joint Chiefs of Staff from
2005-2007. Prior to becoming Chairman, he served as Vice Chairman of the Joint
Chiefs of Staff. General Pace holds the distinction of being the first Marine to
have served in either of these positions. General Pace retired in
2007 after more than 40 years of active service in the United States Marine
Corps.
Born in
Brooklyn and raised in Teaneck, NJ, General Pace was commissioned in June 1967,
following graduation from the United States Naval Academy. He holds a Masters
Degree in Business Administration from George Washington University, attended
the Harvard University Senior Executives in National and International Security
program, and graduated from the National War College.
During
his distinguished career, General Pace held command at virtually every level,
beginning as a Rifle Platoon Leader in Vietnam. He also served in
Europe, Japan, Thailand, South Korea, and Somalia.
In June
2008, General Pace was awarded the Presidential Medal of Freedom, the highest
civilian honor a President can bestow.
He is
currently serving on the Board of Directors of several corporate entities
involved in management consulting, private equity, and IT
security. He served on the Presidents Intelligence Advisory Board,
and on the Secretary of Defenses Defense Policy Board. General Pace
served as leader-in-residence and the Poling Chair of Business and Government,
for the Kelley School of Business, Indiana University. He is a
Distinguished Visiting Research Scholar for Fordham University, and an Adjunct
Faculty member of Georgetown University.
General
Pace is associated with a number of charities focused on supporting the troops
and their families. He is Chairman of the Wall Street Warfighters
Foundation and a long-standing member of the Board of Directors for the Marine
Corps Law Enforcement Foundation. He is a member of the USO World
Board of Governor and serves on the Advisory Board for Snowball
Express. He and his wife Lynne are on the advisory board for Our
Military Kids, an organization that supports children of deployed Guard and
Reserve personnel with tutoring and enrichment activities.
As a
result of these and other professional experiences, the Company believes that General Pace possesses
particular knowledge and experience that strengthen the Boards collective
qualifications, skills and experience. General Pace was elected to the Board on
November 21, 2012.
PAUL
WOLFOWITZ
Paul
Wolfowitz spent more than three decades in public service and higher education,
including 24 years in U.S. government service under seven U.S.
presidents.
After
receiving a Ph.D. in political science from the University of Chicago and
teaching at Yale University, Dr. Wolfowitz served in the Arms Control and
Disarmament Agency, the Department of Defense, and the Department of State from
1973 to 1993, including as Director of Policy Planning, Assistant Secretary of
State for East Asia and the Pacific, Ambassador to Indonesia and Undersecretary
of Defense for Policy. From 1994 to 2001, Dr. Wolfowitz was Dean of the School
of Advanced International Studies at Johns Hopkins University. Most recently, he
served as Deputy Secretary of Defense from 2001 to 2005 and as President of the
World Bank from 2005 to 2007. Dr. Wolfowitz currently focuses on development and
national security issues as a scholar at the American Enterprise
Institute.
In
addition to his work at the American Enterprise Institute, he is Chairman of the
U.S. Taiwan Business Council and has served as a Director of Hasbro Corporation
and on the advisory boards of the Clinton Global Initiative, ING Americas, and
the AMAR Foundation, as well as two organizations that assist veterans from
Afghanistan and Iraq, the Aleethia Foundation and American Corporate
Partners. He also advises international businesses in Indonesia,
Japan, Hong Kong and Switzerland.
His many
awards for public service include The Presidential Citizens Medal, The
Department of Defenses Distinguished Public Service Medal, The Department of
States Distinguished Honor Award, The Department of Defenses Distinguished
Civilian Service Medal, and The Arms Control and Disarmament Agencys
Distinguished Honor Award.
As a
result of these and other professional experiences, the Company believes that Mr. Wolfowitz possesses
particular knowledge and experience that strengthen the Boards collective
qualifications, skills and experience. Mr. Wolfowitz was elected to the board on
November 21, 2012.
JONATHAN
WEINBERGER
Jonathan
R. Weinberger is an experienced and accomplished member of the
Washington D.C. legal, government, and business communities. Mr.
Weinberger currently serves as Executive Vice President of a
technology company called Veedims, LLC (“Veedims”) based in Fort Lauderdale,
Florida.
Mr.
Weinberger has served directly under six cabinet members in various
positions. At the Department of State he was on the staffs of both
Secretary Albright and Secretary Powell. At the U.S. Treasury, he
served as the youngest Executive Secretary of the Treasury in
history. He also served as the Executive Secretary and Deputy Chief
of Staff at the Office of the United States Trade Representative at the White
House. Mr. Weinberger also served as Associate General Counsel where
he was in charge of issues with respect to foreign investment in the United
States and led the litigation team on various high-level trade disputes with
China. Through his service in the government he has developed a superb skill for
executive management at the largest scale, an eye for efficient operation, and a
rare entrepreneurial mindset that allowed for the streamlining of multitudes of
bureaucratic structures and processes.
Originally
from Scranton, Pennsylvania, Mr. Weinberger received his Bachelors Degree in
International Affairs and Italian from The Johns Hopkins University. He also
earned a Masters Degree in U.S. Foreign Policy from the Elliott School of
International Affairs at George Washington University, a Juris Doctor degree
from the Washington College of Law at American University, and a Masters of Law
(LLM) in international finance and national security law, with distinction, from
Georgetown University Law Center.
As a
result of these and other professional experiences, the Company believes that Mr. Weinberger possesses
particular knowledge and experience that strengthen the Boards collective
qualifications, skills and experience. Mr. Weinberger was elected to the board
on November 21, 2012 at the recommendation of VerifyMe.
CLAUDIO
R. BALLARD
Claudio
R. Ballard, 54, is the Chairman, Founder and one of the two Managing Members of
Veedims. Mr. Ballard is currently the President of VerifyMe. In 2010, Mr.
Ballard was named Inventor of the Year by the United States Business and
Industry Council, in recognition of his founding of Iconic Motors and Veedims as
well as the creation of the DataTreasury Global Repository Platform, a
patent-protected electronic transaction system licensed by banks to process
digital checks.
Mr.
Ballard has over 37 years of experience in computer technology, software and
business development. In 1979, he founded FORTEX Corporation, that in 1981
became the worlds first ORACLE Value-Added Reseller and Systems Integrator by
delivering the earliest known commercially viable production mission critical
application software and supporting development tools that initially ran on
ORACLE and eventually ran on other database platforms. By the late 1980s, Mr.
Ballards team had built sophisticated, mission critical systems for more than
30 Fortune 500 companies, including Kidder Peabody, General Electric (14
Divisions), Standard & Poors, CitiBank, Philip Morris, Boeing, McDonnell
Douglas and AT&T Bell Labs, Pfizer, Novartis (formally Ciba-Geigy) as well
as government agencies that included the U.S. Army, U.S. Air Force, U.S. Navy,
the Food and Drug Administration (7 departments at the FDA) and the Central
Intelligence Agency.
In 1994,
Mr. Ballard invented the DataTreasury System, the sophisticated repository and
on-line biometrics system that enables banks to quickly verify identity and
process a myriad number of financial transactions. In 1998, Mr. Ballard founded
DataTreasury Corporation and launched the core technology that led to the
development of the check-imaging platform. Today, over 50 banks throughout the
U.S. representing approximately 70% of U.S. check processing volume use this
technology through a licensing arrangement.
Mr. Ballard was
elected to the Board on March 30, 2013 at the recommendation of VerifyMe.
MICHAEL
CHERTOFF
Michael
Chertoff, 59, is the co-founder and chairman of the Chertoff
Group. At Chertoff Group, Mr. Chertoff provides high-level strategic
counsel to corporate and government leaders on a broad range of security issues,
from risk identification and prevention to preparedness, response and
recovery.
As
Secretary of the U.S. Department of Homeland Security from 2005 to 2009, Mr.
Chertoff, led the country in blocking would-be terrorists from crossing U.S.
borders or implementing their plans if they were already in the country. He also
transformed FEMA into an effective organization following Hurricane
Katrina.
Before
heading up the Department of Homeland Security, Mr. Chertoff served as a federal
judge on the U.S. Court of Appeals for the Third Circuit. Earlier, during more
than a decade as a federal prosecutor, he investigated and prosecuted cases of
political corruption, organized crime, corporate fraud and terrorism including
the investigation of the 9/11 terrorist attacks.
In
addition to his role at Chertoff Group, Mr. Chertoff is also senior of counsel
at Covington & Burling LLP, and a member of the firms White Collar Defense
and Investigations practice group.
As a result of these and
other professional experiences, the Company believes Mr. Chertoff possesses particular
knowledge and experience that strengthen the Boards collective qualifications,
skills and experience. Mr. Chertoff was elected to the Board on May 4,
2013.
SCOTT
A. MCPHERSON
Mr.
McPherson was appointed as the Chief Financial Officer of the Company in
December 2012. Prior to that Mr. McPherson served as the Chief
Financial Officer of Virtual Piggy, Inc., from August 2010 through November
2012. Virtual Piggy, Inc. is a public company that
has increased market interest towards the security aspects of online
gaming and social networking and has focused its efforts towards delivering a
platform technology designed to manage the under 18 age groups online
experience in a secure manner. Mr. McPherson formed McPherson, CPA,
PLLC in January 2005, which he continues to manage today. The firm
performs accounting and tax services for numerous clients in various
industries. The firm also performs litigation support services,
primarily involving class action lawsuits and other lawsuits involving
accounting malpractice or manipulation. The firm has successfully
assisted small public companies by developing procedures for them to implement
in order to initially comply and maintain compliance with the Sarbanes-Oxley
Act. All of these services are conducted under the direction of Mr.
McPherson. Prior to the formation of McPherson, CPA, PLLC, Mr.
McPherson was a partner in the SEC, Merger and Acquisition and Co-Chairman of
the Litigation Support departments of a regional certified public accounting
firm.
Mr. McPherson is a
Certified Fraud Examiner and a Certified Valuation Analyst.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth the compensation earned by the Companys board of
directors, principal executive officer, and principal financial
officer during the years ended December 31, 2012 and 2011.
|
|
|
|
|
|
Name
and Principal
Position |
Year |
Salary
($) |
Option
Awards(1)
($) |
All
Other
Compensation
(3)(4)($) |
Total
($) |
Norman
A. Gardner (2)
Vice
Chairman & CEO |
2012
2011 |
50,000
180,000 |
44,769
40,946 |
56,414
35,880 |
151,183
256,826 |
Neil
Alpert
President
& COO |
2012
2011 |
50,000
- |
44,769
- |
-
- |
94,769
- |
Scott
A. McPherson
CFO |
2012
2011 |
-
- |
11,638
- |
16,325
19,500 |
27,963
19,500 |
(1) |
Represents
the grant date fair value of the option award, calculated in accordance
with FASB Accounting Standard Codification 718, Compensation Stock
Compensation, or ASC 718. The assumptions used in
calculating the grant date fair value of the option awards are set forth
in Note 9 of our Consolidated Financial Statements. |
(2) |
Mr.
Gardner was appointed as our President and Chief Executive Officer on
November 10, 1999. The $180,000 of salary in 2011 was forgiven
in 2012 by Mr. Gardner. |
(3) |
Company
car, insurance, occupancy costs and expenses. |
(4) |
Mr.
McPherson was appointed as Chief Financial Officer in December 2012 and
the amounts received were paid to the accounting firm owned by Mr.
McPherson. |
Outstanding
Equity Awards At December 31, 2012
The
following table sets forth, for each named executive officer, information
regarding unexercised options, stock that had not vested, and equity incentive
plan awards as of the end of our fiscal year ended December 31,
2012.
Name |
Number
of
securities
underlying
unexercised
options
(#)
exercisable |
Number
of
securities
underlying
unexercised
options
(#)
unexercisable |
Option
exercise
price
($) |
Option
expiration
Date |
Norman
A. Gardner |
1,000,000 |
- |
$0.05 |
11/20/2022 |
Neil
Alpert |
1,000,000 |
- |
$0.05 |
11/20/2022 |
Scott
A. McPherson |
200,000 |
- |
$0.05 |
7/16/2022 |
Narrative
Disclosure to Summary Compensation Table and Outstanding Equity Awards
Table
Employment
Agreements
We
currently have a three-year employment agreement dated October 8, 2012 with our
Vice Chairman and Chief Executive Officer of the Company with an annual
compensation of $200,000 per year. In addition, upon execution of the agreement
the Company has agreed to issue options to the Vice Chairman and Chief Executive
Officer to purchase 5% of the fully-diluted shares of the Companys common stock
at an exercise price of $.05 per share, subsequent to the Company receiving
funding of $2.5 million.
We
currently have a three-year employment agreement dated October 16, 2012 with our
President and Chief Operating Officer of the Company with an annual
compensation of $200,000 per year. In addition, upon execution of the agreement
the Company has agreed to issue options to the President and Chief Operating
Officer to purchase 5% of the fully-diluted shares of the Companys common stock
at an exercise price of $.05 per share, subsequent to the Company receiving
funding of $2.5 million.
Option
Issuance
On
November 21, 2012, the Company issued the Vice Chairman and Chief Executive
Officer of the Company an option to purchase 1 million shares of the Companys
common stock at an exercise price of $0.05, with a term of ten
years.
On
November 21, 2012, the Company issued the President and Chief Operating Officer
of the Company an option to purchase 1 million shares of the Companys common
stock at an exercise price of $0.05, with a term of ten years.
Director
Compensation
|
|
|
|
|
|
|
|
|
Name |
|
|
|
Fees
earned or paid
in
cash
($) |
|
Option
awards
($)(1) |
|
Total
($) |
Michael
Sonnenreich |
|
2012
2011 |
|
-
- |
|
89,568
- |
|
89,568
- |
Neil
Alpert
|
|
2012
2011 |
|
-
- |
|
-
- |
|
-
- |
Constance
Harriman |
|
2012
2011 |
|
-
- |
|
89,568
- |
|
89,568
- |
General
Peter Pace |
|
2012
2011 |
|
-
- |
|
89,568
- |
|
89,568
- |
Paul
Wolfowitz |
|
2012
2011 |
|
-
- |
|
89,568
- |
|
89,568
- |
Jonathan
Weinberger |
|
2012
2011 |
|
-
- |
|
89,568
- |
|
89,568
- |
(1) |
Represents
the grant date fair value of the option award, calculated in accordance
with FASB Accounting Standard Codification 718, Compensation Stock
Compensation, or ASC 718. The assumptions used in
calculating the grant date fair value of the option awards are set forth
in Note 9 of our Consolidated Financial Statements. |
Narrative
Disclosure to Directors Compensation Table
We did
not pay an annual fee to any of our directors during 2012. Each
member of our Board receives reimbursement of expenses incurred in
connection with his or her services as a member of our Board or Board
committees.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table provides the names and addresses of each person known to the
Company to own more than 25% of the outstanding common stock as of July 25, 2013,
and by the Officers and Directors, individually and as a group. Except as
otherwise indicated, all shares are owned directly.
|
|
|
Name
and Address of Beneficial Owner |
Amount & Nature
of
Beneficial Ownership(1) |
Percentage of Shares
Beneficially
Owned |
5%
Beneficial Owners |
|
|
|
|
Robert
L. Bast
110
Spruce Lane
Ambler,
PA 19002
|
28,423,622(2) |
6.00% |
|
|
Clydesdale
Partners II LLC
201
Spear Street, Suite 1150
San
Francisco, CA 94105
|
53,275,000(3) |
11.25% |
|
|
Nob
Hill Capital Partners L.P.
1
Ferry Building, Suite 225
San
Francisco, CA 94105
|
29,625,000(4) |
6.26% |
|
|
VerifyMe,
Inc.
c/o
Nix Patterson & Roach, L.L.P.
205
Linda Drive
Daingerfield,
TX 75638 |
153,333,332(5) |
32.39% |
|
|
|
|
|
|
|
Executive
Officers and Directors |
|
|
|
|
Michael
R. Sonnenreich |
5,000,000(6) |
1.06% |
|
|
Norman
A. Gardner |
39,046,339(7) |
8.25% |
|
|
Neil
Alpert |
20,000,000(8) |
4.22% |
|
|
Constance
Harriman |
3,000,000(9) |
* |
|
|
Peter
Pace |
1,000,000(10) |
* |
|
|
Paul
Wolfowitz |
1,000,000(11) |
* |
|
|
Jonathan
Weinberger |
1,090,000(12) |
* |
|
|
Claudio
R. Ballard |
1,000,000(13) |
* |
|
|
Scott
A. McPherson |
200,000(14) |
* |
|
|
|
|
|
|
|
Michael
Chertoff |
1,000,000(15) |
* |
|
|
* Less
than 1% |
|
|
|
|
All
officers and directors as a group (10 people) |
72,336,339 |
15.28% |
|
|
(1) |
This
table has been prepared based on 275,665,122 shares of our common stock
outstanding on July 25, 2013. |
(2) |
Consists
of 28,423,622 shares of common stock. |
(3) |
Consists
of 43,875,000 shares of common stock and 9,400,000 shares held by PFK
Acquisition Group II LLC, which is under common
control. |
(4) |
Consists
of 5,250,000 shares of common stock, 18,375,000 shares underlying
convertible notes payable at an exercise price of $0.00533 and 6,000,000
shares underlying warrants at an exercise price of
$0.01. |
(5) |
Consists of 44,444,444
shares of common stock, 21,111,1111 shares
underlying convertible preferred stock, 87,777,777 shares underlying warrants exercisable at $0.10 or $0.12 per
share. |
(6) |
Consists
of 2,000,000 shares of common stock, 1,000,000 shares underlying options
exercisable at $0.05 per share and 2,000,000 shares underlying warrants
exercisable at $0.15 per share. |
(7) |
Consists
of 19,046,339 shares of common stock, and 20,000,000 shares underlying
options exercisable at $0.05 per share. |
(8) |
Consists
of 20,000,000 shares of common stock underlying options exercisable at
$0.05 per share. |
(9) |
Consists
of 1,333,333 shares of common stock, 1,000,000 shares underlying options
exercisable at $0.05 per share and 666,667 shares underlying warrants
exercisable at $0.15 per share. |
(10) |
Consists
of 1,000,000 shares of common stock underlying options exercisable at
$0.05 per share. |
(11) |
Consists
of 1,000,000 shares of common stock underlying options exercisable at
$0.05 per share. |
(12) |
Consists
of 90,000 shares of common stock and 1,000,000 shares of common stock
underlying options exercisable at $0.05 per share. |
(13) |
Consists
of 1,000,000 shares of common stock underlying options exercisable at
$0.05 per share. |
(14) |
Consists
of 200,000 shares underlying options exercisable at $0.05 per
share. |
(15) |
Consists
of 1,000,000 shares of common stock underlying options exercisable at
$0.05 per share. |
TRANSACTIONS
WITH RELATED PERSONS
Related
Party Transactions
Under
applicable SEC rules and regulations, the following individuals may be
considered promoters of the Company as they were instrumental in forming and
organizing the Company: (i) Norman A. Gardner, the Vice Chairman of our Board of
Directors and Chief Operating Officer.
At
December 31, 2012 and 2011, six and five shareholders of the Company held
$732,249 and $577,500 of the senior secured convertible notes
payable.
One
shareholder held $140,000 of convertible notes payable as of December 31, 2012
and 2011.
At
December 31, 2012 and 2011, three shareholders of the Company held $711,000
of unsecured notes payable.
At
December 31, 2011, accrued and unpaid salary for the Chief Executive Officer was
$208,514. As of December 31, 2012, the Chief Operating Officer has
forgiven $349,000 of accrued salary, which was treated as
additional paid in capital.
We have
entered an employment agreement with Mr. Gardner and Mr. Alpert. We
have issued options to both, which awards are described in more detail under
Executive
Compensation in this prospectus.
Policies
and Procedures for Reviewing Related Party Transactions
We have
not adopted any written policies or procedures governing the review, approval or
ratification of related party transactions. However, our Board reviews, approves
or ratifies, when necessary, all transactions with related parties.
Director
Independence
Pursuant
to Item 407(a)(1)(ii) of Regulation S-K promulgated under the Securities Act, we
have adopted the definition of independent director as set forth in Rules
5000(a)(19) and 5605(a)(2) of the rules of the Nasdaq Stock
Market. We believe that Michael Sonnenreich, Constance Harriman,
General Peter Pace, Paul Wolfowitz and Michael Chertoff qualify as an
independent director pursuant to such rules. Our Board
has created separately-designated standing committees. Members
of these committees are elected annually by our Board and serve at the
discretion of our Board.
LEGAL
MATTERS
The
validity of the issuance of the shares of our common stock and warrants
described in this prospectus has been passed upon for us by Morgan, Lewis &
Bockius LLP.
EXPERTS
The
financial statements of LaserLock Technologies, Inc. as of December 31, 2012,
and for the period from November 10, 1999 (inception) through December 31, 2012,
have been included in this registration statement in reliance upon the report of
Morison Cogen LLP, an independent registered public accounting firm,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
DISCLOSURE OF COMMISSION
POSITION ON INDEMNIFICATION
Our
bylaws provide for the elimination of the personal liability of our officers,
directors, corporate employees and agents to the fullest extent permitted by the
provisions of Nevada law. Under such provisions, the director, officer,
corporate employee or agent who in her capacity as such is made or threatened to
be made, party to any suit or proceeding, shall be indemnified if it is
determined that such director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of our
Company. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and persons controlling our
Company pursuant to the foregoing provision, or otherwise, we have been advised
that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities is asserted by
one of our directors, officers, or controlling persons in connection with the
securities being registered, we will, unless in the opinion of our legal counsel
the matter has been settled by controlling precedent, submit the question of
whether such indemnification is against public policy to a court of appropriate
jurisdiction. We will then be governed by the courts decision.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus, and the documents incorporated by reference into this prospectus,
contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements contained
in, or incorporated by reference into, this prospectus that are not historical
facts are hereby identified as forward-looking statements for this purpose and
include, among others, statements relating to:
|
● |
the
sufficiency of our cash and cash equivalents to fund our operations, debt
service and interest obligations; |
|
● |
our
ability to obtain additional capital in sufficient amounts or on terms
acceptable to us, and the consequences of failing to do
so; |
|
● |
future
expenses and capital requirements; |
|
● |
our
development and commercialization
capabilities; |
|
● |
the
performance of our partners and other third
parties; |
|
● |
our
ability to obtain and maintain intellectual property protection and the
scope of such protection; and |
|
● |
the
effect of legal and regulatory developments in the U.S. and foreign
countries. |
as well
as other statements regarding our projections, expectations, beliefs, future
performance, future financial position, prospects, plans and objectives for
future operations (including assumptions underlying or relating to any of the
foregoing). Forward-looking statements generally can be identified by
words such as may, will, could, would, should, expect, intend,
plan, anticipate, believe, estimate, predict, project, potential,
continue, ongoing and similar expressions, although not all forward-looking
statements contain these identifying words.
Forward-looking statements
are based upon our current expectations and beliefs and are subject to risks and
uncertainties. We may not actually achieve the plans, intentions or
expectations described in our forward-looking statements and you should not
place undue reliance on our forward-looking statements. Actual
results or events could differ materially from the plans, intentions and
expectations described in the forward-looking statements we
make. Furthermore, if our forward-looking statements prove to be
inaccurate, the inaccuracy may be material. In light of the significant
uncertainties in these forward-looking statements, you should not regard these
statements as a representation or warranty by us or any other person that we
will achieve our objectives and plans in any specified timeframe, or at
all.
You
should read this prospectus and the documents that we reference in this
prospectus and have been filed as exhibits to the registration statement of
which this prospectus is a part completely and with the understanding that our
actual future results may be materially different from what we
expect. The information contained in this prospectus is accurate only
as of the date of this prospectus, regardless of the time of delivery of this
prospectus or any issuance or sale of our common stock. We do not assume any
obligation to update any forward-looking statements.
WHERE
YOU CAN FIND MORE INFORMATION
We have
filed with the SEC a registration statement under the Securities Act of 1933, as
amended, that registers the distribution of the securities offered under this
prospectus. The registration statement, including the attached exhibits and
schedules contain additional relevant information about us and the securities.
The rules and regulations of the SEC allow us to omit from this prospectus
certain information included in the registration statement.
In
addition, we file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy this information and the
registration statement at the SEC public reference room located at 100 F Street,
N.E., Room 1580, Washington D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. Any information we file with the SEC, including the
documents incorporated by reference into this prospectus, is also available on
the SECs website at http://www.sec.gov. We also maintain a website at http://www.laserlocktech.com
through which you can access our SEC filings. The information contained on, or
that can be accessed through, our website is not part of this
prospectus.
LaserLock
Technologies, Inc. and Subsidiary
(A Development Stage
Enterprise)
|
|
PAGE |
|
|
|
CONSOLIDATED BALANCE
SHEETS |
|
F-1 |
|
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS |
|
F-2 |
|
|
|
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS DEFICIT |
|
F-3 |
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
|
F-9 |
|
|
|
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS |
|
F-11 F-24 |
LaserLock Technologies, Inc.
and Subsidiary
(A
Development Stage Enterprise)
March 31,
2013 and December 31, 2012
|
|
March 31,
2013 |
|
|
December 31,
2012 |
|
|
|
(Unaudited) |
|
|
(Audited) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
3,485,334 |
|
|
$ |
2,994,350 |
|
Accounts receivable,
net of allowance of $0 at March 31, 2013 and December 31,
2012 |
|
|
6,613 |
|
|
|
3,473 |
|
Inventory |
|
|
29,852 |
|
|
|
19,980 |
|
Prepaid
expenses |
|
|
612,868 |
|
|
|
750,000 |
|
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT ASSETS |
|
|
4,134,667 |
|
|
|
3,767,803 |
|
|
|
|
|
|
|
|
|
|
PROPERTY AND
EQUIPMENT |
|
|
|
|
|
|
|
|
Capital
equipment |
|
|
32,782 |
|
|
|
34,964 |
|
Less
accumulated depreciation |
|
|
23,425 |
|
|
|
32,624 |
|
|
|
|
9,357 |
|
|
|
2,340 |
|
|
|
|
|
|
|
|
|
|
Patents and Trademark,
net of accumulated amortization of $98,077 and $92,302 as of March 31,
2013 and December 31, 2012 |
|
|
324,542 |
|
|
|
311,832 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
4,468,566 |
|
|
$ |
4,081,975 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable and
accrued expenses |
|
$ |
413,568 |
|
|
$ |
660,493 |
|
Accrued
interest |
|
|
13,667 |
|
|
|
97,563 |
|
Notes
payable |
|
|
50,000 |
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT LIABILITIES |
|
|
477,235 |
|
|
|
958,056 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES |
|
|
|
|
|
|
|
|
Embedded derivative
liability |
|
|
1,000,000 |
|
|
|
- |
|
Warrant
liability |
|
|
17,317,301 |
|
|
|
2,400,000 |
|
Accrued
interest |
|
|
1,015,561 |
|
|
|
975,559 |
|
Senior secured
convertible notes payable |
|
|
775,249 |
|
|
|
775,249 |
|
Convertible notes
payable |
|
|
98,000 |
|
|
|
140,000 |
|
Notes
payable, net of discount of $12,393 and $13,632 as of March 31, 2013 and
December 31, 2012 |
|
|
698,607 |
|
|
|
697,368 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LONG-TERM LIABILITIES |
|
|
20,904,718 |
|
|
|
4,988,176 |
|
|
|
|
|
|
|
|
|
|
CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS
DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Preferred
Stock, $ .001 par value; 75,000,000 shares authorized; 33,333,333 shares
issued and outstanding as of March 31, 2013 and no shares issed and
outstanding at December 31, 2012 |
|
|
1,000,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Common stock, $ .001
par value; 675,000,000 shares authorized; 268,265,122 shares issued and
238,469,220 outstanding at March 31, 2013 and 248,244,012 shares issued
and 174,940,506 outstanding at December 31, 2012 |
|
|
268,265 |
|
|
|
248,244 |
|
|
|
|
|
|
|
|
|
|
Additional paid in
capital |
|
|
11,225,425 |
|
|
|
11,387,929 |
|
|
|
|
|
|
|
|
|
|
Treasury stock, at
cost (29,795,903 shares at March 31, 2013 and December 31,
2012) |
|
|
(113,389 |
) |
|
|
(113,389 |
) |
|
|
|
|
|
|
|
|
|
Deficit accumulated
during the development stage |
|
|
(29,293,688 |
) |
|
|
(13,387,041 |
) |
|
|
|
|
|
|
|
|
|
STOCKHOLDERS
DEFICIT |
|
|
(16,913,387 |
) |
|
|
(1,864,257 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS DEFICIT |
|
$ |
4,468,566 |
|
|
$ |
4,081,975 |
|
See the
accompanying notes to these consolidated financial statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
For the
Three Months Ended March 31, 2013 and 2012
And for
the Period November 10, 1999 (Date of Inception) to March 31, 2013
(Unaudited)
|
|
|
|
|
Three
Months |
|
|
Three
Months |
|
|
|
Cumulative |
|
|
Ended |
|
|
Ended |
|
|
|
Since |
|
|
March
31, |
|
|
March
31, |
|
|
|
Inception |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUES |
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
464,295 |
|
|
$ |
3,140 |
|
|
$ |
3,740 |
|
Royalties |
|
|
645,180 |
|
|
|
- |
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
NET REVENUE |
|
|
1,109,475 |
|
|
|
3,140 |
|
|
|
13,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF SALES |
|
|
431,741 |
|
|
|
2,710 |
|
|
|
2,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT |
|
|
677,734 |
|
|
|
430 |
|
|
|
11,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative |
|
|
1,641,668 |
|
|
|
98,309 |
|
|
|
26,690 |
|
Legal
and accounting |
|
|
1,651,223 |
|
|
|
112,437 |
|
|
|
90,347 |
|
Patent
costs |
|
|
65,000 |
|
|
|
- |
|
|
|
- |
|
Payroll
expenses(a) |
|
|
3,949,311 |
|
|
|
536,329 |
|
|
|
45,000 |
|
Research and
development |
|
|
1,016,948 |
|
|
|
149,156 |
|
|
|
1,257 |
|
Sales
and marketing |
|
|
5,072,036 |
|
|
|
52,304 |
|
|
|
12,308 |
|
Total
operating expenses |
|
|
13,396,186 |
|
|
|
948,535 |
|
|
|
175,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE OTHER INCOME |
|
|
(12,718,452 |
) |
|
|
(948,105 |
) |
|
|
(163,898 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
63,664 |
|
|
|
- |
|
|
|
- |
|
Interest
expense |
|
|
(2,231,673 |
) |
|
|
(41,241 |
) |
|
|
(71,707 |
) |
Change in fair value
of warrants |
|
|
(11,921,510 |
) |
|
|
(11,921,510 |
) |
|
|
- |
|
Fair
value of warrants in excess of consideration for convertible preferred
stock |
|
|
(2,995,791 |
) |
|
|
(2,995,791 |
) |
|
|
- |
|
Gain
on debt forgiveness |
|
|
340,352 |
|
|
|
- |
|
|
|
- |
|
Gain
on disposition of assets |
|
|
4,722 |
|
|
|
- |
|
|
|
- |
|
|
|
|
(16,740,236 |
) |
|
|
(14,958,542 |
) |
|
|
(71,707 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE INCOME TAX BENEFIT |
|
|
(29,458,688 |
) |
|
|
(15,906,647 |
) |
|
|
(235,605 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX
BENEFIT |
|
|
(165,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS |
|
|
(29,293,688 |
) |
|
|
(15,906,647 |
) |
|
|
(235,605 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Deemed dividend distribution |
|
|
(1,000,000 |
) |
|
|
(1,000,000 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS APPLICABLE TO COMMON STOCKHOLDERS |
|
$ |
(30,293,688 |
) |
|
$ |
(16,906,647 |
) |
|
$ |
(235,605 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED NET LOSS PER COMMON SHARE |
|
|
|
|
|
$ |
(0.07 |
) |
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
|
|
|
|
|
|
227,124,683 |
|
|
|
145,144,603 |
|
(a) |
includes
share based compensation of $1,048,121 cumulative, $332,599 for the three
months ended March 31, 2013 and $0 for the three months ended March 31,
2012. |
See the
accompanying notes to these consolidated financial statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
Consolidated Statements of Changes in Stockholders Equity
(Deficit)
For
the Period November 10, 1999 (Date of Inception) to March 31, 2013
|
|
Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Preferred |
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
Deferred |
|
|
Additional |
|
|
|
|
|
During
the |
|
|
|
|
|
|
Number of |
|
|
|
|
|
Number of |
|
|
|
|
|
Consulting |
|
|
Paid-In |
|
|
Treasury |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Fees |
|
|
Capital |
|
|
Stock |
|
|
Stage |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of initial
4,278,000 shares on November 10, 1999 |
|
$ |
- |
|
|
$ |
- |
|
|
|
4,278,000 |
|
|
$ |
4,278 |
|
|
$ |
- |
|
|
$ |
16,595 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
20,873 |
|
Issuance of shares of
common stock in exchange for services |
|
|
- |
|
|
|
- |
|
|
|
1,232,000 |
|
|
|
1,232 |
|
|
|
- |
|
|
|
35,728 |
|
|
|
- |
|
|
|
- |
|
|
|
36,960 |
|
Issuance of shares of
common stock |
|
|
- |
|
|
|
- |
|
|
|
2,090,000 |
|
|
|
2,090 |
|
|
|
- |
|
|
|
60,610 |
|
|
|
- |
|
|
|
- |
|
|
|
62,700 |
|
Stock issuance
costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(13,690 |
) |
|
|
- |
|
|
|
- |
|
|
|
(13,690 |
) |
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(54,113 |
) |
|
|
(54,113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
1999 |
|
|
- |
|
|
|
- |
|
|
|
7,600,000 |
|
|
|
7,600 |
|
|
|
- |
|
|
|
99,243 |
|
|
|
- |
|
|
|
(54,113 |
) |
|
|
52,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of
common stock |
|
|
- |
|
|
|
- |
|
|
|
5,449,999 |
|
|
|
5,450 |
|
|
|
- |
|
|
|
921,050 |
|
|
|
- |
|
|
|
- |
|
|
|
926,500 |
|
Issuance of shares of
common stock in exchange for services |
|
|
- |
|
|
|
- |
|
|
|
240,000 |
|
|
|
240 |
|
|
|
(40,800 |
) |
|
|
40,560 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Stock issuance
costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(16,335 |
) |
|
|
- |
|
|
|
- |
|
|
|
(16,335 |
) |
Fair value
of non-employee stock options grants |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
50,350 |
|
|
|
- |
|
|
|
- |
|
|
|
50,350 |
|
Amortization of deferred
consulting fees |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,117 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,117 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(367,829 |
) |
|
|
(367,829 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2000 |
|
|
- |
|
|
|
- |
|
|
|
13,289,999 |
|
|
|
13,290 |
|
|
|
(20,683 |
) |
|
|
1,094,868 |
|
|
|
- |
|
|
|
(421,942 |
) |
|
|
665,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of
common stock |
|
|
- |
|
|
|
- |
|
|
|
217,500 |
|
|
|
218 |
|
|
|
- |
|
|
|
77,723 |
|
|
|
- |
|
|
|
- |
|
|
|
77,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of common stock and stock options for acquisition of
subsidiary |
|
|
- |
|
|
|
- |
|
|
|
2,000,000 |
|
|
|
2,000 |
|
|
|
- |
|
|
|
736,000 |
|
|
|
- |
|
|
|
- |
|
|
|
738,000 |
|
Issuance of stock
options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,000 |
|
|
|
- |
|
|
|
- |
|
|
|
15,000 |
|
Exercise of
options |
|
|
- |
|
|
|
- |
|
|
|
1,450,368 |
|
|
|
1,450 |
|
|
|
- |
|
|
|
230,609 |
|
|
|
- |
|
|
|
- |
|
|
|
232,059 |
|
Fair value of
non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
323,250 |
|
|
|
- |
|
|
|
- |
|
|
|
323,250 |
|
Amortization of deferred
consulting fees |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,683 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,683 |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,052,299 |
) |
|
|
(1,052,299 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2001 |
|
|
- |
|
|
|
- |
|
|
|
16,957,867 |
|
|
|
16,958 |
|
|
|
- |
|
|
|
2,477,450 |
|
|
|
- |
|
|
|
(1,474,241 |
) |
|
|
1,020,167 |
|
See the accompanying notes to
these consolidated financial statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
Consolidated Statements of
Changes in Stockholders Equity (Deficit) (Continued)
For the
Period November 10, 1999 (Date of Inception) to March 31, 2013
|
|
Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Preferred |
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
Deferred |
|
|
Additional |
|
|
|
|
|
During
the |
|
|
|
|
|
|
Number
of |
|
|
|
|
|
Number
of |
|
|
|
|
|
Consulting |
|
|
Paid-In |
|
|
Treasury |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Fees |
|
|
Capital |
|
|
Stock |
|
|
Stage |
|
|
Total |
|
Issuance of shares of
common stock |
|
|
- |
|
|
|
- |
|
|
|
3,376,875 |
|
|
|
3,377 |
|
|
|
- |
|
|
|
687,223 |
|
|
|
- |
|
|
|
- |
|
|
|
690,600 |
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
94,000 |
|
|
|
- |
|
|
|
- |
|
|
|
94,000 |
|
Salary due to
shareholder contributed capital |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,000 |
|
|
|
- |
|
|
|
- |
|
|
|
15,000 |
|
Return of shares of
common stock related to purchase price
adjustment |
|
|
- |
|
|
|
- |
|
|
|
(1,000,000 |
) |
|
|
(1,000 |
) |
|
|
- |
|
|
|
(353,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
(354,000 |
) |
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,195,753 |
) |
|
|
(1,195,753 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2002 |
|
|
- |
|
|
|
- |
|
|
|
19,334,742 |
|
|
|
19,335 |
|
|
|
- |
|
|
|
2,920,673 |
|
|
|
- |
|
|
|
(2,669,994 |
) |
|
|
270,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of
common stock |
|
|
- |
|
|
|
- |
|
|
|
22,512,764 |
|
|
|
22,512 |
|
|
|
- |
|
|
|
1,387,109 |
|
|
|
- |
|
|
|
- |
|
|
|
1,409,621 |
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
213,300 |
|
|
|
- |
|
|
|
- |
|
|
|
213,300 |
|
Issuance of shares of
common stock in exchange for services |
|
|
- |
|
|
|
- |
|
|
|
143,000 |
|
|
|
143 |
|
|
|
- |
|
|
|
23,857 |
|
|
|
- |
|
|
|
- |
|
|
|
24,000 |
|
Stock
issuance costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(49,735 |
) |
|
|
- |
|
|
|
- |
|
|
|
(49,735 |
) |
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,107,120 |
) |
|
|
(1,107,120 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2003 |
|
|
- |
|
|
|
- |
|
|
|
41,990,506 |
|
|
|
41,990 |
|
|
|
- |
|
|
|
4,495,204 |
|
|
|
- |
|
|
|
(3,777,114 |
) |
|
|
760,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issuance costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(25,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
(25,000 |
) |
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
493,600 |
|
|
|
- |
|
|
|
- |
|
|
|
493,600 |
|
Issuance of shares of
common stock |
|
|
- |
|
|
|
- |
|
|
|
18,600,000 |
|
|
|
18,600 |
|
|
|
- |
|
|
|
939,881 |
|
|
|
- |
|
|
|
- |
|
|
|
958,481 |
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,406,506 |
) |
|
|
(1,406,506 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2004 |
|
|
- |
|
|
|
- |
|
|
|
60,590,506 |
|
|
|
60,590 |
|
|
|
- |
|
|
|
5,903,685 |
|
|
|
- |
|
|
|
(5,183,620 |
) |
|
|
780,655 |
|
See the
accompanying notes to these consolidated financial statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
Consolidated Statements of
Changes in Stockholders Equity (Deficit) (Continued)
For the
Period November 10, 1999 (Date of Inception) to March 31, 2013
|
|
Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Preferred |
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
Deferred |
|
|
Additional |
|
|
|
|
|
During the |
|
|
|
|
|
|
Number of |
|
|
|
|
|
Number of |
|
|
|
|
|
Consulting |
|
|
Paid-In |
|
|
Treasury |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Fees |
|
|
Capital |
|
|
Stock |
|
|
Stage |
|
|
Total |
|
Fair value of
non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
286,762 |
|
|
|
- |
|
|
|
- |
|
|
|
286,762 |
|
Issuance of shares of
common stock |
|
|
- |
|
|
|
- |
|
|
|
3,000,000 |
|
|
|
3,000 |
|
|
|
- |
|
|
|
102,000 |
|
|
|
- |
|
|
|
- |
|
|
|
105,000 |
|
Net loss for
the year ended December 31, 2005 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,266,811 |
) |
|
|
(1,266,811 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2005 |
|
|
- |
|
|
|
- |
|
|
|
63,590,506 |
|
|
|
63,590 |
|
|
|
- |
|
|
|
6,292,447 |
|
|
|
- |
|
|
|
(6,450,431 |
) |
|
|
(94,394 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of
non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
215,463 |
|
|
|
- |
|
|
|
- |
|
|
|
215,463 |
|
Fair value of employee
stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
135,098 |
|
|
|
- |
|
|
|
- |
|
|
|
135,098 |
|
Fair value of warrants
issued for deferred finance charges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
392,376 |
|
|
|
- |
|
|
|
- |
|
|
|
392,376 |
|
Exercise of
warrants |
|
|
- |
|
|
|
- |
|
|
|
5,550,000 |
|
|
|
5,550 |
|
|
|
- |
|
|
|
49,950 |
|
|
|
- |
|
|
|
- |
|
|
|
55,500 |
|
Exercise of
options |
|
|
- |
|
|
|
- |
|
|
|
4,300,000 |
|
|
|
4,300 |
|
|
|
- |
|
|
|
(3,870 |
) |
|
|
- |
|
|
|
- |
|
|
|
430 |
|
Shares retired upon
cancellation of consulting agreements |
|
|
- |
|
|
|
- |
|
|
|
(1,200,000 |
) |
|
|
(1,200 |
) |
|
|
- |
|
|
|
1,080 |
|
|
|
- |
|
|
|
- |
|
|
|
(120 |
) |
Issuance of shares for
services |
|
|
- |
|
|
|
- |
|
|
|
1,200,000 |
|
|
|
1,200 |
|
|
|
- |
|
|
|
53,800 |
|
|
|
- |
|
|
|
- |
|
|
|
55,000 |
|
Net loss for the year
ended December 31, 2006 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,607,017 |
) |
|
|
(1,607,017 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2006 |
|
|
- |
|
|
|
- |
|
|
|
73,440,506 |
|
|
|
73,440 |
|
|
|
- |
|
|
|
7,136,344 |
|
|
|
- |
|
|
|
(8,057,448 |
) |
|
|
(847,664 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of
non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
47,692 |
|
|
|
- |
|
|
|
- |
|
|
|
47,692 |
|
Fair value of employee
stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
67,651 |
|
|
|
- |
|
|
|
- |
|
|
|
67,651 |
|
Recognition of beneficial
conversion feature |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
|
|
375,000 |
|
Net loss for the year
ended December 31, 2007 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,117,334 |
) |
|
|
(1,117,334 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2007 |
|
|
- |
|
|
|
- |
|
|
|
73,440,506 |
|
|
|
73,440 |
|
|
|
- |
|
|
|
7,626,687 |
|
|
|
- |
|
|
|
(9,174,782 |
) |
|
|
(1,474,655 |
) |
See
the accompanying notes to these consolidated financial statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
Consolidated Statements of
Changes in Stockholders Equity (Deficit) (Continued)
For the
Period November 10, 1999 (Date of Inception) to March 31, 2013
|
|
Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Preferred |
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
Deferred |
|
|
Additional |
|
|
|
|
|
During the |
|
|
|
|
|
|
Number of |
|
|
|
|
|
Number of |
|
|
|
|
|
Consulting |
|
|
Paid-In |
|
|
Treasury |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Fees |
|
|
Capital |
|
|
Stock |
|
|
Stage |
|
|
Total |
|
Fair value of
non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
28,752 |
|
|
|
- |
|
|
|
- |
|
|
|
28,752 |
|
Fair value of employee
stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19,720 |
|
|
|
- |
|
|
|
- |
|
|
|
19,720 |
|
Fair value of warrants
issued in conjunction with debt financing |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
25,000 |
|
|
|
- |
|
|
|
- |
|
|
|
25,000 |
|
Net loss for
the year ended December 31, 2008 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(931,338 |
) |
|
|
(931,338 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2008 |
|
|
- |
|
|
|
- |
|
|
|
73,440,506 |
|
|
|
73,440 |
|
|
|
- |
|
|
|
7,700,159 |
|
|
|
- |
|
|
|
(10,106,120 |
) |
|
|
(2,332,521 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of
non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,524 |
|
|
|
- |
|
|
|
- |
|
|
|
1,524 |
|
Fair value of warrants
issued in conjunction with debt financing |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,450 |
|
|
|
- |
|
|
|
- |
|
|
|
15,450 |
|
Issuance of shares for
services |
|
|
- |
|
|
|
- |
|
|
|
7,200,000 |
|
|
|
7,200 |
|
|
|
- |
|
|
|
40,500 |
|
|
|
- |
|
|
|
- |
|
|
|
47,700 |
|
Shares issued for
conversion of notes payable |
|
|
- |
|
|
|
- |
|
|
|
48,750,000 |
|
|
|
48,750 |
|
|
|
- |
|
|
|
263,291 |
|
|
|
- |
|
|
|
- |
|
|
|
312,041 |
|
Net loss for the year
ended December 31, 2009 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(694,910 |
) |
|
|
(694,910 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2009 |
|
|
- |
|
|
|
- |
|
|
|
129,390,506 |
|
|
|
129,390 |
|
|
|
- |
|
|
|
8,020,924 |
|
|
|
- |
|
|
|
(10,801,030 |
) |
|
|
(2,650,716 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of
non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
364 |
|
|
|
- |
|
|
|
- |
|
|
|
364 |
|
Fair value of warrants
issued in conjunction with debt financing |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,143 |
|
|
|
- |
|
|
|
- |
|
|
|
20,143 |
|
Issuance of shares for
services |
|
|
- |
|
|
|
- |
|
|
|
25,950,000 |
|
|
|
25,950 |
|
|
|
- |
|
|
|
182,650 |
|
|
|
- |
|
|
|
- |
|
|
|
208,600 |
|
Net loss for the year
ended Decemberr 31, 2010 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(721,841 |
) |
|
|
(721,841 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2010 |
|
|
- |
|
|
|
- |
|
|
|
155,340,506 |
|
|
|
155,340 |
|
|
|
- |
|
|
|
8,224,081 |
|
|
|
- |
|
|
|
(11,522,871 |
) |
|
|
(3,143,450 |
) |
See
the accompanying notes to these consolidated financial statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
Consolidated
Statements of Changes in Stockholders Equity (Deficit) (Continued)
For the
Period November 10, 1999 (Date of Inception) to March 31, 2013
|
|
Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Preferred |
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
Deferred |
|
|
Additional |
|
|
|
|
|
During the |
|
|
|
|
|
|
Number of |
|
|
|
|
|
Number of |
|
|
|
|
|
Consulting |
|
|
Paid-In |
|
|
Treasury |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Fees |
|
|
Capital |
|
|
Stock |
|
|
Stage |
|
|
Total |
|
Issuance of shares for
services |
|
|
- |
|
|
|
- |
|
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
- |
|
|
|
29,000 |
|
|
|
- |
|
|
|
- |
|
|
|
30,000 |
|
Contribution of common
stock from related parties |
|
|
- |
|
|
|
- |
|
|
|
(12,000,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
95,594 |
|
|
|
(95,594 |
) |
|
|
- |
|
|
|
- |
|
Purchase of common stock
for treasury |
|
|
- |
|
|
|
- |
|
|
|
(17,795,903 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(17,795 |
) |
|
|
- |
|
|
|
(17,795 |
) |
Sale of common
stock |
|
|
- |
|
|
|
- |
|
|
|
15,500,000 |
|
|
|
15,500 |
|
|
|
- |
|
|
|
384,500 |
|
|
|
- |
|
|
|
- |
|
|
|
400,000 |
|
Issuance of shares for
stock issuance costs |
|
|
- |
|
|
|
- |
|
|
|
2,100,000 |
|
|
|
2,100 |
|
|
|
- |
|
|
|
(2,100 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Stock issuance
costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(40,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
(40,000 |
) |
Exercise of
options |
|
|
- |
|
|
|
- |
|
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
- |
|
|
|
9,000 |
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
Fair value of warrants
issued in conjunction with debt financing |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
21,275 |
|
|
|
- |
|
|
|
- |
|
|
|
21,275 |
|
Fair value of employee
stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
47,658 |
|
|
|
- |
|
|
|
- |
|
|
|
47,658 |
|
Fair value of
non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
48,374 |
|
|
|
- |
|
|
|
- |
|
|
|
48,374 |
|
Net loss for the year
ended December 31, 2011 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(665,113 |
) |
|
|
(665,113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2011 |
|
|
- |
|
|
|
- |
|
|
|
145,144,603 |
|
|
|
174,940 |
|
|
|
- |
|
|
|
8,817,382 |
|
|
|
(113,389 |
) |
|
|
(12,187,984 |
) |
|
|
(3,309,051 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for
services |
|
|
- |
|
|
|
- |
|
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
- |
|
|
|
45,500 |
|
|
|
- |
|
|
|
- |
|
|
|
46,500 |
|
Issuance of shares of
common stock |
|
|
- |
|
|
|
- |
|
|
|
44,111,111 |
|
|
|
44,111 |
|
|
|
- |
|
|
|
1,015,889 |
|
|
|
- |
|
|
|
- |
|
|
|
1,060,000 |
|
Issuance of stock for
licensing |
|
|
- |
|
|
|
- |
|
|
|
2,222,222 |
|
|
|
2,222 |
|
|
|
- |
|
|
|
97,778 |
|
|
|
- |
|
|
|
- |
|
|
|
100,000 |
|
Issuance of stock for
trademarks, etc. |
|
|
- |
|
|
|
- |
|
|
|
2,222,222 |
|
|
|
2,222 |
|
|
|
- |
|
|
|
97,778 |
|
|
|
- |
|
|
|
- |
|
|
|
100,000 |
|
Shares issued for
conversion of notes payable and accrued interest |
|
|
- |
|
|
|
- |
|
|
|
12,923,622 |
|
|
|
12,925 |
|
|
|
- |
|
|
|
568,639 |
|
|
|
- |
|
|
|
- |
|
|
|
581,564 |
|
Exercise of
options |
|
|
- |
|
|
|
- |
|
|
|
10,490,996 |
|
|
|
10,491 |
|
|
|
- |
|
|
|
2,622 |
|
|
|
- |
|
|
|
- |
|
|
|
13,113 |
|
Exercise of
warrants |
|
|
- |
|
|
|
- |
|
|
|
333,333 |
|
|
|
333 |
|
|
|
- |
|
|
|
49,667 |
|
|
|
- |
|
|
|
- |
|
|
|
50,000 |
|
Fair value of employee
stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
332,036 |
|
|
|
- |
|
|
|
- |
|
|
|
332,036 |
|
Fair value of
non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,638 |
|
|
|
- |
|
|
|
- |
|
|
|
11,638 |
|
Forgiveness of debt -
related party |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
349,000 |
|
|
|
- |
|
|
|
- |
|
|
|
349,000 |
|
Net loss for
the year ended December 31, 2012 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,199,057 |
) |
|
|
(1,199,057 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2012 (Audited) |
|
|
- |
|
|
|
- |
|
|
|
218,448,109 |
|
|
|
248,244 |
|
|
|
- |
|
|
|
11,387,929 |
|
|
|
(113,389 |
) |
|
|
(13,387,041 |
) |
|
|
(1,864,257 |
) |
See
the accompanying notes to these consolidated financial statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
Consolidated
Statements of Changes in Stockholders Equity (Deficit) (Continued)
For the
Period November 10, 1999 (Date of Inception) to March 31, 2013
|
|
Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Preferred |
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
Deferred |
|
|
Additional |
|
|
|
|
|
During the |
|
|
|
|
|
|
Number of |
|
|
|
|
|
Number of |
|
|
|
|
|
Consulting |
|
|
Paid-In |
|
|
Treasury |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Fees |
|
|
Capital |
|
|
Stock |
|
|
Stage |
|
|
Total |
|
Issuance of shares of
preferred stock |
|
|
33,333,333 |
|
|
$ |
1,000,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,000,000 |
|
Issuance of shares of
common stock |
|
|
- |
|
|
|
- |
|
|
|
4,811,111 |
|
|
|
4,811 |
|
|
|
- |
|
|
|
230,189 |
|
|
|
- |
|
|
|
- |
|
|
|
235,000 |
|
Shares issued for
conversion of notes payable and accrued interest |
|
|
- |
|
|
|
- |
|
|
|
10,875,000 |
|
|
|
10,875 |
|
|
|
- |
|
|
|
251,125 |
|
|
|
- |
|
|
|
- |
|
|
|
262,000 |
|
Exercise of
options |
|
|
- |
|
|
|
- |
|
|
|
3,335,000 |
|
|
|
3,335 |
|
|
|
- |
|
|
|
14,584 |
|
|
|
- |
|
|
|
- |
|
|
|
17,919 |
|
Exercise of
warrants |
|
|
- |
|
|
|
- |
|
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
- |
|
|
|
9,000 |
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
Fair value of employee
stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
332,598 |
|
|
|
- |
|
|
|
- |
|
|
|
332,598 |
|
Deemed dividend
distribution |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,000,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1,000,000 |
) |
Net loss for the year
ended March 31, 2013 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(15,906,647 |
) |
|
|
(15,906,647 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2013
(Unaudited) |
|
|
33,333,333 |
|
|
$ |
1,000,000 |
|
|
|
238,469,220 |
|
|
$ |
268,265 |
|
|
$ |
- |
|
|
$ |
11,225,425 |
|
|
$ |
(113,389 |
) |
|
$ |
(29,293,688 |
) |
|
$ |
(16,913,387 |
) |
See the accompanying notes to these consolidated
financial statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
For the
Three Months Ended March 31, 2013 and 2012
And for
the Period November 10, 1999 (Date of Inception) to March 31, 2013)
(Unaudited)
|
|
|
|
|
Three
Months |
|
|
Three
Months |
|
|
|
Cumulative |
|
|
Ended |
|
|
Ended |
|
|
|
Since |
|
|
March
31, |
|
|
March
31, |
|
|
|
Inception |
|
|
2013 |
|
|
2012 |
|
CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
(29,293,688 |
) |
|
|
(15,906,647 |
) |
|
|
(235,605 |
) |
Adjustments to
reconcile net loss to net cash used in operating
activities |
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of options issued in exchange for services |
|
|
2,749,831 |
|
|
|
332,598 |
|
|
|
- |
|
Accretion of interest
on deferred finance charges |
|
|
453,625 |
|
|
|
- |
|
|
|
4,312 |
|
Accretion of discount
on notes payable |
|
|
444,475 |
|
|
|
1,239 |
|
|
|
1,239 |
|
Change in fair value
warrant liability |
|
|
11,921,510 |
|
|
|
11,921,510 |
|
|
|
- |
|
Fair
value of warrants in excess of consideration for convertible preferred
stock |
|
|
2,995,791 |
|
|
|
2,995,791 |
|
|
|
|
|
Salary due to
stockholder contributed to capital |
|
|
15,000 |
|
|
|
- |
|
|
|
- |
|
Amortization and
depreciation |
|
|
536,100 |
|
|
|
6,045 |
|
|
|
2,768 |
|
Gain
on disposition of assets |
|
|
(4,722 |
) |
|
|
- |
|
|
|
- |
|
Gain
on debt forgiveness |
|
|
(340,352 |
) |
|
|
- |
|
|
|
- |
|
Stock
issued in exchange for services |
|
|
553,760 |
|
|
|
- |
|
|
|
- |
|
Financing expenses
paid directly from stock proceeds |
|
|
5,270 |
|
|
|
- |
|
|
|
- |
|
Amortization of
deferred consulting fees |
|
|
40,800 |
|
|
|
- |
|
|
|
- |
|
(Increase) decrease in
assets |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(6,613 |
) |
|
|
(3,140 |
) |
|
|
(3,060 |
) |
Inventory |
|
|
(29,852 |
) |
|
|
(9,872 |
) |
|
|
2,036 |
|
Prepaid
expenses |
|
|
(212,868 |
) |
|
|
137,133 |
|
|
|
30,378 |
|
Increase in
liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued expenses |
|
|
2,386,502 |
|
|
|
(220,820 |
) |
|
|
164,152 |
|
Net
cash used in operating activities |
|
$ |
(7,785,431 |
) |
|
$ |
(746,163 |
) |
|
$ |
(33,780 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment |
|
|
(45,438 |
) |
|
|
(7,329 |
) |
|
|
- |
|
Purchase of
intangibles |
|
|
(242,577 |
) |
|
|
(18,443 |
) |
|
|
- |
|
Proceeds from sale of
assets |
|
|
6,738 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities |
|
|
(281,277 |
) |
|
|
(25,772 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance
of preferred stock |
|
|
1,000,000 |
|
|
|
1,000,000 |
|
|
|
- |
|
Proceeds from issuance
of common stock |
|
|
6,786,447 |
|
|
|
235,000 |
|
|
|
- |
|
Proceeds from exercise
of stock options |
|
|
273,401 |
|
|
|
17,919 |
|
|
|
- |
|
Proceeds issuance of
stock options |
|
|
15,000 |
|
|
|
- |
|
|
|
- |
|
Proceeds from exercise
of warrants |
|
|
115,500 |
|
|
|
10,000 |
|
|
|
- |
|
Proceeds from issuance
of warrants |
|
|
1,000,000 |
|
|
|
- |
|
|
|
- |
|
Proceeds from issuance
of notes payable |
|
|
2,789,000 |
|
|
|
- |
|
|
|
- |
|
Repayments of notes
payable |
|
|
(202,751 |
) |
|
|
- |
|
|
|
- |
|
Payment for treasury
stock |
|
|
(17,795 |
) |
|
|
- |
|
|
|
- |
|
Debt
issuance costs |
|
|
(62,000 |
) |
|
|
- |
|
|
|
- |
|
Stock
issuance costs |
|
|
(144,760 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities |
|
|
11,552,042 |
|
|
|
1,262,919 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
DECREASE IN CASH AND CASH EQUIVALENTS |
|
|
3,485,334 |
|
|
|
490,984 |
|
|
|
(33,780 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - BEGINNING OF PERIOD |
|
|
- |
|
|
|
2,994,350 |
|
|
|
53,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - END OF PERIOD |
|
$ |
3,485,334 |
|
|
$ |
3,485,334 |
|
|
$ |
19,793 |
|
See the accompanying notes to these consolidated
financial statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
Consolidated Statements of
Cash Flows (Continued)
For the
Years Ended March 31, 2013 and 2012
And for
the Period November 10, 1999 (Date of Inception) to March 31, 2013
(Unaudited)
|
|
|
|
|
Three
Months |
|
|
Three
Months |
|
|
|
Cumulative |
|
|
Ended |
|
|
Ended |
|
|
|
Since |
|
|
March
31, |
|
|
March
31, |
|
|
|
Inception |
|
|
2013 |
|
|
2012 |
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Cash
paid during the year for: |
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
53,336 |
|
|
$ |
13,896 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of shares of
common stock related to purchase price adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock |
|
|
(1,000 |
) |
|
|
- |
|
|
|
- |
|
Additional paid-in
capital |
|
|
(353,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets |
|
$ |
(354,000 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common
stock and stock options for acquisition of subsidiary |
|
$ |
738,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from common
stock sales applied directly to debt and financing expenses
repayment |
|
$ |
55,270 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of warrants issued for deferred finance charges |
|
$ |
392,376 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of stock issued for conversion of notes payable and accrued
interest |
|
$ |
1,155,605 |
|
|
$ |
262,000 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of stock issued for purchase of assets |
|
$ |
100,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of warrants of issued for purchase of assets |
|
$ |
100,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of stock issued for licensing costs |
|
$ |
100,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of warrants issued for licensing costs |
|
$ |
300,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of discount
on preferred stock as deemed dividend distribution |
|
$ |
1,000,000 |
|
|
$ |
1,000,000 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of beneficial conversion feature |
|
$ |
1,400,000 |
|
|
$ |
1,000,000 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of warrants issued as debt discount |
|
$ |
78,043 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common
stock for stock issuance costs |
|
$ |
2,100 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of options as
stock cost for treasury stock |
|
$ |
5,594 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness of
debt-related party treated as additional paid in capital |
|
$ |
349,000 |
|
|
$ |
- |
|
|
$ |
- |
|
See the
accompanying notes to these consolidated financial statements.
Nature of the
Business
LaserLock Technologies, Inc.
and Subsidiary (the Company) is a development stage enterprise incorporated in
the state of Nevada on November 10, 1999. The Company was established to address
counterfeiting issues, initially with respect to the gaming industry. Since
inception, substantially all of the efforts of the company have been developing
technologies for the prevention of product and document counterfeiting. The
Company is in the development stage of raising capital, financial planning, and
establishing sources of supply. The Company anticipates establishing markets for
its technologies in North America, Europe and Asia. The Company has more
recently developed proprietary technologies that could penetrate broader markets
in a cost effective manner.
Basis of
Presentation
The
financial statements are presented in accordance with Financial Accounting
Standards Board Accounting Standards Codification (FASB ASC) 915 for
development stage entities. The accompanying unaudited financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles for interim financial information and with the
instructions for Form 10-Q and Rule 8-03 of Regulation
S-X. Accordingly, they do not include all of 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 accruals) considered necessary for a fair
presentation have been included. The financial statements should be read in
conjunction with the financial statements and notes included in the Companys
Annual Report on Form 10-K for the year ended December 31, 2012, as amended, as
filed with the Securities and Exchange Commission. Operating results
for the three months ending March 31, 2013 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2013.
Principle of
Consolidation
The
accompanying consolidated financial statements include the accounts of LaserLock
Technologies, Inc. and its wholly-owned subsidiary, LL Security Products, Inc.
All inter-company transactions have been eliminated in
consolidation.
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these
estimates.
Comprehensive
Income
The
Company follows Financial Accounting Standards Board Accounting Standards
Codification (FASB ASC) 220 in reporting comprehensive
income. Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information that
historically has not been recognized in the calculation of net
income. Since the Company has no items of other comprehensive income
(loss), comprehensive income (loss) is equal to net income (loss).
Fair Value of Financial
Instruments
The
Companys financial instruments consist of cash, accounts receivable, accounts
payable and accrued expenses, embedded derivative, warrant liability and notes
payable. The carrying value of cash, accounts receivable, accounts
payable and accrued expenses approximate their fair value because of their short
maturities. The Company believes the carrying amount of its notes payable and
convertible debt approximates its fair value based on rates and other terms
currently available to the Company for similar debt instruments.
NOTE 1 SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash
Equivalents
For
purposes of reporting cash flows, the Company considers all cash accounts, which
are not subject to withdrawal restrictions or penalties, and certificates of
deposit and commercial paper with original maturities of 90 days or less to be
cash or cash equivalents.
Concentration of Credit Risk
Involving Cash and Cash Equivalents
The
Companys cash and cash equivalents are held at two financial institutions. At
times, the Companys deposits may exceed Federal Deposit Insurance Corporation
(FDIC) coverage limits. The Company has not experienced any losses
from maintaining cash accounts in excess of federally insured
limits.
Inventory
Inventory principally
consists of penlights and pigments and is stated at the lower of cost
(determined by the first-in, first-out method) or market.
Property and
Equipment
Property
and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, principally
five to seven years. Maintenance and repairs of property are charged to
operations, and major improvements are capitalized. Upon retirement, sale, or
other disposition of property and equipment, the costs and accumulated
depreciation are eliminated from the accounts, and any resulting gain or loss is
included in operations. Depreciation of property and equipment was $312 and $0
for the three months ended March 31, 2013 and 2012.
Patents and
Trademark
The
Company has five issued patents, filed for three provisional patents for
anti-counterfeiting technology and purchased the VerifyMe trademark.
Costs associated with the registration and legal defense of the patents have
been capitalized and are amortized on a straight-line basis over the estimated
lives of the patents which were determined to be 17 to 20 years.
Long-Lived
Assets
The
Company evaluates the recoverability of its long-lived assets in accordance with
ASC 360 Property, Plant, and Equipment. The Company reviews long-lived assets
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of long-lived
assets are measured by a comparison of the carrying amount of an asset to future
cash flows expected to be generated by the asset, undiscounted and without
interest or independent appraisals. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the asset exceeds the fair value of the assets.
Deferred Financing
Costs
Costs
incurred in securing long-term debt are deferred and amortized, as a charge to
interest expense, over the term of the related debt. In the case of long-term
debt modifications, the Company follows the guidance provided by ASC 470-50
Debt Modification and Extinguishments.
Convertible Notes
Payable
Convertible notes payable,
for which the embedded conversion feature does not qualify for derivative
treatment, are evaluated to determine if the effective or actual rate of
conversion per the terms of the convertible note agreement is below market
value. In these instances, the Company accounts for the value of the beneficial
conversion feature (BCF) as a debt discount, which is then accreted to interest
expense over the life of the related debt using the straight-line method which
approximates the effective interest method.
NOTE 1 SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue
Recognition
In
accordance with Securities and Exchange Commission (SEC) Staff Accounting
Bulletin (SAB) No. 104, Revenue Recognition (Codified in FASB ASC 605), the
Company recognizes revenue when (i) persuasive evidence of a customer or
distributor arrangement exists, (ii) a retailer, distributor or wholesaler
receives the goods and acceptance occurs, (iii) the price is fixed or
determinable, and (iv) collectability of the revenue is reasonably assured.
Subject to these criteria, the Company recognizes revenue from product sales,
consisting mainly of pigments and penlights, upon shipment to the customer.
Royalty revenue is recognized upon receipt of notification from a customer that
the Companys product has been used in the customers production
process.
Income
Taxes
The
Company follows FASB ASC 740 when accounting for income taxes, which requires an
asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed
annually for temporary differences between the financial statements and tax
bases of assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
Stock-based
Payments
The
Company accounts for stock-based compensation under the provisions of ASC
718, CompensationStock Compensation (ASC 718),
which requires the measurement and recognition of compensation expense for all
stock-based awards made to employees and directors based on estimated fair
values on the grant date. The Company estimates the fair value of stock-based
awards on the date of grant using the Black-Scholes model. The value
of the portion of the award that is ultimately expected to vest is recognized as
expense over the requisite service periods using the straight-line
method.
The
Company accounts for stock-based compensation awards to non-employees in
accordance with ASC 505-50, Equity-Based Payments to Non-Employees (ASC
505-50). Under ASC 505-50, the Company determines the fair value of the
warrants or stock-based compensation awards granted as either the fair value of
the consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable.
All
issuances of stock options or other equity instruments to non-employees as
consideration for goods or services received by the Company are accounted for
based on the fair value of the equity instruments issued. Any stock options
issued to non-employees are recorded as an expense and additional paid-in
capital in stockholders equity over the applicable service
periods.
Advertising
Costs
Advertising costs are
expensed as incurred. Advertising costs were approximately $2,303 and $0 for the
three months ended March 31, 2013 and 2012, and are included in sales and
marketing expenses.
Research
and Development Costs
In
accordance with FASB ASC 730, research and development costs are expensed when
incurred.
NOTE 1 SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loss Per
Share
The
Company follows FASB ASC 260 when reporting Earnings Per Share resulting in the
presentation of basic and diluted earnings per share. Because the
Company reported a net loss for the years ended December 31, 2012 and 2011,
common stock equivalents, including stock options and warrants were
anti-dilutive; therefore, the amounts reported for basic and dilutive loss per
share were the same.
Segment
Information
The
Company is organized and operates as one operating segment wherein the Companys
patented technologies are utilized to address counterfeiting issues. In
accordance with ASC 280, Segment Reporting, the chief operating decision-maker
has been identified as the Chief Executive Officer, who reviews operating
results to make decisions about allocating resources and assessing performance
for the entire Company. Since the Company operates in one segment and
provides one group of similar products, all financial segment and product line
information required by ASC 280 can be found in the consolidated financial
statements.
Recently Adopted Accounting
Pronouncements
In July
2012, the FASB issued ASU No. 2012-02, Intangibles Goodwill and Other
(Topic 350), Testing Indefinite-Lived Intangible Assets for Impairment.
In accordance with the amendments in this Update, an entity has the option first
to assess qualitative factors to determine whether the existence of events and
circumstances indicates that it is more likely than not that the
indefinite-lived intangible asset is impaired. If, after assessing the totality
of events and circumstances, an entity concludes that it is not more likely than
not that the indefinite-lived intangible asset is impaired, then the entity is
not required to take further action. However, if an entity concludes otherwise,
then it is required to determine the fair value of the indefinite-lived
intangible asset and perform the quantitative impairment test by comparing the
fair value with the carrying amount in accordance with Subtopic 350-30. The
amendments are effective for annual and interim impairment tests performed for
fiscal years beginning after September 15, 2012. The Company adopted the
amendments effective January 1, 2013 and their adoption did not have a material
impact on the financial statements.
Recently Issued Accounting
Pronouncements Not Yet Adopted
In
February 2013, the FASB issued ASU No. 2013-04, Liabilities (Topic 405),
Obligations Resulting from
Joint and Several Liability Arrangements for Which the Total Amount of the
Obligation is Fixed at the Reporting Date. The guidance in this Update
requires an entity to measure obligations resulting from joint and several
liability arrangements for which the total amount of the obligation within the
scope of this guidance is fixed at the reporting date, as the sum of the
following:
|
a. |
The amount the
reporting entity agreed to pay on the basis of its arrangement among its
co-obligors. |
|
b. |
Any additional amount
the reporting entity expects to pay on behalf of its
co-obligors. |
The
guidance in this Update also requires an entity to disclose the nature and
amount of the obligation as well as other information about those
obligations.
The
amendments are effective for fiscal years and interim periods within those years
beginning after December 15, 2013.
NOTE 2
PATENTS AND TRADEMARK
The
Company has five issued patents and filed for three provisional patents for
anti-counterfeiting technology. We also acquired the VerifyMe trademark.
Accordingly, costs associated with the registration of these patents and legal
defense have been capitalized and are amortized on a straight-line basis over
the estimated lives of the patents (17 to 20 years). During the three months
ended March 31, 2013 and 2012, the Company capitalized patent costs of $18,443
and $0. Amortization expense for patents was $5,733 and $2,768 for the three
months ended March 31, 2013 and 2012. Future estimated annual amortization over
the next five years is approximately $23,000 per year for the years ending
December 31, 2013 through 2017.
NOTE 3 INCOME
TAXES
Income tax
expense was $0 for the three months ended March 31, 2013 and 2012.
As of
January 1, 2013, the Company had no unrecognized tax benefits, and accordingly,
the Company did not recognize interest or penalties during 2013 related to
unrecognized tax benefits. There has been no change in unrecognized
tax benefits during the three months ended March 31, 2013, and there was no
accrual for uncertain tax positions as of March 31, 2013. Tax years
from 2008 through 2012 remain subject to examination by major tax
jurisdictions.
There
was no income tax benefit for the losses for the three months ended March 31,
2013 and 2012, since management has determined that the realization of the net
tax deferred asset is not assured and has created a valuation allowance for the
entire amount of such benefits.
NOTE 4
- SENIOR SECURED CONVERTIBLE NOTES PAYABLE
In
February 2006, the Company commenced a private placement of up to $800,000
principal amount of 10% senior secured convertible promissory notes due twelve
months from the date of issue to certain Company shareholders and other
accredited investors. As of December 31, 2006, the Company completed this
private placement by selling all notes payable totaling $800,000. The notes are
secured by a first priority lien on all of the tangible and intangible personal
property of the Company. In May 2007, the due date of these notes was extended
to August 2008 and the interest rate increased to 12% per annum during the
extension period. In June 2011, the interest rate on all of the notes
was reset to 10% and $596,500 of the notes and accrued interest was extended
until September 15, 2015. During the fourth quarter of 2012 the
remaining $178,749 of unextended notes and the associated accrued interest were
extended to September 30, 2015. As of March 31, 2013 and December 31,
2012, the outstanding principal balance on these notes was
$775,249. Accrued interest at March 31, 2013 and December 31, 2012
amounted to $619,567 and $600,091.
Purchasers of the notes were
issued 8,000,000 10-year warrants exercisable into the Companys shares at an
exercise price of $0.01 per share. The warrants were valued at $392,376 and
recorded as a debt discount on the notes payable. The Company used the
Black-Scholes option pricing model to calculate the grant-date fair value of the
warrants, with the following assumptions: no dividend yield, expected volatility
of 169% and 284%, risk-free interest rate between 3.6% and 4.5% and expected
warrant life of ten years. The deferred finance charges were amortized over one
year, which was the original term of the notes. As of March 31, 2013, the
Company has received $80,000 for the exercise of 8,000,000 of the
warrants.
NOTE 4
- SENIOR SECURED CONVERTIBLE NOTES PAYABLE (Continued)
In
addition, if an equity financing with total proceeds of more than $5,000,000
occurs while any notes are outstanding, holders of notes will have the right, at
their option, to convert the outstanding principal and interest of the notes
into shares at a discount of 30% of the price per share in the qualified
financing. Since the embedded conversion feature is contingent upon the
occurrence of the qualified financing, the value of the contingent conversion
feature, if beneficial, will be recognized when the triggering event occurs and
the contingency is resolved.
NOTE 5
- CONVERTIBLE NOTES PAYABLE
During
2007, the Company commenced a private placement of up to $400,000 principal
amount of 10% Convertible Promissory Notes originally due in August 2008 (the
Notes). The Company raised $375,000 under this private placement in 2007 and
the remaining $25,000 was raised in 2008. Holders of Notes will have the right,
at their option, to convert the outstanding principal and interest of the Notes
into shares of the Companys Series A Preferred Stock at any time and from time
to time at the option of the holder at the initial conversion price of $0.005333
per share. It is the intention, however, that the option holder will convert the
Notes into shares of the Companys common stock. The Notes are
unsecured.
The
noteholder of the remaining $140,000 under this convertible note issue agreed to
extend the maturity date of these notes to September 30, 2015 at an interest
rate of 10% per annum. Remaining shares to be potentially issued under this
convertible note issue are 26,250,000.
On March
19, 2013, the investor holding $140,000 of convertible notes transferred $14,000
of the $140,000 convertible notes to the Chief Executive Officer of the
Company. Also on March 19, 2013, the investor agreed to convert
$28,000 of the investors remaining $126,000 of convertible notes into 5,250,000
shares of the Companys common stock.
On March
19, 2013, the Chief Executive Officer of the Company agreed to convert $14,000
of convertible notes into 2,625,000 of the Companys common stock.
As of
March 31, 2013 and December 31, 2012, the remaining principal balance on the
notes is $98,000. Accrued interest at March 31, 2013 and 2012
amounted to $82,250 and $78,750.
NOTE 6 - NOTES
PAYABLE
Notes
payable consists of the following:
|
|
March 31, 2013 |
|
December 31, 2012 |
|
|
|
|
|
|
|
|
|
Unsecured notes
payable; interest at 10% per annum; principal and accrued interest due at
maturity in September 2015 |
|
$ |
561,000 |
|
|
$ |
561,000 |
|
|
|
|
|
|
|
|
|
|
Series A notes
payable; interest at 8% per annum; principal and accrued interest due at
extended maturity date in September 2015 |
|
|
150,000 |
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
Series A notes
payable; interest at 8% per annum; principal and accrued interest due at
maturity in October 2011 (past due) |
|
|
50,000 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
Notes payable,
interest at 25% per annum; principal and interest due September
2013 |
|
|
- |
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
Less:
Debt discount |
|
|
(12,393 |
) |
|
|
(13,632 |
) |
|
|
|
748,607 |
|
|
|
897,368 |
|
|
|
|
|
|
|
|
|
|
Less:
Current portion |
|
|
50,000 |
|
|
|
200,000 |
|
Long-term
portion |
|
$ |
698,607 |
|
|
$ |
697,368 |
|
At March
31, 2013 and December 31, 2012 accrued interest on notes payable was $327,411
and $394,281.
Private Placement of 8%
Series A Notes Payable
In
August 2009, the Company commenced a private placement of up to $300,000
consisting of up to 6 units. Each unit consists of a $50,000, 8% Series A Note
Payable, due September 30, 2011, and a non-detachable warrant to purchase 2
million shares of the Companys common stock. During 2009, the Company sold 4
units, issued $200,000 of 8% Series A Notes Payable, issued 8 million warrants,
and raised $180,000, net of commission of $20,000. In January 2010, the Company
sold 0.5 units, issued $25,000 of 8% Series A Notes Payable, issued 1 million
warrants, and raised $17,500 net of commissions of $7,500. The commissions were
treated as deferred finance charges and are expensed over the term of notes
payable, which have been fully expensed.
The 8
million warrants in 2009 were valued at $15,450, fair value, using the
Black-Scholes option pricing model to calculate the fair-value of the warrants,
with the following assumptions: no dividend yield, expected volatility of
between 30.9% and 34.5%, risk free interest rate between .95% and 1.06% and
warrant life of approximately 2 years. The 1 million warrants in 2010 were
valued at $20,143, fair value, using the Black-Scholes option pricing model to
calculate the fair-value of the warrants, with the following assumptions: no
dividend yield, expected volatility of 28.6 %, risk free interest rate of .84%
and warrant life of approximately 2 years.
NOTE 6 - NOTES PAYABLE
(Continued)
In June
2011, the maturity date on the $150,000 of the 8% Series A Notes Payable and the
term on the associated 6 million warrants were extended to September 30, 2015.
As a result, the warrants were revalued using the Black-Scholes option pricing
model to calculate the incremental fair-value of the warrants of $21,275, with
the following assumptions: no dividend yield, expected volatility of 60%, risk
free interest rate of 1.52% and warrant life of approximately 1.25 years. As
part of the debt extension, the lender holding the 6 million warrants agreed in
writing to suspend its right to exercise these warrants until such time that the
Companys authorized shares have been increased. The authorized
shares of the Companys common stock were increased on November 12, 2012 from
175,000,000 to 425,000,000. The Company's stockholders have approved a further
increase to 675,000,000 shares of common stock, which is expected to take effect
in May, 2013.
The
relative fair value of the warrants issued in conjunction with the 8% Series A
Notes Payable have been treated as a debt discount with an offsetting credit to
additional paid-in capital. The debt discount related to the warrant issuances
is being accreted to interest expense over the term of the notes. When the
warrants were revalued the incremental amount of $21,275 was also treated as
additional debt discount and is being accreted over the new term of the 8%
Series A Notes Payable. As of March 31, 2013 and 2012, the unaccreted
debt discount related to warrants issued in conjunction with the 8% Series A
Notes payable was $12,393 and $13,632. For the three months ended March 31, 2013
and 2012, accreted interest expense from the accretion of the debt discount was
$1,239.
During
the third quarter of 2011, $25,000 plus accrued interest of the 8% Series A
Notes Payable were repaid and 3 million of the associated warrants expired
unexercised.
Private Placement of 25%
Notes Payable
In 2010,
the Company issued $400,000 in notes payable in order to finance a patent
infringement lawsuit (see Note 13 Legal Matters to these condensed
consolidated financial statements). The notes payable accrue interest at 25% per
annum and mature upon the earlier of September 1, 2013 or the date on which the
Company receives net proceeds from the patent infringement claim. In addition to
the base interest of 25% per annum, the lenders are entitled to Bonus Interest
equal to the following:
|
a. |
First monies realized
by the Company from its share of the net proceeds of the lawsuit shall be
allocated and paid to the Lender until the principal and base interest
accruing has been fully paid. |
|
b. |
The next monies from
the net proceeds of the litigation settlement will be paid to the Company
to reimburse for out-of-pocket legal costs related to the
lawsuit. |
|
c. |
The next $825,000 of
proceeds will be split 50%/50% between the Company and the
Lenders. |
|
d. |
The next $1 million
realized by the Company shall be allocated 90% to the Company and 10% to
the Lenders. |
|
e. |
The next $1 million
realized by Company shall be allocated 85% to Company and 15% to
Lenders. |
|
f. |
All remaining proceeds
realized by Company shall be allocated 80% to Company and 20% to
Lenders. |
The
Lenders have a security interest in the Companys patent infringement claim in
which the Lender has the right to the net proceeds of this lawsuit to satisfy
outstanding principal and interest under the notes.
As part
of the private placement of the 25% notes payable, the Company incurred debt
placement fees of $34,500 in 2010. These debt placement fees have been treated
as deferred finance charges and are being amortized to interest expense over two
years. For the three months ended March 31, 2013 and 2012
amortization of deferred finance charges was $0 and $4,312.
NOTE 6 - NOTES PAYABLE
(Continued)
In
December 2012, 250,000 of these notes payable and accrued interest of $122,397
were converted into 8,219,911 shares of the Companys common
stock. In March 2013, the remaining $150,000 of the notes payable and
accrued interest of $83,895 was converted into 3 million shares of the Companys
common stock. Accrued interest of $13,895 was paid in
cash.
Aggregate Maturities of
Long-term Debt
Aggregate maturities of the
senior secured convertible notes, convertible notes and notes payable over the
next five years are as follows:
|
2013 |
|
$ |
50,000 |
|
|
2014 |
|
|
- |
|
|
2015 |
|
|
1,621,856 |
|
|
2016 |
|
|
- |
|
|
2017 |
|
|
- |
|
NOTE 7 WARRANT
LIABILITY
On
December 31, 2012, the Company entered into an Investment Agreement, a
Technology and Services Agreement, a Technology and Services Agreement with
Zaah, a Patent and Technology License Agreement, and an Asset Purchase Agreement
(collectively the Agreements). Included in these Agreements were
Warrants to purchase shares of the Companys common stock.
The
warrants associated with these Agreements are subject to anti-dilution
adjustments outlined in the Agreements. In accordance with ASC 815,
the warrants were classified as a liability in the total amount of $2.4 million
at December 31, 2012. In addition, the warrants must be valued every
reporting period and adjusted to market with the increase or decrease being
adjusted through earnings. For the three months ended March 31, 2013,
the value of the warrants increased to $10,657,015 resulting in a charge to
expenses of $8,257,015.
NOTE 8
CONVERTIBLE PREFERRED STOCK
Subscription
Agreement
The Company
entered into a Subscription Agreement with VerifyMe, Inc. (VerifyMe) on
January 31, 2013 (the Subscription Agreement). Under the terms of
the Subscription Agreement VerifyMe subscribed to purchase 33,333,333 shares of
the Companys preferred stock and a warrant to purchase 33,333,333 shares of the
Companys common stock for $1 million at an exercise price of $0.12.
At any
time within two years after January 31, 2013, the subscriber has the right, but
not the obligation to require the Company to repurchase all, but not less than
all, of the capital stock of the Company and warrants exercisable for capital
stock of the Company held by subscriber in exchange for the price originally
paid by the subscriber therefor upon the occurrence of any of the following
events:(i) the consummation of any bona fide business acquisition, (ii) the
incurring of any indebtedness by the Company in an amount in excess of $2
million, (iii) the issuance or sale of any security having a preference on
liquidation senior to common stock, or (iv) the sale by the Company of capital
stock or warrants exercisable for its capital stock at a price below $0.03 per
share.
NOTE 8
CONVERTIBLE PREFERRED STOCK (Continued)
In
accordance with ASC 480 and 815, the Preferred Stock has been classified as
permanent equity and has been valued at $1 million.
The
conversion feature of the Preferred Stock is an embedded derivative, which is
classified as a liability in accordance with ASC 815 and was valued in
accordance with ASC 470 as a beneficial conversion feature at a fair market
value of $1 million at January 31, 2013. This was classified as an
embedded derivative liability and a discount to Preferred
Stock. Because the Preferred Stock can be converted at any time, the
full amount was accreted and classified as a reduction to the discount on
Preferred Stock and a deemed dividend distribution in the full amount of $1
million.
The
warrants associated with the Preferred Stock were also classified as a liability
and valued at a fair market of $2,995,791 at January 31,
2013. Because this amount was in entirely in excess of the
transaction price, this amount was recorded as a charge to expenses of
$2,995,791. In addition, the warrants must be valued every reporting
period and adjusted to market with the increase or decrease being adjusted
through earnings. For the three months ended March 31, 2013, the
value of the warrants increased to $6,660,286 resulting in a charge to expenses
of $3,664,495.
The Convertible Preferred
Stock have a preference in liquidation that the holders of the Convertible
Preferred Stock are to be paid out of assets available for distribution prior to
holders of common stock. The Convertible Preferred Stockholders may cast the
number of votes equal to the number of whole shares of common stock into which
the shares of Convertible Preferred Stock can be converted. In addition, the
Convertible Preferred Stockholders are to be paid dividends, based on the number
of Convertible Preferred shares as if the shares had been converted to common
shares, prior to the common stockholders receiving a
dividend.
The conversion price of the
Preferred A shares is currently $0.03 per share. There are no arrearages on
cumulative dividends.
NOTE 9
STOCKHOLDERS EQUITY
In
January and February 2013, the Company received $185,000 from the sales of
3,700,000 units from private placements consisting of shares of the Companys
common stock and warrants to purchase shares of the Companys common stock at an
exercise price of $0.10 per share. The shares and warrants were sold
in units with each unit comprised of one share and one warrant at a purchase
price of $.05 per unit.
In
January, 2013, the Company commenced private placements consisting of shares of
the Companys common stock and warrants to purchase shares of the Companys
common stock at an exercise price of $0.12 per share. The shares and
warrants were sold in units with each unit comprised of one share and one
warrant at a purchase price of $.045 per unit. The company sold
1,111,111 units and raised $50,000 as of the date of this report.
On
February 1, 2013, an investor exercised a warrant to purchase 1 million shares
of the Companys common stock that raised $10,000 for the Company.
In
February and March 2013, four investors exercised options to purchase 3,335,000
shares of the Companys common stock that raised $17,919 for the
Company.
NOTE 10 STOCK OPTIONS
AND WARRANTS
During
1999, the Board of Directors (Board) of the Company adopted, with the approval
of the stockholders, a Stock Option Plan. In 2000, the Board superseded that
plan and created a new Stock Option Plan, pursuant to which it is authorized to
grant options to purchase up to 1.5 million shares of common stock. On December
17, 2003, the Board, with approval of the stockholders, superseded this plan and
created the 2003 Stock Option Plan (the Plan). Under the Plan the Company is
authorized to grant options to purchase up to 18,000,000 shares of common stock
to the Companys employees, officers, directors, consultants, and other agents
and advisors. The Plan is intended to permit stock options granted to employees
under the Plan to qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended (Incentive Stock Options). All
options granted under the Plan, which are not intended to qualify as Incentive
Stock Options, are deemed to be non-qualified options (Non-Statutory Stock
Options). As of March 31, 2013, there are 13,590,996 options that have been
issued and exercised, 4,335,000 options that have been issued and are
unexercised, and 74,004 options that are available to be issued under the
Plan.
The Plan
is administered by a committee of the Board of Directors (Stock Option
Committee) which determines the persons to whom awards will be granted, the
number of awards to be granted and the specific terms of each grant, including
the vesting thereof, subject to the provisions of the plan.
In
connection with Incentive Stock Options, the exercise price of each option may
not be less than 100% of the fair market value of the common stock on the date
of the grant (or 110% of the fair market value in the case of a grantee holding
more than 10% of the outstanding stock of the Company). The aggregate fair
market value (determined at the time of the grant) of stock for which an
employee may exercise Incentive Stock Options under all plans of the company
shall not exceed $1,000,000 per calendar year. If any employee shall have the
right to exercise any options in excess of $100,000
during any calendar year, the options in excess of $100,000 shall be deemed to
be Non-Statutory Stock Options, including prices, duration, transferability and
limitations on exercise.
The
Company issued non-statutory stock options pursuant to contractual agreements to
non-employees. Options granted under the agreements are expensed when the
related service or product is provided.
Effective October 8, 2012,
the Company entered into a three year agreement with the Vice Chairman of the
Board and Chief Executive Officer of the Company, with an annual
compensation of $200,000 per year. In addition, upon execution of the agreement
the Company has agreed to issue options to the Vice Chairman to purchase 5% of
the shares of the Companys fully diluted common stock at an exercise price of
$.05 per share, subsequent to the Company receiving funding of $2.5
million. The Company has raised the $2.5 million in funding, but has
not issued the options as of the date of this report.
Effective October 16, 2012,
the Company entered into a three year agreement with the President and Chief
Operating Officer of the Company with an annual compensation of $200,000 per
year. In addition, upon execution of the agreement the Company has agreed to
issue options to the President to purchase 5% of the shares of the Companys
fully diluted common stock at an exercise price of $.05 per share, subsequent to
the Company receiving funding of $2.5 million. The Company has raised
the $2.5 million in funding, but has not issued the options as of the date of
this report.
NOTE 10 STOCK OPTIONS AND WARRANTS
(Continued)
On November
21, 2012, the Company issued options to purchase an aggregate of 2 million
shares of the Companys common stock at an exercise price of $.05, with a term
of ten years, to the Chief Executive Officer and the Chief Operating Officer.
The fair value of options issued was $89,538 and was expensed
immediately.
On November
21, 2012, the Company issued options to purchase an aggregate of 10 million
shares of the Companys common stock at an exercise price of $.05, with a term
of ten years, to the five members of the Board of Directors. The fair value of
options issued was $447,689 of which $223,844 was expensed immediately and the
remainder will be expensed over one year with expense of $55,961 being
expensed for the three months ended March 31, 2013.
All of the
options issued on November 21, 2012 were valued using the Black-Scholes option
pricing model to calculate the grant-date fair value of the options, with the
following assumptions: no dividend yield, expected volatility of 131%, risk-free
interest rate of 1.7% and expected option life of ten years.
On
January 22, 2013, the Company issued options to an employee to purchase 1
million shares of the Companys common stock at an exercise price of $.05, with
a term of ten years. The options vest as follows: 250,000
immediately, 250,000 in one year and 500,000 in two years. The
Company used the Black-Scholes option pricing model to calculate the grant-date
fair value of the warrants, with the following assumptions: no dividend yield,
expected volatility of 222%, risk-free interest rate of 1.9% and expected option
life of ten years. The fair value of options
issued was $99,972 of which $25,000 was expensed immediately and the remainder
is being expensed over the vesting terms. The total expense for the
three months ended March 31, 2013 was $33,324.
On
February 25, 2013, the Company issued options to an employee to purchase 500,000
shares of the Companys common stock at an exercise price of $.05, with a term
of ten years. The options vest as follows: 200,000 in one year,
200,000 in two years and 100,000 in three years. The Company used the
Black-Scholes option pricing model to calculate the grant-date fair value of the
warrants, with the following assumptions: no dividend yield, expected volatility
of 259%, risk-free interest rate of 1.9% and expected option life of ten years.
The fair value
of options issued was $89,998 of which $5,000 was expensed during the three
months ended March 31, 2013 and the remainder will be expensed over the vesting
terms.
On March
13, 2013, the Company issued an option to purchase 2 million shares of the
Companys common stock at an exercise price of $.05, with a term of ten years,
to a member of the Board of Directors. The Company used the
Black-Scholes option pricing model to calculate the grant-date fair value of the
warrants, with the following assumptions: no dividend yield, expected volatility
of 235%, risk-free interest rate of 2.0% and expected option life of ten
years. The fair value of the option issued was $439,963 of which
$219,982 was expensed immediately and the remainder will be expensed over one
year with one month expense of $18,331 being expensed in the three months ended
March 31, 2013.
NOTE 10 STOCK OPTIONS AND WARRANTS
(Continued)
The
following tables summarize non-employee stock option/warrant activity of the
Company since December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average |
|
|
|
Option/Warrant |
|
|
Exercise |
|
|
Exercise |
|
|
|
Shares |
|
|
Price |
|
|
Price |
|
Outstanding, December
31, 2011 |
|
|
15,585,996 |
|
|
|
$0.00125 to
$0.20 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
72,422,221 |
|
|
0.05
to 0.10 |
|
|
|
0.08 |
|
Transferred to
employee options |
|
|
(200,000 |
) |
|
|
(0.05 |
) |
|
|
- |
|
Exercised |
|
|
(5,000,996 |
) |
|
|
0.00125 |
|
|
|
- |
|
Expired |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December
31, 2012 |
|
|
82,807,221 |
|
|
0.00125 to
0.20 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
38,144,444 |
|
|
0.10 to
0.15 |
|
|
|
0.03 |
|
Exercised |
|
|
(3,435,000 |
) |
|
|
0.00125
- 0.07 |
|
|
|
- |
|
Expired |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31,
2013 |
|
|
117,516,665 |
|
|
|
$0.01
to $.20 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, March 31,
2013 |
|
|
117,516,665 |
|
|
|
$0.01
to $.20 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Remaining Life, Exercisable, March 31, 2013
(years) |
|
|
7.4 |
|
|
|
|
|
|
|
|
|
A
summary of incentive stock option transactions for employees since December 31,
2011 is as follows:
|
|
|
|
|
|
|
|
Weighted
Average |
|
|
|
Option/Warrant |
|
|
Exercise |
|
|
Exercise |
|
|
|
Shares |
|
|
Price |
|
|
Price |
|
Outstanding, December
31, 2011 |
|
|
6,390,000 |
|
|
$ |
0.00125 |
|
|
$ |
0.00125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
15,000,000 |
|
|
|
0.05 - 0.15 |
|
|
|
0.06 |
|
Transferred from
non-employee options |
|
|
200,000 |
|
|
|
0.05 |
|
|
|
- |
|
Exercised |
|
|
(5,823,333 |
) |
|
|
0.00125 -
0.15 |
|
|
|
- |
|
Expired/Returned |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December
31, 2012 |
|
|
15,766,667 |
|
|
0.00125 to
0.10 |
|
|
|
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
3,500,000 |
|
|
|
0.05 - 0.15 |
|
|
|
0.06 |
|
Exercised |
|
|
(900,000 |
) |
|
|
0.00125 |
|
|
|
- |
|
Expired/Returned |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31,
2013 |
|
|
18,366,667 |
|
|
|
$0.05
to $0.15 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, March 31,
2013 |
|
|
11,116,667 |
|
|
|
$0.05
to $0.15 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Remaining Life, Exercisable, March 31, 2013
(years) |
|
|
9.7 |
|
|
|
|
|
|
|
|
|
NOTE 11 RELATED PARTY
TRANSACTIONS
At March
31, 2013, eight shareholders of the Company held $775,249 and at December 31,
2012, six shareholders of the Company held $732,249 of the senior secured
convertible notes payable.
At March
31, 2013 and December 31, 2012 one shareholder of the Company held $98,000 of
convertible notes payable.
At March
31, 2013, three shareholders of the Company held 761,000 of unsecured notes
payable and at December 31, 2012 three shareholders of the Company held $711,000
of unsecured notes payable.
The
Company maintains its office at the home of its Chief Executive Officer. No
formal lease agreement exists and no direct rent expense has been incurred.
However, related occupancy costs of $1,199 and $8,359 were incurred during the
three months ended March 31, 2013 and 2012.
NOTE 12 MAJOR
CUSTOMERS
During
the three months ended March 31, 2013, the Company earned a substantial portion
of its revenue from one customer aggregating $3,140. At March 31,
2013, amounts due from that customer included in trade accounts receivable were
$3,140. During the three months ended March 31, 2012, the Company
earned a substantial portion of its revenue from one customer aggregating
$12,000. At March 31, 2012, amounts due from that customer included
in trade accounts receivable were $2,000.
NOTE 13 LEGAL
MATTERS
In
October 2010, the Company filed suit in the Western District of Pennsylvania
against WS Packaging Group, Inc. (WS) alleging that WS infringed on one of the
Companys patents in the manufacture of MONOPOLY game pieces on behalf of
McDonalds Corp. On June 4, 2012, both WS and the Company filed a stipulation to
dismiss the action without prejudice and enter into settlement negotiations.
Settlement negotiations are ongoing.
NOTE 14 SUBSEQUENT
EVENTS
The
Company is in the process of moving its corporate headquarters to Washington
D.C.
On May
4, 2013, the Board of Directors elected a new board member, who received options
to purchase 2 million shares of the Company's common stock at an exercise price
of $.05 and a term of ten years.
LaserLock Technologies, Inc. and
Subsidiary
(A Development Stage Enterprise)
CONTENTS
|
|
PAGE |
|
|
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|
|
F-26
F-27 |
|
|
|
|
|
F-28 |
|
|
|
|
|
F-29 |
|
|
|
|
|
F-30 |
|
|
|
|
|
F-35 |
|
|
|
|
|
F-36
F-53 |
To the
Board of Directors
LaserLock
Technologies, Inc. and Subsidiary
We have
audited the accompanying consolidated balance sheet of LaserLock Technologies,
Inc. and its Subsidiary (a development stage enterprise) as of December 31,
2012 and the related consolidated statements of operations, changes in
stockholders equity (deficit), and cash flows for the year then ended and for
the period from November 10, 1999 (date of inception) to December 31, 2012.
These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based
on our audit. We did not audit the consolidated financial statements of
LaserLock Technologies, Inc. and its Subsidiary as of December 31, 2011, 2010,
2009 and 2008 and for each of the years in the four-year period ended December
31, 2011. Such statements are included in the cumulative inception to December
31, 2012 totals of the consolidated statements of operations and cash flows.
Those statements were audited by other auditors whose report has been furnished
to us, and our opinion, insofar as it relates to amounts for each of the years
in the four-year period ended December 31, 2011, included in the cumulative
totals, is based solely on the report of the other auditors.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit and the report of
the other auditors provide a reasonable basis for our opinion.
In our
opinion, based on our audit and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of LaserLock Technologies, Inc. and
its Subsidiary as of December 31, 2012, and the results of their
operations and their cash flows for the year then ended and for the period
November 10, 1999 (date of inception) to December 31, 2012, in conformity with
accounting principles generally accepted in the United States of
America.
As discussed in Note 14 to the consolidated financial statements,
the accompanying 2012 financial statements have been restated to properly
reflect warrants issued December 31, 2012 as a liability, instead of the
original classification as equity.
/s/
MORISON COGEN LLP
Bala
Cynwyd, Pennsylvania
April 1, 2013, except for Note 14,
to which the date is May 13, 2013
Report of
Independent Registered Public Accounting Firm
To the
Board of Directors
LaserLock Technologies,
Inc. and its Subsidiary
We have
audited the accompanying consolidated balance sheet of LaserLock Technologies,
Inc. and its Subsidiary (a development stage company) (the Company) as of
December 31, 2011 and the related consolidated statements of operations, changes
in stockholders equity (deficit), and cash flows for the year ended December
31, 2011 and for the period from November 10, 1999 (date of inception) to
December 31, 2011. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audit. We did not audit the consolidated
financial statements of LaserLock Technologies, Inc. and its Subsidiary for the
period from November 10, 1999 (date of inception) to December 31, 2007. Such
statements are included in the cumulative inception to December 31, 2011 totals
of the consolidated statements of operations and cash flows. Those statements
were audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to amounts for the period from November 10, 1999
(date of inception) to December 31, 2007, included in the cumulative totals, is
based solely on the reports of the other auditors.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, based on our audit and the reports of other auditors, the consolidated
financial statements referred to above present fairly, in all material respects,
the financial position of LaserLock Technologies, Inc. and its Subsidiary (a
development stage company) as of December 31, 2011, and the results of its
operations and its cash flows for the year ended December 31, 2011 and for the
period November 10, 1999 (date of inception) to December 31, 2011, in conformity
with accounting principles generally accepted in the United States of
America.
The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As described in Note 2 to the 2011
consolidated financial statements, the Companys recurring operating losses from
development stage activities raise substantial doubt about its ability to
continue as a going concern. Managements plans in regards to these matters are
also described in Note 2 to the 2011 consolidated financial statements. The 2011
consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
/s/ ASHER
& COMPANY, Ltd.
Philadelphia,
Pennsylvania
July
13, 2012
LaserLock
Technologies, Inc. and Subsidiary
(A Development Stage
Enterprise)
December
31, 2012 and December 31, 2011
|
|
December 31,
2012 |
|
|
December 31,
2011 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
2,994,350 |
|
|
$ |
53,573 |
|
Accounts receivable, net of allowance of $0 at December 31, 2012 and
December 31, 2011 |
|
|
3,473 |
|
|
|
- |
|
Inventory |
|
|
19,980 |
|
|
|
35,137 |
|
Deferred finance
charges |
|
|
- |
|
|
|
13,625 |
|
Prepaid
expenses |
|
|
750,000 |
|
|
|
117,760 |
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT
ASSETS |
|
|
3,767,803 |
|
|
|
220,095 |
|
|
|
|
|
|
|
|
|
|
PROPERTY AND
EQUIPMENT |
|
|
|
|
|
|
|
|
Capital
equipment |
|
|
34,964 |
|
|
|
32,604 |
|
Less accumulated
depreciation |
|
|
32,624 |
|
|
|
32,604 |
|
|
|
|
2,340 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Patents and Trademark, net of accumulated amortization of $92,302 and
$78,851 as of December 31, 2012 and December 31, 2011 |
|
|
311,832 |
|
|
|
118,618 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
4,081,975 |
|
|
$ |
338,713 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable and
accrued expenses |
|
$ |
660,493 |
|
|
$ |
634,632 |
|
Accrued
interest |
|
|
97,563 |
|
|
|
8,667 |
|
Notes payable |
|
|
200,000 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT
LIABILITIES |
|
|
958,056 |
|
|
|
693,299 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES |
|
|
|
|
|
|
|
|
Warrant
Liability |
|
|
2,400,000 |
|
|
|
- |
|
Accrued
interest |
|
|
975,559 |
|
|
|
940,554 |
|
Senior secured
convertible notes payable |
|
|
775,249 |
|
|
|
781,500 |
|
Convertible notes
payable |
|
|
140,000 |
|
|
|
140,000 |
|
Notes payable, net of discount of $13,632 and $18,589 as
of December 31, 2012 and December 31, 2011 |
|
|
697,368 |
|
|
|
1,092,411 |
|
|
|
|
|
|
|
|
|
|
TOTAL LONG-TERM
LIABILITIES |
|
|
4,988,176 |
|
|
|
2,954,465 |
|
|
|
|
|
|
|
|
|
|
CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS
DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, $ .001 par value; 75,000,000 shares authorized; no
shares issued and outstanding |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Common stock, $ .001 par value; 675,000,000 shares authorized;
248,244,012 shares issued and 218,448,109 outstanding at December 31, 2012
and 174,940,506 shares issued and 145,144,603 outstanding at December 31,
2011 |
|
|
248,244 |
|
|
|
174,940 |
|
|
|
|
|
|
|
|
|
|
Additional paid in
capital |
|
|
11,387,929 |
|
|
|
8,817,382 |
|
|
|
|
|
|
|
|
|
|
Treasury stock, at cost (29,795,903 shares at December 31, 2012 and
December 31, 2011) |
|
|
(113,389 |
) |
|
|
(113,389 |
) |
|
|
|
|
|
|
|
|
|
Deficit accumulated
during the development stage |
|
|
(13,387,041 |
) |
|
|
(12,187,984 |
) |
|
|
|
|
|
|
|
|
|
STOCKHOLDERS
DEFICIT |
|
|
(1,864,257 |
) |
|
|
(3,309,051 |
) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS DEFICIT |
|
$ |
4,081,975 |
|
|
$ |
338,713 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
LaserLock
Technologies, Inc. and Subsidiary
(A Development Stage
Enterprise)
For the
Years Ended December 31, 2012 and 2011
And for
the Period November 10, 1999 (Date of Inception) to December 31,
2012
|
|
|
|
|
Year
Ended |
|
|
Year
Ended |
|
|
|
Cumulative |
|
|
Ended |
|
|
Ended |
|
|
|
Since |
|
|
December
31, |
|
|
December
31, |
|
|
|
Inception |
|
|
2012 |
|
|
2011 |
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUES |
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
461,155 |
|
|
$ |
7,029 |
|
|
$ |
900 |
|
Royalties |
|
|
645,180 |
|
|
|
10,000 |
|
|
|
7,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
NET REVENUE |
|
|
1,106,335 |
|
|
|
17,029 |
|
|
|
8,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF SALES |
|
|
429,031 |
|
|
|
4,083 |
|
|
|
373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT |
|
|
677,304 |
|
|
|
12,946 |
|
|
|
8,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative |
|
|
1,543,359 |
|
|
|
129,329 |
|
|
|
114,376 |
|
Legal
and Accounting |
|
|
1,538,786 |
|
|
|
276,774 |
|
|
|
71,847 |
|
Patent
costs |
|
|
65,000 |
|
|
|
- |
|
|
|
- |
|
Payroll
Expenses |
|
|
3,412,982 |
|
|
|
612,721 |
|
|
|
227,658 |
|
Research
and development |
|
|
867,792 |
|
|
|
5,420 |
|
|
|
9,081 |
|
Sales
and Marketing |
|
|
5,019,732 |
|
|
|
66,499 |
|
|
|
113,377 |
|
Total
operating expenses |
|
|
12,447,651 |
|
|
|
1,090,743 |
|
|
|
536,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE OTHER INCOME |
|
|
(11,770,347 |
) |
|
|
(1,077,797 |
) |
|
|
(527,828 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
63,664 |
|
|
|
1 |
|
|
|
59 |
|
Interest
expense |
|
|
(2,190,432 |
) |
|
|
(277,371 |
) |
|
|
(321,586 |
) |
Gain on
debt forgiveness |
|
|
340,352 |
|
|
|
156,110 |
|
|
|
184,242 |
|
Gain on
disposition of assets |
|
|
4,722 |
|
|
|
- |
|
|
|
- |
|
|
|
|
(1,781,694 |
) |
|
|
(121,260 |
) |
|
|
(137,285 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE INCOME TAX BENEFIT |
|
|
(13,552,041 |
) |
|
|
(1,199,057 |
) |
|
|
(665,113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX
BENEFIT |
|
|
(165,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS |
|
$ |
(13,387,041 |
) |
|
$ |
(1,199,057 |
) |
|
$ |
(665,113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED NET
LOSS PER COMMON SHARE |
|
|
|
|
|
$ |
(0.01 |
) |
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING |
|
|
|
|
|
|
150,559,287 |
|
|
|
146,076,571 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
For the
Period November 10, 1999 (Date of Inception) to December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Stock |
|
|
Deferred |
|
|
Additional |
|
|
|
|
|
During
the |
|
|
|
|
|
|
Number
of |
|
|
|
|
|
Consulting |
|
|
Paid-In |
|
|
Treasury |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Fees |
|
|
Capital |
|
|
Stock |
|
|
Stage |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of initial
4,278,000 shares on November 10, 1999 |
|
|
4,278,000 |
|
|
$ |
4,278 |
|
|
$ |
- |
|
|
$ |
16,595 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
20,873 |
|
Issuance of shares of
common stock in exchange for services |
|
|
1,232,000 |
|
|
|
1,232 |
|
|
|
- |
|
|
|
35,728 |
|
|
|
- |
|
|
|
- |
|
|
|
36,960 |
|
Issuance of shares of
common stock |
|
|
2,090,000 |
|
|
|
2,090 |
|
|
|
- |
|
|
|
60,610 |
|
|
|
- |
|
|
|
- |
|
|
|
62,700 |
|
Stock
issuance costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(13,690 |
) |
|
|
- |
|
|
|
- |
|
|
|
(13,690 |
) |
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(54,113 |
) |
|
|
(54,113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
1999 |
|
|
7,600,000 |
|
|
|
7,600 |
|
|
|
- |
|
|
|
99,243 |
|
|
|
- |
|
|
|
(54,113 |
) |
|
|
52,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of
common stock |
|
|
5,449,999 |
|
|
|
5,450 |
|
|
|
- |
|
|
|
921,050 |
|
|
|
- |
|
|
|
- |
|
|
|
926,500 |
|
Issuance of shares of
common stock in exchange for services |
|
|
240,000 |
|
|
|
240 |
|
|
|
(40,800 |
) |
|
|
40,560 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Stock
issuance costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(16,335 |
) |
|
|
- |
|
|
|
- |
|
|
|
(16,335 |
) |
Fair
value of non-employee stock options grants |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
50,350 |
|
|
|
- |
|
|
|
- |
|
|
|
50,350 |
|
Amortization of
deferred consulting fees |
|
|
- |
|
|
|
- |
|
|
|
20,117 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,117 |
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(367,829 |
) |
|
|
(367,829 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2000 |
|
|
13,289,999 |
|
|
|
13,290 |
|
|
|
(20,683 |
) |
|
|
1,094,868 |
|
|
|
- |
|
|
|
(421,942 |
) |
|
|
665,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of
common stock |
|
|
217,500 |
|
|
|
218 |
|
|
|
- |
|
|
|
77,723 |
|
|
|
- |
|
|
|
- |
|
|
|
77,941 |
|
Issuance of shares of
common stock and stock options for acquisition of
subsidiary |
|
|
2,000,000 |
|
|
|
2,000 |
|
|
|
- |
|
|
|
736,000 |
|
|
|
- |
|
|
|
- |
|
|
|
738,000 |
|
Issuance of stock
options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,000 |
|
|
|
- |
|
|
|
- |
|
|
|
15,000 |
|
Exercise of
options |
|
|
1,450,368 |
|
|
|
1,450 |
|
|
|
- |
|
|
|
230,609 |
|
|
|
- |
|
|
|
- |
|
|
|
232,059 |
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
323,250 |
|
|
|
- |
|
|
|
- |
|
|
|
323,250 |
|
Amortization of
deferred consulting fees |
|
|
- |
|
|
|
- |
|
|
|
20,683 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,683 |
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,052,299 |
) |
|
|
(1,052,299 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2001 |
|
|
16,957,867 |
|
|
|
16,958 |
|
|
|
- |
|
|
|
2,477,450 |
|
|
|
- |
|
|
|
(1,474,241 |
) |
|
|
1,020,167 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
Consolidated Statements of Changes in Stockholders Equity
(Deficit) (Continued)
For the
Period November 10, 1999 (Date of Inception) to December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Stock |
|
|
Deferred |
|
|
Additional |
|
|
|
|
|
During
the |
|
|
|
|
|
|
Number
of |
|
|
|
|
|
Consulting |
|
|
Paid-In |
|
|
Treasury |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Fees |
|
|
Capital |
|
|
Stock |
|
|
Stage |
|
|
Total |
|
Issuance of shares of
common stock |
|
|
3,376,875 |
|
|
|
3,377 |
|
|
|
- |
|
|
|
687,223 |
|
|
|
- |
|
|
|
- |
|
|
|
690,600 |
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
94,000 |
|
|
|
- |
|
|
|
- |
|
|
|
94,000 |
|
Salary due to
shareholder contributed capital |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,000 |
|
|
|
- |
|
|
|
- |
|
|
|
15,000 |
|
Return of shares of
common stock related to purchase
price adjustment |
|
|
(1,000,000 |
) |
|
|
(1,000 |
) |
|
|
- |
|
|
|
(353,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
(354,000 |
) |
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,195,753 |
) |
|
|
(1,195,753 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2002 |
|
|
19,334,742 |
|
|
|
19,335 |
|
|
|
- |
|
|
|
2,920,673 |
|
|
|
- |
|
|
|
(2,669,994 |
) |
|
|
270,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of
common stock |
|
|
22,512,764 |
|
|
|
22,512 |
|
|
|
- |
|
|
|
1,387,109 |
|
|
|
- |
|
|
|
- |
|
|
|
1,409,621 |
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
213,300 |
|
|
|
- |
|
|
|
- |
|
|
|
213,300 |
|
Issuance of shares of
common stock in exchange for services |
|
|
143,000 |
|
|
|
143 |
|
|
|
- |
|
|
|
23,857 |
|
|
|
- |
|
|
|
- |
|
|
|
24,000 |
|
Stock
issuance costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(49,735 |
) |
|
|
- |
|
|
|
- |
|
|
|
(49,735 |
) |
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,107,120 |
) |
|
|
(1,107,120 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2003 |
|
|
41,990,506 |
|
|
|
41,990 |
|
|
|
- |
|
|
|
4,495,204 |
|
|
|
- |
|
|
|
(3,777,114 |
) |
|
|
760,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issuance costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(25,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
(25,000 |
) |
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
493,600 |
|
|
|
- |
|
|
|
- |
|
|
|
493,600 |
|
Issuance of shares of
common stock |
|
|
18,600,000 |
|
|
|
18,600 |
|
|
|
- |
|
|
|
939,881 |
|
|
|
- |
|
|
|
- |
|
|
|
958,481 |
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,406,506 |
) |
|
|
(1,406,506 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2004 |
|
|
60,590,506 |
|
|
|
60,590 |
|
|
|
- |
|
|
|
5,903,685 |
|
|
|
- |
|
|
|
(5,183,620 |
) |
|
|
780,655 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
Consolidated Statements of Changes in Stockholders Equity
(Deficit) (Continued)
For the
Period November 10, 1999 (Date of Inception) to December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Stock |
|
|
Deferred |
|
|
Additional |
|
|
|
|
|
During
the |
|
|
|
|
|
|
Number
of |
|
|
|
|
|
Consulting |
|
|
Paid-In |
|
|
Treasury |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Fees |
|
|
Capital |
|
|
Stock |
|
|
Stage |
|
|
Total |
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
286,762 |
|
|
|
- |
|
|
|
- |
|
|
|
286,762 |
|
Issuance of shares of
common stock |
|
|
3,000,000 |
|
|
|
3,000 |
|
|
|
- |
|
|
|
102,000 |
|
|
|
- |
|
|
|
- |
|
|
|
105,000 |
|
Net
loss for the year ended December 31, 2005 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,266,811 |
) |
|
|
(1,266,811 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2005 |
|
|
63,590,506 |
|
|
|
63,590 |
|
|
|
- |
|
|
|
6,292,447 |
|
|
|
- |
|
|
|
(6,450,431 |
) |
|
|
(94,394 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
215,463 |
|
|
|
- |
|
|
|
- |
|
|
|
215,463 |
|
Fair
value of employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
135,098 |
|
|
|
- |
|
|
|
- |
|
|
|
135,098 |
|
Fair
value of warrants issued for deferred finance charges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
392,376 |
|
|
|
- |
|
|
|
- |
|
|
|
392,376 |
|
Exercise of
warrants |
|
|
5,550,000 |
|
|
|
5,550 |
|
|
|
- |
|
|
|
49,950 |
|
|
|
- |
|
|
|
- |
|
|
|
55,500 |
|
Exercise of
options |
|
|
4,300,000 |
|
|
|
4,300 |
|
|
|
- |
|
|
|
(3,870 |
) |
|
|
- |
|
|
|
- |
|
|
|
430 |
|
Shares retired upon
cancellation of consulting agreements |
|
|
(1,200,000 |
) |
|
|
(1,200 |
) |
|
|
- |
|
|
|
1,080 |
|
|
|
- |
|
|
|
- |
|
|
|
(120 |
) |
Issuance of shares for
services |
|
|
1,200,000 |
|
|
|
1,200 |
|
|
|
- |
|
|
|
53,800 |
|
|
|
- |
|
|
|
- |
|
|
|
55,000 |
|
Net
loss for the year ended December 31, 2006 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,607,017 |
) |
|
|
(1,607,017 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2006 |
|
|
73,440,506 |
|
|
|
73,440 |
|
|
|
- |
|
|
|
7,136,344 |
|
|
|
- |
|
|
|
(8,057,448 |
) |
|
|
(847,664 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
47,692 |
|
|
|
- |
|
|
|
- |
|
|
|
47,692 |
|
Fair
value of employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
67,651 |
|
|
|
- |
|
|
|
- |
|
|
|
67,651 |
|
Recognition of
beneficial conversion feature |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
375,000 |
|
|
|
- |
|
|
|
- |
|
|
|
375,000 |
|
Net
loss for the year ended December 31, 2007 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,117,334 |
) |
|
|
(1,117,334 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2007 |
|
|
73,440,506 |
|
|
|
73,440 |
|
|
|
- |
|
|
|
7,626,687 |
|
|
|
- |
|
|
|
(9,174,782 |
) |
|
|
(1,474,655 |
) |
The
accompanying notes are an integral part of these consolidated financial
statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
Consolidated Statements of Changes in Stockholders Equity
(Deficit) (Continued)
For the
Period November 10, 1999 (Date of Inception) to December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Stock |
|
|
Deferred |
|
|
Additional |
|
|
|
|
|
During
the |
|
|
|
|
|
|
Number
of |
|
|
|
|
|
Consulting |
|
|
Paid-In |
|
|
Treasury |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Fees |
|
|
Capital |
|
|
Stock |
|
|
Stage |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
28,752 |
|
|
|
- |
|
|
|
- |
|
|
|
28,752 |
|
Fair
value of employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19,720 |
|
|
|
- |
|
|
|
- |
|
|
|
19,720 |
|
Fair
value of warrants issued in conjunction with debt
financing |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
25,000 |
|
|
|
- |
|
|
|
- |
|
|
|
25,000 |
|
Net
loss for the year ended December 31, 2008 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(931,338 |
) |
|
|
(931,338 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2008 |
|
|
73,440,506 |
|
|
|
73,440 |
|
|
|
- |
|
|
|
7,700,159 |
|
|
|
- |
|
|
|
(10,106,120 |
) |
|
|
(2,332,521 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,524 |
|
|
|
- |
|
|
|
- |
|
|
|
1,524 |
|
Fair
value of warrants issued in conjunction with debt
financing |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,450 |
|
|
|
- |
|
|
|
- |
|
|
|
15,450 |
|
Issuance of shares for
services |
|
|
7,200,000 |
|
|
|
7,200 |
|
|
|
- |
|
|
|
40,500 |
|
|
|
- |
|
|
|
- |
|
|
|
47,700 |
|
Shares issued for
conversion of notes payable |
|
|
48,750,000 |
|
|
|
48,750 |
|
|
|
- |
|
|
|
263,291 |
|
|
|
- |
|
|
|
- |
|
|
|
312,041 |
|
Net
loss for the year ended December 31, 2009 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(694,910 |
) |
|
|
(694,910 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2009 |
|
|
129,390,506 |
|
|
|
129,390 |
|
|
|
- |
|
|
|
8,020,924 |
|
|
|
- |
|
|
|
(10,801,030 |
) |
|
|
(2,650,716 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
364 |
|
|
|
- |
|
|
|
- |
|
|
|
364 |
|
Fair
value of warrants issued in conjunction with debt
financing |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,143 |
|
|
|
- |
|
|
|
- |
|
|
|
20,143 |
|
Issuance of shares for
services |
|
|
25,950,000 |
|
|
|
25,950 |
|
|
|
- |
|
|
|
182,650 |
|
|
|
- |
|
|
|
- |
|
|
|
208,600 |
|
Net
loss for the year ended December 31, 2010 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(721,841 |
) |
|
|
(721,841 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2010 |
|
|
155,340,506 |
|
|
|
155,340 |
|
|
|
- |
|
|
|
8,224,081 |
|
|
|
- |
|
|
|
(11,522,871 |
) |
|
|
(3,143,450 |
) |
The
accompanying notes are an integral part of these consolidated financial
statements.
LaserLock
Technologies, Inc. and Subsidiary
(A
Development Stage Enterprise)
Consolidated Statements of Changes in Stockholders Equity
(Deficit) (Continued)
For the
Period November 10, 1999 (Date of Inception) to December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Stock |
|
|
Deferred |
|
|
Additional |
|
|
|
|
|
During
the |
|
|
|
|
|
|
Number
of |
|
|
|
|
|
Consulting |
|
|
Paid-In |
|
|
Treasury |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Fees |
|
|
Capital |
|
|
Stock |
|
|
Stage |
|
|
Total |
|
Issuance of shares for
services |
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
- |
|
|
|
29,000 |
|
|
|
- |
|
|
|
- |
|
|
|
30,000 |
|
Contribution of common
stock from related parties |
|
|
(12,000,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
95,594 |
|
|
|
(95,594 |
) |
|
|
- |
|
|
|
- |
|
Purchase of common
stock for treasury |
|
|
(17,795,903 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(17,795 |
) |
|
|
- |
|
|
|
(17,795 |
) |
Sale
of common stock |
|
|
15,500,000 |
|
|
|
15,500 |
|
|
|
- |
|
|
|
384,500 |
|
|
|
- |
|
|
|
- |
|
|
|
400,000 |
|
Issuance of shares for
stock issuance costs |
|
|
2,100,000 |
|
|
|
2,100 |
|
|
|
- |
|
|
|
(2,100 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Stock
issuance costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(40,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
(40,000 |
) |
Exercise of
options |
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
- |
|
|
|
9,000 |
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
Fair
value of warrants issued in conjunction with debt
financing |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
21,275 |
|
|
|
- |
|
|
|
- |
|
|
|
21,275 |
|
Fair
value of employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
47,658 |
|
|
|
- |
|
|
|
- |
|
|
|
47,658 |
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
48,374 |
|
|
|
- |
|
|
|
- |
|
|
|
48,374 |
|
Net
loss for the year ended December 31, 2011 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(665,113 |
) |
|
|
(665,113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2011 |
|
|
145,144,603 |
|
|
|
174,940 |
|
|
|
- |
|
|
|
8,817,382 |
|
|
|
(113,389 |
) |
|
|
(12,187,984 |
) |
|
|
(3,309,051 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for
services |
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
- |
|
|
|
45,500 |
|
|
|
- |
|
|
|
- |
|
|
|
46,500 |
|
Issuance of shares of
common stock |
|
|
44,111,111 |
|
|
|
44,111 |
|
|
|
- |
|
|
|
1,015,889 |
|
|
|
- |
|
|
|
- |
|
|
|
1,060,000 |
|
Issuance of stock for
licensing |
|
|
2,222,222 |
|
|
|
2,222 |
|
|
|
- |
|
|
|
97,778 |
|
|
|
- |
|
|
|
- |
|
|
|
100,000 |
|
Issuance of stock for
trademarks, etc. |
|
|
2,222,222 |
|
|
|
2,222 |
|
|
|
- |
|
|
|
97,778 |
|
|
|
- |
|
|
|
- |
|
|
|
100,000 |
|
Shares issued for
conversion of notes payable and accrued interest |
|
|
12,923,622 |
|
|
|
12,925 |
|
|
|
- |
|
|
|
568,639 |
|
|
|
- |
|
|
|
- |
|
|
|
581,564 |
|
Exercise of
options |
|
|
10,490,996 |
|
|
|
10,491 |
|
|
|
- |
|
|
|
2,622 |
|
|
|
- |
|
|
|
- |
|
|
|
13,113 |
|
Exercise of
warrants |
|
|
333,333 |
|
|
|
333 |
|
|
|
- |
|
|
|
49,667 |
|
|
|
- |
|
|
|
- |
|
|
|
50,000 |
|
Fair
value of employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
332,036 |
|
|
|
- |
|
|
|
- |
|
|
|
332,036 |
|
Fair
value of non-employee stock options |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,638 |
|
|
|
- |
|
|
|
- |
|
|
|
11,638 |
|
Forgiveness of
debt-related party |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
349,000 |
|
|
|
- |
|
|
|
- |
|
|
|
349,000 |
|
Net
loss for the year ended December 31, 2012 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,199,057 |
) |
|
|
(1,199,057 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2012 |
|
|
218,448,109 |
|
|
$ |
248,244 |
|
|
$ |
- |
|
|
$ |
11,387,929 |
|
|
$ |
(113,389 |
) |
|
$ |
(13,387,041 |
) |
|
$ |
(1,864,257 |
) |
The
accompanying notes are an integral part of these consolidated financial
statements.
LaserLock Technologies, Inc.
and Subsidiary
(A
Development Stage Enterprise)
For the
Years Ended December 31, 2012 and 2011
And for
the Period November 10, 1999 (Date of Inception) to December 31,
2012
|
|
|
|
|
Year |
|
|
Year |
|
|
|
Cumulative |
|
|
Ended |
|
|
Ended |
|
|
|
Since |
|
|
December
31, |
|
|
December
31, |
|
|
|
Inception |
|
|
2012 |
|
|
2011 |
|
CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
(13,387,041 |
) |
|
|
(1,199,057 |
) |
|
|
(665,113 |
) |
Adjustments
to reconcile net loss to net cash used in operating
activities |
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of options issued in exchange for services |
|
|
2,417,232 |
|
|
|
343,674 |
|
|
|
96,032 |
|
Accretion
of interest on deferred finance charges |
|
|
453,625 |
|
|
|
13,625 |
|
|
|
27,149 |
|
Accretion
of discount on notes payable |
|
|
443,236 |
|
|
|
4,957 |
|
|
|
17,416 |
|
Salary
due to stockholder contributed to capital |
|
|
15,000 |
|
|
|
- |
|
|
|
- |
|
Amortization
and depreciation |
|
|
530,055 |
|
|
|
13,471 |
|
|
|
10,904 |
|
Gain
on disposition of assets |
|
|
(4,722 |
) |
|
|
- |
|
|
|
- |
|
Gain
on debt forgiveness |
|
|
(340,352 |
) |
|
|
(156,110 |
) |
|
|
(184,242 |
) |
Stock
issued in exchange for services |
|
|
553,760 |
|
|
|
46,500 |
|
|
|
30,000 |
|
Financing
expenses paid directly from stock proceeds |
|
|
5,270 |
|
|
|
- |
|
|
|
- |
|
Amortization
of deferred consulting fees |
|
|
40,800 |
|
|
|
- |
|
|
|
- |
|
(Increase)
decrease in assets |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(3,473 |
) |
|
|
(3,473 |
) |
|
|
10,193 |
|
Inventory |
|
|
19,980 |
|
|
|
15,157 |
|
|
|
(11,451 |
) |
Prepaid
expenses |
|
|
(350,000 |
) |
|
|
(232,240 |
) |
|
|
21,936 |
|
Increase
in liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
|
2,567,362 |
|
|
|
786,436 |
|
|
|
333,291 |
|
Net
cash used in operating activities |
|
$ |
(7,039,268 |
) |
|
$ |
(367,060 |
) |
|
$ |
(313,885 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment |
|
|
(38,109 |
) |
|
|
(2,360 |
) |
|
|
- |
|
Purchase
of intangibles |
|
|
(224,134 |
) |
|
|
(6,665 |
) |
|
|
(3,577 |
) |
Proceeds
from sale of assets |
|
|
6,738 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities |
|
|
(255,505 |
) |
|
|
(9,025 |
) |
|
|
(3,577 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock |
|
|
5,551,447 |
|
|
|
1,060,000 |
|
|
|
400,000 |
|
Proceeds
from exercise of stock options |
|
|
255,482 |
|
|
|
13,113 |
|
|
|
10,000 |
|
Proceeds
issuance of stock options |
|
|
15,000 |
|
|
|
- |
|
|
|
- |
|
Proceeds
from exercise of warrants |
|
|
105,500 |
|
|
|
50,000 |
|
|
|
- |
|
Proceeds
from issuance of warrants |
|
|
2,000,000 |
|
|
|
2,000,000 |
|
|
|
- |
|
Proceeds
from issuance of notes payable |
|
|
2,789,000 |
|
|
|
200,000 |
|
|
|
- |
|
Repayments
of notes payable |
|
|
(202,751 |
) |
|
|
(6,251 |
) |
|
|
(58,500 |
) |
Payment
for treasury stock |
|
|
(17,795 |
) |
|
|
- |
|
|
|
(17,795 |
) |
Debt
issuance costs |
|
|
(62,000 |
) |
|
|
- |
|
|
|
- |
|
Stock
issuance costs |
|
|
(144,760 |
) |
|
|
- |
|
|
|
(40,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities |
|
|
10,289,123 |
|
|
|
3,316,862 |
|
|
|
293,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN
CASH AND CASH EQUIVALENTS |
|
|
2,994,350 |
|
|
|
2,940,777 |
|
|
|
(23,757 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - BEGINNING OF PERIOD |
|
|
- |
|
|
|
53,573 |
|
|
|
77,330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - END OF PERIOD |
|
$ |
2,994,350 |
|
|
$ |
2,994,350 |
|
|
$ |
53,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
39,440 |
|
|
$ |
- |
|
|
$ |
6,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of shares of
common stock related to purchase price
adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock |
|
|
(1,000 |
) |
|
|
- |
|
|
|
- |
|
Additional
paid-in capital |
|
|
(353,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets |
|
$ |
(354,000 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock and stock options for acquisition of
subsidiary |
|
$ |
738,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from common stock sales applied directly to debt and financing
expenses repayment |
|
$ |
55,270 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of warrants issued for deferred finance charges |
|
$ |
392,376 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock
issued for conversion of notes payable and accrued
interest |
|
$ |
893,605 |
|
|
$ |
581,564 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock
issued for purchase of assets |
|
$ |
100,000 |
|
|
$ |
100,000 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants
issued for purchase of assets |
|
$ |
100,000 |
|
|
$ |
100,000 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock
issued for licensing costs |
|
$ |
100,000 |
|
|
$ |
100,000 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants
issued for licensing costs |
|
$ |
300,000 |
|
|
$ |
300,000 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of
beneficial conversion option |
|
$ |
400,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants
issued as debt discount |
|
$ |
78,043 |
|
|
$ |
- |
|
|
$ |
21,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common
stock for stock issuance costs |
|
$ |
2,100 |
|
|
$ |
- |
|
|
$ |
2,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of options as
stock cost for treasury stock |
|
$ |
5,594 |
|
|
$ |
- |
|
|
$ |
5,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness
of debt-related party treated as additional paid in capital |
|
$ |
349,000 |
|
|
$ |
349,000 |
|
|
$ |
- |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
Nature
of the Business
LaserLock Technologies, Inc.
and Subsidiary (the Company) is a development
stage enterprise incorporated in the state of Nevada on November 10, 1999. The
Company was established to address counterfeiting issues, initially with respect
to the gaming industry. Since inception, substantially all of the efforts of the
company have been developing technologies for the prevention of product and
document counterfeiting. The Company is in the development stage of raising
capital, financial planning, and establishing sources of supply. The Company
anticipates establishing markets for its technologies in North America, Europe
and Asia. The Company has more recently developed proprietary technologies that
could penetrate broader markets in a cost effective manner.
Principle
of Consolidation
The
accompanying consolidated financial statements include the accounts of LaserLock
Technologies, Inc. and its wholly-owned subsidiary, LL Security Products, Inc.
All inter-company transactions have been eliminated in
consolidation.
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these
estimates.
Comprehensive
Income
The
Company follows Financial Accounting Standards Board Accounting Standards
Codification (FASB ASC) 220 in reporting comprehensive
income. Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information that
historically has not been recognized in the calculation of net
income. Since the Company has no items of other comprehensive income
(loss), comprehensive income (loss) is equal to net income (loss).
Fair
Value of Financial Instruments
The
Companys financial instruments consist of cash, accounts receivable, accounts
payable and accrued expenses and notes payable. The carrying value of
cash, accounts receivable, accounts payable and accrued expenses approximate
their fair value because of their short maturities. The Company believes the
carrying amount of its notes payable and convertible debt approximates its fair
value based on rates and other terms currently available to the Company for
similar debt instruments.
Cash
and Cash Equivalents
For
purposes of reporting cash flows, the Company considers all cash accounts, which
are not subject to withdrawal restrictions or penalties, and certificates of
deposit and commercial paper with original maturities of 90 days or less to be
cash or cash equivalents.
Concentration
of Credit Risk Involving Cash and Cash Equivalents
The
Companys cash and cash equivalents are held at two financial institutions. At
times, the Companys deposits may exceed Federal Deposit Insurance Corporation
(FDIC) coverage limits. The Company has not experienced any losses
from maintaining cash accounts in excess of federally insured
limits.
Inventory
Inventory principally
consists of penlights and pigments and is stated at the lower of cost
(determined by the first-in, first-out method) or market.
NOTE 1 SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property
and Equipment
Property
and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, principally
five to seven years. Maintenance and repairs of property are charged to
operations, and major improvements are capitalized. Upon retirement, sale, or
other disposition of property and equipment, the costs and accumulated
depreciation are eliminated from the accounts, and any resulting gain or loss is
included in operations. Depreciation of property and equipment was $20 and $0
for the years ended December 31, 2012 and 2011.
Patents
and Trademark
The
Company has five issued patents for anti-counterfeiting technology and purchased
a trademark. Costs associated with the registration and legal defense of the
patents have been capitalized and are amortized on a straight-line basis over
the estimated lives of the patents which were determined to be 17
years.
Long-Lived
Assets
The
Company evaluates the recoverability of its long-lived assets in accordance with
ASC 360 Property, Plant, and Equipment. The Company reviews long-lived assets
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of long-lived
assets are measured by a comparison of the carrying amount of an asset to future
cash flows expected to be generated by the asset, undiscounted and without
interest or independent appraisals. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the asset exceeds the fair value of the assets.
Deferred
Financing Costs
Costs
incurred in securing long-term debt are deferred and amortized, as a charge to
interest expense, over the term of the related debt. In the case of long-term
debt modifications, the Company follows the guidance provided by ASC 470-50
Debt Modification and Extinguishments.
Convertible
Notes Payable
Convertible notes payable,
for which the embedded conversion feature does not qualify for derivative
treatment, are evaluated to determine if the effective or actual rate of
conversion per the terms of the convertible note agreement is below market
value. In these instances, the Company accounts for the value of the beneficial
conversion feature (BCF) as a debt discount, which is then accreted to interest
expense over the life of the related debt using the straight-line method which
approximates the effective interest method.
Revenue
Recognition
In
accordance with Securities and Exchange Commission (SEC) Staff Accounting
Bulletin (SAB) No. 104, Revenue Recognition (Codified in FASB ASC 605), the
Company recognizes revenue when (i) persuasive evidence of a customer or
distributor arrangement exists, (ii) a retailer, distributor or wholesaler
receives the goods and acceptance occurs, (iii) the price is fixed or
determinable, and (iv) collectability of the revenue is reasonably assured.
Subject to these criteria, the Company recognizes revenue from product sales,
consisting mainly of pigments and penlights, upon shipment to the customer.
Royalty revenue is recognized upon receipt of notification from a customer that
the Companys product has been used in the customers production
process.
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income
Taxes
The
Company follows FASB ASC 740 when accounting for income taxes, which requires an
asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed
annually for temporary differences between the financial statements and tax
bases of assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities. Tax years
from 2009 through 2012 remain subject to examination by major tax
jurisdictions.
Stock-based
Payments
The
Company accounts for stock-based compensation under the provisions of ASC
718, CompensationStock Compensation (ASC 718),
which requires the measurement and recognition of compensation expense for all
stock-based awards made to employees and directors based on estimated fair
values on the grant date. The Company estimates the fair value of stock-based
awards on the date of grant using the Black-Scholes model. The value
of the portion of the award that is ultimately expected to vest is recognized as
expense over the requisite service periods using the straight-line
method.
The
Company accounts for stock-based compensation awards to non-employees in
accordance with ASC 505-50, Equity-Based Payments to Non-Employees (ASC
505-50). Under ASC 505-50, the Company determines the fair value of the
warrants or stock-based compensation awards granted as either the fair value of
the consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable.
All
issuances of stock options or other equity instruments to non-employees as
consideration for goods or services received by the Company are accounted for
based on the fair value of the equity instruments issued. Any stock options
issued to non-employees are recorded as an expense and additional paid-in
capital in stockholders equity over the applicable service
periods.
Advertising
Costs
Advertising costs are
expensed as incurred. Advertising costs were approximately $0 and $2,686 for the
years ended December 31, 2012 and 2011, and are included in sales and marketing
expenses.
Research
and Development Costs
In
accordance with FASB ASC 730, research and development costs are expensed when
incurred.
Loss
Per Share
The Company
follows FASB ASC 260 when reporting Earnings Per Share resulting in the
presentation of basic and diluted earnings per share. Because the
Company reported a net loss for the years ended December 31, 2012 and 2011,
common stock equivalents, including convertible notes payable, stock options and
warrants were anti-dilutive; therefore, the amounts reported for basic and
dilutive loss per share were the same.
Segment
Information
The
Company is organized and operates as one operating segment wherein the Companys
patented technologies are utilized to address counterfeiting issues. In
accordance with ASC 280, Segment Reporting, the chief operating decision-maker
has been identified as the Chief Executive Officer, who reviews operating
results to make decisions about allocating resources and assessing performance
for the entire Company. Since the Company operates in one segment and
provides one group of similar products, all financial segment and product line
information required by ASC 280 can be found in the consolidated financial
statements.
NOTE 1 SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently
Adopted Accounting Pronouncements
In
January 2010, FASB issued ASU No. 2010-06, Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.
This update provides amendments to ASC Topic 820 that provide disclosures about
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measurements. Those disclosures are effective for fiscal
years beginning after December 15, 2010, and for interim periods within those
fiscal years. The Company adopted the disclosure requirements effective January
1, 2011. The adoption of this standard did not have a material impact on the
Companys consolidated statements of financial position or results of
operations.
In May
2011, the FASB issued ASU No. 2011-04, Fair Value
Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and IFRS. The amendments change the
wording used to describe the requirements in U.S. GAAP for measuring fair value
and for disclosing information about the fair value measurements. The amendments
include the following:
|
1. |
Those that clarify the
Boards intent about the application of existing fair value measurement
and disclosure requirements. |
|
2. |
Those that change a
particular principle or requirement for measuring fair value or for
disclosing information about fair value
measurements. |
The
amendments in this update are to be applied prospectively. For public entities,
the amendments are effective during interim and annual periods beginning after
December 15, 2011. Early application by public entities is not
permitted.
The
Company adopted the amendments effective January 1, 2012 and their adoption did
not have any impact on the Companys financial position or results of
operations.
Recently
Issued Accounting Pronouncements Not Yet Adopted
As of December 31, 2012, there are no recently issued accounting
standards not yet adopted which would have a material effect on the Company's
financial statements.
Reclassifications
Certain
reclassifications were made to current and long term accrued interest and
payroll expense as a separate line item in the 2011 financial statement in order
to conform to the 2012 financial statement presentation.
NOTE 2
PATENTS AND TRADEMARK
The
Company has five issued patents for anti-counterfeiting technology. Accordingly,
costs associated with the registration of these patents and legal defense have
been capitalized and are amortized on a straight-line basis over the estimated
lives of the patents (17 years). During the years ended December 31, 2012 and
2011, the Company capitalized patent costs of $6,665 and $3,577. Amortization
expense for patents was $13,451 and $10,904 for the years ended December 31,
2012 and 2011. Future estimated annual amortization over the next five years is
approximately $11,000 per year for the years ended December 31, 2013 through
2017. On December 31, 2012, the Company entered into an asset
purchase agreement describe in Note 7 to these financial
statements.
NOTE 3 INCOME
TAXES
The
Company follows FASB ASC 740-10-10 whereby an entity recognizes deferred tax
assets and liabilities for future tax consequences or events that have been
previously recognized in the Companys financial statements or tax returns. The
measurement of deferred tax assets and liabilities is based on provisions of
enacted tax law. The effects of future changes in tax laws or rates are not
anticipated.
NOTE 3
INCOME TAXES (Continued)
At
December 31, 2012 the Company has a net operating loss (NOL) that approximates
$8.3 million. Consequently, the Company may have NOL carryforwards available for
federal income tax purposes, which would begin to expire in 2019. Due to changes
in ownership, a portion of the NOL carryforward may be subject to certain annual
limitations imposed under Section 382 of the Internal Revenue Code. Deferred tax
assets would arise from the recognition of anticipated utilization of these net
operating losses to offset future taxable income.
The
income tax benefit (provision) consists of the following:
|
|
Year
Ended
December
31,
2012 |
|
|
Year
Ended
December
31,
2011 |
|
|
|
|
|
|
|
|
Current |
|
$ |
490,000 |
|
|
$ |
142,000 |
|
Deferred |
|
|
263,000 |
|
|
|
97,000 |
|
Change in valuation
allowance |
|
|
(753,000 |
) |
|
|
(239,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
- |
|
The
following is a reconciliation of the tax derived by applying the U.S. Federal
Statutory Rate of 35% to the earnings before income taxes and comparing that to
the recorded tax provisions:
|
|
2012 |
|
|
2011 |
|
|
|
Amount |
|
|
% |
|
|
Amount |
|
|
% |
|
U.S
federal income tax benefit at Federal statutory rate |
|
$ |
(298,000 |
) |
|
|
(35 |
) |
|
$ |
(226,000 |
) |
|
|
(34 |
) |
State
tax, net of federal tax effect |
|
|
(50,000 |
) |
|
|
(6 |
) |
|
|
(38,000 |
) |
|
|
(6 |
) |
Non
deductible accrued expenses |
|
|
(238,000 |
) |
|
|
(28 |
) |
|
|
- |
|
|
|
- |
|
Non
deductible share based compensation |
|
|
(167,000 |
) |
|
|
(20 |
) |
|
|
25,000 |
|
|
|
4 |
|
Change in valuation
allowance |
|
|
753,000 |
|
|
|
89 |
|
|
|
239,000 |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
The primary
components of the Companys December 31, 2012 and 2011 deferred tax assets,
liabilities and related valuation allowances are as follows:
|
|
December
31,
2012 |
|
|
December
31,
2011 |
|
|
|
|
|
|
|
|
Deferred tax asset for
NOL carryforwards |
|
$ |
3,308,000 |
|
|
$ |
2,354,000 |
|
Deferred tax liability
for intangibles |
|
|
(165,000 |
) |
|
|
(165,000 |
) |
Non
taxable income |
|
|
162,000 |
|
|
|
47,000 |
|
(Deductible) non
deductible accrued expenses |
|
|
386,000 |
|
|
|
702,000 |
|
Valuation
allowance |
|
|
(3,691,000 |
) |
|
|
(2,938,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
- |
|
Management has determined
that the realization of the net deferred tax asset is not assured and has
created a valuation allowance for the entire amount of such
benefits.
NOTE 3 INCOME TAXES
(Continued)
The
Company follows FASB ASC 740-10, which provides guidance for the recognition and
measurement of certain tax positions in an enterprises financial statements.
Recognition involves a determination whether it is more likely than not that a
tax position will be sustained upon examination with the presumption that the
tax position will be examined by the appropriate taxing authority having full
knowledge of all relevant information.
The
Companys policy is to record interest and penalties associated with
unrecognized tax benefits as additional income taxes in the consolidated
statement of operations. As of December 31, 2012 and 2011, the Company had no
unrecognized tax benefits. There were no changes in the Companys unrecognized
tax benefits during the years ended December 31, 2012 and 2011. The Company did
not recognize any interest or penalties during 2012 and 2011 related to
unrecognized tax benefits.
NOTE 4
- SENIOR SECURED CONVERTIBLE NOTES PAYABLE
In
February 2006, the Company commenced a private placement of up to $800,000
principal amount of 10% senior secured convertible promissory notes due twelve
months from the date of issue to certain Company shareholders and other
accredited investors. As of December 31, 2006, the Company completed this
private placement by selling all notes payable totaling $800,000. The notes are
secured by a first priority lien on all of the tangible and intangible personal
property of the Company. In May 2007, the due date of these notes was extended
to August 2008 and the interest rate increased to 12% per annum during the
extension period. In June 2011, the interest rate on all of the notes
was reset to 10% and $596,500 of the notes and accrued interest was extended
until September 15, 2015. During the fourth quarter of 2012 the
remaining $178,749 of unextended notes and the associated accrued interest were
extended to September 30, 2015. As of December 31, 2012 and 2011, the
outstanding principal balance on these notes was $775,249 and $781,500. Accrued
interest at December 31, 2012 and 2011 amounted to $600,091 and
$521,665.
Purchasers of the notes were
issued 8,000,000 10-year warrants exercisable into the Companys shares at an
exercise price of $0.01 per share. The warrants were valued at $392,376 and
recorded as a debt discount on the notes payable. The Company used the
Black-Scholes option pricing model to calculate the grant-date fair value of the
warrants, with the following assumptions: no dividend yield, expected volatility
of 169% and 284%, risk-free interest rate between 3.6% and 4.5% and expected
warrant life of ten years. The deferred finance charges were amortized over one
year, which was the original term of the notes. As of December 31, 2012, the
Company has received $70,000 for the exercise of 7,000,000 of the
warrants. The exercise of these options occurred prior to December
31, 2011.
In
addition, if an equity financing with total proceeds of more than $5,000,000
occurs while any notes are outstanding, holders of notes will have the right, at
their option, to convert the outstanding principal and interest of the notes
into shares at a discount of 30% of the price per share in the qualified
financing. Since the embedded conversion feature is contingent upon the
occurrence of the qualified financing, the value of the contingent conversion
feature, if beneficial, will be recognized when the triggering event occurs and
the contingency is resolved.
NOTE 5
- CONVERTIBLE NOTES PAYABLE
During
2007, the Company commenced a private placement of up to $400,000 principal
amount of 10% Convertible Promissory Notes originally due in August 2008 (the
Notes). The Company raised $375,000 under this private placement in 2007 and
the remaining $25,000 was raised in 2008. Previously $260,000 of the Notes were
converted into shares of the Companys common stock. Holders of Notes
will have the right, at their option, to convert the outstanding principal and
interest of the Notes into shares of the Companys Series A Preferred Stock at
any time and from time to time at the option of the holder at the initial
conversion price of $0.005333 per share. It is the intention, however, that the
option holder will convert the Notes into shares of the Companys common
stock. The Notes are unsecured.
NOTE 5
- CONVERTIBLE NOTES PAYABLE (Continued)
In
accordance with ASC 470, a beneficial
conversion feature of $375,000 and $25,000 was required to be recorded in 2007
and 2008, respectively, since the fair value of the Companys common stock at
the date of issuance ($0.016 per share) was greater than the conversion price of
$0.005333 per share. The value of the beneficial conversion feature was recorded
to additional paid-in capital with the offset to discount on notes payable. The
debt discount was accreted to interest expense over the one-year original term
of the notes.
In
August 2009, noteholders exercised their option to convert $260,000 of the notes
payable plus accrued interest into 48,750,000 shares of common stock. The
noteholder of the remaining $140,000 under this convertible note issue agreed to
extend the maturity date of these notes to September 30, 2015 at an interest
rate of 10% per annum. Additionally, the noteholder agreed in writing to suspend
its right to convert its note until such as the Companys authorized shares have
been increased. Remaining shares to be potentially issued under this convertible
note issue is 26,250,000.
As of
December 31, 2012 and 2011, the remaining principal balance on the notes is
$140,000. Accrued interest at December 31, 2012 and 2011 amounted to
$78,750 and $64,750.
NOTE 6 - NOTES
PAYABLE
Notes
payable consists of the following as of December 31:
|
|
December 31,
2012 |
|
|
December 31,
2011 |
|
|
|
|
|
|
|
|
Unsecured notes
payable; interest at 10% per annum; principal and accrued interest due at
maturity in September 2015 |
|
$ |
561,000 |
|
|
$ |
561,000 |
|
|
|
|
|
|
|
|
|
|
Series A notes
payable; interest at 8% per annum; principal and accrued interest due at
extended maturity date in September 2015 |
|
|
150,000 |
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
Series A notes
payable; interest at 8% per annum; principal and accrued interest due at
maturity in October 2011 (past due) |
|
|
50,000 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
Notes payable,
interest at 25% per annum; principal and interest due September
2013 |
|
|
150,000 |
|
|
|
400,000 |
|
|
|
|
|
|
|
|
|
|
Less:
Debt discount |
|
|
(13,632 |
) |
|
|
(18,589 |
) |
|
|
|
897,368 |
|
|
|
1,142,411 |
|
Less:
Current portion |
|
|
200,000 |
|
|
|
50,000 |
|
Long-term
portion |
|
$ |
697,368 |
|
|
$ |
1,092,411 |
|
NOTE 6 - NOTES PAYABLE
(Continued)
At December
31, 2012 and 2011 accrued interest on notes payable was $394,281 and
$362,806.
Unsecured
Notes Payable
During
the second quarter of 2012, the Company received $200,000 for a 10% unsecured
note payable, due April 27, 2013. In December 2012, this note payable
and accrued interest of $9,167 was converted into 4,703,711 shares of the
Companys common stock.
Private
Placement of 8% Series A Notes Payable
In
August 2009, the Company commenced a private placement of up to $300,000
consisting of up to 6 units. Each unit consists of a $50,000, 8% Series A Note
Payable, due September 30, 2011, and a non-detachable warrant to purchase 2
million shares of the Companys common stock. During 2009, the Company sold 4
units, issued $200,000 of 8% Series A Notes Payable, issued 8 million warrants,
and raised $180,000, net of commission of $20,000. In January 2010, the Company
sold .5 units, issued $25,000 of 8% Series A Notes Payable, issued 1 million
warrants, and raised $17,500 net of commissions of $7,500. The commissions were
treated as deferred finance charges and are expensed over the term of notes
payable. For the years ended December 31, 2012 and 2011, amortization of
deferred finance charges was $0 and $10,650.
The 8
million warrants in 2009 were valued at $15,450, fair value, using the
Black-Scholes option pricing model to calculate the fair-value of the warrants,
with the following assumptions: no dividend yield, expected volatility of
between 30.9% and 34.5%, risk free interest rate between .95% and 1.06% and
warrant life of approximately 2 years. The 1 million warrants in 2010 were
valued at $20,143, fair value, using the Black-Scholes option pricing model to
calculate the fair-value of the warrants, with the following assumptions: no
dividend yield, expected volatility of 28.6 %, risk free interest rate of .84%
and warrant life of approximately 2 years.
In June
2011, the maturity date on the $150,000 of the 8% Series A Notes Payable and the
term on the associated 6 million warrants were extended to September 30, 2015.
As a result, the warrants were revalued using the Black-Scholes option pricing
model to calculate the incremental fair-value of the warrants of $21,275, with
the following assumptions: no dividend yield, expected volatility of 60%, risk
free interest rate of 1.52% and warrant life of approximately 1.25 years. As
part of the debt extension, the lender holding the 6 million warrants agreed in
writing to suspend its right to exercise these warrants until such time that the
Companys authorized shares have been increased. The authorized
shares of the Companys common stock were increased on November 12, 2012 from
175,000,000 to 425,000,000.
The
relative fair value of the warrants issued in conjunction with the 8% Series A
Notes Payable have been treated as a debt discount with an offsetting credit to
additional paid-in capital. The debt discount related to the warrant issuances
is being accreted to interest expense over the term of the notes. When the
warrants were revalued the incremental amount of $21,275 was also treated as
additional debt discount and is being accreted over the new term of the 8%
Series A Notes Payable. As of December 31, 2012 and 2011, the
unaccreted debt discount related to warrants issued in conjunction with the 8%
Series A Notes payable was $13,632 and $18,589. As of the year ended December
31, 2012 and 2011, accreted interest expense from the accretion of the debt
discount was $4,957 and $17,415.
During
the third quarter of 2011, $25,000 plus accrued interest of the 8% Series A
Notes Payable were repaid and 3 million of the associated warrants expired
unexercised.
NOTE 6 - NOTES PAYABLE
(Continued)
Private
Placement of 25% Notes Payable
In 2010,
the Company issued $400,000 in notes payable in order to finance a patent
infringement lawsuit (see Note 11 - Contingencies to these condensed
consolidated financial statements). The notes payable accrue interest at 25% per
annum and mature upon the earlier of September 1, 2013 or the date on which the
Company receives net proceeds from the patent infringement claim. In addition to
the base interest of 25% per annum, the lenders are entitled to bonus interest
equal to the following:
|
a. |
First monies realized
by the Company from its share of the net proceeds of the lawsuit shall be
allocated and paid to the lender until the principal and base interest
accruing has been fully paid. |
|
b. |
The next monies from
the net proceeds of the litigation settlement will be paid to the Company
to reimburse for out-of-pocket legal costs related to the
lawsuit. |
|
c. |
The next $825,000 of
proceeds will be split 50%/50% between the Company and the
lenders. |
|
d. |
The next $1 million
realized by the Company shall be allocated 90% to the Company and 10% to
the lenders. |
|
e. |
The next $1 million
realized by Company shall be allocated 85% to Company and 15% to
lenders. |
|
f. |
All remaining proceeds
realized by Company shall be allocated 80% to Company and 20% to
lenders. |
The
lenders have a security interest in the Companys patent
infringement claim in which the lender has the right to the net proceeds of this
lawsuit to satisfy outstanding principal and interest under the
notes.
As part
of the private placement of the 25% notes payable, the Company incurred debt
placement fees of $34,500 in 2010. These debt placement fees have been treated
as deferred finance charges and are being amortized to interest expense over two
years. For the years ended December 31, 2012 and 2011 amortization of
deferred finance charges was $13,625 and $17,250.
In
December 2012, $250,000 of these notes payable and accrued interest of $122,397
were converted into 8,219,911 shares of the Companys common stock.
Aggregate
Maturities of Long-term Debt
Aggregate maturities of the
senior secured convertible notes, convertible notes and notes payable over the
next five years are as follows:
2013 $ 200,000
2014 -
2015 1,626,249
2016 -
2017
-
NOTE 7 MAJOR
AGREEMENTS
Investment
Agreement
The Company entered into an
Investment Agreement with VerifyMe, Inc, (VerifyMe) on December 31, 2012 (the
Investment Agreement). Under the terms of the Investment Agreement,
VerifyMe purchased 22,222,222 shares of the Companys common stock as
well as a warrant to purchase 22,222,222 shares of the Companys common stock
for $1 million. In addition a Subscription Agreement (discussed
below) was to be entered into on or before January 31,
2013.
Registration Rights
Agreement
In connection with the
Investment Agreement, the Company entered into a Registration Rights Agreement
with VerifyMe (the Registration Rights
Agreement), pursuant to
which VerifyMe can demand at any time on or after four months after
December 31, 2012, that the Company file a registration statement relative to
shares owned by VerifyMe. If the Company has not filed the demand
registration statement by the later of (i) two (2) months after the date of the
request of demand registration and (ii) six (6) months after the date of
the Registration Rights Agreement (such date, the Filing Date), then, (i)
the Company shall not issue any (A) capital stock, (B) evidences of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for capital stock (Convertible Securities), or (C) rights,
options or warrants to subscribe for, purchase or otherwise acquire capital
stock or Convertible Securities to anyone other than the stockholder until it
files the demand registration statement, (ii) beginning on the day following the
Filing Date, the applicable exercise price shall be reduced by $0.01, (iii)
until the Company has filed the registration statement with the SEC, on each
subsequent one (1) month anniversary of the filing date, the applicable exercise price
shall be reduced by $0.01, and (iv) all common stock held by the stockholder and
all common stock held by the Company to be granted by the Company in respect of
the exercise of the warrants, shall automatically convert into a class of
preferred stock of the Company, established by the Company on terms acceptable
to the stockholder, which such class of preferred stock shall have voting rights
representing 51% of the aggregate voting power of the Company.
Technology and Service
Agreement
In connection with the
Investment Agreement, the Company entered into a Technology and Service
Agreement with VerifyMe (the Technology and Service Agreement ), pursuant
to which VerifyMe purchased warrants of the Company to purchase 22,222,222
shares of the Companys common stock for $1 million. Additionally,
the Company executed a services agreement with Zaah Technologies, Inc.
(Zaah) concurrently with this agreement (the Zaah Technology and Service
Agreement). The Company is to use up to $550,000 of the
proceeds from the Technology and Service Agreement for the purpose of
the Companys hiring (i) a full-time Chief Technology Officer or Chief
Information Officer and (ii) two full-time business
developers.
Technology and Service
Agreement with Zaah
Under the Zaah
Technology and Service Agreement, Zaah will provide the Company (a)
twelve (12) months of technical support, (b) up to twelve (12) days of meetings
annually between the respective management teams of the Company and Zaah, (c)
updates to technology as agreed in writing between the Company and Zaah, and (d)
twelve (12) months of technical hosting.
The Company is required to
pay Zaah the following:
(a) |
$450,000 on the date
of the agreement (December 31, 2012), consisting of $250,000 in cash and
warrants to purchase 4,444,444 shares of Common Stock under a cashless
exercise initially at an exercise price of $0.045 on the terms set forth
under the warrants issued by the Company to Zaah under the warrant,
dated as of December 31, 2012. The $450,000 is reflected as prepaid
expenses on the December 31, 2012 balance
sheet. |
NOTE 7 MAJOR
AGREEMENTS (Continued)
(b) |
$100,000, accrued in
full as of the date of this Agreement, and reflected as prepaid expenses
on the December 31, 2012 balance sheet, but payable in twelve (12)
months from the date hereof to a designee of Zaahs selection,
with a right to convert (at Zaahs sole
discretion, from time to time at any time) to shares of common stock at
the prevailing market price per share of common stock (which, as long as
the common stock is listed, shall be the closing price on the last trading
day prior to such issuance or sale of the common stock as traded on a
national securities exchange, the NASDAQ Global Market, the NASDAQ Capital
Market, or another nationally recognized trading system (including Pink
OTC Markets, Inc.)); and |
(c) |
a commission of 10% of
the revenue generated by any Company transaction originated through the
efforts of Zaah, as substantiated by a written agreement between the
Company and Zaah, specifically referencing the transaction in
which Zaah is entitled to such commission, payable by the Company
to Zaah in cash. Such payment shall be made on the earlier of (i) the
date of the signing of such transaction, (ii) the date of the closing of
the transaction, or (iii) any date on which any funds are paid to the
Company in respect of such
transaction. |
Patent and Technology
License Agreement
In connection with the
Investment Agreement, the Company entered into a Patent and Technology License
Agreement with VerifyMe, pursuant to which VerifyMe granted the Company
exclusive and non-exclusive licenses relative to a specific list of patents in
return for the following:
(a) |
Payment 1, payable
upon execution of the Agreement on December 31, 2012: The sum of One
Hundred Thousand Dollars ($100,000), to be paid by issuing (i) a number of
shares of Common Stock, par value $.001 per shares (Shares), of the
Company equal to (x) $100,000 divided by (y) $0.045 (2,222,222 shares) and
(ii) cashless exercise warrants to purchase an equal number of Shares
exercisable at a price of Ten Cents ($0.10) per Share with a term of five
(5) years. The fair value of the shares of common stock ($100,000) and the
fair value of the cashless exercise warrants ($100,000) are reflected as
prepaid expenses on the December 31, 2012 balance
sheet. |
(b) |
Payment 2, payable on
January 1, 2014: The sum of Four Hundred Thousand Dollars ($400,000), to
be paid by issuing (i) a number of Shares equal to (x) $400,000 divided by
(y) a price which equals a 10% discount to market and (ii) cashless
exercise warrants to purchase an equal number of Shares exercisable at a
price of Ten Cents ($0.10) per Share with a term of five (5)
years. |
(c) |
Payment 3, payable on
January 1, 2015: The sum of Four Million Five Hundred Thousand Dollars
($4,500,000), to be paid by issuing (i) a number of Shares equal to (x)
$4,500,000 divided by (y) a price which equals a 10% discount to market
and (ii) cashless exercise warrants to purchase an equal number of Shares
exercisable at a price of Ten Cents ($0.10) per Share with a term of five
(5) years. |
(d) |
Future Payments
Contingent: the Companys payment of Payment 2 and Payment 3 is
contingent. To the extent that VerifyMe does not develop and license
to the Company, at a time subsequent to Payment 1, further technology
and/or a further patent right related to the local, mobile and cloud based
biometric security systems, then any payments not already paid, will not
longer by due to VerifyMe, this nonperformance being a likelihood,
more likely than not. |
NOTE 7 MAJOR
AGREEMENTS (Continued)
Asset Purchase
Agreement
In connection with the
Investment Agreement, the Company entered into an Asset Purchase Agreement with
VerifyMe, pursuant to which the Company purchased trademark rights, software and
a domain name at a purchase price of $100,000 to be paid by issuing shares equal
to $100,000/0.045 (2,222,222 shares) and cashless exercise warrants to purchase
an equal number of shares at an exercise price of ten cents per share with a
term of five years.
The warrants associated with
the above agreements are subject to anti-dilution reset adjustments outlined in
the agreements. In accordance with ASC 815, the warrants were classified as a
liability in the total amount of $2.4 million at December 31, 2012. In addition,
the warrants must be valued every reporting period with the increase/decrease
being adjusted through earnings.
Subscription
Agreement
VerifyMe subscribed to
purchase 33,333,333 shares of the Companys preferred stock and a warrant to
purchase 33,333,333 shares of the Companys common stock for $1 million at an
exercise price of $0.12. This agreement was executed on January 31,
2013.
NOTE 8
STOCKHOLDERS EQUITY
On
February 17, 2011, the Company issued 1 million shares of the Companys common
stock, valued at $30,000 to a consultant.
On April 7, 2011, a board
member returned 2 million shares of the Companys common stock, valued at
$15,000 to the treasury.
On April 7, 2011, the
President of the Company returned 10 million shares of the Companys common
stock, valued at $75,000 to the treasury.
On April 28, 2011, the
Company purchased 17,795,903 shares of the Companys outstanding common stock
for $17,796 and placed them in the treasury.
On May 25, 2011, the Company
sold 15.5 million shares of the Companys stock to an investor for
$400,000.
On May 25, 2011, the Company
issued 2.1 million shares of the Companys common stock, valued at $2,100 to a
consultant for raising the $400,000 associated with the sale of the 15.5 million
shares.
On June 24, 2011, an
investor exercised a warrant to purchase 1 million shares of the Companys
common stock, that raised $10,000 for the Company.
In October, 2012, the
Company commenced private placements consisting of shares of the Companys
common stock and warrants to purchase shares of the Companys common stock at an
exercise price of $0.10 per share. The shares and warrants were sold
in units with each unit comprised of one share and one warrant at a purchase
price of $.045 per unit. As of December 31, 2012, the Company sold
6,888,889 units that raised $310,000 for the Company.
In October, 2012, the
Company commenced private placements consisting of shares of the Companys
common stock and warrants to purchase shares of the Companys common stock at an
exercise price of $0.10 per share. The shares and warrants were sold
in units with each unit comprised of one share and one warrant at a purchase
price of $.05 per unit. As of December 31, 2012, the Company sold 15
million units that raised $750,000 for the Company.
NOTE 8 STOCKHOLDERS
EQUITY (Continued)
On
November 13, 2012, an employee and consultant exercised options to purchase in
the aggregate 10,490,996 shares of the Companys common stock at an exercise
price of $.00125 per share that raised $13,114 for the Company.
On November
21, 2012, the Company issued 1 million shares of the Companys common stock,
valued at $46,500 to a board member for services to the Company.
On
December 5, 2012, the Company issued 12,923,622 shares of the Companys common
stock, valued at $581,564 for the retirement of two notes payable totaling
$450,000 and accrued interest of $131,564.
On
December 20, 2012, an investor exercised warrants to purchase 333,333 shares of
the Companys common stock at $0.15 per share, that raised $50,000 for the
Company.
NOTE 9 STOCK OPTIONS
AND WARRANTS
During
1999, the Board of Directors (Board) of the Company adopted, with the approval
of the stockholders, a Stock Option Plan. In 2000, the Board superseded that
plan and created a new Stock Option Plan, pursuant to which it is authorized to
grant options to purchase up to 1.5 million shares of common stock. On December
17, 2003, the Board, with approval of the stockholders, superseded this plan and
created the 2003 Stock Option Plan (the Plan). Under the Plan the Company is
authorized to grant options to purchase up to 18,000,000 shares of common stock
to the Companys employees, officers, directors, consultants, and other agents
and advisors. The Plan is intended to permit stock options granted to employees
under the Plan to qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended (Incentive Stock Options). All
options granted under the Plan, which are not intended to qualify as Incentive
Stock Options, are deemed to be non-qualified options (Non-Statutory Stock
Options). As of December 31, 2012, there are 13,590,996 options that have been
issued and exercised, 3,335,000 options that have been issued and are
unexercised, and 1,074,004 options that are available to be issued under the
Plan.
The Plan
is administered by a committee of the Board of Directors (Stock Option
Committee) which determines the persons to whom awards will be granted, the
number of awards to be granted and the specific terms of each grant, including
the vesting thereof, subject to the provisions of the plan.
In
connection with Incentive Stock Options, the exercise price of each option may
not be less than 100% of the fair market value of the common stock on the date
of the grant (or 110% of the fair market value in the case of a grantee holding
more than 10% of the outstanding stock of the Company). The aggregate fair
market value (determined at the time of the grant) of stock for which an
employee may exercise Incentive Stock Options under all plans of the company
shall not exceed $1,000,000 per calendar year. If any employee shall have the
right to exercise any options in excess of $100,000 during
any calendar year, the options in excess of $100,000 shall be deemed to be
Non-Statutory Stock Options, including prices, duration, transferability and
limitations on exercise.
The
Company issued non-statutory stock options pursuant to contractual agreements to
non-employees. Options granted under the agreements are expensed when the
related service or product is provided.
On May
9, 2011, an option holder agreed to return an option to purchase 3,056,662
shares of the Companys common stock at an exercise price of $.03 and an option
to purchase 2.8 million shares of the Companys common stock at an exercise
price of $.01, to the Company. On the same day, the Company agreed to issue to
the option holder an option to purchase 5,000,996 shares of the Companys common
stock at an exercise price of $.00125, with a term of ten years. The fair value
of the option issued was $37,186 and was expensed immediately.
NOTE 9 STOCK OPTIONS
AND WARRANTS (Continued)
On May
9, 2011, a board member agreed to return an option to purchase 250,000 shares of
the Companys common stock at an exercise price of $.03 and an option to
purchase 750,000 shares of the Companys common stock at an exercise price of
$.01, to the Company. On the same day, the Company agreed to issue to the board
member an option to purchase 900,000 shares of the Companys common stock at an
exercise price of $.00125, with a term of ten years. The fair value of option
issued was $6,712 and was expensed immediately.
On May
9, 2011, the President of the Company agreed to return an option to purchase 2.5
million shares of the Companys common stock at exercise prices of $.03 and an
option to purchase 3.6 million shares of the Companys common stock at an
exercise price of $.01, to the Company. On the same day, the Company agreed to
issue to the President of the Company an option to purchase 5,490,000 shares of
the Companys common stock at an exercise price of $.00125, with a term of ten
years. The fair value of the option issued was $40,946 and was expensed
immediately.
On May
9, 2011, the Company issued an option to purchase 750,000 shares of the
Companys common stock at an exercise price of $.00125, with a term of ten
years, to a consultant in conjunction with his efforts to acquire the 17,795,903
treasury shares. The fair value of the option issued was $5,594 and was expensed
immediately.
All of
the options issued on May 9, 2011 were valued using the Black-Scholes option
pricing model to calculate the grant-date fair value of the options, with the
following assumptions: no dividend yield, expected volatility of 150%, risk-free
interest rate of 3.7% and expected option life of ten years.
On July
16, 2012, the Company issued an option to purchase 200,000 shares of the
Companys common stock at an exercise price of $.05, with a term of ten years,
to a consultant. The fair value of options issued was $11,638. The Company used
the Black-Scholes option pricing model to calculate the grant-date fair value of
the warrants, with the following assumptions: no dividend yield, expected
volatility of 133%, risk-free interest rate of 1.5% and expected option life of
ten years. These options granted were fully vested as of the date of the
agreement. As a result, the Company recorded $11,638 of consulting expense for
the year ended December 31, 2012.
On
November 21, 2012, the Company issued options to purchase an aggregate of 2
million shares of the Companys common stock at an exercise price of $.05, with
a term of ten years, to the Chief Executive Officer and the Chief Operating
Officer. The fair value of options issued was $89,538 and was expensed
immediately.
On
November 21, 2012, the Company issued options to purchase an aggregate of 10
million shares of the Companys common stock at an exercise price of $.05, with
a term of ten years, to the five members of the Board of Directors. The fair
value of options issued was $447,689 of which $223,844 was expensed immediately
and the remainder will be expensed over one year with one month expense of
$18,564 being expensed in 2012.
All of
the options issued on November 21, 2012 were valued using the Black-Scholes
option pricing model to calculate the grant-date fair value of the options, with
the following assumptions: no dividend yield, expected volatility of 131%,
risk-free interest rate of 1.7% and expected option life of ten
years.
NOTE 9 STOCK OPTIONS
AND WARRANTS (Continued)
The
following tables summarize non-employee stock option/warrant activity of the
Company since December 31, 2010:
|
|
Option/Warrant
Shares |
|
|
Exercise
Price |
|
|
Weighted
Average
Exercise
Price |
|
Outstanding, December
31, 2010 |
|
|
19,856,662 |
|
|
|
$0.01 to
$0.20 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
7,235,996 |
|
|
|
0.00125 |
|
|
|
- |
|
Exercised |
|
|
(1,000,000 |
) |
|
|
0.01 |
|
|
|
- |
|
Expired/Returned |
|
|
(10,506,662 |
) |
|
0.01
to 0.03 |
|
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December
31, 2011 |
|
|
15,585,996 |
|
|
|
$0.00125 to
$0.20 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
72,422,221 |
|
|
0.05
to 0.10 |
|
|
|
0.08 |
|
Transferred to
employee options |
|
|
(200,000 |
) |
|
|
(0.05 |
) |
|
|
- |
|
Exercised |
|
|
(5,000,996 |
) |
|
|
0.00125 |
|
|
|
- |
|
Expired |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December
31, 2012 |
|
|
82,807,221 |
|
|
|
$.00125 to
$.20 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December
31, 2012 |
|
|
82,807,221 |
|
|
|
$.00125 to
$.20 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Remaining Life, Exercisable, December 31, 2012 (years) |
|
|
6.4 |
|
|
|
|
|
|
|
|
|
NOTE 9 STOCK OPTIONS
AND WARRANTS (Continued)
A
summary of incentive stock option transactions for employees since December 31,
2010 is as follows:
|
|
Option/Warrant
Shares |
|
|
Exercise
Price |
|
|
Weighted
Average
Exercise
Price |
|
Outstanding, December
31, 2010 |
|
|
7,100,000 |
|
|
|
$.01 to $.28 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
6,390,000 |
|
|
|
$0.00125 |
|
|
$ |
0.00125 |
|
Exercised |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Expired/Returned |
|
|
(7,100,000 |
) |
|
|
$.01
- $.03 |
|
|
|
(0.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December
31, 2011 |
|
|
6,390,000 |
|
|
|
$0.00125 |
|
|
$ |
0.00125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
15,000,000 |
|
|
|
0.05 - 0.15 |
|
|
|
0.06 |
|
Transferred from
non-employee options |
|
|
200,000 |
|
|
|
0.05 |
|
|
|
- |
|
Exercised |
|
|
(5,823,333 |
) |
|
|
0.00125 -
0.15 |
|
|
|
- |
|
Expired/Returned |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December
31, 2012 |
|
|
15,766,667 |
|
|
|
$0.00125 to
$0.10 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December
31, 2012 |
|
|
10,766,667 |
|
|
|
$0.00125 to
$0.10 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Remaining Life, Exercisable, December 31, 2012 (years) |
|
|
9.8 |
|
|
|
|
|
|
|
|
|
NOTE 10 RELATED
PARTY TRANSACTIONS
At
December 31, 2012 and 2011, six and five shareholders of the Company
held $732,249 and $577,500 of the senior secured convertible notes
payable.
One
shareholder held $140,000 of convertible notes payable as of December 31, 2012
and 2011.
At
December 31, 2012 and 2011 three shareholders of the Company held $711,000 of
unsecured notes payable.
The
Company maintains its office at the home of its Chief Executive Officer. No
formal lease agreement exists and no direct rent expense has been incurred.
However, related occupancy costs of $32,414 and $13,220 were incurred during the
years ended December 31, 2012 and 2011.
At
December 31, 2011, accrued and unpaid salary for the Chief Executive Officer was
$208,514. As of December 31, 2012, the Chief Executive Officer has
forgiven $349,000 of unpaid accrued salary, which was treated as
additional paid in capital.
NOTE 11 MAJOR
CUSTOMERS
During
the years ended 2012 and 2011, the Company earned a substantial portion of its
revenue from two customers. During the years ended December 31, 2012 and 2011,
revenue from those customers aggregated $15,289 and $7,984. At December 31, 2012
and 2011, amounts due from those customers included in trade accounts receivable
were $3,473 and $0.
NOTE 12
CONTINGENCIES
In October 2010, the Company filed suit in
the Western District of Pennsylvania against WS Packaging Group, Inc. (WS)
alleging that WS infringed on one of the Companys patents in the manufacture of
MONOPOLY game pieces on behalf of McDonalds Corp. On June 4, 2012, both WS and
the Company filed a stipulation to dismiss the action without prejudice and
enter into settlement negotiations. Settlement negotiations are ongoing.
NOTE 13 SUBSEQUENT
EVENTS
The
Company received $185,000 from the sales of 3,700,000 units from private
placements consisting of shares of the Companys common stock and warrants to
purchase shares of the Companys common stock at an exercise price of $0.10 per
share. The shares and warrants were sold in units with each unit
comprised of one share and one warrant at a purchase price of $.05 per
unit.
In
January 2012, the Company commenced private placements consisting of shares
of the Companys common stock and warrants to purchase shares of the Companys
common stock at an exercise price of $0.12 per share. The shares and
warrants were sold in units with each unit comprised of one share and one
warrant at a purchase price of $.045 per unit. The company sold
1,111,111 units and raised $50,000 as of the date of this report.
On
January 31, 2013, the Company sold 33,333,333 shares of the Companys preferred
A stock and issued a warrant to purchase 33,333,333 shares of the Companys
common stock at an exercise price of $0.12 per share and having a term of 5
years, beginning July 31, 2013, pursuant to a Subscription
Agreement. The Subscription Agreement raised $1 million (Note
7).
Effective October 8, 2012,
the Company entered into a three year agreement with the Vice Chairman of the
Board and Chief Executive Officer of the Company, with an annual
compensation of $200,000 per year. In addition, upon execution of the agreement
the Company has agreed to issue options to the Vice Chairman to purchase 5% of
the shares of the Companys common stock at an exercise price of $.05 per share,
subsequent to the Company receiving funding of $2.5 million. The
Company has raised the $2.5 million in funding, but has not issued the options
as of the date of this report.
Effective October 16, 2012,
the Company entered into a three year agreement with the President and Chief
Operating Officer of the Company with an annual compensation of $200,000 per
year. In addition, upon execution of the agreement the Company has agreed to
issue options to the President to purchase 5% of the shares of the Companys
common stock at an exercise price of $.05 per share, subsequent to the Company
receiving funding of $2.5 million. The Company has raised the $2.5
million in funding, but has not issued the options as of the date of this
report.
During
February and March 2013, three option holders and one warrant holder exercised
options to purchase 2,435,000 shares of the Companys common stock and a warrant
to purchase 1 million shares of the Companys common stock. These
exercises raised $26.794.
In
February 2013, a former board member exercised an option to purchase 900,000
shares of the Companys common stock. This exercise raised
$1,125.
In March
2013, the Company agreed to convert the Notes payable bearing interest at 25%
per annum and due September 2013, plus the accrued interest thereon of $83,896
into 3 million shares of the Companys common stock and a cash payment of
$13,896.
In March
2013, the Board of Directors authorized an additional 250 million shares of
common stock, with a par value of $.001, which is retroactively reflected on the
Balance Sheet.
In March
2013, the Company issued options to purchase 2 million shares of the Companys
common stock at an exercise price of $.05, with a term of ten years, to a new
member of the Board of Directors.
NOTE
14 RESTATEMENT
The 2012
consolidated financial statements were restated to properly reflect the warrants
issued in the December 31, 2012 major agreements (Note 7) as liabilities in
accordance with FASB ASC 815-40, instead of the original equity classification.
The warrants issued in the December 31, 2012 major agreements contain a reset
provision which requires the Company to reduce the exercise price of the
warrants, if the Company issues additional shares of common stock, as defined in
the warrant agreement, at a price lower than the exercise price of the warrants
in effect at that time. The warrant expires in five years, at which time the
warrant liability would be reclassified into equity.
The
restatement did not change any line items in the consolidated statements of
operations and had no effect on the net loss or the loss per share for the year
ended December 31, 2012 and no effect on the net loss for the period from
November 10, 1999 (date of inception) to December 31, 2012.
The
effect of the restatement on the consolidated financial statements as of
December 31, 2012 and for the year ended December 31, 2012 and for the period
from November 10, 1999 (date of inception) to December 31, 2012 is set forth
below.
|
|
December 31,
2012 |
|
|
|
As
Previously |
|
|
|
|
|
|
|
Consolidated Balance
Sheet |
|
Reported |
|
|
Correction |
|
|
As
Restated |
|
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities |
|
|
|
|
|
|
|
|
|
Warrant
liability |
|
$ |
- |
|
|
$ |
2,400,000 |
|
|
$ |
2,400,000 |
|
Total
long-term liabilities |
|
|
2,588,176 |
|
|
|
2,400,000 |
|
|
|
4,988,176 |
|
Stockholders'
deficit |
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid in
capital |
|
|
13,787,929 |
|
|
|
(2,400,000 |
) |
|
|
11,387,929 |
|
Total
stockholders' equity (deficit) |
|
|
535,743 |
|
|
|
(2,400,000 |
) |
|
|
(1,864,257 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity (deficit) |
|
$ |
4,081,975 |
|
|
$ |
- |
|
|
$ |
4,081,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the year ended December 31, 2012 |
|
|
|
As
Previously |
|
|
|
|
|
|
|
|
|
Consolidated Statement
of Cash Flows |
|
Reported |
|
|
Correction |
|
|
As
Restated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance
of common stock |
|
$ |
2,060,000 |
|
|
$ |
(1,000,000 |
) |
|
$ |
1,060,000 |
|
Proceeds from issuance
of warrants |
|
|
1,000,000 |
|
|
|
1,000,000 |
|
|
|
2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities |
|
$ |
3,316,862 |
|
|
$ |
- |
|
|
$ |
3,316,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Since
Inception |
|
|
|
As
Previously |
|
|
|
|
|
|
|
|
|
Consolidated Statement
of Cash Flows |
|
Reported |
|
|
Correction |
|
|
As
Restated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance
of common stock |
|
$ |
6,551,447 |
|
|
$ |
(1,000,000 |
) |
|
$ |
5,551,447 |
|
Proceeds from issuance
of warrants |
|
|
1,000,000 |
|
|
|
1,000,000 |
|
|
|
2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities |
|
$ |
10,289,123 |
|
|
$ |
- |
|
|
$ |
10,289,123 |
|
LaserLock
Technologies, Inc.
44,444,444 Shares of Common Stock
Warrants
to Purchase up to 87,777,777 Shares of Common Stock
87,777,777 Shares of Common Stock Underlying Warrants
August 5,
2013
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
The
following table sets forth the various expenses to be incurred in connection
with the registration of the securities being registered hereby, all of which
will be borne by the registrant.
Accounting,
legal and professional fees and expenses |
40,000 |
Transfer
agent and miscellaneous expenses |
5,000 |
EDGAR
filing fees |
3,065.97 |
Total
expenses |
48,065.97 |
* To be filed by amendment.
Item
14. Indemnification of Directors and Officers.
Our
Articles of Incorporation, as amended, and bylaws provide that we shall
indemnify our officers or directors against expenses incurred in connection with
the defense of any action in which they are made parties by reason of being our
officers or directors, except in relation to matters as which such director or
officer shall be adjudged in such action to be liable for negligence or
misconduct in the performance of her duty. One of our officers or directors
could take the position that this duty on our behalf to indemnify the director
or officer may include the duty to indemnify the officer or director for the
violation of securities laws.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to our directors, officers and controlling persons
pursuant to our Certificate of Formation, bylaws, Nevada laws or otherwise, we
have been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by one of our directors, officers, or control persons, and the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or control person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by a
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Item
15. Recent Sales of Unregistered
Securities.
The
following list sets forth information regarding all securities sold by us in the
three years preceding the filing of this registration statement which were not
registered under the Securities Act:
On May
25, 2011, the Company sold 15.5 million shares of the Companys stock to an
investor pursuant to a private placement for $400,000.
On
June 24, 2011, an investor exercised a warrant to purchase 1 million shares of
the Companys common stock, which raised $10,000 for the Company.
During
the second quarter of 2012, the Company received $200,000 for a 10% unsecured
note payable, due April 27, 2013.
In
October 2012, the Company commenced private placements consisting of shares of
the Companys common stock and warrants to purchase shares of the Companys
common stock at an exercise price of $0.10 per share, which included the
issuance of 5,555,556 shares of the Companys common stock and an additional
5,555,556 warrants to VerifyMe in January 2013. The shares and
warrants were sold in units with each unit comprised of one share and one
warrant at a purchase price of $0.045 and $0.05 per unit. As of
December 31, 2012, the Company sold 21,888,889 units that raised $1,060,000 for
the Company.
On
November 13, 2012, an employee and a consultant exercised options to purchase in
the aggregate 10,490,996 shares of the Companys common stock at an exercise
price of $.00125 per share that raised $13,114 for the Company.
On
December 5, 2012, the Company issued 12,923,622 shares of the Companys common
stock, valued at $581,564, for the retirement of two notes payable totaling
$450,000 and accrued interest of $131,564. One note was entered into on October
8, 2010 for $250,000 and had accumulated accrued interest of $122,397 and the
other note was entered into on April 27, 2012 for $200,000 and had accumulated
accrued interest of $9,167.
On
December 20, 2012, an investor exercised warrants to purchase 333,333 shares of
the Companys common stock at $0.15 per share, which raised $50,000 for the
Company.
On
December 31, 2012, the Company entered into an investment agreement and
ancillary agreements whereby VerifyMe purchased a total of 26,666,666 shares of
the Companys common stock as well as warrants to purchase 48,888,888 shares of
the Companys common stock at an exercise price of $0.10 for an aggregate sum of
$2 million and other considerations with respect to intellectual property
rights. In connection with these agreements, Zaah Technologies, Inc.
was issued a warrant to purchase 4,444,444 shares of the Companys common stock
at an exercise price of $0.10 per share.
On
January 31, 2013, the Company entered into a subscription agreement whereby
VerifyMe purchased 33,333,333 shares of the companys preferred stock and a
warrant to purchase 33,333,333 shares of the Companys common stock at an
exercise price of $0.12 per share for $1 million.
In January and February 2013, the Company received $185,000
from the sales of 3,700,000 units from private placements consisting of shares of the Company’s common stock and warrants
to purchase shares of the Company’s common stock at an exercise price of $0.10 per share. The shares and warrants were sold
in units with each unit comprised of one share and one warrant at a price of $0.05 per unit.
In January 2013, the Company commenced a private placement
consisting of shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock at
an exercise price of $0.12 per share. The shares and warrants were sold in units with each unit comprised of one share and one
warrant at a purchase price of $0.045 per unit. The Company sold 1,111,111 units and raised $50,000.
On February 1, 2013, an investor exercised warrants
to purchase 1 million shares of the Company’s common stock at $.05 per share, which raised $50,000 for the Company.
In February and March 2013, four investors exercised
options to purchase 3,335,000 shares of the Company’s common stock at $0.00125 and $0.07 per share, which raised $17,919
for the Company.
In March 2013, the Company issued 3 million shares
of the Company’s common stock for the retirement of two notes payable totalling $150,000 accrued interest of $83,895. Of
the accrued interest $13,895 was paid in cash. One note was entered into September 2, 2010 for $100,000 and the other was entered
into on November 18, 2010 for $50,000.
On March 19, 2013, the investor holding $140,000 of
convertible notes payable transferred $14,000 of the $140,000 convertible notes to the Vice Chairman of the Company. Also on March
19, 2013, the investor agreed to convert to $28,000 of the investor’s remaining $126,000 of convertible notes into 5,250,000
shares of the Company’s common stock. The Vice Chairman of the Company also agreed to convert $14, 000 of convertible notes
into 2,625,000 shares of the Company’s common stock.
On June 6, 2013,
the Company issued 7,400,000 shares of the Company’s common stock, for the retirement of three notes payable
totalling $225,000 and accrued interest of $181,125. One note was entered into on February 7, 2006 for $25,000 and had
accumulated accrued interest of $20,625, the second was entered into on February 21, 2006 for $100,000 and had accumulated
accrued interest of $82,500 and the third was entered into on June 28, 2006 for $100,000 and had accumulated accrued interest
of $78,000.
Item
16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
The
exhibits to this registration statement are listed in the Exhibit Index attached
hereto and incorporated herein by reference.
(b)
Financial Statements Schedules.
All
financial statement schedules are omitted because they are not applicable or not
required or because the required information is included in the financial
statements or notes thereto.
Item
17. Undertakings.
None.
SIGNATURES
Pursuant to the requirements
of the Securities Act, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 1st day of August, 2013.
|
LASERLOCK TECHNOLOGIES,
INC. |
|
|
|
|
|
|
By:
|
/s/ Neil Alpert |
|
|
|
Neil
Alpert |
|
|
|
President
and Chief Executive Officer |
|
|
|
|
|
POWER
OF ATTORNEY
Each
person whose individual signature appears below hereby authorizes and appoints
Norman A. Gardner and Neil Alpert, and each of them, with full power of
substitution and resubstitution and full power to act without the other, as his
or her true and lawful attorney in fact and agent to act in his or her name,
place and stead and to execute in the name and on behalf of each person,
individually and in each capacity stated below, and to file any and all
amendments to this Registration Statement, including any and all post effective
amendments and amendments thereto, and any registration statement relating to
the same offering filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys in fact and agents, and each of them, full power
and authority to do and perform each and every act and thing, ratifying and
confirming all that said attorneys in fact and agents or any of them or their or
his substitute or substitutes may lawfully do or cause to be done by virtue
thereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Michael R. Sonnenreich |
|
|
|
August
1, 2013 |
Michael R. Sonnenreich |
|
Chairman
of the Board |
|
|
|
|
|
|
|
/s/ Norman A. Gardner |
|
|
|
August
1, 2013 |
Norman A. Gardner |
|
Vice
Chairman, Chief Operating Officer and |
|
|
|
|
Director |
|
|
|
|
|
|
|
/s/ Constance
Harriman |
|
|
|
August
1, 2013 |
Constance
Harriman |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
Peter Pace
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Wolfowitz
|
|
Director
|
|
|
|
|
|
|
|
/s/ Jonathan
Weinberger |
|
|
|
August
1, 2013 |
Jonathan Weinberger |
|
Director |
|
|
|
|
|
|
|
/s/ Claudio
R. Ballard |
|
|
|
August
1, 2013 |
Claudio
R. Ballard |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
Michael Chertoff |
|
Director
|
|
|
|
|
|
|
|
/s/ Neil Alpert |
|
|
|
August
1, 2013 |
Neil Alpert |
|
President,
Chief Executive Officer and Director |
|
|
|
|
(Principal Executive
Officer) |
|
|
|
|
|
|
|
/s/ Scott A. McPherson |
|
|
|
August
1, 2013 |
Scott A. McPherson |
|
Chief
Financial Officer |
|
|
|
|
(Principal Financial and Accounting Officer) |
|
|
EXHIBIT
INDEX
The
following exhibits are filed as part of this report.
3.1 |
Amended
and Restated Articles of Incorporation of the Company dated December 17,
2003 (filed as an exhibit to the Companys Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission on March 30, 2004 and
incorporated herein by reference).
|
3.2 |
Certificate
of Amendment to Amended and Restated Articles of Incorporation of
LaserLock Technologies, Inc., dated as of November 29, 2012 (filed as an
exhibit to the Companys Annual Report on Form 10-K filed with the
Securities and Exchange Commission on April 1, 2013 and incorporated
herein by reference).
|
3.3 |
Certificate
of Amendment to Amended and Restated Articles of Incorporation of
LaserLock Technologies, Inc., dated as of May 23, 2013 (filed as an
exhibit to the Companys Current Report on Form 8-K filed with the
Securities and Exchange Commission on May 30, 2013 and incorporated herein
by reference).
|
3.3 |
Amended
Certificate of Designation of Series A Preferred Stock, dated as of
January 31, 2013 (filed as an exhibit to the Companys Current Report on
Form 8-K filed with the Securities and Exchange Commission on February 6,
2013 and incorporated herein by reference).
|
3.4 |
Amended
and Restated Bylaws of the Company dated December 17, 2003 (filed as an
exhibit to the Companys Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission on March 30, 2004 and incorporated
herein by reference).
|
5.1+ |
Opinion
of Morgan, Lewis & Bockius, LLP
|
10.1 |
Employment
Agreement by and between the Company and Norman Gardner dated November 5,
2003 (filed as an exhibit to the Companys Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission on March 30, 2004 and
incorporated herein by reference).
|
10.2 |
Stock
Loan Agreement by and among Norman Gardner, Californian Securities, SA and
Pacific Continental Securities (UK) Nominees Limited and the Company
(filed as an exhibit to the Companys Quarterly Report on Form 10-QSB
filed with the Securities and Exchange Commission on November 14, 2003 and
incorporated herein by reference).
|
10.3 |
Regulation
S Stock Purchase Agreement, dated May 2, 2003, by and between the Company
and Californian Securities, S.A. (filed as an exhibit to the Companys
Quarterly Report on Form 10-QSB filed with the Securities and Exchange
Commission on August 14, 2003 and incorporated herein by
reference).
|
10.4 |
Amendment
to Regulation S Stock Purchase Agreement by and between the Company and
Californian Securities, S.A., dated October 15, 2003 (filed as an exhibit
to the Companys Quarterly Report on Form 10-QSB filed with the Securities
and Exchange Commission on November 14, 2003 and incorporated herein by
reference).
|
10.5 |
Regulations
S Stock Purchase Agreement, dated March 10, 2004, by and between the
Company and California Securities, S.A. (filed as an exhibit to the
Companys Quarterly Report on Form 10-QSB filed with the Securities and
Exchange Commission on May 17, 2004 and incorporated herein by
reference).
|
10.6 |
Senior
Secured Convertible Note and Warrant Purchase Agreement, dated February
13, 2006, among the Company and Nob Hill Capital Partners, L.P. (filed as
an exhibit to the Companys Current Report on Form 8-K filed with the
Securities and Exchange Commission on February 17, 2006 and incorporated
herein by reference).
|
10.7 |
Schedule
of Purchasers who have entered into the Senior Secured Convertible Note
and Warrant Purchase Agreement (filed as an exhibit to the Companys
Current Report on Form 8-K filed with the Securities and Exchange
Commission on February 17, 2006 and incorporated herein by
reference).
|
10.8 |
Senior
Secured Convertible Promissory Note, dated February 17, 2006, by the
Company in favor of Nob Hill Capital Partners, L.P. in the amount of
$100,000 (filed as an exhibit to the Companys Current Report on Form 8-K
filed with the Securities and Exchange Commission on February 17, 2006 and
incorporated herein by reference).
|
10.9 |
Schedule
of Payees who have entered into a senior secured convertible promissory
note substantially identical to the Senior Secured Convertible Promissory
Note (filed as an exhibit to the Companys Current Report on Form 8-K
filed with the Securities and Exchange Commission on February 17, 2006 and
incorporated herein by reference).
|
10.10 |
Warrant,
issued by the Company in favor of Nob Hill Capital Partners, L.P., dated
February 13, 2006 (filed as an exhibit to the Companys Current Report on
Form 8-K filed with the Securities and Exchange Commission on February 17,
2006 and incorporated herein by
reference). |
10.11 |
Schedule
of Holders to whom the Company has issued a warrant substantially
identical to the Warrant (filed as an exhibit to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission on
February 17, 2006 and incorporated herein by reference).
|
10.12 |
Security
Agreement, dated February 13, 2006, by and between the Company and Nob
Hill Capital Partners, L.P. (filed as an exhibit to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission on
February 17, 2006 and incorporated herein by reference).
|
10.13 |
Schedule
of Secured Parties who have entered into a security agreement
substantially identical to the Security Agreement (filed as an exhibit to
the Companys Current Report on Form 8-K filed with the Securities and
Exchange Commission on February 17, 2006 and incorporated herein by
reference). |
10.14 |
Grant
of 3,000,000 shares of the Company to Norman A. Gardner on January 3, 2006
in consideration for services provided to the Company (filed as an exhibit
to the Companys Current Report on Form 8-K filed with the Securities and
Exchange Commission on January 18, 2006 and incorporated herein by
reference).
|
10.15 |
LaserLock
Technologies, Inc. 2003 Stock Option Plan adopted on December 19, 2003
(filed as an exhibit to the Companys Annual Report on Form 10-KSB filed
with the Securities and Exchange Commission on March 30, 2004 and
incorporated herein by reference).
|
10.16 |
Option
Agreement, dated as of March 23, 2012, between the Company and Gaming
Partners International Corporation (filed as an exhibit to the Companys
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on July 13, 2012 and incorporated herein by
reference).
|
10.17 |
Investment
Agreement, dated as of December 31, 2012, between LaserLock Technologies,
Inc. and VerifyMe, Inc. (filed as an exhibit to the Companys Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
April 1, 2013 and incorporated herein by reference).
|
10.18 |
Registration
Rights Agreement, dated as of December 31, 2012, between LaserLock
Technologies, Inc. and VerifyMe, Inc. (filed as an exhibit to the
Companys Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 1, 2013 and incorporated herein by
reference).
|
10.19 |
Technology
and Services Agreement, dated as of December 31, 2012, between LaserLock
Technologies, Inc. and VerifyMe, Inc. (filed as an exhibit to the
Companys Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 1, 2013 and incorporated herein by
reference).
|
10.20 |
Patent
and Technology License Agreement, dated as of December 31, 2012, between
LaserLock Technologies, Inc. and VerifyMe, Inc. (filed as an exhibit to
the Companys Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 1, 2013 and incorporated herein by
reference).
|
10.21 |
Asset
Purchase Agreement, dated as of December 31, 2012, between LaserLock
Technologies, Inc. and VerifyMe, Inc. (filed as an exhibit to the
Companys Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 1, 2013 and incorporated herein by
reference).
|
10.22 |
Technology
and Services Agreement (Zaah), dated as of December 31, 2012, between
LaserLock Technologies, Inc. and Zaah Technologies, Inc. (filed as an
exhibit to the Companys Annual Report on Form 10-K filed with the
Securities and Exchange Commission on April 1, 2013 and incorporated
herein by reference).
|
10.23 |
Employment
Agreement between LaserLock Technologies, Inc. and Norman Gardner, dated
as of October 8, 2012 (filed as an exhibit to the Companys Annual Report
on Form 10-K filed with the Securities and Exchange Commission on April 1,
2013 and incorporated herein by reference).
|
10.24 |
Employment
Agreement between LaserLock Technologies, Inc. and Neil Alpert, dated as
of October 8, 2012 (filed as an exhibit to the Companys Annual Report on
Form 10-K filed with the Securities and Exchange Commission on April 1,
2013 and incorporated herein by reference).
|
10.25 |
Employment
Agreement between LaserLock Technologies, Inc. and Scott McPherson, dated
as of December 14, 2012 (filed as an exhibit to the Companys Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
April 1, 2013 and incorporated herein by reference).
|
10.26 |
Nonqualified
Stock Option Grant Agreement between LaserLock Technologies, Inc. and
Norman Gardner, dated as of November 21, 2012 (filed as an exhibit to the
Companys Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 1, 2013 and incorporated herein by
reference).
|
10.27 |
Nonqualified
Stock Option Grant Agreement between LaserLock Technologies, Inc. and Neil
Alpert, dated as of November 21, 2012 (option grant on identical terms and
for same amount of options as pursuant to agreement filed as Exhibit
10.26).
|
10.28 |
Nonqualified
Stock Option Grant Agreement between LaserLock Technologies, Inc. and
Michael Sonnenreich, dated as of November 21, 2012 (filed as an exhibit to
the Companys Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 1, 2013 and incorporated herein by
reference).
|
10.29 |
Nonqualified
Stock Option Grant Agreement between LaserLock Technologies, Inc. and
Constance Harriman, dated as of November 21, 2012 (option grant on
identical terms and for same amount of options as pursuant to agreement
filed as Exhibit 10.28).
|
10.30 |
Nonqualified
Stock Option Grant Agreement between LaserLock Technologies, Inc. and
Peter Pace, dated as of November 21, 2012 (option grant on identical terms
and for same amount of options as pursuant to agreement filed as Exhibit
10.28).
|
10.31 |
Nonqualified
Stock Option Grant Agreement between LaserLock Technologies, Inc. and
Jonathan Weinberger, dated as of November 21, 2012 (option grant on
identical terms and for same amount of options as pursuant to agreement
filed as Exhibit 10.28).
|
10.32 |
Nonqualified
Stock Option Grant Agreement between LaserLock Technologies, Inc. and Paul
Wolfowitz, dated as of November 21, 2012 (option grant on identical terms
and for same amount of options as pursuant to agreement filed as Exhibit
10.28).
|
10.33 |
Subscription
Agreement between LaserLock Technologies, Inc. and VerifyMe, Inc., dated
as of January 31, 2013 (filed as an exhibit to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission on
February 6, 2013 and incorporated herein by reference).
|
10.34 |
Nonqualified
Stock Option Grant Agreement between LaserLock Technologies, Inc. and
Michael Chertoff, dated as of May 4, 2013 (option grant on identical terms
and for same amount of options as pursuant to agreement filed as Exhibit
10.28). |
23.1** |
Consent
of Morison Cogen LLP (filed herewith).
|
23.2+ |
Consent
of Morgan, Lewis & Bockius LLP (included in Exhibit
5.1). |
+ To
be filed by amendment.
** Filed
herewith.