x
|
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934 for the Quarterly Period ended September 30, 2007;
or
|
o
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934 for the transition period from ________ to
________
|
Nevada
|
|
N/A
|
(State
or other jurisdiction of incorporation
or organization)
|
|
(I.R.S.
Employer Identification No.)
|
PART
I -- FINANCIAL INFORMATION
|
||
|
|
PAGE
|
Forward
Looking Statements
|
ii
|
|
|
|
|
Item
1
|
Financial
Statements
|
1
|
|
Condensed
Consolidated Balance Sheets September 30, 2007 (Unaudited) and
December 31, 2006 (Audited)
|
1
|
|
Unaudited
Condensed Consolidated Statements of Operations for the nine and
three months ended September 30, 2007 and 2006
|
2
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the six months
ended September 30, 2007 and 2006
|
3
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
4
|
|
|
|
Item
2
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
11
|
|
|
|
Item
3
|
Controls
and Procedures
|
13
|
|
|
|
PART
II -- OTHER INFORMATION
|
||
|
|
|
Item
1
|
Legal
Proceedings
|
14
|
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
14
|
Item
3
|
Defaults
upon Senior Securities
|
14
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
14
|
Item
5
|
Other
Information
|
14
|
Item
6
|
Exhibits
|
14
|
|
|
|
SIGNATURES
|
15
|
IDO
SECURITY INC. AND
SUBSIDIARY
|
||||||||
CONDENSED
CONSOLIDATED BALANCE
SHEETS
|
||||||||
September
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
ASSETS
|
(unaudited)
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ |
57,139
|
$ |
7,484
|
||||
Inventory
|
192,529
|
-
|
||||||
Prepaid
expenses and other current assets
|
50,608
|
-
|
||||||
Total
current assets
|
300,276
|
7,484
|
||||||
Property
and equipment,
net
|
29,415
|
-
|
||||||
Patents,
net
|
1,130,000
|
-
|
||||||
Goodwill
|
755,002
|
-
|
||||||
Deferred
acquisition
costs
|
-
|
55,550
|
||||||
Total
assets
|
$ |
2,214,693
|
$ |
63,034
|
||||
LIABILITIES
AND STOCKHOLDERS'
EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable and accrued liabilities
|
$ |
195,486
|
$ |
101,548
|
||||
Convertible
promissory notes (net of discount of $1,825,761)
|
1,555,208
|
-
|
||||||
Loan
payable, related party
|
44,826
|
26,896
|
||||||
Total
current liabilities
|
1,795,520
|
128,444
|
||||||
NON-CURRENT
LIABILITIES
|
||||||||
Accrued
severance pay
|
157,150
|
-
|
||||||
Total liabilities
|
1,952,670
|
128,444
|
||||||
STOCKHOLDERS'
EQUITY
(DEFICIT)
|
||||||||
Preferred
Stock
|
||||||||
20,000,000
shares authorized; none outstanding
|
||||||||
Common
stock, $.001 par value;
|
||||||||
50,000,000
shares authorized; 34,336,250 and 30,600,000
|
||||||||
issued
and outstanding, respectively
|
34,336
|
30,600
|
||||||
Additional
paid-in capital
|
9,655,499
|
124,331
|
||||||
Stock
subscription receivable
|
(25 | ) | (36,500 | ) | ||||
Accumulated
other comprehensive loss
|
(331 | ) | (331 | ) | ||||
Accumulated
deficit
|
(9,427,456 | ) | (183,510 | ) | ||||
Total
stockholders' equity (deficit)
|
262,023
|
(65,410 | ) | |||||
Total
liabilities and stockholders' equity (deficit)
|
$ |
2,214,693
|
$ |
63,034
|
||||
See
Notes to Condensed
Consolidated Financial Statements.
|
IDO
SECURITY INC. AND
SUBSIDIARY
|
||||||||||||||||
CONDENSED
CONSOLIDATED STATEMENTS
OF OPERATIONS
|
||||||||||||||||
Nine
Months
|
Three
Months
|
|||||||||||||||
Ended
|
Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Revenues
|
$ | - | $ |
-
|
$ |
-
|
$ |
-
|
||||||||
Operating
expenses
|
||||||||||||||||
Research
and development costs
|
196,094
|
-
|
96,933
|
-
|
||||||||||||
Selling,
general and administrative expenses
|
601,489
|
53,118
|
289,180
|
3,300
|
||||||||||||
Stock
based compensation
|
2,567,829
|
-
|
1,111,752
|
-
|
||||||||||||
Total
operating
expenses
|
3,365,412
|
53,118
|
1,497,865
|
3,300
|
||||||||||||
Loss
from
operations
|
(3,365,412 | ) | (53,118 | ) | (1,497,865 | ) | (3,300 | ) | ||||||||
Interest
expense (including
related parties
|
||||||||||||||||
of
$33,538, $0, $18,534 and $0)
|
(414,798 | ) |
-
|
(213,732 | ) |
-
|
||||||||||
Interest
income
|
2,578
|
-
|
1,041
|
-
|
||||||||||||
Amortization
of debt
discount
|
(4,905,467 | ) |
-
|
(3,262,788 | ) |
-
|
||||||||||
Amortization
of beneficial
conversion feature
|
(448,264 | ) |
-
|
(120,298 | ) |
-
|
||||||||||
Amortization
of deferred finance
costs
|
(112,583 | ) |
-
|
(20,401 | ) |
-
|
||||||||||
Net
loss
|
(9,243,946 | ) | (53,118 | ) | (5,114,043 | ) | (3,300 | ) | ||||||||
Other
comprehensive
income
|
||||||||||||||||
Foreign
currency translation adjustment
|
-
|
171
|
-
|
-
|
||||||||||||
Comprehensive
loss for the
period
|
$ | (9,243,946 | ) | $ | (52,947 | ) | $ | (5,114,043 | ) | $ | (3,300 | ) | ||||
Basic
and diluted loss per
share:
|
$ | (0.28 | ) | $ | 0.00 | $ | (0.15 | ) | $ | 0.00 | ||||||
Weighted
average number of shares
outstanding
|
||||||||||||||||
Basic
and
diluted
|
32,588,493
|
16,732,721
|
34,187,935
|
30,450,000
|
||||||||||||
See
Notes to Condensed
Consolidated Financial Statements.
|
IDO
SECURITY INC. AND
SUBSIDIARY
|
||||||||
CONDENSED
CONSOLIDATED STATEMENTS
OF CASH FLOWS
|
||||||||
Nine
Months
|
||||||||
Ended
|
||||||||
September
30,
|
||||||||
2007
|
2006
|
|||||||
INCREASE
(DECREASE) IN CASH AND
CASH EQUIVALENTS
|
(Unaudited)
|
(Unaudited)
|
||||||
CASH
FLOWS FROM OPERATING
ACTIVITIES
|
||||||||
Net
loss
|
$ | (9,243,946 | ) | $ | (53,118 | ) | ||
Adjustments
to reconcile net loss
to net cash used in operating activities:
|
||||||||
Depreciation
and amortization
|
186,128
|
-
|
||||||
Amortization
of note discount
|
4,905,467
|
-
|
||||||
Amortization
of beneficial conversion feature of convertible
debt
|
448,264
|
-
|
||||||
Accretion
of interest on notes payable
|
380,969
|
-
|
||||||
Stock
based compensation
|
2,567,829
|
-
|
||||||
Increase
in net liability for severance pay
|
6,347
|
-
|
||||||
Increase
(decrease) in cash
attributable to changes in assets and liabilities
|
||||||||
Inventory
|
(110 | ) |
-
|
|||||
Prepaid
expenses and other current assets
|
(37,764 | ) |
-
|
|||||
Accounts
payable
|
(579 | ) |
-
|
|||||
Accrued
expenses and other current liabilities
|
16,845
|
9,939
|
||||||
Net
cash used in operating
activities
|
(770,550 | ) | (43,179 | ) | ||||
CASH
FLOWS
FROM INVESTING ACTIVITIES
|
||||||||
Acquisition
of IDO Security Ltd., net of cash acquired of
$19,974
|
(950,171 | ) |
-
|
|||||
Deferred
acquisition costs
|
-
|
(9,000 | ) | |||||
Purchases
of property and equipment
|
(15,778 | ) |
-
|
|||||
Net
cash used in investing
activities
|
(965,949 | ) | (9,000 | ) | ||||
CASH
FLOWS FROM FINANCING
ACTIVITIES
|
||||||||
Issuance
of common shares
|
-
|
80,375
|
||||||
Stock
subscription receivable
|
36,475
|
(36,500 | ) | |||||
Proceeds
from issuance of secured convertible notes
|
3,000,000
|
-
|
||||||
Payments
of deferred finance costs
|
(325,000 | ) |
-
|
|||||
Proceeds
from related party loans
|
12,735
|
4,149
|
||||||
Proceeds
from short-term debt
|
47,738
|
4,371
|
||||||
Repayment
of short-term debt
|
(985,794 | ) |
-
|
|||||
Net
cash provided by financing
activities
|
1,786,154
|
52,395
|
||||||
Effect
of foreign currency
translation on cash
|
-
|
171
|
||||||
INCREASE
IN CASH AND CASH
EQUIVALENTS
|
49,655
|
387
|
||||||
CASH
AND CASH EQUIVALENTS -
BEGINNING OF PERIOD
|
7,484
|
-
|
||||||
CASH
AND CASH EQUIVALENTS - END OF
PERIOD
|
$ |
57,139
|
$ |
387
|
||||
Supplemental
disclosures of cash
flow information:
|
||||||||
Cash
paid for interest
|
$ |
-
|
$ |
-
|
||||
Non-cash
activities
|
||||||||
Issuance
of common stock relating to convertible promissory
notes
|
$ |
1,261,435
|
$ |
-
|
||||
See
Notes to Condensed
Consolidated Financial Statements.
|
|
Shares
of Common
Stock
|
||||||||
|
Issuable
upon Conversion/Exercise
|
||||||||
|
of
as
|
||||||||
|
September
30
|
||||||||
|
2007
|
2006
|
|||||||
Warrants
|
|
20,211,000
|
---
|
||||||
Convertible
notes
|
|
2,028,557
|
---
|
||||||
Stock
options
|
|
2,750,000
|
---
|
Cash
|
|
$
|
19,974
|
|
Inventories
|
|
|
192,419
|
|
Other
current
assets
|
|
|
12,844
|
|
Patents
|
|
|
1,200,000
|
|
Property
and
equipment
|
|
|
17,182
|
|
Goodwill
|
|
|
755,002
|
|
Accounts
payable and accrued
expenses
|
|
|
(77,672
|
)
|
Amounts
due from related
parties
|
|
|
(943,251
|
)
|
Accrued
severance
pay
|
|
|
(150,803
|
)
|
|
|
$
|
1,025,695
|
|
|
|
|
|
|
|
Nine
Months
Ended
|
Three
Months
Ended
|
|||||||||||||||
|
September
30
|
||||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
|
|
|
|
|||||||||||||
Revenue
|
$ |
19,985
|
$ |
27,511
|
$ |
-
|
$ |
19,461
|
|||||||||
|
|||||||||||||||||
Net
loss
|
$ | (6,810,118 | ) | $ | (1,294,870 | ) | $ | (3,723,042 | ) | $ | (196,610 | ) | |||||
|
|||||||||||||||||
Net
loss per
share,
|
|||||||||||||||||
basic
and
diluted
|
$ | (0.21 | ) | $ | (0.08 | ) | $ | (0.11 | ) | $ | (0.00 | ) |
|
·
|
An
increase in the number of
authorized shares of the Company’s Common Stock from 25,000,000 to 50,0000
shares; and
|
|
|
|
|
·
|
the
designation of 20 million
shares of the Company’s authorized capital stock as preferred stock with
the Board of Directors authorized to fix the number of shares of
any
series of preferred stock and to determine the designation of any
such
series, including the authority to determine the designation of
any such
series, including the authority to determine the rights, preferences,
privileges and restrictions on any such series of preferred
stock.
|
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
|
ITEM
3.
|
CONTROLS
AND PROCEDURES
|
ITEM
1.
|
LEGAL
PROCEEDINGS.
|
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES.
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
|
ITEM
5.
|
OTHER
INFORMATION.
|
EXHIBITS.
|
Exhibit
Number
|
Description
|
31
|
Certification
Pursuant to Rule 13a-14a of the Securities Exchange Act of 1934,
as
amended
|
32
|
Certification
Pursuant to Section 906 of Sarbanes-Oxley Act of
2002
|
|
DATE:
November 19, 2007
|
|
|
|
|
IDO
SECURITY INC.
|
|
|
|
|
|
|
|
/s/
MICHAEL GOLDBERG
|
|
|
|
MICHAEL
GOLDBERG
|
|
ACTING CHIEF EXECUTIVE OFFICER (PRINCIPAL | |||
EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL AND | |||
|
|
ACCOUNTING
OFFICER) AND PRESIDENT
|