-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KxFcH8ltUhnmTfGySMLrCR8qNz3vL6s/ftrEYA44yQH8ghDjmbFKkUmVnoVhpic8 S8kGZoNveHNQG/qzrGvg0A== 0001157523-04-002532.txt : 20040322 0001157523-04-002532.hdr.sgml : 20040322 20040322115536 ACCESSION NUMBER: 0001157523-04-002532 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040131 FILED AS OF DATE: 20040322 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEGIS ASSESSMENTS INC CENTRAL INDEX KEY: 0001183075 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 721525702 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-50213 FILM NUMBER: 04681573 BUSINESS ADDRESS: STREET 1: 4100 NEWPORT PLACE STREET 2: SUITE 660 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 877.718.7599 10QSB 1 a4598337.txt AEGIS ASSESSMENTS INC. 10-QSB DOCUMENT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 2004 ------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________ to _____________ Commission file number 000-50213 AEGIS ASSESSMENTS, INC. ----------------------- (Exact name of small business issuer as specified in its charter) Delaware 72-1525702 - -------- ---------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 7975 N. Hayden Road, Suite D-363, Scottsdale, AZ 85258 ------------------------------------------------------ (Address of principal executive offices) 480.778.9140 ------------ (Issuer's telephone number) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of January 31, 2004, approximately 12,748,271 shares of our common stock were issued and outstanding. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] PART I- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. Aegis Assessments, Inc. (A Development Stage Company) Condensed Balance Sheet January 31, 2004 (Unaudited)
Current Assets Cash $72,042 ------------------------- Total Current Assets 72,042 Property and equipment, net of accumulated depreciation of $6,087 66,978 Other Assets 9,250 ------------------------- Total Assets $148,270 ========================= Liabilities and Shareholders' Deficit Current Liabilities Accounts Payable $41,731 Accrued Payroll 210,608 ------------------------- Total Current Liabilities 252,339 Series A 8% convertible preferred stock $.001 par value; 200,000 shares authorized. - Shareholders' deficit: Preferred stock, $.001 par value, 10,000,000 shares authorized for issuance in one or more series. - Common stock, $.001 par value; 100,000,000 shares authorized; 13,443,238 shares issued and outstanding at January 31, 2004 13,444 Additional paid-in capital 4,109,416 Stock and options issued for future services (1,720,292) Stock subscription receivable - related party (67,500) Deficit accumulated during the development stage (2,439,137) ------------- Total shareholders' deficit (104,069) ------------------------- Total liabilities and shareholders' deficit 148,270 =============
The accompanying notes are an integral part of the condensed financial statements 2 Aegis Assessments, Inc. (A Development Stage Company) Condensed Statements of Operations (Unaudited)
For the period For the from For the three three For the six For the six January 16,2002 months ended months ended months ended months ended (inception) to January January January January 31,2004 31,2003 31,2004 31,2003 January 31,2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) -------------------------------------------------------------------- Net revenue -- -- -- -- -- General and administrative expenses - other $434,843 $695,175 $829,583 $893,553 $2,151,272 Consulting fees - related party 53,588 287,065 -------------------------------------------------------------------- Loss before provision for income taxes (434,843) (695,175) (883,171) (893,553) (2,438,337) Provision for income taxes -- -- -- -- 800 -------------------------------------------------------------------- Net loss $(434,843) $(695,175) $(883,171) $(893,553) $(2,439,137) ==================================================================== Net loss available to common shareholders per common share - basic and diluted $(0.03) $(0.06) $(0.07) $(0.09) $(0.23) Weighted average common shares - basic -------------------------------------------------------------------- and diluted 13,035,883 10,726,000 12,553,770 10,505,000 10,794,510 ====================================================================
The accompanying notes are an integral part of the condensed financial statements 3 Aegis Assessments, Inc. (A Development Stage Company) Condensed Statement of Cash Flows (Unaudited)
For the period from For the six For the six January 16,2002 months ended months ended (inception) to January 31,2004 January 31,2003 January 31,2004 (Unaudited) (Unaudited) (Unaudited) ---------------------------------------------------- Net loss $(883,171) $(893,553) $(2,439,137) Adjustments to reconcile net loss to net cash used in operating activities: Non-cash items included in the net loss: Depreciation 3,739 -- 6,088 Amortization and expenses related to stock and stock options 364,927 580,758 1,299,993 The intrinsic value of non-detachable conversion rights of the Series A 8% preferred stock -- 9,800 9,800 Issuance of stock for payment of interest 1,184 -- 3,266 Increase in Other Assets (9,250) -- (9,250) Increase in Liabilities: Accrued payroll (43,163) -- 210,608 Accounts payable (7,243) 11,173 53,756 Accrued interest officers (1,906) Advances form officers 95,641 ---------------------------------------------------- (574,883) (196,181) (864,876)
The accompanying notes are an integral part of the condensed financial statements 4 Aegis Assessments, Inc. (A Development Stage Company) Statement of Cash Flows (Unaudited)
For the period from For the six For the six January 16,2002 months ended months ended (inception) to January January 31,2004 31,2003 January 31,2004 (Unaudited) (Unaudited) (Unaudited) ---------------------------------------------- Cash flows used in investing activities Payments to acquire property $(46,473) $(30,349) $(73,065) ---------------------------------------------- and equipment Net cash flows used in investing activities (46,473) (30,349) (73,065) Cash flows provided by financing activities Proceeds from issuance of preferred stock 78,000 90,100 Proceeds from issuance of common stock - related party 22,500 Proceeds from issuance of common stock 556,175 106,000 759,675 Proceeds from exercise of warrants 103,708 103,708 Proceeds from issuance of debenture 17,000 Proceeds from notes payable and advances - related parties 583 37,500 17,000 ---------------------------------------------- Net cash provided by financing activities 660,466 221,500 1,009,983 ---------------------------------------------- Net increase in cash and cash equivalents 39,110 (5,030) 72,042 Cash and cash equivalents, beginning of 32,932 9,481 - period ---------------------------------------------- Cash and cash equivalents, end of period $72,042 $4,451 $72,042 ============================================== Supplemental Disclosure Of Non-cash Investing and Financing Activities: Exercise of options applied against notes $17,000 ================ Payment of accounts payable with stock $12,025 ================ Conversion of preferred stock to common stock $27,500 ================ Issuance of 104,000 shares of common stock for 104,000 ==============
5 conversion of accrued officer compensation Issuance of common stock for services 849,915 ============== Beneficial conversion feature on preferred stock 9,800 ============== The accompanying notes are an integral part of the condensed financial statements Aegis Assessments, Inc. (A Development Stage Company) Notes To Financial Statements For The Six And Three Months Ended January 31, 2004 (Unaudited) and January 31, 2003 (Unaudited), For The Period January 16, 2002 (inception) Through January 31, 2004 Forward-Looking Statements This Quarterly Report on Form 10-QSB, including the Notes to the Condensed Financial Statements and this Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements. The words "believe," "expect," "anticipate," "intends," "projects," and similar expressions identify forward-looking statements. Such statements may include, but are not limited to, projections regarding demand for the Company's products, the impact of the Company's development and manufacturing process on its research and development costs, future research and development expenditures, and the Company's ability to obtain new financing as well as assumptions related to the foregoing. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. 1. Basis of Presentation The accompanying unaudited condensed financial statements include all adjustments which management believes are necessary for a fair presentation of the Company's financial position at January 31, 2004 and results of operations for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying condensed financial statements should be read in conjunction with our audited financial statements and footnotes as of and for the year ended July 31, 2003, included in our Annual Report on Form 10-KSB. 6 2. Summary of Significant Accounting Policies ------------------------------------------ New Accounting Pronouncements On May 31, 2003, the FASB issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ("SFAS 150"). SFAS 150 establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. SFAS 150 is effective at the beginning of the first interim period beginning after June 15, 2003. The Company does not have any financial instruments that fall under the guidance of SFAS 150 and, therefore, the adoption did not have any effect on its financial position or results of operations. Development Stage Operations Aegis Assessments, Inc. (a Development Stage Company) (the "Company") is a development stage company and has limited operating history with no revenues. The Company was incorporated under the laws of the State of Delaware on January 16, 2002. The Company is engaged in the development of a specialized emergency response and communication systems for law enforcement agencies at all levels, the U.S. Department of Defense, and select commercial firms. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("US GAAP") 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 reported periods. Management bases its estimates and assumptions on historical experience and on various other assumptions that it believes are reasonable under the circumstances. However, future events are subject to change and the best estimates and assumptions routinely require adjustment. US GAAP requires management to make estimates and judgments in several areas including those related to the capitalization of development costs of the Company's software, the valuation of the recoverability of those costs, and the fair value of stock-based compensation. Actual results in these particular areas could differ from those estimates. Costs of Promotional Materials The cost of promotional materials is expensed as incurred, and includes such items as the cost to produce a corporate capabilities video. The Company incurred promotional costs totaling $8,289 and $36,789 in the three and six months ended January 31, 2004 respectively (unaudited). 7 Income Taxes The Company accounts for income taxes under the asset and liability method, whereby, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. As of October 31, 2002, the Company has provided a 100% valuation allowance for the deferred tax asset, since management has not been able to determine that the realization of that asset is more likely than not. Basic and Diluted Loss Per Share The basic loss per common share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed in the same way as basic loss per common share except that the denominator is increased to include the number of additional common shares that would be outstanding if all potential common shares had been issued and if the additional common shares were dilutive. As of January 31, 2004, the Company had 3,888,200 outstanding stock options, and warrants that can be converted into 265,501 shares of common stock. The options and warrants would have an anti-dilutive effect and, therefore, are not included in diluted loss per share. Property, Plant and Equipment Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized, and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods, generally accelerated depreciation, for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows: Computer hardware and equipment 7 years Shop equipment 7 years Office furniture 7 years 8 Stock-Based Compensation The Company accounts for its two stock option plans and other stock-based employee compensation using the intrinsic value method and related interpretations, as described more fully in the Company's annual report on Form 10-KSB for the year ended July 31, 2003. Accordingly, compensation expense is recorded on the date of grant only to the extent the current market price of the underlying stock exceeds the option exercise price. The Company did not record any stock-based compensation expense in the six months ended January 31, 2004 and 2003. Had compensation expense been determined based on the fair values at dates of grant for its stock options under the fair value approach, net loss and net loss per share would have been reported as indicated in the pro forma results below (in thousands, except per share amounts):
Three Six Months Months Ended Ended January 31, January 31, ----------- ----------- 2004 2003 2004 2003 ---- ---- ---- ---- Net loss, as reported $(434,843) $(695,175)$(883,171)$(893,553) Add: Stock-based compensation expense included in reporting net loss - - - - Deduct: Stock based employee compensation expense determined under fair value based (7,609) (33,260) (26,633) (37,826) method ------------------------------------------ Pro forma net loss $(442,452) (728,435)$(909,804) (931,379) ========================================== Net loss per share, as reported (0.03) (0.06) (0.07) (0.09) Net loss per share, pro forma (0.03) (0.07) (0.07) (0.09)
The fair value for options granted were estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: Expected life (years) 2.5 Interest rate 1.40% Volatility 75% Dividend yield 0 9 Software Development Research and development costs are charged to expense as incurred. However, the costs incurred for the development of computer software that will be sold, leased, or otherwise marketed are capitalized when technological feasibility has been established. These capitalized costs are subject to an ongoing assessment of recoverability based on anticipated future revenues and changes in hardware and software technologies. Costs that are capitalized include direct labor and related overhead. Amortization of capitalized software development costs begins when the product is available for general release. 3. Related Party Transactions In October 2003 two officers who are also major shareholders exercised their options to acquire 170,000 shares for $.10 per share. On July 31, 2003 the Company owed two officers and major shareholders a total of $18,323 for funds advanced the Company and for accrued interest. During the quarter ended October 31, 2003 these amounts were repaid. During October 2002, the Company issued 50,000 shares of its common stock to a related party (the brother of an officer and major shareholder), in exchange for future consulting services valued at $1.00 per share, the fair value per share of the Company's common stock at the date of issuance. The value of the services has been amortized over the term of the agreement, including the final $10,417 in the quarter ended October 31, 2003. During December 2002, the Company issued 50,000 shares of its common stock to a related party (the brother of an officer and major shareholder) in exchange for future consulting services valued at $1.00 per share, the fair value per share of the Company's common stock at the date of issuance. The value of the services has been amortized over the term of the agreement, including the final $7,197 in the quarter ended October 31, 2003. During October 2002, the Company issued options to purchase 225,000 shares of the Company's common stock to a related party (the brother of an officer and major shareholder) in exchange for future consulting services. The fair value of the common stock on the date of issuance was $.25 per share. The fair value of these options amounted to $187,065, which has been amortized over the service period, including the final $35,974 in the quarter ended October 31, 2003. 4. Stock Transactions Common Stock In July 2003, through a private placement the Company authorized 300,000 equity units, each of which consisted of one share of the Company's common stock, one warrant to acquire one share of the Company's common stock at $.50 per share, with an exercise period that expires six months after the purchase, and one warrant to acquire one share of the Company's common stock at $1.50 per share, 10 with an exercise period that expires 18 months after purchase. A total of 254,667 equity units were sold at $1.50 per unit (the "units") and 124,167 of the warrants were exercised during the six months ended January 31, 2004. Of these amounts, 5,000 units were sold and 31,667 warrants were exercised during the quarter ended January 31, 2004. In August 2003, preferred shareholders converted the remaining 5,500 shares of the preferred stock along with related accrued interest into 28,684 shares of common stock. In October 2003, through a private placement the Company authorized the sale of 2,000,000 equity units for $1.50 per unit. Each unit consists of one share of common stock and one warrant to purchase a share of common stock for $.50, with an exercise period that expires six months after the unit is purchased. No units were sold prior to October 31, 2003. As of January 31, 2004 the Company had sold 108,250 units for a total of $163,375, and 83,250 of the warrants were exercised for a total of $41,625. In December 2003 an employee exercised options to acquire 1,800 shares for $1.00 per share. In January 2004 a former consultant exercised options to acquire 10,000 shares for $1.00 per share. In September 2003, 912,500 shares of the Company's common shares were issued to four consultants in exchange for future services totaling $ 900,475 based on $1.00 per share, which was the fair value of the Company's common stock on the date of issuance. In addition, the Company was relieved of debt owed one of the consultants in the amount of $12,025. In December 2003, 250,000 restricted shares of the Company's common shares were issued to a consultant in exchange for future services totaling $ 250,000 based on $1.00 per share, which was the fair value of the Company's restricted common stock on the date of issuance. In January 2004, 205,000 shares of the Company's common shares were issued to consultants in exchange for future services totaling $ 800,500 based on the fair value of the Company's common stock on the dates of issuance. The Company amortized $364,927 and $152,597 in the value of services received for stock in the six and three months ended January 31, 2004 respectively. Of these amounts, $123,831 and $11,271 relate to shares issued in the six and three months ended January 31, 2004 respectively. 5. Lease Agreement In October 2003, the Company entered into a lease agreement for an industrial building. The lease has an initial term of eighteen months with an option to extend the lease for an additional six-month term thereafter. The monthly payment under the lease is $2,250. Upon execution of the lease the Company paid the first and last months lease payment and a security deposit of $7,000. The facility is used for product research and development. 6. Commitments and Contingencies Financial Results, Liquidity and Management's Plan (Unaudited) The Company has incurred net losses since its inception in January 2002 and has no established sources of revenue. Despite its negative cash flows from operations the Company has been able to obtain additional operating capital through private funding sources. Management's plans include the continued 11 development of the Company's SafetyNet MCP products and a client awareness program that it believes will enhance its ability to generate revenues from the sale of the Company's products. The Company has relied upon equity funding and loans from shareholders since inception. During the six months ended January 31, 2004, the Company financed its operations through private equity funding. No assurances can be given that the Company can obtain sufficient working capital through the sale of the Company's securities and borrowing, or that the sale of the SafetyNet MCP products will generate sufficient revenues in the future to sustain ongoing operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Preferred Stock From November 2002 through January 2003, the Company sold 18,020 shares of its Series A Preferred Stock (the "preferred stock"). A question arose as to the propriety of the Company's reliance upon a section of the Securities Act of 1933 that the preferred stock was exempt from registration. The potential consequence of the shares not being subject to the exemption created a right of rescission for each investor amounting to the total of their investment. As of October 31, 2003 all the preferred shareholders had exercised their right to convert their preferred shares into common shares. It is possible that their right of rescission may survive the conversion. However, no provision for this contingency has been made in the accompanying financial statements. Litigation In September 2003, the Company filed a complaint in California Superior Court against two former officers of the Company and a related company (the "defendants"), alleging fraud, deceit, conspiracy, breach of contract and seeking rescission of agreements made in April and August 2002 and the return of the cancelled stock certificates representing 1,000,000 cancelled shares of the Company's common stock. In a preliminary ruling, the court ordered that the disputed stock certificates be held at two brokerage firms until the matter is resolved. The parties are working on a stipulation to deposit the disputed share certificates with the court pending the final resolution of the matter. If the Company prevails in this action, the stock will be considered cancelled. Until the court resolves this matter, the shares are included in common shares outstanding although the Company's position is that the stock has been validly cancelled. The Company believed that if they brought suit against the defendants, a cross-complaint would be filed in retaliation. The defendants have filed an amended cross complaint alleging conversion, breach of duty to transfer securities, breach of contract, defamation, and unfair business practices. The Company intends to vigorously prosecute its complaint and defend the cross-complaint. In the event of an unfavorable outcome of the defense against the cross-complaint, the award of damages to defendants could be material. The Company does not have director and officer insurance or some other form of insurance covering the period that gave rise to these events. The Company 12 believes that the merits of its case are substantial and that the Company will prevail in the matter. If the Company prevails in the pending litigation, there is the potential of a contingent gain of an amount not to exceed $10,000 7. Subsequent Events In October 2003, the Company authorized through a private placement the sale of 2,000,000 equity units for $1.50 per unit. Each unit consists of one share of common stock and one warrant to purchase a share of common stock for $.50, with an exercise period that expires six months after the unit is purchased. As of March 10, 2004 the Company has sold 242,794 units for a total of $364,191. In addition, shareholders have exercised 187,794 warrants for a total of $93,897. On March 1, 2004 the Company moved its corporate headquarters to Scottsdale, Arizona. The Company signed a three-year lease calling for monthly payments of $4,963.13 beginning March 1, 2004. - -------------------------------------------------------------------------------- ITEM 2. PLAN OF OPERATION. Development of the Company Company Background We were founded in January 2001 to provide vulnerability assessments and emergency communications systems to schools and government facilities. Our goal was to improve public safety emergency communications and allow seamless communication between police, fire and emergency medical personnel responding to an emergency at a school or other government facility. Unfortunately, prior to the events of the last two years, there were limited funds available in school budgets for emergency communications systems. Most major public safety incidents, whether arising from terrorism or more common threats such as fires, take place at large buildings. Preparing for those threats is as much a part of homeland security as preparing to respond to terrorism. Public safety officials and facilities managers have now recognized that the ability of first responders to access information and communicate as soon as they arrive at an emergency site is vital. Fires, earthquakes, major electrical power interruptions, floods, blizzards, tornados, and other natural disasters can disrupt emergency life safety and communications systems and interfere with the ability of first responders to protect lives and property. Our SafetyNet(TM) products and technologies can be used to provide first responders with immediate on-site access to information. In addition to working with public safety agencies and the military, we are actively pursuing the emerging market for wireless commercial life safety communications systems. Our business. We develop leading edge wireless and security technologies for the U.S. Government, public safety agencies, and private corporations for Homeland Security applications, including life safety applications for commercial facilities. Having worked with public safety agencies to develop our wireless communication products, we are now actively marketing our products and technologies to exploit the emerging commercial life safety markets, while continuing marketing to public safety agencies. Integrating the public and 13 private emergency communications systems available to first responders and commercial facilities personnel (including management and security personnel) is the new challenge in homeland security that our products and technology address. Our goal is to be the standard in secure interoperable communication systems that improve emergency response capabilities for both the public and private sector. The development of new technologies has enabled companies to link life safety devices to security systems. Integrating these systems will improve the ability of first responders at skyscrapers, airports, hospitals, schools, power plants, and government facilities. The effectiveness of first responders to an emergency at a high-rise building or other commercial facility is highly dependent upon the integration of the life safety communications systems at the facility and the type and quality of the information immediately available at the scene. Using SafetyNet(TM) products and technologies, commercial facilities can provide first responders with communications interoperability and enhanced emergency response capabilities. Our products. We have developed patent-pending products for public safety agencies and commercial end users: the SafetyNet(TM) Wireless Life Safety System (WLSS) for commercial applications, the SafetyNet(TM) Mobile Command Post (MCP) for public safety agencies and the SafetyNet(TM) Radio Bridge. Our radio bridge was originally called the "EKHO(TM)". We are now marketing all of our wireless life safety products under the "SafetyNet(TM)" brand. The effectiveness of public safety agencies responding to an emergency at a high-rise building or other commercial facility is highly dependent upon the integration of public and private emergency systems. Our products provide facility managers with a reliable emergency management system that includes broadband video, audio, and other data from life safety devices that can be shared with public safety agencies. Our portable wireless products allow police, firefighters, and other public safety personnel to communicate effectively with each other for a coordinated, effective response at any multi-jurisdictional emergency. The SafetyNet(TM) line of products provides decision-makers with access to the most up-to-the-second information available from the emergency scene and with an interoperable communication solution. The Market According to the Homeland Security Research Corp., an industry research group, the homeland security industry is projected to grow to more than $170 billion in 2006, from an expected $100 billion in 2003. According to Peter Michel, chair of the Security Industry Association's Homeland Security Advisory Council, there are four distinct markets in the homeland security industry: the federal government, state and local governments, infrastructure companies and private companies. These are emerging markets for new technology, equipment upgrades and increased systems integration. We are marketing our products to all of these emerging markets. Because of our work developing our products and technologies with both the public and private sector, we are directing our marketing efforts to commercial end-users, with particular emphasis on facilities managers and life safety purchasers, as well as continuing our marketing efforts to public safety agencies. Although we have been concentrating on developing our commercial sales force, we continue to pursue our initiatives with the Department of Homeland 14 Security (DHS). In November 2003 we responded to a solicitation by the Office for Domestic Preparedness (ODP), the program office within the DHS responsible for enhancing the capacity of state and local jurisdictions to respond to, and mitigate the consequences of, incidents of domestic terrorism. The Space and Naval Warfare Systems Center, San Diego (SPAWAR) provides support for ODP in that mission and is seeking a communications control system capable of handling anti-terrorism activities that are conducted jointly by local and state law enforcement agencies and first responders. After reviewing our technologies, SPAWAR selected us to demonstrate the SafetyNet(TM) Mobile Command Post and SafetyNet(TM) Radio Bridge to various United States government representatives at SPAWAR in San Diego. We believe our products and technologies will be a big part of the solution to the communication problems faced by public safety agencies and first responders. Major public safety agencies are finally receiving homeland security funds and we have been working with them to promote the use of our products. These agencies include the Los Angeles County Sheriff's Department, the Los Angeles Police Department, Anaheim Police Department and Anaheim Fire Department. We are committed to capturing essential early market share in the emerging public safety wireless communications market and we will continue to work with major public safety agencies across the country to demonstrate and promote the Aegis SafetyNet(TM) line of products. The Aegis SafetyNet(TM) MCP has been nominated as a new law enforcement product to participate in the Office of Law Enforcement Technology Commercialization (OLETC) program, which is sponsored by the National Institute of Justice's Office of Science and Technology. The program is designed to assist in the commercialization of innovative technology for use by the law enforcement community. The program provides support through every stage of technology transfer and commercialization, and includes providing assistance in marketing assessments, product development, testing and evaluation, and financial assistance. We attended the first program session from March 8 through March 12, 2004 in Albuquerque, New Mexico. Results of Operations. We have no revenues and minimal assets and we have incurred losses since our inception. To date we have relied on the sale of our equity securities and on loans from our officers to fund our operations. Liquidity and capital resources. We were incorporated on January 16, 2002. Since our inception, two of our officers and directors, Eric Johnson and Richard Reincke, have paid many of the expenses we have incurred and have also partially deferred their salaries. However, we have not received any commitments or guarantees from Mr. Johnson, Mr. Reincke or any of our other officers or directors to fund any additional capital needs we may have in the future. Our other material cash expenditures have been general and administrative expenses, legal and accounting expenses, equipment purchases, employee expenses and office lease expenses. From inception (January 16, 2002) to January 31, 2004 we accumulated a total net loss of $2,439,137. We expect that deficit to continue to increase during the next quarter as we fund our continuing operations and incur legal and accounting expenses incidental to our reporting obligations as a public company. Moreover, our accountants have expressed concern that we will not be able to continue as a 15 going concern because we have not yet established a source of revenues. Now that we have commercially viable products and technology, we intend to focus on generating revenues by marketing our products and technology to both the public and private sectors. Our assets at January 31, 2004 included $72,042 in cash as well as $66,978 in property and equipment (net of accumulated depreciation), and $9,250 in other miscellaneous assets, for total assets at the end of the period of $148,270. Our liabilities at January 31, 2004 were $41,731 in accounts payable and $210,608 in accrued payroll, for total current liabilities at the end of the period of $252,339. The increase in liabilities resulted from the increased costs of our operations. At January 31, 2004, we had $72,042 in cash and cash equivalents, as compared with $4,451 in cash and cash equivalents at January 31, 2003. The increase was due to sale of our equity during the period. We are currently raising funds through a private placement of equity interest in the Company to raise capital to continue to fund our operations. Proceeds from the issuance of common stock during the six month period ended January 31, 2004 totaled $556,175, with an additional $103,709 in proceeds raised from the exercise of warrants. Our general and administrative expenses for the three-month period ended January 31, 2004 decreased to $434,843, as compared to $695,175 for the three-month period ended January 31, 2003. Consulting fees paid in cash for the three month period ended January 31, 2004 were $5,604; there were no consulting fees incurred during the corresponding period ended January 31, 2003. We incurred payments to acquire property and equipment of $27,938 during the three months ended January 31, 2004, as compared to $30,349 during the corresponding period ended January 31, 2003. Our net loss from operating activities for the three month period ended January 31, 2004 was $434,843, a decrease from the $695,175 net loss from operating activities during the corresponding period ended January 31, 2003. Our net loss from operating activities for the six month period ended January 31, 2004 was $883,171, a decrease from the $893,553 net loss from operating activities during the corresponding period ended January 31, 2003. We believe that we need to raise approximately $2.8 million over the next twelve months to fully fund our operations. We presently have cash and cash equivalents sufficient to satisfy our cash requirements for approximately the next three to four months. We are attempting to raise such funds through a private equity offering. We may also attempt to raise the necessary funds through entering into strategic business relationships or from venture capital resources. Substantial Doubt About Our Viability as a Going Concern. Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to a going concern that contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. We have no revenues and minimal assets and we have incurred losses since our inception. To date we have relied solely on loans from shareholders and officers and the sale of our equity securities to fund our operations. Our general business strategy is unproven, 16 and we are not generating revenues; however, we continue to incur legal, accounting, and other business and administrative expenses. Our auditor has therefore recognized that there is substantial doubt about our ability to continue as a going concern. Employees. In January and February 2004 we opened a national sales office in Scottsdale, Arizona where we have consolidated our sales, marketing, administrative and executive offices. We currently have 9 full-time employees. In addition to our full-time employees, we have consultants who currently provide administrative and advisory services similar to those that would be provided by full and part-time employees. We have also entered into consulting agreements to obtain counsel and services relating to marketing, product development, financial matters, media relations and business development. We anticipate hiring additional employees over the next twelve months to augment our administrative infrastructure, as we plan to expand our National Sales Office staff. We also anticipate recruiting a national, commission-based sales force. At present, we anticipate the sales force will be independent contractors. Additionally, we may hire a significant number of employees for assembling our products unless we are able to enter into satisfactory production out-source arrangements. Copies of consulting agreements and employment agreements have been filed as exhibits to our registration statement on Form SB-2 filed with the Securities and Exchange Commission on October 9, 2002 and subsequent amendments thereto; as exhibits to our previous quarterly reports on Form 10-QSB; and as exhibits to registration statements on Form S-8 filed with the Securities and Exchange Commission on April 22, 2003 and September 4, 2003. ITEM 3. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. As of the date of this quarterly report, we believe our disclosure controls and procedures are effective. (b) Changes in internal controls. There were not any significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Other than as specified in this section, we know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. Other than as disclosed below, there are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest. On September 18, 2003, we filed a complaint in the Superior Court of the State of California, Orange County, Case No. 03CC11547, against Eric Peacock ("Peacock"), Vernon M. Briggs III ("Briggs") and Iocene Technology Corporation, a Nevada corporation ("Iocene), for, among other things, fraud, deceit, conspiracy, breach of contract and conversion. As disclosed in previous filings, 17 we believed that if we brought suit against Briggs and Peacock, they would file a cross-complaint in retaliation. On October 1, 2003, they filed a cross-complaint against the Company and its directors. Both the Company and its directors believe the cross-complaint is entirely without merit and was filed in bad faith, and that naming the Company's directors personally was improper and a bad-faith pressure-tactic by Briggs and Peacock. We intend to vigorously prosecute the complaint against Briggs, Peacock and Iocene and oppose the cross-complaint. We further believe that we will prevail in this action. ITEM 2. CHANGES IN SECURITIES. In November 2003 the Company authorized a private placement of equity units, each of which consisted of one share of the Company's common stock and one warrant to acquire one share of the Company's common stock at $.50 per share, with an exercise period that expires six months after the purchase. During the period November 1, 2003 through January 31, 2004, a total of 113,250 equity units were sold at $1.50 per unit (the "units") for total funds to the company of $169,875. During the same period warrants for 114,917 shares were exercised at $.50 per share for total funds to the Company of $57,459. Additionally, options to purchase 11,800 shares were exercised for total funds to the company of $11,800 ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 5. OTHER INFORMATION. Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. Reports on Form 8-K We filed a report on Form 8-K on January 23, 2004 referencing our press release dated January 5, 2004, which reported the appointment of H. Kenneth Edge as Executive Director of Sales and Mauro Scigliano as National Director of Sales and the opening of our new National Sales Office in Scottsdale, Arizona. That report also detailed our significant progress in preparing our products for national distribution and mass production and the selection of the Aegis SafetyNet(TM) Mobile Command Post, a mobile wireless broadband communication system for emergency responders, as a new law enforcement product to participate in the Office of Law Enforcement Technology Commercialization (OLETC) program sponsored by the National Institute of Justice's Office of Science and 18 Technology. The program is designed to identify and commercialize innovative technology for use by the law enforcement community. The program provides support through every stage of technology transfer and commercialization, including marketing assessments, commercialization planning and capital access. We filed a report on Form 8-K on December 15, 2003, which specified that, effective December 8, 2003, the Company decided to replace Kelly & Company, which audited the Company's financial statements for the fiscal year ended July 31, 2003, with Hein & Associates LLP to act as the Company's independent auditors. Exhibits Required by Item 601 of Regulation S-B Exhibit No. 3.1 Amended and Restated Certificate of Incorporation* 3.2 Bylaws* 5. Opinion Re: legality* 10.1 Stock option plan* 10.2 Consulting Agreement with Louis Alonzi** 10.3 Consulting Agreement with Brian Quinn** 10.4 Consulting Agreement with David Smith (2nd) ** 11. Statement Re: computation of per share earnings (loss)*** 15. Letter on unaudited interim financial information*** 31.1 Section 302 Certification of Eric Johnson 31.2 Section 302 Certification of Richard Reincke 32.1 Section 1350 Certification of Eric Johnson 32.2 Section 1350 Certification of Richard Reincke *Previously filed as exhibits to our Registration Statement on Form SB-2 filed October 9, 2002. **Filed as an exhibit to a Registration Statement on Form S-8 on September 4, 2003 and incorporated herein by this reference. *** Included in financial statements 19 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AEGIS ASSESSMENTS, INC. By: /s/ Richard Reincke Secretary and Chief Operating Officer Date: March 17, 2004 20 EX-31.1 3 a4598337ex31p1.txt AEGIS ASSESSMENTS INC. EXHIBIT 31.1 Exh. 31.1 CERTIFICATIONS I, Eric Johnson, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Aegis Assessments, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 21 b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 17, 2004 /s/ Eric Johnson - ---------------------- Eric Johnson Chief Executive Officer 22 EX-31.2 4 a4598337ex31p2.txt AEGIS ASSESSMENTS INC. EXHIBIT 31.2 Exh. 31.2 CERTIFICATIONS - -------------- I, Richard Reincke, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Aegis Assessments, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 23 b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 17, 2004 /s/ Richard Reincke - ---------------------- Richard Reincke Secretary 24 EX-32.1 5 a4598337ex32p1.txt AEGIS ASSESSMENTS INC. EXHIBIT 32.1 Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Aegis Assessments, Inc., a Delaware corporation (the "Company") on Form 10-QSB for the period ending October 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Eric Johnson, Chief Executive Officer of the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Eric Johnson - ---------------- Eric Johnson Chief Executive Officer March 17, 2004 25 EX-32.2 6 a4598337ex32p2.txt AEGIS ASSESSMENTS INC. EXHIBIT 32.2 Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Aegis Assessments, Inc. a Delaware corporation (the "Company") on Form 10-QSB for the period ending October 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Richard Reincke, Secretary of the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Richard Reincke - ------------------- Richard Reincke Secretary March 17, 2004 26 -----END PRIVACY-ENHANCED MESSAGE-----