-----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,
TQkQWPC5adVS55KS2FXoD6tauN02FaA7V/+9bUkO4oadgNtd8ro48pznKXeBAR6u
0gCbBEg6w1LpQSg894T4CQ==
UNITED STATES FORM 10-KSB 6650 Gunpark Drive, Suite 100, Boulder, CO 80301 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, Par Value $0.001 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. Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. x State issuer's revenues for its most recent fiscal year: $223,192. State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.) $902,417 as determined by the closing price of $0.005 on December 31, 2007. Note: If determining whether a person is an affiliate will involve an unreasonable effort and expense, the issuer may calculate the aggregate market value of the common equity held by non-affiliates on the basis of reasonable assumptions, if the assumptions are stated. (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. (APPLICABLE ONLY TO CORPORATE REGISTRANTS) State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. There are 180,483,368 shares of common stock outstanding as of March 15, 2008. DOCUMENTS INCORPORATED BY REFERENCE If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1990). Transitional Small Business Disclosure Format (Check one): Yes ¨ No x TELEMETRIX INC. 2
Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED December 31, 2007
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM ____ TO ____
COMMISSION FILE NUMBER 000-14724TELEMETRIX INC.
(Name of small business issuer in its charter)
DELAWARE
470830931
(State or other jurisdiction
(I.R.S. Employer
of incorporation or organization)
Identification No.)
(Address of principal executive offices) (Zip Code)
303-652-0103
(Registrants telephone number, including area code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Yes x No ¨
Yes ¨ No ¨
Table of Contents
INDEX
Table of Contents
PART I
ITEM 1. DESCRIPTION OF BUSINESS |
Business Overview |
Throughout this document, Telemetrix Inc. and its subsidiary are referred to as we, the Company, our, or Telemetrix.
Telemetrix is a wireless mobile telecommunications service provider and network operator, with headquarters in Boulder, Colorado. The Company is a provider of wireless voice, data and short-messaging services. The Company is marketing its services under Convey Wireless, our registered doing business as name.
Organizational Structure |
Telemetrix Inc. is a Delaware corporation and has its principal executive offices in Boulder, Colorado, 6650 Gunpark Drive, Suite 100, Boulder, Colorado 80301 (telephone number 303-652-0103).
Telemetrix Inc. was formed through a series of corporate combinations, as follows:
As of December 31, 2007 we have 180,483,368 shares of our common stock outstanding.
The Company |
Telemetrix Inc. (through its wholly owned subsidiary, Convey Communications Inc.), is an FCC-licensed operator of wireless communications services, based in Boulder, Colorado. Telemetrix is a public company that trades on PinkSheets under the symbol TLXT. The Company was founded in 1999, acquired its FCC licenses in 2000, and initially focused on paging and wireless utility meter reading services. During 2006, the Company upgraded its network infrastructure to a Nokia R4 packet-based solution that has the capability to support up to 10 million users.
In late 2007, Telemetrix began offering voice services to developers of wireless convergent services that combine PCS (commonly referred to as cellular), voice over internet protocol (VoIP), Wi-Fi, and soon, WiMAX network products as bundled offers. These providers purchase our cellular services for branding and marketing customized applications such as wireless or virtual PBX, Unified Voicemail, Push to Talk, and seamless roaming. Also in 2007, the Company ramped up the data services offerings focusing on application providers in markets as diverse as vehicle tracking, home and personal security, energy, and utilities services. Telemetrix also provides Short Message Service (SMS) to convergent service providers and application providers who are also in the tracking, security, energy and utility services.
3
In 2007, we received approvals from the Nebraska Public Utilities Commission and the Wyoming Public Utilities Commission to provide wireless services in both Nebraska and Wyoming. In January 2007, the Company received authorization from the Federal Communications Commission (FCC) renewing our FCC licenses in BTA 411. Our network has achieved compliance with Enhanced-911 services, Phase I, as well as compliance with Department of Justice CALEA (Communications Assistance for Law Enforcement Act). During 2007, the Company completed certification for voice and GPRS services with various roaming partners. We executed a roaming agreement with TelCel in Mexico and continue to work with Rogers Communications for roaming services in Canada, Telefonica for roaming services in South America and Jersey Telecom for roaming services in Europe. In addition to these new service offerings, the Company upgraded its back office platforms to provide revenue assurance for roaming traffic within its network as well as customer traffic on our roaming partners networks. The Company also upgraded its mail, shared files and DNS services and developed a company website and web store. In late 2007, Customer Service was greatly enhanced through the deployment of an automated trouble ticket system, streamlined billing, and advanced offerings such as Unified voice mail, push to talk and international long distance.
FCC Licenses |
Telemetrixs wholly owned subsidiary, Convey Communications Inc., holds the following Federal Communications Commission radio frequency licenses:
Intellectual Property |
On January 11, 2000, the US Patent and Trademark Office (PTO) issued the company Patent No. 6,014,089, which is directed to an apparatus and method for transmitting data to and from a data collection devise using the SMS functionality of the control channel of wireless communication system.
On November 21, 2004, the PTO issued the company Patent No. 6,150,955 which is directed to the use of a telemetry data system for monitoring certain digital packets associated with a digital communications control channel, the identification of certain packets, and the replacement of certain non-information bearing packets with packets that contain useful data and information.
On April 9, 2002, the PTO issued the company Patent No. 6,369,719 which is directed to an apparatus and method for collecting and transmitting utility meter data and other information by means of a wireless network.
These patents were used to pursue opportunities in utility metering, including the sale of application-specific telemetry hardware and software. The Company is reviewing the patents and has hired an outside patent intelligence firm to advise the Company on both potential enforcement and infringement actions.
Switch and Network Upgrade |
In March 2006, Telemetrix contracted with Pario Solutions for a Hosted Services package for our Global Systems for Mobile Communications Network (GSM Network). Pario provides Telemetrix with a Nokia R4 switch solution which allows for remote media gateways using IP connectivity. The R4-compliant Nokia Network equipment, including outdoor Omni Base Transceiver Systems, a Base Station Controller (BSC) with Transcoder and a Media Gateway were engineered, installed and commissioned in late 2006.
4
The network infrastructure is in compliance with all FCC mandates such as Local Number Portability, E-911 and CALEA, while offering the capacity for adding enhanced GPRS service.
Paging |
Telemetrix owned and operated a wireless paging service from 1999 until June 2006. At that time, the service was discontinued and customers were transferred to a paging company in Scottsbluff, Nebraska. Revenues from the paging service were approximately $5000 per month, and did not justify the continued operating expenses. The paging service is not consistent with Telemetrixs plans to focus on advanced telecommunications services. The general use of wireless paging service is declining and paging service revenue is decreasing on paging systems nationwide.
Associations |
Telemetrix is a member of the GSM Association (GSMA), which represents more than 700 mobile phone operators across the globe. The primary goals of the GSMA are to ensure that mobile devices and services work globally, network seamlessly, and are easily accessible. GSM is an open, digital cellular technology used for transmitting mobile voice and data services. GSM is the predominant wireless technology in the world, with over 80% global market share, compared to other wireless technologies. GSMs technology platforms include General Packet Radio Service (GPRS), Enhanced Data rates for GSM Evolution (EDGE), and third generation GSM service (3GSM) based on W-CDMA and HSDPA access technologies.
Another major benefit is GSMs international roaming capability. Roaming is a general term in wireless telecommunications that refers to the extending of connectivity service in a location that is different from the home location where the service was registered. Roaming occurs when a subscriber of one mobile communications service provider uses the facilities of another mobile communications service provider. This allows subscribers to access the same services when traveling that are available in their home territory. GSM roaming agreements can provide mobile communication users seamless and same number connectivity in more than 210 countries.
Company Background |
From 1999 to 2004, the company focused on wireless utility meter reading applications, meter hardware design, Short Message Service, and its paging business. In 2005, the primary investors in Telemetrix made a decision to resume day-to-day oversight of the Companys operations, moving the corporate office from Gering, Nebraska to Boulder, Colorado and refocusing the business as a PCS wireless services provider.
To date the Company has accomplished the following milestones:
5
Service Offerings |
The Company offers voice and data services. |
Telemetrix began offering voice services in late 2007. Our current customers are developers of wireless convergent services that combine cellular, VoIP, Wi-Fi, and soon, WiMAX network products as bundled offers. These developers purchase our cellular services for branding and marketing customized wireless applications such as wireless or virtual PBX, Unified mailbox and seamless roaming between IP, WLAN and cell. The Company provides the Developers, Resellers and Mobile Virtual Network Operators (MVNOs) the required commercial-grade wireless networks as well as flexibility, time to market, and customization. To increase our service offerings, the Company intends to begin coverage in Mexico in the first quarter of 2008. Prepaid plans will be available in the second quarter of 2008 for US customers as well as providers of international roaming traffic, such as business and personal travel, students, and those visiting the US.
The Company began offering data services in 2007. GPRS is the standard for wireless data communications that operates at speeds up to 115 kilobits per second. It provides continuous connection to the Internet for mobile phone, PDA, smartphone and computer users. The higher data rates allow for a wide range of corporate and consumer applications such as web browsing, document sharing, collaborative working, still and moving image, corporate and internet e-mail, vehicle positioning, remote LAN access, dispatch and file transfer. Our customers for this service are convergent services providers and application providers. Our emphasis has been on targeting vehicle tracking application providers that supply services similar to those offered by *OnStar and Garmin.
The Company has been offering Short Message Service (SMS) for a number of years. SMS (commonly referred to as text messaging) is a globally accepted wireless service that enables the transmission of alphanumeric messages between mobile subscribers and external systems, and is also used in machine-to-machine (M2M) applications. This service is generally used by our customers for telemetry systems, involving the use of remote devices for data collection, analysis and messaging. Our customers use our services primarily for machine-to-machine data collection and monitoring. As with GPRS, our customers are developers of convergent services as well as application providers in vehicle tracking, security and utilities, The Company has three U.S. patents related to telemetry and data transmission.
Future Offerings |
Future plans for Telemetrix includes the expansion of service within the Nebraska and Wyoming home operating territory for prepaid voice and data services. We will continue to partner with international GSM operators to offer seamless coverage in the United States for our customers and for theirs when traveling to the US. Prepaid voice and data plans will be available in the second quarter of 2008. In addition, the Company will determine whether to integrate with Wi-Fi and WiMAX network operators or to implement its own advanced networks.
Market and Opportunity |
Voice Services Market and Opportunity |
An integral element of Telemetrixs growth strategy is migration from postpaid to prepaid voice services, which will generate additional revenue and minimize uncollectible accounts. Telemetrixs voice strategy encompasses two elements: 1) Capitalize on the lucrative international prepaid rates and; 2) Continue to market to convergent services providers.
Data Services Market and Opportunity |
The US wireless data market continues to grow rapidly, with overall data service revenue at $15B in 2006. According to In-Stat, 75% of organizations now use at least one data application, and the number of total data users increased a dramatic 20% in one year (from 2005 to 2006). Business uses typically include applications such as a companys intranet, e-mail or web-based applications. The available applications are increasing for services in fleet management, vehicle tracking, manufacturing, inventory management, warehouse applications and field operations/dispatch for which the Company has already provided service.
6
Sales and Marketing Strategy |
In 2007, the sales strategy leveraged the Companys various key benefits and competitive advantages, including, time-to-market, 24/7 customer service and support, minimal set-up charges, and cost effective solutions.
The overall sales strategy of Telemetrix will be to continue to market our PCS network services to wireless convergent services providers, data application providers, and to develop a combination of channels to the worldwide market, such as strategic partnerships and retail channels.
Competitive Analysis |
The market segment in which the Company competes and intends to compete is competitive, risky, and is continually subject to price wars and other competitive pressures from the major carriers. Although Telemetrix is well positioned to provide services in the US market, it relies on its agreements with the other US carriers to provide nationwide coverage under our existing roaming agreements. Telemetrixs main competitors include AT&T, T-Mobile, Verizon, Sprint, and their resellers, such as Kore Telematics, Jasper Wireless, and Raco Wireless. These carriers have substantially longer operating histories, greater name recognition, larger customer bases and greater financial and technical resources than us. Because we are financially and operationally smaller than our competitors, and we rely on the continuation of our existing roaming agreements, we may encounter difficulties in capturing market share as our competitors are able to conduct extensive marketing campaigns and create attractive pricing for their target markets. Telemetrixs offerings are differentiated from its likely competitors by the following key factors, which represent the core components of the Companys competitive edge:
The management of Telemetrix understands that the wireless telecommunications industry is one of the most competitive in the world. The company believes that competitive pricing and niche opportunities will obtain a small market share for a viable and profitable business.
Employees |
We have seven full time employees in our Boulder office and four virtual employees in Dallas and the Cayman Islands.
Cost of Compliance with Environmental laws |
The Company has complied with all environmental regulations related compliance. We have no costs associated with environmental regulations related compliance and we do not anticipate any future costs associated with such compliance.
7
Governmental Regulations |
Wireless telecommunications services are subject to significant regulation. The industry and thus the Company could become subject to additional regulatory requirements as our services grow. We are subject to regulations under the Communications Act of 1934, which includes the Telecommunications Act of 1996. The FCC regulates the facilities and services we use to provide, originate, or terminate interstate or international communications. Our PCS and other wireless services require radio frequency licenses from the FCC or a contractual arrangement with a licensee. We received PCS licenses, in the C and F Block License Auctions. We maintain FCC licenses on all of the communication facilities. The PCS license is granted on a 10-year basis with an expectation of renewal at the end of that term.
Material Agreements |
On April 3, 2006, the Company entered into a Hosting Agreement and an Equipment Supplier Agreement with Pario Solutions, a Nokia value added reseller located in Texas. This Hosting Agreement allows the Company to comply with Federal Communications Commission and Department of Justice requirements for wireless carriers, as well as provide a higher level of wireless services. In the Equipment Supplier Agreement, the Company agreed to purchase $794,000 of Nokia equipment, software and services from Pario.
On September 29, 2006, the Company entered into a Master Services Agreement with Verisign, Inc. for outcollect billing and exchange services. This software billing license allows the Company to exchange billing information with its cellular roaming partners. The monthly fees for the outcollect billing and exchange services include a $5,000 minimum per month with per record rates once the Company achieves a certain volume of transactions. The initial term of the contract will terminate on December 31, 2008.
On October 12, 2006, the Company entered into a three year Master Services Agreement for postpaid billing and provisioning services with Haagenti Group Inc. This software billing license allows the Company to create a system for switching and billing telephone calls, managing associated hardware, configuration, and provisioning with Pario Solutions equipment. The monthly fees are a minimum of $3,000 per month or 2.5% of revenue with increased minimums upon obtaining 10,000 customers.
On January 26, 2007, the Company entered into a Prepaid Billing Services Agreement with Verisign, Inc. The software billing license allows the Company to provide cellular services on a prepaid basis which expands our current service offerings as well as provides the capability of limiting bad debt on current service offerings. The contract has a $5,000 minimum per month with service charges for use. The contract is for a four year period. The development and implementation of the system began in third quarter 2007 and it will be fully deployed by the end of the first quarter 2008.
Loans and Loan Conversions |
The Company entered into a Business Loan Agreement on March 30, 2007 and borrowed $718,714 on a variable rate loan due on March 30, 2011. The Company will pay this loan in accordance with the following payment schedule: 12 monthly consecutive interest payments, beginning April 30, 2007, with interest calculated on the unpaid principal balances at an interest rate based on the Wall Street Journal Prime Rate (currently at 7.50%); 35 monthly consecutive principal and interest payments in the initial amount of $22,647 each, beginning April 30, 2008 with the interest calculated on the unpaid principal balances at the interest rate based on the Wall Street Journal Prime Rate (currently at 7.50%) . The current portion of this balance of this loan is $164,859 with $553,855 classified as long-term debt. The Company entered into a Security Agreement granting to Lender a security interest in certain equipment. The Company had previously gra nted a security interest in the equipment to Becker Capital Management and LB Becker Consulting, who assigned the security interest to this Lender.
8
The Company has outstanding notes payable to four affiliates of the Company in the principal amount of $5,084,109 at December 31, 2007. The Company recorded interest expense of $633,007 and $676,917 on these notes as of December 31, 2006 and 2007.
Type of Debt |
|
Interest Rate |
|
Conversion Price |
|
Maturity Date |
|
Amount of Principal |
Convertible notes | 15% | $.010 per share | 12/31/08 | $1,373,260 | ||||
Convertible notes | 15% | $.010 per share | 12/31/08 | $1,875,043 | ||||
Convertible notes | 15% | $.010 per share | 12/31/08 | $1,368,806 | ||||
Convertible notes | 10% | $.020 per share | 12/31/06 | $ 467,000 | ||||
Debt discount, less amortization of $467,000 | - | |||||||
Total | $5,084,109 |
The Company has issued convertible promissory notes to Nyssen LP (Nyssen) totaling $1,373,260 for advances from November 30, 2004 through December 31, 2007. The notes pay interest at 15% per annum and matured on December 31, 2007. The Company and Nyssen agreed to extend the maturity date of the notes to December 31, 2008. The extension of the promissory notes will include a reduction in the conversion rate of the loans from $.015 to $.010. During 2006 and 2007, the Company received $323,259 and $660,000 in advances from Nyssen and recorded interest expense of and $97,996 and $167,506.
On October 2, 2006, the Company issued convertible promissory notes for $1,703,407 and $843,806 to Becker Capital Management LLC and LB Becker Consulting Inc., respectively, in exchange for their cancellation of existing demand notes of $2,382,000 principal and $165,213 of accrued interest. The convertible promissory notes pay interest at 15% per annum and provide a conversion feature, based on the prior 10 day average stock trading price of the Companys common stock on Pinksheets on October 2, 2006, which was $.015 per share. The notes matured on December 31, 2007. The Company and Becker Capital and LB Becker consulting agreed to extend the maturity date of the notes to December 31, 2008. The extension of the promissory notes will include a reduction in the conversion rate of the loans from $.015 to $.010. At December 31, 2007, the principal note balance for Becker Capital Management is $1,875,043 and $1,368,806 for LB Bec ker Consulting. During 2006 and 2007, the Company received $2,398,000 and $910,350 in loans and repaid $718,714 of these loans in 2007. The Company has recorded interest expense of 250,141 and $452,904 on these loans in 2006 and in 2007.
On December 31, 2004, the Company issued a $467,000 term note to Tracy Broadcasting Corporation with interest at 10% per annum and a maturity date of December 31, 2006. The note is convertible into common shares at the rate of $.02 per share. The note evidences prior advances made to the Company in 2002 and 2003. The Company recorded $51,370 and $56,507 of interest expense on this note during 2006 and 2007.
The Company used the intrinsic value method to determine proceeds that should be allocated to the embedded beneficial conversion feature for the $467,000 convertible note. As such, $492,000 was credited to additional paid in capital in 2004. The allocation of $467,000 will be amortized over 24 months commencing January 1, 2005, and the allocation of $25,000 was charged to interest expense during the year ended December 31, 2004. The Company recorded $233,500 of interest expense on this note during 2006.
In November 2006, the Company issued the following common shares for the convertible debt described below:
May 2003 Exchange and Conversion Agreements | 31,310,208 | |
May 2003 Stock Purchase Agreement | 3,519,004 | |
Deferred Officer Compensation | 6,479,474 | |
February 2003 Convertible Promissory Note | 36,175,000 | |
November 30, 2004 Settlement Agreement | 60,000,000 | |
November 30, 2004 Settlement Agreement Future Funding | 18,000,000 | |
Total shares issued | 155,483,686 |
9
May 2003 Exchange and Conversion Agreements:
During May 2003, the Company, through corporate resolution, agreed to convert existing corporate indebtedness of major shareholders and investors in the company into equity through an approved corporate exchange of non-issued common shares for notes and accrued interest aggregating $4,107,297. The conversion of debt to equity by those participating note holders would include the issuance of preferred and common shares since the Company did not have a sufficient number of authorized common shares to complete the transaction. The Corporation's Amended Articles of Incorporation ("Articles") authorizes the Corporation to issue up to 5,000,000 Preferred Shares, with a par value of $.001 ("Preferred Shares") in one or more series at such price and in such number as authorized by the Board of Directors. Accordingly, the Board of Directors designated 250,000 Preferred Shares as Series D Preferred Shares (see Note 8). In addition to the s tated interest rates through 2003 the Company has agreed to issue an aggregate of 16,650,301 shares of common stock as additional consideration for the loans. These shares have been valued at $3,951,927, which represents the fair market value of the shares on the dates of the loans. The parties to the agreements subsequently agreed to accept common stock in lieu of the combination of preferred and common. In November 2006, the Company issued 31,310,208 shares of common stock in to fulfill its obligations under the agreements.
May 2003 Stock Purchase Agreement:
During May 2003 the Company agreed to issue 10,042,500 shares of common stock to an officer for the conversion of notes aggregating $401,700. During the year ended December 31, 2004, the Company issued 6,523,496 of these common shares and reduced the stock subscription by $260,940. In November 2006, the Company issued the remaining 3,519,004 shares of common stock due to the former officer.
November 30, 2004 Settlement Agreement:
During October 2003 the Company entered into a funding agreement with Nyssen LP (Nyssen) under which the Company would be able to borrow up to $2,000,000 in the form of convertible notes. As of November 30, 2004, the Company was advanced an aggregate of $1,600,025 pursuant to this funding agreement. Pursuant to an amended agreement dated November 30, 2004, Nyssen agreed to convert the $1,600,025 into common shares at $.04 per share receiving subscriptions for 40,000,000 shares of common stock. In the same agreement, an entity related to Nyssen received subscriptions for 20,0000,000 shares of common stock for services. In November 2006, the Company issued 40,000,000 share of common stock to Nyssen in exchange for the $1,600,025 note and 20,000,000 to their affiliate for services.
As provided in the November 30, 2004 agreement, Nyssen and another affiliate of the Company, Becker Capital Management LLC (Becker) agreed to invest an additional $600,000 for a total of 18,000,000 shares of common stock. Both Nyssen and Becker advanced the Company $600,000 in 2005. In November 2006, the Company issued 7,000,000 shares of common stock to Nyssen and 11,000,000 shares to Becker.
February 2003 Convertible Promissory Note:
On February 3, 2003, the Company issued a $30,000 term note with interest at 10% per annum payable to a related party which required three installment payments of $10,000 each on March 3, 2003, April 3, 2003 and May 3, 2003. The note provided a penalty that in the event a payment was not received, within 5 days of each due date, the Company would be declared in default. The holder of the note would then be entitled to receive shares of stock of the Company at $0.11 per share, for outstanding principal balance including interest. Additionally, for each 30 days beyond the due date, additional shares would be computed at the rate of ½ of the initial conversion rate. On November 30, 2004, the note plus $4,757 in accrued interest was converted into shares of stock of the Company, at par, with the holder to receive 36,175,000 shares of common stock. In November 2006, the Company issued the related party 36,175,000 shares of common stock.
$1,200,000 Convertible debentures interest at 6.25% per annum, conversion feature allows the holder to use the debenture as payment for a like value of securities should the Company complete a stock offering of $6,000,000 at January 1, 2001. Such an offering was not completed. The debentures are currently in default. The Company recorded $104,474 of interest expense on these debentures during 2007. Total interest payable on these debentures is $649,252 at December 31, 2007.
10
Office Lease Agreements Office Space |
Boulder Office Space |
We have an office in Boulder, Colorado, in the office of Becker Capital Management, located at 6650 Gunpark Drive, Suite 100, Boulder, Colorado. This office is used for accounting and general and administrative functions. The Company leases its office from an officer of the Company at a rate of $2,500 per month pursuant to a lease that expired in October 2007. The Company is currently renting the space on a month-to-month basis. The Company currently requires additional office space and intends to enter into a rental agreement with the officer of the company in January 2008.
Scottsbluff Office Space |
The Company entered into a three year lease agreement in May 2006 for 965 square feet of office space located at 1721 Broadway, Suites 412 and 413, Scottsbluff, Nebraska 69361, to warehouse our media gateway equipment for $980 per month.
ITEM 2. DESCRIPTION OF PROPERTIES |
Network Equipment |
Pario Solutions, our hosted switch provider and Nokia VAR, provides Telemetrix with a Nokia R4 switch solution which allows for remote media gateways using IP connectivity. The media gateways are located in our office in Scottsbluff, NE.
Telemetrix owns and operates GSM radio equipment that was upgraded and linked back to a centrally-located Base Station Controller (BSC). The BSC is linked to an adjacent Multimedia Gateway (MGW), which in turn, is linked to a remotely located Mobile Switching Center (MSC) and the Home Location Register (HLR). All voice paths remain within our local domain, while the call control and service intelligence are located remotely, in Parios facilities.
The Nokia MSC Server is a circuit-switched call control product offering all GSM and 3G circuit-switched services and it is based on 3 GPP Release 4 standards. With 3GPP R4, the MSC functionality is split into two distinct logical entities, the MSC server, responsible for the call control and the control of the media gateways (MGWs), and the MGW which handles user traffic. The R4 MGW is able to perform all necessary user processing with a packet-based transmission network. The Nokia R4 MGW has connections to 2G and 3G wireless, ATM/IP backbone and the PSTN/ISDN. The network equipment includes outdoor Omni BTSs located at our tower sites with one BTS located at our offices in Boulder, CO.
Towers |
We own tower sites in the following locations: |
11
We rent tower sites in the following locations: |
The leases and rental agreements pertaining to these tower sites are generally a five year term. Rental charges are based on a monthly rate calculated by the number of feet of tower space between the antenna location on the tower and the ground multiplied by a per foot rate, plus a monthly charge for equipment space within the building at the base of the tower site used to house equipment.
ITEM 3. LEGAL PROCEEDINGS |
On January 16, 2007 Tracy Broadcasting Corporation filed a complaint in the District Court for Scottsbluff County, Nebraska, against the Company, in Case No. CI-07 37. Tracy Broadcasting Corporation is owned by Michael Tracy, a former CEO and Director of the Company. Mr. Tracy is also a major shareholder of the Company. The Complaint alleges that the Company owes Tracy Broadcasting Corporation $467,000 plus accrued interest at 10% per annum for a promissory note dated December 31, 2004. The Company disputes the claim as having been paid and for lack of subject matter jurisdiction in the District Court for Scottsbluff County, Nebraska. The Company filed a motion to compel arbitration in Denver, Colorado. On November 27, 2007 the motion was denied and the Company has appealed the decision with the Nebraska Supreme Court. In 2001 through 2003 the Company recorded the liabilities to Tracy Broadcasting Corporation, under the direction of Mr. Tracy, as CEO, as Notes Payable to Affiliates. In 2007, the Company discovered that the Notes Payable had in fact been repaid at various dates in 2001 through 2002. The liability to Tracy Broadcasting Corporation remains recorded as a liability of the Company and upon successful legal resolution, the Company will record the correction on the books of the Company.
On February 2, 2007 Michael J. Tracy filed a complaint in the County Court for Scottsbluff County, Nebraska, against the Company, in Case No. CI-07 169. Michael Tracy is a former CEO and Director of the Company. Mr. Tracy is also a major shareholder of the Company. The Complaint alleges that the Company owes Mr. Tracy $3,496.37 expenses associated with a lease agreement that expired October 31, 2006. The case was dismissed with prejudice on May 8, 2007.
On April 12, 2006, Michael J. Tracy filed a complaint in the District Court for Scottsbluff County, Nebraska, against the Company, in Case No. CI-06-291. Mr. Tracy is the former CEO and Director of the Company. The Complaint alleges that the Company owes Mr. Tracy $3,378,129.42 as of April 1, 2006, including principal and interest for loans Mr. Tracy made to the Company at various times in 2001 and 2002. The loans are represented by convertible demand notes. On May 26, 2003, Mr. Tracy and the Company entered into an agreement for the exchange and conversion of these notes for preferred stock of Telemetrix. The Complaint alleges that Telemetrix has failed to perform this agreement. In November 2006, the Company tendered 23,894,351 shares of common stock to Mr. Tracy in satisfaction of the May 26, 2003 Exchange and Conversion Agreement and 3,472,789 shares of common for deferred compensation. Additionally, the Company has offered M r. Tracy the right to exchange the 23,894,351 share of common stock for 101,551 shares of Series D preferred share and 3,584,151 shares of common pursuant to the May 26, 2003 Agreement. Mr. Tracy returned the shares tendered claiming that he did not agree to accept common shares in lieu of preferred shares. The Company filed counterclaims against Mr. Tracy in connection with the Complaint and filed a motion to compel arbitration in Denver, Colorado. On November 27, 2007, the motion to compel arbitration was ordered and the claim was dismissed from District Court in Nebraska. This case docketed in the District Court for Scotts Bluff County, Nebraska, is now closed.
On September 10, 2004, the Company filed a Complaint in the United States District Court in the Southern District of New York against Michael Tracy (Tracy), Michael L. Glaser (Glaser), and William W. Becker (Becker), in case number 04CV7255. The Complaint sought an award for compensatory damages, an injunction against Tracy, Glaser and Becker for breach of fiduciary duty, costs and expenses for litigation (except fees and other disbursements) including reasonable attorneys fees, and against Tracy for conversion, and such other and further relief as may be deemed just and proper.
12
On September 16, 2004, the Company filed a complaint in the United States District Court for the District of Nebraska, in case number 7:04CV5020, against TowerGate Finance, Ltd., (TowerGate) and Nyssen, LP (Nyssen). The Complaint alleges fraudulent misrepresentations against TowerGate, fraudulent concealment against Nyssen, breach of fiduciary duty against TowerGate, civil conspiracy against TowerGate and Nyssen, breach of contract against TowerGate, and breach of the covenant of good faith and fair dealings against TowerGate. The Complaint seeks preliminary and permanent injunction, declaratory judgment and an accounting. The Complaint also requests a jury trial.
On December 10, 2004, the Company, Tracy, Glaser and Becker and our other majority shareholders and TowerGate and Nyssen entered into a binding agreement (Agreement) dated as of November 30, 2004, in which the parties agreed to dismiss the above described lawsuits, and settle the dispute between them and between the Company and TowerGate and Nyssen. The agreement calls for the appointment of an interim board of directors and stipulated that so long as Becker and affiliated entities and TowerGate/Nyssen hold in excess of 25% of the outstanding voting common shares that they will be entitled to appoint two directors.
All parties to the Settlement Agreement are either beneficial owners of the Companys common stock, current or proposed members of the Companys management, and/or are parties or affiliates of parties involved in the Litigation that gave rise to the Settlement Agreement. The specific terms of the Settlement Agreement, including the relationships among the parties to the Settlement Agreement is discussed in the Schedule 14A Proxy Statement filed with the SEC on September 15, 2006 and sent to the shareholders in October 2006.
In the Settlement Agreement, the parties agree that the parties will undertake the following actions:
Increase the Companys authorized share capital;
Effect material share issuances to Becker Capital Management;
Effect material share issuances to Nyssen LP and TowerGate Finance Limited; and
Adopt a stock option plan for the Companys existing and new management.
On October 27, 2006, at the Companys annual meeting of shareholders, a majority of the Companys shareholders: (1) approved the election of William W. Becker, Gary Brown, Piers Linney, Christopher Fitzsimmons, and Larry L. Becker as directors of the Company; (2) ratified the selection of Stark Winter Scheinkein & Co. LLP. as the Companys independent auditors for the fiscal years ending 2005 and 2006; (3) approved an Amendment to the Companys Articles of Incorporation to increase the number of authorized shares of common stock to 750 million shares; (4) approved an Amendment to the Companys Articles of Incorporation to increase the number of authorized shares of preferred stock to 25 million; (5) approved the Settlement Agreement dated November 30, 2004, as described in the Companys Proxy Statement relating to the annual meeting; and (6) approved the adoption of the Companys 2006 Employ ee Incentive Stock Option plan as described in the Proxy Statement related to the annual meeting.
The approval of the Settlement Agreement was approved by holders of approximately 69% of those eligible to vote on the proposal. All of the parties to the Settlement Agreement abstained from voting on this proposal. On November 2, 2006, the Company filed an amendment to its Articles of Incorporation increasing the number of authorized shares of common stock to 750 million shares and increasing the number of authorized shares of preferred stock to 25 million. On November 27, 2006, Becker, Nyssen and TowerGate were issued the shares pursuant to the Settlement Agreement.
The Company is also involved in various legal actions arising in the normal course of business management believes that such matters will not have a material effect upon the financial position of the Company.
13
Other |
On October 19, 2006, the Company filed a Request for Arbitration with the World Intellectual Property Organization against UT Starcom, Inc., the successor in interest to Telos Technologies, Inc., the manufacturer of the Sonata SE switching system (GSM switch). The Request for Arbitration was accepted on October 24, 2006. The dispute relates to a Master Purchase and License Agreement dated October 22, 2003 for a Sonata SE Global System for Mobile Communications switching system. The Company requests arbitration of the following claims: (1) breach of contract; (2) breach of good faith and fair dealing; (3) fraudulent misrepresentations; (4) fraudulent inducement; (5) negligent misrepresentation; (6) intentional interference with existing contractual relations; (7) intentional interference with prospective economic relations; (8) negligent interference with existing economic relations; and (9) negligent interference with prospective economic relations. The Company claims that UT Starcom failed to perform from the time of installation and UT Starcom failed to deliver five significant features and functionality that UT Starcom represented would be available at the time the Company purchased the GSM switch. These features and functionality include among others, (a) E911-Phase II functionality in the GSM Switch so that Telemetrix could comply with the FCCs mandated 911 services requirement by June 30, 2006; a GSM feature including intelligent network functions into a GSM network system; CALEA, which imposes upon Telemetrix a statutory obligation to ensure that its equipment, facilities or services that provide a customer or subscriber with the ability to originate, terminate or direct communications. Telemetrix requests entry of an award during the arbitration in its favor and against UT Starcom as follows:
A. for general damages in an amount to be established at trial;
B. alternatively, a rescission of the Agreement;
C. for cost of the arbitration, including attorneys fees; and
D. for such other and further relief as the Arbitrator may deem just and fair.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 27, 2006, at the Companys annual meeting of shareholders, a majority of the Companys shareholders: (1) approved the election of William W. Becker, Gary Brown, Piers Linney, Christopher Fitzsimmons, and Larry Becker as directors of the Company; (2) ratified the selection of Stark Winter Scheinkein & Co. LLP. as the Companys independent auditors for the fiscal years ending 2005 and 2006; (3) approved an Amendment to the Companys Articles of Incorporation to increase the number of authorized shares of common stock to 750 million shares; (4) approved an Amendment to the Companys Articles of Incorporation to increase the number of authorized shares of preferred stock to 25 million; (5) approved the Settlement Agreement dated November 30, 2004, as described in the Companys Proxy Statement relating to the annual meeting; and (6) approved the adoption of the Companys 2006 Employee Incentive Stock Option plan as described in the Proxy Statement related to the annual meeting.
The election of Messrs. William Becker, Gary Brown, Piers Linney, Christopher Fitzsimmons, and Larry Becker to the Companys Board of Directors was approved by holders of more than 79% of the 24,999,682 issued and outstanding shares of the Companys common stock. The ratification of the Companys auditors, Stark Winter Scheinkein & Co. LLP. was approved by holders of more than 80% of the issued and outstanding shares of the Companys common stock; the approval of the increase in the authorized number of shares of common stock was approved by more than 59% of the issued and outstanding shares of the Companys common stock; the approval of the increase in the authorized number of shares of preferred stock was approved by holders of approximately 52% of the issued and outstanding shares of the Companys common stock; approval of the Settlement Agreement was approved by holders of approximately 69% of the shares eligible to vote on this proposal; and approval of the Companys 2006 Incentive Stock Option plan was approved by holders of approximately 72% of the issued and outstanding shares of the Companys common stock.
14
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Below is the market information pertaining to the range of the high and low bid information of our common stock for each quarter since our common stock has been quoted on the OTC Bulletin Board or the National Quotation Bureaus Pink Sheets. From April 2003 to present, our common stock has been quoted under the symbol TLXT on the National Quotation Bureaus Pink Sheets. From April 1999 to April 2003, our common stock was quoted on the OTC Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
2007 | Low | High | ||
Fourth Quarter | .005 | .05 | ||
Third Quarter | .05 | .08 | ||
Second Quarter | .05 | .07 | ||
First Quarter | .02 | .06 | ||
2006 | Low | High | ||
Fourth Quarter | .02 | .05 | ||
Third Quarter | .005 | .02 | ||
Second Quarter | .02 | .02 | ||
First Quarter | .02 | .02 |
The source of the above information is pinksheets.com. |
There is a limited trading market for our common stock. There is no assurance that a regular trading market for our common stock will develop, or if developed will be sustained. A shareholder in all likelihood, therefore, will not be able to resell their securities should he or she desire to do so when eligible for public resale. Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular trading market develops
Reports and Other Information to Shareholders |
We are subject to the informational requirements of the Securities Exchange Act of 1934. Accordingly, we file annual, quarterly and other reports and information with the Securities and Exchange Commission. You may read and copy these reports and other information we file at the Securities and Exchange Commission's public reference rooms in Washington, D.C. Our filings are also available to the public from commercial document retrieval services and the Internet world wide website maintained by the Securities and Exchange Commission at www.sec.gov.
Holders |
As of December 31, 2007, we had 250 holders of record of our common stock. We have one class of stock outstanding. We have no shares of our preferred stock outstanding. As of December 31, 2007, there were 20,882,613 shares of our stock held by non-affiliates and 159,600,755 shares of our stock held by affiliates.
Options |
We have a total of 15,753,333 options outstanding to purchase 15,753,333 shares of our common stock and are comprise of: 8,303,333 options pursuant to our Employee Stock Option Plan and 7,450,000 to officers and directors of the Company.
15
Warrants |
We do not have any outstanding warrants of our common stock
Penny Stock Considerations |
Our shares are "penny stocks" as generally defined in the Securities Exchange Act of 1934 as equity securities with a price of less than $5.00. Our shares may be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.
Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or "accredited investor" must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:
Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our stock, which may affect the ability of shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities if our securities become publicly traded. In addition, the liquidity for our securities may be adversely affected, with a corresponding decrease in the price of our securities. Our shares may someday be subject to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.
Dividends |
We have not declared any cash dividends on our stock since our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payment of dividends will depend on our earnings and financial position and such other factors as the Board of Directors deems relevant.
Securities Authorized for Issuance under Equity Compensation Plans
In November 2006, the Company issued 6,479,474 shares of our common stock to a former officer of the Company for deferred salary from 1999 through 2003.
Recent Sales of Unregistered Securities |
Not applicable |
Use of Proceeds from Registered Securities |
Not applicable |
16
ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion should be read in conjunction with our financial statements and related notes appearing elsewhere in this Form 10-KSB and our Annual Report on Form 10-KSB for our fiscal year ended December 31, 2007. The terms "the Company," "we," "our" or "us" refer to Telemetrix Inc. This discussion contains forward-looking statements based on our current expectations, assumptions, and estimates. The words or phrases "believe," "expect," "may," "anticipates" or similar expressions are intended to identify "forward-looking statements." Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties pertaining to our business, including: (a) our limited operating history and our history of losses make it difficult for you to evaluate our current and future business and our future financial results; (b) if we are unable to obtain additional fi nancing, we will be unable to proceed with our operating plan; (c) even if we obtain additional debt or equity financing, the value of our common stock will be diluted; (d) we have negative cash flow from operations and an accumulated deficit that raises substantial doubt about our ability to continue as a going concern; (d) we are subject to substantial debt obligations of approximately $9 million, which may negatively affect our ability to grow; (e) whether we will keep pace with the rapid development of technology in the wireless communications services area; (f) whether our existing technology will become obsolete or too expensive to upgrade; (g) the wireless communications services area generally experiences a high rate of "churn" representing the rate of lost customers, and there is no assurance that we will not experience churn due to competitive forces and price competition; (h) should our business be subject to increasing government regulation, we will be subject to increasing costs; and (i) we are dependent upon third party providers, including roaming partners and wireless network companies through which we obtain our interconnections throughout North America and also international markets; should we lose the services of these third party providers, our operations may negatively affected, including interruptions in our service.
Statements are made as of the filing of this Form 10-KSB with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.
OVERVIEW |
The Company was founded in 1999, acquired its FCC licenses in 2000, and initially focused on paging and telemetry services. During 2006, the Company upgraded its switch and network infrastructure to an R4 packet-based solution that has the capability to support up to 10 million users. In 2007, we received approvals from the Nebraska Public Utilities Commission and the Wyoming Public Utilities Commission to provide wireless services in both Nebraska and Wyoming. In January 2007, the Company received FCC approval of renewing our FCC licenses in BTA 411. Our network has achieved compliance with FCC mandates for E911, Phase I, as well as compliance with Department of Justice CALEA functionality. During 2007, the Company completed certification for voice and GPRS services with our roaming partners and testing with additional partners is ongoing. We executed a roaming agreement with TelCel in Mexico and continue to work with Rogers Com munications for roaming services in Canada, Telefonica for roaming services in South America and Jersey Telecom for roaming services in Europe. In addition to these new service offerings, the Company upgraded its backend platform to provide revenue assurance for roaming traffic within its network as well as customer roaming traffic. In late 2007, we deployed 24/7 customer service with an automated trouble ticket system, streamlined billing, and advanced offerings such as voice mail, push to talk and international long distance.
Capital Expenditures and Requirements |
During 2007 and 2006, we made capital expenditures of $62,700 and $945,000 for a Nokia remote media gateway and base station equipment to interface with our switch hosts Nokia R4 switch and billing software licenses. The Company anticipates the purchase of auxiliary equipment and software modules as we increase our service offerings.
17
Critical Accounting Policies and Estimates |
The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts. The estimates and assumptions are evaluated on an on-going basis and are based on historical experience and on various other factors that are believed to be reasonable. Estimates and assumptions include, but are not limited to, fixed asset lives, intangible assets, income taxes, and contingencies. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the f inancial statements. Our accounting for revenue recognition and stock compensation, which requires us to estimate the value of the shares issued, and the value of intangible assets requires us to continually assess whether such assets are impaired. Our critical accounting policies are outlined in our audited financial statements contained in our Form 10-KSB for the year ended December 31, 2007.
During our Fiscal Year 2007 period, our revenues of $223,192 were derived from cellular services
Our revenues are dependent upon the following factors: |
Years Ended December 31, 2007 and 2006 |
Consolidated Statement of Operations |
Revenues. Revenues for the year ended December 31, 2007 decreased 47.9% to $223,192 from $428,112 for the same period in 2006. The decrease in our Revenues is primarily attributable to the following: Our pager related revenues decreased by $27,081 or 100% in 2007 as a result of our discontinuing our wireless paging services in June 2006 due to a declining customer base and declining profit margins. Our Network Services decreased by $173,091 or 100% in 2007 due to our discontinuing our network services division in 2006. Our cellular services remained fairly constant from 2006 to 2007.
Cost of Revenues. Cost of revenues currently consists primarily of roaming charges from our roaming partners, switch operation and network maintenance charges from our switch hosting provider, and circuits. Cost of revenues decreased from $308,400 to $196,952 for the year ended December 31, 2007, representing a 36.1% decrease which represents 88.2% and 72.0% of the total revenues for the year ended December 31, 2007 and December 31, 2006, respectively. The decrease in the cost of revenue is directly related to our 47.9% decrease in revenues. The increase in cost of revenue as a percentage of income is due to our discontinuing our network services division that had higher gross margin percentages than cellular services but required intensive capital equipment costs.
Selling, General and Administrative Expenses. Selling, General and Administrative expenses increased by $324,483 to $2,239,372 for the year ended December 31, 2007 from $1,914,889 for the year ended December 31, 2006. The 16.9% increase in our Selling, General and Administrative Expenses is mainly attributable to increased staffing from 5 to 11 employees.
Interest Expense. Interest expense increased by $50,757 or 6.4% to $841,349 for the year ended December 31, 2007 from $790,592 for the year ended December 31, 2006. Included in interest expense, our non cash interest expense increased from $744,720 in 2006 to $781,390 in 2007. These increases are due to interest expense on increased lender loan balances.
18
Impairment of Assets. The Company discontinued operating its network switching services and wireless paging services in Gering, Nebraska in 2006. The Company wrote off $1,641,592 of network switching and paging equipment and other fixed assets associated with its operations in Gering. The Company recorded a loss on disposal of assets of $661,210 in 2006.
Net Loss. Net Loss for the year ended December 31, 2007 increased by $470,750 to ($2,908,464) as compared to ($2,437,714) for the year ended December 31, 2006. The increase in net loss is due to a combination of decreased revenues, increased selling, general and administrative expenses and interest expense on increasing lender loans.
Net Loss Per Share. The net loss per share of common stock for the year ended December 31, 2007 was ($0.02) and ($0.05) for the year ended December 31, 2006.
Liquidity and Capital Resources December 31, 2006 and 2007.
Cash as of December 31, 2007 amounted to $46,652 as compared with $45,872 for the year ended December 31, 2006, an increase of $780.
Net cash used in operating activities was $1,506,870 as compared with $1,392,305 in 2006. The increase in cash used in operating activities was primarily due to the increased net loss in 2007.
Net cash used in investing activities was $62,700 in 2007 as compared with $945,353 in 2006. The cash used in both years was from the purchase of Nokia equipment.
Net cash provided by financing activities decreased to $1,570,350 in 2007 from $2,383,415 in 2006 due to decreased proceeds from convertible loans related primarily to equipment purchases.
We will continue to finance our operations mainly from loans from major shareholders and fundraising activities. We do not believe that our future cash flow from operations together with our current cash will be sufficient to finance our activities through the year 2008; therefore, we plan to raise money through a private placement to fund the implementation of an expanding operational plan.
We cannot continue to satisfy our current cash requirements for a period of twelve (12) months through our existing capital. We anticipate total estimated operating expenditures of approximately $1,800,000 (or $150,000 per month) over the next twelve (12) months, in the following areas:
Our current cash of $46,652 as of December 31, 2007 will satisfy our cash requirements for less than one month.
Accordingly, we will be unable to fund our expenses through our existing assets or cash unless we obtain adequate financing through traditional bank financing or a debt or equity offering; however, because we have limited revenues and a poor financial condition, we may be unsuccessful in obtaining such financing or the amount of the financing may be minimal and therefore inadequate to implement our business plans. In the event that we do not receive financing or our financing is inadequate, we may have to liquidate our business and undertake any or all of the following actions:
19
Based upon our current assets, however, we will not have the ability to distribute any cash to our shareholders.
If we are unable to satisfy our obligations and we qualify for protection under the U.S. Bankruptcy Code, we may voluntarily file for reorganization under Chapter 11 or liquidation under Chapter 7. Our creditors may also file a Chapter 7 or Chapter 11 bankruptcy action against us. If our creditors or we file for Chapter 7 or Chapter 11 bankruptcy, our creditors will take priority over our shareholders. If we fail to file for bankruptcy under Chapter 7 or Chapter 11 and we have creditors; such creditors may institute proceedings against us seeking forfeiture of our assets, if any.
We do not know and cannot determine which, if any, of these actions we will be forced to take. If any of these foregoing events occur, our shareholders could lose their entire investment in our shares.
To date, we have funded our activities principally from loans from related parties and third parties and a commercial loan from a lending institution.
Going Concern |
The Companys financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company has experienced a significant loss from operations as a result of its investment necessary to achieve its operating plan, which is long-range in nature. For the year ended December 31, 2007, the Company incurred a net loss of $2,908,464 and has a working capital deficit of $9,256,297 and a stockholders deficit of $9,174,280.
The Companys ability to continue as a going concern is contingent upon its ability to attain profitable operations and secure financing. In addition, the Companys ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established markets and the competitive environment in which the Company operates.
The Company is pursuing equity and debt financing for its operations and is seeking to expand its operations. Failure to secure such financing may result in the Company depleting its available funds and not being able pay its obligations.
The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
Contractual Obligations And Commercial Commitments
Other than the Business Loan Agreement discussed in Part 1, Item 1, Loan and Loan Conversions, the material agreements discussed under Part 1, Item 1, Material Agreements, and the Office Leases discussed under Item II., Description of Property, we have no contractual obligations, including lease obligations, apart from agreements in the normal course of our business.
20
Recent Pronouncements |
Please see Note 1 of our audited financial statements for recent pronouncements.
ITEM 7. FINANCIAL STATEMENTS
TELEMETRIX, INC.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
C O N T E N T S
Report of Independent Registered Public Accounting Firm | F-1 | ||
Consolidated Financial Statements: |
|||
Consolidated Balance Sheet |
F-2 | ||
Consolidated Statements of Operations |
F-3 | ||
Consolidated Statement of Stockholders (Deficit) |
F-4 | ||
Consolidated Statements of Cash Flows |
F-5 | ||
Notes to Consolidated Financial Statements |
F-6 |
21
Telemetrix, Inc. Notes to Consolidated Financial Statements December 31, 2007 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors Telemetrix, Inc. |
We have audited the accompanying consolidated balance sheet of Telemetrix, Inc. as of December 31, 2007, and the related consolidated statements of operations, stockholders (deficit) and cash flows for the years ended December 31, 2007 and 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Telemetrix, Inc. as of December 31, 2007, and results of its operations and its cash flows for the years ended December 31, 2007 and 2006, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered a loss from operations and has working capital and stockholders deficits. These factors raise substantial doubt about the Companys ability to continue as a going concern. Managements plans in regard to this matter are also discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Stark Winter Schenkein & Co., LLP
|
Telemetrix, Inc.
Consolidated Balance Sheet
December 31, 2007
Assets | ||
Current assets: | ||
Cash | 46,652 | |
Accounts receivable, net | 38,756 | |
Deposits | 2,918 | |
Total current assets | 88,326 | |
Property and equipment, net | 635,874 | |
Total assets | 724,200 | |
Liabilities and stockholders' (deficit) | ||
Current liabilities: | ||
Accounts payable | $ | 873,795 |
Accrued expenses | 378,013 | |
Accrued interest - Convertible debentures | 649,252 | |
Convertible debentures | 1,200,000 | |
Notes payable - affiliates | 5,084,109 | |
Accrued Interest - affiliates | 994,597 | |
Current portion of long-term debt | 164,859 | |
Total current liabilities | 9,344,625 | |
Long-term debt | 553,855 | |
Stockholders' (deficit): | ||
Preferred stock, $.001 par value, 25,000,000 shares authorized: | ||
Series D, $.001 par value, convertible, liquidation preference | ||
$30 per share, 250,000 shares authorized | ||
none issued or outstanding | - | |
Undesignated, $.001 par value, 24,750,000 shares authorized | ||
none issued or outstanding | - | |
Common stock, $.001 par value, | ||
750,000,000 shares authorized, | ||
180,483,368 shares issued and outstanding | 180,483 | |
Paid in capital | 72,831,407 | |
Accumulated (deficit) | (82,186,170) | |
Total stockholders' (deficit) | (9,174,280) | |
Total liabilities and stockholders' (deficit) | $ | 724,200 |
See the accompanying notes to the consolidated financial statements.
F-2
Telemetrix, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2007 and 2006
2007 | 2006 | |||||
Revenue: | ||||||
Pager | $ | - | $ | 27,081 | ||
Network services | - | 173,091 | ||||
Cellular services | 223,192 | 227,940 | ||||
Total revenue | 223,192 | 428,112 | ||||
Cost of revenue | 196,952 | 308,400 | ||||
Gross margin | 26,240 | 119,712 | ||||
Operating expenses: | ||||||
Selling, general and administrative expenses | 2,239,372 | 1,914,889 | ||||
Total operating expenses | 2,239,372 | 1,914,889 | ||||
(Loss) from operations | (2,213,133 | ) | (1,795,177 | ) | ||
Other (income) expense: | ||||||
Gain on the settlement of debt | (146,018 | ) | (809,265 | ) | ||
Loss on disposal of assets | - | 661,210 | ||||
Interest expense | 841,349 | 790,592 | ||||
Total other (income) expense | 695,331 | 642,537 | ||||
Net (loss) | $ | (2,908,464 | ) | $ | (2,437,714 | ) |
Per share information - basic and fully diluted: | ||||||
Weighted average shares outstanding | 180,483,368 | 50,984,627 | ||||
Net (loss) per share | $ | (0.02 | ) | $ | (0.05 | ) |
See the accompanying notes to the consolidated financial statements.
F-3
Telemetrix, Inc.
Consolidated Statement of Stockholders (Deficit)
For the Years Ended December 31, 2005 and 2006
|
|
|
|
Additional Paid in Capital |
|
|
|
Accumulated (Deficit) |
|
|
|
Total |
| ||||
Common Stock | |||||||||||||||||
Shares | Amount | ||||||||||||||||
Balance at December 31, 2005 | 24,999,682 | $ | 25,000 | $ | 52,165,736 | $ | (76,839,992 | ) | $ | (24,649,256 | ) | ||||||
Subscribed shares issued | 155,483,686 | 155,483 | 20,296,071 | - | 20,451,554 | ||||||||||||
Stock options | - | - | 333,600 | - | 333,600 | ||||||||||||
Reclassification of unissued shares | - | - | 36,000 | - | 36,000 | ||||||||||||
Net (loss) for the year | - | - | - | (2,437,714 | ) | (2,437,714 | ) | ||||||||||
Balance December 31, 2006 | 180,483,368 | 180,483 | 72,831,407 | (79,277,706 | ) | (6,265,816 | ) | ||||||||||
Net (loss) for the year | - | - | - | (2,908,464 | ) | (2,908,464 | ) | ||||||||||
Balance December 31, 2007 | 180,483,368 | $ | 180,483 | $ | 72,831,407 | $ | (82,186,170 | ) | $ | (9,174,280 | ) |
See the accompanying notes to the consolidated financial statements.
F-4
Telemetrix, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2007 and 2006
2007 | 2006 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss) | $ | (2,908,464 | ) | $ | (2,437,714 | ) | ||
Adjustment to reconcile net (loss) to net cash (used in | ||||||||
operating activities: | ||||||||
Depreciation and amortization | 337,698 | 170,926 | ||||||
Bad debts | - | (40,284 | ) | |||||
Accretion of beneficial conversion feature charged to interest | - | 233,500 | ||||||
Stock options | - | 333,600 | ||||||
Loss on the disposal of equipment | - | 661,210 | ||||||
Gain on the settlement of debts | (146,018 | ) | (809,265 | ) | ||||
Decrease in accounts receivable | 2,434 | 199,659 | ||||||
(Increase) decrease in other current assets | (2,918 | ) | 15,000 | |||||
Increase (decrease) in accounts payable | 229,007 | (165,927 | ) | |||||
Increase in accrued expenses | 981,391 | 446,990 | ||||||
Net cash (used in) operating activities | (1,506,870 | ) | (1,392,305 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (62,700 | ) | (945,353 | ) | ||||
Net cash (used in) investing activities | (62,700 | ) | (945,353 | ) | ||||
Cash flows from financing activities: | ||||||||
Convertible notes payable-affiliates | 1,570,350 | 2,721,259 | ||||||
Proceeds from notes payable | 718,714 | - | ||||||
Payments on long term debt and notes payable-affiliates | (718,714 | ) | (337,844 | ) | ||||
Net cash provided by financing activities | 1,570,350 | 2,383,415 | ||||||
Net increase in cash | 780 | 45,757 | ||||||
Beginning - cash balance | 45,872 | 115 | ||||||
Ending - cash balance | $ | 46,652 | $ | 45,872 | ||||
Supplemental cash flow information: | ||||||||
Cash paid for income taxes | $ | - | $ | - | ||||
Cash paid for interest | $ | 59,959 | $ | 58,825 | ||||
Non-cash investing and financing activities: | ||||||||
Conversion of accrued interest to note payable | $ | - | $ | 165,213 |
See the accompanying notes to the consolidated financial statements.
F-5
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization |
Telemetrix Inc. (the Company) is a wireless mobile telecommunications service provider and network operator, with headquarters in Boulder, Colorado. The Company is currently doing business as Convey Wireless.
The Companys wholly owned subsidiary, Convey Communications, Inc., is an FCC-licensed network operator of innovative wireless communication services and offers GSM (Global System for Mobility) services nationwide and in Mexico. As a member of the GSM Association, the Company has the ability to obtain roaming agreements with GSM Network Operators world wide to provide network based services. Up until 2007, Telemetrix was primarily a provider of third generation network connectivity for machine-to-machine applications using short message service. During 2007, the Company expanded its services to include high speed data services as well as voice services in the US and internationally.
Telemetrix offers wholesale minutes and data services to medium and small size communication companies. Examples of our customers are vehicle tracking services, virtual PBX providers, cellular handset resellers, and resellers of niche international cellular minutes.
The Company intends to target international cellular wholesalers world wide to distribute its US network services.
Consolidation |
The financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Reclassifications |
Certain items presented in the previous years financial statements have been reclassified to conform to current year presentation.
Revenue Recognition |
The Company recognizes paging, GSM, and communication services revenue, which consists of fees charged to subscribers, when services are provided. Revenue from the sale of equipment is recognized upon delivery to the customer.
Cash and Cash Equivalents |
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
F-6
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
Accounts Receivable |
Accounts receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts. In determining collectibility, historical trends are evaluated and specific customer issues are reviewed to arrive at appropriate allowances.
Property and Equipment |
Property and equipment is recorded at cost. Depreciation of assets is computed using the straight-line method over the following estimated useful lives.
Buildings and improvements | 5 - 31.5 years | |
Office equipment | 7 years | |
Computer equipment and software | 5 - 7 years | |
Communication equipment | 3 years | |
Vehicles | 5 years |
Licenses
FCC Licenses are capitalized and amortized over their estimated useful lives of 10 years and are stated net of amortization. Amortization charged to operations was $71,202 and $2,650 during 2006 and 2007. The FCC C Block license was fully depreciated in September 2006 when the license was renewed for an additional 10 years. The FCC F Block license was fully depreciated in April 2007 and expires May 26, 2008. The Company intends to renew the license for an additional 10 years.
Licenses consist of the following at December 31, 2007:
Licenses | $ 922,856 | |
Less: accumulated amortization | 922,856 | |
$ - |
Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2007. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, notes payable and convertible debentures. Fair values were assumed to approximate carrying values for these financial instruments because they are short term in nature and their carrying amounts approximate fair values.
The carrying value of the Companys long-term debt approximated its fair value based on the current market conditions for similar debt instruments.
F-7
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
Long Lived Assets |
The carrying value of long-lived assets is reviewed on a regular basis for the existence of facts and circumstances that suggest impairment. The Company will measures the amount of any impairment based on the amount that the carrying value of the impaired assets exceed the undiscounted cash flows expected to result from the use and eventual disposal of the impaired assets. The Company charged $661,210 to operations in 2006 related to the abandonment of equipment.
Net Income (Loss) Per Common Share |
The Company calculates net income (loss) per share as required by Statement of Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses common stock equivalents, if any, are not considered, as their effect would be anti-dilutive.
Use of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Research and Development |
Research and development costs are expensed as incurred.
Advertising Costs |
Advertising costs are charged to expense as incurred. Advertising costs are included in selling, general and administrative expenses were $16,648 and $195 during 2007 and 2006.
Software Development Costs |
Direct costs incurred in the development of software are capitalized once the preliminary project stage is complete, management has committed to funding the project and completion, and use of the software for its intended purpose are probable. The Company ceases capitalization of development costs once the software has been substantially completed and is ready for its intended use. Software development costs are amortized over their estimated useful lives of 3 years. Costs associated with upgrades and enhancements that result in additional functionality are capitalized.
F-8
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
Segment Information |
The Company follows SFAS 131, Disclosures about Segments of an Enterprise and Related Information. Certain information is disclosed, per SFAS 131, based on the way management organizes financial information for making operating decisions and assessing performance. The Company currently operates in a single segment and will evaluate additional segment disclosure requirements as it expands its operations.
Income Taxes |
The Company follows SFAS 109 "Accounting for Income Taxes" for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
Debt with Detachable Warrants and/or Beneficial Conversion Feature
The Company accounts for the issuance of detachable stock purchase warrants in accordance with Accounting Principles Board Opinion 14 ("APB 14"), whereby it separately measures the fair value of the debt and the detachable warrants and allocates the proceeds from the debt on a pro-rata basis to each. The resulting discount from the fair value of the debt allocated to the warrants, which is accounted for as paid-in capital, is amortized over the estimated life of the debt.
In accordance with the provisions of Emerging Issues Task Force Issues 98-5 and 00-27, the Company allocates a portion of the proceeds received to any embedded beneficial conversion feature, based on the difference between the effective conversion price of the proceeds allocated to the convertible debt and the fair value of the underlying common stock on the date the debt is issued. In addition, for the detachable stock purchase warrants, the Company first allocates proceeds to the stock purchase warrants and the debt and then allocates the resulting debt proceeds between the beneficial conversion feature, which is accounted for as paid-in capital, and the initial carrying amount of the debt. The discount resulting from the beneficial conversion feature is amortized over the estimated life of the debt.
F-9
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
Stock-Based Compensation |
In December 2004, the FASB issued SFAS 123 (revised 2004) "Share-Based Payment". This Statement requires that the cost resulting from all share-based transactions be recorded in the financial statements. The Statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The Statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions. The Statement replaces SFAS 123 "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for Stock Issued to Employees".
Recent Pronouncements |
In September 2006, the FASB issued Statement No. 157, "Fair Value Measurements". This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure about fair value measurement. The implementation of this guidance is not expected to have any impact on the Company's financial statements.
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106, and 132(R)" ("SFAS No. 158"). SFAS No. 158 requires companies to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of defined benefit pension and other postretirement benefit plans. SFAS No. 158 requires prospective application, recognition and disclosure requirements effective for the Company's fiscal year ending December 31, 2007. Additionally, SFAS No. 158 requires companies to measure plan assets and obligations at their year-end balance sheet date. This requirement is effective for the Company's fiscal year ending September 30, 2009. The Company is currently evaluating the impact of the adoption of SFAS No. 158 and does not expect that it will have a material impact on its financial statements.
In September 2006, the United States Securities and Exchange Commission ("SEC")SAB No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements." This SAB provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 establishes an approach that requires quantification of financial statement errors based on the effects of each of the company's balance sheet and statement of operations financial statements and the related financial statement disclosures. The SAB permits existing public companies to record the cumulative effect of initially applying this approach in the first year ending after November 15, 2006 by recording the necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adj ustment recorded to the opening balance of retained earnings. Additionally, the use of the cumulative effect transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose. The adoption has not had a material effect on the Company's results of operations or financial position.
F-10
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 (FAS 159). FAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The provisions of FAS 159 will become effective as of the beginning of our 2009 fiscal year. The adoption of these new Statements is not expected to have a material effect on the Companys financial position, results of operations, or cash flows.
In December 2007, the FASB issued SFAS No. 141 (R) Business Combinations. SFAS 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The guidance will become effective as of the beginning of the Companys fiscal year beginning after December 15, 2008. The Company has not yet determined the impact, if any, of SFAS 141R on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160 Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51 . SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance will become effective as of the beginning of the Companys fiscal year beginning after December 15, 2008. The Company has not yet determined the impact, if any, of SFAS 160 on its consolidated financial statements.
NOTE 2. BASIS OF REPORTING |
The Companys financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company has experienced a significant loss from operations as a result of its investment necessary to achieve its operating plan, which is long-range in nature. For the years ended December 31, 2007, and 2006, the Company incurred net losses of $2,908,464 and $2,437,714 and has a working capital deficit of $9,256,299 and a stockholders deficit of $9,174,280 at December 31, 2007.
The Companys ability to continue as a going concern is contingent upon its ability to attain profitable operations and secure financing. In addition, the Companys ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established markets and the competitive environment in which the Company operates.
The Company is pursuing equity and debt financing for its operations and is seeking to expand its operations. Failure to secure such financing may result in the Company depleting its available funds and not being able pay its obligations.
F-11
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
NOTE 3. PROPERTY AND EQUIPMENT |
Property and equipment at December 31, 2007, consisted of the following:
Land | $ 13,301 | |
Billing System | 95,000 | |
Network equipment | 864,200 | |
Towers and Antennas | 222,870 | |
1,195,371 | ||
Accumulated depreciation and amortization | (559,497) | |
$ 635,874 |
Depreciation and amortization expense for the years ended December 31, 2007, and 2006, was $335,049 and $99,725.
On January 26, 2007, the Company entered into a Prepaid Wireless Service Agreement with Verisign, Inc. The Verisign Prepaid Wireless Service Agreement is for a billing service that enables Subscribers to prepay for wireless services and allows carriers to terminate such services when the amount prepaid by the Subscriber has been exhausted. The agreement is for a 4 year period and requires a minimum fee of $5,000 per month.
On September 29, 2006, the Company entered into a Master Services Agreement with Verisign, Inc. for out collect billing and exchange services. This software billing license allows the Company to exchange billing information with its cellular roaming partners, including T-Mobile, Cingular and Dobson Communications. The monthly fees for the out collect billing and exchange services has a $5,000 minimum per month with per record rates once the Company achieves a certain volume of transactions. The initial term of the contract will terminate on December 31, 2008.
On April 3, 2006, the Company entered into a Hosting Agreement and an Equipment Supplier Agreement with Pario Solutions, a Nokia value added reseller located in Texas. This Hosting Agreement allows the Company to comply with Federal Communications Commission and Department of Justice requirements for wireless carriers, as well as provide a higher level of wireless services. The transition from the switch in Gering, Nebraska to Dallas, Texas took place in September 2006. In the Equipment Supplier Agreement, the Company agreed to purchase $794,000 of Nokia equipment, software and services from Pario.
As of December 31, 2006, the Company has purchased $885,363 of equipment, primarily a media gateway, to enable its radio access network in Gering, Nebraska to connect to Pario Solutions switch in Dallas, Texas. This new equipment replaces nearly all of the equipment previously used in our operations. In 2006, the Company wrote off $1,142,382 of fixed assets resulting in a loss on disposal of $661,210. The Company has granted a security interest in this equipment to a related party and the Company has pledged substantially all property and equipment as collateral on the notes described in Notes 4 and 5.
F-12
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
On April 26, 2006, the Company gave notice to its paging customers that it would be discontinuing providing pager services effective June 9, 2006. The Company transitioned its paging customers to a competing local paging company during June 2006. On June 30, 2006, the Company wrote off $432,291 of fully depreciated paging equipment and $66,920 of fully depreciated mobile phone equipment due to the discontinuation of this service.
On October 12, 2006, the Company entered into a three year Master Services Agreement for postpaid billing and provisioning services with Haagenti Group Inc. This software billing license allows the Company to create a system for switching and billing telephone calls, managing associated hardware, configuration, and provisioning with Pario Solutions equipment. The monthly fees are a minimum of $3,000 per month or 2.5% of revenue with increased minimums once we obtain 10,000 customers.
NOTE 4. NOTES PAYABLE RELATED PARTIES
The Company has outstanding notes payable to four affiliates of the Company in the principal amount of $5,084,109 at December 31, 2007. The Company recorded interest expense of $676,917 and $633,007 on these notes as of December 31, 2007 and 2006.
Type of Debt | Interest Rate |
Conversion Price |
Maturity Date |
Amount of Principal | |||||
---|---|---|---|---|---|---|---|---|---|
Convertible notes | 15% | $.010 per share | 12/31/08 | $ 1,373,260 | |||||
Convertible notes | 15% | $.010 per share | 12/31/08 | $ 1,875,043 | |||||
Convertible notes | 15% | $.010 per share | 12/31/08 | $ 1,368,806 | |||||
Convertible notes | 10% | $.020 per share | 12/31/06 | $ 467,000 | |||||
Debt discount, less amortization of $467,000 | | ||||||||
$5,084,109 | |||||||||
The Company has issued convertible promissory notes to Nyssen LP (Nyssen) totaling $1,373,260 for advances from November 30, 2004 through December 31, 2007. The notes pay interest at 15% per annum and matured on December 31, 2007. The Company and Nyssen agreed to extend the maturity date of the notes to December 31, 2008. The extension of the promissory notes will include a reduction in the conversion rate of the loans from $.015 to $.010. During 2007 and 2006, the Company received $660,000 and $323,259 in advances from Nyssen and recorded interest expense of and $167,506 and $97,996.
F-13
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
On October 2, 2006, the Company issued convertible promissory notes for $1,703,407 and $843,806 to Becker Capital Management LLC and LB Becker Consulting Inc., respectively, in exchange for their cancellation of existing demand notes of $2,382,000 principal and $165,213 of accrued interest. The convertible promissory notes pay interest at 15% per annum and provide a conversion feature, based on the prior 10 day average stock trading price of the Companys common stock on Pinksheets on October 2, 2006, which was $.015 per share. The notes matured on December 31, 2007. The Company and Becker Capital and LB Becker Consulting agreed to extend the maturity date of the notes to December 31, 2008. The extension of the promissory notes will include a reduction in the conversion rate of the loans from $.015 to $.010. At December 31, 2007, the principal note balance for Becker Capital Management is $1,875,043 and $1,368,806 for LB Becker Consultin g. During 2007 and 2006, the Company received $910,350 and $2,398,000 in loans and repaid $718,714 of these loans in 2007. The Company has recorded interest expense of $452,904 and $250,141 on these loans in 2007 and in 2006.
On December 31, 2004, the Company issued a $467,000 term note to Tracy Broadcasting Corporation with interest at 10% per annum and a maturity date of December 31, 2006. The note is convertible into common shares at the rate of $.02 per share. The note evidences prior advances made to the Company in 2002 and 2003. The Company recorded $56,507 and $51,370 of interest expense on this note during 2007 and 2006 (See Note 9).
The Company used the intrinsic value method to determine proceeds that should be allocated to the embedded beneficial conversion feature for the $467,000 convertible note. As such, $492,000 was credited to additional paid in capital in 2004. The allocation of $467,000 will be amortized over 24 months commencing January 1, 2005, and the allocation of $25,000 was charged to interest expense during the year ended December 31, 2004. The Company recorded $233,500 of interest expense on this note during 2006.
NOTE 5. NOTES PAYABLE |
The Company entered into a Business Loan Agreement on March 30, 2007, and borrowed $718,714 on a variable rate loan due on March 30, 2011. The Company will pay this loan in accordance with the following payment schedule: 12 monthly consecutive interest payments, beginning April 30, 2007, with interest calculated on the unpaid principal balances at an interest rate based on the Wall Street Journal Prime Rate (currently at 7.50%); 35 monthly consecutive principal and interest payments in the initial amount of $22,647 each, beginning April 30, 2008 with the interest calculated on the unpaid principal balances at the interest rate based on the Wall Street Journal Prime Rate (currently at 7.50%) . The current portion of this balance of this loan is $164,859 with $553,855 classified as long-term debt. The Company entered into a Security Agreement granting to Lender a security interest in certain equipment. The Company had previously granted a secur ity interest in the equipment to Becker Capital Management and LB Becker Consulting, who assigned the security interest to this Lender.
F-14
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
Future minimum principal payments pursuant to long-term debt agreements are as follows:
2008 | $ 164,859 | |
2009 | 234,697 | |
2010 | 252,918 | |
2011 | 66,240 | |
$ 718,714 |
$1,200,000 Convertible debentures interest at 6.25% per annum, conversion feature allows the holder to use the debenture as payment for a like value of securities should the Company complete a stock offering of $6,000,000 at January 1, 2001. Such an offering was not completed. The debentures are currently in default. The Company recorded $104,474 and $98,279 of interest expense on these debentures during 2007 and 2006. Total interest payable on these debentures is $649,252 at December 31, 2007.
NOTE 6. INCOME TAXES |
The Company accounts for income taxes under SFAS 109, which requires use of the liability method. SFAS 109 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences are as follows:
Income tax provision at | ||
the federal statutory rate | 34 % | |
Effect of operating losses | (34)% | |
- |
As of December 31, 2007, the Company has a net operating loss carry forward of approximately $52,000,000. This loss will be available to offset future taxable income. If not used, this carry forward will expire through 2026 subject to certain limitations. The deferred tax asset of approximately $18,000,000 relating to the operating loss carry forward has been fully reserved at December 31, 2007. The principal difference between the operating loss for income tax purposes and book purposes results from non cash stock compensation, accrued officer salaries and accrued interest. Certain of these loss carryforwards my be limited as a result of changes in control of the Company. The change in the valuation allowance was approximately $700,000 during 2007.
F-15
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
NOTE 7. STOCKHOLDERS (DEFICIT) |
On October 27, 2006, at the Companys annual meeting of shareholders, a majority of the Companys shareholders approved an Amendment to the Companys Articles of Incorporation to increase the number of authorized shares of common stock to 750 million shares, approved an Amendment to the Companys Articles of Incorporation to increase the number of authorized shares of preferred stock to 25 million and approved the adoption of the Companys 2006 Employee Incentive Stock Option Plan.
Preferred Stock |
The Company has 25,000,000 shares of authorized but unissued Preferred Shares with a par of $.001, including the Series D Preferred shares described below.
The Company has 250,000 shares of authorized but unissued Series D Preferred Shares that are senior to the Companys common shares in priority for receiving distribution for payment upon liquidation of the Company. Each Series D Share has one vote and has a liquidation preference of $30.00 plus all accrued but unpaid distributions. The Series D Preferred shares will convert into Common Shares at the Conversion Rate, initially to be at two hundred (200) Common Share into one Series D Preferred Share.
Common Stock |
The Company has 750,000,000 shares of authorized common stock. At December 31, 2007, the Company has 180,483,368 shares of issued and outstanding common stock.
A total of 155,483,686 common shares were issued in November 2006 for the following share issue obligations. In addition, subscriptions for 600,000 common shares for $36,000 were cancelled.
Shares | Amount | |||
Officers salary | 6,479,479 | $ 859,000 | ||
Loan incentive shares | 6,055,762 | 719,947 | ||
Conversion of debt | 47,000,000 | 6,300,000 | ||
Services | 20,600,000 | 3,036,000 | ||
Conversion of related | ||||
party debt | 75,948,445 | 9,572,607 | ||
156,083,686 | 20,487,554 | |||
Issued | 155,483,686 | 20,451,554 | ||
Cancelled | 600,000 | 36,000 | ||
156,083,686 | $20,487,554 |
During May 2003 the Company agreed to issue 10,042,500 shares of common stock to an officer for the conversion of notes aggregating $401,700. The difference between the fair market value of the shares and the conversion price aggregating $1,104,675 had been charged to operations in 2003. During the year ended December 31, 2004, the Company issued 6,523,496 of these common shares and reduced the stock subscription by $260,940. In November 2006, the Company issued the remaining 3,519,004 shares of common stock due to the former officer.
F-16
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
During May 2003, the Company agreed to issue 34,016,893 shares of common stock to convert existing corporate indebtedness of major shareholders and investors in the Company into equity through an approved corporate exchange of common shares for notes and accrued interest aggregating $4,107,297. In November 2006, the Company issued 34,016,893 shares of common stock in fulfillment of its obligation under the approved corporate exchange arrangements.
During the year ended December 31, 2004, the Company recorded stock subscriptions for an aggregate of $14,426,250 for 96,175,000 shares of common stock. Of the $14,426,250, $3,000,000 for 20,000,000 shares of common stock is related to compensation and $6,000,000 for 40,000,000 shares of common stock are related to the conversion of debt and non-cash stock interest. The remaining $5,426,250 for 36,175,000 shares of common stock relate to the conversion of the $30,000 note due to a related party. In November 2006, the Company issued an aggregate of 96,175,000 shares for the stock subscriptions aggregating $14,426,250, in fulfillment of these obligations.
During the year ended December 31, 2005, the Company recorded stock subscriptions for an aggregate of $600,000 for 18,000,000 shares of common stock related to the conversion of $600,000 of notes payable to an affiliate. In November 2006, the Company issued 18,000,000 shares of common stock related to the $600,000 stock subscription, in fulfillment of these obligations.
In November 2006, the Company issued 3,472,789 shares of common stock to a former officer of the company for deferred salary in 2003 and prior. The Company previously recorded $859,000 as compensation expense.
Stock-based Compensation |
The Company has a stock option plan, which covers certain key management personnel. Options to purchase common shares may be granted at a price not less than fair market value on the date of the grant. Options may not be exercised prior to one year or after five years from the date of the grant. No options were granted during 2007. During December 2006 the Company granted options to purchase 15,000,000 shares of common stock to employees and 7,000,000 shares of common stock to directors. The options vested for 7,000,000 common shares on the grant date and 15,000,000 over a three year period. The fair value of the option grants is estimated on the date of grant utilizing the Black-Scholes option pricing model with the following weighted average assumptions for grants during the year ended December 31, 2006: expected life of options of 3 years, expected volatility of 312%, risk-free interest rate of 4% and no dividend yield. The weighted averag e fair value at the date of grant for options granted during the year ended December 31, 2006, approximated $0.02 per option. These results may not be representative of those to be expected in future years. During the year ended December 31, 2006, the Company charged $333,600 to operations related to these options.
F-17
Telemetrix, Inc.
Notes to Consolidated Financial Statements December 31, 2007
A summary of stock option and warrant activity is as follows:
|
|
Number of shares |
|
|
Weighted average exercise price |
Balance at December 31, 2005 | 450,000 | $2.04 | |||
Granted | 22,000,000 | $0.02 | |||
Exercised/Forfeited | - | ||||
Balance at December 31, 2006 | 22,450,000 | ||||
Granted | - | ||||
Exercised/Forfeited | (6,666,667 | ) | |||
Balance at December 31, 2007 | 15,783,333 | $0.02 | |||
Exercisable at December 31, 2007 | 12,450,000 |
Weighted average remaining contractual life 4 years
Weighted average fair value - $.02
NOTE 8. COMMITMENTS AND CONTINGENCIES
Operating Leases |
The Company leases office space from an officer of the Company. The rent is $2,500 per month pursuant to a lease that expired October 31, 2007. The Company is currently renting office space from this officer on a month-to-month basis.
In addition, the Company leases office space pursuant to a lease expiring in April 2009 at a monthly rental of $980. Future minimum payments are as follows: 2008 $11,760 2009 $3,920.
Litigation |
On January 16, 2007 Tracy Broadcasting Corporation filed a complaint in the District Court for Scottsbluff County, Nebraska, against the Company, in Case No. CI-07 37. Tracy Broadcasting Corporation is owned by Michael Tracy, a former CEO and Director of the Company. Mr. Tracy is also a major shareholder of the Company. The Complaint alleges that the Company owes Tracy Broadcasting Corporation $467,000 plus accrued interest at 10% per annum for outstanding loans under a promissory note issued in December 2004. The Companys records indicate that the promissory notes were repaid in full and dispute the claim. The Company filed a motion to compel arbitration in Denver, Colorado. On November 27, 2007 the motion was denied and the Company has appealed the decision with the Nebraska Supreme Court.
On February 2, 2007 Michael J. Tracy filed a complaint in the County Court for Scottsbluff County, Nebraska, against the Company, in Case No. CI-07 169. Michael Tracy is a former CEO and Director of the Company. Mr. Tracy is also a major shareholder of the Company. The Complaint alleges that the Company owes Mr. Tracy $3,496 in expenses associated with a lease agreement that expired October 31, 2006. The case was dismissed with prejudice on May 8, 2007.
F-18
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
On April 12, 2006, Michael J. Tracy filed a complaint in the District Court for Scottsbluff County, Nebraska, against the Company, in Case No. CI-06-291. Mr. Tracy is the former CEO and Director of the Company. The Complaint alleges that the Company owes Mr. Tracy $3,378,129 as of April 1, 2006, including principal and interest for loans Mr. Tracy made to the Company at various times in 2001 and 2002. The loans are represented by convertible demand notes. On May 26, 2003, Mr. Tracy and the Company entered into an agreement for the exchange and conversion of these notes for preferred stock of Telemetrix. The Complaint alleges that Telemetrix has failed to perform this agreement. In November 2006, the Company tendered 23,894,351 shares of common stock to Mr. Tracy in satisfaction of the May 26, 2003, Exchange and Conversion Agreement and 3,472,789 shares of common for deferred compensation. Additionally, the Company has offered Mr. Tracy the ri ght to exchange the 23,894,351 share of common stock for 101,551 shares of Series D preferred stock and 3,584,151 shares of common stock pursuant to the May 26, 2003 Agreement. Mr. Tracy returned the shares tendered claiming that he did not agree to accept common shares in lieu of preferred shares. The Company filed counterclaims against Mr. Tracy in connection with the Complaint and filed a motion to compel arbitration in Denver, Colorado. On November 27, 2007, the motion to compel arbitration was ordered and the claim was dismissed from District Court in Nebraska. This case docketed in the District Court for Scotts Bluff County, Nebraska, is now closed. As of the date of the financial statements Mr. Tracy has not filed an arbitration action in Denver, Colorado.
On September 10, 2004, the Company filed a Complaint in the United States District Court in the Southern District of New York against Michael Tracy (Tracy), Michael L. Glaser (Glaser), and William W. Becker (Becker), in case number 04CV7255. The Complaint sought an award for compensatory damages, an injunction against Tracy, Glaser and Becker for breach of fiduciary duty, costs and expenses for litigation (except fees and other disbursements) including reasonable attorneys fees, and against Tracy for conversion, and such other and further relief as may be deemed just and proper.
On September 16, 2004, the Company filed a complaint in the United States District Court for the District of Nebraska, in case number 7:04CV5020, against TowerGate Finance, Ltd., (TowerGate) and Nyssen, LP (Nyssen). The Complaint alleges fraudulent misrepresentations against TowerGate, fraudulent concealment against Nyssen, breach of fiduciary duty against TowerGate, civil conspiracy against TowerGate and Nyssen, breach of contract against TowerGate, and breach of the covenant of good faith and fair dealings against TowerGate. The Complaint seeks preliminary and permanent injunction, declaratory judgment and an accounting. The Complaint also requests a jury trial.
On December 10, 2004, the Company, Tracy, Glaser and Becker and our other majority shareholders and TowerGate and Nyssen entered into a binding agreement (Agreement) dated as of November 30, 2004, in which the parties agreed to dismiss the above described lawsuits, and settle the dispute between them and between the Company and TowerGate and Nyssen. The agreement calls for the appointment of an interim board of directors and stipulated that so long as Becker and affiliated entities and TowerGate/Nyssen hold in excess of 25% of the outstanding voting common shares that they will be entitled to appoint two directors.
F-19
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
All parties to the Settlement Agreement are either beneficial owners of the Companys common stock, current or proposed members of the Companys management, and/or are parties or affiliates of parties involved in the Litigation that gave rise to the Settlement Agreement. The specific terms of the Settlement Agreement, including the relationships among the parties to the Settlement Agreement is discussed in the Schedule 14A Proxy Statement filed with the SEC on September 15, 2006 and sent to the shareholders in October 2006.
In the Settlement Agreement, the parties agree that the parties will undertake the following actions:
Increase the Companys authorized share capital;
Effect material share issuances to Becker Capital Management;
Effect material share issuances to Nyssen LP and TowerGate Finance Limited; and Adopt a stock option plan for the Companys existing and new management.
The Company is also involved in various legal actions arising in the normal course of business management believes that such matters will not have a material effect upon the financial position of the Company.
Other |
On October 19, 2006, the Company filed a Request for Arbitration with the World Intellectual Property Organization against UT Starcom, Inc., the successor in interest to Telos Technologies, Inc., the manufacturer of the Sonata SE switching system (GSM switch). The Request for Arbitration was accepted on October 24, 2006. The dispute relates to a Master Purchase and License Agreement dated October 22, 2003 for a Sonata SE Global System for Mobile Communications switching system. The Company requests arbitration of the following claims: (1) breach of contract; (2) breach of good faith and fair dealing; (3) fraudulent misrepresentations; (4) fraudulent inducement; (5) negligent misrepresentation; (6) intentional interference with existing contractual relations; (7) intentional interference with prospective economic relations; (8) negligent interference with existing economic relations; and (9) negligent interference with prospective economic rel ations. The Company claims that UT Starcom failed to perform from the time of installation and UT Starcom failed to deliver five significant features and functionality that UT Starcom represented would be available at the time the Company purchased the GSM switch. These features and functionality include among others, (a) E911-Phase II functionality in the GSM Switch so that Telemetrix could comply with the FCCs mandated 911 services requirement by June 30, 2006; a GSM feature including intelligent network functions into a GSM network system; CALEA, which imposes upon Telemetrix a statutory obligation to ensure that its equipment, facilities or services that provide a customer or subscriber with the ability to originate, terminate or direct communications. Telemetrix requests entry of an award during the arbitration in its favor and against UT Starcom as follows:
A. | for general damages in an amount to be established at trial; | |
B. | alternatively, a rescission of the Agreement; | |
C. | for cost of the arbitration, including attorneys fees; and | |
D. | for such other and further relief as the Arbitrator may deem just and fair. | |
F-20
Telemetrix, Inc.
Notes to Consolidated Financial Statements
December 31, 2007
NOTE 9. CONCENTRATIONS |
During the year ended December 31, 2007, three customers accounted for approximately 47%, 30% and 13%, a total of 90%, of total revenue.
NOTE 10. NON-RECURRING CHARGES |
In 2007, the Company recorded a gain on the extinguishment of debt of $146,018 as a result of debts going beyond the statute of limitation for collection. Although there are no assurances that our creditors will not file a suit against us for payment, the Company believes that they have substantial evidence to ask a judge to dismiss the suit on the grounds that the statute of limitations has expired. In 2006, the Company recorded a gain on the extinguishment of debt of $809,265. Of the recorded 2006 gain, $151,608 is from the settlement of debt with vendors and $657,657 is the result of debts going beyond the statute of limitations for collection.
The Company recorded a loss on disposal of assets of $661,210 in 2006. The Company discontinued operating its network switching services and wireless paging services in Gering, Nebraska in 2006. The Company wrote off $1,641,592 of network switching and paging equipment and other fixed assets associated with its operations in Gering.
NOTE 11. SUBSEQUENT EVENTS |
As of the date of this report, the Company has received $100,000 in advances in the form of the convertible note to Nyssen described in Note 4.
The Company entered into a five year lease with an officer of the Company on January 1, 2008. The lease is for office space of 3,199 square feet for $5,065 per month. The five year lease includes an annual increase of 3% per annum.
Minimum annual rentals are as follows: |
2008 | $ 60,780 | |
2009 | 62,603 | |
2010 | 64,482 | |
2011 | 66,416 | |
2012 | 68,408 | |
$322,689 |
F-21
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE.
Not applicable |
ITEM 8A. CONTROLS AND PROCEDURES. |
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Acts reports is recorded, processed and summarized and is reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure control procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of the date of this report, the Company's management, including the President (principal executive officer) and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the evaluation, the Company's President (principal executive officer) and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company's periodic SEC filings. There have been no significant changes in the Company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company's management carried out its evaluation.
There have been no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation.
Part III. |
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT.
Directors and Executive Officers: Our Directors may appoint new directors and elect officers at regular meetings with proper notification. Our shareholders elect our directors at each annual general meeting. Directors hold office until their successors have been elected and qualified or until death, resignation or removal. Our Officers are appointed by our Board of Directors. Our Directors and executive officers are as follows:
22
Name | Age | Position | Term of Office | |||
William Becker | 78 | Chairman of the Board | Until resignation | |||
CEO and President | Or removal | |||||
Larry Becker | 50 | Director | Until resignation | |||
Or removal | ||||||
Gary Brown | 55 | Secretary and Treasurer | Until resignation | |||
And Director | Or removal | |||||
Brett Smithard | 41 | Director | Until resignation | |||
Or removal | ||||||
Patrick Kealy | 64 | Director | Until resignation | |||
Or removal |
William W. Becker, Chairman of the Board and Chief Executive Officer. Mr. William Becker has held the position of Chairman of the Board of Telemetrix from 1999 until April 2004. He was reelected Chairman in September 2004, replacing Mr. Patrick J. Kealy who was elected Chairman in April 2004. Mr. Becker is the principal of Hartford Holdings Ltd., a Cayman Islands corporation which invests in real estate, oil and gas, and telecommunication entities. It is solely owned by Mr. William W. Becker. Mr. Becker founded a number of companies in telecommunications, cable television, oil and gas, real estate development, and other industries. From 1993 to 1995, Mr. Becker was a principal of WWB Oil & Gas, Ltd. Mr. Becker was a significant investor of ICG Communications, Inc., a competitive local exchange carrier, for which he served as Chairman and Chief Executive Officer from 1987 to June 1995. Mr. Becker devotes the majority of his ti me to Telemetrix.
Gary Brown has been Secretary and Treasurer since September 16, 2004 and has been a Director since October 9, 2004. Mr. Brown is the Chief Executive Office and President of Gobility Inc., a systems integrator for WIFI networks. Previously, Mr. Brown was Executive Vice President of Global Sales of Global Sales Operations for Tekelec Inc., a manufacturer of next generation switching systems, STP, and communication applications worldwide. From December 2001 to October 2003, Mr. Brown served as Chief Operating Officer of Metro-Optics, also a manufacturer of telecommunications switching systems. Mr. Brown has more than 30 years experience in the telecommunications industry.
Larry Becker is a Director of the Company and was elected to preside over sharpening our strategic focus and concentrating on debt restructuring, financial viability, operating efficiencies, long-term growth opportunities and shareholder appreciation. Larry also manages and oversees the operation of Becker Capital Management and regularly serves in key capacities within its portfolio companies. Larry has numerous years of experience in operating, early stage start up, restructuring and positioning for future investment. Larrys most notable roles include CEO of SkyConnect Inc. an ad insertion company sold to nCUBE a Larry Ellision portfolio company, CEO of VR-1 Inc. a multiplayer game company technology company able to forge strategic relationships with Microsoft, Sony & Deutsche Telecom, CEO of Aircell Inc. which provides air to ground communications for business jets and was able to attract funding from Blumenstein Tho rne and Pritzker of the Chicago area. Larry also manages real estate portfolio in the United States and Canada. Larry serves on a local school board and is a Director of the YMCA of Boulder. Larry graduated from the University of Alberta with a major in Finance.
23
Brett Smithard is a Director of the company and was appointed to the board in September 2007. Mr. Smithard is the Chief Executive Officer of Tower Gate Capital, a London based investment bank. Mr. Smithard is a chartered accountant (formerly with PWC), with international investment, advisory and commercial experience. He was the founder of Smithard & Co., an investment and advisory firm focusing on turnaround and restructuring opportunities, having previously worked as a corporate financier at Personal Trust International. His prior business experience includes serving as CEO of National Autoparks Group, and CFO of TNT International Express and Autopage Holdings, as well as serving as a non-executive director of various other public and private companies.
Patrick Kealy is a Director of the Company and was appointed to the Board in December 2007. Mr. Kealy served as our Chairman of the Board in 2004. Patrick J. Kealy is currently President and CEO of Star Energy Corp and has over 30 years of experience in financial services. He began his career at a major U.K. brokerage and consulting firm Wood MacKenzie & Co. Inc., where he rose to become president of the companys U.S. subsidiary. He continued his career as First Vice President at Morgan Stanley Dean Witter in New York. Kealy then became Senior Managing Director of Credit Lyonnais Securities where he was responsible for management of equity capital markets staff including research, sales and trading of both U.S. and foreign shares.
Immediately prior to joining Star, Kealy enjoyed a tenure as Chairman of SwissFone International, where he negotiated the acquisition of the U.S. division of Swisscom A.G.
Mr. Kealy received his bachelors degree in Finance from the University of Notre Dame and pursued graduate studies in International Finance at New York University. Mr. Kealy is a non executive director of Tower Gate Capital.
Significant Employees |
None |
Family Relationships |
Larry Becker, a Director of the Company, is the son of William Becker, Chairman, CEO and President. Lorn Becker, a 5% beneficial owner of our common stock, is also the son of William Becker.
Gayle Becker, wife of Larry Becker, provides administrative services to the Company on an as needed basis.
There are no other family relationships. |
Legal Proceedings |
No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in legal proceedings that would be material to an evaluation of our management.
Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:
1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
24
3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4. being found by a court of competent jurisdiction (in a civil action),the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Committee of the Board of Directors |
We presently do not have an audit committee, compensation committee, nominating committee, an executive committee of our board of directors, stock plan committee or any other committees. However, our Board of Directors is considering establishing various such committees during the current fiscal year. Currently, our Board of Directors makes decisions regarding compensation, our stock option plan, our audit, the appointment of auditors, and the inclusion of financial statements in our periodic reports.
Audit Committee |
We presently do not have an audit committee and have no financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Larry Becker, a Director of the Company, is experienced in financial matters and holds a Bachelor of Commerce with a major in Finance from the University of Alberta.
Code of Ethics |
We have not yet adopted a corporate code of ethics. Our board of directors is considering establishing, over the next year, a code of ethics to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
ITEM 10. EXECUTIVE COMPENSATION |
The following table sets forth summary information concerning the compensation received for services rendered to it during the current year and the years ended December 31, 2007, 2006, and 2005 respectively.
SUMMARY COMPENSATION CHART
Annual Compensation | Long Term Compensation | |||||||||||||||||
Name & Position | Year | Salary $ |
Bonus $ |
Other $ |
Restricted Stock Awards |
Options $ |
Payouts $ |
All Other Compen- sation $ | ||||||||||
William Becker (1) | 2007 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Chairman, CEO | 2006 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
and President | 2005 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Gary Brown (2) | 2007 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Secretary and | 2006 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Treasurer | 2005 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Larry Becker (3) | 2007 | $ | 200,000 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||
Manager of Daily | 2006 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Operations | 2005 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Charles LaCroix (4) | 2007 | $ | 175,000 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||
COO | 2006 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
2005 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||
Michael Tracy (5) | 2007 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Former CEO and | 2006 | $ | 40,000 | 0 | 0 | 0 | 0 | 0 | $ | 120,000 | ||||||||
President | 2005 | $ | 40,000 | 0 | 0 | 0 | 0 | 0 | $ | 144,687 |
25
1. | William Becker, our Chairman, CEO and President received 2,000,000 options to purchase our common stock, with an exercise price of $.02 per share, the fair market value on the date of grant, December 31, 2006. | |
2. | Gary Brown, our Secretary and Treasurer, received 2,000,000 options to purchase our common stock with an exercise price of $0.02 per share, the fair market value on the date of grant., December 31, 2006 | |
3. | Larry Becker, a Director, received deferred compensation of $200,000 for managing the daily operations and fund raising activities of Telemetrix. Mr. Becker also 2,000,000 options to purchase our common stock with an exercise price of $.02 per share, the fair market value on the date of grant, December 31, 2006. | |
4. | Charles LaCroix, our Chief Operating Officer, receives a salary of $175,000 per year. Mr. LaCroix received no other compensation in 2006, however, he is eligible for a grant of stock options pursuant to the 2006 Employee Stock Option Plan. | |
5. | In 2006, Michael Tracy, our former CEO and President, received payment of $40,000 from a consulting agreement from December 1, 2004 through July 31, 2005. From August 1, 2005 through May 31, 2006, Mr. Tracys wholly owned company, Greenfly LL, received consulting fees of $24,000 per month for a services agreement to operate our switch and radio access network in Gering, Nebraska. In November 2006, Mr. Tracy received 5,879,479 shares of our common stock for deferred compensation from 1999 through 2003. The shares were valued at prices ranging from $.06 to $.36 per share and the Company recorded $859,000 in salary expense in 1999 through 2003. Mr. Tracy has not been an employee of the Company since 11/30/04 and does not have any agreements with the Company as of December 31, 2007. |
OPTION/SAR GRANTS 2007 and 2006
The Company did not grant any Options/SAR Grants in 2007. The grants in 2006:
Name and Principle Position |
|
Number of Securities Underlying Options |
|
% of Total Options Granted in 2006 |
|
Exercise Price |
|
Expiration Date |
William W. Becker, Chairman of | 2,000,000 | 9.0% | .02 | 12/28/11 | ||||
the Board and CEO | ||||||||
Gary Brown, Director, | 2,000,000 | 9.0% | $.02 | 12/28/11 | ||||
Secretary and Treasurer | ||||||||
Larry Becker, | 2,000,000 | 9.0% | $.02 | 12/28/11 | ||||
Director | ||||||||
Total | 6,000,000 | 27.0% | $.02 | 12/28/11 |
26
AGGREGATE OPTIONS/SAR EXERCISES IN 2007 AND FISCAL YEAR END OPTIONS/SAR VALUES
Name |
|
Shares Acquired on Exercise (#) |
|
Value Realized ($) |
|
Number of Securities Underlying Unexercised Options/SARs at FY-End (#) Exercisable/ Unexercisable |
|
Value of Unexercised In- the-Money Options/SARs at FY-End ($) Exercisable/ Unexercisable |
William W. Becker, Chairman | N/A | N/A | 2,150,000 | $0 | ||||
of the Board and CEO | ||||||||
Gary Brown | N/A | N/A | 2,000,000 | $0 | ||||
Director, Secretary and | ||||||||
Treasurer | ||||||||
Larry Becker, | N/A | N/A | 2,000,000 | $0 | ||||
Director | ||||||||
Total | 6,000,000 | N/A | 6,150,000 | $0 | ||||
There were no in-the-money exercisable options or SARs at the end of the fiscal year.
Board Compensation |
Larry Becker, a Director of the Company, received a deferred compensation of $200,000 for services of running the daily operations and fund raising activities of Telemetrix. In 2007, the Board Members did not receive any compensation for Board of Director services. In 2006, William Becker, Gary Brown and Larry Becker received a grant of 2,000,000 options each to purchase shares of our common stock with an exercise price of $.02 per share, the fair market value on the date of grant. The options were granted for prior services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following tables set forth the ownership as of December 31, 2007: (a) by each person known by us to be the beneficial owner of more than five percent (5%) of our outstanding common stock; and (b) by each of our directors, by all executive officers and our directors as a group.
To the best of our knowledge, all persons named have sole voting and investment power with respect to such shares, except as otherwise noted. Other than the Convertible Promissory Notes discussed in Note 4 of the Audited Financial Statements, there are not any pending or anticipated arrangements that may cause a change in our control.
27
Security Ownership of Beneficial Owners: | ||||||||
Title of Class | Name & Address | Amount | Nature | Percentage | ||||
Common | William W. Becker | 21,248,763 | Direct | 11.8% | ||||
Chairman of the Board and CEO, | (1) | And | ||||||
Park Lane West Bay Road | Indirect | |||||||
Georgetown, Grand Cayman, B.W.I. | ||||||||
Common | Gary R. Brown | 2,000 | Indirect | <1% | ||||
Director, Secretary and Treasurer | (2) | |||||||
211 Long Canyon Ct. | ||||||||
Richardson, TX | ||||||||
Common | Larry Becker | 21,347,348 | Indirect | 11.8% | ||||
Director | (3) | |||||||
6650 Gunpark Drive | ||||||||
Boulder, CO 80301 | ||||||||
Common | Man Prince Holdings Ltd., | 15,725,000 | Direct | 8.7% | ||||
201, 9618 42 Avenue | (4) | |||||||
Edmonton, Alberta, Canada | ||||||||
Common | Matthew Hudson | 61,000,000 | Indirect | 33.8% | ||||
New Broad street House, 35 New | (5) | |||||||
Broad Street, London, England | ||||||||
Common | Michael J. Tracy | 32,552,644 | Direct And | 18.0% | ||||
Former CEO and Director | (6) | Indirect | ||||||
721 East 38th Street | ||||||||
Gering, NE 69361 | ||||||||
Common | Dianne Larkowski | 9,042,500 | Direct | 5.0% | ||||
3482 16th Circle | (7) | |||||||
Boulder, CO 80304 | ||||||||
Common | Brett Smithard | 2,000,000 | Indirect | 1.1% | ||||
Director, New Broad street House, | (8) | |||||||
35 New Broad Street, London, | ||||||||
England | ||||||||
Common | Patrick Kealy | 0 | Indirect | 0 | ||||
Director, 53 East 74th Street | (9) | |||||||
New York, NY 10021 | ||||||||
Common | More than 5% ownership, as a Group | 169,258,009 | Direct | 89.7% | ||||
And Indirect | ||||||||
Common | Officers and Directors, as a Group | 46,598,111 | Direct and | 23.6% | ||||
Indirect |
28
1. | William W. Beckers beneficial ownership of 21,248,763 shares of our common stock is composed of: (a) 4,136,263 shares held in the name of Hartford Holding Ltd., a wholly owned company of William Becker; (b) 87,500 shares that he individually owns; (c) 50,000 shares that are owned by his wife, Christine Becker; (d) 16,225,000 shares owned by Wyse Investments, Ltd., a Trust that is maintained for the benefit of one of William Beckers (son/grandson); and (e) 750,000 shares of our stock owned by Ardara Investments, Ltd., a trust that is maintained for the benefit of one of William Beckers sons. | |
2. | Gary R. Brown is the beneficial owner of 2,000 shares of our stock. The shares of stock are held in his wifes name, Pamela Brown. |
3. | Larry Beckers beneficial ownership of 21,347,348 shares of our common stock is composed of: (a) 20,597,348 shares held in the name of Becker Capital Management, LLC, a wholly owned limited liability company of Larry Becker, and (b) 750,000 shares of our common stock held in the name of Ionian Investments, Ltd., a trust that is maintained for the benefit of Larry Becker | |
4. | Lorn Beckers beneficial ownership of 15,725,000 is composed of: 15,725,000 shares of our stock held in the name of Man Prince Holdings Ltd., a wholly owned corporation of Lorn Becker | |
5. | Matthew Hudsons beneficial ownership of 61,000,000 shares of our common stock is composed of: (a) 47,000,000 shares of our common stock in the name of Nyssen LP, a wholly owned limited partnership of Matthew and Katherine Lucy Hudson, and (b) 14,000,000 shares of our common stock in the name of Tower Gate Finance Ltd. | |
6. | Michael J. Tracy owns 32,552,644 shares of our stock. The shares of stock are held in his name. | |
7. | Dianne Larkowski, an employee of the Company, owns 9,042,500 shares of stock. The shares are held in her name. | |
8. | Brett Smithard beneficial ownership of 2,000,000 shares of our common stock is held in the name of TowerGate Finance Ltd. Mr. Smithard is a director and shareholder of TowerGate Finance Ltd. | |
9. | Patrick Kealy does not own any shares of our common stock |
SECURITY OWNERSHIP OF MANAGEMENT: |
Title of | Name & Address | Amount | Nature | Percent | ||||
Class | ||||||||
Common | William W. Becker Chairman of | 21,248,763 | Direct | 11.8% | ||||
the Board, Acting CEO Park Lane | (1) | And Indirect | ||||||
West Bay Road Georgetown, | ||||||||
Grand Cayman British West Indies | ||||||||
Common | Gary R. Brown | 2,000 | Indirect | <1% | ||||
Director, Secretary and Treasurer | (2) | |||||||
211 Long Canyon Ct. | ||||||||
Richardson, TX | ||||||||
Common | Larry Becker | 21,347,348 | Indirect | 11.8% | ||||
Director | (3) | |||||||
6650 Gunpark Drive | ||||||||
Boulder, CO 80304 | ||||||||
Total | Management as a Group | 42598,111 | 25.3% | |||||
29
(1) | William W. Beckers beneficial ownership of 21,248,763 shares of our common stock is composed of: (a) 4,136,263 shares held in the name of Hartford Holding Ltd., a wholly owned company of William Becker; (b) 87,500 shares that he individually owns; (c) 50,000 shares that are owned by his wife, Christine Becker; (d) 16,225,000 shares owned by Wyse Investments, Ltd., a Trust that is maintained for the benefit of one of William Beckers (son/grandson); and (e) 750,000 shares of our stock owned by Ardara Investments, Ltd., a trust that is maintained for the benefit of one of William Beckers sons. | |
(2) | Gary R. Brown is the beneficial owner of 2,000 shares of our stock. The shares of stock are held in his wifes name, Pamela Brown. | |
(3) | Larry Beckers beneficial ownership of 21,347,348 shares of our common stock is composed of: (a) 20,597,348 shares held in the name of Becker Capital Management, LLC, a wholly owned limited liability company of Larry Becker, and (b) 750,000 shares of our common stock held in the name of Ionian Investments, Ltd., a trust that is maintained for the benefit of Larry Becker |
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Larry Becker, a Director of the Company, received $200,000 in deferred compensation for running the daily activities of Telemetrix. Our offices that are located in Boulder, Colorado are leased from Becker Capital Management LLC, a wholly owned limited liability of Larry Becker. During 2007, the Company paid Becker Capital Management LLC $24,000 for rent and $6,000 for equipment, telephones and supply reimbursement.
ITEM 13. EXHIBITS AND REPORTS ON FORMS 8-K
(a) Exhibits
Exhibit |
Description |
31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
(b) | Reports on Form 8-K |
July 30, 2007 Report filed on July 31, 2007 | |
September 18, 2007 Report filed on September 21, 2007 |
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed and estimated unbilled for the fiscal year ended December 31, 2007 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements Included in our Form 10-KSB or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were $37,750.
The aggregate fees billed for the fiscal year ended December 31, 2006 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-KSB or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were $35,000.
Audit-Related Fees None. Tax Fees $24,500 All Other Fees None. |
30
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Telemetrix Inc. | ||
By: /s/William Becker | March 7, 2008 | |
William Becker, Chief Executive Officer | ||
(Principal Executive Officer) |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ William Becker | March 7, 2008 | |
William Becker, Chairman | ||
By: /s/ Gary Brown | March 7, 2008 | |
Gary Brown, Director | ||
By: /s/ Larry Becker | March 7, 2008 | |
Larry Becker, Director | ||
By: /s/ Brett Smithard | March 7, 2008 | |
Brett Smithard, Director | ||
By: /s/ Patrick Kealy | March 7, 2008 | |
Patrick Kealy, Director |
31
Exhibit 31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CERTIFICATION
I, William Becker, Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Accounting Officer) of Telemetrix Inc. certify that:
1. | I have reviewed this annual report on Form 10-KSB for the fiscal year December 31, 2007, of Telemetrix Inc.; | |
2. | Based on my knowledge, this 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 report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial position, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The small business issuers other certifying officer (s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in exchange Act Rules 13a-15(f) and 15d-15(f) for the small business issuer and have: | |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made know to us by others within those entities, particularly during the period in which this report is being prepared: | |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervisions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure control and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d. | Disclosed in this report any change in the small business issuers internal control over financial reporting that occurred during the small business issuers most recent fiscal quarter (the small business issuers forth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuers internal control over financial reporting; and | |
5. | The small business issuers other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuers auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): | |
a. | All significant deficiencies and material weaknesses in the design or operating of internal control over financial reporting which are reasonably likely to adversely affect the small business issuers ability to record, process, summarize and report financial information; and | |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuers internal control over financial reporting. | |
Date: March 7, 2007 |
/s/ William Becker
William Becker
Chief Executive Officer and Chief Financial Officer
(Principal Executive and Accounting Officer)
Exhibit 32.1 |
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOTPED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Annual Report on Form 10-KSB (the Report) of Telemetrix inc. (the Company) for the fiscal year ended December 31, 2007, I, William Becker, Chief Executive Officer and Chief Financial Officer (Principal Executive and Accounting Officer) of the Company, hereby certify pursuant to 18 U.S.C. section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
(1) the Report fully complies with the requirements of section 13(a)or15(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 results of operations of the Company.
March 7, 2007 |
/s/ William Becker
Name: William Becker
Title: Chief Executive Officer and Chief Financial Officer
(Principal Executive and Accounting Officer)