-----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, K/ds46owSWH/2ieN/XgYxVy4ozo9yyUv9uBTKui4YnRT7g3AvMbcImurWncaHPqA +7izHZeQaHdfsoINfy6kFw== 0001019687-06-002601.txt : 20061103 0001019687-06-002601.hdr.sgml : 20061103 20061103151247 ACCESSION NUMBER: 0001019687-06-002601 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060831 FILED AS OF DATE: 20061103 DATE AS OF CHANGE: 20061103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Ingen Technologies, Inc. CENTRAL INDEX KEY: 0000861058 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 880429044 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28704 FILM NUMBER: 061186518 BUSINESS ADDRESS: STREET 1: 35193 AVENUE A, SUITE C CITY: YUCAIPA STATE: CA ZIP: 92399 BUSINESS PHONE: 800-259-9622 MAIL ADDRESS: STREET 1: 35193 AVENUE A, SUITE C CITY: YUCAIPA STATE: CA ZIP: 92399 FORMER COMPANY: FORMER CONFORMED NAME: CREATIVE RECYCLING TECHNOLOGIES INC DATE OF NAME CHANGE: 19980505 FORMER COMPANY: FORMER CONFORMED NAME: CLASSIC RESTAURANTS INTERNATIONAL INC /CO/ DATE OF NAME CHANGE: 19960619 FORMER COMPANY: FORMER CONFORMED NAME: CLASSIC RESTAURANTS INC/CO DATE OF NAME CHANGE: 19960604 10QSB 1 ingen_10q-083106.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2006 Commission File Number ___________ INGEN TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Georgia 88-0429044 ------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 35193 Avenue "A", Suite-C, Yucaipa, California 92399 ---------------------------------------------- ----- (Address of principal executive offices) (Zip Code) (800) 259-9622 -------------- (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, no par value -------------------------- (Title of Class) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [x] At August 31, 2006, 29,709,610 shares of the registrant's common stock (no par value) were outstanding. Transitional Small Business Disclosure Format (check one): YES / / NO /X/ INGEN TECHNOLOGIES, INC. AND SUBSIDIARY PART I. - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS INTERIM REVIEWED FINANCIAL STATEMENTS FOR QUARTER ENDING AUGUST 31, 2006 These interim financial statements have been reviewed but not audited by our auditors, Spector & Wong. CONSOLIDATED BALANCE SHEETS (UNAUDITED) - ----------------------------------------------------------------------------------------------------------- AS OF AUGUST 31, 2006 2005 ------------ ------------ ASSETS Current Assets Cash $ 824,575 $ 404,432 Accounts receivable -- 38,565 ------------ ------------ Total current assets 824,575 442,997 ------------ ------------ Property and equipment, net of accumulated depreciation of $102,984 and $84,910 for 2006 and 2005, respectively 61,542 45,136 Debt issue cost, net of accumulated amortization of $16,400 291,800 -- ------------ ------------ TOTAL ASSETS $ 1,177,917 $ 488,133 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Accounts payable $ 48,186 $ -- Accrued expenses 177,655 394,771 ------------ ------------ Total current liabilities 225,841 394,771 ------------ ------------ Long-term Liabilities Officers' loans 6,886 42,802 Convertible notes payable, net of unamortized discount of $1,366,929 7,290 -- Derivative liabilities 3,860,069 -- ------------ ------------ Total long-term liabilities 3,874,245 42,802 ------------ ------------ Stockholders' deficit Preferred stock Series A, no par value, 40,000,000 and none authorized in 2006 and 2005, respectively; issued and outstanding 14,134,547 for 2006 and 3,000,000 for 2005 734,980 30,000 Preferred stock, no par value, none and 37,000,000 authorized in 2006 and 2005, respectively; issued and outstanding none and 36,900,000 for 2006 and 2005, respectively -- 369,000 Common stock, no par value, authorized 100,000,000 in 2006 and 500,000,000 shares in 2005; issued and outstanding 29,609,610 and 3,182,190 for 2006 and 2005, respectively 7,497,183 6,330,713 Series A preferred stock subscription (220,000) -- Accumulated deficit (10,934,332) (6,679,153) ------------ ------------ Total stockholders deficit (2,922,169) 50,560 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,177,917 $ 488,133 ============ ============ See notes to interim unaudited consolidated financial statements 2
INGEN TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - -------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED AUGUST 31, 2006 2005 ------------ ------------ Sales $ 189,158 $ 532,872 Cost of sales 115,547 85,046 ------------ ------------ GROSS PROFIT 73,611 447,826 Selling, general and administrative expenses 329,104 559,246 ------------ ------------ OPERATING LOSS (255,493) (111,420) Other (expenses): Interest Expenses (3,540,915) (1,542) Change in derivative liabilities 1,031,094 -- ------------ ------------ Total Other Income (expenses) (2,509,821) (1,542) NET LOSS BEFORE TAXES (2,765,314) (112,962) Provision for income taxes 800 800 ------------ ------------ NET LOSS $ (2,766,114) $ (113,762) ============ ============ Basic and diluted net loss per share $ (0.12) $ (0.05) ============ ============ Weighted average number of common shares 22,207,208 2,205,309 See notes to interim unaudited consolidated financial statements 3 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - ---------------------------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED AUGUST 31, 2006 2005 ----------- ----------- CASH FLOW FROM OPERATING ACTIVITIES: Net Loss (2,766,114) $ (113,762) Adjustments to Reconcile Net Loss to Net Cash Used in Operations: Depreciation and amortization 4,576 2,965 Amortization of debt issue cost 16,400 -- (Increase) Decrease in: Accounts receivable -- (38,565) Change in derivative liabilities (1,031,094) -- Noncash interest expense and financing costs 3,523,454 -- Increase (Decrease) in: Accounts payable -- 8,241 Accrued expenses (2,138) -- Litigation reserve -- (143,500) ----------- ----------- NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES (254,916) (284,621) ----------- ----------- CASH FLOW FROM INVESTING ACTIVITIES Addition to Fixed Assets (34,480) (23,174) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (34,480) (23,174) ----------- ----------- CASH FLOW FROM FINANCING ACTIVITIES: Net repayments to note payable to related party (63,941) (60,000) Repayments to notes payable -- (25,000) Proceeds from issuance of common stock -- 779,500 Proceeds from convertible debt 1,066,800 -- ----------- ----------- NET CASH FLOW PROVIDED (USED) BY FINANCING ACTIVITIES 1,002,859 694,500 ----------- ----------- NET INCREASE (DECREASE) INCREASE IN CASH 713,463 386,705 Cash Balance at Beginning of Period 111,112 17,727 ----------- ----------- CASH BALANCE AT END OF PERIOD $ 824,575 $ 404,432 =========== =========== Supplemental Disclosures of Cash Flow Information: Interest paid $ -- $ -- Taxes paid $ -- $ -- Noncash Financing Activities: Issuance warrrants in connection with convertible debt $ 1,987,478 $ -- Recorded a beneficial conversion feature $ 2,903,777 $ -- Stock subscription receivable for preferred stock $ 220,000 $ -- See notes to interim unaudited consolidated financial statements 4
INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ingen Technologies, Inc., (formerly known as Creative Recycling Technologies Inc., the "Company" or "Ingen Technologies"), is a Public Company trading under NASDAQ OTC: IGTG. Ingen Technologies is a growth-oriented technology company that offers a diverse and progressive services and products. Ingen Technologies, Inc., is a Georgia corporation ("IGTG") and owns 100% of the capital stock of Ingen Technologies, Inc. a Nevada corporation and it has been in business since 1999. The Company's flagship product is its BAFI (TM), the world's first wireless digital low gas warning system for pressurized gas cylinders. On October 24, 2000, the BAFI (TM) received a U.S. Patent with Patent No. 6,137,417. BAFI (TM), now in its second generation, is an accurate and cost-effective, real-time pressurized gas warning system that will alert users when gas levels are approaching empty. The BAFI (TM) line has multiple applications, inclusive but not limited to, the Medical Industry, Home Consumer, Residential Development Industry, Safety & Protection (fire and police), Aircraft Industry, and the Recreational Vehicle Industry. BAFI (TM) meets or exceeds regulatory compliance of this type of product and is completed and in production. The Secure Balance (TM) product is a private-label product that includes a vestibular function testing system and balance therapy system available to physicians throughout the United States. FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company's financial instruments consist principally of cash, accounts receivable, accounts payable and borrowings. The Company believes the financial instruments' recorded values approximate current values because of their nature and respective durations. The fair value of embedded conversion options and stock warrants are based on a Black-Scholes fair value calculation. The fair value of convertible notes payable is based on discounted cash flows of principal and interest payments. PRESENTATION OF INTERIM INFORMATION: The accompanying consolidated financial statements as of August 31, 2006 and 2005, for the three months ended August 31, 2006 and 2005 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended May 31, 2006. In the opinion of Management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of August 31, 2006 and 2005, for the three months ended August 31, 2006 and 2005 have been made. The results of operations for the three months ended August 31, 2006 are not necessarily indicative of the operating results for the full year. 5 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PRINCIPLE OF CONSOLIDATION AND PRESENTATION: The accompanying consolidated financial statements include the accounts of Ingen Technologies, Inc. and its subsidiaries after elimination of all inter-company accounts and transactions. Certain prior period balances have been reclassified to conform to the current period presentation. The accompanying consolidated financial statements have been retroactively adjusted to reflect the one-for-forty reverse stock split on December 7, 2005. USE OF ESTIMATES: The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires management to make certain estimates and assumptions that directly affect the results of reported assets, liabilities, revenue, and expenses. Actual results may differ from these estimates. CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES: The Company accounts for convertible notes payable and warrants in accordance with Statement of Financial Accounting Standards (SFAS) No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES." This standard requires the conversion feature of convertible debt be separated from the host contract and presented as a derivative instrument if certain conditions are met. Emerging Issue Task Force (EITF) 00-19, "ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO AND POTENTIALLY SETTLED IN A COMPANY'S OWN STOCK" and EITF 05-2, "THE MEANING OF "CONVENTIONAL CONVERTIBLE DEBT INSTRUMENT" IN ISSUE NO. 00-19" were also analyzed to determine whether the debt instrument is to be considered a conventional convertible debt instrument and classified in stockholders' equity. The convertible notes payable issued on July 27 and August 30, 2006 were evaluated and determined not conventional convertible and, therefore, because of certain terms and provisions including liquidating damages under the associated registration rights agreement the embedded conversion option was bifurcated and has been accounted for as a derivative liability instrument. The stock warrants issued in conjunction with the convertible notes payable were also evaluated and determined to be a derivative instrument and, therefore, classified as a liability on the balance sheet. The accounting guidance also requires that the conversion feature and warrants be recorded at fair value for each reporting period with changes in fair value recorded in the consolidated statements of operations. A Black-Scholes valuation calculation was applied to both the conversion features and warrants at issuance dates and August 31, 2006. The issuance date valuation was used for the effective debt discount that these instruments represent. The debt discount is amortized over the three-year life of the debts using the effective interest method. The August 30, 2006 valuation was used to record the fair value of these instruments at the end of the reporting period with any difference from prior period calculations reflected in the consolidated statement of operations. NET INCOME (LOSS) PER SHARE: Basic net income per share includes no dilution and is computed by dividing net income available to common stockholders by the weighted average number of common stock outstanding for the period. Diluted net income per share is computed by dividing net income by the weighted average number of common shares and the dilutive potential common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares and excludes dilutive potential common shares outstanding, as their effective is anti-dilutive. Dilutive potential common shares consist primarily of stock warrants and shares issuable under convertible debt. 6 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) STOCK-BASED COMPENSATION: The Company accounts for stock issued to non-employees in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 123 and the Emerging Issue Task Force (EITF) Issue No. 00-18, "ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN CONJUNCTION WITH SELLING, GOODS OR SERVICES." SFAS No. 123 states that equity instruments that are issued in exchange for the receipt of goods or services should be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Under the guidance in Issue 00-18, the measurement date occurs as of the earlier of (a) the date at which a performance commitment is reached or (b) absent a performance commitment, the date at which the performance necessary to earn the equity instruments is complete (that is, the vesting date). In June 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), "ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES, AN INTERPRETATION OF FASB STATEMENT NO. 109," which clarifies the accounting of uncertainty in income taxes recognized in financial statements in accordance with FASB Statement No. 109, "ACCOUNTING OF INCOME TAXES." FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The provisions of this Interpretation are effective for fiscal years beginning after December 15, 2006. Management is currently evaluating the financial statement impact of the adoption of FIN 48. NOTE 2 - GOING CONCERN The Company's consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. In the near term, the Company expects operating costs to continue to exceed funds generated from operations. As a result, the Company expects to continue to incur operating losses and may not have sufficient funds to grow its business in the near future. The Company can give no assurance that it will achieve profitability or be capable of sustaining profitable operations. As a result, operations in the near future are expected to continue to use working capital. On July 25, 2006, the Company entered into a Security Purchase Agreement for sale of $2 million aggregate principal amount of callable secured convertible notes. As of August 31, 2006, the Company received an aggregate of $1,066,800 in cash from issuing convertible notes. Management of the Company is actively increasing marketing efforts to increase revenues. The ability of the Company to continue as a going concern is dependent on its ability to meet its financing arrangement and the success of its future operations. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The company incurred a loss of $2,766,114 and $113,762 for the three months ended August 31, 2006 and 2005, and as of that date, had an accumulated deficit of $10,934,332 and $6,679,153, respectively. 7 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment as of August 31, 2006 is summarized as follow: 2006 2005 --------- --------- Automobile $ 9,500 $ 9,500 Furniture & Fixture 27,222 27,222 Machinary & Equipment 65,900 61,277 Leasehold Improvements 32,047 32,047 Molds 29,857 -- --------- --------- 164,526 130,046 Less accumulated depreciation (102,984) (84,910) --------- --------- Property and Equipment, net $ 61,542 $ 45,136 ========= ========= NOTE 4 - ACCRUED EXPENSES Accrued expenses at August 31, 2006 and 2005 consist of: 2006 2005 -------- -------- Accrued officer's compensation $112,000 $363,500 Accrued Professional Fees 6,000 -- Accrued Interest Expense 33,844 30,471 Accrued taxes 25,811 800 -------- -------- Total $177,655 $394,771 ======== ======== NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES 6% $2 MILLION CONVERTIBLE DEBT - ------------------------------ On July 25, 2006, the Company entered into a Security Purchase Agreement (the "Agreement") and agreed to issue and sell (i) callable secured convertible notes up to $2 million, and (ii) warrants to acquire for aggregate of 20 million of the Company's common stocks. The notes bear interest at 6% per annum, and mature three years from the date of issuance. The notes are convertible into the Company's common stock at the applicable percentage of the average of the lowest three trading prices for the Company's shares of common stock during the twenty trading day period to conversion. The applicable percentage is 50%; however, the percentage shall be increased to: (i) 55% in the event that a Registration Statement is filed within thirty days from July 26, 2006, and (ii) 60% in the event that the Registration Statement becomes effective within one hundred and twenty days from July 26, 2006. The Company may prepay the notes in the event that no event of default exists, there are sufficient number of shares available for conversion, and the market price is at or below $0.10 per share. In addition, in the event that the average daily price of the common stock, as reported by the reporting service, for each day of the month ending on any determination date is below $0.10, the Company may repay a portion of the outstanding principal amount of the notes equal to 101% of the principal amount thereof divided by thirty-six plus one month's interest. The full principal amount of the notes is due upon default under the terms of the Notes. In addition, the Company has granted the investors a security interest in substantially all of its assets and intellectual property as well as registration rights. 8 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES (CONTINUED) The Company received the first tranch of $700,000 on July 27, 2005, less issuance costs of $295,200, the second tranch of $600,000, less issuance costs of $13,000 on August 30, 2006, and the third and final tranch of $700,000 is to be purchases upon effectiveness of the Registration Statement. The Company issued seven year warrants to purchase 20,000,000 shares of our common stock at an exercise price of $0.10. The Company filed a, SB-2 registration statement with the SEC on August 25, 2006, regarding the agreement; however, a registration withdrawal request was filed with the SEC on October 31, 2006. The issuance costs incurred in connection with the convertible notes are deferred and being amortized to interest expense over the life of each debenture tranch. The Company is accounting for the conversion option in the debentures and the associated warrants as derivative liabilities in accordance with SFAS 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," EITF 00-19, "ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO AND POTENTIALLY SETTLED IN A COMPANY'S OWN STOCK" and EITF No. 05-2, "THE MEANING OF "CONVENTIONAL CONVERTIBLE DEBT INSTRUMENT" IN ISSUE NO. 00-19." The Company attributed beneficial conversion features to the convertible debt using the Black-Scholes Option Pricing Model. The fair value of the conversion feature has been included as a discount to debt in the accompanying balance sheet up to the proceeds received from each tranch, with any excess charged to operations. The discount is being amortized over the life of each debenture tranch using the interest method. The following tables describe the valuation of the conversion feature of each tranch of the convertible debenture, using the Black Scholes pricing model: 7/27/2006 8/30/2006 Tranch Tranch -------------- ------------- Approximate risk free rate 5.01% 4.80% Average expected life 3 years 3 years Dividend yield 0% 0% Volatility 202.01% 202.01% Estimated fair value of conversion feature $ 1,328,118 $ 1,137,929 The Company recorded the fair value of the conversion feature, aggregate of $2,466,047, as a discount to the convertible debt in the accompanying balance sheet up to the proceeds received from each tranch, with any excess or $1,166,047 charged to expense. Amortization expense related to the conversion feature discount for the three months ended August 31, 2006 was $7,290. Remaining unamortized discount as of that date was $1,292,710. The Company also granted warrants to purchase 20,000,000 shares of common stock in connection with the financing. The warrants are exercisable at $0.10 per share for a period of seven years, and were fully vested. The warrants have been valued at $1,987,478 using the Black-Scholes Option Pricing Model with the following weighted-average assumptions used. 9 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES (CONTINUED) 6/26/2006 -------------- Approximate risk free rate 5.23% Average expected life 7 years Dividend yield 0% Volatility 202.01% Number of warrants granted 20,000,000 Estimated fair value of total warrants granted $ 1,987,478 6% $75,000 DEBT - --------------- On June 7, 2006, the Company entered into an agreement with an accredited investor to sale a convertible debenture. The Company received proceeds of $75,000 from the sale of the convertible debenture on June 7, 2006. The debenture is convertible at any time within a three year period into 3,750,000 shares of common stock at $0.02 per share. The debenture carries an interest rate of 6% per annum, and payable annually. In the event that the debenture is not converted to common stock, any unpaid balance, including interest and the principal, becomes due on May 31, 2009. 6/7/2006 -------------- Approximate risk free rate 4.99% Average expected life 3 years Dividend yield 0% Volatility 202.01% Estimated fair value of conversion feature $ 437,730 The Company recorded the fair value of the conversion feature of $437,730, as a discount to the convertible debt in the accompanying balance sheet up to the proceeds received with any excess or $362,730 charged to expense. DERIVATIVE LIABILITIES - ---------------------- In accordance with the EITF 00-19, the conversion feature of each convertible debenture and the stock warrants issued in conjunction with convertible debentures have been included as long-term liabilities and were originally valued at fair value at the date of issuance. As a liability, the convertible features and the stock warrants are revalued each period until and unless the debt is converted. As of August 31, 2006, the fair values of the conversion feature and the stock warrants aggregated to $3,860,069. The Company recorded a gain of $1,031,094 related to the change in fair value from the date of issuance of the convertible debt to August 31, 2006. This amount is recorded as "Change in Derivative Liabilities" a component of other income in the accompanying consolidated statement of operations. If the debt is converted prior to maturity, the carrying value will be transferred to equity. 10 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 6 - PREFERRED STOCKS On December 7, 2005, the Company had a reverse stock split of 3 to 1 for all issued and outstanding preferred shares and converted all classes of preferred shares into Series A preferred stock. No dividends shall accrue or be payable on the Series A preferred stocks. The Company has the right to redeem each share of Series A preferred stock for $1; however, there is no obligation for this redemption. Each share of Series A preferred stock is entitled to vote on all matters with holders of the common stock; however, each Series A preferred stock is entitled to 1 vote. Each share of Series A preferred stock is convertible, at the option of the holder and subject to a 65 day written notice to the Company, at any time after the date of the issuance into 1 share of fully paid and non-assessable share of common stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of Series A preferred stock shall be entitled to be paid $1 per share before any payments or distribution of assets of the Company to the holders of the common stock or any other equity securities of the Company. The accompanying consolidated financial statements have been retroactively adjusted to reflect the reverse stock split. On April 5, 2006, the Company filed an SB-2 with the SEC regarding an investment Contract (the "Contract") providing that the Company intends to raise up to $5 million or more utilizing Replacement S-B of the SEC. Under this Contract a subscriber agreed to purchase 3 million shares of the Company's restricted series A preferred stock shares at a price of $0.0733 per share or $220,000. These shares will be registered by the Company in the S-B offering. As of August 31, 2006, all of 3 million shares of restricted series A preferred shares were issued and a subscription receivable of $220,000 was recorded against the Company's equity. On July 25, 2006, the Company filed a request for withdrawal of Registration Statement with the SEC. The filing of an SB-2 is pending due to the Company's delinquency in periodic filings with the SEC under the Securities Exchange Act of 1934. The Company did not report from 1998 until it resumed reporting in November 2005. NOTE 7 - COMMON STOCK On October 31, 2005, the Board approved on reverse split to reduce the authorized common shares to 100 million and also approved the reverse split of 40 to 1 outstanding and issued common shares; the effective was on December 7, 2005. The accompanying consolidated financial statements have been retroactively adjusted to reflect the reverse stock split. NOTE 8 - NET LOSS PER SHARE The following table sets forth the computation of basic and diluted net loss per share: August 31,2006 August 31, 2005 --------------- --------------- Numerator: Net Loss $ (2,766,114) $ (113,762) --------------- --------------- Denominator: Weighted Average Number of Shares 22,207,208 7,536,098 --------------- --------------- Net loss per share-Basic and Diluted $ (0.12) $ (0.02) 11 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 8 - NET LOSS PER SHARE (CONTINUED) As the Company incurred net losses for the three months ended August 31, 2006, it has excluded from the calculation of diluted net loss per share approximately 6,083,333 related to its convertible debt in accordance with EITF Issue No. 04-8, "THE EFFECT OF CONTINGENTLY CONVERTIBLE DEBT ON DILUTED EARNINGS PER SHARE". There are no dilutive items for the three months ended August 31, 2005. NOTE 9 - SEGMENT INFORMATION SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" requires that a publicly traded company must disclose information about its operating segments when it presents a complete set of financial statements. Since the Company has only one segment; accordingly, detailed information of the reportable segment is not presented. NOTE 10 - RELATED PARTY TRANSACTIONS The Company had a note payable to a related party in the amounts of $6,886 and $42,802 as of August 31, 2006 and 2005, respectively. The interest rate on the note is 6% and due upon working capital availability. The related accrued interest is $33,844 and $30,471 as of August 31, 2006 and 2005, respectively. NOTE 11 - GUARANTEES The Company from time to time enters into certain types of contracts that contingently require the Company to indemnify parties against third-party claims. These contracts primarily relate to: (i) divestiture agreements, under which the Company November provide customary indemnifications to purchasers of the Company's businesses or assets; and (ii) certain agreements with the Company's officers, directors and employees, under which the Company November be required to indemnify such persons for liabilities arising our of their employment relationship. The terms of such obligations vary. Generally, a maximum obligation is not explicitly stated. Because the obligated amounts of these types of agreements often are not explicitly stated, the overall maximum amount of the obligation cannot be reasonably estimated. Historically, the Company has not been obligated to make significant payments for these obligations, and no liabilities have been recorded for these obligations on its balance sheet as of August 31, 2006. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS This Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which reflect management's current views with respect to future events and financial performance. In this report, the words "anticipates," "believes," "expects," "intends," "future," "may" and similar expressions identify forward-looking statements. These and other forward-looking statements are subject to certain risks and uncertainties, including those discussed in the Risk Factors section of this Item 2 and elsewhere in this Form 10-QSB, that could cause actual results to differ materially from historical results or those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances occurring subsequent to the filing of the Form 10-QSB with the Securities and Exchange Commission. OVERVIEW We are a medical device manufacturer and service provider for medical and consumer markets both domestic and (planned for) abroad. We have four products, one of which has had sales in at least the last three fiscal years (Secure Balance(TM)). The others are oxygen and gas monitoring safety devices that we have developed over the last few years; one of which (OxyView(tm)) we expect to begin selling in calendar year 2006, OxyView(tm), OxyAlert(TM) and GasAlert(TM). GasAlert(TM) development is currently "on hold" and we don't intend to focus on it until we have OxyView(tm) and OxyAlert(TM) in a production and sales mode. We also have a agri-business concept known as Pure Produce, which involves establishing soil-less indoor farming facilities near population centers to grow food and neutriceuticals. We account for our Secure Balance(TM) sales on a cash basis. We had sales revenues of $189,158 for the first quarter of our fiscal year 2007 (running from June 1, 2006 to May 31, 2007) compared to $532,872 for the same time period in fiscal year 2006 (all sales of Secure Balance(TM)). Management attributes the drop in Secure Balance(tm) sales (in comparison to a year ago) to a change in billing practices of Medicare. The government "changed" the rules, telling physicians that they could not utilize the balance therapy equipment in their offices without having a licensed physical therapist on hand while the equipment was in use. Therefore, for a period of time, only physicians willing to bring physical therapists into their offices were willing to purchase or lease Secure Balance(tm). However, after an outcry from physicians, Management has learned that Medicare's decision has been reversed. It is Management's understanding that now Secure Balance(tm) can be utilized by physicians, in their offices (without the need to have a physical therapist present), as long as the use is "incident" to their practices. As a result, Management expects Secure Balance(tm) sales to increase. In addition, we have completed our prototype testing for OxyView(tm) and plan to begin manufacturing and sales during our next fiscal quarter (that ends on November 30, 2006). We have had significant losses since inception. Our net loss for the first quarter of fiscal year 2007 is $2,627,033 compared with $113,762 during the same time period in fiscal year 2006. We anticipate that we will continue to incur substantial operating losses in our fiscal year 2007 as we wrap up our research and development of our BAFI(TM) product line and continue to seek an increase in Secure Balance(TM) sales. We will also have continuing development, manufacturing and sales costs for OxyView(tm). We will have continuing costs in our efforts to catch up on our delinquent periodic reporting filings with the SEC, in filing our current periodic reporting filings with the SEC and when filing our registration statements (as required by investment contracts). All of these factors contributed to our net loss during the current quarter. 13 As of August 31, 2006 we had an accumulated deficit of $10,795,251 (up from $6,679,153 as of the first quarter of fiscal year 2006). Our business plan for the remainder of fiscal year 2007 (ending May 31, 2007) is to continue our efforts to increase the market share Secure Balance(TM) and to begin world-wide sales of one of our BAFI(TM) product lines, OxyView(tm). We will also continue to develop Oxy Alert(tm) and Pure Produce if funds allow. SIGNIFICANT FINANCING THIS QUARTER On July 25, 2006, we entered into a Securities Purchase Agreement for a total subscription amount of $2,000,000 that included Stock Purchase Warrants and Callable Secured Convertible Notes with AJW Capital Partners, LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC and New Millennium Capital Partners II, LLC. The initial funding of $700,000 (we received net proceeds of $640,000) was completed on July 26, 2006 with the following parties and evidenced by callable secured convertible notes: AJW Capital Partners, LLC invested $67,900; AJW Offshore, Ltd. invested $413,000; AJW Qualified Partners, LLC invested $210,000; and New Millennium Capital Partners II, LLC invested $9,100. The callable secured convertible notes are convertible into shares of our common stock at a variable conversion price based upon the applicable percentage of the average of the lowest three (3) Trading Prices for the Common Stock during the twenty (20) Trading Day period prior to conversion. The "Applicable Percentage" means 50%; provided, however, that the Applicable Percentage shall be increased to (i) 55% in the event that a Registration Statement is filed within thirty days of the closing and (ii) 60% in the event that the Registration Statement becomes effective within one hundred and twenty days from the Closing. Under the terms of the callable secured convertible note and the related warrants, the callable secured convertible note and the warrants are exercisable by any holder only to the extent that the number of shares of common stock issuable pursuant to such securities, together with the number of shares of common stock owned by such holder and its affiliates (but not including shares of common stock underlying unconverted shares of callable secured convertible notes or unexercised portions of the warrants) would not exceed 4.99% of the then outstanding common stock as determined in accordance with Section 13(d) of the Exchange Act. The parties received the following seven year warrants to purchase shares of our common stock, exercisable at $.10 per share: AJW Capital Partners, LLC - 1,940,000 warrants; AJW Offshore, Ltd. - 11,800,000 warrants; AJW Qualified Partners, LLC - 6,000,000 warrants; and New Millennium Capital Partners II, LLC - - 260,000 warrants (the "Warrants"). The Warrants are not subject to registration rights. Upon full subscription to the Securities Purchase Agreement and the conversion in full of the Callable Secured Convertible Notes, the total shares being registered are 47,619,048 as follows: (i) AJW Capital Partners, LLC - 4,619,048 shares of common stock issuable in connection with the conversion of the callable secured convertible note; (ii) AJW Offshore, Ltd. - 28,095,238 shares of common stock issuable in connection with the conversion of the callable secured convertible note;; (iii) AJW Qualified Partners, LLC - 14,285,714 shares of common stock issuable in connection with the conversion of the callable secured convertible note; and (iv) New Millennium Capital Partners II, LLC - 619,048 shares of common stock issuable in connection with the conversion of the callable secured convertible note. 14 Lionheart Associates, LLC (d/b/a Fairhills Capital) ("Lionheart") acted as a consultant to us. In consideration for their services, we issued to them warrants representing the right to purchase up to 2,000,000 shares of our common stock at an exercise price of $.10 per share. These warrants also expire on July 26, 2013. More information regarding this transaction is available within our Form SB-2 as filed with the SEC on August 25, 2006. WITHDRAWAL OF OUR SB-2 OF APRIL 5, 2006 On July 25, 2006, we filed a Request for Withdrawal of Registration Statement. This filing withdrew our first SB-2 filing of April 5, 2006. This withdrawal was necessary in order for the company to proceed with the SB-2 as filed on August 25, 2006. CRITICAL ACCOUNTING POLICIES Our significant accounting policies are disclosed in Note 1 to our consolidated financial statements. Certain of our policies require the application of management's judgment in making estimates and assumptions that affect the amounts reported in the consolidated financial statements and disclosures made in the accompanying notes. Those estimates and assumptions are based on historical experience and various other factors deemed to be applicable and reasonable under the circumstances. The use of judgment in determining such estimates and assumptions is by nature, subject to a degree of uncertainty. Accordingly, actual results could differ from the estimates made. Our significant accounting policies include: STOCK-BASED COMPENSATION SFAS No. 123, "Accounting for Stock-Based Compensation," establishes the use of the fair value based method of accounting for stock-based compensation arrangements under which compensation cost is determined using the fair value stock-based compensation determined as of the date of grant and is recognized over the periods in which the related services are rendered. The statement also permits companies to elect to continue using the intrinsic value accounting method specified in Accounting Principles Bulletin Opinion No. 25, "Accounting for Stock Issued to Employees," to account for stock-based compensation issued to employees. Through May 31, 2005, we have elected to use the intrinsic value based method and have disclosed the pro forma effect of using the fair value based method to account for our stock-based compensation. We plan to continue using the intrinsic value based method and providing disclosure for the pro forma effect of using the fair value based method to account for our stock-based compensation through our fiscal quarter ending in February of 2006. As a result of the recent adoption by the Financial Accounting Standards Board of SFAS No. 123 (revised 2004) "Share-Based Payment," or SFAS No. 123(R), we will be required, beginning in our fiscal quarter ending February of 2006, to apply the fair value method as prescribed in SFAS No. 123(R). Although our adoption of SFAS No. 123(R) could have a material impact on our financial position and results of operations, we are still evaluating the potential impact from adopting this statement. ALLOCATION OF COSTS We allocate certain indirect costs associated with support activities such as the rent and utilities for facilities. These costs are allocated between research and development expense and general and administrative expense based on headcount and/or square footage. 15 OFF-BALANCE SHEET ARRANGEMENTS We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities" (SPEs). RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 31, 2006 COMPARED TO THE THREE MONTHS ENDED AUGUST 31, 2005 We had $189,158 in sales for the first quarter of fiscal year 2007, down from $532,872 during the same period of fiscal year 2006. Our cost of sales was $115,547 for this period of fiscal year 2006 and $85,046 for the first quarter of fiscal year 2005. As a result, our gross profit decreased from $447,826 in the first quarter of fiscal year 2006 to $73,611 in the same period of fiscal year 2007 (this quarter). Our selling, general and administrative expenses for the first quarter of fiscal year 2007 were $329,104 ($559,246 in the same period of fiscal year 2006). Our operating loss increased from $111,420 for the first quarter of fiscal year 2006 to $255,493 for the first quarter of fiscal year 2007. We expect our operating costs to fluctuate in relation to our sales results during fiscal year 2007, but still have a goal of turning a profit at some point in fiscal year 2007. OPERATING LOSS CARRYFORWARD (CALCULATED ON A FISCAL YEAR BASIS) As of May 31, 2006 and 2005, the Company had net operating loss carryforwards, approximately, of $3,009,598 and $1,406,771, respectively, to reduce future federal and state taxable income. To the extent not utilized, the carryforwards will begin to expire through 2026. The Company's ability to utilize its net operating loss carryforwards is uncertain and thus a valuation reserve has been provided against the Company's net deferred tax assets. A valuation allowance is recorded for the full amount of deferred tax assets of approximately $1,294,127 and $602,098, for the years ended May 31, 2006 and 2005, respectively, which relates to these loss carryforwards, since future profits are indeterminable. See our Form 10-KSB for more information (filed on August 8, 2006). LIQUIDITY AND CAPITAL RESOURCES Our net cash flow from financing activities was $1,002,859 in the quarter ending August 31, 2006. We financed our operations in the first quarter of fiscal year 2007 with $189,158 of sales of Secure Balance(TM) and private placement securities sales totaling $1,066,800. As of August 31, 2006, we had cash on hand of $824,575 (compared to $404,432 in the same quarter of fiscal year 2006). We had no accounts receivable during this time period (compared to ($38,565) during same quarter of fiscal year 2006). Our future cash requirements will depend on many factors, including finishing our research and development programs for our BAFI(TM) product line (largely completed for OxyView(tm)) and tooling for manufacturing of OxyView(tm), which we are currently engaged in. We will have costs involved in filing, prosecuting and enforcing patents, including foreign patents (planned for the immediate future for OxyView(tm)). We will have costs to complete technological and market developments and the cost of product commercialization, commencing our manufacturing and sales programs for OxyView(tm), as well as our ongoing Secure Balance(TM) sales effort. We also have considerable expense involved in our effort to get up-to-date on all SEC periodic reporting filings under the Securities Exchange Act of 1934, as well as costs involved in filing current periodic reporting and securities registration (as required by contracts with investors). 16 We do not expect to generate a positive cash flow from operations at least until the commercial launch of our OxyView(tm) product line (planned for the second quarter of our fiscal year 2007) and possibly later given the expected cost of commercializing our products. We intend to seek additional funding through public or private financing transactions. Successful future operations are subject to a number of technical and business risks, including our continued ability to obtain future funding, satisfactory product development and market acceptance for our products. See "Business Risks" below. PLAN OF OPERATION FOR OXYVIEW OxyView is a proprietary medical product with a United States Patent (and Trademark) Pending that measures the accuracy of oxygen flow-rate for patients using oxygen during surgery, hospitalization, and outpatient oxygen therapy. OxyView is a disposable pneumatic analog gauge that measures the oxygen flow-rate close to the patient. It allows the medical staff and patient to quickly determine any malfunction of oxygen flow-rate between the source and the patient. OxyView can be used with any oxygen delivery source and has additional markets in aviation, fire fighting, and military. According to a 2002 report of the Department of Health and Human Resources, there are over 5,000 oxygen cannulas used every day in hospitals and surgical rooms, and over 8 million patients using oxygen as outpatient therapy for a variety of pulmonary diseases. The hospitals and surgical staff are required to dispose of the units per OSHA regulations. OxyView is a product that is clean-packaged and disposable. All of our manufacturing tooling and ultimately the manufacturing process itself, is out-sourced. We are estimating that we'll spend $260,000 into the Fall of 2006 getting OxyView manufacturing equipment (called manufacturing molds) ready for production. We've budgeted $114,000 for product molding tooling, about $88,000 for assembly of the manufacturing unit and a sonic welder and about $58,000 for special printing around the cylinder and piston face. We will be able to order the commencement of manufacturing of OxyView units when the manufacturing molds are completed. We plan to order 250,000 OxyView units in our first manufacturing run. Once manufacturing commences, we anticipate about 2 weeks before product will be ready for shipping to customers. We do not have to file a 510(k) pre-market notification with the Food and Drug Administration for this particular product (because it is a monitoring device). Our retail sales effort will be through independent sales people and entities. We do not plan to hire Ingen employees to sell OxyView. OxyView retail pricing will start at $14.95/unit (per our current plan). As long as we meet our timing goal for the commencement of manufacturing and have funds available for advertising, the Company hopes to penetrate 10% of the market throughout the calendar year of 2007. If we meet these goals, we will have $2.8 million in sales to hospitals and surgical facilities, and another $12 million sold to oxygen suppliers/medical supply chains for patients using outpatient oxygen therapy during the first year. The elderly population will increase dramatically over the next 10 years. The majority of pulmonary diseases reside within our elderly population over 55. OxyView, once in production, will be available to all patients of any age. With the increasing problems of medical malpractice law suits, OxyView provides additional means to assist with the prevention of various medical malpractice issues related to oxygen therapy and provides a means to assure proper and accurate oxygen delivery to patients. We do not plan to hire employees to manufacture, ship or sell OxyView. All of these functions will be performed by companies and individuals that we contract with on an independent contractor, or outside sales representative, basis. 17 TRENDS THAT MAY IMPACT OUR LIQUIDITY Positive Trends: The United States has an increasingly elderly population. Our Secure Balance(TM) and BAFI(TM) product line (except GasAlert(TM) which targets the entire adult population) are made to meet some of the challenges and circumstances experienced by our senior citizens. As a result, we expect our sales to increase in time in reflection of this positive trend. Management also believes that our products provide increasing protection in relation to medical malpractice issues. Use of our Secure Balance(TM) system and OxyAlert(TM) and OxyView(tm) products enhance the safety of patients, and therefore, we believe, lessen the chances of medical malpractice exposure to our physician clients. We have been developing our BAFI(TM) product line since 1999. Now, some 7 years later, we still have not identified competition in the marketplace for our BAFI(TM) product line. The lack of competition is expected to enhance our planned marketing campaign. We believe that Secure Balance(TM) is now among the leaders in the balance and fall prevention industry. We expect to be able to capitalize on this notoriety and increase our Secure Balance(TM) sales in fiscal year 2007 and beyond (as long as physicians are not impacted by Medicare billing changes, that may fluctuate periodically, as discussed above, and below). Negative Trends: Our product sales are impacted by Medicare, and are Medicare dependent. Adverse economic conditions, federal budgetary concerns and politics can affect Medicare regulations and could negatively impact our product sales. SEASONAL ASPECTS THAT EFFECT MAY IMPACT OUR MEDICAL MARKET Traditionally, the medical market experiences an economic decrease in purchasing during the summer months. Peak months are usually October through February, followed by a decrease from March to May. Except for the summer of 2005 (when we had better-than-expected Secure Balance(tm) sales), this is the common "bell curve" that has been consistent for several decades and will affect our sales during the course of a year. OUR SECURE BALANCE(TM) LEASING AND FINANCING PROGRAMS Our Secure Balance(TM) Leasing and Financing Programs are offered to allow our physician and medical facility clients a variety of affordable leasing and financing options. Our financing option includes a 90 deferral program, giving clients a chance to earn revenues from Secure Balance(TM) before payments are due. Please see our website to see the particulars of these financing options. 18 EMPLOYEES We have no employees. Our company is basically a holding company (formed in Georgia) that owns or has rights to certain proprietary products and operates our business through another company with our same name, Ingen Technologies, Inc., a Nevada company. As of the date of this periodic report, Ingen Technologies, Inc., the Nevada company, has one full time employee, Mr. Scott R. Sand, our CEO, Founder and Chairman. Mr. Sand is paid a monthly draw on a "1099" basis of $5000; the company does not withhold taxes from his draw. Our Secure Balance(TM) systems (the equipment) are sold to us for re-sale on a "private label" basis; we have no part in the design or manufacture of the systems. We hire sales representatives to sell Secure Balance(TM). These reps are paid on a contractual basis and are not technically our employees. We will out-source the manufacturing of our OxyView(tm) product and will sell these products utilizing a distribution network that will not include the use of company employees. BUSINESS RISKS EACH OF THE FOLLOWING RISKS COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS, WHICH COULD CAUSE THE PRICE OF OUR SHARES TO DECLINE SIGNIFICANTLY. OUR FORWARD-LOOKING STATEMENTS ARE SUBJECT TO THE FOLLOWING RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED BY OUR FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS BELOW. SEE "FORWARD-LOOKING STATEMENTS." THE FOLLOWING RISKS RELATE TO OUR OBLIGATION TO FILE REPORTS UNDER THE SECURITIES EXCHANGE ACT OF 1934: THE SEC HAS THREATENED TO SUSPEND TRADING OF OUR STOCK On October 13, 2005, we received a letter from the Division of Corporate Finance of the Securities and Exchange Commission ("SEC") in connection with our failure to file periodic reports as required by the Securities Exchange Act of 1934. Specifically, as of the date of the SEC's letter, our predecessor failed to file periodic reports dating to fiscal year ended 1998. After the Merger, we recommenced filing of our periodic reports on November 7, 2005. Based on same, we are required to file all reports not previously filed or we may face an SEC administrative hearing pursuant to which the trading of our stock could be suspended until such time as our filings become current. Our counsel has contacted the SEC in connection with this matter and has communicated progress we have made to date in bringing our filings current. To date, the SEC has not scheduled such an administrative hearing. 19 Our fiscal year is from June 1 to May 31. We have filed annual reports on Form 10-KSB for our fiscal years 2004, 2005, and 2006 and quarterly reports on Form 10-QSB for each quarter during fiscal years 2004 and 2005 and the first three quarters of fiscal year 2006, as well as other documents as contained on EDGAR. We are currently attempting to gather information from former CRTZ officials, attorneys and accountants so that our auditors can complete back financial statements and our legal counsel can complete and file the remaining back reporting documents. Our counsel is keeping the SEC abreast of our efforts on a continuing basis. However, there is no guarantee that we will be able to complete our back filings in a manner and within a period of time acceptable to the SEC. There is no guarantee that we will be able to maintain an uninterrupted public market for our securities. THERE IS CONSIDERABLE EFFORT AND EXPENSE INVOLVED IN OUR EFFORT TO CATCH UP ON THE DELINQUENT FILINGS We have expended considerable administrative time on our effort to bring our reporting obligation up to date and will continue to do so until we are able to catch up on all the back periodic reporting filings. We have expended a considerable amount of money in fees to our auditor and counsel to commence periodic reporting, and to go back in time to research and prepare the filings we have done since November of 2005. We plan to continue to expend these administrative and financial resources until such time as we are able to file all past-due reporting on EDGAR (and keep abreast of deadlines for prospective filings). Given the circumstances, this is a necessary drain on the company's resources and until we complete and file all required back reporting, this administrative effort and financial expense may adversely affect our ability to operate and finance our business operations. WE MAY BE SUBJECT TO DISCIPLINE PURSUANT TO SECTION 14 OF THE SECURITIES EXCHANGE ACT OF 1934 BASED ON OUR FAILURE TO FILE A PROXY STATEMENT WITH THE SEC IN CONNECTION WITH THE EFFECTUATION OF OUR REVERSE STOCK SPLITS AND AMENDMENTS TO OUR ARTICLES OF INCORPORATION. Pursuant to Section 14 of the Securities Exchange Act of 1934, we are required to furnish a publicly-filed preliminary and/or definitive written proxy statement to any shareholder whose vote shall be solicited in connection with any proposed corporate action requiring a shareholder vote. We are also required to file such proxy statements with the Securities and Exchange Commission. Certain exemptions may apply which allow us to furnish shareholders with an information statement, as opposed to a proxy statement, which must also be filed with the Securities and Exchange Commission. Additionally, the Georgia Business Corporation Code requires us to provide shareholder notice within a reasonable time from the date shareholder approval was acquired. Based upon same, we were required to notify our shareholders and file an information statement prior to filing amendments to our Articles of Incorporation pursuant to which we reduced the number of authorized shares of our common stock from 500,000,000 to 100,000,000 with the State of Georgia, as well as prior to the effectuation of the 1-for-40 reverse split of all of our common shares and the 1-for-3 reverse stock split of our preferred shares. 20 Although such actions were approved by the holders of the majority of our outstanding shares entitled to vote thereon and although notice was sent to the shareholders as required under Georgia state law, such actions should not have been effectuated without the filing of the information statement with the SEC. Because we failed to file such information statement in a timely manner and provide our shareholders with proper notice, we may be subject to discipline by the Securities and Exchange Commission in violation of Section 14 of the Securities and Exchange Act. THE FOLLOWING RISKS RELATE PRIMARILY TO THE OPERATION OF OUR BUSINESS: NEW BUSINESS VENTURES OR ACQUISITIONS THAT WE MAY UNDERTAKE WOULD INVOLVE A NUMBER OF INHERENT RISKS, ANY OF WHICH COULD CAUSE US NOT TO REALIZE THE BENEFITS ANTICIPATED TO RESULT. We continually seek to expand our operations through acquisitions of businesses and assets, including Pure Produce. These transactions involve various inherent risks, such as: o uncertainties in assessing the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition or other transaction candidates; o the potential loss of key personnel of an acquired business; o the ability to achieve identified operating and financial synergies anticipated to result from an acquisition or other transaction; o problems that could arise from the integration of the acquired or new business; o unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying the acquisition or other transaction rationale; and o unexpected development costs that adversely affect our profitability. Any one or more of these factors could cause us not to realize the benefits anticipated to result from the acquisition of businesses or assets or the commencement of a new business venture. WE HAVE A HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT, AND WE MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY IN THE FUTURE. We have experienced significant operating losses in each period since our inception. As of August 31, 2006, we have incurred total accumulated losses of $10,795,251. We expect these losses to continue and it is uncertain when, if ever, we will become profitable. These losses have resulted principally from costs incurred in research and development and from general and administrative costs associated with operations. We expect to incur increasing operating losses in the future as a result of expenses associated with research and product development as well as general and administrative costs. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. 21 WE WILL NEED ADDITIONAL CAPITAL IN THE FUTURE TO SUPPORT OUR GROWTH, AND RAISING SUCH CAPITAL WILL LIKELY CAUSE SUBSTANTIAL DILUTION TO EXISTING STOCKHOLDERS. IF ADDITIONAL CAPITAL IS NOT AVAILABLE, WE MAY HAVE TO CURTAIL OR CEASE OPERATIONS. Our current plans indicate we will need significant additional capital for research and development and market penetration before we have any anticipated revenue generated from our BAFI(TM) product line. The actual amount of funds that we will need will be determined by many factors, some of which are beyond our control, and we may need funds sooner than currently anticipated. These factors include: o the extent to which we enter into licensing arrangements, collaborations or joint ventures; o our progress with research and development; o the costs and timing of obtaining new patent rights (if any); o cost of continuing operations and sales; o the extent to which we acquire or license other technologies; and o regulatory changes and competition and technological developments in the market. We may be relying on future securities sales to enable us to grow and reach profitability. There is no guarantee we will be able to sell our securities. WE HAVE RELIED ON CAPITAL CONTRIBUTED BY RELATED PARTIES, AND SUCH CAPITAL MAY NOT BE AVAILABLE IN THE FUTURE. Ingen Nevada relied on loans and compensation deferrals from our CEO and Chairman, Scott R. Sand, and investment from an individual named Jeffrey Gleckman, to sustain the company from 1999 into fiscal year 2004. Our finances are now consolidated and reported along with those of Ingen Nevada. Although we have paid much of these loans from Mr. Sand back, we may be unable to repay the remainder as planned and may have to look again to Mr. Sand for assistance in financing if our securities sales don't go as planned. There is no guarantee that Mr. Sand will have financial resources available to assist in our funding. Mr. Sand's executive compensation continues to accrue; currently we are paying him $60,000 per year of the $150,000 per year he is entitled to as CEO under our oral employment agreement with him. WE ARE SUBJECT TO NEW CORPORATE GOVERNANCE AND INTERNAL CONTROLS REPORTING REQUIREMENTS, AND OUR COSTS RELATED TO COMPLIANCE WITH, OR OUR FAILURE TO COMPLY WITH EXISTING AND FUTURE REQUIREMENTS COULD ADVERSELY AFFECT OUR BUSINESS. We face new corporate governance requirements under the Sarbanes-Oxley Act of 2002, as well as new rules and regulations subsequently adopted by the SEC. These laws, rules and regulations continue to evolve and may become increasingly stringent in the future. In particular, we will be required to include management and auditor reports on internal controls as part of our annual report for the year ended December 31, 2006 pursuant to Section 404 of the Sarbanes-Oxley Act. We cannot assure you that we will be able to fully comply with these laws, rules and regulations that address corporate governance, internal control reporting and similar matters. Failure to comply with these laws, rules and regulations could materially adversely affect our reputation, financial condition and the value of our securities. 22 OUR PRODUCTS MAY NOT BE SUCCESSFULLY DEVELOPED OR COMMERCIALIZED, WHICH WOULD HARM US AND FORCE US TO CURTAIL OR CEASE OPERATIONS. We are a relatively new company and our BAFI(TM) product line in particular is still in the late stages of development. We have manufacturing prototypes for OxyView(tm), but still need manufacturing prototypes for OxyAlert(TM) and GasAlert(TM). These products, once marketing commences, may not be successfully commercialized on a timely basis, or at all. If we are unable, for technological or other reasons, to complete the development, introduction or scale-up of manufacturing of these products or other potential products, or if our products do not achieve a significant level of market acceptance, we would be forced to curtail or cease operations. Even if we develop our products for commercial use, we may not be able to develop products that: o are accepted by, and marketed successfully to, the medical marketplace; o are safe and effective; o are protected from competition by others; o do not infringe the intellectual property rights of others; o are developed prior to the successful marketing of similar products by competitors; or o can be manufactured in sufficient quantities or at a reasonable cost. WE MAY NOT BE ABLE TO FORM AND MAINTAIN THE COLLABORATIVE RELATIONSHIPS THAT OUR BUSINESS STRATEGY REQUIRES, AND IF WE CANNOT DO SO, OUR ABILITY TO DEVELOP PRODUCTS AND REVENUE WILL SUFFER. We must form research collaborations and licensing arrangements with several partners at the same time to operate our business successfully. To succeed, we will have to maintain our existing relationships and establish additional collaborations. We cannot be sure that we will be able to establish any additional research collaborations or licensing arrangements necessary to develop and commercialize products using our technology or that we can do so on terms favorable to us. If our collaborations are not successful or we are not able to manage multiple collaborations successfully, our programs may suffer. Collaborative agreements generally pose the following risks: o collaborators may not pursue further development and commercialization of products resulting from collaborations or may elect not to continue or renew research and development programs; o collaborators may delay clinical trials, under-fund a clinical trial program, stop a clinical trial or abandon a product, repeat or conduct new clinical trials or require a new formulation of a product for clinical testing; o collaborators could independently develop, or develop with third parties, products that could compete with our future products; 23 o the terms of our agreements with our current or future collaborators may not be favorable to us; o a collaborator with marketing and distribution rights to one or more products may not commit enough resources to the marketing and distribution of our products, limiting our potential revenues from the commercialization of a product; o disputes may arise delaying or terminating the research, development or commercialization of our products, or result in significant litigation or arbitration; and o collaborations may be terminated and, if terminated, we would experience increased capital requirements if we elected to pursue further development of the product. SECURE BALANCE(TM) IS A PRIVATE LABEL PRODUCT THAT IS NOT EXCLUSIVE TO US. We provide education, training and services related to the SportKat product lines that constitute what we call "Secure Balance(TM)." (See "Description of Business" below) However, the devices themselves are provided to us on a non-exclusive basis, meaning that other companies are marketing the same devices under other names (or using the SportKat name). Only time will tell if the non-exclusive nature of the provision of the devices themselves to us negatively impacts our ability to capture a meaningful market share. If our sales of Secure Balance(TM) suffer because of this non-exclusive relationship, our financial prospects and operational results will be negatively impacted. Currently, our only source of sales revenues is Secure Balance(TM). ALTHOUGH WE DO NOT HAVE DIRECT COMPETITION IN RELATION TO OUR BAFI(TM) PRODUCT LINE, WE EXPECT IT IN THE FUTURE. Although we are unaware of any current competition for our BAFI(TM) product line, we expect competition to develop after we begin marketing our products. It is unknown at this time what impact any such competition could have on us. However, we are a "going concern" enterprise and it is certainly foreseeable that more than one competitor could emerge that is much stronger financially than we are and/or could already have significant marketing relationships for other medical devices. WE DO NOT HAVE INTERNATIONAL PATENTS. Although we have stated that we intend to apply for international patents for our BAFI(TM) product line, we have not as yet done so. If there are delays in obtaining the patents, or if we are unable to obtain the patents, we may not be able to adequately protect our technologies in foreign markets. 24 IF WE ARE UNABLE TO PROTECT EFFECTIVELY OUR INTELLECTUAL PROPERTY, THIRD PARTIES MAY USE OUR TECHNOLOGY, WHICH COULD IMPAIR OUR ABILITY TO COMPETE IN OUR MARKETS. Our success will depend on our ability to obtain and protect patents on our technology and to protect our trade secrets. The patents we currently own may not afford meaningful protection for our technology and products. Others may challenge our patents and, as a result, our patents could be narrowed, invalidated or unenforceable. In addition, our current and future patent applications may not result in the issuance of patents in the United States or foreign countries. Competitors might develop products similar to ours that do not infringe on our patents. In order to protect or enforce our patent rights, we may initiate interference proceedings, oppositions, or patent litigation against third parties, such as infringement suits. These lawsuits could be expensive, take significant time and divert management's attention from other business concerns. The patent position of medical firms generally is highly uncertain, involves complex legal and factual questions, and has recently been the subject of much litigation. No consistent policy has emerged from the U.S. Patent and Trademark Office or the courts regarding the breadth of claims allowed or the degree of protection afforded under biotechnology patents. In addition, there is a substantial backlog of applications at the U.S. Patent and Trademark Office, and the approval or rejection of patent applications may take several years. We cannot guarantee that our management and others associated with us will not improperly use our patents, trademarks and trade secrets. Further, others may gain access to our trade secrets or independently develop substantially equivalent proprietary information and techniques. OUR SUCCESS WILL DEPEND PARTLY ON OUR ABILITY TO OPERATE WITHOUT INFRINGING ON OR MISAPPROPRIATING THE PROPRIETARY RIGHTS OF OTHERS. We may be sued for infringing on the patent rights or misappropriating the proprietary rights of others. Intellectual property litigation is costly, and, even if we prevail, the cost of such litigation could adversely affect our business, financial condition and results of operations. In addition, litigation is time consuming and could divert management attention and resources away from our business. If we do not prevail in any litigation, we could be required to stop the infringing activity and/or pay substantial damages. Under some circumstances in the United States, these damages could be triple the actual damages the patent holder incurs. If we have supplied infringing products to third parties for marketing or licensed third parties to manufacture, use or market infringing products, we may be obligated to indemnify these third parties for any damages they may be required to pay to the patent holder and for any losses the third parties may sustain themselves as the result of lost sales or damages paid to the patent holder. If a third party holding rights under a patent successfully asserts an infringement claim with respect to any of our products, we may be prevented from manufacturing or marketing our infringing product in the country or countries covered by the patent we infringe, unless we can obtain a license from the patent holder. Any required license may not be available to us on acceptable terms, or at all. Some licenses may be non-exclusive, and therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around a patent, we may be unable to market some of our anticipated products, which could have a material adverse effect on our business, financial condition and results of operations. 25 IF WE LOSE OUR KEY MANAGEMENT PERSONNEL, OUR PRODUCT DEVELOPMENT AND COMMERCIALIZATION EFFORTS WOULD SUFFER. Our performance is substantially dependent on the performance of our current senior management, Board of Directors and key scientific and technical personnel and advisers. The loss of the services of any member of our senior management, in particular Mr. Sand, our CEO and Chairman, Board of Directors, scientific or technical staff may significantly delay or prevent the achievement of product development and other business objectives and could have a material adverse effect on our business, operating results and financial condition. We do not have "key person" life insurance policies. WE HAVE NO COMMERCIAL PRODUCTION CAPABILITY YET FOR OUR BAFI(TM) PRODUCT LINE AND WE MAY ENCOUNTER PRODUCTION PROBLEMS OR DELAYS, WHICH COULD RESULT IN LOWER REVENUE. To date, we have not produced a BAFI(TM) product line product for sale. Customers for any potential products and regulatory agencies will require that we comply with current good manufacturing practices that we may not be able to meet. We may not be able to maintain acceptable quality standards if we ramp up production. To achieve anticipated customer demand levels, we will need to scale-up our production capability and maintain adequate levels of inventory. We may not be able to produce sufficient quantities to meet market demand. If we cannot achieve the required level and quality of production, we may need to further outsource production or rely on licensing and other arrangements with third parties. This reliance could reduce our gross margins and expose us to the risks inherent in relying on others. We may not be able to successfully outsource our production or enter into licensing or other arrangements under acceptable terms with these third parties, which could adversely affect our business. WE HAVE NO MARKETING OR SALES STAFF, AND IF WE ARE UNABLE TO ENTER INTO COLLABORATIONS WITH MARKETING PARTNERS OR IF WE ARE UNABLE TO DEVELOP OUR OWN SALES AND MARKETING CAPABILITY, WE MAY NOT BE SUCCESSFUL IN COMMERCIALIZING OUR PRODUCTS. We currently have no in-house sales, marketing or distribution capability. As a result, we will depend on collaborations with third parties that have established distribution systems and direct sales forces. To the extent that we enter into co-promotion or other licensing arrangements, our revenues will depend upon the efforts of third parties, over which we may have little or no control. If we are unable to reach and maintain agreement with one or more distribution entities or collaborators under acceptable terms, we may be required to market our products directly (direct marketing is one component of our marketing strategy). We may elect to establish our own specialized sales force and marketing organization to market our products. In order to do this, we would have to develop a marketing and sales force with technical expertise and with supporting distribution capability. Developing a marketing and sales force is expensive and time consuming and could delay a product launch. We may not be able to develop this capacity, which would make us unable to commercialize our products. 26 IF WE ARE SUBJECT TO PRODUCT LIABILITY CLAIMS AND HAVE NOT OBTAINED ADEQUATE INSURANCE TO PROTECT AGAINST THESE CLAIMS, OUR FINANCIAL CONDITION WOULD SUFFER. If we are able to launch our BAFI(TM) product line, we will face exposure to product liability claims. We have exposure selling Secure Balance(TM)). We have limited product liability insurance coverage, but there is no guarantee that it is adequate coverage. There is also a risk that third parties for which we have agreed to indemnify could incur liability. We cannot predict all of the possible harms or side effects that may result and, therefore, the amount of insurance coverage we obtain may not be adequate to protect us from all liabilities. We may not have sufficient resources to pay for any liabilities resulting from a claim beyond the limit of, or excluded from, our insurance coverage. SHAREHOLDERS MUST RELY ON MANAGEMENT FOR THE OPERATION OF THE COMPANY All decisions with respect to the operation of Ingen and development, production and marketing of our products, will be made exclusively by management. Our success will, to a large extent, depend on the quality of the management of the company. In particular, we will depend on the services of our board members and officers. Management believes that these individuals have the necessary business experience to supervise the management of the company and production and commercial exploitation of our products, however, there can be no assurance that they will perform adequately or that our operations will be successful. Shareholders will have no right or power to take part in the management of the company, for the most part, except to the extent of voting for the members of the Board of Directors each year. Accordingly, no person should purchase any of the stock offered hereby unless such prospective purchaser is willing to entrust all aspects of the management of the company to management and has evaluated management's capabilities to perform such functions. THE COMPANY IS A "C" CORPORATION FOR FEDERAL TAX PURPOSES The corporation is a "C" corporation for federal tax purposes which means that losses or profits of the company, if any, remain in the corporation and are not passed through for tax purposes to shareholders. All assets and liabilities of the company are owned by the company, and not by the shareholders. A shareholder's only asset with respect to the company is his, her or its company share(s) of stock. THERE ARE NO TAX BENEFITS ASSOCIATED WITH THIS OFFERING There are no tax benefits associated with this offering of corporate stock and the company does not intend and believes it has no obligation to register with the Internal Revenue Service as a tax shelter. Any corporate distributions that may be paid by the company to shareholders will be taxed as ordinary income as to the shareholders. We have no current plans to make cash distributions to shareholders and will not be able to do so until (and if) we achieve profitability. 27 INDEMNIFICATION PROVISIONS MAY ADVERSELY AFFECT THE COMPANY The Corporation's Articles of Incorporation provide that under certain circumstances management and other agents will be indemnified by the company for any liabilities or losses arising out of management's activities in connection with the company. Indemnification under such provision could reduce or deplete the assets of the company. OUR QUARTERLY OPERATING RESULTS WILL FLUCTUATE Our quarterly operating results will fluctuate for many reasons, including: o our ability to retain existing customers, attract new customers and satisfy our customers' demands, o our ability to acquire merchandise, manage our inventory and fulfill orders, o changes in gross margins of our current and future products, services, and markets o introduction of our new sites, services and products or those of competitors o changes in usage of the Internet and online services and consumer acceptance of the Internet and online commerce o timing of upgrades and developments in our systems and infrastructure o the level of traffic on our Web site o the effects of acquisitions and other business combinations, and related integration o technical difficulties, system downtime or Internet brownouts o our ability to properly anticipate demand, o our ability to prevent fraud perpetrated by third parties through credit card transactions, and payments transactions o our level of merchandise returns o disruptions in service by common shipping carriers due to strikes or otherwise o disruption of our ongoing business o problems retaining key technical and managerial personnel o expenses associated with amortization of goodwill and other purchased intangible assets o additional operating losses and expenses of acquired businesses, if any o impairment of relationships with existing employees, customers and business partners 28 RISKS RELATED TO FRAUD Although we have developed systems and processes to mitigate fraudulent credit card transactions, failure to prevent such fraud may impact our financial results and may create liability for us in the sale of our products. In addition, the steps we take to protect our proprietary rights may not be adequate and third parties may infringe or misappropriate our copyrights, trademarks, trade dress, patents and similar proprietary rights. Other parties may claim that we infringed their proprietary rights. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources. THE FOLLOWING RISKS RELATE PRINCIPALLY TO OUR COMMON STOCK AND ITS MARKET VALUE: A SUBSTANTIAL NUMBER OF SHARES WE HAVE ISSUED IN EXEMPT TRANSACTIONS ARE, OR ARE BEING MADE, AVAILABLE FOR SALE ON THE OPEN MARKET. THE RESALE OF THESE SECURITIES MIGHT ADVERSELY AFFECT OUR STOCK PRICE. Some of our "restricted" common shares have been held by our shareholders for periods of one or two years or longer. Some of these shares have had restrictions lifted. We will undoubtedly have unrestricted shares issued in the future. Combined, we and our selling shareholders are offering tens of millions of unrestricted common shares in this offering. We have little in the way of contractual restrictions in our agreements for the sale of privately placed shares. There is no way to control the sale of these shares on the secondary market (we trade on the Pink Sheets). The resale of these unrestricted shares, and/or sale of shares registered in this offering, might adversely affect our stock price. OUR STOCK IS THINLY TRADED, WHICH CAN LEAD TO PRICE VOLATILITY AND DIFFICULTY LIQUIDATING YOUR INVESTMENT. The trading volume of our stock has been low, which can cause the trading price of our stock to change substantially in response to relatively small orders. In addition, during the last two fiscal years, our common stock has traded as low as .002 and as high as .40 (as of August 31, 2006). Both volume and price could also be subject to wide fluctuations in response to various factors, many of which are beyond our control, including: o actual or anticipated variations in quarterly and annual operating results; o announcements of technological innovations by us or our competitors; o developments or disputes concerning patent or proprietary rights; and o general market perception of medical device and provider companies. 29 WE MAY ISSUE PREFERRED STOCK IN THE FUTURE, AND THE TERMS OF THE PREFERRED STOCK MAY REDUCE THE VALUE OF YOUR COMMON STOCK. We are authorized to issue up to 40,000,000 shares of preferred stock in one or more series. Our Board of Directors will be able to determine the terms of preferred stock without further action by our stockholders. If we issue preferred stock, it could affect your rights or reduce the value of your common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with or sell our assets to a third party. These terms may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, and sinking fund provisions. WE HAVE NOT, AND CURRENTLY DO NOT ANTICIPATE, PAYING DIVIDENDS ON OUR COMMON STOCK. We have never paid dividends on our common stock and do not plan to pay dividends on our common stock for the foreseeable future. We currently intend to retain future earnings, if any, to finance operations, capital expenditures and the expansion of our business. THERE IS A LIMITED MARKET FOR OUR COMMON STOCK WHICH MAKES IT DIFFICULT FOR INVESTORS TO ENGAGE IN TRANSACTIONS IN OUR SECURITIES. Our common stock is quoted on the Pink Sheets under the symbol "IGTG." There is a limited trading market for our common stock. If public trading of our common stock does not increase, a liquid market will not develop for our common stock. The potential effects of this include difficulties for the holders of our common shares to sell our common stock at prices they find attractive. If liquidity in the market for our common stock does not increase, investors in our company may never realize a profit on their investment. OUR STOCK PRICE IS VOLATILE WHICH MAY MAKE IT DIFFICULT FOR INVESTORS TO SELL OUR SECURITIES FOR A PROFIT. The market price of our common stock is likely to be highly volatile and Could fluctuate widely in price in response to various factors, many of which are beyond our control, including: o technological innovations or new products and services by us or our competitors; o additions or departures of key personnel; o sales of our common stock 30 o our ability to integrate operations, technology, products and services; o our ability to execute our business plan; o operating results below expectations; o loss of any strategic relationship; o industry developments; o economic and other external factors; and o period-to-period fluctuations in our financial results. Because we have a limited operating history with little revenues to date, you may consider any one of these factors to be material. Our stock price may fluctuate widely as a result of any of the above. In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock. OUR COMMON STOCK IS DEEMED A "PENNY STOCK" UNDER THE RULES OF THE SEC, WHICH MAKES TRANSACTIONS IN OUR STOCK CUMBERSOME. Our common stock is currently listed for trading on the Pink Sheets which is generally considered to be a less efficient market than markets such as NASDAQ or other national exchanges, and which may cause difficulty in conducting trades and difficulty in obtaining future financing. Further, our securities are subject to the "penny stock rules" adopted pursuant to Section 15 (g) of the Securities Exchange Act of 1934, as amended, or Exchange Act. The penny stock rules apply to non-NASDAQ companies whose common stock trades at less than $5.00 per share or which have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). Such rules require, among other things, that brokers who trade "penny stock" to persons other than "established customers" complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade "penny stocks" because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. In the event that we remain subject to the "penny stock rules" for any significant period, there may develop an adverse impact on the market, if any, for our securities. Because our securities are subject to the "penny stock rules," investors will find it more difficult to dispose of our securities. Further, for companies whose securities are traded on the Pink Sheets, it is more difficult: (i) to obtain accurate quotations, (ii) to obtain coverage for significant news events because major wire services, such as the Dow Jones News Service, generally do not publish press releases about such companies, and (iii) to obtain needed capital. 31 A SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE. If our shareholders sell substantial amounts of our common stock in the public market, including shares issued upon the exercise of outstanding options or warrants, the market price of our common stock could fall. These sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. As of August 31, 2006, 18,134,547 shares of our issued common stock are unrestricted and 11,205,158 shares are restricted (but many may be eligible to have restrictions lifted). ITEM 3. CONTROLS AND PROCEDURES We maintain disclosure controls and procedures designed to ensure that material information related to our company is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. (a) As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our CEO and CFO concluded, as of the date of such evaluation, that the design and operation of such disclosure controls and procedures were effective. (b) No significant changes were made in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recent fiscal quarter. (c) Limitations. Our management, including our CEO and CFO, does not expect that our disclosure controls or internal controls over financial reporting will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 32 PART II. - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We may from time to time become a party to legal proceedings arising in the ordinary course of business. Other than the lawsuit described above, we are not currently a party to any material pending litigation or other material legal proceeding. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES We received proceeds of $75,000 from the sale of a convertible debenture to Salvatore Amato. The debenture is convertible at any time within a 3 year period into 3,750,000 shares ($0.02 per share) of restricted common shares with registration rights. The agreement and debenture are dated May 31, 2006. The debenture pays 6% per annum. On July 26, 2006, we completed a financing agreement by signing a securities purchase agreement for a maximum of $2,000,000. The initial closing was for financing of the principal amount of $700,000 for which we issued callable secured convertible notes. The initial funding was undertaken as follows: AJW Capital Partners, LLC - $67,900; AJW Offshore, Ltd. - $413,000; AJW Qualified Partners, LLC - $210,000; and New Millennium Capital Partners II, LLC - $9,100. Under the securities purchase agreement, we will receive the principal amount of $600,000 when this SB-2 registration statement is filed with the SEC; and the final principal amount of $700,000 when this registration statement is declared effective. At both times, we will issue callable secured convertible notes for such amounts. The note is convertible into our common shares at the lowest 3 intra-day trading prices during the 20 trading days immediately prior to the conversion date discounted by 40%. The investors in the financing shall not be entitled to convert the promissory note if such conversion would result in any investor solely owning more than 4.99% of our outstanding shares of common stock. Based on our recent financing, we have also issued 20,000,000 warrants convertible into shares of our common stock. Each Warrant entitles to holder to one share of our common stock. The warrants were issued as follows: AJW Capital Partners, LLC - 1,940,000 warrants; AJW Offshore, Ltd. - 11,800,000 warrants; AJW Qualified Partners, LLC - 6,000,000 warrants; and New Millennium Capital Partners II, LLC - 260,000 warrants. The exercise price is $.10 and is exercisable for seven years from the date of issuance. The warrants have a cashless exercise feature. For the 20,000,000 warrants issued on July 26, 2006, the expiration date is July 26, 2013. II-1 The convertible notes and the warrants (the "Securities") were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such Securities. The above issuance of Securities qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. The holders set forth above were each accredited investors and had access to information normally provided in a prospectus regarding us. The offering was not a "public offering" as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of Securities offered. We did not undertake an offering in which we sold a high number of Securities to a high number of investors. In addition, the holders set forth above had the necessary investment intent as required by Section 4(2) since they agreed to receive a share certificate bearing a legend stating that such shares underlying the Securities are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a "public offering." Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction. On July 26, 2006 we issued warrants to representing the right to purchase up to 2,000,000 shares of our common stock at an exercise price of $.10 per share. The exercise price is $.10 and is exercisable for seven years from the date of issuance. The warrants have a cashless exercise feature. The warrants were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933. No commissions were paid for the issuance of such warrants. The above issuance of warrants to purchase shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such warrants did not involve a public offering. The warrant-holder represented that it was an accredited investor and had access to information normally provided in a prospectus regarding us. The offering was not a "public offering" as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, the warrant-holder had the necessary investment intent as required by Section 4(2) and agreed to receive a share certificate upon exercise of the warrant bearing a legend that such shares underlying the warrant are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a "public offering." Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transaction. All of the above issuances of shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance of such shares by us did not involve a public offering. Each of these shareholders was a sophisticated investor and had access to information regarding us. The offering was not a "public offering" as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, these shareholders had the necessary investment intent as required by Section 4(2) since they agreed to and received a share certificate bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a "public offering." Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for the above transactions. II-2 All stock numbers and prices per share have been adjusted to reflect the 1-for-40 reverse split of our common stock split effective December 8, 2005. ITEM 6. EXHIBITS (all exhibits with original signatures are contained in the corporate office files of Ingen Technologies, Inc. ("Ingen")) Exhibit No. Document Description - ----------- -------------------- 4.5 Form of Stock Purchase Warrant by and among Ingen Technologies, Inc. and the New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC. (incorporated by reference to Ingen's Form 8-K filed August 8, 2006) 4.6 Registration Rights Agreement by and among Ingen Technologies, Inc. and the New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC. (incorporated by reference to Ingen's Form 8-K filed August 8, 2006) 4.7 Security Agreement by and among Ingen Technologies, Inc. and the New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC. (incorporated by reference to Ingen's Form 8-K filed August 8, 2006) 4.8 Intellectual Property Security Agreement by and among Ingen Technologies, Inc. and the New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC. (incorporated by reference to Ingen's Form 8-K filed August 8, 2006) 5.1 Opinion of legality and consent of Anslow & Jaclin, LLP, dated August 25, 2006 (incorporated by reference to Ingen's Form SB-2 filed on August 25, 2006) 10.1 Investment Agreement with Salvatore Amato, dated May 31, 2006.* 10.2 Consulting Agreement between National Financial Communications Corp. and Ingen Technologies, Inc. dated July 24, 2006 pursuant to which NFC will render public relations, communications, advisory and consulting services (incorporated by reference to Ingen's Form SB-2 filed on August 25, 2006) 31.1 Certification of Chief Executive Officer as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 31.2 Certification of Chief Financial Officer as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.3 Certification of Chief Executive Officer and Chief Financial Officer as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* - ------------ * Filed herewith. II-3 SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INGEN TECHNOLOGIES, INC. November 1, 2006 /s/ Scott R. Sand ------------------------------------- Scott R. Sand Chief Executive Officer and Chairman November 1, 2006 /s/ Thomas J. Neavitt ------------------------------------- Thomas J. Neavitt Secretary and Chief Financial Officer II-4 EX-10.1 2 ingen_10q-ex1001.txt Exhibit 10.1 INVESTMENT CONTRACT (DEBT) -------------------------- ACCREDITED INVESTORS ONLY (SALVATORE AMATO) A. PARTIES This agreement is entered into this 31st day of May, 2006, by and between INGEN TECHNOLOGIES, INC., a Georgia corporation and Salvatore Amato, an accredited investor of New Jersey ("subscriber" or "undersigned"). B. RECITALS AND SUMMARY Ingen Technologies, Inc. ("COMPANY") intends to raise up to $5 million or more utilizing Regulation S-B of the SEC ("S-B offering"). The purpose of this Agreement is for subscriber to supply $ 75,000 in interim financing to the COMPANY. Subscriber will be issued a convertible debenture (see Exhibit "A" hereto) for 3,750,000 shares of COMPANY restricted common shares at a price of $0.02 per share. These shares will be registered by the COMPANY in the S-B offering. The COMPANY states that it will file the S-B registration statement with the SEC and applicable states (Blue Sky registration) as soon as is practical. The purchase price is payable on or before June 7, 2006. Upon receipt of payment, COMPANY will deliver the convertible debenture. The COMPANY's common stock trades on the Pink Sheets under the symbol "IGTG." The COMPANY is delinquent in its periodic reporting to the SEC under the Securities Exchange Act of 1934. The COMPANY did not report from 1998 until it resumed reporting in November of 2005. The COMPANY is in the process of tracking down and gathering information for the unreported time periods. COMPANY counsel is in regular contact with the SEC Enforcement Staff, supplying information regarding back filing plans. The COMPANY has also pledged to stay current with new reporting filings as they become due. This is a HIGH RISK INVESTMENT that should be undertaken only by accredited, sophisticated people with the means to risk loss of the entire investment. C. OTHER TERMS OF THE CONTRACT This offering is limited to qualified persons and entities who are accredited as defined by federal law (Regulation D of the Securities and Exchange Commission). Subscribers must have the experience, knowledge and sophistication to ascertain the suitability of this investment opportunity in relation to their own needs and/or have a pre-existing personal, family or business relationship with management and/or its officials. There is no impound amount in this offering. All proceeds from this stock debenture Agreement will go directly into the COMPANY's bank account to be utilized as contained below. Prospective investors should realize that additional investment is needed before the COMPANY is able to begin the manufacture and sale of its proprietary products. There is no guarantee the COMPANY will be able to raise enough funds in this or some other offering enabling it to progress beyond its current stage of operation. D. COMPLIANCE WITH SECURITIES LAWS The parties understand that this Agreement is a "security" as defined under applicable state and federal law. This is primarily because the investment provided for herein is in the nature of a "passive investment" wherein subscriber is providing funds for the COMPANY through purchase of a convertible debenture, but not participating in the active management of the funds. It is understood that this Agreement will not be registered with any state or federal securities regulatory authority and that the parties are relying upon exemptions from registration under state and federal law, or, the parties are relying on a federal law "private placement" exemption that pre-empts state law. No state or federal securities regulator has read or passed upon the merits or adequacy of this Agreement. E. ESTIMATED USE OF PROCEEDS Funds will be utilized for engineering, tooling, marketing and inventory production of the COMPANY's product OxyView and for general and administrative expenses. Management should be contacted directly for more specific information regarding OxyView and the COMPANY's operation. In addition, the COMPANY's EDGAR filings contain information regarding its operation. F. ALLOCATIONS AND PROFIT PARTICIPATION The COMPANY has no current dividend policy in place. The COMPANY is a "going concern" and there are no plans to pay shareholder dividends until and if the COMPANY progresses to the point of generating sales revenues beyond that needed to operate and grow the COMPANY. G. MANAGEMENT The resume of Mr. Scott R. Sand, CEO and Chairman, is contained within Form 10-KSB for the COMPANY's fiscal year ending May 31, 2005 (as filed on EDGAR). Other officers and directors of the COMPANY (as well as additional information about the COMPANY and its business) can be found on the COMPANY's website: www.Ingen-Tech.com and on EDGAR in the Form 10-KSB for the fiscal year ending May 31, 2005 and in other EDGAR filings. H. COMPENSATION, STOCK OWNERSHIP OF MANAGEMENT Mr. Sand is paid $5000 per month on a "1099" basis by the COMPANY. Board members are paid $500 per meeting. Management stock ownership is contained on EDGAR in the COMPANY's Form 10-KSB for the fiscal year ending May 31, 2005. Scott Sand has sold or gifted some of his preferred shares since then and should be contacted directly for more information regarding any such transaction. I. SALE OF COMPANY STOCK BY MANAGEMENT Management has marketed the convertible debenture offered hereby. Management will not pay itself a commission regarding this transaction. -2- J. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The COMPANY represents and warrants that it is properly formed and in good standing in the state of Georgia. The COMPANY represents and warrants that Management will use its best efforts to raise or otherwise provide enough funding to move the COMPANY into a profitable operating mode. The COMPANY does not represent and warrant that it will ultimately be able to obtain an Effective Date for its S-B Offering. The COMPANY does not represent and warrant that it will be able to complete its back filings on EDGAR in a timely or complete manner as required by the SEC rules and staff or that the COMPANY's shareholders will always be able to trade the COMPANY's stock in a public market. Management will conduct all business on behalf of the COMPANY in a professional and timely manner. The COMPANY represents and warrants that it has the legal right to develop, manufacture and sell its products. K. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER ("THE UNDERSIGNED") 1. The undersigned has received and carefully reviewed, and is familiar with this Agreement and all material incorporated by reference herein, all amendments and attachments delivered herewith. In evaluating the suitability of an investment in this Agreement, the undersigned has not relied upon any representations or other information (whether oral or written) from the COMPANY, its officers, directors, managers or employees other than as set forth in the Agreement and other delivered materials. 2. The undersigned has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective entrance into this Agreement. 3. The undersigned has obtained, to the extent he deems necessary, his own personal professional advice with respect to the risks inherent in the investment in this Agreement, and the suitability of the investment in light of his financial condition and investment needs. 4. The undersigned believes that the investment in this Agreement is suitable for him based upon his investment objectives and financial needs, and the undersigned is accredited and has adequate means of providing for his current financial needs and personal contingencies and has no need for liquidity of investment with respect to this Agreement. 5. The undersigned has been given access to full and complete information (or is aware of and has reviewed the COMPANY's EDGAR filings) regarding the COMPANY, its Management and business plan, and has utilized such access to his satisfaction, or waived the opportunity to do so, for the purpose of asking questions and receiving answers concerning the terms and conditions of this Agreement, obtaining information in addition to, or verifying information included in, this Agreement, and obtaining any of the documents or information described herein. The undersigned has either attended or been give reasonable opportunity to attend a meeting with representatives of the COMPANY for the purpose of asking questions of, and receiving answers from, such representatives concerning the terms and conditions of this Agreement and to obtain any additional information, to the extent reasonably available, necessary to verify the accuracy of information provided in this Agreement. -3- 6. The undersigned recognizes that the COMPANY has a limited operating history, and that entry into this Agreement as an investment involves a high degree of risk including, but not limited to, the risk of economic losses from operations of the COMPANY and the risks involved in developing, producing, marketing a electronic medical monitoring devices and other products. 7. The undersigned realizes that although he is receiving rights to restricted common COMPANY shares with "piggy back registration rights," that there is no guarantee or promise made that the S-B offering in which the shares will be registered will receive an Effective Date or that a public market for the shares (if the registration becomes effective) will remain in existence. The price of the shares has been arbitrarily established by Management without regard to the financial condition of the COMPANY. 8. The undersigned acknowledges that the COMPANY and its affiliates have not retained counsel to provide its prospective investors with representation in connection with this offering. The undersigned also acknowledges that he understands that (i) no counsel has undertaken any independent due diligence investigation of the facts and circumstances relating to this offering, and (ii) he must assume responsibility for his own due diligence investigation, and (iii) the protection afforded by a complete due diligence investigation of counsel is not present in this offering. 9. The undersigned acknowledges that he understands the risk that insufficient capital will be raised in this offering or in any subsequent offering or financing to assist in accomplishing the COMPANY's goals; and that there is absolutely no assurance that (a) the COMPANY will complete adequate private offerings of its stock; (b) that the COMPANY will be able to operate profitably. Further, the undersigned acknowledges that if the COMPANY is unable to successfully conclude this offering, any other private or public offering or obtain other financing, the COMPANY (and, therefore, the undersigned) would suffer a substantial loss which may result in the COMPANY not being able to develop and market the COMPANY's products or product lines. 10. The undersigned has been advised that this Agreement has not being registered under the Act or the relevant state securities law, but are being offered and sold pursuant to exemptions from such registrations, and that the COMPANY's reliance upon such exemptions is predicated partly on the undersigned's representations to the COMPANY as contained herein. 11. The undersigned represents and warrants that he is a bona fide resident of, and is domiciled in, the State of New Jersey, and that his entry into this Agreement is solely for his own beneficial interest and not as nominee for, or on behalf of, or for the beneficial interest of, or with the intention to transfer to, any other person, trust, or organization. 12. The undersigned is informed of the significance to the COMPANY of the foregoing representations, and such representations are made with the intention that the COMPANY will rely on the same. The undersigned shall indemnify and hold harmless the COMPANY, its officers, directors, managers and agents against any losses, claims, damages, or liabilities to which they, or any of them, may become subject insofar as such losses, claim, damages, or liabilities (or actions in respect thereof) arise from any misrepresentation or misstatement of facts or omission to represent or state facts made by the undersigned to the COMPANY concerning the undersigned or the undersigned's financial position in connection with the offering or sale of the Securities. 13. The undersigned, if other than an individual, makes the following additional representations and warranties: -4- a. The undersigned was not organized for the specific purpose of entering into this Agreement. b. The execution of this Agreement has been duly authorized by all necessary action on the part of the undersigned, has been duly executed by the authorized officer or representative of the undersigned, and is a legal, valid and binding obligation of the undersigned enforceable in accordance with its terms. 14. The undersigned, if executing this Agreement in a representative or fiduciary capacity, (ii) represents that he has full power and authority to execute and deliver this Agreement on behalf of the subscribing individual, partnership, trust, estate, corporation, or other entity for whom the undersigned is executing this Agreement, and such individual, partnership, trust, estate, corporation, or other entity has full right and power to perform pursuant to such Agreement and become a shareholder of the COMPANY and (ii) acknowledges that the representations and warranties contained herein shall be deemed to have been made on behalf of the person or persons for whom the undersigned is so purchasing. 15. Confidentiality. a. The provisions of this Agreement are confidential and private and are not to be disclosed to outside parties (except on a reasonable need to know basis only) without the written and express, advance consent of all parties hereto. b. Subscriber agrees and acknowledges that in his association with the COMPANY under this Agreement, he may come into possession or knowledge of confidential and/or proprietary information. Such confidential and/or proprietary information includes, but is not limited to: information regarding agents, contractors, employees and all affiliates of which the COMPANY possesses an ownership interest of ten percent (10%) or greater; corporate and/or financial information and records of or any client, customer or associate of the COMPANY; customer information; client information; shareholder information; business contacts; investor leads and contacts; employee information; documents regarding the COMPANY's website and any product, business plan or presentation materials of the COMPANY. Subscriber represents and warrants to the COMPANY that he will not divulge confidential, proprietary information of the COMPANY or any of its subsidiaries to anyone or anything without the written and express, advance consent of the COMPANY, and further represents and warrants that he will not use any proprietary information of the COMPANY for his or anyone else's gain or advantage at any time during or after the Term of this Agreement. L. PRODUCT INFORMATION Information concerning the COMPANY'S products maybe obtained online at the COMPANY'S website as mentioned above, on EDGAR in the COMPANY's periodic reporting filings and/or by contacting Management. M. REPORTS TO SHAREHOLDERS Shareholders will receive annual reports from Management containing pertinent COMPANY business information. Shareholders, under law, have a right of inspection of the books of the COMPANY for certain limited purposes. -5- N. LITIGATION, LEGAL MATTERS Management has no information leading it to believe that litigation is imminent or planned by anyone with respect to the COMPANY. O. ACCESS TO INFORMATION Prospective shareholders have the right to request additional information relative to this private placement of securities and Management, to the extent it can reasonably and affordably supply the same, has the duty to supply the same in a timely manner. P. MISCELLANEOUS LEGAL CONSIDERATIONS 1. Modifications and Amendments. The terms and conditions of this Agreement may be amended at any time and from time to time, in whole and in part, upon written agreement signed by a duly authorized officer of the COMPANY and subscriber. 2. Expenses. Each party shall bear its own respective costs, fees and expenses associated with entering into and executing its duties under this Agreement. 3. Indemnification. Each party, if an offending party, agrees to indemnify and hold harmless all other parties from any claim of damage of any party or non-party arising out of any act or omission of the offending party arising from this Agreement. 4. Notices. Any notice, request, proposal, statement or other communication required or permitted to be given hereunder shall be in writing and shall be deemed given when personally delivered or confirmed by facsimile or ten (10) days after mailed by certified mail, postage prepaid, to the parties at their respective addresses first set forth above or to such other address of which a party shall have theretofore notified the other by a notice given in accordance with this Paragraph, together with a courtesy copy to the receiving party's counsel, as follows: If to the COMPANY: - ----------------- Ingen Technologies, Inc. 285 E. County Line Rd. Calimesa, CA 92320 If to Subscriber: 5. Breach. In the event of a breach of this Agreement, the breaching party shall be notified by the other party by written notice pursuant to the Notices Paragraph herein within ten (10) days of reasonable discovery of the breach. Upon notice so given, the breach shall be corrected within fifteen (15) days. If the breach is not corrected within this period, the non-breaching party may take appropriate legal action consistent with the terms of this Agreement. -6- 6. Assignment. The provisions of this Agreement shall be binding upon and inure to the benefit of the COMPANY and Subscriber and their respective successors, assigns and personal representatives. If the COMPANY shall at any time be merged or consolidated into or with any other corporation or if the COMPANY's stock or substantially all of its assets are transferred to another corporation, the provisions of this Agreement shall be binding upon and inure to the benefit of Subscriber and the corporation resulting from such merger or consolidation or to which such capital stock or assets shall be transferred, and this provision shall apply in the event of any subsequent merger, consolidation or transfer. 7. Entire Agreement. This Agreement is the full and complete, integrated agreement of the parties, merging and superseding all previous written and/or oral agreements and representations between the parties, and is amendable only as provided for herein. This Agreement shall be interpreted as if the parties had participated equally in its drafting. 8. Governing Law. This Agreement shall be governed by the laws of the State of California applicable to contracts made to be performed entirely therein, and each party agrees to submit to the personal jurisdiction of any Court of competent jurisdiction in San Bernardino County and to all the rules and orders of such Court, and the laws of the State of California. 9. Waiver. Any waiver by either party of any provision of this Agreement or any right hereunder shall not be deemed a continuing waiver and shall not prevent or estop such party from thereafter enforcing such provision, and the failure of either party to insist in any one or more instances upon the strict performance of any of the provisions of this Agreement by the other party shall not be construed as a waiver or relinquishment for the future performance of any such term or provision, but the same shall continue in full force and effect. 10. Enforcement. If the parties cannot settle any dispute arising out of or relating to this Agreement, or the breach thereof, in a reasonable and timely fashion, either party may file for binding arbitration (as the exclusive means of dispute resolution) within San Bernardino County, California. Arbitration shall be governed by the rules of the American Arbitration Association and judgment upon the award may be entered in any Court having jurisdiction thereof. The arbitrator(s) may award reasonable attorneys fees and costs to the prevailing party. However, the parties agree to reserve the right to obtain a preliminary injunction from a court of competent jurisdiction if necessary in the event of a material breach arising from this Agreement or to otherwise enforce this Agreement if necessary. 11. Headings. The headings in this Agreement are solely for convenience of reference and shall not affect its interpretation. 12. Possible Invalidity. In case any provision of this Agreement should be held to be contrary to, or invalid under, the law of any country, state or other jurisdiction, such illegality or invalidity shall not affect in any way any of the other provisions hereof, this Agreement in such event to be construed as though the offending provision had been deleted or modified in such a manner as to make it enforceable to the maximum extent possible to reflect the parties' intent hereunder, and all of the provisions hereof nevertheless shall continue unmodified and in full force and effect in any country, state or jurisdiction in which such provisions are legal and valid. 13. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same agreement. Facsimile signatures shall be considered as valid and binding as original signatures. -7- 14. Independent Covenants: Each of the respective rights and obligations of the parties hereunder shall be deemed independent and may be enforced independently irrespective of any of the other rights and obligations set forth herein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. /s/ Scott R. Sand /s/ Salvatore Amato - ---------------------------------- ----------------------------------- INGEN TECHNOLOGIES, INC. SUBSCRIBER: By: Scott R. Sand, CEO & Chairman Salvatore Amato -8- EXHIBIT "A" CONVERTIBLE DEBENTURE/Amato $75,000 U.S. (Seventy-five thousand dollars) For sum received per the attached investment contract, Ingen Technologies, Inc. ("maker") agrees to issue 3,750,000 shares of its restricted common stock to Salvatore Amato ("Amato") on or before (upon written notice from Amato or issuance by maker) May 31, 2009. Notice and the timing of conversion to stock must be reasonably approved by counsel to maker with regard to applicable securities laws. During the term of this debenture, maker shall pay Amato simple interest of six percent (6%) per annum; payable on the anniversary date of the debenture, or pro-rated if the conversion to stock takes place during the course of a year. If maker does not convert this debenture to stock and if Amato does not transmit a notice requesting conversion to stock, any unpaid interest and the principal above is due on May 31, 2009. Default and notice provisions (related to default) in the attached investment contract apply to this debenture. Maker shall pay Amato's reasonable attorney's fee and costs if legal action is required with respect to collecting interest or principal hereof. This debenture is non-transferable and cannot be assigned except by operation of law. Dated May 31, 2006 Maker: Ingen Technologies, Inc. /s/ Scott R. Sand - ----------------------------- Scott R. Sand Chairman & CEO -9- EX-31.1 3 ingen_10q-ex3101.txt Exhibit 31.1 CERTIFICATION I, Scott R. Sand, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Ingen Technologies, 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 condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's 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)) 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 our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's Board of Directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's 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 issuer's internal control over financial reporting. Date: November 1, 2006 /s/ Scott R. Sand --------------------------------------------------- Scott R. Sand, Chief Executive Officer and Chairman EX-31.2 4 ingen_10q-ex3102.txt Exhibit 31.2 CERTIFICATION I, Thomas J. Neavitt, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Ingen Technologies, 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 condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's 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)) 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 our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's Board of Directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's 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 issuer's internal control over financial reporting. Date: November 1, 2006 /s/ Thomas J. Neavitt ---------------------------------- Thomas J. Neavitt, Secretary and Chief Financial Officer EX-32 5 ingen_10q-ex3200.txt Exhibit 32 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Each of the undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Ingen Technologies, Inc. (the "Company"), that, to his knowledge, the Quarterly Report of the Company on Form 10-QSB for the period ended August 31, 2006, fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the Company as of the dates and for the periods presented in the financial statements included in such report. Dated: November 1, 2006 /S/ Scott R. Sand -------------------------------------- Scott R. Sand, Chief Executive Officer and Chairman Dated: November 1, 2006 /S/ Thomas J. Neavitt -------------------------------------- Thomas J. Neavitt, Secretary and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----