-----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, AmbHv+HiCgDFjrUer48fqMdEbONUX4defDRgUrF46FeLh1DMjLRLsGMU0EH5XQWr Kfg3OLoJc4eCyhmer+oZ0Q== 0001019687-08-001787.txt : 20080421 0001019687-08-001787.hdr.sgml : 20080421 20080421145335 ACCESSION NUMBER: 0001019687-08-001787 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20080229 FILED AS OF DATE: 20080421 DATE AS OF CHANGE: 20080421 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Ingen Technologies, Inc. CENTRAL INDEX KEY: 0000861058 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS MANUFACTURING INDUSTRIES [3990] IRS NUMBER: 880429044 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28704 FILM NUMBER: 08766543 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_10qsb-022908.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 FEBRUARY 29, 2008 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from: __________ to __________ Commission File Number: 0-28704 INGEN TECHNOLOGIES, INC. ------------------------ (Exact name of registrant as specified in its charter) Georgia 84-1122431 ------- ---------- (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 [x] No [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x] At March 17, 2008, 62,683,474 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 FOR QUARTER ENDED FEBRUARY 29, 2008 CONSOLIDATED BALANCE SHEET (UNAUDITED) - --------------------------------------------------------------------------------------------- AS OF FEBRUARY 29, 2008 ------------ ASSETS Current Assets Cash $ 6,719 Inventory 74,857 Prepaid expenses 155,105 ------------ Total current assets 236,681 ------------ Property and equipment, net of accumulated depreciation of $163,186 244,431 Debt issue cost, net of accumulated amortization of $163,891 204,309 Other assets 68,895 ------------ TOTAL ASSETS $ 754,316 ============ LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Accounts payable $ 214,926 Accrued expenses 226,516 Taxes payable 8,350 Current portion of long-term debt 14,539 Short-term notes 45,500 Officer's loans 98,705 ------------ Total current liabilities 608,536 ------------ Long-term Liabilities Note payable 89,426 Convertible notes payable, net of unamortized discount of $1,161,318 968,682 Derivative liabilities 4,370,435 ------------ Total long-term liabilities 5,428,543 ------------ Total liabilities 6,037,079 ------------ Stockholders' deficit Preferred stock Series A, no par value, 40,000,000 shares authorized; and 24,275,960 issued and outstanding as of February 29, 2008 873,313 Common stock, no par value, 750,000,000 shares authorized; 60,183,474 issued and outstanding as of February 29, 2008 4,618,199 Series A preferred stock subscription receivable (220,000) Accumulated deficit (10,554,275) ------------ Total stockholders' deficit (5,282,763) ------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 754,316 ============ See notes to interim unaudited consolidated financial statements 2 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - -------------------------------------------------------------------------------- For the three months ended February 29, February 28, 2008 2007 - -------------------------------------------------------------------------------- Revenue $ 59,843 $ 281,380 Cost of Sales 38,487 160,455 ------------ ------------ Gross Profit 21,356 120,925 Selling, General and Administrative Expenses 478,694 533,693 ------------ ------------ Operating Loss (457,338) (412,768) ------------ ------------ Other (Expenses): Interest Expenses (251,231) (352,808) Change in Derivative Liabilities 667,279 212,276 ------------ ------------ Net Loss before Taxes (41,290) (553,300) Provision for Income Taxes -- -- ------------ ------------ Net Loss $ (41,290) $ (553,300) ============ ============ Basic and diluted net loss per share nil $ (0.02) ============ ============ Weighted average number of common shares 50,495,201 32,292,943 See notes to interim unaudited consolidated financial statements 3 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - -------------------------------------------------------------------------------- For the nine months ended February 29, February 28, 2008 2007 - -------------------------------------------------------------------------------- Revenue $ 251,852 $ 605,011 Cost of Sales 167,604 342,644 ------------ ------------ Gross Profit 84,248 262,367 Selling, General and Administrative Expenses 1,224,420 1,379,955 ------------ ------------ Operating Loss (1,140,172) (1,117,588) ------------ ------------ Other (Expenses): Interest Expenses (945,592) (4,051,776) Change in Derivative Liabilities 855,161 1,526,403 ------------ ------------ Net Loss before Taxes (1,230,603) (3,642,961) Provision for Income Taxes -- 1,215 ------------ ------------ Net Loss $ (1,230,603) $ (3,644,176) ============ ============ Basic and diluted net loss per share $ (0.03) $ (0.12) ============ ============ Weighted average number of common shares 42,540,474 30,594,250 See notes to interim unaudited consolidated financial statements 4 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - --------------------------------------------------------------------------------------------------- For the nine months ended February 29, February 28, 2008 2007 ----------- ----------- CASH FLOW FROM OPERATING ACTIVITIES: Net Loss (1,230,603) $(3,644,176) Adjustments to Reconcile Net Loss to Net Cash Used in Operations: Depreciation and amortization 43,410 20,823 Amortization of debt issue cost 77,228 44,767 (Increase) Decrease in: Change in derivative liabilities (855,161) (1,526,403) Noncash interest expense and financing costs 769,466 3,965,130 Changes in operating assets and liabilities: (Increase)Decrease in inventory 10,738 (85,728) Increase (Decrease) in accounts payable 130,409 16,881 Increase (Decrease) in accrued expenses 38,979 40,782 Decrease (Increase)in prepaid expenses (121,472) (22,215) Expenses paid with stock 728,350 99,453 ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (408,656) (1,090,686) ----------- ----------- CASH FLOW FROM INVESTING ACTIVITIES Addition to fixed assets -- (99,405) Addition to intangibles -- (7,345) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES -- (106,750) ----------- ----------- CASH FLOW FROM FINANCING ACTIVITIES: Repayments of loan owed to officer (27,207) (66,137) Proceeds from loan from officer 41,570 -- Repayments of notes payable (21,026) -- Proceeds from issuance of common stock 166,300 (52,000) Net proceeds from convertible debt 200,000 1,266,800 Net proceeds from notes payable 55,500 -- ----------- ----------- NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES 415,137 1,148,663 ----------- ----------- NET INCREASE IN CASH 6,481 (48,773) Cash Balance at Beginning of Period 238 111,112 ----------- ----------- CASH BALANCE AT END OF PERIOD $ 6,719 $ 62,339 =========== =========== Supplemental Disclosures of Cash Flow Information: Interest paid $ 17,976 $ -- Taxes paid $ 800 $ -- Noncash Financing Activities: Value of issuance of warrants in connection with convertible debt $ -- $ 1,987,103 Recorded a beneficial conversion feature $ 428,343 $ 3,275,253 Stock subscription receivable for preferred stock $ -- $ 220,000 See notes to interim unaudited consolidated financial statements 5
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., a Georgia corporation (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 diverse and progressive services and products. Ingen Technologies, Inc. owns 100% of the capital stock of Ingen Technologies, Inc. a Nevada corporation that has been in business since 1999. The Company's flagship product is its BAFI (TM) line of products. These are the world's first wireless digital low gas warning system for pressurized gas cylinders. These products include Oxyview(TM), OxyAlert(TM)and GasAlert(TM). On October 24, 2000, the Company received a U.S. Patent for the BAFI (TM) 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 Company has a patent pending on Oxyview(TM) and OxyAlert(TM). 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 Company's 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. On November 16, 2006, the Company purchased the intellectual property rights for Oxyview(TM). The Company had co-invented the Oxyview (TM) product with a third party. The agreement gave the Company sole ownership of the product and intangible pending patents associated with Oxyview (TM), which is part of the Company's BAFI(TM) line of products. Patents for Oxyview (TM) are pending in the United States, Japan, People's Republic of China and the European Communities. Oxyview(TM) relates to flow meters which provide a visual signal for gas flow through a conduit. More particularly it relates to a flow meter which provides a visual cue viewable with the human eye, as to the flow of gas through a cannula which conventionally employs very low pressure and gas volume to a patient using the Oxyview(TM). The Company began recording sales of Oxyview(TM) in November of 2006. Presentation of Interim Information: The accompanying consolidated financial statements for the three and nine months ended February 29, 2008 and February 28, 2007, 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, 2007. 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 for the three and nine months ended February 29, 2008 and February 28, 2007, have been made. The results of operations for the three and nine months ended February 29, 2008 are not necessarily indicative of the operating results for the full year. Principle of Consolidation and Presentation: The accompanying consolidated financial statements include the accounts of Ingen Technologies, Inc. and its subsidiary after elimination of all intercompany accounts and transactions. Certain prior period balances have been reclassified to conform to the current period presentation. 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) Fair Value of Financial Instruments: The Company's financial instruments consist principally of cash, accounts receivable, inventories, 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 has been discounted to the extent that the fair value of the embedded conversion option feature exceeds the face value of the note. This discount is being amortized over the term of the convertible note. Cash Equivalents: For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Revenue Recognition: The Company generally recognizes product revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collection is probable. In instances where final acceptance of the product is specified by the customer, revenue is deferred until all acceptance criteria have been met. No provisions were established for estimated product returns and allowances based on the Company's historical experience. All orders are customized with substantial down payments. Products are released upon receipt of the remaining funds. Use of estimates: The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States 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. Property and Equipment: Property and Equipment are valued at cost. Maintenance and repair costs are charged to expenses as incurred. Depreciation is computed on the straight-line method based on the following estimated useful lives of the assets: 3 to 5 years for computer, software and office equipment, and 5 to 7 years for furniture and fixtures. 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 June 6, 2006, July 27, 2006, August 30, 2006, January 24, 2007, March 15, 2007, April 15, 2007, May 15, 2007, June 15, 2007 and July 31, 2007 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 February 29, 2008. 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 February 29, 2008 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. Income Taxes: Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Net Loss Per Share: Basic net loss per share includes no dilution and is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding for the period. Diluted net loss per share does not differ from basic net loss per share since potential shares of common stock are anti-dilutive for all periods presented. Potential shares consist of Series A preferred stock and outstanding warrants. 7 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) In February, 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 155, ACCOUNTING FOR CERTAIN HYBRID FINANCIAL INSTRUMENTS. SFAS No. 155 eliminates the temporary exemption of bifurcation requirements to securitized financial assets, contained in SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. As a result, similar financial instruments are accounted for similarly regardless of the form of the instruments. In addition, in instances where a derivative would otherwise have to be bifurcated, SFAS No. 155 allows a preparer on an instrument-by-instrument basis to elect fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to remeasurement. SFAS No. 155 is effective for our fiscal year beginning June 1, 2007. In March, 2006, the FASB issued SFAS No. 156, ACCOUNTING FOR SERVICING OF FINANCIAL ASSETS, an amendment of FASB Statement No. 140, ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES. The pronouncement establishes standards whereby servicing assets and servicing liabilities are initially measured at fair value, where applicable. In addition, SFAS No. 156 allows subsequent measurement of servicing assets and liabilities at fair value, and where applicable, derivative instruments used to mitigate risks inherent with servicing assets and liabilities are likewise measured at fair value. SFAS No. 156 is effective for our fiscal year beginning June 1, 2007. In September, 2006, the FASB issued SFAS No. 157, FAIR VALUE MEASUREMENTS. The statement defines fair value, determines appropriate measurement methods, and expands disclosure requirements about those measurements. SFAS No. 157 is effective for our fiscal year beginning June 1, 2008. In February 2007, the FASB issued SFAS No. 159, THE FAIR VALUE OPTION FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES, including an amendment of FASB Statement No. 115. This pronouncement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 is effective as of the beginning of our fiscal year which begins June 1, 2008. In December 2007, the FASB issued SFAS No. 160, "NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS - AN AMENDMENT OF ARB NO. 51." This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The statement requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. This statement is effective for fiscal years beginning on or after December 15, 2008. The statement applies prospectively as of the beginning of the fiscal year in which this is applied. In March 2008, the FASB issued SFAS No. 161, "DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES." This new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. 8 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 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 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. To successfully grow the individual segments of the business, the Company must decrease its cash burn rate, improve its cash position and the revenue base of each segment, and succeed in its ability to raise additional capital through a combination of primarily public or private equity offering or strategic alliances. The Company also depends on certain contractors, and its sole employee, the CEO, and the loss of any of those contractors or the employee, may harm the Company's business. In the nine months ended February 29, 2008, the Company received net proceeds from the sale of callable secured convertible notes of $200,000 (the principal balance of the notes was $220,000). The Company also made equity sales which netted $166,300 in the period. 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 $1,230,603 for the nine months ended February 29, 2008, and as of that date, had an accumulated deficit of $10,554,275. 9 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment as of February 29, 2008 and February 29, 2007 is summarized as follow: 2008 2007 --------- --------- Automobile $ 9,500 $ 9,500 Mobile Demonstration Unit 136,096 -- Furniture & Fixture 31,706 31,705 Machinery & Equipment 120,252 118,652 Leasehold Improvements 41,606 40,180 Molds 68,457 59,272 --------- --------- 407,617 259,309 Less accumulated depreciation (163,186) (119,232) --------- --------- Property and Equipment, net $ 244,431 $ 140,077 ========= ========= NOTE 4 - ACCRUED EXPENSES Accrued expenses at February 29, 2008 and February 29, 2007 consist of: 2008 2007 -------- -------- Accrued officer's compensation $ 63,356 $158,667 Accrued Interest Expense 162,871 55,695 Accrued payroll -- 4,000 Accrued taxes -- 2,078 Royalty payable 289 135 -------- -------- Total $226,516 $220,575 ======== ======== NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES 6% $75,000 DEBT On June 7, 2006, the Company entered into an agreement with an accredited investor for sale of 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 on date of note issuance $437,565 Estimated fair value of conversion feature as of February 29, 2008 $ 61,465 The Company recorded the fair value of the conversion feature of $437,565, as a discount to the convertible debt in the accompanying balance sheet up to the proceeds received with the excess of $362,565 charged to expense. Amortization expense related to the conversion feature discount for the quarter ended February 29, 2008 was $6,373. Remaining unamortized discount as of that date was $31,434. 10 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES (continued) CALLABLE SECURED CONVERTIBLE NOTES AND WARRANTS July 25, 2006 Securities Purchase Agreement ($1.5 Million Convertible Debt) On July 25, 2006, we entered into a Securities Purchase Agreement with New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (the "Investors") and agreed to issue and sell (i) callable secured convertible notes up to $2 million, and (ii) warrants to acquire an aggregate of 20 million shares of our common stock. The notes bear interest at 6% per annum (15% "default interest" per annum), and mature three years from the date of issuance. The notes are convertible into our common stock at the applicable percentage of the average of the lowest three trading prices for our shares of common stock during the twenty trading day period prior 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 25, 2006, and (ii) 60% in the event that the Registration Statement becomes effective within one hundred and twenty days from July 26, 2006. Since we did not have a Registration Statement become effective within one hundred and twenty days of July 25, 2006, the applicable percentage is 50%. Under the Agreement, the conversion price of the secured convertible notes will be adjusted in the event we issue securities below the fixed conversion price and may be adjusted in certain circumstances such as merger, consolidation or if we pay a stock dividend. At May 31, 2007, only $1.5 million of the convertible notes were funded. We received the first tranche of $700,000 on July 27, 2006, less issuance costs of $295,200, the second tranche of $600,000, less issuance costs of $13,000 on August 30, 2006, and the third tranche of $200,000 was received on January 24, 2007. We may prepay the notes in the event that no event of default exists, there are a sufficient number of shares available for conversion, and the market price is at or below $0.10 per share. Prepayment of the convertible notes is to be made in cash equal to 140% of the outstanding principal and accrued interest (for prepayment occurring after the 60th day following the issue date of the notes). In addition, in the event that the reported average daily price of the common stock for each day of the month ending on any determination date is below $0.10, we may repay a portion of the outstanding principal amount of the notes equal to 101% of the principal amount divided by thirty-six plus one month's interest and this will stay all conversions for the month. Events of default under the notes generally include failure to repay the principal or interest when due, failure to issue shares of common stock upon conversion by the holder, failure to timely file a registration statement or have such registration statement declared effective, breach of certain covenants or representation or warranty in the Securities Purchase Agreement or related convertible note, the assignment or appointment of a receiver to control a substantial part of our property or business, a money judgment, writ or similar process entered or filed against us in excess of $50,000 which continues for 20 days unless consented to by the holder, the commencement of a bankruptcy, insolvency, reorganization or liquidation proceeding against us without stay or the delisting of our common stock. Upon the occurrence of an event of default, the note holders may by written notice demand repayment in an amount equal to the greater of (i) the then outstanding principal amount of the convertible notes, together with unpaid interest and any outstanding penalties times 140% or (ii) the "parity value" of the default sum, where parity value means (a) the highest number of shares of common stock issuable upon conversion of the default sum, treating the trading day immediately preceding the prepayment date as the "conversion date" for the purpose of determining the lowest applicable conversion price (unless the event of default is a result of a breach in reference to a specific conversion date), multiplied by (b) the highest closing price for the common stock during the period beginning on the date of first occurrence of the event of default and ending one day prior to the prepayment date. In addition, we granted the Investors a security interest in substantially all of our assets and intellectual property pursuant to a Security Agreement and an Intellectual Property Security Agreement. The warrants have an exercise price of $0.10 per share and expire after seven years. The Investors may exercise the warrants on a cashless basis if the shares of common stock underlying the warrants are not then registered pursuant to an effective registration statement. In addition, the exercise price of the warrants will be adjusted in the event we issue common stock at a price below market, with the exception of any securities issued as of the date of the warrants, certain issuances under our employee stock plans, or shares issued upon exercise of the warrants. 11 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES (continued) The Investors have contractually agreed to restrict their ability to convert the notes and exercise the warrants and receive shares of our common stock so that the number of shares of our common stock held by them and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of our common stock. Without the prior written consent of a majority-in-interest of the Investors, subject to certain exceptions as set forth in the agreement, we may not negotiate or contract with any party to obtain additional equity financing (including debt financing with an equity component) that involves (A) the issuance of common stock at a discount to the market price of the common stock on the date of issuance (taking into account the value of any warrants or options to acquire common stock issued in connection therewith) or (B) the issuance of convertible securities that are convertible into an indeterminate number of shares of common stock or (C) the issuance of warrants during the lock-up period beginning on July 25, 2006 and ending on the later of (i) two hundred seventy (270) days from July 25, 2006 and (ii) one hundred eighty (180) days from the date the registration statement is declared effective. In addition, subject to certain exceptions as set forth in the agreement, we agreed that we would not conduct any equity financing (including debt with an equity component) during the period beginning on July 25, 2006 and ending two (2) years after the end of the above lock-up period unless we have first provided to each Investor an option to purchase its prorata share (based on the ratio of each Investor's purchase under the Securities Purchase Agreement) of the securities being offered in any proposed equity financing. We must provide each Investor written notice describing any proposed equity financing at least 20 business days prior to the closing and the option must be extended to each Investor for 15 days following delivery of the notice. We agreed to file a registration statement for the shares underlying the notes and the warrants within thirty days of closing, to be declared effective within 120 days of closing. We filed an SB-2 registration statement with the Securities and Exchange Commission ("SEC") on August 25, 2006 for the securities underlying the agreement; however, we requested withdrawal of this statement on October 31, 2006. We have filed a new S-1/A to register 12,649,662 of the underlying shares of these convertible notes. Because the required registration statement was not effective by the due date, we may be declared to be in default under the agreement. Further, per the agreement, we are subject to liquidated damages in the amount of 0.02% of the outstanding principal amount of the notes per month, payable in cash or common stock, until the registration is effective. We also agreed to increase our number of authorized shares of common stock from 100 million to 500 million within thirty days of the agreement. From this reserved amount, we are required to have a number of common shares reserved for issuance equal to no less than two times the number issuable upon conversion of the notes and the warrants (based on the conversion price of the notes and the exercise price of the warrants in effect from time to time). If the amount reserved is below the amount to be reserved for the Investors under the agreement, we are required to take all corporate action necessary to authorize and reserve a sufficient number of shares. Under the agreement, if we fail to obtain the shareholder approval necessary to increase the number of authorized shares within thirty days following the date which the number of required reserve shares exceeds the authorized and reserved shares, we may be noticed of an event of default and required to pay the Investors liquidated damages of three (3) percent of the outstanding amount of the notes per month plus accrued and unpaid interest on the notes, prorated for partial months, in cash or shares at the Investor's option. We amended our Articles of Incorporation on February 13, 2008 to increase the number of authorized shares of common stock from 100 million to 750 million. With our current stock price as of this filing, we currently do not have enough shares reserved under the agreement. The issuance costs incurred in connection with the convertible notes are deferred and being amortized to interest expense over the life of each debenture tranche. 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 tranche, with any excess charged to interest and financing expense. The discount is being amortized over the life of each debenture tranche using the interest method. 12 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES (continued) The following tables describe the valuation of the conversion feature of each tranche of the convertible debenture, using the Black Scholes pricing model on the date of each note: 7/27/2006 8/30/2006 1/24/2007 Tranche Tranche Tranche ------------- ------------- ------------- Approximate risk free rate 5.25% 4.80% 4.65% Average expected life 3 years 3 years 2.5 years Dividend yield 0% 0% 0% Volatility 202.01% 201.26% 138.21% Estimated fair value of conversion feature on date of notes $ 1,328,118 $ 1,137,064 $ 371,193 Estimated fair value of conversion feature as of February 29, 2008 $ 1,248,855 $ 1,072,199 $ 354,507 The Company recorded the fair value of the conversion feature, aggregate of $2,836,375, as a discount to the convertible debt in the accompanying balance sheet up to the proceeds received from each tranche, with the excess of $1,336,375 charged to expense. Amortization expense related to the conversion feature discount for the quarter ended February 29, 2008 was $129,617. Remaining unamortized discount as of that date was $717,245. In February 2008, the noteholders converted $5,000 of their notes due under the convertible debts into 500,000 shares of common stock. 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 were originally valued at $1,987,103 using the Black-Scholes Option Pricing Model with the following weighted-average assumptions used. 7/26/2006 ------------- Approximate risk free rate 5.23% Average expected life 7 years Dividend yield 0% Volatility 201.26% Number of warrants granted 20,000,000 Estimated fair value of total warrants granted $ 1,987,103 The warrants were revalued as of the date of this report at a value of $395,440 using the Black-Scholes Option Pricing Model. For the quarter ended February 29, 2008, the Company has reported $395,392 in other income related to changes in its derivative liability associated with these warrants. March 15, 2007 Securities Purchase Agreement ($450,000 Convertible Debt) On March 15, 2007, we entered into a Securities Purchase Agreement with New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (the "Investors") and agreed to issue and sell (i) callable secured convertible notes up to $450,000, and (ii) warrants to acquire an aggregate of 9 million shares of our common stock. The callable secured convertible notes (4 notes, $450,000 total loan principal; 3 year term; 6% annual interest, 15% annual "default interest") 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 trading prices for the common stock during the twenty 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 required filing and (ii) 60% in the event that the Registration Statement becomes effective within ninety days from the required filing. Under the Agreement, the conversion price of the secured convertible notes will be adjusted in the event we issue securities below the fixed conversion price and may be adjusted in certain circumstances such as merger, consolidation or if we pay a stock dividend. We received the first tranche of $120,000 on March 15, 2007, less issuance costs of $20,000, the second tranche of $110,000, less issuance costs of $10,000 on April 16, 2007, and the third tranche of $110,000 was received on May 15, 2007, less issuance costs of $10,000 and the final tranche of $110,000 was received on June 12, 2007. 13 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES (continued) We may prepay the notes in the event that no event of default exists, there are a sufficient number of shares available for conversion, and the market price is at or below $0.10 per share. Prepayment of the convertible notes is to be made in cash equal to either (i) 120% of the outstanding principal and accrued interest for prepayments occurring within 30 days following the issuance of the notes, (ii) 130% of the outstanding principal and accrued interest for prepayment occurring between 31 and 60 days following the issue dates of the notes; and (iii) 140% of the outstanding principal and accrued interest for prepayment occurring after the 60th day following the issue date of the notes. In addition, in the event that the average daily price of the common stock for each day of the month ending on any determination date is below $0.10, we may repay a portion of the outstanding principal amount of the notes equal to 101% of the principal amount divided by thirty-six plus one month's interest and this will stay all conversions for the month. Events of default under the notes generally include failure to repay the principal or interest when due, failure to issue shares of common stock upon conversion by the holder, failure to timely file a registration statement or have such registration statement declared effective, breach of certain covenants or representation or warranty in the Securities Purchase Agreement or related convertible note, the assignment or appointment of a receiver to control a substantial part of our property or business, a money judgment, writ or similar process entered or filed against us in excess of $50,000 which continues for 20 days unless consented to by the holder, the commencement of a bankruptcy, insolvency, reorganization or liquidation proceeding against us without stay or the delisting of our common stock. Upon the occurrence of an event of default, the note holders may demand repayment in an amount equal to the greater of (i) the then outstanding principal amount of the convertible notes, together with unpaid interest and any outstanding penalties times 140% or (ii) the "parity value" of the default sum, where parity value means (a) the highest number of shares of common stock issuable upon conversion of the default sum, treating the trading day immediately preceding the prepayment date as the "conversion date" for the purpose of determining the lowest applicable conversion price (unless the event of default is a result of a breach in reference to a specific conversion date), multiplied by (b) the highest closing price for the common stock during the period beginning on the date of first occurrence of the event of default and ending one day prior to the prepayment date. In addition, we granted the Investors a security interest in substantially all of our assets and intellectual property pursuant to a Security Agreement and an Intellectual Property Security Agreement. We issued seven year warrants to purchase 9,000,000 shares of our common stock at an exercise price of $0.06 per share. The Investors may exercise the warrants on a cashless basis if the shares of common stock underlying the warrants are not then registered pursuant to an effective registration statement. In addition, the exercise price of the warrants will be adjusted in the event we issue common stock at a price below market, with the exception of any securities issued as of the date of the warrants, certain issuances under our employee stock plans, or shares issued upon exercise of the warrants. Under the terms of the callable secured convertible notes and the related warrants, the callable secured convertible notes 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. Per the agreement, we must file a registration statement covering two times the number of shares underlying the notes and the shares underlying the warrants, within 30 days of written demand. A penalty of .02% of the outstanding principal amount per month for each month will accrue if the registration is not effective in ninety days from filing. Without the prior written consent of a majority-in-interest of the Investors, subject to certain exceptions as set forth in the agreement, we may not negotiate or contract with any party to obtain additional equity financing (including debt financing with an equity component) that involves (i) the issuance of common stock at a discount to the market price of the common stock on the date of issuance (taking into account the value of any warrants or options to acquire common stock issued in connection therewith) or (B) the issuance of convertible securities that are convertible into an indeterminate number of shares of common stock or (C) the issuance of warrants during the lock-up period beginning on March 15, 2007 and ending one hundred eighty (180) days from March 15, 2007. In addition, subject to certain exceptions as set forth in the agreement, we agreed that we will not conduct any equity financing (including debt with an equity component) during the period beginning on March 15, 2007 and ending two (2) years after the end of the above lock-up period unless we have first provided to each Investor an option to purchase its prorata share (based on the ratio of each Investor's purchase under the Securities Purchase Agreement) of the securities being offered in any proposed equity financing and the option must be extended to each Investor during the 15-day period following delivery of notice. 14 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES (continued) Subject to shareholder approval, we are required to have a number of common shares reserved for issuance equal to no less than two times the number issuable upon conversion of the notes and the warrants (based on the conversion price of the notes and the exercise price of the warrants in effect from time to time). If the amount reserved is below the amount to be reserved for the Investors under the agreement, we are required to take all corporate action necessary to authorize and reserve a sufficient number of shares. Under the agreement, if we fail to obtain the shareholder approval necessary to increase the number of authorized shares within thirty days following the date which the number of required reserve shares exceeds the authorized and reserved shares, we may be noticed of default and required to pay the Investors liquidated damages of three (3) percent of the outstanding amount of the notes per month plus accrued and unpaid interest on the notes, prorated for partial months in cash or shares at the Investor's option. The issuance costs incurred in connection with the convertible notes are deferred and being amortized to interest expense over the life of each debenture tranche. 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 tranche, with any excess charged to interest and financing expense. The discount is being amortized over the life of each debenture tranche using the interest method. The following tables describe the valuation of the conversion feature of each tranche of the convertible debenture, using the Black Scholes pricing model on the date of each note: 3/15/2007 4/16/2007 5/15/2007 6/12/2007 Tranche Tranche Tranche Tranche ------------- ------------- ------------- ------------ Approximate risk free rate 4.47% 4.80% 4.87% 5.13% Average expected life 3 years 3 years 3 years 3 years Dividend yield 0% 0% 0% 0% Volatility 182.97% 193.30% 193.30% 235.23% Estimated fair value of conversion feature on date of notes $ 237,789 $ 218,638 $ 218,638 $ 214,099 Estimated fair value of conversion feature as of February 29, 2008 $ 224,327 $ 207,605 $ 208,467 $ 202,290
The Company recorded the fair value of the conversion feature, aggregate of $889,164, as a discount to the convertible debt in the accompanying balance sheet up to the proceeds received from each tranche, with the excess of $439,164 charged to expense. Amortization expense related to the conversion feature discount for the quarter ended February 29, 2008 was $37,399. Remaining unamortized discount as of that date was $324,137. The Company also granted warrants to purchase 9,000,000 shares of common stock in connection with the financing. The warrants are exercisable at $0.06 per share for a period of seven years, and were fully vested. The warrants were originally valued at $443,468 using the Black-Scholes Option Pricing Model with the following weighted-average assumptions used. 3/15/2007 ------------- Approximate risk free rate 4.47% Average expected life 7 years Dividend yield 0% Volatility 182.97% Number of warrants granted 9,000,000 Estimated fair value of total warrants granted $ 443,468 The warrants were revalued as of the date of this report at a value of $538,320 using the Black-Scholes Option Pricing Model. For the quarter ended February 29, 2008, the Company has reported $177,948 in other income related to changes in its derivative liability associated with these warrants. July 30, 2007 Callable Secured Convertible Note ($110,000 Convertible Debt) 15 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES (continued) On July 30, 2007, the Company issued a callable secured convertible note in the amount of $110,000. This note was issued under the same terms as the 6% $450,000 Convertible Debt above (the March 15, 2007 Securities Purchase Agreement). The issuance cost of $10,000 incurred in connection with the convertible note is deferred and being amortized to interest expense over the life of the note. The Company is accounting for the conversion option in the debenture 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 the note, with any excess charged to interest and financing expense. The discount is being amortized over the life of the note using the interest method. The following tables describe the valuation of the conversion feature of the convertible debenture, using the Black Scholes pricing model on the date of the note: 7/30/2007 ------------- Approximate risk free rate 4.57% Average expected life 3 years Dividend yield 0% Volatility 236.86% Estimated fair value of conversion feature on date of notes $ 214,244 Estimated fair value of conversion feature as of February 29, 2008 $ 210,353 The Company recorded the fair value of the conversion feature at $214,244, as a discount to the convertible debt in the accompanying balance sheet up to the proceeds received, with the excess of $104,244 charged to expense. Amortization expense related to the conversion feature discount for the quarter ended February 29, 2008 was $9,142. Remaining unamortized discount as of that date was $88,502. EVENTS OF DEFAULT UNDER NOTE AGREEMENTS The Company has committed various acts which constitute events of default under its Securities Agreements dated July 25, 2006, March 15, 2007 and July 30, 2007 (and the notes thereunder with a total original principal balances of $2,060,000). The Company has received assurance from counsel for the investors that the investors have not placed the Company in default under the notes and therefore the Company does not consider itself in default. There can be no assurance that the investors will not declare a default in the future. Should such notice of default be received by the Company, its liabilities would increase dramatically due to the penalties, reset provisions, and other damages specified in the transaction documents. The increase in liabilities attributed to a notice of default under the transaction documents could exceed the Company's current market capitalization and affect negatively on its financial condition by $7-13 million dollars. The debentures are collateralized by the Company's assets and, in the event if the Company is unable to repay or restructure these debentures, there is no assurance that the holders of the debentures will not institute legal proceedings to recover the amounts owed including foreclosure on the Company's assets. DERIVATIVE LIABILITIES In accordance with 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 February 29, 2008, the fair values of the conversion feature and the stock warrants aggregated to $4,370,457. The Company recorded income of $667,279 related to the change in fair value from the last date of valuation of the convertible debt on November 30, 2007 to February 29, 2008. 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. 16 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES (continued) NONEMPLOYEE OPTIONS The Company has accounted for options granted to nonemployees in accordance with FAS 123. Under FAS 123, the option award is based on the fair market value of the underlying security based on the Black-Scholes Pricing Model, less the option price. 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. The Company is authorized to issue 40,000,000 shares of no par value Series A preferred stock. As of February 29, 2008, the Company had 24,275,960 shares of preferred stock Series A issued and outstanding. 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. During the nine months ended February 29, 2008, holders of the Company's Series A preferred stock converted 500,000 shares of their Series A preferred stock into 500,000 shares of the Company's common stock. On May 21, 2006, the Company and a subscriber entered into an Investment Contract (the "Contract") in which the subscriber agreed to purchase 3 million shares of the Company's restricted series A preferred shares at a price of $0.0733 per share or $220,000. Under the Contract, these shares are to be registered by the Company on Form SB-2. Such registration has not occurred. As of August 31, 2007, all 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. NOTE 7 - COMMON STOCK On October 31, 2005, the Board approved a 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 date was on December 7, 2005. The accompanying consolidated financial statements reflect the reverse stock split. On February 13, 2008, the Company amended its Articles of Incorporation to increase its total number of authorized common shares from 100 million to 750 million. NOTE 8 - NET LOSS PER SHARE The following table sets forth the computation of basic and diluted net loss per share: For the nine months ended February 29, February 28, 2008 2007 ----------------------------------- Numerator: Net Loss $(1,230,603) $(3,644,176) Denominator: Weighted Average Number of Shares 42,540,474 30,594,250 --------------- --------------- Net loss per share-Basic and Diluted $ (0.03) $ (0.12) 17 INGEN TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 8 - NET LOSS PER SHARE (CONTINUED) As the Company incurred a net loss for the nine months ended February 29, 2008 and February 28, 2007, it has excluded from the calculation of diluted net loss per share approximately 260,525,960 and 6,083,333 shares, respectively. These shares represent the Series A preferred stock, outstanding warrants and assume that all convertible notes could be converted at the market price as of February 29, 2008 and February 28, 2007, respectively. 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 detailed information of the reportable segment is not presented. NOTE 10 - RELATED PARTY TRANSACTIONS The Company had notes payable to its CEO, Scott Sand, in the amounts of $98,705 and $4,689 as of February 29, 2008 and February 28, 2007, respectively. Interest on the loan was accrued at 6% for the quarter ended February 29, 2007. The bulk of the balance due as of February 29, 2008 was a result of business expenses paid by Mr. Sand on his personal credit cards. The Company will record interest in the amount of finance charges on the credit cards. The related accrued interest of $2,903 is included in the note balance as of February 29, 2008. In addition to the note amounts, the Company also has accrued salary expense payable to Mr. Sand in the amounts of $63,356 and $158,667 as of February 29, 2008 and February 28, 2007, respectively. On October 25, 2007, the Company issued 8,333,333 shares of Series A preferred stock to Scott Sand to retire $200,000 owed to him for accrued compensation. NOTE 11 - LEASE OBLIGATION The Company leases its administrative office under a two unsecured leases agreement which expire on April 1, 2008 and December 31, 2009. The Company also maintains a corporate office under a month-to-month lease agreement. As of February 29, 2008, the remaining lease obligation is as follows: Year Ending Lease May 31, Obligation --------------------------------------- 2008 $ 2,325 2009 9,300 2010 5,425 ------------ $ 17,050 ============ The total rent expense for the three and nine months ended February 29, 2008 was $7,200 and $21,400, respectively. NOTE 12 - INTANGIBLE ASSETS The Company has recorded patents at a cost of $67,345. This represents legal costs of filing for patents and the purchase of the exclusive rights for a patent with common stock valued at $60,000. The costs associated with the patents relate to the OxyView(TM) and OxyAlert(TM) patents. Both of these patents are still pending in status so the Company has not started amortizing these costs. NOTE 13 - 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 may 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 may be required to indemnify such persons for liabilities arising out 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 February 29, 2008. 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS This Quarterly Report on Form 10-QSB contains forward-looking statements, 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 abroad. All of our manufacturing is currently subcontracted. We have four products, two of which are currently generating revenues; Secure Balance(TM) and Oxyview(TM). The Secure Balance(TM) product is a private-label product that includes a vestibular function testing system and balance therapy system. Oxyview(TM) is part of our product line for wireless, digital, low gas warning systems for pressurized gas cylinders, known as BAFI(TM). The other oxygen and gas monitoring safety devices in our BAFI product line that are still being developed are OxyAlert(TM) and GasAlert(TM). GasAlert(TM) development is currently "on hold" and we do not intend to focus on it until we have OxyAlert(TM) in a production and sales mode. We also have an agri-business concept known as Pure Produce, which involves establishing soil-less indoor farming facilities near population centers to grow food and neutriceuticals. Our development plans for Pure Produce are currently suspended, pending the full launch of our BAFI product line and additional funding. Our Oxyview(TM) product went into production after FDA registration in October of 2006. Our first sale of this product was on November 11, 2006. We have launched a marketing campaign and have entered into agreements with several distributors to sell Oxyview(TM) units. All manufacturing of Oxyview(TM) units has been subcontracted with Accent Plastics. The Company is the registered manufacturer of Oxyview(TM) and owns the tooling and molds on location at the manufacturing plant of Accent Plastics, Inc. The Company placed its first order with Accent on October 20, 2006. The Company's arrangement with Accent is solely based on purchase orders from the Company and invoices from Accent at an agreed price per unit. Oxyview (TM), has a U.S. (as well as in the People's Republic of China, Japan and Europe) patent and trademark pending, and is a pneumatic gauge that provides visual safety warning of oxygen flow to hospitalized patients. This product is designed to enhance the safety, assurance and accuracy of hospitalized patients being administered oxygen from any source. Oxyview (TM) is a lightweight pneumatic gauge that is attached to the oxygen tubing just below the neck. It informs the nursing staff of oxygen flow rate near the patient. It is designed to quickly inform the hospital staff of any leak or inaccuracy between the delivery source and the patient. We have filed for approval with the FDA to commence marketing of our OxyAlert(TM) units. Upon approval of the FDA, we will begin marketing and sales of OxyAlert(TM). The OxyAlert(TM) system is intended to be used in monitoring oxygen intake pressure to a recipient of supplemental oxygen. The caregiver is alerted when the oxygen level falls below a predetermined threshold. The OxyAlert Receiver Monitor is an interface that provides the caregiver with visual or audio signals notifying them of the low oxygen levels. The patent application for OxyAlert(TM) was filed in the quarter ended February 29, 2008. Both the Oxyview (TM) and OxyAlert (TM) products are low-oxygen safety warning devices used on remote oxygen cylinders for patients, commercial aircraft, military transport, and fire and safety equipment. OxyAlert(TM) technology encompasses the use of digital sensing and RF frequency transfer so that care givers can access a hand-held remote to monitor the actual oxygen level of any oxygen cylinder at a reasonable distance. Using the same patented and proprietary technology, the Company also plans to offer our GasAlert(TM) product; a device that interfaces between any gas line and accessory, such as a water heater, dryer, stove or heater, to detect leaks. This is a mass consumer item. We do not have an anticipated market date for GasAlert(TM). Our business plan for the remainder of fiscal year ending May 31, 2008 is to continue our efforts to increase the market share for Secure Balance(TM) and to continue with the world-wide sales of one of our BAFI(TM) product lines, OxyView(tm). We will also continue to develop OxyAlert(TM) if funds allow. The marketing costs incurred to increase the sales of OxyView(TM) could be quite substantial. 19 RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 29, 2008 COMPARED TO THE THREE AND NINE MONTHS ENDED FEBRUARY 28, 2007 We reported gross sales of $59,843 in the quarter ended February 29, 2008. Our total sales fell 79% from sales of $281,380 in the quarter ended February 28, 2007. Our sales decrease was attributable to less sales of our Secure Balance (TM) product. Our Secure Balance(TM) sales were $58,045 in the current quarter, compared to $281,380 in the quarter ended February 28, 2007. Secure Balance(TM) sales accounted for 97% of our current quarter's sales and 99% of the sales in the quarter ended February 28, 2007. We reported gross sales of $251,852 in the nine months ended February 29, 2008. Our total sales fell 58% from sales of $605,011 in the nine months ended February 28, 2007. Our sales decrease was attributable to less sales of our Secure Balance (TM) product. Our Secure Balance (TM) sales were $207,358 in the nine months ended February 29, 2008, compared to $601,011 in the nine months ended February 28, 2007. Secure Balance (TM) sales accounted for 83% of the sales in the nine months ended February 29, 2008 and and 99% of the sales in the nine months ended February 28, 2007. 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. Further, our sales of Oxyview (TM) are anticipated to continue to increase from the current quarter's sales as we expand sales channels. After shipping our first sale of Oxyview (TM) in November of 2006, our sales of Oxyview (TM) were $41,593 in the nine months ended February 29, 2008 (we reported $820 of Oxyview (TM) sales in the three months ended February 29, 2008). We also reported $264 in sales of supplies and $2,638 in freight charges that we collected and recorded as income in the nine months ended February 29, 2008. Our total cost of sales was $38,487 in the quarter ended February 29, 2008 and our gross profit was $21,356 (a gross margin of 35.6%). We reported cost of sales of $160,455 in the quarter ended February 28, 2007 with a gross profit of $120,925 (a gross margin of 43.0%). The high percentage of Secure Balance (TM) sales in the current quarter resulted in a reduction in the gross margin. We also are paying higher commissions on our Secure Balance (TM) sales, which has reduced our gross margins. We anticipate that our gross margin will improve as we increase our Oxyview (TM) sales which generates a higher gross margin than our Secure Balance (TM) sales. The cost of sales for our Oxyview (TM) sales was $85 which generated a gross profit of $219 (a gross margin of 89.6%). Secure Balance sales in the quarter ended February 29, 2008 generated a gross margin of 33.8% (cost of sales of $38,401 generating a gross profit of $19,644). Our total cost of sales was $167,604 in the nine months ended February 29, 2008 and our gross profit was $84,248 (a gross margin of 33.5%). We reported cost of sales of $342,644 in the nine months ended February 28, 2007 with a gross profit of $262,367 (a gross margin of 43.4%). We are paying higher commissions on our Secure Balance (TM) sales, which has reduced our gross margins. We anticipate that our gross margin will improve as we increase our Oxyview (TM) sales which generates a higher gross margin than our Secure Balance (TM) sales. The cost of sales for our Oxyview (TM) sales was $10,738 for the nine months ended February 29, 2008 which generated a gross profit of $30,122 (a gross margin of 74.2%). Secure Balance sales in the nine months ended February 29, 2008 generated a gross margin of 24.3% (cost of sales of $156,867 generating a gross profit of $50,491). Our selling, general and administrative expenses were $478,694 in the quarter ended February 29, 2008. This was a decrease of approximately 10.3% from the selling, general and administrative expenses of $533,693 reported in the quarter ended February 28, 2007. The decrease in SG&A is primarily attributable to a decrease in accounting and legal expenses associated with our filings with the Securities and Exchange Commission. Our selling, general and administrative expenses were $1,224,420 in the nine months ended February 29, 2008. This was a decrease of approximately 11.3% from the selling, general and administrative expenses of $1,379,955 reported in the six months ended February 28, 2007. Our interest expense for the quarter ended February 29, 2008 was $251,231. This was an decrease of 28.8% from the interest expense of $352,808 in the quarter ended February 28, 2007. 20 Our interest expense for the nine months ended February 29, 2008 was $945,592. This was a decrease of 76.7% from the interest expense of $4,051,776 in the nine months ended February 28, 2007. The vast majority of our interest expense in both the nine months ended February 29, 2008 and February 28, 2007 related to the accounting treatment of the convertible feature of the notes payable. The interest expense relating to financing costs in the nine months ended February 29, 2008 and February 28, 2007 was $827,429 and $4,009,897, respectively. The interest expense accrued on the notes payable and other interest paid in the nine months ended February 29, 2008 and February 28, 2007 were $118,163 and $41,879, respectively. We recorded income due to the change in our derivative liability in the amount of $855,161 in the nine months ended February 29, 2008. This is compared to the income that we reported in the amount of $1,526,403 in the nine months ended February 28, 2007. This income was a result of the Company's treatment of certain convertible notes payable and warrants. The Company is required to value the convertible feature of each convertible note and also value the warrants when they are issued. The valuation was done again as of February 29, 2008 and February 28, 2007. Any increases in these values, which are based on a Black Scholes valuation, have been recorded as expense and decreases are recorded as income. We have not generated net profit to date and therefore have not paid any federal income taxes since inception. We paid $0 and $1,215 in state taxes in the nine months ended February 29, 2008 and February 28, 2007, respectively. We estimate that our federal tax net operating loss carryforward will be approximately $4.6 million as of May 31, 2007, the end of our last fiscal year. This carryforward was equal to $3,009,598 as of May 31, 2006. The loss carryforward will begin to expire in 2019, if not utilized. Our ability to utilize our net operating loss and tax credit carryforwards may be limited in the event of a change in ownership. LIQUIDITY AND CAPITAL RESOURCES At February 29, 2008, our current assets totaled $236,681 (including cash of $6,719, inventory of $74,857 and prepaid expenses of $155,105). Total current liabilities were $608,536, consisting of $214,926 in accounts payable, $226,516 in accrued expense, $8,350 in taxes payable, $98,705 in an officer's loan and $14,539 representing the current portion of long-term debt. We had $251,852 of sales in the nine months ended February 29, 2008, sales of convertible debentures and other notes on which we netted $255,500 and sales of common stock on which we netted $166,300. Our finances were assisted by deferments from our CEO and Chairman Scott R. Sand. Mr. Sand accrued $50,000 in salary in the current quarter and a total of $150,000 in the nine months ended February 29, 2008. On October 25, 2007, the Company issued 8,333,333 shares of its preferred series A stock to pay for $200,000 in accrued salary. As of February 29, 2008, we owed Mr. Sand $63,356 in accrued salary and an additional $98,705 for expenses that he has paid on behalf of the Company. Our future cash requirements will depend on many factors, including finishing the development of our BAFI(TM) product line (largely completed, as our Oxyview product is now being sold), the costs involved in filing, prosecuting and enforcing patents, competing technological and market developments and the cost of product commercialization for OxyAlert in particular, as well as our ongoing Secure Balance(TM) and Oxyview sales efforts. 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. 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). SIGNIFICANT FINANCING July 25, 2006 Securities Purchase Agreement 21 On July 25, 2006, we entered into a Securities Purchase Agreement with New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (the "Investors") and agreed to issue and sell (i) callable secured convertible notes up to $2 million, and (ii) warrants to acquire an aggregate of 20 million shares of our common stock. The notes bear interest at 6% per annum (15% "default interest" per annum), and mature three years from the date of issuance. The notes are convertible into our common stock at the applicable percentage of the average of the lowest three trading prices for our shares of common stock during the twenty trading day period prior 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 25, 2006, and (ii) 60% in the event that the Registration Statement becomes effective within one hundred and twenty days from July 26, 2006. Since we did not have a Registration Statement become effective within one hundred and twenty days of July 25, 2006, the applicable percentage is 50%. Under the agreement, the conversion price of the secured convertible notes will be adjusted in the event we issue securities below the fixed conversion price and may be adjusted in certain circumstances such as merger, consolidation or if we pay a stock dividend. At May 31, 2007, only $1.5 million of the convertible notes were funded. We received the first tranche of $700,000 on July 27, 2006, less issuance costs of $295,200, the second tranche of $600,000, less issuance costs of $13,000 on August 30, 2006, and the third tranche of $200,000 was received on January 24, 2007. We may prepay the notes in the event that no event of default exists, there are a sufficient number of shares available for conversion, and the market price is at or below $0.10 per share. Prepayment of the convertible notes is to be made in cash equal to 140% of the outstanding principal and accrued interest (for prepayment occurring after the 60th day following the issue date of the notes). In addition, in the event that the reported average daily price of the common stock for each day of the month ending on any determination date is below $0.10, we may repay a portion of the outstanding principal amount of the notes equal to 101% of the principal amount divided by thirty-six plus one month's interest and this will stay all conversions for the month. Events of default under the notes generally include failure to repay the principal or interest when due, failure to issue shares of common stock upon conversion by the holder, failure to timely file a registration statement or have such registration statement declared effective, breach of certain covenants or representation or warranty in the Securities Purchase Agreement or related convertible note, the assignment or appointment of a receiver to control a substantial part of our property or business, a money judgment, writ or similar process entered or filed against us in excess of $50,000 which continues for 20 days unless consented to by the holders, the commencement of a bankruptcy, insolvency, reorganization or liquidation proceeding against us without stay or the delisting of our common stock. Upon the occurrence of an event of default, the note holders may by written notice demand repayment in an amount equal to the greater of (i) the then outstanding principal amount of the convertible notes, together with unpaid interest and any outstanding penalties times 140% or (ii) the "parity value" of the default sum, where parity value means (a) the highest number of shares of common stock issuable upon conversion of the default sum, treating the trading day immediately preceding the prepayment date as the "conversion date" for the purpose of determining the lowest applicable conversion price (unless the event of default is a result of a breach in reference to a specific conversion date), multiplied by (b) the highest closing price for the common stock during the period beginning on the date of first occurrence of the event of default and ending one day prior to the prepayment date. In addition, we granted the Investors a security interest in substantially all of our assets and intellectual property pursuant to a Security Agreement and an Intellectual Property Security Agreement. The warrants have an exercise price of $0.10 per share and expire after seven years. The Investors may exercise the warrants on a cashless basis if the shares of common stock underlying the warrants are not then registered pursuant to an effective registration statement. In addition, the exercise price of the warrants will be adjusted in the event we issue common stock at a price below market, with the exception of any securities issued as of the date of the warrants, certain issuances under our employee stock plans, or shares issued upon exercise of the warrants. The Investors have contractually agreed to restrict their ability to convert the notes and exercise the warrants and receive shares of our common stock so that the number of shares of our common stock held by them and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of our common stock. 22 Without the prior written consent of a majority-in-interest of the Investors, subject to certain exceptions as set forth in the agreement, we may not negotiate or contract with any party to obtain additional equity financing (including debt financing with an equity component) that involves (A) the issuance of common stock at a discount to the market price of the common stock on the date of issuance (taking into account the value of any warrants or options to acquire common stock issued in connection therewith) or (B) the issuance of convertible securities that are convertible into an indeterminate number of shares of common stock or (C) the issuance of warrants during the lock-up period beginning on July 25, 2006 and ending on the later of (i) two hundred seventy (270) days from July 25, 2006 and (ii) one hundred eighty (180) days from the date the registration statement is declared effective. In addition, subject to certain exceptions as set forth in the agreement, we agreed that we would not conduct any equity financing (including debt with an equity component) during the period beginning on July 25, 2006 and ending two (2) years after the end of the above lock-up period unless we have first provided to each Investor an option to purchase its prorata share (based on the ratio of each Investor's purchase under the Securities Purchase Agreement) of the securities being offered in any proposed equity financing. We must provide each Investor written notice describing any proposed equity financing at least 20 business days prior to the closing and the option must be extended to each Investor for 15 days following delivery of the notice. We agreed to file a registration statement for the shares underlying the notes and the warrants within thirty days of closing, to be declared effective within 120 days of closing. We filed an SB-2 registration statement with the Securities and Exchange Commission ("SEC") on August 25, 2006 for the securities underlying the agreement; however, we requested withdrawal of this statement on October 31, 2006. We intend to file a new SB-2 to register the underlying shares of these convertible notes and 6 million additional shares once we have cured our delinquent filings with the SEC. Because the required registration statement was not effective by the due date, we may be declared to be in default under the agreement. Further, per the agreement, we are subject to liquidated damages in the amount of 0.02% of the outstanding principal amount of the notes per month, payable in cash or common stock, until the registration is effective. We also agreed to increase our number of authorized shares of common stock from 100 million to 500 million within thirty days of the agreement. From this reserved amount, we are required to have a number of common shares reserved for issuance equal to no less than two times the number issuable upon conversion of the notes and the warrants (based on the conversion price of the notes and the exercise price of the warrants in effect from time to time). If the amount reserved is below the amount to be reserved for the Investors under the agreement, we are required to take all corporate action necessary to authorize and reserve a sufficient number of shares. Under the agreement, if we fail to obtain the shareholder approval necessary to increase the number of authorized shares within thirty days following the date which the number of required reserve shares exceeds the authorized and reserved shares, we may be noticed of an event of default and required to pay the Investors liquidated damages of three (3) percent of the outstanding amount of the notes per month plus accrued and unpaid interest on the notes, prorated for partial months, in cash or shares at the Investor's option. We amended our Articles of Incorporation on February 13, 2008 to increase the number of authorized shares of common stock from 100 million to 750 million. With our current stock price as of this filing, we currently do not have enough shares reserved under the agreement. In February 2008, the noteholders converted $5,000 of their notes due under the convertible debts into 500,000 shares of common stock. March 15, 2007 Securities Purchase Agreement On March 15, 2007, we entered into a Securities Purchase Agreement with New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (the "Investors") and agreed to issue and sell (i) callable secured convertible notes up to $450,000, and (ii) warrants to acquire an aggregate of 9 million shares of our common stock. The callable secured convertible notes (4 notes, $450,000 total loan principal; 3 year term; 6% annual interest, 15% annual "default interest") 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 trading prices for the common stock during the twenty 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 required filing and (ii) 60% in the event that the Registration Statement becomes effective within ninety days from the required filing. Under the agreement, the conversion price of the secured convertible notes will be adjusted in the event we issue securities below the fixed conversion price and may be adjusted in certain circumstances such as merger, consolidation or if we pay a stock dividend. We received the first tranche of $120,000 on March 15, 2007, less issuance costs of $20,000, the second tranche of $110,000, less issuance costs of $10,000 on April 16, 2007, and the third tranche of $110,000 was received on May 15, 2007, less issuance costs of $10,000 and the final tranche of $110,000 was received on June 12, 2007. 23 We may prepay the notes in the event that no event of default exists, there are a sufficient number of shares available for conversion, and the market price is at or below $0.10 per share. Prepayment of the convertible notes is to be made in cash equal to either (i) 120% of the outstanding principal and accrued interest for prepayments occurring with 30 days following the issuance of the notes, (ii) 130% of the outstanding principal and accrued interest for prepayment occurring between 31 and 60 days following the issue dates of the notes; and (iii) 140% of the outstanding principal and accrued interest for prepayment occurring after the 60th day following the issue date of the notes. In addition, in the event that the average daily price of the common stock for each day of the month ending on any determination date is below $0.10, we may repay a portion of the outstanding principal amount of the notes equal to 101% of the principal amount divided by thirty-six plus one month's interest and this will stay all conversions for the month. Events of default under the notes generally include failure to repay the principal or interest when due, failure to issue shares of common stock upon conversion by the holder, failure to timely file a registration statement or have such registration statement declared effective, breach of certain covenants or representation or warranty in the Securities Purchase Agreement or related convertible note, the assignment or appointment of a receiver to control a substantial part of our property or business, a money judgment, writ or similar process entered or filed against us in excess of $50,000 which continues for 20 days unless consented to by the holders, the commencement of a bankruptcy, insolvency, reorganization or liquidation proceeding against us without stay or the delisting of our common stock. Upon the occurrence of an event of default, the note holders may demand repayment in an amount equal to the greater of (i) the then outstanding principal amount of the convertible notes, together with unpaid interest and any outstanding penalties times 140% or (ii) the "parity value" of the default sum, where parity value means (a) the highest number of shares of common stock issuable upon conversion of the default sum, treating the trading day immediately preceding the prepayment date as the "conversion date" for the purpose of determining the lowest applicable conversion price (unless the event of default is a result of a breach in reference to a specific conversion date), multiplied by (b) the highest closing price for the common stock during the period beginning on the date of first occurrence of the event of default and ending one day prior to the prepayment date. In addition, we granted the Investors a security interest in substantially all of our assets and intellectual property pursuant to a Security Agreement and an Intellectual Property Security Agreement. We issued seven year warrants to purchase 9,000,000 shares of our common stock at an exercise price of $0.06 per share. The Investors may exercise the warrants on a cashless basis if the shares of common stock underlying the warrants are not then registered pursuant to an effective registration statement. In addition, the exercise price of the warrants will be adjusted in the event we issue common stock at a price below market, with the exception of any securities issued as of the date of the warrants, certain issuances under our employee stock plans, or shares issued upon exercise of the warrants. Under the terms of the callable secured convertible notes and the related warrants, the callable secured convertible notes 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. Per the agreement, we must file a registration statement covering two times the number of shares underlying the notes and the shares underlying the warrants, within 30 days of written demand. A penalty of .02% of the outstanding principal amount per month for each month will accrue if the registration is not effective in ninety days from filing. Without the prior written consent of a majority-in-interest of the Investors, subject to certain exceptions as set forth in the agreement, we may not negotiate or contract with any party to obtain additional equity financing (including debt financing with an equity component) that involves (i) the issuance of common stock at a discount to the market price of the common stock on the date of issuance (taking into account the value of any warrants or options to acquire common stock issued in connection therewith) or (B) the issuance of convertible securities that are convertible into an indeterminate number of shares of common stock or (C) the issuance of warrants during the lock-up period beginning on March 15, 2007 and ending one hundred eighty (180) days from March 15, 2007. In addition, subject to certain exceptions as set forth in the agreement, we agreed that we will not conduct any equity financing (including debt with an equity component) during the period beginning on March 15, 2007 and ending two (2) years after the end of the above lock-up period unless we have first provided to each Investor an option to purchase its prorata share (based on the ratio of each Investor's purchase under the Securities Purchase Agreement) of the securities being offered in any proposed equity financing and the option must be extended to each Investor during the 15-day period following delivery of notice. 24 Subject to shareholder approval, we are required to have a number of common shares reserved for issuance equal to no less than two times the number issuable upon conversion of the notes and the warrants (based on the conversion price of the notes and the exercise price of the warrants in effect from time to time). If the amount reserved is below the amount to be reserved for the Investors under the agreement, we are required to take all corporate action necessary to authorize and reserve a sufficient number of shares. Under the agreement, if we fail to obtain the shareholder approval necessary to increase the number of authorized shares within thirty days following the date which the number of required reserve shares exceeds the authorized and reserved shares, we may be noticed of default and required to pay the Investors liquidated damages of three (3) percent of the outstanding amount of the notes per month plus accrued and unpaid interest on the notes, prorated for partial months in cash or shares at the Investor's option. On July 30, 2007, we issued a callable secured convertible note in the amount of $110,000. This note was issued under the same terms as the 6% $450,000 Convertible Debt described above (the March 15, 2007 Securities Purchase Agreement). The foregoing is a general description of the securities purchase agreements and related obligations, copies of the July 25, 2006 agreements were filed as exhibits to our Current Report on Form 8-K, filed with the SEC on August 8, 2006 and copies of the March 15, 2007 agreements were filed as exhibits to our Form 10-KSB, filed with the SEC on August 29, 2007. Under the transaction documents, we have committed various acts and failed to timely perform other acts that constitute events of default under the transaction documents. We have received assurance from counsel for the investors that "You are not in default. We [the investors] have to put you into default and we have not." There can be no assurance that the investors will not declare a default in the future. Our stockholders should be aware that if the investors provide written notice of default to us, then our liabilities would increase dramatically due to the penalties, reset provisions, and other damages specified in the transaction documents. The increase in liabilities attributed to a notice of default under the transaction documents could exceed our current market capitalization and affect negatively our financial condition by $7-13 million dollars. The debentures are collateralized by our assets and, in the event if we are unable to repay or restructure these debentures, there is no assurance that the holders of the debentures will not institute legal proceedings to recover the amounts owed including foreclosure on our assets. 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 8 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 hope to increase our Secure Balance(TM) sales (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. 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 day deferral program, giving clients a chance to earn revenues from Secure Balance(TM) before payments are due. 25 BUSINESS RISKS The following is a summary of the many risks and uncertainties we face in our business. You should carefully read these risks and uncertainties as well as the other information in this report in evaluating our business and its prospects. RISKS RELATED TO OUR BUSINESS: 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 February 29, 2008, we have incurred total accumulated losses of $10,554,275. 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 the development of our products 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. 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 substantial 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; 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 will be relying on future securities sales or additional loans to enable us to grow and reach profitability. There is no guarantee we will be able to sell our securities or secure additional loans. Further, future sales of securities will likely subject our shares to dilution. WE HAVE RELIED ON CAPITAL CONTRIBUTED BY RELATED PARTIES, AND SUCH CAPITAL MAY NOT BE AVAILABLE IN THE FUTURE. The Company has relied on loans and compensation deferrals from our CEO and Chairman, Scott R. Sand, and investment in the form of convertible notes payable from various individuals and entities to sustain the Company from 1999 into the current fiscal year. 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. 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 obligated to pay him $200,000 per year under his employment contract with the Company. As of February 29, 2008, the Company owes Mr. Sand $63,356 under his employment contract and also owes him $98,705 in loans made to the Company. If future capital is not available from Mr. Sand or other third parties in the future, the Company's operations may be negatively affected. OUR BAFI 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 most of our BAFI(TM) product line is still in the late stages of development as we still need manufacturing prototypes. Of the BAFI(TM) products, only Oxyview (TM) is currently being marketed and sold. Our Oxyview (TM) sales for the nine months ended February 29, 2008 were $41,593. These products, once marketing commences, may not be successfully developed or 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; 26 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 may not be able to establish any additional research collaborations or licensing arrangements necessary to develop and commercialize products using our technology or 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; 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. 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. 27 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 all constitute what we call "Secure Balance(TM)." 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). The non-exclusive nature of the provision of the devices to us may negatively impact 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. 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 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; WHICH MAY NEGATIVELY IMPACT OUR PLANS FOR FOREIGN OPERATIONS. 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 except for European, Chinese and Japanese patents for Oxyview. We do not know when, and if, we will apply for such patents. If we do not apply for these patents, or 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. 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. 28 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. 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 or advisory board 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 HAVE NO COMMERCIAL PRODUCTION CAPABILITY YET FOR MOST OF 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 most of our BAFI(TM) product line product for sale. We have begun production and sales of our Oxyview product, but not OxyAlert or GasAlert. 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 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 an agreement with one or more distribution entities or collaborators under acceptable terms, we may be required to market our products directly. This requires that we establish our own specialized sales force and marketing organization to market our products. 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. IF WE ARE SUBJECT TO PRODUCT LIABILITY CLAIMS AND HAVE NOT OBTAINED ADEQUATE INSURANCE TO PROTECT AGAINST THESE CLAIMS, OUR FINANCIAL CONDITION WOULD SUFFER. As we continue to launch commercially our BAFI(TM) product line, we will face increased 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. 29 RISKS RELATING TO OUR CURRENT FINANCING AGREEMENTS: EVENTS OF DEFAULT UNDER OUR CONVERTIBLE DEBENTURES As previously disclosed in our current reports on Form 8-K filed August 8, 2006, and March 16, 2007, we entered a series of agreements to obtain financing during the last 18 months. Under the transaction documents, we have committed various acts and failed to timely perform other acts that constitute events of default under the transaction documents. We have received assurance from counsel for the investors that "You are not in default. We [the investors] have to put you into default and we have not." There can be no assurance that the investors will not declare a default in the future. Our stockholders should be aware that if the investors provide written notice of default to us, then our liabilities would increase dramatically due to the penalties, reset provisions, and other damages specified in the transaction documents. The increase in liabilities attributed to a notice of default under the transaction documents could exceed our current market capitalization and affect negatively our financial condition by $7-13 million dollars. The debentures are collateralized by our assets and, in the event if we are unable to repay or restructure these debentures, there is no assurance that the holders of the debentures will not institute legal proceedings to recover the amounts owed including foreclosure on our assets. THE CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR CONVERTIBLE DEBENTURES COULD REQUIRE US TO ISSUE A SUBSTANTIALLY GREATER NUMBER OF SHARES TO THE HOLDERS, WHICH WILL CAUSE DILUTION TO OUR EXISTING STOCKHOLDERS. Our obligation to issue shares upon conversion of our convertible securities under the June 2006 and March 2007 agreements is essentially limitless. The following table shows the effect on the number of shares issuable upon full conversion ($2,055,000 aggregate principal)(without taking into account the 4.99% limitation or any interest, penalties, events of default or other amounts under the notes), in event our common stock price declines by 25%, 50% and 75% from the trading price at February 29, 2008. PRICE DECREASES BY - ----------------------- -------------------- --------------------- --------------------- -------------------- 2/29/08 25% 50% 75% - ----------------------- -------------------- --------------------- --------------------- -------------------- Common Stock Price(1) 0.02 0.015 0.01 0.005 - ----------------------- -------------------- --------------------- --------------------- -------------------- Conversion Price (2) 0.01 0.0075 0.005 0.0025 - ----------------------- -------------------- --------------------- --------------------- -------------------- 100% Conversion Shares 205,500,000 274,000,000 411,000,000 822,000,000 - ----------------------- -------------------- --------------------- --------------------- -------------------- _____________ (1) Represents the average of the lowest three (3) trading prices for the common stock during the twenty (20) trading day period prior to February 29, 2008 as calculated pursuant to the agreements (2) Assuming 50% applicable percentage
The issuance of shares upon conversion of the convertible debentures and exercise of warrants may result in substantial dilution to the interests of other stockholders since the holders of such securities may ultimately convert and sell the full amount issuable on conversion. Although the holders of our convertible debentures and warrants may not convert and/or exercise such securities if such conversion or exercise would cause them to own more than 4.99% of our outstanding common stock, this restriction does not prevent them from converting and/or exercising some of their holdings, selling the stock and then converting the rest of their holdings. In this way, the holders of our convertible debentures, and warrants could sell more than this limit while never holding more than this limit. There is no upper limit on the number of shares that may be issued which will have the effect of further diluting the proportionate equity interest and voting power of all holders of our common stock. In addition, the number of shares of common stock issuable upon conversion of the outstanding convertible debentures may increase if the market price of our stock declines. The sale of these shares may adversely affect the market price of our common stock. IF WE ARE REQUIRED FOR ANY REASON TO REPAY OUR OUTSTANDING CONVERTIBLE DEBENTURES, WE WOULD BE REQUIRED TO DEPLETE OUR WORKING CAPITAL, IF AVAILABLE, OR RAISE ADDITIONAL FUNDS. OUR FAILURE TO REPAY THE CONVERTIBLE DEBENTURES, IF REQUIRED, COULD RESULT IN LEGAL ACTION AGAINST US, WHICH COULD REQUIRE THE SALE OF SUBSTANTIAL ASSETS. We have entered into convertible debenture agreements that total $2,130,000. Unless sooner converted into shares of our common stock, we are required to repay the convertible debentures. To do so, we would be required to use our working capital, if any at that time, and/or raise additional funds. If we were unable to repay the debentures when required, the debenture holders could commence legal action against us to recover the amounts due. Any such action may require us to curtail or cease operations. 30 RISKS RELATED TO OUR COMMON STOCK: 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 management 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. We have worked diligently on getting these past due filings completed and filed with the SEC. To date, we have filed all past due Forms 10-KSB and 10-QSB. We believe that all delinquencies have been cured. Our counsel is keeping the SEC Staff 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. 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. Most of our common shares have been held by our shareholders for periods of one or two years or longer. As of February 29, 2008, we have 22,168,119 unrestricted shares issued. We will undoubtedly have unrestricted shares issued in the future. There is no way to control the sale of these shares on the secondary market. The resale of these unrestricted shares 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 $0.02 and as high as $2.20 (adjusted for our 40 to 1 reverse split which was effected in December of 2005). 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. 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 Series A Preferred Stock. The Series A is convertible upon 65 days written notice into one share of common stock and votes with the common stock on an as converted basis. Our Board of Directors are able to determine the terms of preferred stock without further action by our stockholders. We have issued 24,275,960 shares of preferred stock as of February 29, 2008. To the extent we issue preferred stock, it could affect your rights or reduce the value of your common stock. WE HAVE NOT, AND CURRENTLY DO NOT ANTICIPATE, PAYING DIVIDENDS ON OUR COMMON STOCK. We have never paid any 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. 31 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; 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. 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, or conversion of convertible notes or Series A Preferred Stock, 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 February 29, 2008, 22,168,119 shares of our issued common stock are unrestricted and 38,015,355 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 our disclosure controls and procedures were effective. 32 (b) No 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 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. (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. 33 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. We are not currently a party to any material pending litigation or material legal proceeding. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During the quarter ended February 29, 2008, we sold the following securities without registration under the Securities Act of 1933 in reliance on the exemption contained in Section 4(2) and Regulation D promulgated thereunder: Common Stock - ------------- a) In December 2007, we issued 4,775,000 shares of restricted common stock to three entities for services rendered. We valued this stock at an average price of $0.046 per share (the closing price as of the date of issuance), or a total of $218,750. b) In December 2007, we sold 1,000,000 shares of restricted common stock to one investor at a price of $0.01 per share, or $10,000. c) In December 2007, we issued 4,000,000 shares of restricted common stock to one entity at a price of $0.05. This stock was valued at a total of $200,000 and is being expensed over the 6-month term of the agreement. d) In January 2008, we sold 525,000 shares of restricted common stock to five Individuals at a price of $0.02 per share, or a total of $10,500. e) In January 2008, one note holder with a $10,000 note converted his note into 1,000,000 shares of restricted common stock (a price of $0.01 per share). f) In February 2008, the holders of our July 26, 2007 convertible debentures converted $5,000 in principal of their notes into 500,000 shares of common stock. This conversion was done at $0.01 per share. g) In consideration for one individual making a $20,000 loan in February 2008, we agreed to issue him 2,000,000 shares of restricted common stock. This stock was valued at $0.01 per share. The $20,000 value is being expensed over the 90-day term of the loan. h) In February 2008, we sold 2,000,000 shares of restricted common stock to one individual at a price of $0.008 per share, or a total of $16,000. ITEM 3 - DEFAULTS UPON SENIOR SECURITIES None. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5 - OTHER INFORMATION None. ITEM 6. EXHIBITS (All exhibits with original signatures are contained in the corporate office files of Ingen Technologies, Inc. ("Ingen")) Exhibit No. Document Description - ----------- -------------------- 3.1 Amendment to the Articles of Incorporation of Ingen Technologies, Inc. Increasing the number of authorized common shares from 100 million to 750 million. 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 34 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. April 21, 2008 /s/ Scott R. Sand ------------------------------------- Scott R. Sand Chief Executive Officer and Chairman April 21, 2008 /s/ Thomas J. Neavitt ------------------------------------- Thomas J. Neavitt Secretary and Chief Financial Officer 35 EX-3.1 2 ingen_ex0301.txt AMENDMENT TO ARTICLES EXHIBIT 3.1 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF INGEN TECHNOLOGIES, INC. Pursuant to the provisions of the Georgia Business Corporation Code, the undersigned corporation hereby amends its Articles of Incorporation, as amended and restated (the "Articles of Incorporation"), and for that purpose, submits the following statement: 1. The name of the corporation is: INGEN TECHNOLOGIES, INC. 2. The articles of incorporation are amended as follows: (i) Article Three of the Articles of Incorporation is amended as follows: 3.1 The corporation has the authority to issue not more than: (a) SEVEN HUNDRED FIFTY MILLION (750,000,000) SHARES OF COMMON STOCK OF NO PAR VALUE PER SHARE (THE "COMMON STOCK"); and (b) Forty Million (40,000,000) shares of preferred stock of no par value per share (the "Preferred Stock") which may be issued in one or more classes or one or more series by the Board of Directors as hereinafter provided. 3.2 The shares of Common Stock shall be entitled to receive the net assets of the corporation upon dissolution and shall be entitled to one (1) vote per share on all matters and shall be entitled to receive distributions from time to time, from legally available funds, as determined by the board of directors. 3.3 The shares of Preferred Stock of the corporation may be issued from time to time in one or more classes or one or more series. The Preferred Stock shall have such voting rights, no voting rights, or such special voting rights as the Board of Directors may fix and determine in issuing such stock, and shall have rights to receive cumulative, non-cumulative, or partially cumulative dividends as the Board of Directors shall fix and determine. Moreover, the shares of Preferred Stock shall have such other rights and preferences, including, but not limited to redemption, liquidation preference, conversion, and dilution rights as may be allowed under the Georgia Business Corporation Code and set forth by the Board of Directors in writing and filed with the Georgia Secretary of State at the time such class or series is designated. 3.4 The corporation designates Forty Million (40,000,000) shares of its Preferred Stock as the Series A Convertible Preferred Stock (the "Series A") with the following rights, preferences and limitations. (a) CLASS OR SERIES. The number of shares of Preferred Stock constituting the Series A shall be Forty Million (40,000,000). (b) DIVIDENDS. The Series A shall not be entitled to receive any dividends from the corporation. (c) REDEMPTION. The corporation shall have the right, but not the obligation to redeem each share of Series A for One Dollar ($1.00) per share. (d) LIQUIDATION RIGHTS. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the corporation, each share of Series A shall be entitled to receive from the assets of the corporation One Dollar ($1.00) per share, which shall be paid or set apart before the payment or distribution of any assets of the corporation to the holders of the Common Stock or any other equity securities of the corporation. (e) VOTING RIGHTS. Each share of Series A shall be entitled to vote on all matters with the holders of the Common Stock. Each share of Series A shall be entitled to one (1) vote. Further, the holders of the Series A voting as a class shall be entitled to elect one person to serve on the corporation's Board of Directors. (f) CONVERSION RIGHTS. Each share of Series A shall be convertible, at the option of the holder thereof and subject to notice requirements of paragraph (f)(i) below, at any time after the date of issuance of such share into one (1) share of fully paid and non-assessable share of Common Stock. (i) Each Series A stockholder who desires to convert into the corporation's Common Stock must provide a 65 day written notice to the corporation of their intent to convert one or more shares of Series A into Common Stock. The corporation may, in its sole discretion, waive the written notice requirement and allow the immediate exercise of the right to convert. Before any holder shall be entitled to convert, he shall surrender the certificate or certificates representing Series A to be converted, duly endorsed or accompanied by proper instruments of transfer, at the office of the corporation or of any transfer agent, and shall given written notice to the corporation at such office that he elects to convert the same. The corporation shall, as soon as practicable thereafter, issue a certificate or certificates for the number of shares of Common Stock to which the holder shall be entitled. The corporation shall reserve and keep available out of its authorized, but unissued Common Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect conversion of the Series A. (g) DILUTION PROTECTION. The shares of Series shall not be effected by or subject to adjustment following any change to the amount of authorized shares of Common Stock or the amount of Common Stock issued and outstanding caused by any split or consolidation of the corporation's Common Stock. (ii) Article Eight is hereby added to the Articles of Incorporation: ARTICLE EIGHT ------------- 8.1 ANY ACTION THAT IS REQUIRED OR PERMITTED TO BE TAKEN AT A MEETING OF THE SHAREHOLDERS MAY BE TAKEN WITHOUT A MEETING IF THE ACTION IS TAKEN BY PERSONS WHO WOULD BE ENTITLED TO VOTE AT A MEETING SHARES HAVING VOTING POWER TO CAST NOT LESS THAN THE MINIMUM NUMBER (OR NUMBERS, IN THE CASE OF VOTING GROUPS) OF VOTES THAT WOULD BE NECESSARY TO AUTHORIZE OR TAKE SUCH ACTION AT A MEETING AT WHICH ALL SHAREHOLDERS ENTITLED TO VOTE WERE PRESENT AND VOTED. THE ACTION MUST BE EVIDENCED BY ONE OR MORE WRITTEN CONSENTS BEARING THE DATE OF SIGNATURE AND DESCRIBING THE ACTION TAKEN, SIGNED BY SHAREHOLDERS ENTITLED TO TAKE ACTION WITHOUT A MEETING AND DELIVERED TO THE CORPORATION FOR INCLUSION IN THE MINUTES OR FILING WITH THE CORPORATE RECORDS. (iii) All other provisions of the Articles of Incorporation shall remain in full force and effect. 3. The date of adoption of each amendment by the stockholders was February 9, 2008. 4. The amendment was duly approved by the shareholders in accordance with the provisions of Code Section 14-2-1003. Date: February 12, 2008 INGEN TECHNOLOGIES, INC. By: /s/ Scott R. Sand ---------------------------------- Name: Scott R. Sand Title: Chief Executive Officer and Chairman of the Board of Directors EX-31.1 3 ingen_ex3101.txt CERT Exhibit 31.1 CEO Certification I, Scott R. Sand, certify that: 1. I have reviewed this 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: April 21, 2008 /s/ Scott R. Sand - ---------------------------- Scott R. Sand Chief Executive Officer EX-31.2 4 ingen_ex3102.txt CERT Exhibit 31.2 CFO Certification I, Thomas J. Neavitt, certify that: 1. I have reviewed this 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: April 21, 2008 /s/ Thomas J. Neavitt - ----------------------------- Thomas J. Neavitt Chief Financial Officer EX-32.1 5 ingen_ex3201.txt CERT Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-QSB of Ingen Technologies, Inc. (the "Company") for the quarter ended February 29, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Scott R. Sand, Chief Executive Officer and Thomas J. Neavitt, Chief Financial Officer of Ingen Technologies, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: April 21, 2008 /s/ Scott R. Sand ----------------------------- Scott R. Sand Chief Executive Officer /s/ Thomas J. Neavitt ----------------------------- Thomas J. Neavitt Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----