U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2004
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number: 0-27321
ICOP Digital, Inc.
--------------------------------------------
(Name of small business issuer in its charter)
Colorado 84-1493152
------------------------------ -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11011 King Street, Suite 260, Overland Park, KS 66210
----------------------------------------------------------
(Address of principal executive offices, including ZIP Code)
Issuer's telephone number: (913) 393-2700
Vista Exploration Corporation
------------------------------------------------------------------
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Transitional Small Business Disclosure Format Yes [ ] No [X]
The issuer had 16,062,000 shares of its common stock issued and outstanding
as of October 31, 2004, the latest practicable date before the filing of this
report.
ICOP DIGITAL, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
Page
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet - September 30, 2004 Unaudited)........................4
Statements of Operations (Unaudited) - three months ended
September 30, 2004 and 2003..........................................5
Statements of Operations (Unaudited) - nine months ended
September 30, 2004 and 2003..........................................6
Statement of Changes in Shareholders' Deficit (Unaudited)............7
Statements of Cash Flows (Unaudited) - nine months ended
September 30, 2004 and 2003..........................................9
Notes to Financial Statements (Unaudited)...........................10
Item 2. Plan of Operation...................................................13
Item 3. Controls and Procedures.............................................14
PART II--OTHER INFORMATION...................................................15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
Item 6. Exhibits............................................................15
Signature...........................................................15
2
PART I - FINANCIAL INFORMATION
Forward-Looking Statements
This report on Form 10-QSB contains forward-looking statements that concern
our business. Such statements are not guarantees of future performance and
actual results or developments could differ materially from those expressed or
implied in such statements as a result of certain factors, including those
factors set forth in Item 2 - Plan of Operation and elsewhere in this report.
All statements, other than statements of historical facts, included in this
report that address activities, events or developments that we expect, believe,
intend or anticipate will or may occur in the future, including the Company's
ability to successfully maintain its existence while it identifies potential
business opportunities, are forward looking statements.
These statements are based on certain assumptions and analyses made by us
in light of our experience and our product research. Such statements are subject
to a number of assumptions including the following:
o business risks and uncertainties;
o general economic and business conditions;
o acceptance of our new product offerings;
o our ability to fulfill orders in a timely manner;
o changes in laws or regulations and other factors, many of which are
beyond our control; and
o ability to obtain financing on favorable conditions.
The cautionary statements contained or referred to in this report should be
considered in connection with any subsequent written or oral forward-looking
statements that may be issued by us or persons acting on our behalf. We
undertake no obligation to release publicly any revisions to any forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
3
Item 1. Financial Statements
ICOP DIGITAL, INC.
(A development stage company)
Balance Sheet (Unaudited)
September 30, 2004
Assets
Cash $ 71,032
Prepaid expenses 36,459
Property and equipment, at cost, net of
accumulated depreciation 102,679
Other assets:
Deferred patent application cost 59,032
-----------
$ 269,202
===========
Liabilities and Shareholders' Deficit
Liabilities:
Accounts payable and accrued liabilities $ 1,815,308
Accrued liabilities 275,820
Customer deposits 114,890
Notes payable, related parties 160,066
Notes payable 220,408
Accrued interest 4,214
-----------
Total liabilities 2,590,706
-----------
Commitment --
Shareholders' deficit (Note 4):
Preferred stock, no par value; 5,000,000 shares authorized,
183,333 shares issued and outstanding 1,099,998
Common stock, no par value; 50,000,000 shares authorized,
16,062,000 shares issued and outstanding 3,231,268
Accumulated other comprehensive loss-foreign currency translation (21,405)
Accumulated deficit (6,631,365)
-----------
Total Shareholders' deficit (2,321,504)
-----------
$ 269,202
===========
See accompanying notes to financial statements.
4
ICOP DIGITAL, INC.
(A development stage company)
Statements of Operations (Unaudited)
Three Months
Ended
September 30,
-----------------------------
2004 2003*
------------ ------------
Operating expenses:
Stock-based compensation................ $ 315,000 $ --
Selling, general and administrative .... 387,282 264,322
Research and development ............... 62,948 1,789,460
Equity in losses of equity-method
investee, net (Note 3) .............. -- 60,715
------------ ------------
Total operating expenses 765,230 2,114,497
------------ ------------
Loss from operations ... (765,230) (2,114,497)
Other (expenses):
Interest expense ....................... (4,809) (5,973)
------------ ------------
Loss before income taxes (770,039) (2,120,470)
Income tax provision ....................... -- --
------------ ------------
Net loss ............... $ (770,039) $ (2,120,470)
============ ============
Basic and diluted loss per share ........... $ (0.05) $ (0.15)
------------ ------------
Basic and diluted weighted average
common shares outstanding .............. 16,020,333 13,699,639
============ ============
* Restated, as explained in Note 1
See accompanying notes to financial statements.
5
ICOP DIGITAL, INC.
(A development stage company)
Statements of Operations (Unaudited)
Nine Months May 24, 2002
Ended Inception
September 30, through
----------------------------- September 30,
2004 2003* 2004*
------------ ------------ ------------
Operating expenses:
Stock-based compensation................ $ 315,000 $ 50,000 $ 555,000
Selling, general and administrative .... 1,246,794 661,790 2,420,486
Research and development ............... 668,568 2,052,225 3,674,685
Equity in losses of equity-method
investee, net (Note 3) .............. -- 157,170 450,000
------------ ------------ ------------
Total operating expenses 2,230,362 2,921,185 7,100,171
------------ ------------ ------------
Loss from operations ... (2,230,362) (2,921,185) (7,100,171)
Other (expenses):
Foreign currency translation ........... -- -- (4,221)
Gain on restructure of trade debt....... 485,482 -- 485,482
Interest expense ....................... (5,828) (8,529) (12,455)
------------ ------------ ------------
Loss before income taxes (1,750,708) (2,929,714) (6,631,365)
Income tax provision ....................... -- -- --
------------ ------------ ------------
Net loss ............... $ (1,750,708) $ (2,929,714) $ (6,631,365)
============ ============ ============
Basic and diluted loss per share ........... $ (0.11) $ (0.22)
------------ ------------
Basic and diluted weighted average
common shares outstanding .............. 16,069,381 13,167,013
============ ============
* Restated, as explained in Note 1
See accompanying notes to financial statements.
6
ICOP DIGITAL, INC.
(A development stage company)
Statement of Changes in Shareholders' Deficit (Unaudited)
Preferred Stock Common Stock
------------------------- ---------------------------
Shares Par Value Shares Amount
----------- ----------- ----------- -----------
Balance at May 24, 2002 (inception) ................ -- $ -- -- $ --
June to August 2002, shares sold in private
placement offering ($.01/share) ................. -- -- 10,620,000* 106,200
September 2002, shares sold in private
placement offering ($.10/share) ................. -- -- 1,000,000* 100,000
October to November 2002, shares sold in private
placement offering ($1.00/share) ................ -- -- 150,000* 150,000
December 2002, shares issued in exchange for
public relations services ($1.00/share) ......... -- -- 100,000* 100,000
Net loss for the period ended December 31, 2002 .... -- -- -- --
----------- ----------- ----------- -----------
Balance at December 31, 2002 ....................... -- -- 11,870,000 456,200
January to December 2003, shares sold in private
placement offering ($1.00/share), net of
offering costs of $22,500 ....................... -- -- 1,946,000* 1,923,500
February 2003, shares issued in exchange for
equipment installation services ($1.00/share) ... -- -- 11,000* 11,000
February 2003, shares issued in exchange for
design services ($1.00/share) ................... -- -- 50,000* 50,000
February 2003, shares issued to acquire McCoy's
Law Line, Inc. ($1.00/share) (Note 1) ........... -- -- 700,000* 700,000
Stock options issued in exchange for
services provided ............................... -- -- -- 90,000
----------- ----------- ----------- -----------
Balance at December 30, 2003, prior to merger ...... -- -- 14,577,000 3,230,700
December 31, 2003, shares issued in conjunction
with merger with ICOP Digital, Inc. (Note 1) .... -- -- 1,790,000 (9,432)
Unrealized effect of the change in foreign
currency exchange rates ......................... -- -- -- --
Net loss for the year ended December 31, 2003 ...... -- -- -- --
----------- ----------- ----------- -----------
Balance at December 31, 2003 ....................... -- -- 16,367,000 3,221,268
January to September, 2004, shares sold in private
placement offering ($1.00/share) (Note 4) ....... -- -- 295,000 295,000
January 2004, shares issued in exercise of
options ($1.00/share) (Note 4) .................. -- -- 100,000 100,000
January to March 2004, preferred shares sold in
private placement offering ($6.00/share) (Note 4) 183,333 1,099,998 -- --
March 2004, shares received to divest McCoy's
Law Line, Inc. ($1.00/share) (Note 1) ........... -- -- (700,000) (700,000)
Stock options issued in exchange for
services provided ............................... -- -- -- 315,000
Unrealized effect of the change in foreign
currency exchange rates ......................... -- -- -- --
Net loss for the nine months ended September 30, 2004 -- -- -- --
----------- ----------- ----------- -----------
Balance at September 30, 2004 ..................... 183,333 $ 1,099,998 16,062,000 $ 3,231,268
=========== =========== =========== ===========
* Restated, as explained in Note 1
Table continues on following page.
7
ICOP DIGITAL, INC.
(A development stage company)
Statement of Changes in Shareholders' Deficit (Unaudited) (Continued)
Accumulated
Other
Comprehensive Accumulated
Loss Deficit* Total
----------- ----------- -----------
Balance at May 24, 2002 (inception) ................ $ -- $ -- $ --
June to August 2002, shares sold in private
placement offering ($.01/share) ................. -- -- 106,200
September 2002, shares sold in private
placement offering ($.10/share) ................. -- -- 100,000
October to November 2002, shares sold in private
placement offering ($1.00/share) ................ -- -- 150,000
December 2002, shares issued in exchange for
public relations services ($1.00/share) ......... -- -- 100,000
Net loss for the period ended December 31, 2002 .... -- (537,615) (537,615)
----------- ----------- -----------
Balance at December 31, 2002 ....................... -- (537,615) (81,415)
January to December 2003, shares sold in private
placement offering ($1.00/share), net of
offering costs of $22,500 ....................... -- -- 1,923,500
February 2003, shares issued in exchange for
equipment installation services ($1.00/share) ... -- -- 11,000
February 2003, shares issued in exchange for
design services ($1.00/share) ................... -- -- 50,000
February 2003, shares issued to acquire McCoy's
Law Line, Inc. ($1.00/share) (Note 1) ........... -- -- 700,000
Stock options issued in exchange for
services provided ............................... -- -- 90,000
----------- ----------- -----------
Balance at December 30, 2003, prior to merger ...... -- (537,615) 2,693,085
December 31, 2003, shares issued in conjunction
with merger with ICOP Digital, Inc. (Note 1) .... -- -- (9,432)
Unrealized effect of the change in foreign
currency exchange rates ......................... (75,581) -- (75,581)
Net loss for the year ended December 31, 2003 ...... -- (4,343,042) (4,343,042)
----------- ----------- -----------
Balance at December 31, 2003 ....................... (75,581) (4,880,657) (1,734,970)
January to September, 2004, shares sold in private
placement offering ($1.00/share) (Note 4) ....... -- -- 295,000
January 2004, shares issued in exercise of
options ($1.00/share) (Note 4) .................. -- -- 100,000
January to March 2004, preferred shares sold in
private placement offering ($6.00/share) (Note 4) -- -- 1,099,998
March 2004, shares received to divest McCoy's
Law Line, Inc. ($1.00/share) (Note 1) ........... -- -- (700,000)
Stock options issued in exchange for
services provided ............................... -- -- 315,000
Unrealized effect of the change in foreign
currency exchange rates ......................... 54,176 -- 54,176
Net loss for the nine months ended September 30, 2004 -- (1,750,708) (1,750,708)
----------- ----------- -----------
Balance at September 30, 2004 ..................... $ (21,405) $(6,631,365) $(2,321,504)
=========== =========== ===========
* Restated, as explained in Note 1
See accompanying notes to financial statements.
8
ICOP DIGITAL, INC.
(A development stage company)
Statements of Cash Flows (Unaudited)
Nine Months May 24, 2002
Ended Inception
September 30, through
-------------------------- September 30,
2004 2003* 2004*
----------- ----------- -----------
Cash flows from operating activities:
Net loss ..................................... $(1,750,708) $(2,929,714) $(6,631,365)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation ............................. 20,633 14,282 43,541
Book value of equipment retired .......... 1,734 -- 28,837
Stock-based compensation ................. -- 50,000 150,000
Stock options issued ..................... 315,000 -- 405,000
Loss on unconsolidated subsidiary ........ -- 157,170 450,000
Gain on restructured trade debt .......... (485,482) -- (485,482)
Changes in operating liabilities:
Increase in accounts receivable
and prepaid expenses ................ (31,059) (33,273) (36,459)
Increase in accounts payable and
accrued liabilities ................. 845,658 1,175,641 2,674,308
----------- ----------- -----------
Net cash used in
operating activities ......... (1,084,224) (1,565,894) (3,401,620)
----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment .......... (26,678) (50,415) (91,648)
Payment of patent costs ...................... (59,032) -- (59,032)
Liabilities assumed in recapitalization (Note 1) -- -- 9,432
Investment in subsidiary ..................... (450,000) -- (450,000)
Deposits ..................................... 3,000 -- --
----------- ----------- -----------
Net cash used in
investing activities ......... (532,710) (50,415) (591,248)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable ...... 445,000 268,500 897,231
Principal payments on notes payable .......... (370,812) (20,887) (585,529)
Proceeds from the sale of preferred stock .... 1,099,998 -- 1,099,998
Proceeds from the sale of common stock ....... 395,000 1,408,500 2,674,700
Payment of offering costs .................... -- (22,500) (22,500)
----------- ----------- -----------
Net cash provided by
financing activities ......... 1,569,186 1,633,613 4,063,900
----------- ----------- -----------
Net change in cash ........... (47,748) 17,304 71,032
Cash, beginning of period ........................ 118,780 20,782 --
----------- ----------- -----------
Cash, end of period .............................. $ 71,032 $ 38,086 $ 71,032
=========== =========== ===========
Supplemental disclosure of cash flow information:
Income taxes ................................. $ -- $ -- $ --
Interest ..................................... $ 4,164 $ 3,058 $ 8,241
Non-cash investing and financing transactions:
Subsidiary acquired with stock ............. $ -- $ 700,000 $ 700,000
Subsidiary divested for stock .............. $ (700,000) $ -- $ (700,000)
Foreign currency translation ............... $ (54,176) $ -- $ 21,405
Equipment acquired with stock .............. $ -- $ -- $ 11,000
Equipment acquired with notes payable ...... $ 72,408 $ -- $ 72,408
* Restated, as explained in Note 1
See accompanying notes to financial statements.
9
ICOP DIGITAL, INC.
(A development stage company)
Notes to Financial Statements
Note A: Basis of Presentation
-----------------------------
The financial statements presented herein have been prepared by the Company in
accordance with the accounting policies in its audited financial statements for
the period ended December 31, 2003, as filed in its annual report on Form 10K-SB
filed April 16, 2004, and should be read in conjunction with the notes thereto.
The Company entered the development stage in accordance with Statement of
Financial Accounting Standard ("SFAS") No. 7 on May 24, 2002. It is a
development stage enterprise engaged in the design, development and marketing of
an in-car video recorder system for use in the law enforcement industry. No
in-car video units have been sold.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
Interim financial data presented herein are unaudited. The unaudited interim
financial information presented herein has been prepared by the Company in
accordance with the policies in its audited financial statements for the period
ended December 31, 2003 and should be read in conjunction with the notes
thereto.
The accompanying statements of operations and cash flows reflect the nine-month
period ended September 30, 2004. The comparative figures for the nine-month
period ended September 30, 2003 have been included in the accompanying
statements of operations and cash flows for comparison on an unaudited basis.
Note 1: Nature of Operations, Merger, and Summary of Significant Accounting
Policies
Operations and Merger
ICOP Digital, Inc. (the "Company"), was incorporated in May 2002 in Nevada. It
is a development stage enterprise engaged in the design, development and
marketing of an in-car video recorder system for use in the law enforcement
industry. No in-car video units have been sold. The Company's offices are
located in Overland Park, Kansas.
Certain changes have been made to the prior year's financial statements in order
to conform to the current year's presentation.
In February 2003, the Company purchased all of the issued and outstanding common
stock of McCoy's Law Line, Inc. ("McCoy's"). The primary reason for the purchase
was to permit ICOP to sell and distribute law enforcement-related products in
addition to its in-car digital video record system. The purchase price consisted
10
ICOP DIGITAL, INC.
(A development stage company)
Notes to Financial Statements
of 700,000 shares of ICOP common stock valued at $1.00 per share by the
Company's Board of Directors based on contemporaneous stock sales to unrelated
third parties. In March 2004, the Company sold its investment in McCoy's to
develop a different system to market its products. The sale price consisted of
the 700,000 shares of ICOP common stock valued at $1.00 per share that had been
paid for the purchase.
On December 31, 2003, ICOP Digital, Inc. (ICOP) exchanged 100 percent of its
outstanding shares of common stock for 14,577,000 shares of the common stock of
Vista Exploration Corporation ("Vista".) In January 2004, the two companies
merged. The acquisition has been treated as a recapitalization of ICOP, with
Vista the legal surviving entity. Since Vista had, prior to the recapitalization
of ICOP, no assets and net liabilities (consisting principally of accounts
payable) and no operations, the recapitalization has been accounted for as the
sale of 1,790,000 shares of ICOP common stock for the net liabilities of Vista.
The historical financial statements presented herein have been restated and are
those of ICOP. Costs of the transaction have been charged to the period. On
November 10, 2004 Vista changed its name to ICOP Digital, Inc. after receiving
shareholder approval at its annual meeting held November 5, 2004.
Basis of Presentation
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the accompanying
financial statements, the Company has suffered significant losses since
inception. This factor, among others, may indicate that the Company will be
unable to continue as a going concern.
Management plans to continue to sell common stock to raise capital for research
and development and operations. In addition, the Company plans to seek debt
financing to support the manufacture and import of its new products as they come
to market. In the longer term, the Company plans to expand its acquired
operations, commence sale of its new products and become profitable. There is no
assurance that the Company's new products will gain market acceptance or that
the Company will attain profitability.
The financial statements do not include any adjustments relating to the
recoverability and classification of assets and/or liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to meet
its obligations on a timely basis, and, ultimately to attain profitability.
Note 2: Related Party Transactions
Notes payable to related parties consisted of unsecured advances made to the
Company under promissory note agreements for working capital purposes and pay no
interest. The notes payable are due on demand. During the nine months ended
September 30, 2004 shareholders and affiliates advanced $295,066 to the Company
and during that period the Company repaid $310,000.
11
ICOP DIGITAL, INC.
(A development stage company)
Notes to Financial Statements
The Company purchased furnishings and equipment from a company owned by a
shareholder for a total price of $50,066. The price paid was the predecessor's
depreciated cost, which the board of directors determined to represent the fair
value of the property.
The Company paid an automobile lease payment of $720 per month on behalf of the
Chairman of the Board. Total payments related to the lease were $5,760 in 2004.
During 2003, certain shareholders advanced to the Company $70,418 for working
capital. The Company repaid $36,541 to those shareholders during the same
period. The advances are interest free and are due as cash becomes available.
The Company repaid the shareholders the remaining $33,877 during the nine months
ending September 30, 2004.
Note 3: Investment in Unconsolidated Subsidiary
In March, 2004, the Company transferred $450,000 to its unconsolidated
subsidiary, McCoy's Law Line, Inc. This payment was the amount of the Company's
share of the net loss for 2003 of the subsidiary. The Company also sold its
investment in McCoy's to McCoy's original owners in exchange for the 700,000
shares of ICOP common stock that the Company had paid for the original purchase.
No gain or loss was recorded from this investment in 2004.
Note 4: Shareholders' Equity
Preferred Stock issued for Cash
From January through March, 2004, the Company sold 183,333 shares of convertible
preferred stock for total proceeds of $1,099,998. These shares can each be
converted into eight shares of common stock and carry a warrant that allows the
purchase of an additional eight common shares at a price of $1.80 per share.
Common Stock Issued for Cash
In 2004, the Company sold 295,000 shares of its common stock for a total of
$295,000, or $1.00 per share. The shares of common stock were sold under a
private offering memorandum relating to the private offering of up to 2 million
shares of its common stock at $1.00 per share.
In 2004, the Company sold 100,000 shares of its common stock for a total of
$100,000, or $1.00 per share in exercise of stock options issued in 2002.
The securities sold have not been registered pursuant to the Securities Act of
1933, as amended (the "ACT"), nor have they been registered under the securities
act of any state. These securities were offered pursuant to an exemption from
registration requirements of the Act and exemptions from registration provided
by applicable state securities laws. Management of the Company, who were not
paid any commission or compensation for offering or selling the securities, sold
the securities.
12
ICOP DIGITAL, INC.
(A development stage company)
Notes to Financial Statements
Note 5: Income Taxes
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". The Company incurred
net operating losses during the periods shown on the condensed financial
statements resulting in a deferred tax asset, which was fully allowed for,
therefore the net benefit and expense result in $0 income taxes.
Item 2. Plan of Operation.
During the three months ended September 30, 2004, the Company incurred
$62,948 in research and development expenses, $387,282 in general and
administrative expense and $315,000 in expense related to stock options,
resulting in an operating loss of $765,230. During the three months ended
September 30, 2003, the Company incurred $1,789,460 in research and development
expenses, $264,322 in general and administrative expense and $60,715 in losses
from its marketing subsidiary, resulting in an operating loss of $2,114,497. The
increased level of general expense is the result of increased personnel and
activity as the Company focuses on execution of its marketing plan and has
substantially completed development of its initial products.
During the nine months ended September 30, 2004, the Company incurred
$668,568 in research and development expenses, $1,246,794 in general and
administrative expense and $315,000 in expense related to stock options,
resulting in an operating loss of $2,230,362. In addition the company reported a
gain of $485,482 on restructure of contract development expense incurred in
2003. During the nine months ended September 30, 2003, the Company incurred
$2,052,225 in research and development expenses, $661,790 in general and
administrative expense, $157,170 in losses from its marketing subsidiary and
$50,000 in design services paid by issuance of common stock, resulting in an
operating loss of $2,951,185. The increased level of general expense is the
result of increased personnel and activity as the Company focuses on execution
of its marketing plan and has substantially completed development of its initial
products.
Liquidity and Capital Resources
On September 30, 2004, the Company had $71,032 in cash and a total of
$2,590,706 in current liabilities, significantly related to research and
development costs. Net cash used in operating activities for the nine months
ended September 30, 2004 was $1,084,224 compared to cash used in operating
activities of $1,565,894 for the nine months ended September 30, 2003. Net cash
used in investing activities for the nine months ended September 30, 2004 was
$532,710, including $450,000 paid to the marketing subsidiary that was divested
in March 2004 and $59,032 paid for patent applications. Net cash provided by
financing activities was $1,569,186 for the nine months ended September 30,
2004, compared to $1,633,613 for the nine months ended September 30, 2003,
primarily from the sale of preferred and common stock.
13
Our auditors have included an additional paragraph to their report on our
financial statements for the year ended December 31, 2003, to state that our
losses since inception and our net capital deficit at December 31, 2003 raise
substantial doubt about our ability to continue as a going concern. Our ability
to continue as a going concern is dependent upon raising additional capital and
achieving profitable operations. We cannot assure you that our plan of operation
will be successful in addressing this issue.
Our Capital Requirements
We will need to raise additional funds to finance our planned operations
during the next 12 months.
We currently do not have any binding commitments for, or readily available
sources of, additional financing. There is no guarantee that additional
financing will be available to us when needed or, if available, that it can be
obtained on commercially reasonable terms. If we do not obtain additional
financing we will not be able to implement our plan. Furthermore, we could be
forced to cease operations and liquidate our assets.
Employees
We currently have seven full time employees.
Item 3. Controls and Procedures.
Currently we have one employee who pays all Company bills and keeps all
files and records for all Company business activities, which are limited. On a
quarterly basis, all records are turned over to the Company's accountant who
prepares financial statements based on those records. The Company's accountant
has consistent and cooperative access to management and the Company's files and
records. After the financial statements are prepared by the Company's
accountant, they are approved by management.
Given the current level of very limited business activity of the Company
and the financial and accounting procedures described above, it is the
conclusion of our Chief Financial Officer and Chief Accounting Officer that the
Company's disclosure controls and procedures are effective to ensure that the
information required to be disclosed by the Company in the reports that it files
or submits under the Securities and Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported, within the time periods specified
in the applicable rules and forms of the Securities and Exchange Commission.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect the Company's disclosure controls
and procedures during the period covered by this report, nor any significant
deficiencies or material weaknesses in such disclosure controls and procedures
requiring corrective actions. As a result, no corrective actions were taken.
14
PART II - OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the period covered by this report, the Company raised a total of
$70,000 through the sale of 70,000 shares of common stock through a private
placement of securities. The Company intends to use the proceeds of this
offering for general working capital purposes, as management deems appropriate.
The Company paid no commissions in connection with the private placement.
The shares of stock sold in the private placement were exempted from
registration in reliance upon Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), and Regulation D promulgated thereunder. Shares
in the private placement were only offered to select accredited investors (as
such term is defined in Rule 501(a) of Regulation D of the Securities Act).
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are furnished as part of this report:
1. Exhibit 31.1 Certification required by Section 302 of the
Sarbanes-Oxley Act of 2002.
2. Exhibit 31.2 Certification required by Section 302 of the
Sarbanes-Oxley Act of 2002.
3. Exhibit 32.1 Certification required by Section 906 of the
Sarbanes-Oxley Act of 2002.
4. Exhibit 32.2 Certification required by Section 906 of the
Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of
1934, as amended, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ICOP Digital, Inc.
Date: November 15, 2004 By: /s/ David C. Owen
----------------------------
David C. Owen,
Chief Executive Officer
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