<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-QSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR I5(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(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, 2000
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934.
SECURITY BIOMETRICS INC.
(Exact name of Small Business Issuer in Its Charter)
NEVADA 980209119
(State or other jurisdiction of (I.R.S Employer Identification Number)
incorporation or organization)
3838 CAMINO DEL RIO NORTH, SUITE 333, 92108 1789
SAN DIEGO, CA (Zip Code)
(Address of principal executive offices)
1-619-280-8000
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which
To be So Registered Each Class is to be Registered
------------------- ------------------------------
N/A N/A
Securities registered under Section 12(g) of the Exchange Act:
COMMON EQUITY, PAR VALUE $.001
(Title of Class)
<PAGE>
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: As of September 30, 2000 there
were 50, 757, 675 shares of common stock outstanding.
2
<PAGE>
SECURITY BIOMETRICS, INC.
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
NO. TITLE. PAGE NO.
<S> <C> <C>
PART I
Item 1 Financial Statements 4
Item 2. Management's Discussion and Analysis or Plan of Operation 11
PART II
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defualts upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Securities Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
3
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
4
<PAGE>
SECURITY BIOMETRICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
SEPTEMBER 30, 2000 (UNAUDITED) AND JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
2000 2000
(UNAUDITED) (AUDITED)
------------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash $149,109 $2,262
Stock subscriptions receivable 225,000 -
-------- -------
Total current assets 374,109 2,262
-------- -------
Property and equipment 691 -
-------- -------
Other assets:
Gesture recognition technology licensing costs 320,010 -
-------- -------
Total other assets 320,010 -
-------- -------
Total assets $694,810 $ 2,262
======== =======
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 10,545 $ 4,126
Accounts payable, related party 19,405 10,548
-------- -------
Total current liabilities 29,950 14,674
-------- -------
Total liabilities 29,950 14,674
-------- -------
Commitments and contingencies - -
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 100,000,000 shares authorized,
50,757,675 and 3,125,000 shares issued and outstanding 50,758 3,125
Capital in excess of par value 662,133 46,025
Capital in excess of par value - stock options 571,875 -
Deficit accumulated during the development stage (619,906) (61,562)
-------- -------
Total stockholders' equity 664,860 (12,412)
-------- -------
Total liabilities and stockholders' equity $694,810 $ 2,262
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
5
<PAGE>
SECURITY BIOMETRICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF LOSS FOR THE PERIODS ENDED
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION,
JULY 25, 2000
THROUGH PERIODS ENDED SEPTEMBER 30,
SEPTEMBER 30, ----------------------------------------
2000 2000 1999
------------- --------------- -----------------
<S> <C> <C> <C>
Revenues $ - $ - $ -
---------- ----------- ----------
General and administrative expenses:
Stock options compensation expense 571,875 571,875 -
Other administrative expenses 48,031 48,031 -
---------- ----------- ----------
Total operating expenses 619,906 619,906 -
---------- ----------- ----------
(Loss) before taxes (619,906) (619,906) -
---------- ----------- ----------
Provision (credit) for taxes on income:
Current - - -
Deferred - - -
---------- ----------- ----------
Total provision (credit) for taxes on income - - -
---------- ----------- ----------
Net (loss) $(619,906) $ (619,906) $ -
========== =========== ==========
Basic earnings (loss) per common share $ (0.02) $ -
=========== ==========
Weighted average number of shares outstanding 27,886,239 -
=========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
6
<PAGE>
SECURITY BIOMETRICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCEPTION,
JULY 25, 2000
THROUGH PERIODS ENDED SEPTEMBER 30,
SEPTEMBER 30, ---------------------------------
2000 2000 1999
---------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $(619,906) $(619,906) $ -
Adjustments to reconcile net (loss) to cash
provided (used) by developmental stage activities:
Stock options compensation expense 571,875 571,875
Changes in current assets and liabilities:
Accounts payable and and accrued expenses 10,545 10,545 -
Accounts payable, related party 19,405 19,405 -
--------- --------- ---------
Net cash flows from operating activities (18,081) (18,081) -
--------- --------- ---------
Cash flows from investing activities:
Purchase of equipment (691) (691) -
Purchase of gesture recognition technology license (320,010) (320,010) -
--------- --------- ---------
Net cash flows from investing activities (320,701) (320,701) -
--------- --------- ---------
Cash flows from financing activities:
Net proceeds from sale of common stock 487,891 487,891 -
--------- --------- ---------
Net cash flows from financing activities 487,891 487,891 -
--------- --------- ---------
Net increase (decrease) in cash and equivalents 149,109 149,109 -
Cash and equivalents, beginning of period - - -
--------- --------- ---------
Cash and equivalents, end of period $ 149,109 $ 149,109 $ -
========= ========= =========
Supplemental cash flow disclosures:
Cash paid for interest $ - $ - $ -
Cash paid for income taxes - - -
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
7
<PAGE>
SECURITY BIOMETRICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
-------------------------------------------------------------------------------
The accompanying unaudited interim financial statements include all adjustments
which in the opinion of management are necessary in order to make the
accompanying financial statements not misleading, and are of a normal recurring
nature. However, the accompanying unaudited financial statements do not include
all of the information and footnotes necessary for a complete presentation of
financial position, results of opertations, cash flows and stockholders' equity
in conformity with generally accepted accounting principles. Except as disclosed
herein, there has been no material change in the information disclosed in the
notes to the financial statements included in the Company's Form 10-KSB as of
the year ended June 30, 2000. Operating results for the three months ended
September 30, 2000, are not necessarily indicative of the results that can be
expected for the year ended June 30, 2001.
NOTE 1 - MERGER WITH BIOMETRICS SECURITY, INC.:
On August 1, 2000, the Company signed a Letter of Intent with Biometrics
Security, Inc. to acquire all of the outstanding stock of Biometrics Security,
Inc. ("BSI") in exchange for 38,257,675 post-split shares of restricted stock.
Biometrics Security, Inc. is a newly formed corporation, which was created to
develop, market and sell static and dynamic biometric technologies specific to
the security applications of banking and financial transactions. As Biometrics
Security, Inc. is in the development stage, its business activities are
primarily related to expenses incurred in the formation of the company and the
raising of capital.
The acquisition of BSI was completed on August 25, 2000, and after the
acquisition, BSI shareholders owned more than 50% of the outstanding shares of
Security Biometrics, Inc. Therefore, pursuant to the rules of the Securities and
Exchange Commission, the transaction has been accounted for as a "reverse
merger." Accordingly, the accompanying consolidated statements of operations and
consolidated statements of cash flows reflect the historical operations and cash
flows of BSI (including those of Security Biometrics, Inc. ("SBI" or "The
Company") after August 25, 2000, the effective date of the merger), whereas
previous reports filed by the Company reflected operations and cash flows of
only Security Biometrics, Inc. The audited balance sheet of SBI as of June 30,
2000, as reported in its annual Form 10-K, is presented for comparative
purposes.
NOTE 2 - STOCK SUBSCRIPTIONS RECEIVABLE:
Prior to August 25, 2000, the date of acquisition and the resulting reverse
merger, Biometrics Security, Inc. had issued 757,675 shares of its Class A
Common Stock in exchange for cash of $532,665 and stock subscription agreements
totaling $225,000. The stock subscriptions were collected on October 31, 2000.
The stock subscriptions receivable have been reflected in the accompanying
balance sheet as a receivable in accordance with EMERGING ISSUES TASK FORCE
ISSUE NO. 85-1.
NOTE 3 - PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost less accumulated depreciation,
computed on the 20% double declining balance method over the estimated useful
life of the assets. Estimated useful lives of depreciable assets range from five
to seven years.
NOTE 4 - LICENSING COSTS:
In July, 2000, the Company's subsidiary acquired an option to license DSI
Datotech Systems, Inc. gesture recognition technology, which include the
interfaces and software for executing banking and financial transactions. The
option was acquired for initial cash consideration of $320,000, which is fully
creditable towards the $8,000,000 that may be owed to Datotech pursuant to the
execution of the License
8
<PAGE>
SECURITY BIOMETRICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
-------------------------------------------------------------------------------
Agreement. Also, BSI issued 10 shares of its common stock as additional
consideration. The Company is obligated to pay Datotech $3,000,000 July 22,
2001. The balance of the $8,000,000 license agreement must be paid within three
months of delivery of a reasonably acceptable prototype device using Datotech
technology. In addition, the Company will issue a perpetual non-dilutive twenty
percent (20%) Common Share Interest in Security Biometrics, Inc., or the
assignee of the Option and License Agreements upon the signing of the Licensing
Agreement
NOTE 5 - STOCK OPTIONS:
In August, 2000, the Company adopted the 2000 Stock Option Plan. The Plan sets
aside 5,100,000 shares of common stock options for issuance to employees,
directors, officers and consultants to the company. The Plan has a five year
term.
During the quarter ended September 30, 2000, the Company granted options to six
officers, directors and consultants to purchase 975,000 shares of the Company's
common stock at $1.00 per share under the Plan. The options are exercisable as
follows:
- As to 25% of the Shares subject to the Option, or any portion thereof,
during the period commencing from the Date of the Grant and ending on
the Expiry Date;
- As to a further 25% of the shares subject to the Option, or any portion
thereof, during the period commencing six months from the Date of Grant
and ending on the Expiry Date;
- As to a further 25% of the shares subject to the Option, or any portion
thereof, during the period commencing 12 months from the Date of Grant
and ending on the Expiry Date;
- As to the balance, if any, of the Shares subject to the Option, or any
portion thereof, during the period commencing 18 months from the Date
of Grant and ending on the Expiry Date.
At September 30, 2000, none of these options had been exercised. The transaction
was recorded by a charge to compensation expense for $571,875, which was
calculated using the Black-Scholes Option Pricing Model.
NOTE 6 - CAPITAL STOCK:
Since its inception, the Company has issued shares of its common stock as
follows:
<TABLE>
<CAPTION>
PRICE PER
DATE DESCRIPTION SHARES SHARE AMOUNT
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
03/31/99 Shares issued for cash 2,000,000 $0.005 $ 10,000
05/26/99 Shares issued for cash 855,000 0.030 25,650
06/07/99 Shares issued for services 70,000 0.050 3,500
---------------- ------------------
06/30/99 Cumulative total 2,925,000 $ 39,150
09/30/99 Shares issued for cash 200,000 0.050 10,000
---------------- ------------------
06/30/00 Cumulative total 3,125,000 49,150
08/11/00 4 for 1 stock split 9,375,000 0.000 -
08/25/00 Stock issued for all outstanding stock of
Biometric Security, Inc. 38,257,675 757,612
09/30/00 Expenses in connection with purchase of
Biometric Security, Inc. - - (29,047)
09/30/00 Effect of reverse merger with Biometric
Security, Inc. - - (64,824)
---------------- ------------------
09/30/00 Cumulative total 50,757,675 712,891
================ ==================
</TABLE>
9
<PAGE>
SECURITY BIOMETRICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
-------------------------------------------------------------------------------
The Company's articles of incorporation also authorize it to issue preferred
stock in one or more series and in such amounts as may be determined by the
Board of Directors. At September 30, 2000, no preferred stock series had been
created.
NOTE 7 - FEDERAL INCOME TAX:
The Company follows Statement of Financial Accounting Standards Number 109 (SFAS
109), ACCOUNTING FOR INCOME TAXES. Deferred income taxes reflect the net effect
of (a) temporary difference between carrying amounts of assets and liabilities
for financial purposes and the amounts used for income tax reporting purposes,
and (b) net operating loss carryforwards. No net provision for refundable
Federal income tax has been made in the accompanying statement of loss because
no recoverable taxes were paid previously. Similarly, no deferred tax asset
attributable to the net operating loss carryforward has been recognized, as it
is not likely to be realized.
The current provision for refundable Federal income tax consists of the
following:
<TABLE>
<CAPTION>
2000 1999
------------------- -----------------
<S> <C> <C>
Refundable Federal income tax attributable to:
Current operations $211,000 $ -
Less, Limitation due to absence of prior
year taxable income (211,000) -
------------------- -----------------
Net refundable amount - -
=================== =================
</TABLE>
The cumulative tax effect at the expected rate of 34% of significant items
comprising the Company's net deferred tax amounts as of September 30, 2000 and
1999, are as follows:
<TABLE>
<CAPTION>
2000 1999
------------------- -----------------
<S> <C> <C>
Deferred tax asset attributable to:
Net operating loss carryover $211,000 $ -
Less, Valuation allowance (211,000) -
------------------- -----------------
Net deferred tax asset - -
=================== =================
</TABLE>
NOTE 8 - RELATED PARTY TRANSACTIONS:
The Company paid $29,047 during the quarter ended September 30, 2000 in
professional fees to an officer for legal services.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
FORWARD-LOOKING STATEMENTS - CAUTIONARY STATEMENTS
THE QUARTERLY REPORT ON FORM 10-QSB CONTAINS CERTAIN "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES EXCHANGE ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SPECIFICALLY, ALL
STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS REPORT,
REGARDING THE COMPANY'S FINANCIAL POSITION, BUSINESS STRATEGY AND PLANS AND
OBJECTIVES OF MANAGEMENT OF THE COMPANY FOR FUTURE OPERATIONS ARE
FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE
BELIEFS OF THE COMPANY'S MANAGEMENT, AS WELL AS ASSUMPTIONS MADE BY AND
INFORMATION CURRENTLY AVAILABLE TO THE COMPANY'S MANAGEMENT. WHEN USED IN THIS
REPORT, THE WORDS "ANTICIPATE", "BELIEVE", "COULD", "ESTIMATE", "EXPECT",
"INTEND" AND WORDS AND PHRASES OF SIMILAR IMPORT, AS THEY RELATE TO THE COMPANY
OR THE COMPANY'S MANAGEMENT, ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. SUCH STATEMENTS REFLECT THE CURRENT VIEW OF THE COMPANY WITH RESPECT
TO FUTURE EVENTS AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES, ASSUMPTIONS
AND RELATED FACTORS INCLUDING, WITHOUT LIMITATIONS, COMPETITIVE FACTORS, GENERAL
ECONOMIC CONDITIONS, CUSTOMER RELATIONS, RELATIONSHIP WITH VENDORS, INTEREST
RATES, CURRENCY FLUCTUATIONS, GOVERNMENT REGULATION AND SUPERVISION, POLITICAL
EVENTS, THE OPERATION OF THE COMPANY'S NETWORKS, TRANSMISSION COSTS, PRODUCT
INTRODUCTIONS AND ACCEPTANCE, TECHNOLOGICAL CHANGE, CHANGES IN INDUSTRY
PRACTICES, ONE-TIME EVENTS AND OTHER FACTORS DESCRIBED HEREIN ("CAUTIONARY
STATEMENTS"). ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO BE
CORRECT. BASED UPON CHANGING CONDITIONS, SHOULD ANY OR MORE OF THESE RISKS OR
UNCERTAINTIES MATERIALIZE, OR SHOULD ANY UNDERLYING ASSUMPTIONS PROVE INCORRECT,
ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED HEREIN AS ANTICIPATED,
BELIEVED, ESTIMATED, EXPECTED OR INTENDED. ALL SUBSEQUENT WRITTEN AND ORAL
FORWARD-LOOKING STATEMENTS ATTRIBUTED TO THE COMPANY OR PERSONS ACTING ON ITS
BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE APPLICABLE CAUTIONARY
STATEMENTS.
RESULTS OF OPERATIONS
In the last quarter (June 30 to September 30, 2000) the Registrant acquired a
company named Biometrics Security Inc. through a reverse merger stock exchange
agreement, whereby Biometrics Security Inc. became a 100% wholly owned
subsidiary of the registrants.
Biometrics Security, Inc. is in the business to specifically develop, market
under license and sell static and dynamic biometric technologies specific to the
security applications of banking and financial transactions. These include
dynamic Gesture Recognition Technology (GRT), static biometric finger and palm
prints, retinal scans, voice-recognition technology and other appropriate
technologies. GRT is a dynamic system that interprets hand gestures or
signatures using sophisticated software algorithms performed on patented,
proprietary touch pads. Dynamic Gesture Recognition Technology is deemed
superior to existing pen input and other signature recognition technologies.
Furthermore the registrant appointed new directors and senior management, set up
and appointed a new advisory committee in order to focus on positioning the
company as a key provider of biometric security interfaces that will offer a
wide array of end-to-end solutions targeted to the specific multi-trillion
dollar banking and financial transaction markets.
LIQUIDITY AND CAPITAL RESOURCES
During this reporting period, the Registrants wholly owned subsidiary raised
US$ 757, 675 through the sale of their common stock. On August 22, 2000 the
Registrants subsidiary acquired the exclusive licensing agreement through an
option from DSI Datotech Systems, Inc. for US$ 8 Million and a 20% equity
interest in the Registrant's subsidiary.
In consideration of the option granted to Biometrics Security hereunder,
Biometrics Security shall pay Datotech the amount of US$ 320, 000, which shall
be fully creditable towards any amounts due Datotech under the license
agreement. Said US$ 320, 000 has been paid in full on the date of signing this
option agreement. Biometrics Security shall pay Datotech US$ 3, 000, 000 within
eleven months of the signature
11
<PAGE>
of the Option Agreement. Datotech will exclusively apply the US$ 3, 000, 000
payment towards the development of the prototype. "Prototype" shall mean a
device using Datotech technology that will demonstrate, beyond any reasonable
doubt, multi-touch gesture recognition and individual gesture patterns utilizing
a PC system. Datotech commits to use its best efforts to make this prototype
available at this charge of US$ 3, 000, 000 to Biometrics Security within 12
months of the delivery of this US$ 3, 000, 000 to Datotech. Upon the exercise by
Biometrics Security of the Option granted hereunder and the signing of the
License Agreement, Biometrics Security shall pay Datotech the amount of US$ 8,
000, 000 less the above amount of US$ 3, 320, 000 paid to Datotech within the
terms of this agreement. Biometrics Security must exercise its option within
three months of the time a reasonably acceptable prototype is made available to
Biometrics Security by Datotech. In addition, Biometrics Security or its
assignee grants to Datotech a perpetual non-dilutable twenty percent (20%)
Common Share interest in Biometrics Security or the assignee of the option and
license agreements upon the signing of the licensing agreement.
12
<PAGE>
The Registrant has now completed their business plan and is in the process of
securing a US$ 30, 000, 000 secondary financing.
THE REGISTRANT ON OCTOBER 16TH 2000, FILED A 10K-SB40 COVERING THE PERIOD ENDING
JUNE 30TH 2000. IN THIS FILING AS EX 6.1 (STOCK EXCHANGE AGREEMENT) THE
REGISTRANT WISHES TO DISCLOSE THAT THE DATES OF THE AGREEMENT HAVE BEEN AMENDED
FROM JULY 25TH 2000 TO AUGUST 2ND 2000, THE LETTER OF INTENT WAS AMENDED FROM
JULY 21ST 2000 TO JULY 27TH 2000 AND THE CLOSING FROM JULY 25TH 2000, TO AUGUST
25TH 2000. THIS AGREEMENT WAS RATIFIED ON SEPTEMBER 12TH 2000.
BUSINESS RISKS
RISK FACTORS, BANKING AND FINANCIAL TRANSACTIONS MARKETS:
LACK OF OPERATIONS AND PROFITABILITY
The Registrant is in the development stage and has no history of operations and
profits in the Banking and Financial Transaction Security markets.
UNCERTAINTY OF COMMERCIAL SUCCESS
Although the Registrant is optimistic about its revenues and profitability
prospects, there can be no assurances of commercial success.
COMPETITION
The Registrant is subject to competition in the Banking and Financial
Transaction Security markets from other companies. These competitors have been
in the business longer than the Registrant and may have larger, more
sophisticated and better financed organizations.
NEED FOR ADDITIONAL FINANCING
The Registrant will require additional financing in order to complete on the
licensing and option agreement covering Gesture Recognition Technologies
specific to the Banking and Financial Transaction markets. There are no
assurances that such financing will be forth coming or that it can be obtained
on terms favorable to the Registrant.
DEPENDENCE ON DSI DATOTECH SYSTEMS INC.
The Registrant is largely dependent upon the efforts and abilities of DSI
Datotech Systems Inc.'s technical groups to succeed in the Gesture Recognition
Technologies Banking and Financial Transactions markets. There are no assurances
that the Registrant can be successful in operating in this business without the
full co-operation of DSI Datotech Systems Inc.
RISK FACTORS. INTERNET GAMING:
LACK OF OPERATIONS AND PROFITABILITY.
The Registrant is in the pre-operational development stage and has no history of
operations or profits in the Internet gaming industry.
13
<PAGE>
UNCERTAINTY OF COMMERCIAL SUCCESS.
Although the Registrant is optimistic about its revenue and profitability
prospects, there can be no assurances of commercial success of its
CasinolnterPlex product. Furthermore, the Internet gaming industry is relatively
new and in the midst of rapid change, growth and uncertainty. There can be no
assurance that the Registrant will be able to keep up with the pace of
technological change or fund its growth.
COMPETITION.
The Registrant is subject to competition in the Internet based entertainment
business from other companies that compete with similar products and services.
These competitors have been in the business longer than the Registrant and may
have larger and more sophisticated organizations with better- experienced and
larger executive and operating staffs. There can be no assurance that the
Registrant's prospects will not be adversely affected by competition from these
companies.
NEED FOR ADDITIONAL FINANCING.
The Registrant will require additional financing in order to establish
profitable operations. There is no assurance that such financing will be
forthcoming, or that it can be obtained on terms favorable to the Registrant.
DEPENDENCE ON MANAGEMENT.
The Registrant is largely dependent upon the efforts and abilities of its
management team to succeed in the Internet based entertainment business. The
management team has particular experience and gaming industry contacts. There is
no assurance that the Registrant can be successful in operating the business, if
the services of the management team become unavailable.
14
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no changes since the Registrant's last report in Item
3, Legal Proceedings of Form 10-KSB for the fiscal year ended June 30th
2000.
ITEM 2. CHANGES IN SECURITIES
On August 11th 2000, the name of the company was changed from Great
Bear Investments Inc. to Security Biometrics Inc. and the common shares
were rolled forward on a one old for a four new basis, thus increasing
the outstanding and issued shares from 3, 125, 000 to 12, 500, 000.
Than on August 25th 2000, the registrant acquired Biometrics Security
Inc. through a share exchange, leaving the issued and outstanding
shares at 50, 757, 675.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None since the filing of the 10K-SB40 on October 16th 2000.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - one
(b) Form 8-K - attached
15
<PAGE>
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.
SECURITY BIOMETRICS INC.
DATE : NOVEMBER 27, 2000 BY: /s/ GEORGE GOULD
----------------------------
George Gould
President
16
