IRBL Inrob Tech Ltd (CE)

Registration Number 333-139508

 

SECURITIES AND EXCHANGE COMMISSION

  Washington, D.C. 20549

 

 Post-Effective Amendment No. 2

to

FORM SB-2

 

  REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

INROB TECH LTD.

(Name of Small Business Issuer in its Charter)

 

Nevada	3559	88-0219239
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

 

1515 Tropicana Ave, Suite 140

Las Vegas NV 89119

702-795-3601

(Address and telephone number of principal executive offices)

 

Ben-Tsur Joseph  

President

1515 Tropicana Ave, Suite 140

Las Vegas NV 89119

702-795-3601

(Name, address and telephone number of agent for service)

 

Copies to:

Marc Ross, Esq.

Louis A. Brilleman, Esq.

Sichenzia Ross Friedman Ference LLP

1065 Avenue of the Americas, 21st Floor

New York, New York 10018

Tel: (212) 930-9700

Fax: (212) 930-9725

 

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.  x

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o ______

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  o ________

 

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  o

EXPLANATORY NOTE

 

On January 11, 2007, the Securities and Exchange declared effective the registration statement on SB-2 (the “Registration Statement”) filed by Inrob Tech Ltd. (the “Company”). On October 16, 2007, the Company filed a post effective amendment to the Registration Statement for the purpose of updating its financial and other disclosures. The 9,822,822 shares included in that post effective amendment was lower than the number of shares included in the Registration Statement (18,405,000) as a result of sales of shares by the selling securityholders following the effective date of the Registration Statement.

 

This second post-effective amendment to the Registration Statement is being filed to further update certain developments relating to the Company. Specifically, on October 23, 2007, the Company entered into an amendment to its March 2007 financing arrangement. The terms of that amendment are set forth in the prospectus included in this post-effective amendment to the Registration Statement under “Management's Discussion and Analysis or Plan of Operation.”

Subject to Completion, Dated October 30, 2007

 

INROB TECH LTD.

 

9,822,822   Shares of Common Stock

 

This prospectus relates to the resale by the selling stockholders of up to 9,822,822   shares of our common stock. The selling stockholders may sell common stock from time to time in the principal market on which the stock is traded at the prevailing market price or in negotiated transactions.

 

The total number of shares sold herewith consists of shares to be issued to the selling shareholders upon conversion of convertible notes. We are not selling any shares of common stock in this offering and therefore will not receive any proceeds from this offering. All costs associated with this registration will be borne by us.

 

Our common stock currently trades on the Over the Counter Bulletin Board ("OTC Bulletin Board") under the symbol "IRBL.OB."

 

On October 15, 2007, the last reported sale price for our common stock on the OTC Bulletin Board was $0.185 per share.

 

Investing in these securities involves significant risks.

 

See "Risk Factors" beginning on page 3.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this Prospectus is ________, 2007

You may only rely on the information contained in this prospectus or that we have referred you to. We have not authorized anyone to provide you with different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the common stock offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this prospectus nor any sale made in connection with this prospectus shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this prospectus or that the information contained by reference to this prospectus is correct as of any time after its date.

 

PROSPECTUS SUMMARY

 

This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including, the section entitled "Risk Factors" before deciding to invest in our common stock. Inrob Tech Ltd. is referred to throughout this prospectus as "Inrob," "we" or "us."

 

General

Through our wholly owned subsidiary, Inrob Ltd., we develop and produce advanced wireless control system and integrated solutions for mobile robots. Bringing emerging robotics technology out of the lab and into the open market, InRob focuses on civil, security and consumer related applications in the mobile robotics business. Our objective is to be a world leader in the development and production of advanced wireless control systems and integrated solutions for robots. We aim to provide integrated solutions to meet the needs of a wide range of mission-critical military, law enforcement and civilian applications.

Inrob offers its Explosive Ordinance Disposal technologies for bomb squads, advanced remote-control technologies as well as mobile surveillance technologies, all in support of the increased use of unmanned ground vehicles for "dirty and dangerous" missions in military, homeland security and law enforcement missions.

 

Our principal executive office is located at 1515 Tropicana Ave, Suite 140, Las Vegas NV 89119. Our telephone number at that address is 702-795-3601.

 

RISK FACTORS

 

An investment in our shares involves a high degree of risk. Before making an investment decision, you should carefully consider all of the risks described in this prospectus. If any of the risks discussed in this prospectus actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the price of our shares could decline significantly and you may lose all or a part of your investment. The risk factors described below are not the only ones that may affect us. Our forward-looking statements in this prospectus are subject to the following risks and uncertainties. Our actual results could differ materially from those anticipated by our forward-looking statements as a result of the risk factors below. See "Forward-Looking Statements."

 

Risks Related to Our Business

 

We have incurred significant losses to date and expect to continue to incur losses.

 

During the year ended December 31, 2006, we incurred net losses of approximately $828,232. For the six months ended June 30, 2007, we incurred net losses of $838,476. We expect to continue to incur losses for at least the next 12 months. Continuing losses will have an adverse impact on our cash flow and may impair our ability to raise additional capital required to continue and expand our operations.

 

Our auditors have issued a going concern opinion, which may make it more difficult for us to raise capital.

 

Our auditors have included a going concern opinion on our financial statements because of concerns about our ability to continue as a going concern. These concerns arise from the fact that we have continuing operating losses and negative working capital. If we are unable to continue as a going concern, you could lose your entire investment in us.

 

If we are unable to obtain additional funding, we may have to reduce our business operations.

 

We recently completed two $3,000,000 financings (November 15, 2006, and March 27, 2007) and anticipate, that the funds received will be sufficient to satisfy our operations for the next 12 months. Nevertheless, if our marketing campaign is not successful in promoting sales of our services, we will be required to seek additional financing. We may also require additional financing to expand into other markets and further develop our products and services. We have no current arrangements with respect to any additional financing. Consequently, there can be no assurance that any additional financing will be available when needed, on commercially reasonable terms or at all. The inability to obtain additional capital may reduce our ability to expand our business operations. Any additional equity financing may involve substantial dilution to our then existing shareholders.

If we cannot maintain our current relationship with A.R.T.S. Ltd., our operations would be materially adversely affected.

 

One of our main sub-contractors, A.R.T.S. Ltd., provides critical research, development and production operations to us. During the past 10 years, A.R.T.S. Ltd. has developed for us most of the software required for our robot related activities. We do not have an agreement with A.R.T.S. Ltd. for the provision of their services to us, and cannot be assured that we will be able to maintain this relationship with that entity. In the event that our relationship with A.R.T.S. Ltd. ceases, the interruption to our research and development activities and production operations would be harmful to our business, and may require a long period of time to establish relationships with new partners with the required level of know-how and expertise. We currently know of several wireless communications software companies, both in Israel and worldwide, capable of providing us with the same services we currently outsource to A.R.T.S. Ltd.

 

As we are a technology-based company, we are required to update our technology and knowledge base on a regular basis. We are a relatively small company, and we have never made the quantitative distinction between our research and development expenses and any other expenses. Thus, we are not able to assess the amount of funds we have paid for research and development over the years, nor are we able to assess the financial effects a break up with A.R.T.S. Ltd. may have on our business.  

 

We believe that we have a good overall relationship with our employees, and it is common practice for us to amicably settle all debts between the parties upon the termination of the employees' term with us. We have never made an active effort to ascertain whether or not workers maybe entitled to such payments, benefits or advantages, nor have we ever made an active effort to ascertain what such payments, benefits or advantages might be.

 

We have no knowledge as to whether we adhere to the aforementioned legal requirements. Should an authorized court determine that we do not adhere to the said requirements we may be responsible to pay significant damages that could adversely affect the results of our operations.

 

% BELOW MARKET		PRICE PER SHARE			WITH 25% DISCOUNT			NUMBER OF SHARES			PERCENTAGE *
25%		$	0.15		$	0.1125			40,888,888			37.7	%
50%		$	0.10		$	0.075			61,333,333			47.5	%
75%		$	0.05		$	0.0375			122,666,666			64.4	%

__________

FORWARD-LOOKING STATEMENTS

 

Our representatives and we may from time to time make written or oral statements that are "forward-looking," including statements contained in this prospectus and other filings with the Securities and Exchange Commission, reports to our stockholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements within the meaning of the Act. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," "may," "should," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Important factors on which such statements are based are assumptions concerning uncertainties, including but not limited to uncertainties associated with the following:

 

(a)	volatility or decline of our stock price;

 

(b)	potential fluctuation in quarterly results;

 

(c)	our failure to earn revenues or profits;

 

(d)	inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement its business plans;

 

(e)	inadequate capital to continue business;

 

(f)	changes in demand for our products and services;

 

(g)	rapid and significant changes in markets;

 

(h)	litigation with or legal claims and allegations by outside parties; and

 

(i)	insufficient revenues to cover operating costs.

USE OF PROCEEDS

 

This prospectus relates to shares of our common stock that may be offered and sold from time to time by selling stockholders. We will receive no proceeds from the sale of shares of common stock in this offering.

 

Other (Expense)-

 

Other expense increased by $32,479, or 96.4 percent, to $66,154 during 2006. This increase was due to an overall increase in interest expense from a Company financing plus the amortization of debt issuance costs, offset by the elimination of certain bank debt for the period, and an increase in interest income amounting to $31,928 in 2006.

 

Comprehensive Income (Loss)-

 

Comprehensive income for 2006 amounted to $36,642, an increase of $16,452 or 81.5 percent, when compared to comprehensive income of $20,190 for 2005, and was due primarily to favorable fluctuations in Israeli currency.

 

Weighted Average Number of Shares Outstanding-

 

The weighted average number of common shares outstanding increased from 38,753,607 in 2005 to 61,350,201 in 2006. The increase was primarily due to various transactions that were completed involving our Common Stock.

 

Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006

Revenues-

For the three months ended June 30, 2007, the Company recognized $537,847 in revenues compared to $478,617 for the same period in 2006, which resulted in an overall increase of $59,230, or 12.4%. The overall increase in revenues resulted primarily from an increase in product sales from to $69,135 in 2006 to $119,730 in 2007, and increase of $50,595 or 73.2%. Service revenues also increased from $409,482 in 2006 to $418,117 in 2007, an increase of 2.1%. The increase in service revenues resulted from the completion of additional projects under contract during the quarter.

Cost of Goods Sold-

Cost of goods sold amounted to $340,822 compared to $272,539 for the same period in 2006, resulting in an increase of $68,283, or 25.1%. The increase was primarily attributed to increases in salaries and wages, repairs and maintenance, employee goodwill, and vehicle operating expenses, offset by reductions in occupancy/rent costs, insurance, and project consulting expenses.  

We believe that our competitive edge is the quality, product features and level of integration of our solutions. Because of Israel's security situation and our close work with the Israel Defense Forces and the Israeli police, we have extensive experience in a wide range of military and law enforcement applications. We have the ability to provide fast and reliable solutions to meet the immediate operational needs of front-line IDF units as they arise.

 

According to research in the United States, the most important issues in current UVR usage include the ability to provide integrated solutions and dependable control and communication systems. We have particular expertise and experience in these two critical areas. Overall, we believe that this experience gives our technology and applications a crucial competitive advantage.

 

Intellectual Property

 

We do not have any patents, trademarks or any other protection over our intellectual property. All of our intellectual property is "know how" and not original proprietary intellectual property. As such, it cannot be protected by patent or trademark. In addition, we do not have confidentiality agreements with any of our employees or suppliers with respect to our intellectual property. The theft or unauthorized use of our intellectual property is not sufficiently provided for, and our intellectual property is extremely susceptible to theft or unauthorized use. Any theft or unauthorized use of our intellectual property could materially adversely affect our operations.

In addition, our relationship with Ben-Tsur Joseph, our President, is governed by the terms of a management agreement.

 

There is currently a collective agreement signed between the labor federation and the industry union in Israel, which applies to the employees of Inrob Ltd. under an expansion order. We believe that our employee relations are good.

Description of Property

 

EXECUTIVE COMPENSATION

 

The following table sets forth the total compensation we paid for our fiscal years ended December 31, 2006, and 2005, to each of our executive officers. During the fiscal years ended December 31, 2005, 2004, and 2003, no Executive Officer or Director of the Company received cash remuneration in excess of $100,000. There are no standard arrangements for the compensation of directors.

Summary Compensation Table

Name and principal position (a)		Year (b)			Salary ($) (c)			Bonus ($) (d)			Stock Awards ($) (e)			All Other Compensation ($) (i)			Total ($) (j)*
Ben-Tsur Joseph President and Chief Executive Officer			2006			-0-			-0-			150,000	***		-0-			-0-
			2005			-0-			-0-						-0-			-0-
Frank H. DeRenzo President**			2005			-0-			-0-						-0-			-0-

 

---

*   Mr. Joseph’s services to us are made available through a management agreement which may be terminated by either party upon 90 day prior notice. During the years ended December 31, 2005, and 2006, under the management agreement, we accrued $120,000 and $220,000 in management fees, respectively. During 2005 and 2006, no management fees were paid to Mr. Joseph. Mr. Joseph provided for the offset of $205,000 owed to the Company by a related party entity of Mr. Joseph against the management fee liability which reduced the total amount owed as of December 31, 2006, to approximately $135,000.

 

**   Mr. DeRenzo resigned his position in 2005.

 

***   Consists of 1,000 shares of Preferred Stock

 

Option Grants in Fiscal Year 2006

 

We did not issue any option grants during fiscal year 2006.

 

Our Employee Stock Option Plan was previously extended to 2010. Currently no options have been issued under the Employee Stock Option Plan.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Under Section 16(a) of the Exchange Act, our directors and certain of our officers, and persons holding more than 10 percent of our common stock are required to file forms reporting their beneficial ownership of our common stock and subsequent changes in that ownership with the Securities and Exchange Commission. Such persons are also required to furnish us with copies of all forms so filed.

 

Based solely upon a review of copies of such forms filed on Forms 3, 4, and 5, and amendments thereto furnished to us, we believe that during the year ended December 31, 2006, our executive officers, directors and greater than 10 percent beneficial owners complied on a timely basis with all Section 16(a) filing requirements.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth information as of October 15, 2007 regarding the beneficial ownership of our Common Stock, based on information provided by (i) each of our executive officers and directors; (ii) all executive officers and directors as a group; and (iii) each person who is known by us to beneficially own more than 5% of the outstanding shares of our Common Stock.

 

Unless otherwise indicated, each person named in the table above has the sole voting and investment power with respect to the shares of our common and preferred stock which he beneficially owns.

 

For purposes of this table, a person is deemed to be a beneficial owner of the securities if that person has the right to acquire such securities within 60 days of October 15, 2007 upon the exercise of options or warrants. In determining the percentage ownership of the persons in the table below, we assumed in each case that the person exercised all options and warrants which are currently held by that person and which are exercisable within such 60 day period, but that options and warrants held by all other persons were not exercised, and based the percentage ownership on 67,704,934 shares outstanding on October 15, 2007.

Name of Shareholder		Number of Shares			Percent
Ben-Tsur Joseph			428,500,004	(1)		91.6	%
2 Haprat St.
Yavne
Israel
All directors and officers as a group (one person)

(1) Includes 1,000 shares of Series A Preferred Stock, each of which carries voting rights equal to 400,000 shares of common stock.

 

Year Ended December 31, 2005		HIGH			LOW
First Quarter			5.60			0.32
Second Quarter			1.75			0.54
Third Quarter			4.39			0.13
Fourth Quarter			0.42			0.15
Year Ended December 31, 2006			HIGH			LOW
First Quarter			0.68			0.38
Second Quarter			0.68			0.41
Third Quarter			0.44			0.21
Fourth Quarter			0.38			0.26
Year Ended December 31, 2007			HIGH			LOW
First Quarter			0.315			0.24
Second Quarter			0.26			0.19
Third Quarter			0.30			0.171

Dividend Policy

 

Historically, we have not paid any dividends to the holders of our common stock and we do not expect to pay any such dividends in the foreseeable future as we expect to retain our future earnings for use in the operation and expansion of our business.

 

Selling Shareholder		Shares Beneficially Owned   Prior to Offering (1)			Shares to be Sold in  Offering (2)			Shares Beneficially Owned After Offering			Percentage of Shares Beneficially Owned After Offering
Professional Offshore Opportunity Fund, Ltd. (3)			1,632,501			1,073,001			559,500			*
First Mirage, Inc. (4)			619,642			386,131			233,511			*
Generation Capital Associates (5)			619,642			386,131			233,511			*
The Hart Organization (6)			256,670			163,034			93,636			*
Platinum Partner Long Term Growth IV (7)			1,883,534			1,231,198			652,336			*
Centurion Microcap, LP (8)			2,543,534			1,611,648			931,886			1.3
Truk Opportunity Fund, LLC (9)			1,610,128			578,079			1,032,049			1.4
Truk International, L.P. (10)			362,655			79,688			282,967			*
Alpha Capital Anstalt (11)			1,357,787			798,287			559,500			*
Vision Opportunity Master Fund, Ltd. (12)			13,381,522			3,515,625			9,865,897			13	%
Total Shares to be Sold						9,822,822

---

* less than 1%.

 

	(1)	The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the selling stockholders has sole or shared voting power or investment power and also any shares, which the selling stockholders has the right to acquire within 60 days. Nevertheless, for purposes hereof, for each selling shareholder does not give effect to the 4.99% limitation on the number of shares that may be held by each shareholder under the transaction documents which limitation is subject to waiver by the holder upon 61days prior written notice to us. The actual number of shares of common stock issuable upon the conversion of the secured convertible notes is subject to adjustment depending on, among other factors, the future market price of the common stock, and could be materially less or more than the number estimated in the table. The percentage of shares owned by each is based on a total outstanding number of 67,704,934 as of October 15, 2007.
	(2)	For each selling shareholder the indicated number represents the number of shares to be registered on behalf of that selling shareholder as a proportion of the total number of shares that may be included in the registration statement of which this prospectus forms a part in accordance with the subscription agreement, minus the shares that have already been issued to and sold by each such person.
	(3)	Number of shares beneficially owned includes shares issuable upon conversion of convertible notes and exercise of warrants. Mr. Howard Berger has sole voting and dispositive power over the shares beneficially owned by this entity.
	(4)	Number of shares beneficially owned includes shares issuable upon conversion of convertible notes and exercise of warrants. Mr. David Rappaport has sole voting and dispositive power over the shares beneficially owned by this entity.
	(5)	Number of shares beneficially owned includes shares issuable upon conversion of convertible notes and exercise of warrants. Mr. David Rappaport has sole voting and dispositive power over the shares beneficially owned by this entity.
	(6)	Number of shares beneficially owned includes shares issuable upon conversion of convertible notes and exercise of warrants. Mr. David Rappaport has sole voting and dispositive power over the shares beneficially owned by this entity.
	(7)	Number of shares beneficially owned includes shares issuable upon conversion of convertible notes and exercise of warrants. Mr. Mark Nordlicht has sole voting and dispositive power over the shares beneficially owned by this entity.

 

In July 2005, Inrob Israel purchased, on behalf of Ben-Tsur Joseph, its President, Director and sole stockholder, 2,057,415 shares of common stock of the Company in connection with the reverse merger. The amount of consideration provided by Inrob Israel for the shares was $475,000. Thereafter, Mr. Joseph entered into a Share Transfer and Loan Agreement with Inrob Israel whereby the company transferred to Mr. Joseph 2,057,415 shares of the common stock of the Company. in exchange for a promissory note issued by Mr. Joseph in the amount of $475,000. The promissory note carries an interest rate of four (4) percent per annum, and is payable to Inrob Israel on demand.

 

Inrob Israel entered into a management agreement with an officer and director on October 1, 2003, which was subsequently extended as to its commencement date to May 1, 2005. Other terms and conditions related to equipment usage commenced with the original date of the agreement. Under the terms of the agreement, the Company is obligated to pay $15,000 per month during the first year and $20,000 per month thereafter for management fees. For the years ended December 31, 2005, and 2006, the Company accrued $120,000 and $220,000, respectively, under the management agreement. Mr. Joseph provided for the offset of $205,000 owed to the Company by a related party entity of Mr. Joseph against the management fee liability which reduced the total amount owed as of December 31, 2006, to approximately $135,000. The management agreement does not have a specific completion date, but may be terminated by either party on written notice of three months.

 

As of December 31, 2006, Mr. Joseph, our President and Director, had loaned a total of $61,435 to the Company for working capital purposes. The loan is unsecured, non-interest bearing, and has no terms for repayment.

 

Transfer Agent and Registrar

 

PLAN OF DISTRIBUTION

 

The selling stockholders, or their pledgees, donees, transferees, or any of their successors in interest selling shares received from the named selling stockholders as a gift, partnership distribution or other non-sale-related transfer after the date of this prospectus (all of whom may be a selling stockholder) may sell the common stock offered by this prospectus from time to time on any stock exchange or automated interdealer quotation system on which the common stock is listed or quoted at the time of sale, in the over-the-counter market, in privately negotiated transactions or otherwise, at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices related to prevailing market prices or at prices otherwise negotiated. The selling stockholders may sell the common stock by one or more of the following methods, without limitation:

 

·	Block trades in which the broker or dealer so engaged will attempt to sell the common stock as agent but may position and resell a portion of the block as principal to facilitate the transaction;
·	An exchange distribution in accordance with the rules of any stock exchange on which the common stock is listed;
·	Ordinary brokerage transactions and transactions in which the broker solicits purchases;
·	Privately negotiated transactions;
·	In connection with short sales of company shares;
·	Through the distribution of common stock by any selling stockholder to its partners, members or stockholders;
·	By pledge to secure debts of other obligations;
·	In connection with the writing of non-traded and exchange-traded call options, in hedge transactions and in settlement of other transactions in standardized or over-the-counter options;
·	Purchases by a broker-dealer as principal and resale by the broker-dealer for its account; or
·	In a combination of any of the above.

 

These transactions may include crosses, which are transactions in which the same broker acts as an agent on both sides of the trade. The selling stockholders may also transfer the common stock by gift. We do not know of any arrangements by the selling stockholders for the sale of any of the common stock.

 

The selling stockholders may engage brokers and dealers, and any brokers or dealers may arrange for other brokers or dealers to participate in effecting sales of the common stock. These brokers or dealers may act as principals, or as an agent of a selling stockholder. Broker-dealers may agree with a selling stockholder to sell a specified number of the stocks at a stipulated price per share. If the broker-dealer is unable to sell common stock acting as agent for a selling stockholder, it may purchase as principal any unsold shares at the stipulated price. Broker-dealers who acquire common stock as principals may thereafter resell the shares from time to time in transactions in any stock exchange or automated interdealer quotation system on which the common stock is then listed, at prices and on terms then prevailing at the time of sale, at prices related to the then-current market price or in negotiated transactions. Broker-dealers may use block transactions and sales to and through broker-dealers, including transactions of the nature described above. The selling stockholders may also sell the common stock in accordance with Rule 144 or Rule 144A under the Securities Act, rather than pursuant to this prospectus. In order to comply with the securities laws of some states, if applicable, the shares of common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers.

 

From time to time, one or more of the selling stockholders may pledge, hypothecate or grant a security interest in some or all of the shares owned by them. The pledgees, secured parties or person to whom the shares have been hypothecated will, upon foreclosure in the event of default, be deemed to be selling stockholders. The number of a selling stockholder's shares offered under this prospectus will decrease as and when it takes such actions. The plan of distribution for that selling stockholder's shares will otherwise remain unchanged. In addition, a selling stockholder may, from time to time, sell the shares short, and, in those instances, this prospectus may be delivered in connection with the short sales and the shares offered under this prospectus may be used to cover short sales.

 

To the extent required under the Securities Act, the aggregate amount of selling stockholders' shares being offered and the terms of the offering, the names of any agents, brokers, dealers or underwriters, any applicable commission and other material facts with respect to a particular offer will be set forth in an accompanying prospectus supplement or a post-effective amendment to the registration statement of which this prospectus is a part, as appropriate. Any underwriters, dealers, brokers or agents participating in the distribution of the common stock may receive compensation in the form of underwriting discounts, concessions, commissions or fees from a selling stockholder and/or purchasers of selling stockholders' shares, for whom they may act (which compensation as to a particular broker-dealer might be less than or in excess of customary commissions). Neither we nor any selling stockholder can presently estimate the amount of any such compensation.

 

LEGAL MATTERS

 

The validity of the common stock has been passed upon by Sichenzia Ross Friedman Ference LLP, New York, New York.

EXPERTS

 

The Company's balance sheet as of December 31, 2006 and the related statements of operations and comprehensive income (loss), stockholders' (deficit), and cash flows for each of the two years in the period ended December 31, 2006, included in this Prospectus have been audited by Davis Accounting Group P.C., Certified Public Accountants, as set forth in its report appearing elsewhere herein and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We filed with the SEC a registration statement on Form SB-2 under the Securities Act for the common stock to be sold in this offering. This prospectus does not contain all of the information in the registration statement and the exhibits and schedules that were filed with the registration statement. For further information with respect to the common stock and us, we refer you to the registration statement and the exhibits and schedules that were filed with the registration statement. Statements made in this prospectus regarding the contents of any contract, agreement or other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of the registration statement and the exhibits and schedules that were filed with the registration statement may be inspected without charge at the public reference facilities maintained by the SEC, 100 F Street, N.E., Washington, DC 20549. Copies of all or any part of the registration statement may be obtained from the SEC upon payment of the prescribed fee. Information regarding the operation of the public reference rooms may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov.

 

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION

FOR SECURITIES ACT LIABILITIES

 

Under the Nevada General Corporation Law and our Articles of Incorporation, as amended, our directors will have no personal liability to us or our stockholders for monetary damages incurred as the result of the breach or alleged breach by a director of his "duty of care". This provision does not apply to the directors' (i) acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) acts or omissions that a director believes to be contrary to the best interests of the corporation or its shareholders or that involve the absence of good faith on the part of the director, (iii) approval of any transaction from which a director derives an improper personal benefit, (iv) acts or omissions that show a reckless disregard for the director's duty to the corporation or its shareholders in circumstances in which the director was aware, or should have been aware, in the ordinary course of performing a director's duties, of a risk of serious injury to the corporation or its shareholders, (v) acts or omissions that constituted an unexcused pattern of inattention that amounts to an abdication of the director's duty to the corporation or its shareholders, or (vi) approval of an unlawful dividend, distribution, stock repurchase or redemption. This provision would generally absolve directors of personal liability for negligence in the performance of duties, including gross negligence.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

INROB TECH LTD.  

 

INDEX TO FINANCIAL STATEMENTS

 

DECEMBER 31, 2006, AND 2005

Financial Statements-
Report of Registered Independent Auditors	F-2
Balance Sheet as of December 31, 2006	F-3
Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2006, and 2005	F-4
Statements of Stockholders' (Deficit) for the Years Ended December 31, 2006, and 2005	F-5
Statements of Cash Flows for the Years Ended December 31, 2006, and 2005	F-6
Notes to Financial Statements for the Years Ended December 31, 2006, and 2005	F-8

 

INDEX TO INTERIM CONSOLIDATED

FINANCIAL STATEMENTS

JUNE 30, 2007, AND 2006

(Unaudited)

Financial Statements-
Consolidated Balance Sheet as of June 30, 2007	F-25
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months And Six Months Ended June 30, 2007, and 2006	F-26
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007, and 2006	F-27
Notes to Financial Statements for the Six Months Ended June 30, 2007, and 2006	F-29

 

F-1

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REPORT OF REGISTERED INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of

Inrob Tech Ltd.:

We have audited the accompanying balance sheet of Inrob Tech Ltd. (a Nevada corporation) as of December 31, 2006, and the related statements of operations and comprehensive income (loss), stockholders’ (deficit), and cash flows for each of the two years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Inrob Tech Ltd. as of December 31, 2006, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has experienced operating losses, and has negative working capital. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Respectfully submitted,

 

/s/ Davis Accounting Group P.C.
Cedar City, Utah, April 20, 2007.

 

F-2

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INROB TECH LTD.

BALANCE SHEET (NOTE 2)

AS OF DECEMBER 31, 2006

 

		2006
ASSETS
Current Assets:
Cash and cash equivalents		$	2,278,371
Accounts Receivable-
Trade			256,881
Less - Allowance for doubtful accounts			-
Inventories			711,772
Cost of uncompleted contracts in excess of billings			161,371
Prepaid expenses			8,597
Total current assets			3,416,992
Property and Equipment:
Office and computer equipment			88,027
Furniture and fixtures			59,633
Vehicles			346,096
Leasehold improvements			39,941
			533,697
Less - Accumulated depreciation and amortization			(288,040	)
Net property and equipment			245,657
Other Assets:
Deposits and other			2,788
Debt issuance costs, net			319,219
Loans to and interest receivable from related parties			261,849
Total other assets			583,856
Total Assets		$	4,246,505
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Bank overdrafts		$	94,910
Bank loans and other debt, current portion			43,858
Current portion of convertible notes			1,570,800
Accounts payable - Trade			238,606
Due to related party - Director and stockholder			61,435
Due to related party company			20,496
Billings on uncompleted contracts in excess of costs			134,434
Due to related party - Investor group			161,202
Accrued liabilities			394,740
Reserve for estimated loss on contract			39,141
Deferred revenue			735,277
Total current liabilities			3,494,899
Long-term Debt, less current portion:
Bank loans and other debt			7,839
Convertible notes			1,429,200
Total long-term debt			1,437,039
Total liabilities			4,931,938
Commitments and Contingencies
Stockholders' (Deficit):
Preferred stock, par value $.0001 per share; 20,000,000 shares authorized; 1,000 Series A shares issued and outstanding			-
Additional paid-in capital			150,000
Capital stock, par value $.0001 per share; 380,000,000 shares authorized; 61,350,201 shares issued and outstanding			6,135
Additional paid-in capital			907,783
Less - Loan receivable - Director and stockholder			(475,000	)
Accumulated other comprehensive income			40,411
Accumulated (deficit)			(1,314,762	)
Total stockholders' (deficit)			(685,433	)
Total Liabilities and Stockholders' (Deficit)		$	4,246,505

 

The accompanying notes to financial statements

are an integral part of this balance sheet.

F-3

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INROB TECH LTD.

STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS) (NOTE 2)

FOR THE YEARS ENDED DECEMBER 31, 2006, AND 2005

 

		2006			2005
Revenues:
Services		$	1,262,011		$	1,154,932
Product sales			394,787			425,683
Total revenues			1,656,798			1,580,615
Cost of Goods Sold:
Services			1,185,000			832,315
Product sales			165,594			102,615
Total cost of goods sold			1,350,594			934,930
Gross Profit			306,204			645,685
Expenses:
General and administrative			1,065,342			502,568
Total general and administrative expenses			1,065,342			502,568
Income (Loss) from Operations			(759,138	)		143,117
Other Income (Expense):
Interest and other income			48,269			16,341
Interest (expense)			(114,423	)		(50,016	)
Total other income (expense)			(66,154	)		(33,675	)
Income (Loss) before Income Taxes			(825,292	)		109,442
(Provision) Benefit for income taxes			(2,940	)		(14,057	)
Net Income (Loss)			(828,232	)		95,385
Comprehensive Income (Loss):
Israeli currency translation			36,642			20,190
Total Comprehensive Income (Loss)		$	(791,590	)	$	115,575
Income (Loss) Per Common Share:
Income (Loss) per common share - Basic and Diluted		$	(0.01	)	$	0.00
Weighted Average Number of Common Shares Outstanding During the Periods- Basic and Diluted			61,350,201			38,753,607

 

The accompanying notes to financial statements are

an integral part of these statements.

 

F-4

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INROB TECH LTD.

STATEMENTS OF STOCKHOLDERS' (DEFICIT) (NOTE 2)

FOR THE PERIODS ENDED DECEMBER 31, 2006, AND 2005

 

																				Less - Loan Receivable -			Accumulated
		Preferred						Additional			Common						Additional			Director			Other
		Stock						Paid-in			Stock						Paid-in			and			Comprehensive			Accumulated
Description		Shares			Amount			Capital			Shares			Amount			Capital			Stockholder			Income (Loss)			(Deficit)			Totals
Balance - December 31, 2004			-		$	-		$	-			26,880,484		$	2,688		$	(711,856	)	$	-		$	(16,421	)	$	(581,915	)	$	(1,307,504	)
Exercise of stock options to reduce debt and liabilities			-			-			-			109,290			11			47,989			-			-			-			48,000
Issuance of common stock to reduce debt and liabilities			-			-			-			602,806			60			152,526			-			-			-			152,586
Purchase of common stock for   cash			-			-			-			2,057,415			206			474,794			(475,000	)		-			-			-
Common stock issued for liabilities and services			-			-			-			350,000			35			39,965			-			-			-			40,000
Conversion of convertible debenture into common stock			-			-			-			10,114,470			1,011			248,989			-			-			-			250,000
Conversion of convertible debenture into common stock			-			-			-			21,035,715			2,104			630,396			-			-			-			632,500
Issuance of common stock for accrued interest on convertible debenture			-			-			-			200,000			20			24,980			-			-			-			25,000
Israeli currency translation			-			-			-			-			-			-			-			20,190			-			20,190
Net income for the period			-			-			-			-			-			-			-			-			95,385			95,385
Balance - December 31, 2005			-		$	-		$	-			61,350,180		$	6,135		$	907,783		$	(475,000	)	$	3,769		$	(486,530	)	$	(43,843	)
Correction of commons tock for fractional shares			-			-			-			21			-			-			-			-			-			-
Issuance of Series A preferred stock for services rendered			1,000			-			150,000			-			-			-			-			-			-			150,000
Israeli currency translation			-			-			-			-			-			-						36,642			-			36,642
Net (loss) for the period			-			-			-			-			-			-			-			-			(828,232	)		(828,232	)
Balance - December 31, 2006			1,000		$	-		$	150,000			61,350,201		$	6,135		$	907,783		$	(475,000	)	$	40,411		$	(1,314,762	)	$	(685,433	)

 

The accompanying notes to financial statements are

an integral part of these statements.

F-5

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INROB TECH LTD.

STATEMENTS OF CASH FLOWS (NOTE 2)

FOR THE YEARS ENDED DECEMBER 31, 2006, AND 2005

 

		2006			2005
Operating Activities:
Net income (loss)		$	(828,232	)	$	95,385
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Depreciation and amortization			78,567			45,441
Amortization of debt issuance costs			21,281			-
Series A preferred stock issued for officer's compensation			150,000			-
Reserve for (recovery of ) loss on contract			(10,956	)		50,097
Changes in net assets and liabilities-
Accounts receivable			64,651			(31,799	)
Inventories			(234,465	)		(276,113	)
Cost of uncompleted contracts in excess of billings			28,612			(189,983	)
Prepaid expenses and deposits			6,507			22,785
Deposits			(805	)		-
Accounts payable - trade and accrued liabilities			124,128			(90,433	)
Billings on uncompleted contracts in excess of related costs			133,431			1,003
Deferred revenue			310,781			146,276
Income taxes payable and other			(20,147	)		(6,334	)
Net Cash (Used in) Operating Activities			(176,647	)		(233,675	)
Investing Activities:
Purchases of and adjustments to property and equipment			(89,114	)		8,195
Proceeds from sale of property and equipment			-			5,120
Net Cash (Used in) Provided by Investing Activities			(89,114	)		13,315
Financing Activities:
Payments on long-term debt			(324,225	)		(58,680	)
Proceeds from (offset to) bank overdrafts			54,549			(523,818	)
Proceeds from issuance of convertible debentures			-			617,500
Payment on convertible debenture and related interest			(46,750	)		-
Proceeds from issuance of convertible notes			3,000,000			-
Debt issuance costs - Convertible notes			(340,500	)		-
Loan receivable - Director and stockholder			-			(475,000	)
Interest on loan receivable - Director and stockholder			(18,962	)		(8,484	)
Proceeds from loan from related party - Investor group			161,202			-
Payments on (advances to) Loan - Director and stockholder			-			155,525
Due from related party - Director and stockholder			(490	)		82,421
Received from (loans to) related party companies			22,666			410,706
Net Cash Provided by Financing Activities			2,507,490			200,170
Effect of Exchange Rate Changes on Cash			36,642			20,190
Net Increase (Decrease) in Cash			2,278,371			-
Cash - Beginning of Period			-			-
Cash - End of Period		$	2,278,371		$	-

 

The accompanying notes to financial statements are

an integral part of these statements.

 

F-6

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INROB TECH LTD.

STATEMENTS OF CASH FLOWS (NOTE 2)

FOR THE YEARS ENDED DECEMBER 31, 2006, AND 2005

 

		2006			2005
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest		$	64,213		$	48,945
Income taxes		$	20,147		$	20,391

 

Supplemental Information of Noncash Investing and Financing Activities:

On January 5, 2005, a former Director and officer of Inrob Tech exercised 91,075 stock options to purchase a like number of shares of common stock for $0.439 per share, or $40,000. The value of the common stock was charged against notes payables, accrued interest and accrued compensation due to the former Director and officer. In addition, on February 21, 2005, the Board of Directors of Inrob Tech accepted the exercise of stock options by two parties to acquire 18,215 shares of common stock for $0.439 per share, or $8,000. The value of the common stock was charged against accrued compensation due to the same former Director and officer.

In July 2005, the Company issued 602,806 shares of its common stock in satisfaction of certain accounts payable, accrued liabilities, accrued compensation and related taxes, and notes payable. The value of the obligations satisfied by issuance of common stock was $152,586.

On July 21, 2005, Inrob Tech issued to a former Director and officer of the Company 350,000 shares of its common stock for prior services and the satisfaction of $40,000 of liabilities of the Company.

On July 21, 2005, the Company entered into a Stock Purchase Agreement with Inrob Israel, and issued 26,442,585 shares of its common (post reverse split) for all of the issued and outstanding capital stock of Inrob Israel (10,020 shares of common stock). At the same time, the Company effected a 10.98 for 1 reverse stock split of its common stock. Immediately following the completion of the Stock Purchase Agreement transaction, the Company had 29,999,995 shares of its common stock outstanding. At that time, Mr. Ben-Tsur Joseph, the sole Director and officer of Inrob Israel, owned 28,500,000 shares of the Company's common stock, or 95 percent of the then issued and outstanding common stock of Inrob Tech, and had voting control. Through this process Inrob Israel is considered to have acquired Inrob Tech by a reverse merger. The reverse merger has been recorded as a recapitalization of the Company, with the net assets of Inrob Israel and Inrob Tech brought forward at their historical bases. The costs associated with the reverse merger have been expensed as incurred. On July 31, 2005, the Company issued 10,114,470 shares of its common stock for the conversion of a convertible debenture issued to a third-party entity by Inrob Israel. The value of the common stock issued was $250,000.

On September 15, 2005, the Company issued 21,035,715 shares of its common stock for the conversion of a convertible debenture issued to a third-party entity by Inrob Israel. The value of the common stock issued was $632,500.

On November 30, 2005, the Company issued 200,000 shares of its common stock in connection with the satisfaction of accrued interest on the $250,000 convertible debenture issued by Inrob Israel (see above). The value of the common stock issued was $25,000.

On November 9, 2006, the Company issued 1,000 shares of its Series A preferred stock to the President, Chief Executive Officer, and Director of the Company for services rendered. The value of the preferred stock issued was $150,000.

The accompanying notes to financial statements are

an integral part of these statements.

F-7

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INROB TECH LTD.  

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

(1)   Summary of Significant Accounting Policies

    Organization and Basis of Presentation

Inrob Tech Ltd. (“Inrob Tech” or the “Company”) is a Nevada corporation which provides engineering products and services for the maintenance of critical and sophisticated equipment, and the integration and production of advanced wireless control solutions for unmanned ground vehicle (“UVR”) robots. The remote control systems of the Company are the “brains” for many UVR solutions. The current nature of Israel’s security situation coupled with the Company’s close work with the Israeli Defense Forces (“IDF”) and the Israeli police, has helped the Company gain extensive experience in a wide range of military and law enforcement UVR applications and control solutions. The Company has also targeted the civilian applications market, which includes solar powered equipment, and dangerous tasks such as nuclear plant maintenance, inspection and decommissioning, the demolition industry, and firefighting and rescue services. The accompanying financial statements of Inrob Tech were prepared from the accounts of the Company under the accrual basis of accounting in United States dollars. In addition, the accompanying financial statements reflect the completion of a reverse merger between Inrob Tech and Inrob Ltd. (“Inrob Israel”), which was effected on July 21, 2005.

Prior to the completion of the reverse merger, Inrob Tech was a near dormant corporation with virtually no assets or operations (essentially since April 1, 2001, when the Company sold its paging business, known as The Sports Page and Score Page to BeepMe, to a third party vendor and creditor). The Company was originally incorporated in the State of Nevada under the name of Beeper Plus, Inc. On July 15, 2003, the Company then changed its name to Western Gaming Corporation. On August 17, 2005, the Company again changed its name to Inrob Tech Ltd. to reflect the reverse merger effected on July 21, 2005, and its new business plan.

Inrob Israel was organized as an Israeli corporation in 1988, under the name of Eligal Laboratories Ltd., and its UVR solutions include: (i) remote control systems (the “brains” of any robot); (ii) complete robot systems; and (iii) customized solutions. Inrob Israel is certified to design, manufacture and maintain electronic, optical and electro-mechanical equipment, and is a certified supplier to the Israeli Defense Forces and the Israeli Air Force. It has also been issued a certificate from the Israeli Air Force stating that its quality system is approved to perform inspections of products and services supplied to the Israeli Air Force. Inrob Israel changed its name to Inrob Ltd. in September 2003.

In addition, in January 2004, Inrob Israel completed two equity purchase transactions with separate entities and raised $195,000 from the issuance of 30,000,000 shares of its common stock. Thereafter, Inrob Israel commenced a registration activity of such shares of its common stock on behalf of the two entities as selling shareholders on Form F-1 with the Securities and Exchange Commission (“SEC”). The registration activity continued through December 31, 2004, and into the year 2005. In early 2005, Inrob Israel decided not to complete the registration of the common stock of the selling shareholders with the SEC, and withdrew its registration statement on July 28, 2005. As an alternative transaction, effective July 21, 2005, Inrob Israel completed the reverse merger with Inrob Tech, a publicly traded Nevada corporation.

 

Given that Inrob Israel is considered to have acquired Inrob Tech by a reverse merger through a Stock Purchase Agreement, and its sole stockholder currently has voting control of the Company, the accompanying financial statements and related disclosures in the notes to financial statements present the financial position as of December 31, 2006, and the operations for the two years in the period ended December 31, 2006, of Inrob Israel under the name of Inrob Tech Ltd. The reverse merger has been recorded as a recapitalization of the Company, with the net assets of Inrob Israel and Inrob Tech brought forward at their historical bases. The costs associated with the reverse merger have been expensed as incurred.

 

F-8

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

Cash and Cash Equivalents  

For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.

  Restricted Cash

The Company maintains restricted cash as funds designated for specific purposes or for compliance with terms of contractual agreements. As of December 31, 2006, $15,018 was pledged as collateral against certain bank loans, and offset against bank overdrafts for financial reporting purposes.

 

  Accounts Receivable

Accounts receivable consist of amounts due from customers, employees and related parties. The Company establishes an allowance for doubtful accounts in amounts sufficient to absorb potential losses on accounts receivable. As of December 31, 2006, no allowance for doubtful accounts was deemed necessary. While management uses the best information available upon which to base estimates, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used for the purpose of analysis.

  Revenue Recognition

The Company generates revenues from product sales and maintenance service contracts.

Revenues from product sales are recognized on a completed-contract basis, in accordance with Staff Accounting Bulletin No. 104, “ Revenue Recognition in Financial Statements ” (“SAB No. 104”) and Statement of Position 81-1, “ Accounting for Performance of Construction-Type and Certain Production-Type Contracts. ” Revenue is recognized when delivery has occurred provided there is persuasive evidence of an agreement, acceptance tests results have been approved by the customer, the fee is fixed or determinable and collection of the related receivable is probable. Customers are billed, according to individual agreements, upon completion of the contract. All product costs are deferred and recognized on completion of the contract and customer acceptance. A provision is made for the amount of any expected loss on a contract at the time it is known. As of December 31, 2006, the Company had a reserve for estimated loss on a contract in the amount of $39,141.

F-9

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

On-going maintenance service contracts are negotiated separately at an additional fee. The maintenance service is separate from the functionality of the products, which can function without on-going maintenance. Revenues relating to maintenance service contracts are recognized as the services are rendered ratably over the period of the related contract.

The Company is not required to perform significant post-delivery obligations, does not provide warranties and does not allow product returns. As such, no provision is made for costs of this nature.

The Company does not sell products with multiple deliverables. It is management’s opinion that EITF 00-21, “ Revenue Arrangements With Multiple Deliverables ” is not applicable.

 

  Property and Equipment

The components of property and equipment are stated at cost. Property and equipment costs are depreciated or amortized for financial reporting purposes over the useful lives of the related assets by the straight-line method. Useful lives utilized by the Company for calculating depreciation or amortization are as follows:

Computer and office equipment		5 to 10 years
Furniture and fixtures		3 to 15 years
Vehicles		5 to 6 years
Leasehold improvements		10 years

Upon disposition of an asset, its cost and related accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is recognized.

Lease Obligations

 

All noncancellable leases with an initial term greater than one year are categorized as either capital or operating leases. Assets recorded under capital leases are amortized according to the same methods employed for property and equipment or over the term of the related lease, if shorter.

Impairment of Long-Lived Assets

The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives when events or circumstances lead management to believe that the carrying value of an asset may not be recoverable. For the periods ended December 31, 2006, and 2005, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.

  Earnings (Loss) Per Common Share

Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

 

F-10

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

Common Stock Registration Expenses

The Company considers incremental costs and expenses related to the registration of equity securities with the SEC, whether by contractual arrangement as of a certain date or by demand, to be unrelated to original issuance transactions. As such, subsequent registration costs and expenses are reflected in the accompanying financial statements as general and administrative expenses, and are expensed as incurred.

  Research and Development Costs

The Company conducts research and development activities for others under contractual arrangements. Research and development costs incurred under contractual arrangements are accounted for in accordance with Statement of Financial Accounting Standards No. 68, “Research and Development Agreements” (“SFAS 68”). All costs incurred under the contractual arrangements are deferred and recognized as cost of sales (product sales) upon completion of the contract work.

Deferred Offering Costs

The Company defers as other assets the direct incremental costs of raising capital until such time as the offering is completed. At the time of the completion of the offering, the costs are charged against the capital raised. Should the offering be terminated, deferred offering costs are charged to operations during the period in which the offering is terminated.

  Debt Issuance Costs

The Company defers as other assets the costs associated with the issuance of debt instruments. Such costs are amortized as additional interest expense over the life of the related debt. During the period ended December 31, 2006, the Company recorded $340,500 of debt issuance costs related to convertible notes, and amortized $21,281 of such costs as additional interest expense.

Advertising and Promotion Costs

Advertising and promotion costs are charged to operations when incurred. For the periods ended December 31, 2006, and 2005, advertising and promotion costs amounted to $92,867 and $8,481, respectively.

Comprehensive Income (Loss)

The Company presents comprehensive income (loss) in accordance with Statement of Financial Accounting Standards No. 130, “ Reporting Comprehensive Income” (“SFAS 130”). SFAS 130 states that all items that are required to be recognized under accounting standards as components of comprehensive income (loss) be reported in the financial statements. For the periods ended December 31, 2006, and 2005, the only components of comprehensive income (loss) were the net income (loss) for the periods, and the foreign currency translation adjustments.

 

F-11

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

Income Taxes

The Company accounts for income taxes pursuant to SFAS No. 109, “ Accounting for Income Taxes” (“SFAS 109”). Under SFAS 109, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

 

The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.

  Foreign Currency Translation

The Company accounts for foreign currency translation pursuant to SFAS No. 52, “ Foreign Currency Translation” (“SFAS 52”). The Company’s functional currency is the Israeli New Shekel. Under SFAS 52, all assets and liabilities are translated into United States dollars using the current exchange rate at the end of each fiscal period. Revenues and expenses are translated using the average exchange rates prevailing throughout the respective periods. Translation adjustments are included in other comprehensive income (loss) for the period. Certain transactions of the Company are denominated in United States dollars. Translation gains or losses related to such transactions are recognized for each reporting period in the related statement of operations and comprehensive income (loss).

  Fair Value of Financial Instruments

The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of December 31, 2006, the Company’s financial instruments approximated fair value to do the nature and maturity of such instruments.

  Estimates

The financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of December 31, 2006, and revenues and expenses for the periods ended December 31, 2006, and 2005. Actual results could differ from those estimates made by management.

F-12

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

(2)   Going Concern

During the year ended December 31, 2006, and subsequent thereto, Inrob Tech continued its operations, business expansion, and capital formation activities through the issuance of convertible debt.  On November 15, 2006, the Company completed a subscription agreement with a group of accredited investors for the issuance of Convertible Notes in the amount of $3,000,000. The maturity date of the Convertible Notes is two years from the date of issuance - November 15, 2008. Net proceeds to the Company amounted to $2,659,500, after deducting debt issuance costs. On March 27, 2007, the Company effected a second subscription agreement with a group of accredited investors for the issuance of Convertibles Notes also in the amount of $3,000,000. The maturity date of the second issuance of Convertible Notes is two years from the date of issuance - March 27, 2009. The second transaction was completed under essentially the same terms and conditions as the first issuance. In additional, under the terms of the transactional documents, all rights and benefits to be granted to the investor (including the security interest) are identical to and are intended to be shared equally with the holders of the Convertible Notes and warrants issued by the Company as of November 15, 2006. Proceeds from the second subscription agreement amounted to approximately $2,594,738 after debt issuance costs.

While management of the Company believes that the Company will be successful in increasing its working capital from operations and the generation of additional business revenues from new and existing clients, there can be no assurance that the Company will be able to generate the funds needed to meet its debt and working capital obligations under its business plan, or be successful in the sale of its products and services to generate sufficient revenues to allow the Company to achieve profitability, and to sustain its operations.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has incurred operating losses, and had negative working capital as of December 31, 2006. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

(3)   Inventories

As of December 31, 2006, inventories consisted of the following:

 

		2006
Work in progress		$	668,388
Materials			43,384
Total		$	711,772

 

(4)   Loan Receivable - Director and Stockholder

As discussed in Note 9, in July 2005, Inrob Israel purchased, on behalf of Ben-Tsur Joseph, President, sole Director and stockholder, 2,057,415 shares of common stock of Inrob Tech in connection with the reverse merger. The amount of consideration provided by Inrob Israel for the shares was $475,000. Thereafter, Mr. Joseph entered into a Share Transfer and Loan Agreement with Inrob Israel whereby the company transferred to Mr. Joseph 2,057,415 shares of the common stock of Inrob Tech in exchange for a promissory note issued by Mr. Joseph in the amount of $475,000. The promissory note carries an interest rate of four (4) percent per annum, and is payable to Inrob Israel on demand. As of December 31, 2006, the balance owed on the loan plus accrued interest amounted to $502,447. The Company has classified the amount of the promissory note due from Mr. Joseph, or $475,000, as an offset to common stock equity, due to the nature of the transaction as a common stock subscription arrangement.

F-13

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

(5)   Loan to and Interest Receivable from Related Parties

 

A loan to a related party entity bears interest at a variable rate equivalent to the minimum rate allowed by the Israel Income Tax Ordinance (4% percent), is unsecured and is due, including principal and interest, on December 31, 2008. Interest receivable from Mr. Joseph associated with the loan transaction described in Note 4 above amounted to $27,447 as of December 31, 2006. The following summarizes the amounts receivable as of December 31, 2006:

 

		2006
Ben-Tsur Joseph Holdings Ltd.		$	234,402
Ben-Tsur Joseph - Interest receivable			27,447
Totals		$	261,849

(6)   Bank Indebtedness

The Company has certain loans and bank arrangements to fund its operations in Israel which are described as follows:

 

		2006
Bank Loan #1:
Monthly payments including interest
at 6.15-6.95% per annum, matures
February 27, 2008, secured		$	31,708
Bank Loan #2:
Monthly payments including interest
at 6.1% per annum, matures
February 10, 2008, secured.			7,170
Bank Loan #3:
Monthly payments including interest
at 5.88% per annum, matures
June 2, 2007, secured.			12,819
Totals			51,697
Less - Current portion			(43,858	)
Total Bank Loans		$	7,839

 

F-14

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

Principal repayments of bank debt are as follows:
2007		$	43,858
2008			7,839
Totals		$	51,697

(7)   Convertible Debentures

As of August 1, 2004, in connection with the conversion of the common stock equity investments of two shareholder entities (see Note 9), and the assignment of the rights and interests of such entities to a third-party entity, Inrob Israel issued a convertible debenture (the “Debenture”) in the amount of $250,000. The Debenture carried an interest rate of ten (10) percent per annum, and was due on July 31, 2005, unless otherwise paid to the holder, or converted into shares of common stock. So long as Inrob Israel was not in default, the holder of the Debenture was to receive shares of common stock at a discount of fifty-five (55%) percent of the average closing bid price for the three days immediately prior to the receipt of the notice of conversion from the holder divided into the face amount of the Debenture plus accrued interest. The Debenture also provided that the maturity date may be extended to a date when Inrob Israel’s common stock was publicly traded on a recognized stock exchange. As of July 31, 2005, Inrob Israel was in default under the terms of the Debenture, and could not repay the amount due. The Debenture was then assumed by Inrob Tech and converted into 10,114,285 shares of its publicly traded common stock. On November 30, 2005, accrued interest of $25,000 related to the Debenture was also satisfied by the issuance of 200,000 publicly traded shares of common stock.

On July 21, 2005, Inrob Israel issued a convertible debenture (the “Second Debenture”) in the amount of $575,000 to a third-party entity. The Second Debenture carried an interest rate of ten (10) percent per annum, and payments of principal and interest were due and payable as follows: (i) on or about October 1, 2005, $200,000; (ii) on or about December 1, 2005, $200,000; and, (iii) on or about February 1, 2006, the remaining amount, including interest, of $232,500. So long as Inrob Israel was not in default, the holder of the Second Debenture was to receive shares of common stock at a discount of fifty-five (55%) percent of the average closing bid price for the three days immediately prior to the receipt of the notice of conversion from the holder divided into the face amount of the Second Debenture plus accrued interest. The amount of the Second Debenture was subsequently increased from $575,000 to $632,500. On September 13, 2005, the Second Debenture was in default for nonpayment. Thereafter, effective September 15, 2005, the Second Debenture obligation was assumed by Inrob Tech, and satisfied by the issuance of 21,035,715 publicly traded shares of common stock.

On September 30, 2005, the Company issued a convertible debenture (the “Third Debenture”) in the amount of $42,500 to the same third-party entity that was the recipient of the Second Debenture. The Third Debenture carried an interest rate of ten (10) percent per annum, was due on November 30, 2005, and was convertible into 2,000,000 publicly traded shares of the Company’s common stock. The due date of the Third Debenture was extended to December 31, 2006, by written agreement between the parties. In addition, effective September 30, 2006, the third-party entity executed a document wherein it indicated that it had waived its right to convert the Third Debenture to common stock of the Company. In November, 2006, the Third Debenture, together with accrued interest, for a total amount of $46,750, was paid off.

 

F-15

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

(8)   Issuance of Convertible Notes and Warrants

On November 15, 2006, the Company effected a subscription agreement with a group of accredited investors under Regulation D of the Securities Act of 1933, as amended, which provided for the issuance to the investors, exempt from registration, of certain 8 percent convertible notes (the “Convertible Notes”) in the principal amount of $3,000,000. The maturity date of the Convertible Notes is two years from the date of issuance - November 15, 2008.

Payments amortizing the outstanding principal amount and related interest under the Convertible Notes will commence on the third month anniversary date of the date of issuance (February 15, 2007) and on the same day of each month thereafter until the principal amount and interest have been repaid in full. On each repayment date, the Company is required to make payments to the investors in the amount of 4.76 percent of the initial principal amount and all interest accrued on the Convertible Notes as of the repayment date. Upon an event of default, the interest rate will automatically be increased to 15 percent. At the Company’s election, monthly repayments may be made (i) in cash in an amount equal to 115 percent of the principal amount component of the monthly payment, and 100 percent of all other components, or (ii) in shares of registered common stock of the Company at a conversion price equal to the lesser of (a) $0.25, or (b) 75 percent of the average of the closing bid price of the common stock of the Company as reported by Bloomberg L.P. for the common stock’s principal market for the five trading days preceding the date a notice of conversion given to the Company after the Company notifies the holder of the Convertible Notes of its election to make a monthly repayment in shares of registered common stock.

 

Provided there is no default under the Convertible Notes, the Company may prepay the outstanding principal amount of the Convertible Notes at a 20 percent premium, together with accrued but unpaid interest thereon and any and all other sums due.

The investors have a right to convert the Convertible Notes into registered shares of common stock of the Company at $0.25 per share. Upon an event of default, the conversion price shall be the lesser of $0.25 or 75 percent of the average of the closing bid prices of the common stock of the Company for the five trading days prior to a conversion date. No conversions may take place if it would cause an investor to become the beneficial owner of more than 4.99 percent of the outstanding shares of common stock of the Company, which limitation is subject to waiver by an investor upon 61 days prior written notice to the Company.

The Company has granted a security interest in all of its assets, and the assets of Inrob Israel to secure its obligations under the Convertible Notes. Further, in connection with the Convertible Note transaction, the Company has determined that there was no beneficial conversion feature recorded.

F-16

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

The Company also issued Class A warrants to purchase 6,000,000 shares of the Company’s common stock at $0.40 per share and Class B warrants to purchase 6,000,000 shares of the Company’s common stock at $0.50 per share. All warrants are exercisable for a period of five years following the effective date of a registration statement filed with the SEC, which the Company agreed to complete.

The Company filed a Registration Statement on Form SB-2 with the SEC on December 20, 2006, to register 18,405,000 shares of common stock related to the Convertible Notes. The Registration Statement was declared effective by the SEC on January 11, 2007.

In connection with the issuance of the Convertible Notes, the Company incurred $340,500 in debt issuance costs, which included $300,000 paid in cash as a finder’s fee. The Company is obligated to pay additional finder’s fees in the amount of ten percent of the proceeds generated from the exercise of Class A and Class B warrants. In addition, the Company also issued 1,200,000 warrants to the finder (similar to and carrying the same rights as the Class A warrants issued to the investors in the Convertible Notes) to purchase a like number of shares of common stock of the Company for $0.25 per share. Such warrants are exercisable for a period of five years following the effective date of the Registration Statement filed by the Company with the SEC.

(9)   Capital Stock Transactions

On January 5, 2005, a former Director and officer of Inrob Tech exercised 91,075 stock options to purchase a like number of shares of common stock for $0.439 per share, or $40,000. The value of the common stock was charged against notes payable, accrued interest and accrued compensation due to the former Director and officer. In addition, on February 21, 2005, the Board of Directors of Inrob Tech accepted the exercise of stock options by two parties to acquire 18,215 shares of common stock for $0.439 per share, or $8,000. The value of the common stock was charged against accrued compensation due to a former Director and officer.

In July 2005, the Company issued 602,806 shares of its common stock in satisfaction of certain accounts payable, accrued liabilities, accrued compensation and related taxes, and notes payable. The value of the obligations satisfied by issuance of common stock was $152,586.

On July 21, 2005, Inrob Israel purchased, on behalf of Ben-Tsur Joseph, President, sole Director and stockholder, 2,057,415 shares of common stock of the Company in connection with the reverse merger. The amount of consideration provided by Inrob Israel for the shares was $475,000. Thereafter, Mr. Joseph entered into a Share Transfer and Loan Agreement with Inrob Israel whereby the company transferred to Mr. Joseph 2,057,415 shares of the common stock of Inrob Tech in exchange for a promissory note issued by Mr. Joseph in the amount of $475,000. The promissory note carries an interest rate of four (4) percent per annum, and is payable to Inrob Israel on demand. The Company has classified the amount of the promissory note due from Mr. Joseph, or $475,000, as an offset to common stock equity, due to the nature of the transaction as a common stock subscription arrangement.

F-17

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

On July 21, 2005, Inrob Tech issued to a former Director and officer of the Company 350,000 shares of its common stock for prior services and the satisfaction of $40,000 of liabilities of the Company.

 

On July 21, 2005, the Company entered into a Stock Purchase Agreement with Inrob Israel, and issued 26,442,585 shares of its common stock (post reverse split) for all of the issued and outstanding capital stock of Inrob Israel (10,020 shares of common stock). At the same time, the Company effected a 10.98 for 1 reverse stock split of its common stock. Immediately following the completion of the Stock Purchase Agreement transaction, the Company had 29,999,995 shares of its common stock outstanding. At that time, Ben Tsur Joseph, the sole officer and Director of Inrob Israel, owned 28,500,000 shares of the Company’s common stock, or 95 percent of the then issued and outstanding common stock of Inrob Tech, and had voting control. Through this process Inrob Israel is considered to have acquired Inrob Tech by a reverse merger. The reverse merger has been recorded as a recapitalization of the Company, with the net assets of Inrob Israel and Inrob Tech brought forward at their historical bases. The costs associated with the reverse merger have been expensed as incurred.

Effective January 1, 2004, Inrob Israel issued 30,000,000 shares of common stock (post 100 for 1 stock split) to two unrelated entities as equity investors for consideration in the amount of $195,000. Thereafter, the Inrob Israel commenced a registration activity of such shares of its common stock on behalf of the two entities as selling shareholders on a Form F-1 Registration Statement with the SEC. The proceeds from the issuance of common stock were used to pay legal and other professional fees and expenses associated with the Inrob Israel’s common stock registration activities with the SEC. The registration activity continued through December 31, 2004, and into the year 2005. In early 2005, management decided not to complete the registration of the common stock of the selling shareholders with the SEC, and withdrew its registration statement on July 28, 2005. As of August 1, 2004, Inrob Israel notified the two investors that it was converting their equity investment in common stock into the Debenture. The two shareholder entities immediately assigned their rights and interests in the Debenture to a third-party entity. Inrob Israel canceled the 100 for 1 stock split and the issuance of the 30,000,000 shares of its common stock.

In March 2005, Ben-Tsur Joseph, as President and a Director of Inrob Israel, entered into an agreement to purchase 5,010 shares of common stock, or fifty (50%) percent of the total outstanding common stock of that company, from Itshak Hamami, the other Director of the Inrob Israel. Thereafter, Mr. Joseph owned 100 percent of the issued and outstanding shares of common stock of the Inrob Israel and became the sole Director and officer of that company.

On October 4, 2006, pursuant to authorization by the shareholders of the Company, Inrob Tech filed Amended Articles of Incorporation with the Nevada Secretary of State to increase the number of authorized shares of its common stock from 80,000,000 shares authorized to 380,000,000 shares, and to change the par value of its preferred and common stock from $0.001 per share to $0.0001 per share. Subsequent to the filing, the Company was authorized to issue a total of 400,000,000 shares, consisting of 380,000,000 shares of common stock and 20,000,000 shares of preferred stock, all with a par value of $0.0001 per share. In connection with the change in par value of preferred and common stock described above, all prior transactions involving common stock with a par value of $0.001 have restated to reflect the new par value of $0.0001 in the accompanying financial statements.

F-18

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

On November 9, 2006, pursuant to written consent provided by the board of directors, the Company established 1,000 shares of Series A Preferred Stock, par value $0.0001 with the Nevada Secretary of State. Each share of Series A Preferred Stock carries voting rights equal to 400,000 shares of common stock of the Company. In addition, the board of directors authorized the issuance of 1,000 shares of Series A Preferred Stock to Mr. Ben-Tsur Joseph, President and Director of the Company for services rendered. The issuance of the Series A Preferred Stock was valued at $150,000.

As described in Note 8, in November 2006, the Company issued Class A warrants to purchase 6,000,000 shares of the Company’s common stock at $0.40 per share, and Class B warrants to purchase 6,000,000 shares of the Company’s common stock at $0.50 per share. In addition, 1,200,000 finder’s warrants were also issued to purchase 1,200,000 shares of the Company’s common stock at $0.25 per share. All warrants are exercisable for a period of five years following the effective date of a registration statement filed with the SEC, which the Company received on January 11, 2007.

(10)   Recent Accounting Pronouncements

 

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140, ” (“SFAS No. 155”). This Statement permits fair value of re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amended SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, - A Replacement of FASB Statement 125,” to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 is effective for all financial instruments acquired, issued, or subject to a re-measurement (new basis) event occurring after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The management of the Company does not believe that this new pronouncement will have a material impact on its financial statements.

 

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets,” (“SFAS No. 156”), which amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. ” In a significant change to current guidance, SFAS No. 156 permits an entity to choose either of the following subsequent measurement methods for each class of separately recognized servicing assets and servicing liabilities: (1) Amortization Method or (2) Fair Value Measurement Method. SFAS No. 156 is effective as of the beginning of an entity’s first fiscal year that begins after September 15, 2006. The management of the Company does not believe that this new pronouncement will have a material impact on its financial statements.

F-19

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

In June 2006, the FASB issued SFAS Board Interpretation No. 48, “ Accounting for Uncertainty in Income Taxes - an Interpretation of FASB statement No. 109 ” (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB No. 109. The interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. Earlier application of the provisions of FIN 48 is encouraged if the enterprise has not yet issued financial statements, including interim financial statements, in the period this Interpretation is adopted. The management of the Company does not believe that this new pronouncement will have a material impact on its financial statements.

In September 2006, the FASB issued SFAS No. 157, “ Fair Value Measurements .” This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurement, the FASB having previously concluded in those accounting pronouncement that fair value is the relevant measurement attribute. This statement does not require any new fair value measurements. However, for some entities, the application of the statement will change current practice. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management of the Company does not believe that this new pronouncement will have a material impact on its financial statements.

In September 2006, the FASB issued SFAS No. 158, “ Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R) .” This statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multi-employer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets for a not-for-profit organization. This statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The management of the Company does not believe that this new pronouncement will have a material impact on its financial statements.

F-20

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

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 ," which permits entities to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. An entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The decision about whether to elect the fair value option is applied instrument by instrument, with a few exceptions; the decision is irrevocable; and it is applied only to entire instruments and not to portions of instruments. SFAS No. 159 requires disclosures that facilitate comparisons (a) between entities that choose different measurement attributes for similar assets and liabilities and (b) between assets and liabilities in the financial statements of an entity that selects different measurement attributes for similar assets and liabilities. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year provided the entity also elects to apply the provisions of SFAS No. 157. Upon implementation, an entity shall report the effect of the first re-measurement to fair value as a cumulative-effect adjustment to the opening balance of retained earnings. Since the provisions of SFAS No. 159 are applied prospectively, any potential impact will depend on the instruments selected for fair value measurement at the time of implementation. The management of the Company is currently evaluating the impact, if any, that the adoption of SFAS No. 159 will have on its financial statements.

(11)   Related Party Transactions

Inrob Israel entered into a management agreement with a Director and officer on October 1, 2003, which was subsequently extended as to its commencement date to May 1, 2005. Other terms and conditions related to equipment usage commenced with the original date of the agreement. Under the terms of the agreement, the Company is obligated to pay $15,000 per month during the first year and $20,000 per month thereafter for management fees. For the periods ended December 31, 2006, and 2005, the Company accrued $220,000 and $120,000, respectively under the management agreement. The Director and officer agreed to offset approximately $205,000 owed to the Company by a related party entity of the Director and officer against the management fee liability which reduced the total amount owed as of December 31, 2006, to approximately $135,000. The management agreement does not have a specific completion date, but may be terminated by either party on written notice of three months.

As described in Note 9 above, in July 2005, Inrob Israel purchased, on behalf of Ben-Tsur Joseph, its President, Director and sole stockholder, 2,057,415 shares of common stock of Inrob Tech in connection with the reverse merger. The amount of consideration provided by Inrob Israel for the shares was $475,000. Thereafter, Mr. Joseph entered into a Share Transfer and Loan Agreement with Inrob Israel whereby the company transferred to Mr. Joseph 2,057,415 shares of the common stock of Inrob Tech in exchange for a promissory note issued by Mr. Joseph in the amount of $475,000. The promissory note carries an interest rate of four (4) percent per annum, and is payable to Inrob Israel on demand. The Company has classified the amount of the promissory note due from Mr. Joseph, or $475,000, as an offset to common stock equity, due to the nature of the transaction as a common stock subscription arrangement.

F-21

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

As of December 31, 2006, Mr. Ben-Tsur Joseph, President and Director of the Company, had loaned a total of $61,435 to the Company for working capital purposes. The loan is unsecured, non-interest bearing, and has no terms for repayment.

(12)   Commitments and Contingencies

For the year ended December 31, 2005, the Company was a party to a lease agreement in Israel for its premises which expired in January, 2006. In 2006, the Company entered into a new one-year lease agreement, with an option to extend the agreement for an additional year. The Company paid approximately $23,000 in operating lease payments for its premises through June 2006. Thereafter, effective July 1, 2006, the Company entered into a new lease agreement for its premises. The Company leased approximately 3,767 square feet of office and production space for a period of three years. For the six months ended December 31, 2006, the Company paid approximately $6,300 in operating lease payments for its premises. Minimum lease payments for the years 2007, 2008, and 2009 under the lease agreement will be $12,600, $12,600 and $6,300, respectively. After the initial term, the Company has two option periods to extend the lease through 2013.

The Company leases on a month-to-month basis approximately 1,885 square feet of warehouse space at the same facility that it occupies for production and office space. The monthly rental amount for the warehouse space is $913 per month.

The Company leases four autos under an operating lease agreement which expires in December 2008. Minimum annual payments under the operating lease amount to $23,424 per year.

The Company also entered into two sublease agreements for its leased premises in Israel which expired on December 31, 2005, under which it received approximately $31,350 for the year. Subsequent to December 31, 2005, the sublease agreements continued on a month-to-month basis until April, 2006, and June, 2006, respectively, when the parties to the sublease agreements moved from the leased premises of the Company. For the year ended December 31, 2006, the Company received approximately $10,716 of sublease income from the two parties.

In December 2005, the Company entered into an agreement for securing capital financing, and services related to stockholder relations and introductory services to market makers with an unrelated entity. The terms of the agreement required a payment of $50,000 at the commencement of the services which began in January 2006, and $10,000 per month thereafter for a period six months. For the nine months ended December 31, 2006, the Company paid $110,000 for services related to the agreement. Funding for the agreement was provided by an advance from a related party investor group.

In February 2006, the Company entered into an agreement with MoneyTV for certain media services related to the promotion of the Company on an international level. The agreement required the payment of a fee of $11,500 for such services. Funding for the agreement was provided by an advance from a related party investor group.

F-22

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INROB TECH LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, AND 2005

 

(13)   Income Taxes

The provision (benefit) for income tax for the periods ended December 31, 2006, and 2005, were as follows (assuming a 34% effective tax rate):

 

		2006			2005
Current Tax Provision:
Federal-
Taxable income		$	2,940		$	14,057
Total current tax provision		$	2,940		$	14,057
Deferred Tax Provision:
Federal-
Loss carryforwards			281,600			32,400
Change in valuation allowance			(281,600	)		(32,400	)
Total deferred tax provision		$	-		$	-

The Company had deferred income tax assets as of December 31, 2006, and 2005, as follows:

 

		2006			2005
Loss carryforwards		$	447,000		$	165,400
Less - Valuation allowance			(447,000	)		(165,400	)
Total net deferred tax assets		$	-		$	-

The Company provided a valuation allowance equal to the deferred income tax assets for the periods ended December 31, 2006, and 2005, because it is not presently known whether future taxable income will be sufficient to utilize the loss carryforwards.

As of December 31, 2006, the Company had approximately $1,314,700 in tax loss carryforwards that can be utilized in future periods to reduce taxable income.

(14)   Significant Customers

For the years ended December 31, 2006, and 2005, the Company had certain customers that accounted for more that ten (10) percent of total revenues, as follows:

 

		2006			2005
Customer A		$	643,612		$	610,579
Customer B			-			168,681

INROB TECH LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS) (NOTE 2) FOR THE

SIX MONTHS ENDED JUNE 30, 2007, AND 2006

(Unaudited)

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2007			2006			2007			2006
Revenues:
Services		$	418,117		$	409,482		$	757,080		$	860,316
Product sales			119,730			69,135			224,067			184,525
Total revenues			537,847			478,617			981,147			1,044,841
Cost of Goods Sold:
Services			303,909			248,815			852,584			523,423
Product sales			36,913			23,724			71,692			75,817
Total cost of goods sold			340,822			272,539			924,276			599,240
Gross Profit			197,025			206,078			56,871			445,601
Expenses:
General and administrative			269,093			138,135			668,441			327,142
Total general and administrative expenses			269,093			138,135			668,441			327,142
Income (Loss) from Operations			(72,068	)		67,943			(611,570	)		118,459
Other Income (Expense):
Interest and other income			63,541			23,046			89,174			37,650
Interest (expense)			(189,539	)		(11,025	)		(316,080	)		(21,540	)
Total other income (expense)			(125,998	)		12,021			(226,906	)		16,110
Income (Loss) before Income Taxes			(198,066	)		79,964			(838,476	)		134,569
(Provision) Benefit for income taxes			-			(10,419	)		-			(18,145	)
Net Income (Loss)			(198,066	)		69,545			(838,476	)		116,424
Comprehensive Income (Loss):
Israeli currency translation			(90,435	)		34,975			4,937			14,461
Total Comprehensive Income (Loss)		$	(288,501	)	$	104,520		$	(833,539	)	$	130,885
Income (Loss) Per Common Share:
Income (Loss) per common share - Basic and Diluted		$	(0.00	)	$	0.00		$	(0.01	)	$	0.00
Weighted Average Number of Common Shares   Outstanding During the Periods- Basic and Diluted			65,541,665			61,350,180			64,061,947			61,350,180

INROB TECH LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 2)

FOR THE SIX MONTHS ENDED JUNE 30, 2007, AND 2006

(Unaudited)

 

		Six Months Ended
		June 30,
		2007			2006
Operating Activities:
Net income (loss)		$	(838,476	)	$	116,424
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization			29,259			32,194
Amortization of debt issuance costs			131,966			-
(Recovery of) loss on contract			(39,141	)		(13,370	)
Gain on sale of vehicle			(1,221	)		-
Changes in net assets and liabilities-
Accounts receivable			(88,768	)		(64,395	)
Inventories			403,323			(83,200	)
Cost of uncompleted contracts in excess of billings			153,506			(28,535	)
Prepaid expenses			(5,258	)		193
Deposits			430			-
Accounts payable - trade and accrued liabilities			1,368			141,317
Billings on uncompleted contracts in excess of related costs			113,245			15,679
Deferred revenue			(322,858	)		(107,773	)
Income taxes payable and other			-			14,249
Net Cash Provided by (Used in) Operating Activities			(462,625	)		22,783
Investing Activities:
Proceeds from sale of vehicle			10,049			-
Purchases of and adjustments to property and equipment			(72,163	)		(43,642	)
Net Cash (Used in) Provided by Investing Activities			(62,114	)		(43,642	)
Financing Activities:
Proceeds from long-term debt			95,076			-
Payments on long-term debt			(48,864	)		(60,743	)
Proceeds from (offset to) bank overdrafts			5,783			31,148
Proceeds from issuance of convertible notes			3,000,000			-
Debt issuance costs - Convertible notes			(355,262	)		-
Loan receivable - Director and stockholder			(9,512	)		(9,420	)
Proceeds from loan from related party - Investor group			10,924			146,250
Payments on (advances to) Loan - Director and stockholder			(61,169	)		(35,250	)
Due from related party - Director and stockholder			-			25,801
Received from (loans to) related party companies			(48,729	)		(91,388	)
Net Cash Provided by Financing Activities			2,588,247			6,398
Effect of Exchange Rate Changes on Cash			3,358			14,461
Net Increase (Decrease) in Cash			2,066,866			-
Cash and Cash Equivalents - Beginning of Period			2,278,371			-
Cash and Cash Equivalents - End of Period		$	4,345,237		$	-

INROB TECH LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 2)

FOR THE SIX MONTHS ENDED JUNE 30, 2007, AND 2006

(Unaudited)

Supplemental Disclosures of Cash Flow Information:

		Six Months Ended
		June 30,
		2007			2006
Cash paid during the period for:
Interest		$	19,705		$	19,422
Income taxes		$	-		$	3,896

Property and Equipment

The components of property and equipment are stated at cost. Property and equipment costs are depreciated or amortized for financial reporting purposes over the useful lives of the related assets by the straight-line method. Useful lives utilized by the Company for calculating depreciation or amortization are as follows:

Computer and office equipment	5 to 10 years
Furniture and fixtures	3 to 15 years
Vehicles	5 to 6 years
Leasehold improvements	10 years

INROB TECH LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007, AND 2006

(Unaudited)

(3)         Inventories

As of June 30, 2007, inventories consisted of the following:

 

		2007
Work in progress		$	266,245
Materials			42,204
Total		$	308,449

		2007
Ben-Tsur Joseph Holdings Ltd.		$	237,628
Ben-Tsur Joseph - Interest receivable			36,959
Totals		$	274,587

ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS

 

Under the Nevada General Corporation Law and our Articles of Incorporation, as amended, our directors will have no personal liability to us or our stockholders for monetary damages incurred as the result of the breach or alleged breach by a director of his "duty of care". This provision does not apply to the directors' (i) acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) acts or omissions that a director believes to be contrary to the best interests of the corporation or its shareholders or that involve the absence of good faith on the part of the director, (iii) approval of any transaction from which a director derives an improper personal benefit, (iv) acts or omissions that show a reckless disregard for the director's duty to the corporation or its shareholders in circumstances in which the director was aware, or should have been aware, in the ordinary course of performing a director's duties, of a risk of serious injury to the corporation or its shareholders, (v) acts or omissions that constituted an unexcused pattern of inattention that amounts to an abdication of the director's duty to the corporation or its shareholders, or (vi) approval of an unlawful dividend, distribution, stock repurchase or redemption. This provision would generally absolve directors of personal liability for negligence in the performance of duties, including gross negligence.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

Securities and Exchange Commission Registration Fee		$	532
Accounting Fees and Expenses		$	5,000	*
Legal Fees and Expenses		$	15,000	*
Total		$	20,532

 

*Estimated  

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

II-2

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ITEM 27. EXHIBITS  

 

Exhibit		Description
3.1		Certificate of Incorporation (1)
3.1a		Certificate of Designation for Series A Preferred Stock(2)
3.2		Bylaws (1)
4.1		Form of Secured Convertible Note, dated November 15, 2006 (3)
4.2		Form of Warrant, dated November 15, 2006 (3)
4.3		Form of Secured Convertible Note, dated March 27, 2007 (4)
4.4		Form of Warrant, dated March 27, 2007 (4)
5.1		Opinion of Sichenzia Ross Friedman Ference LLP (1)
10.1		Subscription Agreement, dated November 15, 2006 (3)
10.2		Funds Escrow Agreement, dated November 15, 2006 (3)
10.3		Security Agreement, dated November 15, 2006 (3)
10.4		Stock Pledge Agreement, dated November 15, 2006 (3)
10.5		Guaranty Agreement, dated November 15, 2006 (3)
10.6		Collateral Agent Agreement, dated November 15, 2006 (3)
10.7		Agreement dated October 1, 2003 between InRob, Ltd and Ben-Tsur Joseph (1)
10.8		Subscription Agreement, dated March 27, 2007 (4)
10.9		Funds Escrow Agreement, dated March 27, 2007 (4)
10.10		Stock Pledge Agreement, dated March 27, 2007 (4)
10.11		Guaranty Agreement, dated March 27, 2007 (4)
10.12		Collateral Agent Agreement, dated March 27, 2007 (4)
10.13		Security Agreement, dated March 26, 2007 (4)
10.14		Amendment to Subscription Agreement dated October 23, 2007 (5)
23.1		Consent of Sichenzia Ross Friedman Ference LLP (included in exhibit 5.1)
23.2		Consent of Davis Accounting Group P.C. *

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* Filed herewith
	(1)	Incorporated by reference to Registrant’s Registration Statement on Form SB-2 (SEC File No. 333-129074)   filed on December 20, 2006.
	(2)	Incorporated by reference to Registrant’s Definitive Information Statement filed on September 18, 2006.
	(3)	Incorporated by reference to Registrant’s Current Report on Form 8-K filed on November 21, 2006.
	(4)	Incorporated by reference to Registrant’s Current Report on Form 8-K filed on March 30, 2007.

(5)

Incorporated by reference to Registrant’s Current Report on Form 8-K filed on October 29, 2007.

 

ITEM 28. UNDERTAKINGS

 

(a) The undersigned Registrant hereby undertakes to:

 

(1) file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:

 

(i) Include any prospectus required by section 10(a)(3) of the Securities Act;

 

(ii) reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and Notwithstanding the forgoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation From the low or high end of the estimated maximum offering range may be reflected in the form of prospects filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.

 

(iii) Include any additional or changed material information on the plan of distribution.

 

(2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

 

(3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature		Title		Date
/s/ Ben-Tsur Joseph		Director and Chief Executive Officer		October 30, 2007
		Chief Financial Officer (Principal Executive, Financial
		and Accounting Officer)

 

II-4

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