IRBL Inrob Tech Ltd (CE)

The current nature of Israel's security situation coupled with our close work with the Israel Defense Forces ("IDF") and the Israeli police have helped us gain extensive experience in a wide range of military and law enforcement UVR applications and control solutions. We have the ability to provide fast and reliable solutions to meet the immediate operational needs of front-line IDF units as they arise. We recently began targeting the civilian applications market, which includes dangerous tasks such as nuclear plant maintenance, inspection and decommissioning, the demolition industry, firefighting, and rescue services.

Our UVR solutions include:

	·	Remote control systems (the "brains" of any robot);
	·	Complete robot systems;
	·	Customized solutions

We are certified to design, manufacture, and maintain electronic, optical, and electro-mechanical equipment and are a certified supplier to the Israel Defense Forces and the Israeli Air Force. We have also been issued a certificate from the Israeli Air Force stating that our quality system is approved to perform inspection of products and services supplied to the Israeli Air Force.

 

Market for our Products

Robots are increasingly used in tasks involving any of the "three Ds" — dirty, dangerous, or dull. Many commercial industries have successfully made use of robotic technology in well-structured ground environments such as manufacturing and in semi structured environments such as automated agriculture. There is also extensive use of unmanned vehicles in the relatively uncluttered environments of air and sea operations. However, perhaps the most difficult challenge for robots today is the use of unmanned ground vehicles in the unstructured, complex, and changing outdoor environment of land operations.

Our target market is the full range of military, law enforcement, and civilian mission-critical applications for unmanned ground vehicles. We have particular expertise and experience in such applications of UVRs.

Advances in remote-control technologies are leading to increased use of UVRs. For example, UVRs are expected to produce significant changes in ground warfare. Under a plan presented to the United States Congress by Senator John Warner of Virginia in 2000, one-third of U.S. ground combat vehicles would be unmanned by 2015. The Senate Armed Services Committee responded by earmarking $246 million in the 2001 budget for research in unmanned ground and air systems. The U.S. defense budget also includes significant funding for unmanned vehicle projects including research by the Defense Advanced Research Projects Agency (DARPA), which develops advanced technologies for the US Army's future combat systems. We have, with one relatively insignificant exception, made no sales outside of Israel to date, and cannot assure you that sales to the United States or other countries will be made on commercially acceptable terms, if at all.

Over time, robotic technologies will enable UVRs to be more independent. Maneuvering autonomous and semi-autonomous mobile robots between obstacles in real environments and operating independently, is one of the most challenging research and development topics in mobile robotics today. The control algorithms under development include collecting information from various sensors (laser range finders, ultrasonic sensors, infrared sensors), processing this information, including use of artificial intelligence, and generating real-time instructions for the desired robot motion.

 

Military Applications:

Explosive Ordinance Disposal (“EOD”) . Robots reduce or eliminate the bomb technician's time-on-target. Procedures performed during bomb disposal missions include surveillance and inspection, X-ray imaging, and disruption. These tasks require that sensors or tools be placed in close proximity to the threat. A robot takes risk out of potentially deadly scenarios and lets a bomb technician focus on what to do with the explosive device rather than on the immediate danger to his life.

 

Any significant delay in collecting outstanding receivables from Israel's Ministry of Defense could adversely affect our ability to conduct our business.

 

Israel's Ministry of Defense is one of our significant customers and comprises a significant portion of our accounts receivable. The M.O.D.'s conventional payment terms are 60 days. In the past, we have experienced significant delays in payment from the M.O.D. (up to current payment + 150 days). These delays are mostly due to strikes by the M.O.D.'s public workers. Any future delays could adversely affect our cash flow and ability to operate our business, especially in light of the fact that this entity represents a large portion of our revenues.

 

The volatility of the Ministry of Defense’s budget could adversely affect the amount of business it may conduct with us.

 

In the past, the Ministry of Defense’s budget has been volatile and any significant cuts in its budget could adversely affect the amount of business it conducts with us. As our largest customer, any significant reduction in the amount of purchases the Ministry of Defense makes from us or from third parties which have subcontracted work to us, could materially adversely affect our results of operations.

 

Our intellectual property is unprotected and is susceptible to piracy.

 

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.

 

Our President has absolute control of our affairs.

 

In November 2006, we granted to Ben-Tsur Joseph, our President, Chief Financial Officer, and sole Director, 1,000 shares of our Series A Preferred Stock, each of which carries voting rights equal to 400,000 shares of our common stock. As a result, for voting purposes, Mr. Joseph owns a total of 428,500,004 shares. This gives him absolute control over our affairs including the right to elect and remove Directors, appoint officers, amend our Articles of Incorporation and Bylaws, and approve a merger, consolidation, or sale of all or substantially all of our assets. In addition, this concentration of voting control could inhibit the management of our business and affairs and have the effect of delaying, deferring, or preventing a change in control or impeding a merger, consolidation, takeover, or other business combination which other shareholders may view favorably. Therefore, you will not be able to exert any control over our business. This greatly reduces the value of your investment and your sole remedy for disagreeing with the direction of our business will be to sell your shares.

 

If our employees' entitlements do not comply with Israeli law, we may have to pay additional compensation to our employees.

 

Terms of employment for our employees are individually negotiated with each and every employee. The relationship between the parties, their rights, and mutual duties are determined solely on the basis of the verbal agreements reached after these negotiations. 

Loss of Ben-Tsur Joseph , our President, could impair our ability to operate.

 

If we lose our President, Ben-Tsur Joseph, or are unable to attract or retain qualified personnel, our business could suffer. Our success is highly dependent on our ability to attract and retain qualified scientific and management personnel. We are highly dependent on our management, in particular, Ben-Tsur Joseph, who is critical to the development of our business. Mr. Joseph’s services are made available to us under the terms of a management agreement, which may be terminated on three-month prior notice. The loss of his services could have a material adverse effect on our operations. If we were to lose this individual, we may experience difficulties in competing effectively, developing our technology, and implementing our business strategies. We do not have key man life insurance in place for any person working for us.

 

We face intense competition that could adversely impact our market share and our revenue.

 

Our competitors include several large, integrated defense contractors (e.g. Northrop Grumman, Lockheed Martin, Elbit, El-Op, Israel Aircraft Industries, Israel Military Industries). These companies have significantly greater financial, technical, and human resources than we do, as well as a wider range of products than we have. In addition, many of our competitors have much greater experience in marketing their products, as well as more established relationships with our target government customers. Our competitors may also have greater name recognition and more extensive customer bases that they can use to their benefit. As a result, we may have difficulty maintaining or increasing our market share.

 

The intense competition in our industry has also led to rapid technological developments, evolving industry standards, and frequent releases of new products and enhancements. It has also led to steep declines in the price of products as manufacturers find low cost locales for the manufacture of their products. If we are unable to continue enhancing our current capabilities, to adapt to other technological changes in the industry, or offer our products at competitive prices, our business, financial condition, liquidity, and results of operations could be significantly harmed.

 

We are authorized to issue "blank check" preferred stock which, if issued without stockholders approval, may adversely affect the rights of holders of our common stock.

 

 

PLAN OF OPERATIONS

 

Our operating subsidiary is Inrob Israel. Inrob Israel was established in 1988 as an engineering firm providing cost-efficient solutions for organizations to outsource maintenance of critical and sophisticated equipment. We now provide maintenance support of industrial electronic, electro-mechanical, optical, and other scientific equipment, mainly to customers in the defense industry.

 

Inrob Israel and its management team built on this engineering experience and customer base, and in 1992 expanded into a second area of operations. Today, on top of our maintenance and support services, we develop, integrate, and produce advanced wireless control solutions for unmanned ground vehicle robots. Our remote control systems are the "brains" for many UGV solutions.

 

The current nature of Israel's security situation coupled with our close work with the Israel Defense Forces and the Israeli police, has helped us gain extensive experience in a wide range of military and law enforcement UGV applications and control solutions. We have the ability to provide fast and reliable solutions to meet the immediate operational needs of front-line IDF units as they arise. We are also targeting the civilian applications market, which includes dangerous tasks such as nuclear plant maintenance, inspection and decommissioning, the demolition industry and firefighting, and rescue services.

 

Our UGV solutions include:

 

● Remote control systems (the "brains" of any robot)

● Complete robot systems

● Customized solutions

 

  Liquidity and Financial Resources

During the year ended December 31, 2007, net cash (used in) operating activities amounted to $(2,302,714) when compared to net cash (used in) operating activities of $(176,647) for the same period in 2006. The increase in net cash (used in) operations was due primarily to increases in net (loss), accounts receivable, a deposit on a manufacturing contract, and a decrease in deferred revenue, offset by decreases in inventory, cost of uncompleted contracts in excess of billings, and increases in accounts payable and accrued liabilities, depreciation, and the amortization of debt issuance costs. Net cash used in investing activities in 2007 for the purchase of property and equipment amounted to $(305,804). In 2007, financing activities provided $2,803,008 in net cash primarily due to the issuance of convertible notes in the amount of $3,000,000, and bank loans. As of December 31, 2007, current liabilities exceeded current assets by $1,935,096, and the accumulated deficit amounted to $(3,501,745). Considering our obligation under a manufacturing contract, we will need to complete the manufacturing and sale of products and services under the turn-key arrangement, and additional capital formation transaction in 2008 in order to sustain our operations for at least the next 12 months.

Recent Financing Activities

November 2006 Financing

On November 15, 2006, we issued to a group of accredited investors our 8% two-year convertible notes in the principal amount of $3,000,000. Amortizing payments of the outstanding principal amount and interest under the notes will commence on the third month anniversary date of the date of issuance of the Notes and on the same day of each month thereafter until the principal amount and interest have been repaid in full. On each payment date, we are required to make payments to the note holders in the amount of 4.76% of the initial principal amount and all interest accrued on the notes as of the payment date. At our election, monthly payments may be made (i) in cash in an amount equal to 115% of the principal amount component of the monthly payment and 100% of all other components, or (ii) in shares of our registered common stock at a conversion price equal to the lesser of (A) $0.25, or (B) 75% of the average of the closing bid price of our common stock for our common stock’s principal market for the five trading days preceding the date a notice of conversion is given to us after we notify the holder of the notes of its election to make a monthly payment in shares of our common stock. We may prepay the outstanding principal amount of the Notes at a 20% premium, together with accrued but unpaid interest thereon and any and all other sums due. The note holders have a right to convert the notes into shares of common stock at $0.25 per share. No conversions may take place if it would cause a holder to become the beneficial owner of more than 4.99% of the outstanding shares of our common stock, which limitation is subject to waiver by the holder upon 61 days prior written notice to us.

In connection with the notes, we also issued Class A Warrants to purchase 6,000,000 shares of our common stock at $0.40 per share and Class B Warrants to purchase 6,000,000 shares of our common stock at $0.50 per share. All warrants are exercisable for a period of five years following the effective date of the Registration Statement of which this Prospectus forms a part.

 

We believe that the proceeds from the sale of the notes will be sufficient to sustain us through the next 12 months. Nevertheless, the aforementioned factors raise substantial doubt about our ability to continue as a going concern. We anticipate that in order to fulfill our plan of operation including repayment of certain bank debt, a convertible debenture, and other liabilities, we will need to seek debt and/or equity financing from outside sources. We are currently pursuing debt and equity capital formation activities in order to increase our working capital and overall solvency positions.

INROB TECH LTD. AND SUBSIDIARY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, AND 2006

Report of Registered Independent Auditors	F-2
Consolidated Financial Statements-
Consolidated Balance Sheet as of December 31, 2007	F-3
Consolidated Statements of Operations and Comprehensive Income (Loss)
for the Years Ended December 31, 2007 and 2006	F-4
Consolidated Statements of Stockholders’ (Deficit) for the Years
Ended December 31, 2007 and 2006	F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2007, and 2006	F-6
Notes to Consolidated Financial Statements for the Years
Ended December 31, 2007, and 2006	F-8

 

REPORT OF REGISTERED INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of

Inrob Tech Ltd.:

We have audited the accompanying consolidated balance sheet of Inrob Tech Ltd. (a Nevada corporation) and subsidiary as of December 31, 2007, and the related consolidated statements of operations and comprehensive (loss), stockholders’ (deficit), and cash flows for each of the two years in the period ended December 31, 2007. 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 consolidated financial position of Inrob Tech Ltd. and subsidiary as of December 31, 2007, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated 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 12, 2008.

 

INROB TECH LTD. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2007

		2007
ASSETS
Current Assets:
Cash and cash equivalents		$	2,486,975
Accounts Receivable-
Trade			303,133
Income and other taxes			57,517
Less - Allowance for doubtful accounts			-
Inventories			507,744
Cost of uncompleted contracts in excess of billings			56,407
Prepaid expenses			19,574
Total current assets			3,431,350
Property and Equipment:
Office and computer equipment			99,885
Furniture and fixtures			65,335
Vehicles			587,522
Leasehold improvements			43,760
			796,502
Less - Accumulated depreciation and amortization			(352,700	)
Net property and equipment			443,802
Other Assets:
Deposits and other			586
Debt issuance costs, net			368,572
Loans to related party companies			274,061
Interest receivable on loan to Ben-Tsur Joseph			46,537
Manufacturing contract deposit			982,000
Total other assets			1,671,756
Total Assets		$	5,546,908
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Bank overdrafts		$	191,870
Bank loans and other debt, current portion			46,931
Current portion of convertible notes			3,715,389
Accounts payable - Trade			228,272
Due to related party - Director and stockholder			2,849
Due to related party - Affiliate company			2,880
Billings on uncompleted contracts in excess of costs			195,341
Due to related party - Investor group			178,438
Accrued liabilities			252,260
Income tax payable			19,643
Deferred revenue			532,573
Total current liabilities			5,366,446
Long-term Debt, less current portion:
Bank loans and other debt			183,792
Convertible notes			750,000
Total long-term debt			933,792
Total liabilities			6,300,238
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
Common stock, par value $.0001 per share; 380,000,000 shares
authorized; 79,134,307 shares issued and outstanding			7,913
Additional paid-in capital			3,010,977
Less - Loan receivable - Director and stockholder			(475,000	)
Accumulated other comprehensive income			54,525
Accumulated (deficit)			(3,501,745	)
Total stockholders' (deficit)			(753,330	)
Total Liabilities and Stockholders' (Deficit)		$	5,546,908

The accompanying notes to financial statements

are an integral part of this balance sheet.

 

INROB TECH LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE (LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2007, AND 2006

 

		2007			2006
Revenues:
Services		$	1,700,246		$	1,262,011
Product sales			293,576			394,787
Total revenues			1,993,822			1,656,798
Cost of Goods Sold:
Services			1,482,924			1,185,000
Product sales			97,859			165,594
Total cost of goods sold			1,580,783			1,350,594
Gross Profit			413,039			306,204
Expenses:
General and administrative			1,838,438			1,065,342
Total general and administrative expenses			1,838,438			1,065,342
Income (Loss) from Operations			(1,425,399	)		(759,138	)
Other Income (Expense):
Interest and other income			198,855			48,269
Interest (expense)			(960,439	)		(114,423	)
Total other income (expense)			(761,584	)		(66,154	)
Income (Loss) before Income Taxes			(2,186,983	)		(825,292	)
(Provision) for income taxes			-			(2,940	)
Net Income (Loss)			(2,186,983	)		(828,232	)
Comprehensive Income:
Israeli currency translation			14,114			36,642
Total Comprehensive (Loss)		$	(2,172,869	)	$	(791,590	)
(Loss) Per Common Share:
(Loss) per common share - Basic and Diluted		$	(0.03	)	$	(0.01	)
Weighted Average Number of Common Shares
Outstanding During the Periods- Basic and Diluted			66,704,947			61,350,201

The accompanying notes to financial statements are

an integral part of these statements.

 

INROB TECH LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) (NOTE 2)

FOR THE PERIODS ENDED DECEMBER 31, 2007, AND 2006

																				Less - Loan			Accumulated
								Additional									Additional			Receivable -			Other
		Preferred Stock						Paid-in			Common Stock						Paid-in			Director and			Comprehensive			Accumulated
Description		Shares			Amount			Capital			Shares			Amount			Capital			Stockholder			Income (Loss)			(Deficit)			Totals
Balance - December 31, 2005		$	-		$	-		$	-		$	61,350,180		$	6,135		$	907,783		$	(475,000	)	$	3,769		$	(486,530	)	$	(43,843	)
Correction of common stock 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	)
Issuance of common stock for payments on convertible notes and accrued interest			-			-			-			17,784,106			1,778			2,103,194			-			-			-			2,104,972
Israeli currency translation			-			-			-			-			-			-			-			14,114			-			14,114
Net (loss) for the period			-			-			-			-			-			-			-			-			(2,186,983	)		(2,186,983	)
Balance - December 31, 2007		$	1,000		$	-		$	150,000		$	79,134,307		$	7,913		$	3,010,977		$	(475,000	)	$	54,525		$	(3,501,745	)	$	(753,330	)

The accompanying notes to financial statements are

an integral part of these statements.

 

INROB TECH LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 2)

FOR THE YEARS ENDED DECEMBER 31, 2007, AND 2006

		2007			2006
Operating Activities:
Net (loss)		$	(2,186,983	)	$	(828,232	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			106,427			78,567
Amortization of debt issuance costs			305,910			21,281
Series A preferred stock issued for officer's compensation			-			150,000
Reserve for (recovery of ) loss on contract			(39,141	)		(10,956	)
Loss on sale of vehicles			1,232			-
Changes in net assets and liabilities-
Accounts receivable			(103,769	)		64,651
Inventories			204,028			(234,465	)
Cost of uncompleted contracts in excess of billings			104,964			28,612
Prepaid expenses and deposits			(8,775	)		5,702
Manufacturing contract deposit			(982,000	)		-
Accounts payable - Trade and accrued liabilities			417,547			124,128
Billings on uncompleted contracts in excess of related costs			60,907			133,431
Deferred revenue			(202,704	)		310,781
Income taxes payable and other			19,643			(20,147	)
Net Cash (Used in) Operating Activities			(2,302,714	)		(176,647	)
Investing Activities:
Proceeds from sale of vehicles			20,487			-
Purchases of and adjustments to property and equipment			(326,291	)		(89,114	)
Net Cash (Used in) Investing Activities			(305,804	)		(89,114	)
Financing Activities:
Proceeds from long-term debt			247,987			-
Payments on long-term debt			(68,961	)		(324,225	)
Proceeds from bank overdrafts			96,960			54,549
Payment on convertible debenture and related interest			-			(46,750	)
Proceeds from issuance of convertible notes			3,000,000			3,000,000
Debt issuance costs - Convertible notes			(355,263	)		(340,500	)
Loan receivable - Director and stockholder			27,447			-
Interest on loan receivable - Director and stockholder			(46,537	)		(18,962	)
Proceeds from loan from related party - Investor group			17,236			161,202
Due from related party - Director and stockholder			-			(490	)
Due to related parties			(76,202	)		-
Received from (loans to) related party companies			(39,659	)		22,666
Net Cash Provided by Financing Activities			2,803,008			2,507,490
Effect of Exchange Rate Changes on Cash and Cash Equivalents			14,114			36,642
Net Increase in Cash and Cash Equivalents			208,604			2,278,371
Cash and Cash Equivalents - Beginning of Period			2,278,371			-
Cash and Cash Equivalents - End of Period		$	2,486,975		$	2,278,371

The accompanying notes to financial statements are

an integral part of these statements.

 

INROB TECH LTD. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 2)

FOR THE YEARS ENDED DECEMBER 31, 2007, AND 2006

 

		2007			2006
Cash paid during the periods for:
Interest		$	43,336		$	64,213
Income taxes		$	-		$	20,147

Supplemental Information of Noncash Investing and Financing Activities:

During the year ended December 31, 2007, the Company issued 17,784,106 shares of its common stock as payment of $1,534,611 of principal and $570,361 of accrued interest on certain convertible notes.

The accompanying notes to financial statements are

an integral part of these statements.

 

 

 

(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 robots (“UVR”). 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, 2007, and the operations for the two years in the period ended December 31, 2007, 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.

The consolidated financial statements as of December 31, 2007, include the accounts of Inrob Tech Ltd., Inrob Israel through a reverse merger transaction, and a wholly owned subsidiary, Inrob Philippines, Incorporated. Intercompany transactions and balances have been eliminated in consolidation.

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.

  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, 2007, 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 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.

 

 

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:

 

 

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, 2007, and 2006, 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. 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.

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 No. 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, 2007, the Company recorded $695,763 of debt issuance costs related to convertible notes, and amortized $327,191 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, 2007, and 2006, advertising and promotion costs amounted to $34,476 and $92,867, respectively.

 

Comprehensive Income (Loss)

The Company presents comprehensive income (loss) in accordance with Statement of Financial Accounting Standards No. 130, “ Reporting Comprehensive Income” (“SFAS No. 130”). SFAS No. 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, 2007, and 2006, the only components of comprehensive (loss) were the net (loss) for the periods, and the foreign currency translation adjustments.

Income Taxes

The Company accounts for income taxes pursuant to SFAS No. 109, “ Accounting for Income Taxes” (“SFAS No. 109”). Under SFAS No. 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 No. 52”). The Company’s functional currency is the Israeli New Shekel. Under SFAS No. 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, 2007, the Company’s financial instruments approximated fair value to do the nature and maturity of such instruments.

 

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, 2007, and revenues and expenses for the periods ended December 31, 2007, and 2006. Actual results could differ from those estimates made by management.

(2)	Going Concern

During the years ended December 31, 2007, and 2006, 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 investors (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. As described in Note 8, on October 23, 2007, the terms of the second issuance of Convertible Notes were amended by agreement between the accredited investors of the second issuance of Convertible Notes and the Company.

On December 24, 2007, the Company through its wholly owned subsidiary, Inrob Philippines, Incorporated, entered into a Manufacturing Agreement with CP Communications Services, Inc., (“CPCOM”) a Philippines corporation located in Makati City, Philippines. The Agreement provides for the lease of the use of CPCOM’s premises on a full turnkey basis. Under the terms of the Agreement, CPCOM is committing to manufacture, and the Company has the right to order, products with a total value of up to $28,500,000. In order to secure this right, the Company is required to pay to CPCOM an amount of $2,950,000, of which $1,000,000 was due by December 31, 2007, with the balance due and payable by March 31, 2008. As of December 31, 2007, the Company had paid $980,000 to CPCOM, which was considered as satisfaction of the initial $1,000,000 obligation.

 

 

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, 2007. 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, 2007, inventories consisted of the following:

 

		2007
Work in progress		$	461,733
Materials			46,011
Total		$	507,744

(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, 2007, the balance owed on the loan plus accrued interest amounted to $521,537. 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.

 

(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 $46,537 as of December 31, 2007. The following summarizes the amounts receivable as of December 31, 2007:

 

		2007
Ben-Tsur Joseph Holdings Ltd.		$	274,061
Totals		$	274,061

 

(6)	Bank Indebtedness

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

		2007
Bank Loan #1:
Monthly payments including interest at 6% per annum, matures February 27, 2008, secured.		$	2,986
Bank Loan #2:
Monthly payments including interest at 5% per annum, matures November 5, 2012, secured.			126,025
Automobile Loans:
Monthly payments including interest at 4.5% per annum, matures June 29, 2012, secured.			101,712
Totals			230,723
Less - Current portion			(46,931	)
Total Bank Loans		$	183,792

 

2008		$	46,931
2009			46,085
2010			48,328
2011			50,682
2012			38,697
Totals		$	230,723