As filed with the Securities and Exchange Commission on May 11, 2004

Commission File No. 333—111683

Delaware (State or other jurisdiction of incorporation or organization)

3845 (Primary Industrial Code)

87-0441351 (I.R.S. Employer Identification No.)

Title of Each Class of Securities to be Registered		Amount to be Registered			Proposed Offering Price Per Share			Proposed Aggregate Offering Price			Amount of Registration Fee
Common stock			88,000		$	7.23 (2	)	$	635,800		$	170.33
Common stock issued upon conversion of underlying series 'A' convertible preferred stock (1)			131,670		$	3.15 (3	)	$	414,761		$	33.55(4	)
Common stock underlying series 'A' convertible preferred stock			55		$	7.23 (2	)	$	397		$	0.11
Common stock underlying series 'A' convertible preferred stock			1,661,250		$	3.15 (3	)	$	5,232,938		$	423.34(4	)
Common stock underlying class 'C' warrants			28		$	7.23 (2	)	$	202		$	0.05
Common stock underlying class 'C' warrants			896,460		$	3.15 (3	)	$	2,823,849		$	228.45(4	)
Common stock underlying series 'A' convertible preferred stock underlying placement agent's warrants			179,292		$	3.15 (3	)	$	564,770		$	45.69(4	)
Common stock underlying placement agent's warrants			89,646		$	3.15 (3	)	$	282,385		$	22.84(4	)
Total			3,046,401					$	9,955,101		$	923.37

1. Included in prior registration statement as common stock underlying series ‘A’ convertible preferred stock.
   
2. Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of Regulation C as of the close of the market on April 30, 2004, based upon the average of the high and low prices for that date.
   
3. Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of Regulation C as of the close of the market on December 26, 2003 based upon the average of the high and low prices for that date.
   
4. Previously paid in connection with the initial filing of this registration statement on January 2, 2004.
   

Prospectus

• 605,670 common shares;
  
  
• 1,661,305 common shares underlying series 'A' convertible preferred shares issued on October 2, 2003 to a number of investors pursuant to a private placement effected through Maxim Group, LLC, as placement agent;
  
  
• 896,488 common shares underlying class 'C' common share purchase warrants issued to those investors under that private placement;
  
  
• 179,292 common shares underlying series 'A' convertible preferred shares issuable under placement agent's unit purchase warrants granted to Maxim Group as agent's compensation under that private placement; and
  
  
• 89,646 common shares underlying class 'C' common share purchase warrants also issuable under those placement agent's warrants.

TABLE OF CONTENTS

• the success of our research and development activities, the development of a viable commercial production model, and the speed with which regulatory authorizations and product launches may be achieved;
  
  
• whether or not a market for our products develops and, if a market develops, the pace at which it develops;
  
  
• our ability to successfully sell our products if a market develops;
  
  
• our ability to attract the qualified personnel to implement our growth strategies,
  
  
• our ability to develop sales, marketing and distribution capabilities;
  
  
• our ability to obtain reimbursement from third party payers for the products that we sell;
  
  
• the accuracy of our estimates and projections;
  
  
• our ability to fund our short-term and long-term financing needs;
  
  
• changes in our business plan and corporate strategies; and
  
  
• other risks and uncertainties discussed in greater detail in the sections of this prospectus, including those captioned "Risk Factors" and "Plan of Operation".

• 605,670 common shares;
  
  
• 1,661,305 common shares underlying series 'A' convertible preferred shares issued on October 2, 2003 to a number of investors pursuant to a private placement effected through Maxim Group, LLC, as placement agent;
  
  
• 896,488 common shares underlying class 'C' common share purchase warrants issued to those investors under that private placement;
  
  
• 179,292 common shares underlying series 'A' convertible preferred shares issuable under placement agent's unit purchase warrants granted to Maxim Group as agent's compensation under that private placement; and
  
  
• 89,646 common shares underlying class 'C' common share purchase warrants also issuable under those placement agent's warrants.

	Year Ended December 31,
		2003			2002
Consolidated Statements of Operations Data:
Revenue	$	—		$	—
Research and development expenses	$	(497,631	)	$	(67,500	)
General and administrative expenses	$	(4,813,746	)	$	(144,454	)
Net loss	$	(5,311,377	)	$	(211,954	)
Preferred dividend	$	(1,953,199	)	$	—
Net loss attributed to common stockholders	$	(7,264,547	)	$	(211,954	)
Basic and diluted loss per share	$	(0.17	)	$	(0.02	)
Basic and diluted loss per share attributed to common stockholders	$	(0.23	)	$	(0.02	)
Weighted average shares outstanding, basic and diluted		31,765,404			11,609,162

• ECGs administered in the clinical (resting) setting are typically given under either emergency circumstances when an individual complains of symptoms typically associated with heart disease (i.e. chest pains, shortness of breath, heart palpitations), or every year or so for older patients as part of their annual physicals. Most ECGs are given in the clinical (resting) setting.

• The principal purpose in conducting ECG tests on an ambulatory basis is that many coronary artery diseases such as cardiac ischemia and cardiac hypertrophy as well as the occurrence of past or present heart attacks can escape detection without longer-term monitoring in a more physically active or stressful setting. Requiring a patient to remain immobile in a clinical setting for the requisite period of time to identify the presence of these diseases is often impossible, impractical or unduly expensive. Thus, these diseases or conditions may go undetected. An ambulatory heart monitor, commonly known as a "holter" monitor, allows the patient's heart to be continuously monitored over a period of hours or days, while the patient carries out his or her daily activities under typical conditions of stress away from the physicians' office or hospital.
  
  
• In an exercise ECG, the patient exercises on a treadmill, step machine or exercise cycle to enable the cardiologist to monitor, among other things, his heart behavior under maximum conditions of physical stress. Similar to an ambulatory ECG, this allows the cardiologist to identify many coronary artery diseases such as cardiac ischemia and cardiac hypertrophy as well as the occurrence of past or present heart attacks that may not be evident under a clinical (resting) ECG test.

• CardioNet, Inc., located in San Diego, California, sells an ambulatory ECG monitor system which records and wirelessly transmits physiological data by an RF to a handheld PDA for later modem or Internet transmission. We believe that CardioNet’s system is closest to our product in terms of operations and features. The CardioNet monitor is only certified under EC 38, and only uses three leads. As a consequence, CardioNet’s system can only identify irregularities in the heart's rate and rhythm (arrhythmia).
  

• Cardiac Telecom, located outside Pittsburgh, Pennsylvania, sells an ambulatory heart monitor system which transmits wirelessly from the chest to a data processor/phone-connected station. The data is then sent over a hard line to the Internet. This system is only ambulatory when in 30/60 feet of the base unit. The base unit is the size of a desk-top PC and runs on line current. Hence it is only used as a home unit. The Cardiac Telecom monitor is only certified under EC 38, and only uses three leads. As a consequence, Cardiac Telecom’s system can only identify irregularities in the heart's rate and rhythm (arrhythmia).
  
  
• Raytel Medical, located in Windsor, Connecticutt, is a division of SHL Telemedicine based in Israel. Raytel Medical is the largest provider in the United States for holter monitoring and cardiac event devices. All of their systems are transtelephonic and not wireless. They have a 12 lead ECG system but we believe that the electrode system is poor and is put on the chest by the patient to record 30 to 120 sec strip when they feel an event occurring. Then the patient must bring the device to a phone and transmit it to a monitoring center. Our system requires no patient effort to record the signal and when an abnormal signal is recorded, it is sent wirelessly to a monitoring center. The Raytel Medical monitor is only certified under EC 38.
  
  
• Mortara Instrument, located in Milwaukee, Wisconsin, manufacturers a 12 lead ECG ambulatory system. The Mortara Instrument monitor is only certified under EC 38.
  
  
• Card Guard, located in Switzerland, has two divisions in the United States, Instromedix and Lifewatch. Presently, they market event recorders as well as operating monitoring centers. They are looking to move into the wireless monitoring space but today they are all transtelephonic.

• Heart disease and stroke, the principal components of cardiovascular disease, claim more lives in the United States each year than the next five leading causes of death combined;
  
  
• Approximately 61,800,000 people in the United States suffer from one or more types of cardiovascular disease each year;
  
  
• Approximately 950,000 lives were claimed by cardiovascular diseases in the United States in 1999;
  
  
• Patients who have suffered heart attacks in the United States number 7.3 million, congestive heart failure 4.7 million, arrhythmia 2.0 million, and angina 6.4 million;
  
  
• Approximately one-sixth of all people in the United States killed by cardiovascular disease are under the age of 65; and
  
  
• In 2004 the estimated direct and indirect healthcare cost of cardiovascular disease in the United States will be $368.4 billion.

• We need to finalize the remaining development work on the "front-end" portion of the device, which consists of designing the device to meet the ANSI/AAMI EC-38 standard for ambulatory electrocardiographs adopted by the FDA for clinical (resting) diagnostic heart monitors (i.e., ability to interpret physiological signals throughout the entire 0.7HZ to 150 HZ range), as well as satisfying applicable performance, safety and environmental standards such as those relating to electromagnetic interference, electromagnetic susceptibility, shock and current leakage. These latter standards include the IEC60601-2-27 requirements for the safety of electrocardiograph devices; the IEC 60601-1-2 requirements for safety and electromagnetic compatibility; the UL2601-1 medical equipment general requirements for safety; and FCC regulations under part 15, subpart C, governing allowable frequency ranges for different types of devices, including medical devices. None of this work needs to be approved by the FDA, however, before we can commence marketing our model 100 monitor, we must not only satisfactory complete the performance testing of our monitor to establish that it satisfies the requirements described above, but must also conduct user preference tests measuring our device against other ambulatory monitors. This latter testing will be conducted at our laboratory facilities as well as at selected hospitals and university sites. A minor expense in the testing will be the cost to acquire competitor’s devices. We anticipate that we will complete this work by the end of the fourth quarter of 2004. We have budgeted $280,000 for this phase.
  
  
• We also need to complete the "back-end" portion of the device. To do so, we anticipate spending $250,000 to purchase off-the-shelf software which we can use with only minor modifications, and spending an additional $200,000 to develop proprietary software and algorithms. We anticipate that we will complete this work by the end of the first quarter of 2005.
  
  
• Once we have fully designed the "front-end" portion of our device, we intend to submit test protocols in the third quarter of 2005 to several institutional review boards to review. We will coordinate the writing of a number of "white papers" relating to effectives of our device and published results in peer review journals. The term “white paper” is used to describe articles written by recognized experts in the field and presented at technical conferences or published in scientific journals. During this period, we also intend to make arrangements with four or more hospitals or clinics to test our device. We anticipate that we will complete this process by the third quarter of 2005. During the course of this period we should complete the "back-end" portion of the device, and we will then have the opportunity to use it during the clinical testing with the "front-end" portion. Our anticipated budget for these activities is $300,000.
  
  
• We need to design a vest which can be used on a 24/7 basis for extended periods of time, while being taken off by the patient intermittently for showers, etc. We must address two engineering issues in developing this vest. First, we need to develop an electrode which can be incorporated into the vest to monitor the patient's heart signal, thus replacing the use of leads and gels currently used in recording ECGs. Second, we need to design the vest in such a fashion that it not only holds the electrode against the body at the correct locations and in the proper manner, but it also can be adapted to fit patients with different heights, weights and physiques. We project that we will spend approximately $230,000 to conduct these development activities, and expect to complete them by the last quarter of 2005.
  
  
• We have also budgeted $60,000 to purchase various items of equipment to test the operation of the device over different phases.

Name And Municipality Of Residence		Age		Office		Initial Election Or Appointment Date
Marvin H. Fink     Los Angeles, California		67		Chief Executive Officer, President, Secretary, and Chairman of the Board		October 12, 2002
Budimir S. Drakulic, Ph.D. Los Angeles, California		54		Vice President and Chief Technology Officer		October 15, 2002
Charles Dargan Los Angeles, California		48		Interim Chief Financial Officer		December 18, 2003
Ellsworth Roston Los Angeles, California		81		Director		November 1, 2002
Robert Koblin, M.D. Los Angeles, California		72		Director		February 6, 2003
Lowell T. Harmison, Ph.D. Washington, D.C.		66		Director		June 6, 2003
Jennifer Black Lake Oswego, Oregon		48		Director		January 20, 2004

Name			Grant Date		Common Shares Purchasable		Exercise Price		Expiration Date
Marvin H. Fink			2/6/2003		150,000(3)		$ 0.88		2/5/2008
			11/3/2003		28,000		$ 4.40		11/2/2008
			4/1/2004		2,000		$ 6.00		3/31/2009
Ellsworth Roston(1)			2/6/2003		150,000(3)		$ 0.88		2/5/2008
			11/3/2003		28,000		$ 4.40		11/2/2008
			4/1/2004		2,000		$ 6.00		3/31/2009
Dr. Robert Koblin			6/6/2003		50,000		$ 4.20		6/5/2008
			2/5/2004		28,000		$ 3.70		2/4/2009
			4/1/2004		4,000		$ 6.00		3/31/2009
Dr. Lowell T. Harmison(2)			2/5/2003		50,000		$ 0.88		2/4/2008
Jennifer Black			1/20/2004		50,000		$ 3.50		1/19/2009
			4/1/2004		2,000		$ 6.00		3/31/2009

1. Excludes 450,000 common share purchase warrants unrelated to the provision of services as a director which were granted to Mr. Roston as compensation for providing consulting services. See “Business-Employment And Consulting Agreements With Management”.
   
2. Excludes 216,000 common share purchase warrants unrelated to the provision of services as a director which were granted to Dr. Harmison as compensation for providing consulting services. See “Business-Employment And Consulting Agreements With Management”.
   
3. 50,000 shares pre-split.
   

• Mr. Fink's will receive an initial base salary of $1 per year. Following the one-year anniversary of the agreement, our board of directors may review and adjust the base salary in light of our company's performance. Given the status of Recom’s development efforts, the board has not decided to increase Mr. Finks’s base salary under this provision to date.

• Mr. Fink is entitled to a cash bonus for his second through fourth years of employment. The amount of the bonus is 10% of our after tax income exclusive of extraordinary expenses for the second year, and 15% of that amount for the third and fourth years. On May 10, 2004, Mr. Fink and Recom agreed to pay Mr. Fink 250,000 common shares upon Recom achieving $0.50 in fully-diluted earnings per share in lieu of the cash bonus, subject to approval by Recom's full board of directors.
  
  
• Mr. Fink is granted 2,100,000 "restricted" common shares (700,000 shares pre-split), to be earned over three years of continuous employment. These shares, which are held in escrow by the company pursuant to the terms of a restricted stock agreement until they are earned, vest in tranches of 1744,999 each at the end of the first eleven quarters of Mr. Fink's employment, with the balance vesting at the end of the twelfth quarter. Mr. Fink is entitled to all dividends which may be declared with respect to these shares, even if not vested.
  
  
• The agreement contains a "gross up" provision obligating us to make a cash payment to Mr. Fink to cover any taxes he may incur by reason of receiving any payment or distribution that would constitute an excess golden parachute payment under the federal tax laws. The gross up provision also applies to the 2,100,000 restricted common shares described above, however, Mr. Fink exercised his section 83(b) election under the Internal Revenue Code subjecting him to immediate taxation upon the receipt of the shares notwithstanding their future forfeitability, so our liability, if any, for any taxes imposed under that grant should be nominal.
  
  
• Should our common shares be listed on any of the NYSE, AMEX or Nasdaq national stock exchanges or markets, Mr. Fink would be entitled, if then still employed by us, to an additional grant of 600,000 common shares (200,000 shares pre-split).
  
  
• In the event of a change in control (as that term is defined in the employment agreement), Mr. Fink would be entitled, if then still employed by us, to an additional grant of common shares having a market value of $5,000,000, but not to exceed 600,000 common shares (200,000 shares pre-split) in total.
  
  
• Mr. Fink is entitled to a number of employee benefits under the agreement, including a $1,200 per month automobile allowance, individual medical plan reimbursement of up to $2,000 per month, and the right to participate in all benefit plans established for company employees or executives, including medical, hospitalization, dental, long-term care and life insurance programs.

• if the agreement is terminated during years two through four due to Mr. Fink's disability, termination by Mr. Fink for good reason; Recom's termination of Mr. Fink without cause, or a change in ownership, Mr. Fink will nevertheless be entitled to a pro rata portion (based upon the actual number of days of employment) of the cash bonus based on our after-tax income that he would have otherwise received for the year of termination had he remained employed until the end of that year;
  
  
• if the agreement is terminated due to Mr. Fink's death, disability, termination by Mr. Fink for good reason; Recom's termination of Mr. Fink without cause, or a change in ownership, the unvested portion of the 2,100,000 restricted common share grant to Mr. Fink will become fully vested and the shares released from escrow; and
  
  
• Mr. Fink and his family will be entitled to an additional three years' medical, hospitalization, dental, long-term care and life insurance coverage if the agreement is terminated by Mr. Fink for good reason or terminated by Recom's termination without cause, and an additional one years' coverage if the agreement is terminated due to Mr. Fink's disability.

• The agreement provides for a ten-year initial term. After the initial term, the agreement renews automatically for successive one year terms, unless either party delivers 90-days' written notice to the other of their intent not to renew.
  
  
• Dr. Drakulic's services are provided on a mutually-acceptable part-time basis.
  
  
• Recom is obligated to pay B Technologies a $10,000 bonus upon execution, and a monthly service fee of $15,000 thereafter.
  
  
• B World Technologies was granted 600,000 "restricted" common shares (200,000 shares pre-split), to be earned over five years of continuous provision of services by Dr. Drakulic. These shares, which will be held in escrow with the company pursuant to the terms of a restricted stock agreement until they are earned, vest at the rate of 30,000 shares per quarter with the first 30,000 shares vesting on January 15, 2003. B World Technologies is entitled to all dividends which may be declared with respect to these shares, even if not vested.

• Recom is obligated to pay Dr. Harmison $36,000 per year over the term of the agreement, payable quarterly.
  
  
• Dr. Harmison was entitled to receive upon execution of the agreement an initial grant of options entitling him to purchase 108,000 common shares (36,000 shares pre-split) at $0.97 per share, exercisable over five years.
  
  
• Dr. Harmison was further entitled to receive upon execution of the agreement an additional grant of options entitling him to purchase 108,000 common shares (36,000 shares pre-split) at $0.97 per share, vesting in increments of 9,000 common shares each upon the first through twelfth quarterly anniversary dates of the agreement based upon his provision of services. These options are exercisable for a period of five years following vesting.
  
  
• Dr. Harmison is entitled to receive grants of common share purchase options in tranches of 20,000 shares per milestone for assisting Recom in attaining various milestones determined by our board of directors, including the preparation and filing with the FDA of a 510(k) application for our product as it relates to its incorporation into a vest, approval of that application by the FDA, and market launch of that product.
  
  
• Dr. Harmison is entitled to receive a grant of 20,000 common shares in the event of a "change in control" as that term is defined in the agreement.

								Long Term Compensation
			Annual Compensation (1)					Awards			Payouts
Named Executive Officer and Principal Position		Year	Salary	Bonus	Other			Restricted Stock	Securities Underlying Options & SARs		Long Term Incentive Plan	All Other Compensation
Marvin H. Fink (2) Chief Executive Officer		2003 2002 2001	$ 1(5) 1     —	$ — — —	$ 19,598(8) —      —			$ —     14,284(9) —	178,000 — —		$ — — —	$ — — —
Dr. Budimir Drakulic (3) Vice President and Chief Technology Officer		2003 2002 2001	$ 180,000(6) 45,000(6) —	$ — — —	$ —      —      —			$ —     3,987(10) —	750,000 — —		$ — — —	$ — — —
Charles Dargan (4) Interim Chief Financial Officer		2003 2002 2001	$ 7,500(7) —     —	$ — — —	$ —      —      —			$ —     —     —	— — —		$ — — —	$ — — —

1. Includes, among other things, perquisites and other personal benefits, securities or property which exceed in the aggregate the lesser of either $50,000 or 10% of the total annual salary and bonus reported for that fiscal year.
2. Mr. Fink has served as our Chief Executive Officer since October 12, 2002.
3. Dr. Drakulic has served as our Vice President and Chief Technology Officer since October 15, 2002.
4. Mr. Dargan has served as our interim Chief Financial Officer since December 18, 2003 on a leased basis through CFO 911, an agency that specializes in providing financial management personnel to businesses on a temporary basis.
5. Recom has recorded a non-cash accounting expense in the amount of $80,000 to reflect the value of Mr. Fink’s services.
6. These amounts were paid in consulting payments to B Technologies in connection with its provision of Dr. Drakulic’s services.
7. Amounts paid to CFO 911 in December 2003.
8. Includes $14,400 in automobile allowance payments and $5,598 in premiums payable on life insurance.
9. Reflects the value of an award to Mr. Fink of 2,100,000 restricted common shares (700,000 shares pre-split) in conjunction with the execution of his employment agreement dated October 12, 2002. The value cited is based upon the closing price for on common shares as of the date of the employment agreement. As of December 31, 2003, all 2,100,000 restricted common shares remained outstanding. The value of those shares as of that date was $7,875,000 based upon the $3.75 closing price for our common shares as quoted on the OTCBB for December 31, 2003.
10. Reflects the value of an award to B. World Technologies of 600,000 restricted common shares (200,000 shares pre-split) in conjunction with the execution of a loan-out agreement dated October 12, 2002 by which it provided the services of Dr. Drakulic to Recom. The value cited is based upon the closing price for on common shares as of the date of the loan-out agreement. As of December 31, 2003, all 600,000 restricted common shares remained outstanding. The value of those shares as of that date was $2,250,000 based upon the $3.75 closing price for our common shares as quoted on the OTCBB for December 31, 2003.

Name		Common Shares Underlying Grant Of Options Or SARs			As Percentage Of Grants To All Employees(1)			Exercise Or Base Price			FMV At Grant Date			Expiration Date
Marvin H. Fink			150,000(2	)		7.1	%	$	0.88(2	)	$	0.88			February 5, 2008
Dr. Budimir S. Drakulic			750,000(3	)		12.0	%	$	0.95(3	)	$	0.95			March 9, 2008
Marvin H. Fink			28,000			1.3	%	$	4.40		$	4.40			November 2, 2008
Charles Dargan			—			—			—			—			—

1. The numerator in calculating this percentage includes common share purchase options granted to each named executive officer in fiscal 2003 in his capacity as an officer (employee) and, if applicable, as a director. The denominator in calculating this percentage is 2,088,000, which represents options granted to all Recom employees during fiscal 2003, including those to the named executive officers.
   
2. 50,000 shares pre-split exercisable at $2.64 per share.
   
3. 250,000 shares pre-split exercisable at $2.76 per share.

			Unexercised In-The-Money Options and SARs at December 31, 2003
Named Executive Officer	Shares Acquired On Exercise	Value  Realized (1)	Number  (Exercisable/Unexercisable)	Value (2) (Exercisable/Unexercisable)
Marvin H. Fink	—	—	150,000  /  0	$430,500  /  $0
Dr. Budimir S. Drakulic	—	—	187,500  /  562,500	$530,625  /  $1,591,875
Charles Dargan	—	—	—  /  —	—  /  —

1. The dollar amount shown represents the difference between the fair market value of our common stock underlying the options as of the date of exercise and the option exercise price.
   
2. The dollar value provided represents the cumulative difference in the fair market value of our common stock underlying all in-the-money options as of December 31, 2003 and the exercise prices for those options. Options are considered "in-the-money" if the fair market value of the underlying common shares as of the last trading day in fiscal 2003 exceeds the exercise price of those options. The fair market value of Recom common shares for purposes of this calculation is $3.75, based upon the closing price for our common shares as quoted on the OTCBB on December 31, 2003.

		Class Of Stock(1)
		Common(Voting)						Series 'A' Preferred (2)(Voting)
Name		Amount			%			Amount			%
Marvin H. Fink (3)(4)(5)			2,264,500(7	)		6.8	%		0			—
Dr. Budimir S. Drakulic (4)			834,375(8	)		2.5	%		0			—
Charles Dargan (4)			0			—			0			—
Ellsworth Roston (3)			910,750(9	)		2.7	%		0			—
Dr. Robert Koblin (3)			158,000(10	)		*			0			—
Dr. Lowell T. Harmison (3)			272,793(11	)		*			0			—
Jennifer Black (3)			50,500 (12	)		*			0			—
Tracey Hampton / ARC Finance Group, LLC (5)(6)			22,950,000(13	)		69.6	%		0			—
Morgan Witt Alliance			0			—			316,673			19	%
Directors and executive officers, as a group			4,494,918(14	)		13.0	%		0			—

1. Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and also any shares which the shareholder has the right to acquire within 60 days, including upon exercise of common shares purchase options or warrant or conversion of UGC series ‘A’ preferred shares. The number of outstanding shares of our common and series 'A' preferred shares as of the April 30, 2004 are 33,345,262 and 1,661,305 shares, respectively.
   
2. Each series 'A' preferred share is convertible into one common share.
   
3. Director.
   
4. Executive officer.
   
5. 5% shareholder.
   
6. The address of Ms. Hampton and ARC Finance Group LLC is 23679 Calabasas Road, Suite 754, Calabasas, CA 91302.
   
7. Includes 2,100,000 common shares held by the Fink Family Trust, and 164,500 common shares issuable upon exercise of options granted to Mr. Fink in his capacity as a director.
   
8. Includes 600,000 common shares held by B World Technologies, Inc. and 234,375 common shares issuable upon exercise of options granted to B World Technologies in connection with services performed by Dr. Drakulic. Both B World Technologies and B Technologies are owned and controlled by Dr. Drakulic.
   
9. Includes 296,250 common shares held by Roston Enterprises, 450,000 common shares issuable upon exercise of warrants granted to Mr. Roston in his capacity as a consultant, and 164,500 common shares issuable upon exercise of options granted to Mr. Roston in his capacity as a director.
   
10. Includes 158,000 common shares issuable upon exercise of options granted to Dr. Koblin in his capacity as a director.
    
11. Includes 216,000 common shares issuable upon exercise of warrants granted to Dr. Harmison in his capacity as a consultant, and 50,000 common shares issuable upon exercise of options granted to Dr. Harmison in his capacity as a director.
    
12. Includes 50,500 common shares issuable upon exercise of options granted to Ms. Black in her capacity as a director.
    
13. Includes 22,950,000 common shares held by ARC Finance Group, Inc. ARC Finance Group is owned and controlled by Ms. Hampton.
    
14. Includes 1,487,875 common shares issuable upon exercise of common share purchase options and warrants.
    

	34

 

TRANSACTIONS AND BUSINESS RELATIONSHIPS WITHMANAGEMENT AND PRINCIPAL SHAREHOLDERS

 
Transactions With Executive Officers, Directors And Shareholders


Summarized below are certain transactions and business relationships between Recom and persons who are or were an executive officer, director or holder of more than five percent of any class of our securities since January 1, 2002:
 
• On September 19, 2002, as part of the agreements leading to and facilitating the acquisition of the Signal Technologies from ARC Finance Group, Mr. Sim Farar, our president and principal shareholder at that time, invested $125,000 into the company as working capital in exchange for a warrant entitling him to purchase 600,000 common shares (200,000 shares pre-split) at approximately $0.21 per share.
  
  
• On October 12, 2002 we entered into a four-year employment agreement with Mr. Marvin H. Fink pursuant to which, among other things, we employed Mr. Fink as our Chief Executive Officer and Chairman of the Board, and granted to Mr. Fink 2,100,000 "restricted" common shares (700,000 shares pre-split) as compensation for those services. For a description of the full terms of that agreement see that section of this prospectus captioned "Management—Employment And Consulting Agreements With Management".
  
  
• On October 15, 2002 we entered into a ten-year loan-out agreement with Dr. Budimir S. Drakulic and his two companies, B. World Technologies and B Technologies pursuant to which, among other things, we engaged the services of Dr. Drakulic as our Vice President and Chief Technology Officer, and granted B World Technologies 600,000 "restricted" common shares (200,000 shares pre-split) as compensation for those services. For a description of the full terms of that agreement see that section of this prospectus captioned "Management—Employment And Consulting Agreements With Management".
  
  
• On October 11, 2002, we reached an agreement-in-principle with Dr. Budimir Drakulic to become our Vice President and Chief Technology Officer on a consulting basis through his consulting companies. In conjunction with that understanding, we also reached an agreement-in-principle with Dr. Drakulic to offer to sell our common shares to certain individuals with potential claims against Dr. Drakulic relating to termination of a prior license of the Signal Technologies to a company in which those claimants had invested. While we did not believe that these claims had legal basis, we nevertheless agreed to assist Dr. Drakulic in the settlement in order to ensure that Dr. Drakulic’s time, effort and focus in developing the technology was not unduly disrupted by litigation, and to otherwise ensure that our rights in the Signal Technologies were protected should that be a matter of concern to any of our investors. Pursuant to this understanding, on October 22, 2002, we sold 564,810 common shares (188,270 shares pre-split) to eleven of those individuals (Bernard Carmeol, William London, Walter M. Sawyer, Stephen Verchick, Belle Zwerdling, Steve Neuberger, Tom Byers, Baron St. John, Thomas Mozjesik, Jeffrey H. Sawyer and Robert M. Cherry), and issued a five-year warrant to purchase 375,000 common shares (125,000 shares pre-split) for $0.007 per share to one of those individuals (Stephen Verchick), in consideration of their cash investment of $17,786. We further agreed that should we raise more than $2 million in certain offerings, to pay 4% of the proceeds of those offerings to those individuals up to the amount of $480,350. We have since entered into agreements with ten of those investors releasing Recom from the obligation to pay $380,350 of the $480,350, and are currently in discussion with the last of those individuals, Mr. Verchick, to release the remaining liability of $100,000, including $35,203 to which he would be entitled under our private placement in the amount of $5,378,750 facilitated through Maxim Group LLC.
  

• On November 1, 2002, we entered into a two-year consulting agreement with Mr. Ellsworth Roston, who then became one of our directors pursuant to that agreement. Under the terms of that agreement, we granted to Mr. Roston, among other things, Roston 225,000 "restricted" common shares (75,000 shares pre-split) and five-year warrants to purchase an additional 450,000 common shares (150,000 shares pre-split) at $1.67 per share. For a description of the full terms of that agreement see that section of this prospectus captioned "Management—Employment And Consulting Agreements With Management".
  
  
• In compensation for his consulting services, we granted to Mr. Roston 225,000 "restricted" common shares (75,000 shares pre-split) and five-year warrants to purchase an additional 450,000 common shares (150,000 shares pre-split) at $1.67 per share.
  
  
• On February 14, 2003, we entered into a three-year consulting agreement with Dr. Lowell T. Harmison, who later became one of our directors. Under the terms of that agreement, we granted to Dr. Harmison, among other things, (1) fully vested options entitling him to purchase 108,000 common shares (36,000 shares pre-split) at $0.97 per share, and (2) options entitling him to purchase an additional 108,000 common shares (36,000 shares pre-split) at $0.97 per share subject to vesting over twelve quarters. All of the aforesaid options are exercisable over five years after vesting. For a description of the full terms of that agreement see that section of this prospectus captioned "Management—Employment And Consulting Agreements With Management".
  
  
• On April 8, 2003, we sold to Mr. Mitchell Stein 112,812 common shares (37,604 shares pre-split) for $100,000 in cash and $150,000 in expenses and equipment. Mr. Stein is the spouse of Ms. Tracey Hampton, who owns and controls ARC Finance Group, LLC, which owns approximately 69.6% of our outstanding common shares.
  
  
• On May 15, 2003, we sold to Mr. Mitchell Stein 16,000 units at $3 per unit for cash amounting to $48,000. Each unit consisted of one common share and one warrant. Each warrant is exercisable at $3 until May 14, 2004. Upon exercise of the warrants, Mr. Stein will receive one common share and an additional warrant to purchase one common share $6 per share until November 15, 2004. The sale of units to Mr. Stein was part of a larger private placement on the same terms and conditions with two other investors.
  
  
• On July 24, 2003, we sold to Mr. Mitchell Stein 30,030 units at $3.33 per unit for cash amounting to $100,000. Each unit consisted of one common share and one warrant. Each warrant is exercisable at $3.33 until July 14, 2004. Upon exercise of the warrants, Mr. Stein will receive one common share and an additional warrant to purchase one common share at $6.66 per share until November 15, 2004. The sale of units to Mr. Stein was part of a larger private placement on the same terms and conditions with three other investors.
  
  

Parent Corporation

ARC Finance Group, LLC, owns approximately 69.6% of our outstanding common shares. ARC Finance Group is principally owned and controlled by Ms. Tracey Hampton. As a consequence, Ms. Hampton has the ability, through ARC Finance Group, to elect a majority of our board of directors, and thereby control our management. Ms. Hampton also has the ability to control the outcome of corporate actions requiring shareholder approval, including mergers and other changes of corporate control, going private transactions, and other extraordinary transactions.

	36

 

DESCRIPTION OF CAPITAL STOCK


General


Our authorized capital consists of 100,000,000 shares of common stock, par value $.001 per share (these shares are referred to in this prospectus as "common shares"), and 10,000,000 shares of "blank check" preferred stock, par value $.001 per share (these shares are referred to in this prospectus as "preferred shares"), having such rights, preferences, privileges and restrictions as may be designated from time-to-time by our board. On September 25, 2003, our board of directors designated 1,818,710 of the preferred shares as series 'A' convertible preferred stock (these shares are referred to in this prospectus as "series 'A' preferred shares"), with the rights, preferences, privileges and restrictions described below. On April 26, 2004, we increased the number of shares designated as series ‘A’ preferred shares to 3,000,000. As of April 30, 2004, there were issued and outstanding 33,345,262 common shares and 1,661,305 series 'A' preferred shares.


Common Shares


Our common shareholders are entitled to one vote per share on all matters to be voted upon by those shareholders, and are also entitled to cumulative voting for the election of directors. Subject to the rights of our series 'A' preferred shares, our common shareholders are entitled to receive ratably dividends as they may be declared by our board of directors out of funds legally available for that purpose. Subject to the rights of our series 'A' preferred shares, upon the liquidation, dissolution, or winding up of Recom, our common shareholders will be entitled to share ratably in all of the assets which are legally available for distribution, after payment of all debts and other liabilities. Our common shareholders have no preemptive, subscription, redemption or conversion rights.


Preferred Shares


We may issue our preferred shares from time to time in one or more series as determined by our board of directors. The voting powers and preferences, the relative rights of each series, and the qualifications, limitations and restrictions thereof may be established by our board of directors without any further vote or action by our shareholders.


Series 'A' Preferred Shares


Our series 'A' preferred shares have the following rights, preferences, privileges and restrictions:


• Rank—Our series 'A' preferred shares rank senior to our common shares, and any other securities we may issue;
  
  
• Dividends—Our series 'A' preferred shareholders are entitled to receive an annual cumulative dividend on each share equal to $0.24 payable quarterly, on March 31, June 30, September 30 and December 31 of each year, either in cash from funds legally available for that purpose, or in kind, in the form of additional series 'A' preferred shares, at our discretion. Dividends for the period between the October 2, 2003 sale of the shares and December 31, 2003 are pro rated based upon the actual number of days elapsed, assuming a 360- day year. If the dividend is paid in the form of series 'A' preferred shares, each share which is paid will be valued at $3 per share.
  
  
• Conversion—Each series 'A' preferred share (along with accrued dividends payable in series 'A' preferred shares) is convertible, at the option of the holder, at any time into common shares on a one-for-one basis. The conversion price for the series 'A' preferred shares is subject to certain weighted average anti-dilution adjustments.
  
  
• Forced Conversion—We can force conversion of the series 'A' preferred shares into common shares upon 45 days written notice to the holders of the shares in the event that:

• our common shares are listed on a qualified national exchange (Nasdaq, AMEX or NYSE);
  
  
• the closing bid price for our common shares as reported by the Nasdaq, AMEX or NYSE is at least $7.50 for 30 consecutive trading days ending within three trading days prior to the date of the written notice of conversion;
  
  
• the average trading volume during any such 30 consecutive trading day period equals or exceeds 30,000 shares per day; and
  
  
• the common shares underlying the series 'A' preferred shares are covered by an effective registration statement filed with the SEC.
  
  
• Liquidation Rights—In the event of any liquidation, dissolution or winding up of Recom, either voluntary or involuntary, our series 'A' preferred shareholders are entitled to receive an amount per share equal to the greater of $3 for each outstanding share plus accrued and unpaid dividends (as adjusted for stock dividends, stock distributions, splits, combinations or recapitalizations), or the amount such shareholders would be entitled to receive had they converted their series 'A' preferred shares into common shares. These rights are prior and in preference to any distribution of any of our assets to our common shareholders or holders of any other series or class of preferred shares.
  
• Voting Rights—Our series 'A' preferred shareholders have the right to vote on an as-converted basis, with our common shareholders on all matters submitted to a vote of our shareholders. In addition, we cannot, without the prior approval of the holders of at least a majority of our then issued and series 'A' preferred shares voting as a separate class:
  
  
• issue or create any series or class of equity securities with rights superior to or on a parity with our series 'A' preferred shares or increase the rights or preferences of any series or class of equity securities having rights or preferences that are junior to our series 'A' preferred shares so as to make the rights or preferences of such series or class equal or senior to our series 'A' preferred shares;
  
  
• pay any cash dividends on shares of our capital stock; or
  
  
• effect any exchange or reclassification of any stock affecting our series 'A' preferred shares or a recapitalization involving Recom and our subsidiaries (if any) taken as a whole;

Further, we cannot, without the approval of each series 'A' preferred shareholder:

• effect any amendment of our Certificate of Incorporation or Bylaws which would materially and adversely affect his or her rights as a shareholder; or
  
  
• amend, alter, or repeal the preferences, special rights, or other powers of the series 'A' preferred shares so as to adversely effect the shareholder.

Options And Warrants Convertible into Common Shares

As of April 30, 2004, there were outstanding common share purchase options or warrants entitling the holders to purchase up to 5,517,327 common shares at an average weighted exercise price of $2.35 per share.

EQUITY COMPENSATION PLANS


Summary Equity Compensation Plan Data


The following table sets forth information compiled on an aggregate basis, with respect to equity compensation plans, including individual compensation arrangements as of December 31, 2003 under which we are granted or are authorized to issue equity securities to employees or non-employees in exchange for consideration in the form of goods or services:
 

Plan Category	Number Of SecuritiesTo BeIssued Upon Exercise Of Outstanding Options,Warrants Or Rights		Weighted-Average Exercise Price Of Outstanding Options, Warrants And Rights		Number Of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities To Be Issued Upon Exercise Of Outstanding Options, Warrants And Rights)
Equity compensation plans approved by shareholders: Recom Managed Systems, Inc. 2002 Stock Plan	2,149,000		$ 1.21		3,851,000
Equity compensation plans not approved by shareholders: Recom Managed Systems, Inc. 2003 Nonqualified Stock Option And Stock Plan   Stand-alone grants	—   537,000		$    —   $ 2.12		1,187,273   —
Total	2,686,000		$ 1.39		5,038,273





Description of Equity Compensation Plans Approved By Shareholders


Recom has one equity compensation plan or arrangement that has been approved by our shareholders, the Recom Managed Systems, Inc. 2002 Stock Plan (the "2002 Stock Plan"). Recom adopted the 2002 Stock Plan, pursuant to which 6,000,000 common shares (2,000,000 shares pre-split) were originally reserved for issuance, on November 1, 2002. Shareholder approval was received on June 5, 2003.


The 2002 Stock Plan was adopted by our board of directors as a vehicle to encourage and provide for the acquisition of an equity interest in Recom by our employees, officers, directors and consultants. Our board believes the plan will enable us to attract and retain the services of key employees, officers, directors and consultants upon whose judgment, interest and special effort the successful conduct of its operations is largely dependent, and to motivate those individuals by providing additional incentives and motivation toward superior performance.


The 2002 Stock Plan allows our board of directors, or a committee established by our board, to award restricted stock and stock options from time to time to our employees, officers, directors and consultants. The board has the power to determine at the time an option is granted whether the option will be an incentive stock option (an option which qualifies under Section 422 of the Internal Revenue Code of 1986) or an option which is not an incentive stock option. Incentive stock options may only be granted to persons who are our employees. Vesting provisions are determined by our board at the time options are granted. Options may be exercisable by the payment of cash or by other means as authorized by the committee or our board of directors.


	39
 
The 2003 Stock Plan also provides that our board of directors, or a committee established by our board, may issue restricted stock pursuant to restricted stock right agreements which will contain such terms and conditions as our board or committee determines.


As of April 30, 2004, there were 2,317,000 common shares issued or reserved for issuance under the 2002 Stock Plan, and 3,683,000 common shares available for issuance.


Description of Equity Compensation Plans Not Approved By Shareholders


2003 Stock Plan


Recom has one formal stock plan considered to be an equity compensation plan or arrangement that has not been approved to date by our shareholders, the Recom Managed Systems, Inc. 2003 Nonqualified Stock Option And Stock Plan (the "2003 Stock Plan"). Recom adopted the 2003 Stock Plan, pursuant to which 1,500,000 common shares (500,000 shares pre-split) were originally reserved for issuance, on March 31, 2003. The 2003 Stock Plan was adopted by our board of directors as a vehicle to encourage and provide for the acquisition of an equity interest in Recom by our employees, officers, directors and consultants. Our board believes the plan will enable us to attract and retain the services of key employees, officers, directors and consultants upon whose judgment, interest and special effort the successful conduct of its operations is largely dependent, and to motivate those individuals by providing additional incentives and motivation toward superior performance.


The 2003 Stock Plan allows our board of directors to grant stock options or issue stock from time to time to our employees, officers, directors and consultants. Options granted under the 2003 Plan do not qualify under Section 422 of the Internal Revenue Code as an incentive stock options.


The 2003 Plan also provides that our board of directors, or a committee, may issue free-trading or restricted stock pursuant to stock right agreements containing such terms and conditions as our board of directors deems appropriate.


As of April 30, 2004, there were 412,470 common shares issued or reserved for issuance under the 2003 Stock Plan, and 1,087,530 common shares available for issuance.


On March 26, 2003, we filed with the SEC a registration statement on form S-8 for the purpose of registering the common shares issuable under our 2003 Stock Plan under the Securities Act of 1933. We have, to date, principally used the 2003 Stock Plan to grant registered common shares to selected consultants as compensation for services, while utilizing the 2002 Stock Plan for unregistered grants of stock and options to directors, officers, employees and other consultants.


The stand-alone grant to Mr. Marvin Fink of 2,100,000 "restricted" shares under his employment agreement pursuant to which he agreed to become our Chief Executive Officer, President and Chairman of the Board; the stand-alone grant to B Technologies of 600,000 "restricted" common shares under the terms of the loan-out agreement by which we procured the services of Mr. Budimir S. Drakulic as our Vice President and Chief Technology Officer, and the stand-alone grant to Mr. Ellsworth Roston of 225,000 "restricted" common shares and warrants entitling him to purchase an additional 450,000 common shares under the terms of his consulting agreement with our company, each constitute an equity compensation plan or arrangement that has not been approved to date by our shareholders. For further information relating to these transactions, see that section of this prospectus captioned "Management—Employment And Consulting Agreements With Management".


	40
 
Stand-Alone Grants


From time to time our board of directors grants common share purchase options or warrants to selected directors, officers, employees, consultants, advisors or vendors in payment of goods or services provided by such persons on a stand-alone basis outside of any of our formal stock plans. The terms of these grants are individually negotiated.


MARKET FOR SECURITIES


Description Of Market


Our common shares are currently quoted on the OTCBB under the symbol "RECM." The following table sets forth the quarterly high and low bid prices for our common shares on the OTCBB for the periods indicated. The prices set forth below represent inter-dealer quotations, without retail markup, markdown or commission and may not be reflective of actual transactions. The prices have been adjusted to reflect a 3 for 1 stock split that was effective on April 11, 2003.

		Bid Price
Period	Volume	High	Low
2003:
First Quarter	5,541,962	$ 6.15	$ 3.05
2003:
Fourth Quarter	3,808,295	$ 5.15	$ 2.70
Third Quarter	3,683,800	5.55	3.24
Second Quarter	2,494,700	4.20	1.98
First Quarter	1,464,600	2.30	0.88
2002:
Fourth Quarter	1,264,800	$ 3.97	$ 0.08
Third Quarter	0	0.08	0.07
Second Quarter	0	0.07	0.05





On April 30, 2004, the last reported closing price for our common shares as reported on the OTCBB was $7.21 per share.


A shareholders' list provided by our transfer agent showed 334 registered shareholders and 33,345,262 common shares outstanding as of April 30 2004. This number excludes any estimate by us of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed.


Dividend Policy


We have never paid any cash dividends on our common shares, and we do not anticipate that we will pay any dividends with respect to those securities in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion development of our business. Any future determination to pay cash dividends will be at the discretion of our board of directors, and will be dependent upon our financial condition, results of operations, capital requirements and other factors as our board may deem relevant at that time.


	41
 
SELLING SHAREHOLDERS


The following table sets forth the total number of common shares beneficially owned by each of the selling shareholders as of April 30, 2004, the total number of common shares they may sell under this prospectus, and the number of common shares they will own thereafter assuming no other acquisitions or dispositions of common shares. The number and percentage of shares beneficially owned before and after the sales is determined in accordance with Rule 13d-3 and 13d-5 of the Exchange Act, and the information is not necessarily indicative of beneficial ownership for any other purpose. See footnote (1) to this table. We believe that each individual or entity named has sole investment and voting power with respect to the securities indicated as beneficially owned by them, subject to community property laws, where applicable, except where otherwise noted.


The selling shareholders are under no obligation to sell all or any portion of the common shares offered for sale under this prospectus. Accordingly, no estimate can be given as to the amount or percentage of our common shares that will ultimately be held by the selling shareholders upon termination of sales pursuant to this prospectus.


The total number of common shares sold under this prospectus may be adjusted to reflect adjustments due to (1) stock dividends, stock distributions, splits, combinations or recapitalizations; or (2) the triggering of certain anti-dilution provisions were we to sell securities at a price below the price at which we sold those shares. For a description of this latter mechanism, see "Description of Capital Stock—Series 'A' Preferred Shares".


Unless otherwise stated below, to our knowledge no selling shareholder nor any of affiliate of such shareholder has held any position or office with, been employed by or otherwise has had any material relationship with us or our affiliates during the three years prior to the date of this prospectus. To our knowledge, the only selling shareholder who is a broker-dealer or an affiliate of a broker-dealer within the meaning of Rule 405 are Maxim Group, LLC and Jenkins Capital Management, LLC.
 

		Common Shares Owned Before Sales (1)									Common Shares Owned After Sales (2)
Selling Shareholder		Number			%			Common Shares Offered For Sale			Number			%
Allen, Bernd		12,501 (13	)		*			12,501 (13	)		0			0	%
Anszelowicz, Marcos		25,001 (14	)		*			25,001 (14	)		0			0	%
Anthony Polak, IRA		25,002 (15	)		*			25,002 (15	)		0			0	%
Asher, Donald		50,001 (16	)		*			50,001 (16	)		0			0	%
Aurelius Consulting Group, Inc.		25,000			*			8,000			17,000			*	%
Axius Holdings, LLC (4)		25,001 (14	)		*			25,001 (14	)		0			0	%
Banks, Jamie		6,251 (18	)		*			6,251 (18	)		0			0	%
Beaber, Rex Julian		449,000			*			80,000			0(17	)		*	%
Bergman, Ronald		12,501 (19	)		*			12,501 (19	)		0			0	%
Berkowitz, Steven and Pamela		12,501 (13	)		*			12,501 (13	)		0			0	%
Binder, Hermann		12,501 (13	)		*			12,501 (13	)		0			0	%
Brazier, Stephen		12,501 (13	)		*			12,501 (13	)		0			0	%
Burdick, Kenneth and Denise		12,501 (13	)		*			12,501 (13	)		0			0	%
Catherine Polak Trust		12,501 (13	)		*			12,501 (13	)		0			0	%
Chasanoff, Teddy		12,501 (13	)		*			12,501 (13	)		0			0	%
Chatpar, Prem C.		25,001 (21	)		*			25,001 (21	)		0			0	%
Chatwin, Michael		25,001 (21	)		*			25,001 (21	)		0			0	%
Clarke, Kevin		12,501 (13	)		*			12,501 (13	)		0			0	%
Coy, Geoffrey		12,501 (13	)		*			12,501 (13	)		0			0	%
Damaco Venture Capital (5)		12,501 (13	)		*			12,501 (13	)		0			0	%
D'Amato, Alfonse		50,001 (20	)		*			50,001 (20	)		0			0	%
Dean Erickson Irrevocable Trust		25,001 (21	)		*			25,001 (21	)		0			0	%
Doubovik, Alexei and Filek, Tatyana		25,001 (14	)		*			25,001 (14	)		0			0	%
Englebert, Mark		12,501 (13	)		*			12,501 (13	)		0			0	%
Equity Interest Inc. (5)		12,501 (13	)		*			12,501 (13	)		0			0	%
Ferrari, Michael		6,251 (18	)		*			6,251 (18	)		0			0	%
Fixel, Arthur and Deborah		12,501 (13	)		*			12,501 (13	)		0			0	%
Fountain, Derward G.		12,501 (13	)		*			12,501 (13	)		0			0	%
Fryer, Leonard and Michael Ann		18,000 (22	)		*			18,000 (22	)		0			0	%
Garfinkle, Arthur		25,001 (21	)		*			25,001 (21	)		0			0	%
Ghauri, Najeeb		12,501 (13	)		*			12,501 (13	)		0			0	%
Goodge, Genevieve R.		3,125 (23	)		*			3,125 (23	)		0			0	%
Greenbaum, Leonard		25,001 (21	)		*			25,001 (21	)		0			0	%
Grodko, Jeffrey		6,251 (18	)		*			6,251 (18	)		0			0	%
Grodko, Allen		6,251 (18	)		*			6,251 (18	)		0			0	%
Gross, John		12,501 (13	)		*			12,501 (13	)		0			0	%
Guirguis, Allen B.		50,001 (16	)		*			50,001 (16	)		0			0	%
Haddad, Charles		25,002 (15	)		*			25,002 (15	)		0			0	%
Halikas, James		25,001 (21	)		*			25,001 (21	)		0			0	%
Halpern, Bart		25,001 (21	)		*			25,001 (21	)		0			0	%
Harley, Michael		50,001 (16	)		*			50,001 (16	)		0			0	%
Hight, Randall		12,501 (13	)		*			12,501 (13	)		0			0	%
Himpele, Richard		12,501 (13	)		*			12,501 (13	)		0			0	%
Jack Polak IRA		12,501 (13	)		*			12,501 (13	)		0			0	%
Jenkins Capital Management, LLC (6)		12,506 (24	)		*			12,506 (24	)		0			0	%
Jegou, Peter J.		5,000 (25	)		*			5,000 (25	)		0			0	%
John O'Neal Johnston Trust		6,251 (18	)		*			6,251 (18	)		0			0	%
Judith T. Huff Revocable Living Trust		6,251 (18	)		*			6,251 (18	)		0			0	%
Kamins, David		6,251 (18	)		*			6,251 (18	)		0			0	%
Kaufman, Robert		25,001 (21	)		*			25,001 (21	)		0			0	%
Kennan, Christopher		25,001 (21	)		*			25,001 (21	)		0			0	%
Kent, Richard		65,001 (26	)		*			65,001 (26	)		0			0	%
Margrit Polack S Account		12,501 (13	)		*			12,501 (13	)		0			0	%
Laden, Susan		12,501 (13	)		*			12,501 (13	)		0			0	%
Landing Wholesale Group (7)		10,001 (27	)		*			10,001 (27	)		0			0	%
Largarticha, Richard C.		25,001 (14	)		*			25,001 (14	)		0			0	%
Long, Leo		62,502 (28	)		*			62,502 (28	)		0			0	%
Marotta, Joseph and Nancy		12,501 (13	)		*			12,501 (13	)		0			0	%
Maxim Group, LLC (8)		256,433 (29	)		*			256,433 (29	)		0			0	%
McClure, Ian		25,001 (21	)		*			25,001 (21	)		0			0	%
Morgan Witt Alliance (9)		475,010 (30	)		1.4	%		475,010 (30	)		0			0	%
O'Silver, Arthur, Trustee of the Arthur O'Silver Trust		25,001 (21	)		*			25,001 (21	)		0			0	%
Otape Investments LLC (10)		125,003 (31	)		* 1			125,003 (31	)		0			0	%
Pearlmutter, Lee		12,501 (13	)		*			12,501 (13	)		0			0	%
Polak, Fred		12,501 (13	)		*			12,501 (13	)		0			0	%
Richard Wallace IRA		12,501 (13	)		*			12,501 (13	)		0			0	%
Richman, Catherine M.		3,750 (32	)		* 1			3,750 (32	)		0			0	%
Richman, Joseph		6,251 (33	)		*			6,251 (33	)		0			0	%
RL Capital Partners (11)		50,001 (16	)		*			50,001 (16	)		0			0	%
Robinson, Jeffrey		12,501 (13	)		*			12,501 (13	)		0			0	%
Ron Lazar IRA		25,001 (21	)		*			25,001 (21	)		0			0	%
Rosenberg, Leslie and Sybil		12,501 (13	)		*			12,501 (13	)		0			0	%
Rosenberg, Robert		25,001 (21	)		*			25,001 (21	)		0			0	%
Rothschild, Jonathan		12,501 (13	)		*			12,501 (13	)		0			0	%
Ryan, Earl James		12,501 (13	)		*			12,501 (13	)		0			0	%
Saker, Wayne		50,001 (16	)		*			50,001 (16	)		0			0	%
Sander, Bella		12,501 (13	)		*			12,501 (13	)		0			0	%
Savey, W. R.		50,001 (16	)		*			50,001 (16	)		0			0	%
Sands Brothers Venture Capital LLC (12)		25,001 (21	)		*			25,001 (21	)		0			0	%
Sands Brothers Venture Capital II LLC (12)		25,001 (21	)		*			25,001 (21	)		0			0	%
Sands Brothers Venture Capital III, LLC (12)		125,003 (31	)		* 1			125,003 (31	)		0			0	%
Sands Brothers Venture Capital IV LLC (12)		50,001 (16	)		*			50,001 (16	)		0			0	%
SB Mechanical Associates LLC (12)		25,001 (21	)		*			25,001 (21	)		0			0	%
Shaw, Sr., Roy G.		25,001 (21	)		*			25,001 (21	)		0			0	%
Stadmauer, Gary		12,501 (13	)		*			12,501 (13	)		0			0	%
Stadmauer, Murray and Clare		12,501 (13	)		*			12,501 (13	)		0			0	%
Stone, Michael		50,001 (16	)		*			50,001 (16	)		0			0	%
Tarica, Michele		12,501 (13	)		*			12,501 (13	)		0			0	%
Vallarino, Vincent		17,001 (34	)		* 1			17,001 (34	)		0			0	%
Van Emon, Peter		5,000 (25	)		* 1			5,000 (25	)		0			0	%
Viney, John		150,003 (35	)		* 1			150,003 (35	)		0			0	%
Wallace, Richard		18,752 (36	)		* 1			18,752 (36	)		0			0	%
Warner, Larry and Rebecca		6,251 (18	)		*			6,251 (18	)		0			0	%
Weinger, Jerold		50,001 (16	)		*			50,001 (16	)		0			0	%
William Peterson Living Trust		12,501 (13	)		*			12,501 (13	)		0			0	%
Wolkowicki, Shimon		25,001 (14	)		*			25,001 (14	)		0			0	%
Young, Jonathan		25,001 (21	)		*			25,001 (21	)		0			0	%
Total		3,432,401						3,046,401			17,000

*   Less than one percent

	42

 

1. Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any common shares as to which a shareholder has sole or shared voting power or investment power, and also any common shares which the shareholder has the right to acquire within 60 days, including upon exercise of common shares purchase options or warrant or conversion of UGC series ‘A’ preferred shares. There were 33,345,262 common shares outstanding as of April 30, 2004.
2. Assumes the sale of all common shares offered under this prospectus.
3. Mr. Dave Gentry is the controlling person of Aurelius Consulting Group, Inc.
4. Mr. Henry Robertelli is the controlling person of Axius Holdings, LLC.
5. Mr. Jack Polak is the controlling person of Damaco Venture Capital and Equity Interest Inc.
6. Mr. Dave Jenkins is the controlling person of Jenkins Capital Management, LLC.
7. Mr. Andrew Bello is the controlling person of Landing Wholesale Group.
8. Mr. Michael Rabinowitz is the controlling person of the Maxim Group LLC.
9. Mr. Edward Witt is the controlling person for Morgan Witt Alliance.
10. Mr. James W. Santori is the controlling person of Otapi Investments LLC.
11. Mr. Ron Lazar is the controlling person of RL Capital Partners.
12. Mr. Martin Sands is the controlling person of Sands Brothers Venture Capital LLC, Sands Brothers Venture Capital II, LLC, Sands Brothers Venture Capital III, LLC, Sands Brothers Venture Capital IV, LLC, and SB Mechanical Associates LLC.
13. Includes 8,334 common shares to be issued upon the conversion of series 'A' preferred shares and 4,167 common shares to be issued upon the exercise of class 'C' warrants.
14. Includes 8,334 common shares to be issued upon the exercise of class 'C' warrants.
15. Includes 16,668 common shares to be issued upon the conversion of series 'A' preferred shares and 8,334 common shares to be issued upon the exercise of class 'C' warrants.
16. Includes 33,334 common shares to be issued upon the conversion of series 'A' preferred shares and 16,667 common shares to be issued upon the exercise of class 'C' warrants.
17. Pursuant to the terms of a settlement agreement, upon the registration of the 80,000 common shares held by Mr. Beaber, the balance of the 449,000 shares held by Mr. Beaber will be cancelled and returned to treasury.
18. Includes 4,167 common shares to be issued upon the conversion of series 'A' preferred shares and 2,084 common shares to be issued upon the exercise of class 'C' warrants.
19. Includes 4,167 common shares to be issued upon the exercise of class 'C' warrants.
20. Includes 16,667 common shares to be issued upon the exercise of class 'C' warrants.
21. Includes 16,667 common shares to be issued upon the conversion of series 'A' preferred shares and 8,334 common shares to be issued upon the exercise of class 'C' warrants.
22. Includes 12,000 common shares to be issued upon the conversion of series 'A' preferred shares and 6,000 common shares to be issued upon the exercise of class 'C' warrants.
23. Includes 2,083 common shares to be issued upon the conversion of series 'A' preferred shares and 1,042 common shares to be issued upon the exercise of class 'C' warrants.
24. Includes 8,337 common shares to be issued upon the conversion of series 'A' preferred shares and 4,169 common shares to be issued upon the exercise of class 'C' warrants.
25. Includes 3,333 common shares to be issued upon the conversion of series 'A' preferred shares and 1,667 common shares to be issued upon the exercise of class 'C' warrants.
26. Includes 43,334common shares to be issued upon the conversion of series 'A' preferred shares and 21,667 common shares to be issued upon the exercise of class 'C' warrants.
27. Includes 6,667 common shares to be issued upon the conversion of series 'A' preferred shares and 3,334common shares to be issued upon the exercise of class 'C' warrants.
28. Includes 41,668common shares to be issued upon the conversion of series 'A' preferred shares and 20,834common shares to be issued upon the exercise of class 'C' warrants.
29. Includes 170,955 common shares to be issued upon the conversion of series 'A' preferred shares and 85,478 common shares to be issued upon the exercise of class 'C' warrants.
30. Includes 316,673 common shares to be issued upon the conversion of series 'A' preferred shares and 158,337 ommon shares to be issued upon the exercise of class 'C' warrants.
31. Includes 83,335 common shares to be issued upon the conversion of series 'A' preferred shares and 41,668 common shares to be issued upon the exercise of class 'C' warrants.
32. Includes 1,250 common shares to be issued upon the exercise of class 'C' warrants.
33. Includes 2,084 common shares to be issued upon the exercise of class 'C' warrants.
34. Includes 11,334 common shares to be issued upon the conversion of series 'A' preferred shares and 5,667 common shares to be issued upon the exercise of class 'C' warrants.
35. Includes 100,002 common shares to be issued upon the conversion of series 'A' preferred shares and 50,001 common shares to be issued upon the exercise of class 'C' warrants.
36. Includes 12,501 common shares to be issued upon the conversion of series 'A' preferred shares and 6,251 common shares to be issued upon the exercise of class 'C' warrants.

On October 1, 2003 through November 1, 2003, we raised $5,378,650 in gross proceeds from a private placement to 100 investors effected through Maxim Group, LLC, a registered broker-dealer, as placement agent, pursuant to which we sold:


• 1,792,976 series 'A' convertible preferred shares, with each share convertible into one common share; and
  
  
• 896,488 Class 'C' warrants, each warrant entitling the holder to purchase one common share for $3.75.

Under our placement agency agreement with Maxim Group, we were obligated to pay it in cash (1) an amount equal to 8% of funds raised in cash as its placement fee, (2) a non-accountable expense allowance equal to 2% of the gross proceeds of the placement, and (3) legal fees up to $20,000 and other offering expenses. As additional consideration, we were also obligated to pay Maxim Group an amount of securities issuable under the private placement equal to 10% of all securities sold. Pursuant to those obligations, we (1) paid Maxim Group $537,865 in cash as its placement fee, (2) paid or reimbursed Maxim Group $34,820 in cash for expenses, and (3) issued to Maxim Group placement agent's unit purchase warrants entitling it to purchase a total of  179,292 series 'A' convertible preferred shares and&nbs p;89,646 class 'C' warrants. We also granted Maxim Group for a period of eighteen months a first right of refusal to manage selected private or public placements of our securities or to act as our financial advisor in the event of a merger, acquisition or other business combination. We are also obligated to indemnify and defend Maxim Group and its affiliates from any liability arising from the private placement other than that attributable to its bad faith or gross negligence.

As part of private placement, we entered into registration rights agreements with the investors under which we agreed to file the registration statement of which this prospectus is a part in order to register the common shares issuable upon the conversion of those series 'A' convertible preferred shares or the exercise of those class 'C' warrants. The registration right agreements require us to use our best efforts to file the registration statement as soon as reasonably practicable after the first closing for the offering (October 1, 2003), but in no event less than 90 days following the first closing. If we fail to do so, the exercise price for the class 'C' warrants will be reduced to $3 from $3.75. Maxim Group was also granted comparable registration rights under the placement agency agreement. Our filing of the registration statement containing this prospectus satisfied those requirements.

In the registration statement of which this prospectus is a part, we are also registering (1) a total of 8,000 common shares issued to Auerlius Consulting Group, Inc. pursuant to registration rights granted to that shareholder under a marketing agreement, and (2) a total of 80,000 common shares issued to Mr. Rex Julian Beaber pursuant to registration rights granted to that shareholder under a piggyback registration rights agreement.

	44

The common shares offered by this prospectus may be sold by the selling shareholders in one or more transactions at market prices prevailing at the time of the sale, at negotiated prices, at fixed prices which may be changed, or at prices related to prevailing market prices, or at varying prices determined at the time of sale. These sales may be effected by the selling shareholders at various times in (1) transactions effected on any national securities exchange or United States inter-dealer system of a registered national securities association on which the common shares may be listed or quoted at the time of sale; (2) transactions effected on the over-the-counter market; or (3) in private transactions and transactions effected otherwise than on these exchanges or systems or in the over-the-counter market. We will receive no proceeds from any resales of the shares offered under this prospectus.


The selling shareholders and their successors, including their transferees, pledgees or donees or their successors, may sell the common shares directly to a purchaser or through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions from the selling shareholder or the purchaser. These discounts, concessions or commissions as to any particular underwriter, broker-dealer or agent may be in excess of those customary in the types of transactions involved. These brokers or dealers and any other participating brokers or dealers may be deemed to be underwriters within the meaning of the Securities Act of 1933 in connection with these sales


Our selling shareholders may also enter into hedging transactions, and persons with whom they effect such transactions, including broker-dealers, may engage in short sales of our common shares. Our selling shareholders may also engage in short sales and short sales against the box, and in options, swaps, derivatives and other transactions in our securities, and may sell and deliver the shares covered by this prospectus in connection with such transactions or in settlement of securities loans. These transactions may be entered into with broker-dealers or other financial institutions that may resell those shares.


A selling shareholder may also pledge the shares offered under this prospectus pursuant to the margin provisions of customer agreements or otherwise. Upon delivery of the shares or a default by a selling shareholder, the broker-dealer or financial institution may offer and sell the pledged shares from time to time.


If necessary, the specific common shares to be sold, the names of the selling shareholders, the respective purchase prices and public offering prices, the names of any agent, dealer or underwriter, and any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement of which this prospectus is a part.


Our selling shareholders may be deemed to be "underwriters" within the meaning of section 2(11) of the Securities Act in connection with the sales and distributions contemplated under this prospectus, and may have civil liability under Section 11 and 12 of the Securities Act for any omissions or misstatements in this prospectus and the registration statement of which it is a part. Additionally, any profits which our selling shareholders may receive might be deemed to be underwriting compensation under the Securities Act.


The rules and regulations in Regulation M under the Securities Exchange Act of 1934 provide that during the period that any person is engaged in the distribution (as that term is defined in Regulation M) of our common shares, that person generally may not purchase common shares. The selling shareholders are subject to applicable provisions of the Securities Act of 1933 and Securities Exchange Act of 1934 and the rules and regulations thereunder, including, without limitation, Regulation M, which provisions may limit the timing of purchases and sales of our common shares by the selling shareholders. The foregoing may affect the marketability of our common shares.

	45

 

We have entered into registration rights agreements for the benefit of the selling shareholders to register the common shares under applicable federal and state securities laws. The registration rights agreements generally provide for cross-indemnification of those selling shareholders and us and each party's respective directors, officers and controlling persons against liability in connection with the offer and sale of our stock, including liabilities under the Securities Act of 1933, and to contribute to payments the parties may be required to make in respect thereof. We have agreed to indemnify those selling shareholders and hold them harmless from certain liabilities under the Securities Act of 1933. We will bear all expenses relating to the sale of our common shares under this prospectus, except that the selling shareholders will pay any applicable underwriting commissions and expenses, brokerage fees and transfer taxes, as well as the fees and disbursements of counsel to and experts for the selling shareholders.


Any common shares offered under this prospectus which qualify for sale pursuant to Rule 144 of the Securities Act may also be sold under Rule 144 rather than pursuant to this prospectus.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON ACCOUNTING AND FINANCIAL DISCLOSURE




On December 1, 2003, we dismissed our independent auditor, Burnett + Company, LLC, and on December 2, 2003, we engaged Stonefield Josephson, Inc. as our independent auditor for the fiscal year ending December 31, 2003. The decision to dismiss Burnett + Company was approved by our board of directors.


Burnett + Company's reports on our financial statements as of and for the years ended December 31, 2002 and December 31, 2001 did not contain an adverse opinion or a disclaimer of opinion, nor were they modified as to uncertainty, audit scope, or accounting principles. During the periods ended December 31, 2001 and December 31, 2002, and the interim period from January 1, 2003 through the date of Burnett + Company's dismissal, we did not have any disagreements with Burnett + Company on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Burnett + Company's satisfaction, would have caused it to make a reference to the subject matter of the disagreements in connection with its reports.


Prior to engaging Stonefield Josephson, we did not consult with Stonefield Josephson regarding the application of accounting principles to a specified completed or contemplated transaction or the type of audit opinion that might be rendered on our financial statements.


TRANSFER AGENT


The transfer agent for our common shares is Atlas Stock Transfer Corporation, 5899 South State Street, Salt Lake City, Utah 84107. We act as our own transfer agent with regard to our series 'A' preferred shares and our outstanding common share purchase options and warrants.


LEGAL MATTERS


The validity of the issuance of the common shares to be sold by the selling shareholders under this prospectus and the underlying series 'A' preferred shares and class 'C' common share purchase warrants was passed upon for our company by Richardson & Patel LLP.

	46

 

EXPERTS


The financial statements included in this prospectus have been audited by Stonefield Josephson, Inc., independent certified public accountants to the extent and for the periods set forth in their report appearing elsewhere herein and are included in reliance upon such report given upon the authority of that firm as experts in auditing and accounting.


INDEMNIFICATION OF DIRECTORS AND OFFICERS


Our Certificate of Incorporation, as amended, provide shall that we shall, to the maximum extent and in the manner under Delaware corporate law, indemnify each of our directors and officers against expenses (including attorneys' fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. The effect of this provision of our Certificate of Incorporation is to eliminate our right and our shareholders (through shareholders' derivative suits on behalf of our company) to recover damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions contained in our Certificate of Incorporation are necessary to attract and retain qualified persons as directors and officers.


Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. No pending material litigation or proceeding involving our directors, executive officers, employees or other agents as to which indemnification is being sought exists, and we are not aware of any pending or threatened material litigation that may result in claims for indemnification by any of our directors or executive officers.


WHERE YOU CAN FIND MORE INFORMATION


This prospectus is part of a registration statement on form SB-2 we have filed with the SEC. This prospectus does not contain all of the information set forth in that registration statement and the exhibits and schedules filed therewith because that information has been omitted from this prospectus in accordance with the SEC's rules and regulations. You should refer to that registration statement and those exhibits and schedules for further information regarding our company and the common shares to be offered and sold under this prospectus. Please also note that any statements or descriptions contained in this prospectus relating to the contents of any contract or other document are not necessarily complete, and those statements or descriptions are qualified in all respects to the underlying contract or document in each instance where it is filed as an exhibit to the registration statement.


You should rely only on the information or representations provided in this prospectus. We have authorized no one to provide you with different information. Neither the delivery of this prospectus nor any sale or distribution made under this prospectus shall, under any circumstances, create any implication that information contained in this prospectus is correct as of any time subsequent to the date of this prospectus.


We are also a voluntary reporting company under Section 15(d) of the Securities Act and, as such, voluntarily file annual reports on form 10-KSB, quarterly reports on form 10-QSB, proxy statements and other reports, statements and information with the SEC prepared in accordance with the requirements of the Exchange Act. While we mail our annual proxy materials and annual reports on form 10-KSB to our shareholders prior to our annual meeting of shareholders, we do not mail any other periodic reports and other information to our shareholders other than in response to specific requests for these materials.

	47

 

You may review and print-out the registration statement containing this prospectus as well as any other reports and statements we may file with the SEC through its website at http://www.sec.gov. You may also inspect and copy any document we file with the SEC at its public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. For obtain information about these references rooms you should call the SEC at 1-800-SEC-0330.


You may also request a copy of any document we file with the SEC, at no cost, by either writing us at our principal executive offices located at 4705 Laurel Canyon Boulevard, Suite 203, Studio City, California 91607; telephoning us at (818) 432-4560; or e-mailing your request to info@recom-systems.com. Selected documents we file with the SEC are also available for print-out in pdf format on our corporate website at www.recom-systems.com.

 

	F-1

		December 31,2003
ASSETS
CURRENT ASSETS
Cash		$	3,957,720
Prepaid expenses			130,749
Total current assets			4,088,469
Property, plant and equipment, net of accumulated depreciation of $39,751.			169,299
Intangible – patents, net of accumulated amortization of $11,146			157,828
TOTAL ASSETS		$	4,415,596
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable			158,282
Accrued dividend payable			107,575
Accrued expenses			324,999
Total current liabilities			590,856
STOCKHOLDERS’ EQUITY
Series ‘A’ convertible preferred stock, $.001 par value;     10,000,000 shares authorized; 1,792,975 shares issued and outstanding		$	1,793
Common stock, $.001 par value;     100,000,000 shares authorized; 32,993,912 shares issued and outstanding			32,993
Additional paid-in capital			11,477,573
Deferred compensation			(232,020	)
Deficit accumulated during development stage			(7,455,599	)
TOTAL STOCKHOLDERS’ EQUITY			3,824,740
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	4,415,596

	F-2

		For the Years Ended December 31,						From Inception of Development Stage (Nov. 7, 2000) to
			2003			2002			Dec. 31, 2003
Revenue		$	—		$	—		$	—
Research and development			497,631			67,500			565,131
General and administrative expenses			4,813,746			144,454			5,044,873
Total expense			5,311,377			211,954			5,610,004
Provision for income taxes			—			—			—
Net loss		$	(5,311,377	)	$	(211,954	)	$	(5,610,004	)
Preferred dividend			1,953,170			—			1,953,170
Net loss attributed to common stockholders		$	(7,264,547	)	$	(211,954	)	$	(7,563,174	)
Basic and diluted loss per share		$	(0.17	)	$	(0.02	)	$	(0.37	)
Basic and diluted loss per share attributed to common stockholders		$	(0.23	)	$	(0.02	)	$	(0.49	)
Weighted average shares outstanding— basic and diluted			31,765,404			11,609,162			15,311,041

	F-3

	Common Stock		Series ‘A’ Convertible Preferred Stock				Additional Paid-		Deferred		Deficit Accumulated During Development		From Inception (Nov. 7, 2000) To Dec. 31,
	Shares	Amount	Shares		Amount		in Capital		Compensation		Stage		2003
2000:
Balance November 7, 2000 (as restated for 3:1 stock split)	4,139,784	$        4,139	—		$                —		$               (4,139)		$                    —		$                         —		$           —
Contributed capital	—	—	—				35,000		—		—		35,000
Net loss	—	—	—		—		—		—		(36,673)		(36,673)
Balance December 31, 2000	4,139,784	4,139	—		—		30,861		—		(36,673)		(1,673)
2001:
Capital contributed	—	—	—		—		45,000		—		—		45,000
Shares issued for services July 2001 – $0.033	150,000	150	—		—		4,850		—		—		5,000
Net loss	—	—	—		—		—		—		(50,000)		(50,000)
Balance December 31, 2001	4,289,784	4,289	—		—		80,711		—		(86,673)		(1,673)
Capital contributed	—	—	—		—		56,400		—		—		56,400
Warrants issued for cash	—	—	—		—		125,000		—		—		125,000
Issuance of common stock for:			—		—
Technology – Sept. 2002 – $0.006	23,400,000	23,400	—		—		54,623		—		—		78,023
Services rendered – Oct. 2002 – $0.021	2,925,000	2,925	—		—		17,958		(19,678)		—		1,205
Cash – Oct 2002 – $0.03	564,810	565	—		—		17,221		—		—		17,786
Cash – Nov 2002 – $2.66	71,250	71	—		—		189,929		—		—		190,000
Contributed services – officer	—	—	—		—		20,000		—		—		20,000

	F-4

	F-5

		Common Stock		Series ‘A’ Convertible Preferred Stock				Additional Paid-in		Deferred		Deficit Accumulated During Development		From Inception (Nov. 7, 2000) To Dec. 31
		Shares	Amount	Shares		Amount		Capital		Compensation		Stage		2003
Contributed services – officer		—	—	—		—		80,000		—		—		80,000
Employee stock options issued below market		—	—	—		—		38,400		—		—		38,400
Amortization of deferred compensation		—	—	—		—		—		6,668		—		6,668
Options and warrants issued for:
Services		—	—	—		—		2,196,068		(219,010)		—		1,977,058
Financing cost		—	—	—		—		74,088		—		—		74,088
Issuance of preferred stock for cash		—	—	1,792,975		1,793		5,376,857		—		—		5,378,650
Series ‘A’ preferred offering expenses		—	—	—		—		(572,785)		—		—		(572,785)
Preferred stock beneficial conversion feature		—	—	—		—		896,474		—		(896,474)		—
Allocation of fair value to warrants		—	—	—		—		949,121		—		(949,121)		—
Preferred stock accrued dividend payable		—	—	—		—		(107,575)		—		—		(107,575)
Net loss		—	—	—		—		—		—		(5,311,377)		(5,311,377)
Balance December 31, 2003		32,993,912	$ 32,993	1,792,975		$ 1,793		$ 11,477,573		$ (232,020)		$ (7,455,599)		$ 3,824,740

	F-6

	F-7

	F-8

		For the Year Ended December 31, 2003			For the Year Ended December 31, 2002
Net loss as reported		$	(5,311,377	)	$	(211,954	)
Current period expense calculated under APB 25			38,400			—
Stock compensation calculated under SFAS 123			(730,865	)		—
Pro forma net loss		$	(6,003,842	)	$	(211,954	)
Basic and diluted historical loss per share		$	(0.17	)	$	(0.02	)
Pro forma basic and diluted loss per share		$	(0.19	)	$	(0.02	)

		December 31, 2003
Computer equipment		$	68,070
Leasehold improvements			66,792
Furniture and fixtures			50,000
Software			15,904
Other equipment			8,284
Total property, plant and equipment			209,050
Accumulated depreciation			39,751
Property, plant and equipment, net		$	169,299

		December 31,2003			December 31,2003
Statutory federal income tax rate			(35)	%		(35)	%
Accounting effect of:
Consultant options/warrant expense			12	%		--
Consultant options/warrant exercise			(19	%)		--
Valuation allowance			42	%		35	%
Effective income tax rate			0	%		0	%

		December 31,2003			December 31,2003
Deferred tax assets:
Net operating loss carryforwards			(5,311,377	)		(184,203	)
Consultant options/warrant expense			2,284,146			--
Consultant options/warrant exercise			(3,690,000	)		--
Gross deferred assets			(6,717,231	)		(184,203	)
Valuation allowance			(6,717,231	)		(184,203	)
Net deferred tax assets			--			--

		December 31, 2003						December 31, 2002
		Number			Weighted Average Exercise Price			Number			Weighted Average Exercise Price
Outstanding at beginning of the period			975,000		$	0.21			—		$	—
Granted during the period			2,780,439			1.46			975,000			0.21
Exercised during the period			1,205,000			0.54			—			—
Terminated during the period			750,000			0.95			—			—
Outstanding at end of the period			1,800,439			1.72			975,000			0.20
Exercisable at end of the period			1,583,932		$	1.64			375,000		$	0.01

Range of Exercise Prices		Remaining Number Outstanding		Weighted Average Contractual Life (Years)		Weighted Average Fair Value		Weighted Average Exercise Price
$0 to 1		682,000		3.6		$ 1.16		$ 0.83
1 to 2		50,000		4.3		$ 2.01		$ 1.25
2 to 3		158,000		4.4		$ 2.11		$ 2.35
3 to 4		367,439		4.7		$ 1.28		$ 3.55
4 to 5		150,000		4.5		$ 1.19		$ 4.70
5 to 6		18,000		4.7		2.09		$ 5.29

Range of Exercise Prices		Remaining Number Outstanding		Weighted Average Contractual Life (Years)		Weighted Average Fair Value		Weighted AverageExercise Price
$0 to 1		375,000		3.8		$ 0.02		$ 0.01

		December 31, 2003						December 31, 2002
		Number			Weighted Average Exercise Price			Number			Weighted Average Exercise Price
Outstanding at beginning of the period			—		$	—			—		$	—
Granted during the period			1,866,000			1.14			—			—
Exercised during the period			—			—			—			—
Terminated during the period			—			—			—			—
Outstanding at end of the period			1,866,000			1.14			—			—
Exercisable at end of the period			1,002,750		$	1.03			—		$	—

Range of Exercise Prices		Remaining Number Outstanding		Weighted Average Contractual Life (Years)		Weighted Average Fair Value		Weighted AverageExercise Price
$0 to 1		1,740,000		4.2		$ 0.62		$ 0.92
1 to 2		—		—		$ —		$ —
2 to 3		10,000		4.3		$ 1.48		$ 2.85
3 to 4		10,000		4.6		$ 1.46		$ 3.75
4 to 5		106,000		4.6		$ 0.82		$ 4.31

• Mr. Fink's initial base salary under the agreement is $1 per year. Following the one-year anniversary of the agreement, the Board of Directors may review and adjust the base salary in light of the Company's performance.

• Mr. Fink is entitled to a cash bonus for his second through fourth years of employment. The amount of the bonus is 10% of the after tax income exclusive of extraordinary expenses for the second year, and 15% of that amount for the third and fourth years.

• Mr. Fink is granted 2,100,000 "restricted" shares of common stock (700,000 shares pre-split), to be earned over three years of continuous employment. These shares, which are held in escrow by the company pursuant to the terms of a restricted stock agreement until they are earned, vest in tranches of 174,999 each at the end of the first eleven quarters of Mr. Fink's employment, with the balance vesting at the end of the twelfth quarter. Mr. Fink is entitled to all dividends, which may be declared with respect to these shares, even if not vested. See Note 10, “Other Equity Transactions”.

• The agreement contains a "gross up" provision obligating the Company to make a cash payment to Mr. Fink to cover any taxes he may incur by reason of receiving any payment or distribution that would constitute an excess golden parachute payment under the federal tax laws. The gross up provision also applies to the 2,100,000 restricted shares of common stock described above, however, Mr. Fink exercised his section 83(b) election under the Internal Revenue Code subjecting him to immediate taxation upon the receipt of the shares notwithstanding their future forfeitability, so the Company's liability, if any, for any taxes imposed under that grant should be nominal.

 

• Should the Company’s shares of common stock be listed on any of the NYSE, AMEX or Nasdaq national stock exchanges or markets, Mr. Fink would be entitled, if then still employed by the Company, to an additional grant of 600,000 shares of common stock (200,000 shares pre-split).

• In the event of a change in control (as that term is defined in the employment agreement), Mr. Fink would be entitled, if then still employed by the Company, to an additional grant of common stock having a market value of $5,000,000, but not to exceed 600,000 shares (200,000 shares pre-split) in total.

• Mr. Fink is entitled to a number of employee benefits under the agreement, including a $1,200 per month automobile allowance, individual medical plan reimbursement of up to $2,000 per month until the Company adopts a group plan for the Company’s employee’s, and the right to participate in all benefit plans established for the Company’s employees or executives, including medical, hospitalization, dental, long-term care and life insurance programs.

• The employment agreement provides for early termination in the case of Mr. Fink's death or disability, Mr. Fink's termination by the Company for "cause" as that term is defined in the agreement; Mr. Fink's termination of employment for "good reason" as that term is defined in the agreement, a "change in ownership" as that term is defined in the agreement, or sixty days' prior notice by Mr. Fink. In the event of an early termination of the agreement for any reason, all compensation and benefits under the agreement will terminate and the unvested portion of the 2,100,000 restricted common share grant shall be deemed forfeit as of the effective termination date, with the following exceptions:

• If the agreement is terminated during years two through four due to Mr. Fink's disability, termination by Mr. Fink for good reason; the Company's termination of Mr. Fink without cause, or a change in ownership, Mr. Fink will nevertheless be entitled to a pro rata portion (based upon the actual number of days of employment) of the cash bonus based on the Company's after-tax income that he would have otherwise received for the year of termination had he remained employed until the end of that year
• If the agreement is terminated due to Mr. Fink's death, disability, termination by Mr. Fink for good reason; The Company's termination of Mr. Fink without cause, or a change in ownership, the unvested portion of the 2,100,000 restricted common share grant to Mr. Fink will become fully vested and the shares released from escrow; and
• Mr. Fink and his family will be entitled to an additional three years' medical, hospitalization, dental, long-term care and life insurance coverage if the agreement is terminated by Mr. Fink for good reason or terminated by The Company's termination without cause, and an additional one years' coverage if the agreement is terminated due to Mr. Fink's disability.

• The agreement provides for a ten-year initial term. After the initial term, the agreement renews automatically for successive one-year terms, unless either party delivers 90-days' written notice to the other of their intent not to renew.

• Dr. Drakulic's services are provided on a mutually-acceptable part-time basis.

 

• The Company is obligated to pay B Technologies a $10,000 bonus upon execution, and a monthly service fee of $15,000 thereafter.

• B World Technologies was granted 600,000 "restricted" shares of common stock (200,000 shares pre-split), to be earned over five years of continuous provision of services by Dr. Drakulic. These shares, which will be held in escrow with the company pursuant to the terms of a restricted stock agreement until they are earned, vest at the rate of 30,000 shares per quarter with the first 30,000 shares vesting on January 15, 2003. B World Technologies is entitled to all dividends, which may be declared with respect to these shares, even if not vested. See Note 10, “Other Equity Transactions”.

• The loan-out agreement provides for early termination should B World and B Technologies fail, neglect or refuse to provide Dr. Drakulic's services. In such an event, all compensation under the agreement will terminate and the unvested portion of the 600,000 restricted common share grants shall be deemed forfeit as of the effective termination date.

• The Company is obligated to pay Dr. Harmison $36,000 per year over the term of the agreement, payable quarterly. Dr. Harmison was entitled to receive upon execution of the agreement an initial grant of options entitling him to purchase 216,000 shares of common stock, in two tranches of 108,000 options, (36,000 shares pre-split) at $0.97 per share, exercisable over five years. The first tranche of 108,000 options vest immediately and the second tranche of 108,000 options vest over three years on a quarterly basis. The fair value of the first tranche of options was $80,456 estimated using the Black-Scholes option-pricing model computed as of the measurement dates, which is the grant date, with the following assumptions: (i) dividend yield of 0%, (ii) expected volatility of 158.48%, (iii) weighed-average risk-free interest rate of approximately 1.65, and (iv) expected life of 1.5 years. The second tranche of 108,000 options are measured on the vesting dates which are the dates that the services were completed. As of December 31, 2003 there have been three quarterly vestings which were fair valued with the Black Scholes model at $74,643 and are amortized over the remaining life of the contract. The following assumptions were used in the model: (i) dividend yield of 0%, (ii) expected volatility range between 53.84% and 114.24%, (iii) weighted average risk free rate range of between 1.42% and 1.86%, and (iv) expected life of 1.5 years.

• Dr. Harmison is entitled to receive options exercisable into shares of common stock in tranches of 20,000 shares per milestone for assisting the Company in attaining various milestones determined by the Company's Board of Directors, including the preparation and filing with the FDA of a 510(k) application for the Company's product, approval of that application by the FDA, and market launch of that product.
• A grant of 20,000 shares of common stock in the event of a "change in control" as that term is defined in the agreement.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13   Other Expenses Of Issuance And Distribution

The following table sets forth the estimated costs and expenses which we expect to incur with respect to the offering and sale or distribution of common shares under this registration statement. We have agreed to pay all of these expenses.

SEC Registration Fee	$ 935.11
Financial Printer Fees to EDGARize and Print Registration Statement	3,000.00*
Transfer Agent Fees, including Printing and Engraving Stock Certificates	1,000.00*
Legal Fees and Expenses	65,000.00*
Accounting Fees and Expenses	15,000.00*
Miscellaneous	1,000.00*
Total	$ 85,935.11*
* estimated

Item 14 Indemnification Of Directors And Officers

Our Articles of Incorporation, as amended, provide shall that we shall, to the maximum extent and in the manner under Delaware corporate law, indemnify each of our directors and officers against expenses (including attorneys' fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. The effect of this provision of our Articles of Incorporation, as amended, is to eliminate our right and our shareholders (through shareholders' derivative suits on behalf of our company) to recover damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions in our Articles of Incorporation are necessary to attract and retain qualified persons as directors and officers.

We have also entered into an indemnification agreement with Marvin Fink, our Chief Executive Officer and Chairman of the Board.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC 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, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and we will be governed by the final adjudication of such issue.

Rule 506

We have sold or issued the following securities not registered under the Securities Act of 1933 by reason of the exemption afforded under SEC Rule 506 promulgated under Regulation D or, in the alternative, Section 4(2) of the Securities Act, during the three year period ending on the date of filing of this registration statement. Except as stated below, no underwriting discounts or commissions were payable with respect to any of the following transactions. The offer and sale of the following securities was exempt from the registration requirements of the Securities Act under Rule 506 insofar as (1) except as stated below, each of the investors was accredited within the meaning of Rule 501(a); (2) the transfer of the securities were restricted by the company in accordance with Rule 502(d); (3) there were no more than 35 non-accredited investors in any transaction within the meaning of Rule 506(b), after taking into consideration all prior investors under Section 4(2) of the Securities Act within the twelve months preceding the transaction; and (4) none of the offers and sales were effected through any general solicitation or general advertising within the meaning of Rule 502(c).

• On September 19, 2002, immediately prior to our acquisition of the Signal Technologies from ARC Finance Group, Mr. Sim Farar, our president and principal shareholder at that time, invested $125,000 into the company as working capital in exchange for a warrant entitling him to purchase 600,000 common shares at $0.21 per share (200,000 shares at $0.65 per share pre-split). The warrant may not be exercised before September 1, 2003, expires in September 2006, contains cashless exercise options and certain anti-dilution and other provisions. At the time, Vanguard West LLC, a company owned and controlled by Mr. Farar, held approximately 98% of our common shares.
  
  
• On February 5, 2003, pursuant to a director's compensation plan adopted by our board of directors on that date, we issued to each of our five directors as of that date, including Messrs. Fink and Roston and Dr. Robert Koblin, options to purchase 150,000 common shares at $0.88 per share (50,000 shares at $2.65 per share pre-split) under our 2002 Stock Plan. The options are fully vested and lapse, if unexercised, on February 4, 2008. For further information relating to these transactions, see that section of the prospectus contained in this registration statement "Management—Board Compensation".
  
  
• On March 10, 2003, we issued to Dr. Budimir S. Drakulic, our Vice President and Chief Technology Officer, options to purchase 750,000 common shares at $0.95 per share (250,000 shares at $2.76 per share pre-split) under our 2002 Stock Plan. The options vest over a period of four years, and lapse if unexercised on March 9, 2008.
  
  
• On March 10, 2003, we issued to Mr. Charles McGill options to purchase 900,000 common shares at $0.95 per share (300,000 common shares at $2.85 per share (900,000 shares at $0.95 per share pre-split). These options were issued as an inducement for Mr. McGill to become our Chief Financial Officer pursuant to an employment agreement entered into on that same date. The options were to vest over a period of three years, and lapse if unexercised on March 24, 2008. Mr. McGill retired in November 2003, at which time 150,000 options vested and the balance lapsed.
  
  
• On March 10, 2003, we issued warrants to purchase 900,000 restricted common shares post-split at $0.50 per share (300,000 shares at $1.50 per share pre-split).  The warrants, which are held by Crown Reef for its provision of strategic planning, marketing and business advisory consulting services, lapse if not exercised by March 9, 2008.  We valued the grant at $450,000.
  
  
• On April 8, 2003, we sold to Mr. Mitchell Stein 112,812 common shares (37,604 shares pre-split) for $100,000 in cash and $150,000 in expenses and equipment.

• On April 15, 2003, we issued to Brookstreet Securities Corporation warrants to purchase 200,000 common pursuant to an investment banking agreement. The warrants are exercisable in four tranches of 50,000 common shares each. The first tranche was fully vested upon grant and exercisable at $1.25 per share. The second tranche vested 90 days after issuance with an exercise price of $2.25 per share. The third tranche vested 180 days after issuance with an exercise price of $3.25 per share. The fourth tranche vested 270 days after issuance with an exercise price of $4.25 per share. We valued the grant at $550,000.
  
  
• On May 15, 2003, we completed the first tranche of a private placement pursuant to which we sold 82,667 units to Mr. Mitchell Stein, SJ Investments and Ms. Norma Provencio at $3 per unit for cash amounting to $248,000. Each unit consisted of one common share and one warrant. Each warrant is exercisable at $3 until May 14, 2004. Upon exercise of the warrants each investor will receive one common share and an additional warrant to purchase one common share $6 per share until November 15, 2004.
• On June 5, 2003, we issued to Dr. Lowell T. Harmison, in his capacity as a director, options to purchase 50,000 common shares at $4.20 per share under our 2002 Stock Plan. These options are fully vested, and lapse if unexercised on June 5 2008. For further information relating to this transaction, see that section of the prospectus contained in this registration statement captioned "Management—Board Compensation".
  
  
• On July 17, 2003, we issued to Maxim Group, LLC warrants to purchase 100,000 common shares at $4.62 per share pursuant to an investment banking agreement. The warrants lapse if unexercised on July 16, 2008. We valued the grant at $492,000.
  
  
• On July 24, 2003, we completed the second tranche of a private placement pursuant to which we sold 75,075 units to Messrs. Mitchell Stein, Jerry L. Page and Mark M Giardiano and to Ashton Reed & Company, Inc. at $3.33 per unit for cash amounting to $250,000. Each unit consisted of one common share and one warrant. Each warrant is exercisable at $3.33 until July 14, 2004. Upon exercise of the warrants each investor will receive one common share and an additional warrant to purchase one common share at $6.66 per share until November 15, 2004.
  
  
• On October 2, 2003, we completed a private placement through Maxim Group LLC pursuant to which we sold 53.7875 units to 100 investors at a price of $100,000 per unit, for gross proceeds of $5,378,750. The net proceeds of this offering, after expenses, was $4,805,965. Each unit sold consisted of 33,334 series 'A' preferred shares and 16,667 class 'C' warrants. In total, we issued 1,792,976 series 'A' preferred shares and 896,488 class 'C' warrants. Each series 'A' preferred share is convertible into one common share. Each warrant is exercisable at $3.75 for a period of four years.
  
  
• Under the terms of our agreement with Maxim Group, we were obligated to pay Maxim Group $537,875, representing an 8% commission and a 2% non-accountable expense allowance. In addition, we are obligated to issue to Maxim an agent's warrant entitling it to purchase a number of units equal to 10% of the total units sold in this offering. Maxim has the right under the agent's warrant to purchase at total of 179,292 units at the price of $3.60 per unit, each unit comprised on one series 'A' preferred share and one-half of a class C warrant. The agent's warrant expires in five years to the extent unexercised.
  
  
• On November 3, 2003, we issued to Messrs. Fink and Roston, in their capacity as directors, options entitling each of them to purchase 28,000 common shares at $4.40 per share pursuant to our director's compensation plan. The options vest quarterly over a period of one year, and lapse if unexercised on November 2, 2008. For further information relating to these transactions, see that section of the prospectus contained in this registration statement captioned "Management—Board Compensation".
  
  
• On January 20 2004, we issued to Ms. Jennifer Black, in her capacity as a director, options to purchase 50,000 common shares at $3.60 per share under our 2002 Stock Plan. The options were fully vested upon grant, and lapse if unexercised on January 19,2009. For further information relating to this transaction, see that section of the prospectus contained in this registration statement captioned "Management—Board Compensation".

• On February 5 2004, we issued to Dr. Robert Koblin, in his capacity as a director, options to purchase 28,000 common shares at $3.70 per share. The options vest quarterly over a period of one year, and lapse if unexercised on February 4, 2008. For further information relating to these transactions, see that section of the prospectus contained in this registration statement captioned "Management—Board Compensation".
  
  
• On April 1 2004, we issued to Messrs. Marvin H. Fink and Ellsworth Roston, Dr. Robert Koblin, and Ms. Jennifer Black, in their capacity as directors, options to purchase 2,000, 2,000, 4,000 and 2,000 common shares at $6 per share. The options vest quarterly over a period of one year, and lapse if unexercised on March 31, 2009. For further information relating to these transactions, see that section of the prospectus contained in this registration statement captioned "Management—Board Compensation".

Except as stated above, no underwriting discounts or commissions were payable with respect to any of the aforesaid transactions. The offer and sale of the aforesaid securities was exempt from the registration requirements of the Securities Act under Rule 506 insofar as (1) each of the investors was accredited; (2) the transfer of the securities were restricted by Recom in accordance with Regulation D; and (3) there were no more than 35 non-accredited investors in any transaction, after taking into consideration all prior investors under Section 4(2) of the Securities Act within the twelve months preceding the transaction.

Rule 504; Section 4(2)

We have sold or issued the following securities not registered under the Securities Act of 1933 by reason of the exemption afforded under SEC Rule 504 promulgated under Regulation D or, in the alternative, Section 4(2) of the Securities Act, during the three year period ending on the date of filing of this registration statement. Except as stated below, no underwriting discounts or commissions were payable with respect to any of the following transactions. The offer and sale of the following securities was exempt from the registration requirements of the Securities Act under Rule 504 insofar as the aggregate offering price for each such transaction did not exceed $1,000,000, after taking into consideration the aggregate offering price for all securities sold by the company under Section 3(b) of the Securities Act within the twelve months preceding the transaction.

• In July 2001, we issued 150,000 common shares (50,000 shares pre-split) to Messrs. Jack Brehm, John Carrassco, Roger Linn, Art Lyons, Stephen Roseberry and Erik Sterling and the law firm of Weintraub, Genshler, Chediak, Sproul as partial compensation for consulting services rendered to the Company. We valued the total grants at $5,000.
  
  
• On September 19, 2002, we issued 23,400,000 common shares (7,800,000 shares pre-split) to ARC Finance Group in connection with our acquisition of the Signal Technologies. The shares represented approximately 85% of our issued and outstanding common shares. We valued the Signal Technologies at $78,023 for financial accounting purposes.
  
  
• On October 11, 2002, we reached an agreement-in-principle with Mr. Marvin H. Fink to become our Chief Executive Officer and President. Pursuant to that understanding, we entered into an employment agreement with Mr. Fink on October 12, 2002 and contemporaneously issued to him 2,100,000 restricted common shares (700,000 shares pre-split) as an inducement for that employment. These shares vest over a period of four years based upon Mr. Fink's continuous provision of services. For further information relating to this transaction see that section of the prospectus contained in this registration statement captioned "Management—Employment And Consulting Agreements With Management".
  
  
• On October 11, 2002, we reached an agreement-in-principle with Dr. Budimir Drakulic to become our Vice President and Chief Technology Officer on a consulting basis through his consulting companies. Pursuant to that understanding, on October 15, 2002, we entered into a loan-out agreement with Dr. Drakulic's two consulting companies, B World Technologies, Inc. and B Technologies, Inc., relative to the provision of Dr. Drakulic's services, and contemporaneously issued to one of those companies, B World Technologies, 600,000 restricted common shares (200,000 shares pre-split) as an inducement for the provision of those services. These shares vest over a period of five years. B World Technologies and B World are each owned and controlled by Dr. Drakulic. For further information relating to this transaction see that section of the prospectus contained in this registration statement captioned "Management—Employment And Consulting Agreements With Management".

• As part of the October 11, 2002 agreement-in-principle with Dr. Budimir Drakulic described above, we also reached an agreement-in-principle to offer to sell our common shares to certain individuals in order to protect our rights in the Signal Technologies from any litigation that might be filed against Dr. Drakulic and to ensure that our development of the technology would not be interrupted or disrupted while Dr. Drakulic defended any such action. Pursuant to this understanding, on October 22, 2002, we sold  564,810 common shares (188,270 shares pre-split) to eleven of those individuals, and issued a five-year warrant to purchase 375,000 common shares (125,000 shares pre-split) for $0.007 per share to one of those individuals, in consideration of their cash investment of $17,786. For further information relating to this transaction see that section of the prospectus contained in this registration statement captioned "Transactions And Business Relationships With Management And Principal Shareholders".
  
  
• On October 11, 2002, we reached an agreement-in-principle with Mr. Ellsworth Roston to provide consulting advice to us relating to engineering, developing and refining our products and technologies; to become a director of the company, and to make an investment into the company. Pursuant to that understanding, on October 30, 2002 we sold Mr. Roston 71,250 common shares (23,750 shares pre-split) for $190,000 in cash, and on November 1, 2002 we entered into a two year consulting agreement with Mr. Roston documenting the provision of his consulting services and his appointment to our board of directors. Pursuant to that latter agreement we granted Mr. Roston 225,000 common shares (75,000 shares pre-split), and five-year warrants to purchase an additional 150,000 common shares at $5 per share (50,000 shares at $1.6 per share pre-split), effective as of October 15, 2002. We consider the grant of common shares to Mr. Roston to be compensation for the provision of his consulting services, and the grant of the common share purchase warrants to be additional consideration for his cash investment pursuant to our original understanding. For further information relating to these transactions, see that section of the prospectus contained in this registration statement captioned "Management—Employment And Consulting Agreements With Management".
  
  
• On February 14, 2003 we issued to Dr. Lowell Harmison (1) fully vested options entitling him to purchase 108,000 common shares at $0.97 per share (36,000 shares $2.91 per share pre-split), and (2) options entitling him to purchase an purchase an additional 108,000 common shares at $0.97 per share (36,000 shares $2.91 per share pre-split) to vest over twelve quarters. These options were issued as an inducement for Dr. Harmison to provide consulting services pursuant to a consulting agreement entered into on that same date. For further information relating to this transaction, see that section of the prospectus contained in this registration statement captioned "Management—Employment And Consulting Agreements With Management".
  
  
• On March 10, 2003, we issued to an employee options to purchase 240,000 common shares at $0.95 per share (80,000 shares at $2.76 per share pre-split) under our 2002 Stock Plan. The options vest over a period of four years, and lapse if unexercised on March 9, 2008.
  
  
• On March 10, 2003, we issued to Mr. Rowland Perkins, in connection with the provision of consulting services relating to identifying prospective directors, warrants to purchase 21,000 common shares at $0.81 per share (7,000 shares at $2.43 per share pre-split). The warrants were fully vested, and lapse if unexercised on March 9, 2008. We valued the grant at $17,010.

• On April 15, 2003, we issued to an employee options to purchase 10,000 common shares at $2.85 per share under our 2002 Stock Plan. The options vest over a period of four years, and lapse if unexercised on April 14, 2010.
  
  
• On June 2, 2003, we issued to Dr. Michael Laks, as compensation providing medical advisory and technical consulting services, options to purchase 108,000 common shares at $2.40 per share under our 2002 Stock Plan. The options vest over a period of four years, and lapse if unexercised on June 4, 2008. We valued the grant at $259,200.
  
  
• On July 29, 2003, we issued to an employee options to purchase 10,000 common shares at $3.19 per share under our 2002 Stock Plan. The options vest over a period of five years, and lapse if unexercised on July 28, 2008.
  
  
• On August 5, 2003, we issued to two shareholders, Messrs. John Epperson Jr. and Jack Lee, warrants entitling them to purchase 23,501 common shares at $3.29 per share pursuant to a voluntary partial trading restriction (lock-up) agreement entered into with each of those shareholders on that date. These warrants lapse on August 4, 2008 to the extent not exercised by the first shareholder, and February 4, 2005 to the extent not exercised by the second shareholder. We valued the grant at $77,318.
  
  
• On September 23, 2003, we issued to a current shareholder, Mr. Aaron Grunfield, warrants to purchase 18,000 common shares at $5.29 per share pursuant to a voluntary partial trading restriction (lock-up) agreement with that shareholder entered into on that same date. These warrants lapse on March 22, 2005 to the extent not exercised. We valued the grant at $95,220.
  
  
• On September 25, 2003, we issued to Mr. Bill Mathews, as compensation for providing consulting services relating to the procurement of FDA approval for our products, warrants to purchase 25,000 common shares at $3.19 per share under our 2002 Stock Plan. These warrants lapse on March 24, 2010 to the extent not exercised. We valued the grant at $79,750.
  
  
• On January 20, 2004, we issued to four employees options to purchase a total of 80,000 common shares at $3.60 per share. The options vest over a period of five years, and lapse if unexercised on January 19, 2009.
  
  
• On February 11, 2004, we entered into a marketing agreement with The Ruth Group under which we agreed to issue 500 restricted common shares to it per month as partial compensation under the agreement for the provision of investor relations and media relations consulting services over a six-month period, including introducing our company to its’ broker network, disseminating information about our company, organizing conferences and due diligence meetings, fielding calls investors and brokers, and procuring analyst coverage or investment banking sponsorships. We valued the grant of those shares at $5,200.
  
  
• On March 10, 2004, we entered into a marketing agreement with Aurelius Consulting Group, Inc. under which we agreed to issue 28,000 restricted common shares to it as partial compensation under the agreement for the provision of various investor relations services over a six-month period, including introducing our company to its’ broker network, disseminating information about our company, organizing conferences and due diligence meetings, fielding calls investors and brokers, and procuring analyst coverage or investment banking sponsorships. We valued the grant at $113,750.

• On April 28, 2004, we issued to Mr. Rex Julian Beaber warrants to purchase 250,000 restricted common shares at $7.90 per shares. The warrants are exercisable on or after August 1, 2004, and lapse if unexercised on July 31, 2007. The warrants were granted to Mr. Beaber in connection with a settlement agreement pursuant to which Mr. Beaber agreed to surrender $369,000 unregistered common shares in exchange for the warrants and the company's agreement to register another 80,000 shares held by Mr. Beaber. We valued the grant at $0.
   

Item 16 Exhibits And Financial Statement Schedules

2.1

Order dated October 26, 2000 Confirming Plan of Reorganization and Granting Final Approval of Disclosure Statement *

3.1

Amended And Restated Certificate Of Incorporation Of Recom Managed System, Inc. filed by the Delaware Secretary of State on November 6, 2000 (1)

3.2

Certificate Of Amendment Of Certificate Of Incorporation Of Recom Managed System, Inc. filed by the Delaware Secretary of State on June 20, 2003 (8)

3.3

Certificate Of Designation Of Rights, Preferences And Limitations Of Series 'A' Convertible Preferred Stock Of Recom Managed System, Inc. filed by the Delaware Secretary of State on September 9, 2003 **

3.4

Amendment To Certificate Of Designation Of Rights, Preferences And Limitations Of Series 'A' Convertible Preferred Stock Of Recom Managed System, Inc. filed by the Delaware Secretary of State on April 26, 2004 *

3.5

Bylaws Of Recom Managed Systems, Inc. adopted March 31, 2003 (6)

4

Legal opinion by Richardson & Patel LLP **

5.1

Specimen common stock certificate (8)

5.2

Specimen series 'A' preferred stock certificate (8)

5.3

Recom Managed Systems, Inc. 2002 Stock Plan adopted on November 1, 2002 (6)

5.4

Form of option issued under Recom Managed Systems, Inc. 2002 Stock (8)

5.5

Recom Managed Systems, Inc. 2003 Nonqualified Stock Option And Stock Plan adopted on March 31, 2002 (6)

5.6

Warrant To Purchase Common Stock dated September 19, 2002 issued to Sim Farrar (2)

5.7

Form of Standard Warrant (8)

5.8

Form of Class 'A' Warrant (8)

5.9

Form of Class 'C' Warrant (8)

5.10

Agent's Warrant dated November 1, 2003 with Maxim Group LLC *

5.11

Agent's Warrant dated November 1, 2003 with Jenkins Capital Management, LLC *

10.1

Standard Multi-Tenant Office Lease dated August 20, 2002 between Bershin Properties I, LLC, as lessor, and Recom Managed Systems, Inc., LLC, as lessee *

10.2

Addendum To Standard Office Lease dated August 20, 2002 between Bershin Properties I, LLC, as lessor, and Recom Managed Systems, Inc., as lessee *

10.3

Addendum To Standard Office Lease dated December 17, 2003 between Bershin Properties I, LLC, as lessor, and Recom Managed Systems, Inc., as lessee *

10.4

Stock Acquisition and Signal Technologies Transfer Agreement dated September 12, 2002 between Recom Managed Systems, Inc. and ARC Finance Group, LLC (2)

10.5

Employment Agreement dated October 14, 2002 between Recom Managed Systems, Inc. and Marvin H. Fink (3)

10.6

License Agreement dated December 9, 1993 between Dr. Budimir S. Drakulic and Teledyne Electronic Industries, Inc. (8)

10.7

Restricted Stock Agreement dated October 14, 2002 between Recom Managed Systems, Inc. and Marvin H. Fink (3)(4)

10.8

Indemnification Agreement dated October 14, 2002 between Recom Managed Systems, Inc. and Marvin H. Fink (3)(4)

	55

10.9

Loan-out Agreement dated October 15, 2002 between Recom Managed Systems, Inc. and Budimir Drakulic, B World and B Technologies (3)

10.10

Restricted Stock Agreement dated October 15, 2002 between Recom Managed Systems, Inc. and Budimir Drakulic, B World and B Technologies (3)(5)

10.11

Consulting Agreement dated November 1, 2002 between Recom Managed Systems, Inc. and Ellsworth Roston (3)

10.12

Employment, Confidential Information, Invention Assignment, And Arbitration Agreement dated October 15, 2002 between Recom Managed Systems, Inc. and Budimir Drakulic, B World and B Technologies (3)(5)

10.13

Consulting Agreement dated February 14, 2003 between Recom Managed Systems, Inc. and Lowell T. Harmison (8)

10.14

Employment Agreement dated March 10, 2003 between Recom Managed Systems, Inc. and Charles E. McGill (6)

10.15

Investment Banking Agreement dated April 15, 2003 between Recom Managed Systems, Inc. and Brookstreet Securities Corporation (7)

10.16

Investment Banking Agreement dated July 17, 2003 between Recom Managed Systems, Inc. and Maxim Group, LLC **

10.17

Placement Agency Agreement dated September 4, 2003 between Recom Managed Systems, Inc. and Maxim Group, LLC *

10.18

Form of Registration Rights Agreement for purchasers of Series 'A' Preferred Stock (8)

10.19

Scope Letters and Engagement Agreements dated December 18, 2003, January 23, 2004 and March 22, 2004 between Recom Managed Systems, Inc. and CFO 911*

10.20

Letter of Intent dated January 10, 2004 between Recom Managed Systems, Inc. and TZ Medical Inc.

10.21

Settlement Agreement And Releases, Warrant and Piggyback Registration RIghts Agreement each dated April 28, 2004 between Recom Managed Systems, Inc., Mitchell J. Stein, ARC Finance Group, LLC, Tracey Hampton-Stein and Rex Julian Beaber *

21

List of subsidiaries *

23

Consent of Stonefield Josephson, Inc. *

24.1

Powers of Attorney for Mr. Ellsworth Roston and Drs. Robert Koblin and Lowell T. Harmison (9)

24.2

Power of Attorney for Jennifer Black (10)

*

Filed herewith

**

Refiled herewith

(1)

Previously filed as an exhibit to our report on form 10-KSB for our fiscal year ended December 31, 2001 filed with the SEC on February 22, 2002.

(2)

Previously filed as an exhibit to our report on form 8-K filed with the SEC on September 25, 2002.

(3)

Previously filed as an exhibit to our report on form 10-QSB for our fiscal quarter ended September 30, 2002 filed with the SEC on November 12, 2002.

(4)

Filed as part of the Employment Agreement for Mr. Fink noted in item 10.5.

(5)

Filed as part of the Loan-Out Agreement for with B World Technologies, B Technologies and Dr. Drakulic noted in item 10.9.

(6)

Previously filed as an exhibit to our report on form 10-KSB for our fiscal year ended December 31, 2002 filed with the SEC on March 26, 2003.

(7)

Previously filed as an exhibit to our report on form 10-QSB for our fiscal quarter ended March 30, 2003 filed with the SEC on May 7, 2003.

(8)

Previously filed as an exhibit to our registration statement on form SB-2 filed with the SEC on January 2, 2004.

(9)

Included on the signature page of our registration statement on form SB-2 filed with the SEC on January 2, 2004.

(10)

Included on the signature page of our registration statement on form SB-2 (amendment no. 1) filed with the SEC on February 23, 2003.

	56

Item 17 Undertakings

We hereby undertake to:

1.  File, during any period in which we offer or sell 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 foregoing, 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 SEC under 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 on the face page of the effective registration statement; or

(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.

4. For determining any liability under the Securities Act, treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons under the foregoing provisions or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. If a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by any of our directors, officers or controlling persons 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, we will, unless in the opinion of our counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

SIGNATURES

         In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and authorizes this registration statement to be signed on its behalf by the undersigned, in the City of Studio City, State of California, on May 1, 2004.

	RECOM MANAGED SYSTEMS, INC.
	By:	/s/ Marvin H. FInk
		Marvin H. Fink         Chief Executive Officer and President         (principal executive officer)

 

	RECOM MANAGED SYSTEMS, INC.
	By:	/s/ Charles Dargan
		Charles Dargan         Interim Chief Financial Officer         (principal accounting and financial officer)

        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.
 

/s/ Marvin H. Fink	Chief Executive Officer, President and Chairman of the Board (principal executive officer)	May 1, 2004
Marvin H. Fink
/s/ Charles Dargan	Interim Chief Financial Officer (principal accounting and financial officer)	May 1, 2004
Charles Dargan
/s/ Ellsworth Roston *	Director	May 1, 2004
Ellsworth Roston
/s/ Robert Koblin *	Director	May 1, 2004
Robert Koblin
/s/ Lowell T. Harmison *	Director	May 1, 2004
Lowell T. Harmison
/s/ Jennifer Black*	Director	May 1, 2004
Jennifer Black
* /s/ Marvin H. Fink
Marvin H. Fink Agent-In-Fact