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EX-21 - ITRACKR SYSTEMS INC | v206128_ex21.htm |
EX-23 - ITRACKR SYSTEMS INC | v206128_ex23.htm |
EX-23.2 - ITRACKR SYSTEMS INC | v206128_ex23-2.htm |
EX-10.7 - ITRACKR SYSTEMS INC | v206128_ex10-7.htm |
As
filed with the Securities and Exchange Commission on December 20,
2010
Registration
No. 333-166275
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
S-1/A
AMENDMENT
NO. 4
Registration
Statement
Under
The Securities
Act of 1933
iTrackr
Systems, Inc.
(Exact
name of Registrant as specified in its charter)
Florida
(State or other jurisdiction of
incorporation or organization)
|
|
2340
(Primary Standard Industrial
Classification Code number)
|
|
050597678
(I.R.S. Employer
Identification No.)
|
20423
State Road 7 Suite F6490
Boca
Raton, FL 33498
(561)
962-4111
(Address,
including zip code, and telephone number, including area code, of Registrant’s
principal executive offices)
John
Rizzo
Chairman
iTrackr
Systems, Inc.
20423
State Road 7 Suite F6490
Boca
Raton, FL 33498
(561)
962-4111
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
Copies
to:
Joel D.
Mayersohn
350 East
Las Olas Boulevard,
Suite
1150
Fort
Lauderdale, FL 33301
(954)
462-4150
(954)
462-4260 (Facsimile)
Approximate
date of commencement of proposed sale to the public:
From time
to time after the Registration Statement becomes effective.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, check the
following box. þ
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement number for the
same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
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Smaller
reporting company þ
|
CALCULATION
OF REGISTRATION FEE
Amount to be registered
(1)
|
Proposed maximum
offering price (2)
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Amount of registration
fee
|
||||||||||
Common
Stock, no par value
|
15,422,393 | 0.25 | $ | 271.91 | ||||||||
Common
Stock, underlying $0.05 option
|
157,500 | 0.25 | $ | 2.81 | ||||||||
Common
Stock, underlying $0.10 option
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2,000,000 | 0.25 | $ | 35.61 | ||||||||
Common
Stock, underlying $0.25 option
|
50,000 | 0.25 | $ | 0.89 | ||||||||
Common
Stock, underlying $0.10 warrant
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1,000,000 | 0.25 | $ | 17.83 | ||||||||
Common
Stock, underlying $0.40 warrant
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1,000,000 | 0.25 | $ | 17.83 |
(1)
|
Pursuant
to Rule 416, this Registration Statement also covers such additional
securities that may be issuable as a result of stock splits, stock
dividends and similar transactions. Includes 4,207,500 shares issuable
upon the exercise of options and
warrants.
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(2)
|
Estimated
solely for the purpose of calculating the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933, as
amended.
|
“The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section
8(a), may determine.”
The
information in this preliminary prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed with the
U.S. Securities and Exchange Commission (“SEC”) is effective. This preliminary
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.
PRELIMINARY
PROSPECTUS
Subject
to Completion, dated December 20, 2010
19,629,893
Shares of Common Stock
iTrackr
Systems, Inc.
This is
our initial public offering and no public market currently exists for our
shares. The initial public offering price for our common shares will
be $0.25. (The offering of the Shares may be referred to herein as the
"Offering.") The Selling Shareholders will sell their shares at a
price per share of $0.25 until our shares are quoted on the Over the Counter
Bulletin Board (OTCBB) and thereafter at prevailing market prices or in
privately negotiated transactions. While we seek to have our shares
quoted on the OTCBB there is no assurance that our shares will be approved for
listing on the OTCBB or any other listing service or
exchange.
This
prospectus relates solely to resale of up to an aggregate of 19,629,893 shares
of common stock of iTrackr Systems, Inc., including 4,207,500 shares of common
stock underlying options and warrants issued by iTrackr Systems,
Inc., by the Selling Stockholders identified in the section entitled “Selling
Stockholders” on page 30 of this prospectus or their transferees.
For
additional information, you should refer to the section entitled “Plan of
Distribution” on page 39 of this prospectus. We will not receive any
proceeds from the sale or other disposition of the shares of common stock
covered hereby by the Selling Stockholders. However, we will receive the
exercise price of the options if the options are exercised for cash. All
expenses of registration incurred in connection with this offering are being
borne by us, but all selling and other expenses incurred by the selling
stockholders will be borne by the selling stockholders.
Prior to
this offering, there has been no market for our securities. You should rely only
on the information contained in this prospectus. We have not authorized any
other person to provide you with different information.
You
should consider carefully the risks that we have described in “Risk Factors”
beginning on page 2 before deciding whether to invest in our common
stock.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful and complete. Any representation to the contrary is a criminal
offense.
The
date of this Prospectus is December 20, 2010
TABLE
OF CONTENTS
Page
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Part
I – Information Required in Prospectus
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Prospectus
Summary
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1
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Risk
Factors
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3
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Information
Regarding Forward-Looking Statements
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12
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Market
and Industry Data
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13
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Use
of Proceeds
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13
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Dividend
Policy
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13
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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14
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Business
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24
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Legal
Proceedings
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32
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Management
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32
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Executive
Compensation
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36
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Selling
Stockholders
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40
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Security
Ownership of Certain beneficial Owners and Management
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50
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Certain
Relationships and Related Party Transactions
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51
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Description
of Capital Stock
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52
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Plan
of Distribution
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54
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Legal
Matters
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55
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Experts
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56
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Where
You Can Find More Information
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56
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Consolidated
Financial Statements
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57
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You
should rely only on the information contained in this prospectus or contained in
any free writing prospectus filed with the Securities and Exchange Commission,
or SEC. We have not authorized anyone to provide you with information different
from that contained in this prospectus. The Selling Stockholders are offering to
sell, and seeking offers to buy, shares of our common stock only in
jurisdictions where offers and sales are permitted. The information in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale or other disposition of our
common stock.
Dealer
Prospectus Delivery Obligation
Until 90
days after the effective date of this Prospectus, all dealers that effect
transactions in these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
PROSPECTUS
SUMMARY
This
summary highlights selected information more fully described elsewhere in this
prospectus. You should read the following summary together with the entire
prospectus, including the more detailed information regarding us and the common
stock being sold in this offering and our financial statements and the related
notes appearing elsewhere in this prospectus. You should carefully consider,
among other things, the matters discussed in the section entitled “Risk Factors”
beginning on page 2 before deciding to invest in our common stock. Unless
otherwise stated or the context requires otherwise, references in this
prospectus to “we,” “our,” “us,” “Must Haves” “iTrackr” or the Company refer to
iTrackr Systems, Inc., and its subsidiary.
Corporate
History
We were
incorporated in the State of Wyoming on May 10, 2006 to develop, market and
commercialize a product and inventory search application through a social
networking site designed to leverage the best of Internet and mobile
technologies.
On
November 27, 2007 we adopted Articles of Merger to merge iTrackr, the Wyoming
corporation with and into iTrackr, Inc., a Florida corporation. On
December 10, 2009, we entered into a Plan of Merger with Must Haves, Inc.
which closed on January 12, 2010 pursuant to which (i) we received an aggregate
of 17,875,695 shares, or 93.5% of Must Haves, Inc. common stock, and (ii) Must
Haves, Inc. assumed 6,555,000 options and warrants of iTrackr, which are
exercisable at prices from $0.01 to $0.40.
On March
9, 2010, we amended our Articles of Incorporation with the State of Florida to
change our name to iTrackr Systems, Inc., which more appropriately reflects the
nature of our underlying business.
On
February 5, 2010, we issued a warrant to an accredited investor to purchase up
to 1,000,000 shares of our common stock at a purchase price of $0.40, in
exchange for $50,000 used towards expenses related to the filing of this
registration statement and general operating expenses.
Overview
We are an
emerging ecommerce software and services company. In 2006, we began development
of an online search application for retailers and consumers and launched www.itrackr.com, a social networking
website designed to enable consumers the ability to search for products and
services at brick-and-mortar retail stores on location-based, and
inventory-available basis, within their geographic communities. In 2009, we
acquired online customer support software from ChatStat, which enables us to
provide retailers with a support and sales tool for agents with the goal of
increasing transactional business. We serve customers primarily in North America
in a variety of industries with a particular emphasis on ecommerce
markets.
For the
nine months ended September 30, 2010 and the years ended December 31, 2009 and
2008, the Company had a net loss of $$903,264, $924,442 and $1,328,873,
respectively. From inception to September 30, 2010, we have incurred
an accumulated deficit of $3,995,718. As a result, our auditor has
issued an uncertainty paragraph about our ability to continue as a going concern
in their 2009 and 2008 audit report stating the Company has suffered recurring
losses and has yet to generate an internal cash flow that raises substantial
doubt about our ability to continue as a going concern.
Our
principal executive offices are located at 475 Plaza Real, Suite 275 Boca Raton,
Fl, and our telephone number is (561) 962-4111. Our website address is http://www.itrackr.com. Information on
or accessed through our website is not incorporated into this prospectus and is
not a part of this prospectus.
1
The
Offering
Common
Stock offered by selling shareholders:
|
19,629,893shares
of common stock, consisting of 9,215,054 (1) shares issued upon debt
conversion, 4,207,500 shares underlying options and warrants,
6,010,984 related to shares issued for services rendered, and 196,355
shares purchased for cash.
|
Common
Stock outstanding prior to Offering:
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20,319,997
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Common
Stock outstanding after this Offering:
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24,527,497(2)
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Use
of Proceeds:
|
We
will not receive any proceeds from the sale of shares in this offering by
the selling stockholders. However, we will receive proceeds from the
exercise of the options and warrants if the options and warrants are
exercised for cash
|
Risk
Factors:
|
You
should carefully consider the information set forth in this prospectus
and, in particular, the specific factors set forth in the “Risk Factors”
section beginning on page 2 of this prospectus before deciding whether or
not to invest in shares of our common
stock.
|
(1)
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9,215,054
of a total 11,083,002 shares of common stock issued upon the conversion of
debt is being offered under this
prospectus:
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a.
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5,526,192
shares of common stock were issued on August 21, 2007 in exchange for
$110,524 of principle and interest converted at an exercise price of $0.02
per share.
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b.
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985,169
shares of common stock were issued on August 21, 2007 in exchange for
$98,517 of principle and interest converted at an exercise price of $0.10
per share.
|
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c.
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729,052
shares of common stock were issued on August 21, 2007 in exchange for
$182,263 of principle and interest converted at an exercise price of $0.25
per share.
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d.
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1,386,322
shares of common stock were issued on April 28, 2010 in exchange for
$270,000 of principle and interest converted at an exercise price of
$0.195 per share.
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e.
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121,332
shares of common stock were issued on July 30, 2010 in exchange for
$42,466 of principle and interest converted at an exercise price of $0.35
per share.
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f.
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2,334,935
shares of common stock were issued on April 28, 2010 in exchange for
$1,167,468 of principle and interest converted at an exercise price of
$0.50 per share.
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(2)
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The
number of outstanding shares after the offering is based upon 20,319,997
shares outstanding as of September 30, 2010 and assumes the full exercise
of all warrants with respect to which the underlying shares are being
registered pursuant to the registration statement of which this prospectus
forms a part.
|
The
number of shares of common stock outstanding after this offering excludes
4,202,833 shares of common stock available for future issuance under certain
agreements, including options issued to our Chairman, John Rizzo to purchase
2,000,000 shares of common stock, options issued to JK Porto to purchase 55,000
shares of common stock, options issued to Mark Whitney to purchase 337,500
shares of common stock, options issued to Michael Uhl, a director to purchase
300,000 shares of common stock, options issued to David Baesler, a director to
purchase 405,000 shares of common stock, options issued to Ramesh
Anand to purchase 200,000 shares of common stock, a warrant to Gene Bowen, a
former consultant, to purchase 400,000 shares of common stock, warrant to Mark
MacDougall, a former employee to purchase 400,000 shares of common stock,
warrant to Maplehurst Investment Group, a former creditor, to purchase 36,000
shares of common stock, warrant to American Capital Ventures, a former creditor,
to purchase 56,000 shares of common stock and a warrant to Jason Lyons, a former
creditor, to purchase 13,333 shares of common stock.
2
RISK
FACTORS
You
should carefully consider the risks described below before making a decision to
buy our common stock. If any of the following risks actually occurs, our
business, financial condition and results of operations could be harmed. In that
case, the trading price of our common stock could decline and you might lose all
or part of your investment in our common stock. You should also refer to the
other information set forth in this prospectus, including our financial
statements and the related notes.
Risks
Related to Our Business
Because
there is doubt about our ability to continue as a going concern, an investor may
lose all of his investment in our company.
Our
auditor’s report for the year ending December 31, 2009 financial statements
expresses an opinion that substantial doubt exists as to whether we can continue
as an ongoing business. Since our sole officer and director may be reluctant or
unable to loan or advance additional capital to the Company, we believe that if
we do not raise additional capital, we may be required to suspend or cease the
implementation of our business plans.
iTrackr
has a history of losses and may not be able to generate sufficient net revenue
from its business in the future to achieve or sustain
profitability.
iTrackr
has incurred losses since inception. To date, iTrackr’s revenues have largely
come from click through referral fees and call center service revenue from
ChatTracker. iTrackr’s primary expenses relate to personnel, website development
and maintenance, professional and stock based compensation and significantly
exceed revenues. iTrackr’s consolidated financial statements have
been prepared assuming that iTrackr will continue as a going concern. Successful
transition to profitable operations is dependent upon obtaining a level of sales
adequate to support the Company’s cost structure. The Company has suffered
recurring losses resulting in a stockholders’ deficit of approximately
$3,995,718 and a working capital deficiency of $888,304 as of September 30,
2010. Historically, the Company has been able to finance operations
from the capital obtained through the issuance of convertible
debt. Management intends to continue to finance the operations of the
Company through future cash flows from operations and future
financings. However, iTrackr’s expenses are expected to increase as
it incurs additional costs of becoming publicly traded, and increasing
operational infrastructure, and there is no assurance that iTrackr will be able
to obtain sufficient financing (or financing on acceptable terms) or earn
sufficient revenues to generate positive cash flow and attain
profitability.
iTrackr’s
cash on hand and anticipated near term sales may be insufficient to fund
operations for the next 12 months.
We
believe that approximately $15,000 to $20,000 per month or $180,000 to $300,000
will be required to cover our minimum cash outflows for the next 12
months. Our current cash balance and anticipated near term sales may
be insufficient meet this requirement. As a result our management
continues to work diligently to secure additional sales and either debt or
equity based financing for which we are currently in discussions. In
the short term, if this registration statement is declared effective, we hope to
receive commitments from certain warrant holders that they intend to exercise
their warrants. The cash to be realized upon exercise of these
warrants is expected to be approximately $550,000. In the event no
outside funding is achieved Mr. Rizzo, our CEO will continue to provide personal
funds as needed to fund our required minimum cash outflows. From
January 1, 2010 through December 17, 2010, Mr. Rizzo has loaned the Company
$36,000. Mr. Rizzo is an accredited investor and has committed
to fund up to an additional $250,000.
3
If
iTrackr is unable to fund its operations and capital expenditures, iTrackr may
not be able to continue to develop and market its products and services which
would have a material adverse effect on its business.
iTrackr
has experienced significant negative cash flow since its inception. In order to
fund iTrackr’s operations and capital expenditures, iTrackr may be required to
incur borrowings or raise capital through the sale of debt or equity securities.
The Company’s ability to borrow or access the capital markets for future
offerings may be limited by its financial condition at the time of any such
offering as well as by adverse market conditions resulting from, among other
things, general economic conditions and contingencies and uncertainties that are
beyond our control. iTrackr’s failure to obtain the funds for necessary future
capital expenditures would limit its ability to develop and market its services
and could have a material adverse effect on our business, results of operations
and financial condition.
iTrackr
is dependent upon key personnel whose loss may adversely impact iTrackr’s
business.
iTrackr
depends on the expertise, experience and continued services of its senior
management employees, especially John Rizzo, its founder, Chairman, Chief
Executive Officer and Chief Financial Officer, and Ramesh Anand, its Chief
Operating Officer. Both Mr. Rizzo and Mr. Anand have acquired specialized
knowledge and skills with respect to iTrackr and its operations and most
decisions concerning the business of iTrackr will be made or significantly
influenced by them. iTrackr does not maintain life insurance with respect to
Messrs. Anand and Rizzo. The loss of Messrs. Anand and Rizzo or other senior
management employees, or an inability to attract or retain other key
individuals, could materially adversely affect the Company. The Company seeks to
compensate and incentivize its key executives, as well as other employees,
through competitive salaries and bonus plans, but there can be no assurance that
these programs will allow iTrackr to retain key or hire new employees. As a
result, if Messrs. Anand and Rizzo were to leave iTrackr, the Company could face
substantial difficulty in hiring qualified successors and could experience a
loss in productivity while any such successors obtain the necessary training and
experience. In January, 2010, iTrackr entered into a one year employment
agreement with Mr. Anand which expires in January 2011, and it extended its
existing employment agreement with Mr. Rizzo. However, there can be no assurance
that a successor employment agreement will be entered into with Messrs. Anand
and Rizzo following their respective employment contractual terms or that the
terms of this employment agreement will be sufficient to retain
Messrs. Anand and Rizzo.
iTrackr’s
management systems and personnel may not be sufficient to effectively manage its
growth.
iTrackr’s
growth strategy involves expanding its customer based amongst online retailers
with high transaction websites, increasing agent-hours for its customer support
software and increasing consumer demand for its product search applications.
Achieving iTrackr’s growth strategy is critical in order for its business to
achieve economies of scale and to achieve profitability. Any condition that
would deny, limit or delay its ability to manage and support existing accounts,
as well as market to new customers in the future will constrain iTrackr’s
ability to grow. There can be no assurance that iTrackr will be able to
successfully expand its business in its highly competitive environment, and if
iTrackr fails to do so, its business could be harmed.
Expansion
of iTrackr’s business will also strain its existing management resources and
operational, financial and management information systems to the point that they
may no longer be adequate to support its operations, requiring iTrackr to make
significant expenditures in these areas. There can be no assurance that iTrackr
will be able to develop such additional systems or procedures to accommodate its
future expansion on a timely basis, and the failure to do so could harm its
business.
If
we are not competitive in the market for online sales, marketing and customer
service solutions, or online consumer services our business could be
harmed.
The
market for online sales, marketing and customer service technology is intensely
competitive and characterized by aggressive marketing, evolving industry
standards, rapid technology developments and frequent new product introductions.
Established or new entities may enter the market in the near future, including
those that provide solutions for real-time interaction online, or online
consumer services related to real-time advice.
4
We
compete directly with companies focused on technology that facilitates real-time
sales, conversion of online shoppers to buyers, email management, searchable
knowledgebase applications, and customer service interaction. These markets
remain fairly saturated with small companies that compete on price and features.
We face significant competition from online interaction solution providers,
including SaaS providers such as LivePerson, Art Technology Group, Instant
Service, RightNow Technologies and TouchCommerce. We face potential competition
from Web analytics and online marketing service providers, such as Omniture. The
most significant barriers to entry in this market are knowledge of:
|
·
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Online
consumer purchasing habits;
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|
·
|
Methodologies
to efficiently engage customers and
consumers;
|
|
·
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Metrics
proving return on investment; and
|
|
·
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Technology
innovation opportunities.
|
Furthermore,
many of our competitors offer a broader range of customer relationship
management products and services than we currently offer. We may be
disadvantaged and our business may be harmed if companies doing business online
choose real-time sales, marketing and customer service solutions from such
providers.
We also
face potential competition from larger enterprise software companies such as
Oracle and SAP. In addition, established technology companies such as Microsoft,
Yahoo and Google may leverage their existing relationships and capabilities to
offer real-time sales, marketing and customer service applications or consumer
services similar to our consumer offerings.
Finally,
we compete with clients and potential clients that choose to provide a real-time
sales, marketing and customer service solution in-house as well as, to a lesser
extent, traditional offline customer service solutions, such as telephone call
centers.
We
believe that competition will increase as our current competitors increase the
sophistication of their offerings and as new participants enter the market. As
compared to our company, some of our larger current and potential competitors
have:
|
·
|
Greater
brand recognition;
|
|
·
|
More
diversified lines of products and services;
and
|
|
·
|
Significantly
greater financial, marketing and research and development
resources.
|
Additionally,
some competitors may enter into strategic or commercial relationships with
larger, more established and better-financed companies. These competitors may be
able to:
|
·
|
Undertake
to make more extensive marketing
campaigns;
|
|
·
|
Adopt
more aggressive pricing policies
and
|
|
·
|
Make
more attractive offers to business or individuals to induce them to use
their products or services.
|
Any
change in the general market acceptance of the real-time sales, marketing and
customer service solution business model or in online, real-time consumer advice
services may harm our competitive position. Such changes may allow our
competitors additional time to improve their service or product offerings, and
would also provide time for new competitors to develop real-time sales,
marketing, customer service and Web analytics applications or competitive
consumer service offerings and solicit prospective clients within our target
markets. Increased competition could result in pricing pressures, reduced
operating margins and loss of market share.
5
We
are dependent on technology systems and third-party content that are beyond our
control.
The
success of our services depends in part on our clients’ online services as well
as the Internet connections of visitors to websites, both of which are outside
of our control. As a result, it may be difficult to identify the source of
problems if they occur. In the past, we have experienced problems related to
connectivity which has resulted in slower than normal response times to Internet
user chat requests and messages and interruptions in service. Our services rely
both on the Internet and on our connectivity vendors for data transmission.
Therefore, even when connectivity problems are not caused by our services, our
clients or Internet users may attribute the problem to us. This could diminish
our brand and harm our business, divert the attention of our technical personnel
from our product development efforts or cause significant client relations
problems.
In
addition, we rely in part on third-party service providers and other third
parties for Internet connectivity and network infrastructure hosting, security
and maintenance. These providers may experience problems that result in slower
than normal response times and/or interruptions in service. If we are unable to
continue utilizing the third-party services that support our Web hosting and
infrastructure or if our services experience interruptions or delays due to
third party providers, our business could be harmed.
Our
business service also depends on third parties for hardware and software and our
consumer services depend on third parties for content, which products and
content could contain defects or inaccurate information. Problems arising from
our use of such hardware or software or third party content could require us to
incur significant costs or divert the attention of our technical or other
personnel from our product development efforts or to manage issues related to
content. To the extent any such problems require us to replace such hardware or
software, we may not be able to do so on acceptable terms, if at
all.
Our
agreement with Saveology is a material contract, and presently represents 100%
of our current business. Our business would be materially and negatively
impacted if our services agreement with Saveology were terminated. (See
“Saveology Agreement” in Business section below).
Our
services are subject to payment-related risks.
For
certain payment methods, including credit and debit cards, we pay interchange
and other fees, which may increase over time and raise our operating costs and
lower our profit margins. We rely on third parties to provide payment processing
services, including the processing of credit cards, debit cards and it could
disrupt our business if these companies become unwilling or unable to provide
these services to us. We are also subject to payment card association operating
rules, certification requirements and rules governing electronic funds
transfers, which could change or be reinterpreted to make it difficult or
impossible for us to comply. If we fail to comply with these rules or
requirements, we may be subject to fines and higher transaction fees and lose
our ability to accept credit and debit card payments from our customers or
facilitate other types of online payments, and our business and operating
results could be adversely affected.
Through
our consumer-facing platform, we facilitate online transactions between
individual service providers who provide online advice and information to
consumers. In connection with these services, we accept payments using a variety
of methods, such as credit card, debit card and PayPal. These payments are
subject to “chargebacks” when consumers dispute payments they have made to us.
Chargebacks can occur whether or not services were properly provided.
Susceptibility to chargebacks puts a portion of our revenue at risk. We take
measures to manage our risk relative to chargebacks and to recoup properly
charged fees, however, if we are unable to successfully manage this risk our
business and operating results could be adversely affected. As we offer new
payment options to our users, we may be subject to additional regulations,
compliance requirements, and fraud.
We are
also subject to a number of other laws and regulations relating to money
laundering, international money transfers, privacy and information security and
electronic fund transfers. If we were found to be in violation of applicable
laws or regulations, we could be subject to civil and criminal penalties or
forced to cease our payments services business.
6
We
may be liable if third parties misappropriate personal information belonging to
our clients’ Internet users.
We
maintain dialogue transcripts of the text-based chats and email interactions
between our clients and Internet users and store on our server’s information
supplied voluntarily by these Internet users in surveys. We provide this
information to our clients to allow them to perform Internet user analyses and
monitor the effectiveness of our services. Some of the information we collect
may include personal information, such as contact and demographic information.
If third parties were able to penetrate our network security or otherwise
misappropriate personal information relating to our clients’ Internet users or
the text of customer service inquiries, we could be subject to liability. We
could be subject to negligence claims or claims for misuse of personal
information. These claims could result in litigation, which could have a
material adverse effect on our business, results of operations and financial
condition. We may incur significant costs to protect against the threat of
security breaches or to alleviate problems caused by such breaches.
The need
to physically secure and securely transmit confidential information online has
been a significant barrier to electronic commerce and online communications. Any
well-publicized compromise of security could deter people from using online
services such as the ones we offer, or from using them to conduct transactions,
which involve transmitting confidential information. Because our success depends
on the general acceptance of our services and electronic commerce, we may incur
significant costs to protect against the threat of security breaches or to
alleviate problems caused by these breaches.
Our
products and services may infringe upon intellectual property rights of third
parties and any infringement could require us to incur substantial costs and may
distract our management.
We are
subject to the risk of claims alleging infringement of third-party proprietary
rights. Substantial litigation regarding intellectual property rights exists in
the software industry. In the ordinary course of our business, our services may
be increasingly subject to third-party infringement claims as the number of
competitors in our industry segment grows and the functionality of services in
different industry segments overlaps. Some of our competitors in the market for
real-time sales, marketing and customer service solutions or other third parties
may have filed or may intend to file patent applications covering aspects of
their technology. Any claims alleging infringement of third-party intellectual
property rights could require us to spend significant amounts in litigation
(even if the claim is invalid), distract management from other tasks of
operating our business, pay substantial damage awards, prevent us from selling
our products, delay delivery of the iTrackr services, develop non-infringing
software, technology, business processes, systems or other intellectual property
(none of which might be successful), or limit our ability to use the
intellectual property that is the subject of any of these claims, unless we
enter into license agreements with the third parties (which may be costly,
unavailable on commercially reasonable terms, or not available at all).
Therefore, such claims could have a material adverse effect on our business,
results of operations and financial condition.
Technological
or other defects could disrupt or negatively impact our services, which could
harm our business and reputation.
We face
risks related to the technological capabilities of our services. We expect the
number of interactions between our clients’ operators and Internet users over
our system to increase significantly as we expand our client base. Our network
hardware and software may not be able to accommodate this additional volume.
Additionally, we must continually upgrade our software to improve the features
and functionality of our services in order to be competitive in our markets. If
future versions of our software contain undetected errors, our business could be
harmed. If third-party content is flawed, our business could be harmed. As a
result of major software upgrades at iTrackr, our client sites have, from time
to time, experienced slower than normal response times and interruptions in
service. If we experience system failures or degraded response times, our
reputation and brand could be harmed. We may also experience technical problems
in the process of installing and initiating the iTrackr services on new Web
hosting services. These problems, if not remedied, could harm our
business.
Our
services also depend on complex software which may contain defects, particularly
when we introduce new versions onto our servers. We may not discover software
defects that affect our new or current services or enhancements until after they
are deployed. It is possible that, despite testing by us, defects may occur in
the software. These defects could result in:
|
·
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Damage
to our reputation;
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7
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·
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Lost
sales;
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·
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Delays
or loss of market acceptance of our products;
and
|
|
·
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Unexpected
expenses and diversion of resources to remedy
errors.
|
Our
promotion and marketing of our websites may not result in generation of
significant revenue which may cause our business to fail.
We
believe that successful marketing, development and promotion of our websites are
crucial to our success in attracting business. If our marketing and promotion is
not successful in developing strong public recognition of our websites, then we
may not be able to earn significant revenues and our business may
fail.
Unauthorized
disclosure of sensitive or confidential client and customer data, whether
through breach of our computer systems or otherwise, could expose us to
protracted and costly litigation and cause us to lose clients which may result
in our going out of business and for you to lose your investment.
We may be
required to collect and store sensitive data in connection with our services,
including names, addresses, social security numbers, credit card account
numbers, checking and savings account numbers and payment history records, such
as account closures and returned checks. If any person, including any of our
employees, penetrates our network security or otherwise misappropriates
sensitive data, we could be subject to liability for breaching contractual
confidentiality provisions and/or privacy laws, which would devastate our
business, and may result in the loss of your investment.
Competition
in the social networking, online marketing and e-commerce industry is intense
and our competitors have greater financial resources and development
capabilities than we have, and we may not have the resources necessary to
successfully compete with them.
Our
business plan involves providing consumers with online real-time product and
inventory information, retailers with access to targeted consumer demand for
their products and marketing firms with targeted content for their campaigns.
These business areas are highly competitive. There are numerous companies that
compete in these markets, most of whom have greater financial resources and more
expertise in this business than we do. Our ability to develop our business will
depend on our ability to successfully market our services in this highly
competitive environment. We cannot guarantee that we will be able to do so
successfully.
Our
services may become obsolete and unmarketable if we are unable to respond
adequately to rapidly changing technology and customer demands.
Our
services may quickly become obsolete and unmarketable. Our future success will
depend on our ability to adapt to technological advances, anticipate customer
demands, develop new products and enhance our current products on a timely and
cost-effective basis. We may be unsuccessful in responding to technological
developments and changing customer needs. In addition, our applications and
services offerings may become obsolete due to the adoption of new technologies
or standards.
We may
experience technical or other difficulties that could delay or prevent the
development, introduction or marketing of new products or enhanced versions of
existing products. Also, we may not be able to adapt new or enhanced services to
emerging industry standards, and our new products may not be favorably received
by our target market.
The
loss of our executive officers or directors, could adversely affect our
business.
Our
success depends largely upon the efforts, abilities, and decision-making of our
executive officers and directors. The loss of any of these individual would have
an adverse effect on our business prospects. We do not currently maintain
“key-man” life insurance and there is no contract in place assuring the services
our executive officers and directors for any length of time. In the event that
we should lose our sole officer or directors and we are unable to find suitable
replacements, we may not be able to develop our business.
8
Our
Controls and Procedures may not prevent misstatements.
The
Company has limited segregation of duties amongst its employees with respect to
the Company’s preparation and review of the Company’s financial statements due
to the limited number of employees, which is a material weakness in internal
controls, and if the Company fails to maintain an effective system of internal
controls, it may not be able to accurately report its financial results or
prevent fraud. As a result, current and potential stockholders could
lose confidence in the Company’s financial reporting which could harm the
trading price of the Company’s stock.
Management
has found it necessary to limit the Company’s administrative staffing in order
to conserve cash, until the Company’s level of business activity
increases. As a result, there is limited segregation of duties
amongst the employees, and the Company and its independent public accounting
firm have identified this as a material weakness in the Company’s internal
controls. The Company intends to remedy this material weakness by
hiring additional employees and reallocating duties, including responsibilities
for financial reporting, among the employees as soon as there are sufficient
resources available. However, until such time, this material weakness
will continue to exist. Despite the limited number of employees and
limited segregation of duties, management believes that the Company is capable
of following its disclosure controls and procedures
effectively.
Our
Financial Statements for the year ended December 31, 2009 and the quarterly
periods ended March 31, 2010 and June 30, 2010 were Restated as a Result of a
Re-Audit by our New Independent Accountant Which was Necessitated Due to
Revocation of our Former Auditor’s Public Company Accounting Oversight Board
(“PCAOB”) Registration.
Management
received notification that our former auditor’s PCAOB registration had been
revoked as of August 12, 2010 pursuant to PCAOB Release No.
105-2010-007. As a result, the Company engaged a new auditor,
Bedinger and Company, effective August 25, 2010 and had our financial statements
for the years ending December 31, 2008 and 2009 re-audited and our financial
statements for the quarterly periods ending March 31, 2010 and June 30, 2010
re-reviewed. Our auditors discovered material misstatements in our
financial statements that required the Company to restate our financial
statements for the year ending December 31, 2009 and the quarterly periods ended
March 31, 2010 and June 30, 2010. As a result Management concluded
that our disclosure controls and procedures were not effective during the
aforementioned periods. In addition, management recognizes that our
new auditor may also not discover potential misstatements due to our currently
assessed ineffective controls which are due to our lack of segregation of duties
discussed above.
Risks
Related to Our Common Stock
There
will be a substantial number of shares of iTrackr’s common stock available for
sale in the future that may be dilutive to its current stockholders and may
cause a decrease in the market price of its common stock.
As of
September 30, 2010, the Company had 20,319,997 shares of
common stock outstanding, 45,000,000 shares of common stock available for future
issuance under its 2007 Long-Term Stock Incentive Plan and warrants and options
to purchase 8,410,333 shares outstanding. The 19,629,893 shares of common stock
outstanding and underlying certain options and warrants registered pursuant to
this Registration Statement will be freely tradable once this Registration
Statement is declared effective by the Securities and Exchange Commission
without restriction or further registration under the Securities Act, unless the
shares are purchased by “affiliates” as that term is defined in Rule 144 under
the Securities Act. Any shares purchased by an affiliate may not be resold
except pursuant to an effective registration statement or an applicable
exemption from registration, including an exemption under Rule 144 of the
Securities Act. These restricted securities may be sold in the public market
only if they are registered or if they qualify for an exemption from
registration under Rule 144 or Rule 701 under the Securities Act.
Future
sales or issuances of the Company’s common stock or securities convertible into
common stock, the perception such sales or issuances may occur or the
availability for sale in the public market of substantial amounts of our common
stock could adversely affect the prevailing market price of our common stock and
could impair our ability to raise capital through future sales of equity
securities at a time and price that we deem appropriate.
9
Our
common stock is considered “a penny stock” and may be difficult to
sell.
The SEC
has adopted regulations which generally define “penny stock” to be an equity
security that has a market price of less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to specific exemptions. Presently,
our common stock is considered a “penny stock” according to SEC rules. This
designation requires any broker or dealer selling these securities to disclose
certain information concerning the transaction, obtain a written agreement from
the purchaser and determine that the purchaser is reasonably suitable to
purchase the securities. These rules may restrict the ability of brokers or
dealers to sell our common stock and may affect the ability of investors to sell
their shares. In addition, when and if our common stock trades on the OTC
Bulletin Board, investors may find it difficult to obtain accurate quotations
for our common stock and may experience a lack of buyers to purchase such stock
or a lack of market makers to support the stock price.
iTrackr
may be unable to receive a listing of its securities on NASDAQ or another
national securities exchange, and this may make it more difficult for its
stockholders to sell their securities.
We intend
that shares of iTrackr’s common stock will be traded in the over-the-counter
market and quoted on the OTCBB. The Company’s common stock and units are not
currently eligible for inclusion in The NASDAQ Stock Market. If the Company is
unable to receive a listing or approval of trading of securities on NASDAQ or
another national securities exchange, then it may be more difficult for
stockholders to sell their securities.
Risks
Related to this Offering
One
stockholder owns a majority of our common stock and may act, or prevent certain
types of corporate actions, to the detriment of other stockholders.
John
Rizzo owns 5,250,000 common shares and holds options to acquire 2,000,000
options at an average exercise price of $0.325 per share until July 1,
2017, with $622,000 in debt owed to him by iTrackr Systems, Inc. as of September
30, 2010 which has been assumed by the company pursuant to the terms and
conditions of the Merger Agreement. Accordingly, Mr. Rizzo beneficially
owns approximately 32.5% of our issued and outstanding common stock.
Accordingly, Mr. Rizzo may exercise significant influence over all matters
requiring stockholder approval, including the election of a majority of the
directors and the determination of significant corporate actions. This
concentration could also have the effect of delaying or preventing a change in
control that could otherwise be beneficial to our stockholders.
If
we issue additional shares of common stock in the future this may result in
dilution to our existing stockholders.
On
October 26, 2009, we simultaneously completed a 4-1 reverse split of our
common stock and amended our articles of incorporation to authorize the issuance
of 110,000,000 shares of stock consisting of 100,000,000 shares of common stock
and 10,000,000 shares of preferred stock. Our board of directors has the
authority to issue additional shares of common stock up to the authorized
capital stated in the articles of incorporation. Our board of directors may
choose to issue some or all of such shares to provide additional financing in
the future. The issuance of any such shares may result in a reduction of the
book value or market price of the outstanding shares of our common stock. It
will also cause a reduction in the proportionate ownership and voting power of
all other stockholders.
There
is currently no market for trading our common stock, and when such a market does
develop, the trading price of our common stock may be volatile, with the result
that an investor may not be able to sell any shares acquired at a price equal to
or greater than the price paid by the investor.
Our
common shares are currently not quoted for trading. We intend to file
registration statement with the Securities and Exchange Commission and have our
common shares quoted on the OTC Bulletin Board. Companies quoted on the OTC
Bulletin Board have traditionally experienced extreme price and volume
fluctuations. In addition, our stock price may be adversely affected by factors
that are unrelated or disproportionate to our operating performance. Market
fluctuations, as well as general economic, political and market conditions such
as recessions, interest rates or international currency fluctuations may
adversely affect the market price of our common stock. In addition, to date,
there has been no trading volume for our shares on the over-the-counter markets.
As a result of this potential volatility and potential lack of a trading market,
an investor may not be able to sell any of our common stock that they acquire
that a price equal or greater than the price paid by the
investor.
10
The
trading price of iTrackr’s common stock is likely to be volatile, and you might
not be able to sell your shares at or above the public offering
price.
The
trading price of iTrackr’s common stock is likely to be subject to wide
fluctuations. Factors, in addition to those outlined elsewhere in this
prospectus, that may affect the trading price of the Company’s common stock
include:
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·
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Actual
or anticipated variations in the Company’s operating
results;
|
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·
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Announcements
of technological innovations, new products or product enhancements,
strategic alliances or significant agreements by the Company or its
competitors;
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·
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Changes
in recommendations by any securities analysts that elect to follow the
Company’s common stock;
|
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·
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The
financial projections the Company may provide to the public, any changes
in these projections or its failure to meet these
projections;
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·
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The
loss of a key customer;
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·
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The
loss of a key supplier;
|
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·
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The
loss of key personnel;
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·
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Lawsuits
filed against the Company;
|
|
·
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Changes
in operating performance and stock market valuations of other companies
that sell similar products and
services;
|
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·
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Price
and volume fluctuations in the overall stock
market;
|
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·
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Market
conditions in our industry, the industries of our customers and the
economy as a whole; and
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·
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Other
events or factors, including those resulting from war, incidents of
terrorism or responses to these
events.
|
If
securities analysts do not publish research or reports about iTrackr’s business
or if they downgrade its stock, the price of its stock could
decline.
The
research and reports that industry or financial analysts publish about iTrackr
or its business will likely have an effect on the trading price of its common
stock. If an industry analyst decides not to cover the Company, or if an
industry analyst decides to cease covering the Company at some point in the
future, the Company could lose visibility in the market, which in turn could
cause its stock price to decline. If an industry analyst downgrades iTrackr’s
stock, its stock price would likely decline rapidly in response.
The
concentration of iTrackr’s capital stock ownership with insiders will likely
limit your ability to influence corporate matters.
iTrackr’s
insiders, (its executive officers, directors, current five percent or greater
stockholders and affiliated entities) together beneficially own approximately
48.0% of our outstanding common stock. As a result, these
stockholders, acting together, will have significant influence over all matters
that require approval by the Company’s stockholders, including the election of
directors and approval of significant corporate transactions. Corporate action
might be taken even if other stockholders, including those who purchased shares
in this offering, oppose them. This concentration of ownership might also have
the effect of delaying or preventing a change of control that other stockholders
may view as beneficial.
11
The
Company does not expect to pay any cash dividends for the foreseeable
future.
The
Company does not anticipate that it will pay any cash dividends to holders of
its common stock in the foreseeable future. Accordingly, investors must rely on
sales of their common stock after price appreciation, which may never occur, as
the only way to realize any future gains on their investment. Investors seeking
cash dividends in the foreseeable future should not purchase the Company’s
common stock.
INFORMATION
REGARDING FORWARD-LOOKING STATEMENTS
This Form
S-1/A contains forward-looking statements relating to future events and the
future performance of the Company, including, without limitation, statements
regarding the Company’s expectations, beliefs, intentions or future strategies
that are signified by the words “expects,” “anticipates,” “intents,” “believes,”
or similar language. You should read statements that contain these words
carefully because they:
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·
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Discuss
future expectations;
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·
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Contain information
which could impact future results of operations or financial condition;
or
|
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·
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State
other “forward-looking”
information.
|
We
believe it is important to communicate our expectations to the iTrackr
stockholders. However, there may be events in the future that we are not able to
accurately predict or over which we have no control and which could cause our
actual results to differ materially from the information contained in the
forward-looking statements contained in this document. The risk factors and
cautionary language discussed in this Registration Statement and in our Annual
Report on Form 10-K/A provide examples of risks, uncertainties and events that
may cause actual results to differ materially from the expectations described by
iTrackr in its forward-looking statements, including among other
things:
(1)
|
Our
inability to generate sufficient net revenue in the
future;
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(2)
|
Our
inability to fund our operations and capital
expenditures;
|
(3)
|
The
loss of key personnel;
|
(4)
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Our
inability to effectively manage our
growth;
|
(5)
|
Our
inability to generate sufficient cash flows to meet our debt service
obligations;
|
(6)
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Competitive
conditions in the chat and online support
industry;
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(7)
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Extensive
government regulation;
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(8)
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Changing
economic conditions; and
|
(9)
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Our
failure to attract and retain qualified
personnel.
|
You are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this document.
All
forward-looking statements included herein attributable to iTrackr or any person
acting on iTrackr’s behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section. Except to the
extent required by applicable laws and regulations, iTrackr undertakes no
obligations to update these forward-looking statements to reflect events or
circumstances after the date of this document or to reflect the occurrence of
unanticipated events.
You
should be aware that the occurrence of the events described in the “Risk
Factors” section and elsewhere in this Registration Statement could have a
material adverse effect on iTrackr.
12
MARKET
AND INDUSTRY DATA
This
prospectus includes market and industry data and forecasts that we have
developed from independent consultant reports, publicly available information,
various industry publications, other published industry sources and our internal
data and estimates. Independent consultant reports, industry publications and
other published industry sources generally indicate that the information
contained therein was obtained from sources believed to be
reliable.
Our
internal data and estimates are based upon information obtained from our
investors, trade and business organizations and other contacts in the markets in
which we operate and our management’s understanding of industry conditions.
Although we believe that such information is reliable, we have not had this
information verified by any independent sources.
USE
OF PROCEEDS
The
Company will not receive any proceeds from the sale or other disposition of the
shares of common stock covered by this prospectus. The maximum proceeds the
Company could receive upon the exercise of all the warrants and options with
respect to which the underlying shares of common stock have been registered on
this Registration Statement is $720,375.00, which the Company anticipates
using as general working capital.
Determination
of Offering Price
As there
is no established public market for our shares, the Offering price and other
terms and conditions relative to our shares have been arbitrarily determined by
iTrackr. The Offering price of the shares of our common stock does not
necessarily bear any relationship to our book value, assets, past operating
results, financial condition, or any other established criteria of
value. In addition, no investment banker, appraiser, or other
independent third party has been consulted concerning the Offering price for the
shares or the fairness of the Offering price used for the shares. Among the
factors considered in determining the Offering price were:
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·
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Our
lack of operating history
|
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·
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The
viability of our technologies
|
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·
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The
most recent round of financing
|
Although
our common stock is not listed on a public exchange, we have contacted a market
maker and applied to have our shares quoted on the Over the Counter Bulletin
Board (OTCBB). In order to be quoted on the OTCBB, a market maker must file an
application on our behalf in order to make a market for our common stock. There
can be no assurance that a market maker will agree to file the necessary
documents, nor can there be any assurance that such an application for quotation
will be approved. In addition, there is no assurance that our common stock will
trade at market prices in excess of the initial public Offering price, as prices
for the common stock in any public market, which may develop, will be determined
in the marketplace and may be influenced by many factors, including depth and
liquidity.
DIVIDEND
POLICY
The
Company has never declared or paid cash dividends on our common stock. The
Company currently expects to retain all future earnings for use in the operation
and expansion of our business and does not anticipate paying cash dividends in
the foreseeable future. The declaration and payment of any dividends in the
future will be determined by our board of directors, in its discretion, and will
depend on a number of factors, including our earnings, capital requirements and
overall financial condition.
13
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis of the results of operations and financial
condition of the Company on a consolidated basis for the three and nine months
ended September 30, 2010 and 2009 and the years ended December 31, 2009 and
2008 and should be read in conjunction with iTrackr’s consolidated financial
statements, and the notes to those consolidated financial statements that are
included elsewhere in this Prospectus. Our discussion includes forward-looking
statements based upon current expectations that involve risks and uncertainties,
such as our plans, objectives, expectations and intentions. Actual results and
the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those
set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking
Statements and Business sections in this Prospectus. We use words such as
“anticipate,” “estimate,” “project,” “continuing,” “ongoing,” “expect,”
“believe,” “intend,” “may,” “will,” “should,” “could,” and similar expression to
identify forward-looking statements.
Recent Events
On
February 1, 2010, Must Haves, Inc. amended its articles of incorporation with
the State of Florida, changing its name to iTrackr Systems, Inc.
On
December 10, 2009, Must Haves, Inc., iTrackr Acquisition, Inc. (“Merger
Sub”) and iTrackr, Inc., a Florida corporation (“iTrackr”), entered into an
Agreement and Plan of Merger (the “Agreement”), which closed January 12, 2010.
On the Closing Date, iTrackr was merged with and into Merger Sub, which is the
surviving corporation and became a wholly-owned subsidiary of the
Registrant.
At the
closing of the Merger, subject to and pursuant to the terms and conditions of
the Agreement, each outstanding share of Purchaser common stock was converted
into one share of common stock of the Registrant. Upon consummation of the
Merger, the shareholders of the Purchaser received an aggregate of 17,875,695
shares of Registrant common stock and thus owned 93.5% of Must Have’s common
stock. Must Haves also assumed 6,555,000 options and warrants of iTrackr, which
are exercisable at prices from $0.01 to $0.40.
In
addition, pursuant to the Plan of Merger Agreement, on January 12, 2010 Stella
Gostfrand submitted her resignation as an officer and director of the Company,
and also on January 12, 2010 Michael Uhl, Dave Baesler and John Rizzo were
appointed to serve as members of the board of directors of the Company, all of
which will be effective following the expiration of the ten day period following
the mailing of the information statement required by Rule 14f-1 under the
Exchange Act. Upon the consummation of the Reverse Merger on January 12, 2010
Ramesh Anand was appointed to serve as Chief Operating of the Company, and Mr.
Rizzo was appointed to serve as Chief Executive Officer and Chief Financial
Officer of the Company.
Overview
iTrackr
Systems, Inc. (“iTrackr”, the “Company”, “we”, “us” or “our”) was formed in May
2006 to develop, market and commercialize a product and inventory search
application through a social networking site designed to leverage the best of
Internet and Mobile technologies. We have taken the best of several burgeoning
markets, including eCommerce, social networking and mobile content, and
developed what we believe is a powerful platform that drives value to consumers,
retailers and advertising and marketing firms.
iTrackr
Systems intends to introduce and commercialize Internet and Mobile social
merchandizing technology platforms to retailers and consumers. “Social
merchandizing” applies the variety of traditional marketing practices to promote
products and services to a community of individuals via social networking
technologies. iTrackr is similar to MySpace and Facebook; however, our members’
interests are not in diary or event blogging, but in the timely location of
products and services which can be acquired and consumed on a local
level.
14
iTrackr
Systems’ technology enables consumers to search and track merchandise, letting
the consumer know which retail locations in a local zip code are stocking the
queried merchandise, as well as the comparative prices. In addition, if the item
is not in stock, the consumer can request that iTrackr Systems notify them via
mobile text message or email when the item is delivered to a local retailer and
where that retailer is located.
In 2009,
iTrackr purchased online customers support software technology from Chatstat for
approximately $95,000. iTrackr has subsequently launched its customer
support chat software (“ChatTrackr”) which facilitates real-time customer
support and expert advice, and paid transactions.
iTrackr
generates revenues primarily through the licensing of its ChatTrackr to one
customer, Saveology. This customer uses our application service provider (“ASP”)
system, outsourcing our chat applications for a monthly fee-per-agent, or
license fee and in certain cases, an annual enterprise fee.
In
addition, we offer customers a hosted ChatTrackr solution, enabling them to
download our software on their website, where agents download a fee-based
desktop application, while we manage the service on our network for an
additional fee. Examples of websites we manage include www.buycomcast.com and
www.buytimewarner.com. We also bill customers for maintenance and upgrades to
our service.
Our plans
to grow our customer support business is to position ChatTrackr as a sales tool
for online retailers, increasing fees through customer additions, traffic and
through the number of agents using ChatTrackr. We intend to expand our product
search business by offering this service to existing ChatTrackr customers as a
means of driving further traffic to their own websites and transactional volume.
Our target markets include all ecommerce businesses, financial services,
healthcare and automotive.
Our
primary sources of operating funds have been historically through the issuance
of debt and equity. For the nine months ended September 30, 2010 we raised
$50,000 from the sale of a warrant, $100,000 from the sale of common stock and
$98,000 in debt. For the year ended December 31, 2009, we raised
$333,312 in debt. To finance our growth strategy, we may continue to
actively pursue additional funds through equity financing, including the sale of
additional shares of common and preferred stock, asset sales, accelerated
payments of maintenance and management fees, debt financing, or a combination
thereof.
At
September 30, 2010, iTrackr Systems had assets of $195,195, including cash on
hand of $8,197 and accounts receivable of $14,178. For the nine months ended
September 30, 2010 the Company had revenue of $35,860, and net losses of
$903,264, of which $475,959 was related to stock compensation
expense. iTrackr has incurred losses since inception and may not be
able to generate sufficient net revenue from its business in the future to
achieve or sustain profitability. The Company believes that its cash on hand is
insufficient to continue operations. The Company currently receives
approximately $16,000 to $23,000 per month in sales revenue. The
Company currently needs approximately $15,000 to $20,000 per month to fund our
minimum cash outflows and $43,300 to $53,300 per month to maintain and expand
our sales and operations. The difference between the required minimum
cash outflows of $15,000 to$20,000 per month and $43,300 to $53,300 per month
primarily represents the salaries of 4 to 8 additional sales and administrative
personnel, whom we intend to gradually hire as our cash flow
increases. Thus, the Company will need approximately $180,000 to
$300,000 to continue through September 30, 2011. In order to meet our
cash needs, management is working to secure additional sales and debt and equity
financing. In the event no outside funding is achieved or sales
remain flat Mr. Rizzo, our CEO will continue to provide personal
funds as needed to fund our required minimum cash outflows. From
January 1, 2010 through December 17, 2010, Mr. Rizzo has loaned the Company
$36,000. Mr. Rizzo is an accredited investor and has committed
to fund up to and additional $250,000. However, the Company does not
expect to need the full commitment amount primarily as a result of increasing
sales.
Impact
of Inflation
General
inflation in the economy has driven the operating expenses of many businesses
higher, and, accordingly we have experienced increased salaries and higher
prices for supplies, goods and services. We continuously seek methods of
reducing costs and streamlining operations while maximizing efficiency through
improved internal operating procedures and controls. While we are subject to
inflation as described above, our management believes that inflation currently
does not have a material effect on our operating results. However, inflation may
become a factor in the future.
15
Critical
Accounting Policies
The
preparation of financial statements and related disclosures in conformity with
accounting principles generally accepted in the United States requires us to
make judgments, assumptions and estimates that affect the amounts reported. Note
A of Notes to Financial Statements describes the significant accounting policies
used in the preparation of the financial statements. Certain of these
significant accounting policies are considered to be critical accounting
policies, as defined below.
A
critical accounting policy is defined as one that is both material to the
presentation of our financial statements and requires management to make
difficult, subjective or complex judgments that could have a material effect on
our financial condition and results of operations. Specifically, critical
accounting estimates have the following attributes:
|
·
|
We are required to make
assumptions about matters that are highly uncertain at the time of the
estimate; and
|
|
·
|
Different estimates we could
reasonably have used, or changes in the estimate that are reasonably
likely to occur, would have a material effect on our financial condition
or results of operations.
|
Estimates
and assumptions about future events and their effects cannot be determined with
certainty. We base our estimates on historical experience and on various other
assumptions believed to be applicable and reasonable under the circumstances.
These estimates may change as new events occur, as additional information is
obtained and as our operating environment changes. These changes have
historically been minor and have been included in the consolidated financial
statements as soon as they became known. Based on a critical assessment of our
accounting policies and the underlying judgments and uncertainties affecting the
application of those policies, management believes that our financial statements
are fairly stated in accordance with accounting principles generally accepted in
the United States, and present a meaningful presentation of our financial
condition and results of operations.
In
preparing our financial statements to conform to accounting principles generally
accepted in the United States, we make estimates and assumptions that affect the
amounts reported in our financial statements and accompanying notes. These
estimates include useful lives for fixed assets for depreciation calculations
and assumptions for valuing options and warrants. Actual results could differ
from these estimates.
Stock-Based
Compensation
The
Company accounts for all compensation related to stock, options and warrants
using a fair value based method whereby compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period. We use the Black-Scholes
pricing model to calculate the fair value of options and warrants issued to both
employees and non-employees.
In
calculating this fair value, there are certain assumptions that we use
consisting of:
|
1)
|
The
expected life of the option. This number is known and not
subject to significant
judgment.
|
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2)
|
Risk-free
interest rate. We use the treasury bill rate that most closely
aligns with the duration of the
derivative.
|
|
3)
|
Dividend
yield. Until a dividend is offered this input will always be
zero.
|
|
4)
|
Volatility. We
use the Dow Jones Internet Composite Index (Ticker: FDN) from inception of
the index to the date of grant.
|
|
5)
|
Forfeiture
rate. To date this rate has been
zero.
|
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6)
|
Stock
price (see discussion
below).
|
16
The
use of a different estimate for any one of these components could have a
material impact on the amount of calculated compensation
expense.
We
periodically issue common stock as compensation. Pursuant to ASC
505-50-30-6 issuances are valued using the market price of the stock or value of
the services rendered on the date of the related agreement, whichever is more
readily determinable. To date, common stock granted and issued for
services has been issued free of obligation to the recipient and for no
consideration. The shares are valued at the price non-employees are
willing to accept as payment in lieu of cash, which, historically, has been the
price per share of recent sales of unregistered securities or value of debt
converted to common stock.
Long-lived
Assets
Long-lived
assets, comprised of equipment, and identifiable intangible assets, are
evaluated for impairment whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. Factors that may cause an
impairment review include significant changes in technology that make current
computer-related assets that we use in our operations obsolete or less useful
and significant changes in the way we use these assets in our operations. When
evaluating long-lived assets for potential impairment, we first compare the
carrying value of the asset to the asset’s estimated future cash flows
(undiscounted and without interest charges). If the estimated future cash flows
are less than the carrying value of the asset, we calculate an impairment loss.
The impairment loss calculation compares the carrying value of the asset to the
asset’s estimated fair value, which may be based on estimated future cash flows
(discounted and with interest charges). We recognize an impairment loss if the
amount of the asset’s carrying value exceeds the asset’s estimated fair value.
If we recognize an impairment loss, the adjusted carrying amount of the asset
becomes its new cost basis. The new cost basis will be depreciated (amortized)
over the remaining useful life of that asset. Using the impairment evaluation
methodology described herein, there have been no long-lived asset impairment
charges for each of the last two years.
Our
impairment loss calculations contain uncertainties because they require
management to make assumptions and to apply judgment to estimate future cash
flows and asset fair values, including forecasting useful lives of the assets
and selecting the discount rate that reflects the risk inherent in future cash
flows.
We have
not made any material changes in our impairment loss assessment methodology
during the past two fiscal years. We do not believe there is a reasonable
likelihood that there will be a material change in the estimates or assumptions
we use to calculate long-lived asset impairment losses. However, if actual
results are not consistent with our estimates and assumptions used in estimating
future cash flows and asset fair values, we may be exposed to losses that could
be material.
Goodwill
Goodwill
is no longer amortized, but evaluated for impairment annually, or immediately if
conditions indicate that impairment could exist. Goodwill represents
the excess of the purchase price over the fair value of current financial
assets, property and equipment, and separately reportable intangible
assets. The tangible assets, intangible assets, and goodwill acquired
are then assigned to reporting units. Goodwill is then tested for
impairment at least annually for each reporting unit. Step one of the
goodwill impairment test involves comparing the fair value of the reporting unit
to its carrying value. If the fair value exceeds the carrying value, no
further testing is required. If the carrying value exceeds the fair value,
a step two test must be performed. Step two includes estimating the fair
value of all tangible and intangible assets for the reporting
unit. The fair value of goodwill is then estimated by subtracting the
fair value of tangible and intangible assets from the fair value of the
reporting unit total assets determined in step one. The goodwill
impairment is the excess of the recorded goodwill over the estimated fair value
of goodwill.
We
acknowledge the uncertainty surrounding the key assumptions that drive the
estimated fair value. Any material negative change in the fundamental
outlook of our business, our industry or the capital market environment could
cause the reporting unit to fail step one. Accordingly, we will be
monitoring events and circumstances each quarter (prior to the annual testing
date) to determine whether an additional goodwill impairment test should be
performed.
17
Income
Taxes
Provisions
for income taxes are based on taxes payable or refundable for the current period
and deferred taxes on temporary differences between the amount of taxable income
and pretax financial income and between the tax bases of assets and liabilities
and their reported amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statements at currently enacted income
tax rates applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled.
When
accounting for Uncertainty in Income Taxes, first, the tax position is evaluated
to determine the likelihood that it will be sustained upon external examination.
If the tax position is deemed “more-likely-than-not” to be sustained, the tax
position is then assessed to determine the amount of benefit to recognize in the
financial statements. The amount of the benefit that may be recognized is the
largest amount that has a greater than 50 percent likelihood of being
realized upon ultimate settlement. As changes in tax laws or rates are enacted,
deferred tax assets and liabilities are adjusted through the provision for
income taxes. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. The Company underwent
a change of control for income tax purposes on October 8, 2003 according to
Section 381 of the Internal Revenue Code. The Company’s utilization of U.S.
Federal net operating losses will be limited in accordance to Section 381
rules. As changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
RESULTS
OF OPERATIONS
Results
of Operations
Three
and Nine Months Ended September 30, 2010 Compared With the Three and Nine Months
Ended September 30, 2009.
Revenues
Revenues
for the three months ended September 30, 2010 were $17,285 representing a
$16,978 increase from revenues of $307 for the three months ended September 30,
2009. Revenues for the nine months ended September 30, 2010 were
$35,860 representing a $34,193 increase from revenues of $1,667 for the nine
months ended September 30, 2009. The increase in revenue is primarily
due to the purchase of ChatStat and resulting sales of live chat software which
began in our fourth quarter of 2009. Of the $35,860 of sales in our
first nine months of 2010, $216 relates to click through referral fees and
$35,644 to sales of ChatTrackr. One customer, Saveology, accounted
for all of our ChatTrackr related sales. These results compare to
2009 where all $1,667 was related to click through referral fees. The
$1,451 decrease in referral fees from $1,667 in 2009 to $216 in 2010 is due to a
decrease in advertising due to the current economic climate.
Saveology
and RespondQ are our only ChatTrackr customers and are not related parties to
the Company. On September 1, 2009 we entered into an agreement
whereby the Company provides Saveology Click2Chat (i.e., ChatTrackr) software as
a service. The Company bills Saveology monthly on net 30 day payment
terms at the rate of $0.75 per chat hour. The initial contract term
is 12 months and renews for successive 12 month periods unless
terminated. Services that are voluntarily terminated are payable to
the Company by Saveology through the then current 12 month
term.
On
November 1, 2010, the Company and RespondQ entered into an agreement whereby the
Company provides Click2Chat (i.e., ChatTrackr) software as a
service. The Company bills Saveology monthly on net 30 day payment
terms at a flat monthly rate of $12,700 with an initial contract fee of $25,000
due within 90 days. The initial contract term is 12 months and renews
for successive 12 month periods unless terminated. Services that are
voluntarily terminated are payable to the Company by RespondQ through the then
current 12 month term.
18
Operating
Expenses
Total
operating expenses for the three months ended September 30, 2010 were $196,304,
an increase of $39,316 from $156,988 for the three months ended September 30,
2009. Total operating expenses for the nine months ended September
30, 2010 were $927,967, an increase of $477,188 from $450,779 for the nine
months ended September 30, 2009. The nine month increase in expense
is mainly due to a year-over-year $451,790 increase in the recognition of
non-cash stock compensation primarily related to the issuance of stock for
services, grant of warrants and legal settlement with Marc Falcone, and a
$112,150 increase in professional fees offset by an $83,317 decrease in
personnel expenses. Excluding stock compensation expense of $475,959
through the nine months ended September 30, 2010 and $24,169 through the nine
months ended September 30, 2009, operating expenses were $452,008 for the nine
months ended September 30, 2010 compared to $426,610 for the nine months ended
September 30, 2009, or $25,398 higher in the current year compared to
2009.
Other
Income and Expense
Other
expense decreased $159,933 to $3,996 for the three months ended September 30,
2010 compared to $163,929 of expense during the same period last
year. Other expense decreased $203,784 to $11,157 for the nine months
ended September 30, 2010 compared to $214,941 of expense during the same period
last year. The decrease is due the recognition of a $138,000 loss
related to an investment that was written off in 2009 and to the reduction of
interest expense as a result of converting most of our debt to common stock at
the end of 2009.
Net
Loss
As a
result of the foregoing, our net loss was $183,015, or $0.009 per share, for the
three months ended September 30, 2010 compared to a loss of $320,610, or $0.023
per share for the three months ended September 30, 2009. Our net loss
was $903,264, or $0.045 per share, for the nine months ended September 30, 2010
compared to a loss of $664,053, or $0.047 per share for the nine months ended
September 30, 2009. Excluding one-time, non-cash charges totaling
$475,959 in 2010 related to stock compensation and $162,169 in 2009 related to
stock compensation and investment write down, the Company’s loss decreased
$74,579, or 15% to $427,305 for the nine months ended September 30, 2010
compared to $501,884 for the nine months ended September 30, 2009.
Year
Ended December 31, 2009 Compared With the Year Ended December 31,
2008
Revenues
Revenues
for the year ended December 31, 2009 were $7,493 representing a 70% increase
from revenues of $4,419 for the year ended December 31, 2008. The
increase in revenue is primarily due to the purchase of ChatStat and resulting
sales of live chat software which began in our fourth quarter of
2009. Of the $7,493 in 2009 sales, $1,707 relates to click through
referral fees and $5,786 to sales of ChatTrackr. One customer,
Saveology, accounted for all of our ChatTrackr related sales. These
results compare to 2008 where all $4,419 was related to click through referral
fees. The $2,712 decrease in referral fees from $4,419 in 2008 to
$1,707 in 2009 is due to a decrease in advertising due to the current economic
climate.
During
the year ended December 31, 2009, Saveology was our only ChatTrackr
customer. On September 1, 2009 we entered into an agreement whereby
the Company provides Saveology Click2Chat (i.e., ChatTrackr) software as a
service. The Company bills Saveology monthly on net 30 day payment
terms at the rate of $0.75 per chat hour. The initial contract term
is 12 months and renews for successive 12 month periods unless terminated by the
Company. Services that are voluntarily terminated are payable to the
Company by Saveology through the then current 12 month term.
Operating
Expenses
Total
operating expenses for the year ended December 31, 2009 were $678,473 or 47%
lower compared to $1,274,718 for the year ended December 31,
2008. The $596,245 decrease in operating expenses is the result of
cost cutting measures and was primarily due to a $483,523 decrease in personnel
and professional fees and a $107,767 decrease in stock compensation
expense.
19
Other
Income and Expense
Total
other income and expense was expense of $253,462 for the year ended December 31,
2009 compared to $58,574 for the year ended December 31, 2008. The
$194,888, increase was due to an increase of $31,888 in interest expense as our
debt balance in 2009 increased compared to 2008, $25,000 accrued for the
settlement of a legal claim by a former consultant and $138,000 write-off of a
worthless investment.
Net
Loss
Our net loss was $924,442
for the year ended December 31, 2009, compared to a loss of $1,328,873 for the
year ended December 31, 2008. The $404,431 or 30% improvement in 2009
compared to 2008 was primarily due to our cost cutting measures which reduced
operating expenses $596,245 offset by increases in other expenses of
$194,888.
Liquidity
and Capital Resources
From
inception to September 30, 2010, we have incurred an accumulated deficit of
$3,995,718. This loss has been incurred through a combination of
stock compensation of $1,146,816, professional fees and expenses supporting our
plans to develop our website and brand our services as well as continued
operating losses. Since inception, we have financed our operations
primarily through debt and equity financing. However, we cannot
provide assurance that management will be successful in acquiring such sources
of capital in the future. During the nine months ended September 30,
2010 we had a net increase in cash of $4,974. Total cash resources as
of September 30, 2010 was $8,197 compared with $3,223 at December 31,
2009.
Our
accounts payable and accrued expense balance as of September 30, 2010 was
approximately $710,867 and includes $622,000 due to our CEO for unpaid salary
and expenses and $88,867 of accounts payable and accrued
liabilities. As of December 17, 2010, 1) our accounts payable and
accrued expense balance was approximately $743,471 and includes $665,667 due to
our CEO for unpaid salary and expenses and $77,805 of accounts payable and
accrued liabilities, 2) we have $37,680 of accounts receivable; and 3) $531 of
cash on hand. Between accounts receivable and cash on hand we have
enough to fund approximately seven to ten weeks of required minimum cash
outflows. (See discussion below).
Our
available working capital and capital requirements will depend upon numerous
factors, including the sale of live chat services, the timing and cost of
expanding into new markets, the cost of developing competitive technologies, the
resources that we devote to developing new products and commercializing
capabilities, the status of our competitors, our ability to establish
collaborative arrangements with other organizations, and our ability to attract
and retain key employees. We believe that approximately $43,300 to $53,300
per month or $520,000 to $640,000 will be required to maintain and expand our
sales and operations and cover our operating and public company administrative
expenses for the next 12 months. These costs are comprised of wages,
professional fees, communications (i.e., cell phone and internet service)
internet hosting and supplies. In addition to covering our operating
expenses, we may require additional cash resources due to changing business
conditions or other future developments, including any acquisitions we may
decide to pursue. At present, the Company does not have any proposed business
combination, agreements, the consummation of which is probable.
The
Company currently receives approximately $16,000 to $23,000 per quarter in sales
revenue compared to $15,000 to$20,000 per month in required minimum cash
outflows. Due to our limited operating history, we cannot estimate
the level of future sales and may not generate enough cash to cover our required
minimum cash outflows. With the acquisition of RespondQ in November
2010 as a new customer combined with Saveology, we are in a much better position
to fund our required minimum cash outflows. However, in order to
expand our sales efforts we will gradually need approximately $43,300 to $53,300
per month. The difference between the required minimum cash outflows
of $15,000 to$20,000 per month and $43,300 to $53,300 per month primarily
represents the salaries of 4 to 8 additional sales and administrative personnel,
whom we intend to gradually hire as our cash flow increases. In order
to meet this increase our management continues to work diligently to secure
either debt or equity based financing for which we are currently in
discussions. In the short term, if this registration statement is
declared effective, we hope to receive commitments from certain warrant holders
that they intend to exercise their warrants. The cash to be realized
upon exercise of these warrants is expected to be approximately
$550,000 In the event no outside funding is achieved or sales
remain flat Mr. Rizzo, our CEO will continue to provide personal funds as needed
to fund our required minimum cash outflows. From January 1, 2010
through December 17, 2010, Mr. Rizzo has loaned the Company
$36,000. Mr. Rizzo is an accredited investor and has committed
to fund up to an additional $250,000. However, the Company does not
expect to need the full commitment amount primarily as a result of increasing
sales.
20
Net cash
used by operating activities was $218,121 for the nine months ended September
30, 2010 as compared to $369,256 for the nine months ended September 30,
2009.
Net cash
provided by investing activities was $95 for the nine months ended September 30,
2010 as compared to $34,860 for the nine months ended September 30,
2009.
Net cash
provided by financing activities was $223,000 for the nine months ended
September 30, 2010 as compared to $267,000 for the nine months ended September
30, 2009.
Net cash
used by operating activities was $414,379 for the period ended December 31,
2009 as compared to $794,550 for the period ended December 31,
2008.
Net cash
used by investing activities was $98,854 for the period ended December 31,
2009 as compared to $5,485 for the period ended December 31,
2008.
Net cash
provided by financing activities was $333,312 for the period ended
December 31, 2009 as compared to $883,000 for the year ended
December 31, 2008.
During
the year ended December 31, 2008, iTrackr, Inc.:
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·
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Issued
214,025 shares of restricted common stock in exchange for services valued
at $107,013.
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·
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Received
gross proceeds of $968,750 from promissory notes and repaid $85,750 of
promissory notes.
|
During
the year ended December 31, 2009, iTrackr, Inc.:
|
·
|
Issued
150,000 shares of restricted common stock in exchange for services valued
at $75,000.
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·
|
Converted
$1,300,000 of principle and $137,467 of accrued interest into 3,721,257
shares of restricted common stock.
|
|
·
|
Received
gross proceeds of $333,312 from promissory
notes.
|
During
the nine months ended September 30, 2010, iTrackr Systems, Inc.:
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·
|
Received
$50,000 in exchange for the issuance of 166,666 shares of restricted
common stock.
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·
|
Received
$50,000 upon the exercise of warrants to purchase 166,666 shares of
restricted common stock.
|
|
·
|
Received
$50,000 in exchange for a warrant to purchase 1,000,000 shares of common
stock.
|
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·
|
Converted
$42,000 of principle and $466 of accrued interest into 121,332 shares of
restricted common stock.
|
|
·
|
Received
gross proceeds of $98,000 from promissory
notes.
|
|
·
|
Issued
360,000 shares of restricted common stock valued at $108,000 to settle a
legal dispute with Marc Falcone.
|
|
·
|
Issued
101,000 shares of restricted common stock to settle accounts payable
valued at $32,000.
|
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·
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Issued
350,000 shares of restricted common stock in exchange for services valued
at 105,000.
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Off-Balance
Sheet Arrangements
We have
no material off-balance sheet transactions.
21
Controls
and Procedures.
Evaluation
of Disclosure Controls and Procedures
As of
December 31, 2009, under the direction of the Chief Executive Officer and Chief
Financial Officer, the Company evaluated the effectiveness of the design and
operation of our disclosure controls and procedures, as defined in Rule 13a —
15(e) under the Securities Exchange Act of 1934, as amended. Based on the
evaluation of these controls and procedures required by paragraph (b) of Sec.
240.13a-15 or 240.15d-15 the disclosure controls and procedures have been found
to be ineffective.
The
Company maintains a set of disclosure controls and procedures designed to ensure
that information required to be disclosed by us in our reports filed under the
securities Exchange Act, is recorded, processed, summarized, and reported within
the time periods specified by the SEC’s rules and forms. Disclosure controls are
also designed with the objective of ensuring that this information is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.
Evaluation
of Internal Control Over Financial Reporting
Management
conducted an evaluation of the effectiveness of the Company’s internal control
over financial reporting as of December 31, 2009. In making this
assessment, management used the criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission, or COSO. The COSO framework summarizes each of the
components of a company’s internal control system, including (i) the
control environment, (ii) risk assessment, (iii) control activities,
(iv) information and communication, and (v) monitoring. In
management’s assessment of the effectiveness of internal control over financial
reporting (as defined in Exchange Act Rule 13a-15(f)) as required by Exchange
Act Rule 13a-15(c), our management concluded as of the end of the fiscal year
covered by this Annual Report on Form 10-K/A, due to a lack of segregation of
duties that our internal control over financial reporting has not been
effective. However, at this time, our resources and size prevent us from being
able to employ sufficient resources to enable us to have adequate segregation of
duties within our internal control system. In addition, management has decided
that considering the employees involved and the control procedures in place, the
risks associated with such lack of segregation of duties are insignificant.
Management will periodically reevaluate this situation. If the volume of
business increases and sufficient capital is secured, it is the Company’s
intention to further increase staffing to mitigate the current lack of
segregation of duties within the general, administrative and financial
functions.
Our Board
of Directors were advised by Bedinger and Company, our independent registered
public accounting firm, that during their performance of audit procedures for
the year ended December 31, 2009 and 2008, they have identified a material
weakness as defined in Public Accounting Oversight Board Standard No. 5 in our
internal control over financial reporting. Our auditors have identified the
following material weaknesses in our internal control over financial reporting
as of December 31, 2009:
A
material weakness in the Company’s internal control over financial reporting
exists in that there is limited segregation of duties amongst the Company’s
employees with respect to the Company’s preparation and review of the Company’s
financial statements. This material weakness is a result of the Company’s
limited number of employees. This material weakness may affect management’s
ability to effectively review and analyze elements of the financial statement
closing process and prepare financial statements in accordance with U.S.
GAAP.
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this
prospectus.
22
Changes in Internal
Controls
Management
of the Company has evaluated, with the participation of the Chief Executive
Officer of the Company, any change in the Company’s internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during the fiscal year ended December 31, 2009.
There was no change in the Company’s internal control over financial reporting
identified in that evaluation that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting, other than what has been reported above.
Limitations on the
Effectiveness of Controls and Other Matters
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange
Act of 1934, as amended). Internal control over financial reporting is designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
may be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control.
The
design of any system of controls also is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions; over time, a control may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be
detected.
Risk Factor Related to
Controls and Procedures
The
Company has limited segregation of duties amongst its employees with respect to
the Company’s preparation and review of the Company’s financial statements due
to the limited number of employees, which is a material weakness in internal
controls, and if the Company fails to maintain an effective system of internal
controls, it may not be able to accurately report its financial results or
prevent fraud. As a result, current and potential stockholders could lose
confidence in the Company’s financial reporting which could harm the trading
price of the Company’s stock.
Management
has found it necessary to limit the Company’s administrative staffing in order
to conserve cash, until the Company’s level of business activity increases. As a
result, there is very limited segregation of duties amongst the employees, and
the Company and its independent public accounting firm have identified this as a
material weakness in the Company’s internal controls. The Company intends to
remedy this material weakness by hiring additional employees and reallocating
duties, including responsibilities for financial reporting, among the employees
as soon as there are sufficient resources available. However, until such time,
this material weakness will continue to exist. Despite the limited number of
employees and limited segregation of duties, management believes that the
Company is capable of following its disclosure controls and procedures
effectively.
23
BUSINESS
Overview
iTrackr
was formed in May 2006 to develop, market and commercialize a product and
inventory search application through a social networking site designed to
leverage the best of Internet and Mobile technologies. We have taken the best of
several burgeoning markets, including eCommerce, social networking and mobile
content, and developed what we believe is a powerful platform that drives value
to consumers, retailers and advertising and marketing firms.
iTrackr
intends to introduce Internet and Mobile social merchandizing technology
platforms. Social merchandizing applies the variety of traditional marketing
practices to promote products and services to a community of individuals via
social networking technologies. iTrackr is similar to MySpace and Facebook;
however, our members’ interests are not in diary or event blogging, but in the
timely location of products and services which can be acquired and consumed on a
local level.
iTrackr
enables consumers to search and track merchandise, letting the consumer know
which retail locations in a local zip code are stocking the queried merchandise,
as well as the comparative prices. In addition, if the item is not in stock, the
consumer can request that iTrackr notify them via mobile text message or email
when the item is delivered to a local retailer and where that retailer is
located.
In 2009,
iTrackr purchased online customers support software technology from Chatstat for
approximately $95,000. iTrackr has launched its customer support chat software
which facilitates real-time customer support and expert advice, and paid
transactions.
On
December 10, 2009, Must Haves, Inc., iTrackr Acquisition, Inc. (“Merger
Sub”) and iTrackr, Inc., a Florida corporation (“iTrackr”), entered into an
Agreement and Plan of Merger (the “Agreement”), which closed January 12, 2010.
On the Closing Date, iTrackr was merged with and into Merger Sub, which is the
surviving corporation and became a wholly-owned subsidiary of the
Registrant.
Products
and Services
The
iTrackr community brand has created one of the first mobile shopping communities
which is fully integrated with the online and mobile world. Our community
bridges cyberspace and the mobile space with the real world for the benefit of
our users, retailers and merchants. iTrackr is recognized nationally for
locating hard to find products and major media organizations such as U.S. News
and World Report, The Wall Street Journal and CNET have consulted with us for
reference retail statistics.
Our
current product line consists of our online Chat customer support application,
“TrackiT!”, “PriceiT!”, Groups, Calendar and status update messaging for mobile
and Internet.
Customer
Support and Chat Software
Bridging
the gap between visitor traffic and successful business outcomes, our business
solutions deliver measurable return on investment by enabling clients
to:
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Increase
conversion rates and reduce abandonment by selectively engaging website
visitors;
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Accelerate
the sales cycle, drive repeat business and increase average order
values;
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Increase
customer satisfaction, retention and loyalty while reducing service
costs;
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Harness
the knowledge of subject-matter experts by allowing consumers to engage
with major online brands ;
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Refine
and improve performance by understanding which initiatives deliver the
highest rate; and
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Lower
operating costs in the call center by deflecting costly phone and email
interactions.
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24
TrackiT,
PriceiT and iTrackr Community Applications
These
products are based on a “pull/push” model where the consumers tell us what
products they are interested in via the Retail “TrackiT!” button and iTrackr
pulls the information from the retailers’ inventory and pushes it to the
consumer. The consumer establishes their messaging preferences of site only,
mobile text messaging and/or email. The main product is the “TrackiT!” function
which allows consumers to search local stores’ inventory for products like the
Wii Console, Guitar Hero video game as well as a host of other
products.
Our
products are focused on creating value by and to the consumer, the retailer and
the marketing firm. The success of our business is predicated on our ability to
effectively achieve and maximize value on each of these fronts.
Our
business and technology was created first and foremost with the individual
consumer, and the consumer’s “interests” in mind. More than ever, consumers are
challenged with issues of time and convenience in fulfilling their purchases.
This factor has been one of the primary catalysts for the growth of online
shopping which addresses both of these constraints directly. But the fact is
that online commerce remains less than 5% of total retail, according to the Q1
2010 Census Bureau of the Department of Commerce Report and is forecast to only
reach about 8% of total retail by 2014, according to Forrester Research.
Tracking and utilizing the expressed interests of our users allows us to
maintain our relevance to the consumer and to provide information that keeps
them engaged with our Community.
The vast
majority of consumers are committed to fulfilling their shopping purchases at
brick-and-mortar locations. This creates another significant inconvenience, or
“pain”, for the consumer – namely, the need to find the product they are looking
for in stock and in their area now. We believe that the best solution, or
resolution, for the consumer’s need is to help them mitigate and eliminate
altogether the hassle of locating stores that have the products they want in
stock and to provide them with an opportunity to secure that in-stock product
with an immediate purchase. We leverage the power and ubiquitous nature of the
Internet and mobile marketplace to provide this intelligence to the consumer in
an on-demand, real-time capability. We simplify the process in a turnkey fashion
and with immediate resolution.
The value
proposition that we offer to the retailer is equally compelling. We drive
purchases to the retailer. Our presence and content will greatly influence where
our users fulfill their transactions. Our powerful e-commerce driven, social
networking platform cost-effectively pushes consumers that are ready to purchase
to retail locations. Retailer’s can market incentives and promotions on a local
and even store-by-store basis to our consumers. That is the essence of social
merchandising. iTrackr can provide layers of intelligence to retailers that can
be parsed all-the-way down to the zip-code layer. The implications to the
retailer range well beyond target marketing and extend directly to inventory
management, fulfillment and settlement in the consumer supply
chain.
Substantiating
“return-on-investment remains the biggest challenge for marketing firms catering
to online advertisers. Much of the problem online advertiser’s face is related
to the measurement tools currently available and the data which is ultimately
produced from those tools. Additionally, it is also difficult to determine the
quality of placement and the impact of advertising amongst the online audience
at a particular destination.
The
primary advantage that we offer marketing firms is the assurance that the ads
and promotional campaigns launched within the iTrackr Community are both highly
targeted and are being sought by the confirmed consumers that are at our site
first and foremost for retail interests. This is a significant advantage and a
key differentiator from other platforms. We believe that marketing firms can
more effectively demonstrate ROI to their clients on our platform, and we can
provide them with the statistics to prove it.
We are
working with our commercial partners to provide inventory and service tracking
functions within the branded image of their existing online presence. This is
the fundamental building block of social merchandising. From these services, our
Retail partners will extend product and service fulfillment messaging with
derivative sales offerings, associated mobile advertising and mobile couponing.
iTrackr subscribers will benefit from brand affinity offerings through our
Retailers’ partners.
25
Transaction
Fulfillment
Consumers
can complete the process of searching for products and services by securing them
with a “BuyiT!” purchase when they locate what they want. Goods and services can
be secured when they become available, and the consumer will know that their
products will be waiting for them when they go to pick them up.
Group
Messaging
Consumers
can communicate or forward received messages to any of their groups, regardless
of which devices they are using, where each member receives messages according
to their individual profiles and permissions that they have established.
Retailers can leverage this group messaging functionality to push special offers
and incentives to relevant groups, notifying them of brick-and-mortar locations
where they can locate products and take advantage of special
offers.
MyiTrackr
Dashboard
When a
community member signs in, their home page is also their personal dashboard.
Whether from the web or from the mobile device, the MyiTrackr Personal Dashboard
is the interface to the world of iTrackr services. From a user’s personal
dashboard they can personalize and configure their view of the iTrackr
community. From here they can set up their communications settings, their group
affiliations and their personal preferences. Community members can research
subscriber submitted opinions of products and services, or they may wish to
submit reviews of their own. The MyiTrackr Personal Dashboard is the member’s
one-stop for personalization of the iTrackr Community experience.
iTrackr
Trackit Reports
iTrackr’s
TrackiT Reports provide commercial subscribers with invaluable data provided by
the iTrackr consumer. We have unique insight into the purchasing trends of
groups of consumers by product. When a community member stops tracking a
product, we glean specific information about the retail experience, and while we
never release specific user information, we can aggregate very specific
information about consumer behavior. As our membership grows many consumer
trends can be noted and quantified. iTrackr TrackiT Reports are the only place
where that data can be found.
Saveology
Agreement
iTrackr
has entered into an agreement with Saveology which presently represents 100% of
our current business. Key terms and conditions of this contract
are:
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iTrackr
Systems will license certain hosted “Click2Chat software as a service” and
provide all other services, data importI export, monitoring,
support, backup and recovery, change management. technology upgrades, and
training necessary for Saveology's productive use of such software (the
"Services"),
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the
Services are offered on a non-exclusive
basis
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ITrackr
shall not enter into any subcontracts for the performance of the Services,
or assign or transfer any of its rights or obligations under this
Agreement, without Saveology's prior written consent and any attempt to do
so shall be void and without further effect. Saveology's consent to
iTrackr's right to subcontract any of the Services shall not relieve
ITrackr of any of its duties or obligations under this Agreement, and
ITrackr shall indemnify and hold Saveology harmless from any payment
required to be paid to any such
subcontractors.
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Saveology
may, upon written notice, request increases or decreases to the scope of
the Services
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The
initial term of the agreement is 12 months and following the initial term,
the agreement will automatically renew for successive one-year
terms (each, a "Renewal Term") until such time as Saveology provides
ITrackr with written notice of
termination.
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26
Business
Strategy
iTrackr
Technologies has built a community-driven website at www.itrackr.com where
consumers can create user-generated content focused on feedback and
recommendations about popular products. What is truly unique about our website
is that the users all have something in common; they are confirmed consumers.
They have found www.itrackr.com
because they are looking for one item or another in their local shopping area
for immediate purchase. Since our initial launch, in December 2006, we increased
our membership 170,000 subscribers solely through viral, word-of-mouth
marketing.
In
addition to our web presence we are working with retailers to extend iTrackr’s
fulfillment tracking applications to their branded web sites. Our mobile suite
of applications are also extensible with our commercial partners’ look and feel,
giving them an iTrackr enabled mobile presence under their existing corporate
brand. We will augment our offering with transaction settlement capabilities to
complement our existing capabilities and provide our partners with a complete
fulfillment solution.
Our
initial objective is to reach critical mass as quickly as possible in order to
establish the iTrackr Community as viable and attractive to marketing firms and
online and mobile advertisers. We will achieve critical mass when revenue from
our Community presence approaches our current cost of operations. We intend to
leverage our suite of applications over wired and mobile devices in order to
achieve the broadest possible uptake and the greatest potential market
penetration.
We have
employed a “freemium” model to maximize consumer uptake for our social shopping
tools. In other words, we offer product tracking and notification, as well as
the consumer social network capabilities to our users and members without a
charge. We believe this will provide us with the most efficient path to
establishing critical mass and validation of our offering. We believe that as
traffic and usage increases on our network we will be able to generate revenues
through sales of marketing and advertising campaigns, usage fees for premium
content and services and subscriptions.
We
believe that our user base will be driven by the content that we propagate to
our iTrackr database, the number of consumers that will employ mobile data
applications, and more generally mirror the broader online consumer demographic.
Our strategy is to populate our database initially with the most sought after,
or the “hottest” consumer products, demand for which is generated by the
community members themselves. This category of products is, by nature, more
difficult to locate in-store due to the fact that demand is higher. These will
be the products which will highlight the value of our offering to the consumer,
and create the largest viral “buzz” amongst all consumers. Around the holidays,
these hot items are typically new releases of consumer electronics, games and
communications devices, but can be any consumer good or service for which supply
is constrained regionally or nationally.
Over
time, other factors will contribute to the products available for tracking on
our network, including consumer user-generation of product tracking requests as
well as our development of partnerships and affiliation with retail and
marketing firms.
We have
developed the iTrackr platform to scale on a distributed basis, where consumers
have the capability to add products for tracking, as well as for reviews and
commentary to propagate within our community. We are seeking to maximize the
relevance of the tracking services, while increasing the likelihood of longer
and more frequent site visits. This increases the attractiveness of our site as
a merchandising destination for online advertisers and marketing
firms.
Our plan
for 2010 is to grow by promoting our mobile networking tools and retail search
capabilities to community and affinity groups that will benefit the most from
mobile social networking. These groups include retailers, students, affinity
groups and mobile device manufacturers. By soliciting participation from retail
sponsors, we will provide free services to our target
communities.
27
Viral
Promotion Strategy
iTrackr
has been lauded on websites and in the media with no direct marketing
expenditures or outlays on our behalf. For example, U.S. News & World
Report mentioned the iTrackr service on December 6, 2007, within the
context of “Tracking the Elusive Wii”. Almost immediately after we made our
application available on the world wide web, mention of our service and positive
reviews appeared on Google searches for the term iTrackr. We will continue to
promote our community virally, and will expand our blog presence for the
foreseeable future.
Consumer
Reach Strategy
Today
most consumers utilizing iTrackr do so for products that can be found and
purchased at their local store. Our new product offerings will allow consumers
to form private communities and to exchange group messages or discuss things
within groups of their making. By offering these features, we extend the
consumers ability to seek fulfillment for services as well as goods. These
services include event ticketing such as movie tickets, concerts or sporting
events, and they will also include packages combining events with merchandise
and entertainment. iTrackr’s messaging and community products will offer
consumer’s the ability to organize the events in a one step process including
the purchase of the service via the Internet. This can occur from any Internet
or mobile device.
Retailer
Promotion Strategy
We intend
to solicit commercial participation from big box consumer electronics and
pharmaceutical retailers, but our service is not limited to any particular set
of retail categories. Consider the following examples:
Pharmaceutical Retailer: we
provide the retailer with the ability to notify customers via text message or
email that their prescription has been filled and is available for pickup. With
these highly-qualified messages, we can extend the retailers the ability to
offer special coupons or exclusive promotional opportunities. By combining our
service with an exclusive marketing opportunity, we will drive derivative sales
from the subsequent store visit by the consumer.
Electronic Retailer: our
utilities give retailers the ability to notify their customers that a product at
a particular location has become available, and iTrackr will facilitate the
transaction. In addition, the retailer can drive additional sales by offering
additional incentives or bundles when the customer visits the store to purchase
the originally tracked item. We have identified several major retailers with
whom we have engaged or intend to engage. These include Best Buy, Target, Radio
Shack, Circuit City and Costco. Additionally, other retail areas will be pursued
as commercial adoption grows. These secondary retailers include book stores such
as Barnes & Noble and manufacturing retailers such as
Apple.
Mobile
Supply Chain Distribution
Making
iTrackr an integral part of the mobile technology supply chain is one of our
ultimate, long-term goals. Strategically placing the iTrackr Community button on
mobile devices gives us one of the strongest opportunities to extend our
community brand. Placement on the deck of PDA’s and cell phones will give us a
true advantage in the marketplace. Developing relationships with manufacturers
and service providers will allow us to pursue this goal, and having service
providers as commercial partners will only further strengthen our offerings to
potential subscribers. Even one partner in this arena greatly expands our reach
and brand presence to a broad consumer group. Those consumers will drive new
communities to the iTrackr offering and further expand mobile social networking
in today’s wireless world.
Our
Industry
Chat
and Online Customer Support
Despite
the current state of the U.S. economy, online sales are still strong. Total
online sales reached were essentially flat in the U.S. during 2009, at $131.4
billion, down from $132.3 billion in 2008 (not including sales of travel),
according to analysts at eMarketer, and will grow to $141.3 billion in
2010. U.S. travel sales online for 2009 were projected to reach $92.6
billion, according to eMarketer. Plunkett Research estimates global travel
expenditures online at about $300 billion for 2009.
28
We
believe that the online channel presents expansion opportunities for many
industries, and that the increased e-commerce revenue that results from this
expansion may outweigh the decrease that stems from consumers who will curtail
their overall spending in 2009. To survive in this competitive environment,
e-businesses must differentiate their service, quality and overall experience to
gain customer loyalty.
Online
advertising continues to grow, with search engine-based marketing leading the
way. We believe the shift from television, print, radio and other traditional
media may accelerate in a recessionary environment largely because Web-based
media is more measurable, interactive, targeted and relevant. comScore reports that “the
total worldwide search market boasted more than 131 billion searches conducted
by people age 15 or older from home and work locations in December 2009,
representing a 46-percent increase in the past year. This number represents more
than 4 billion searches per day, 175 million per hour, and 2.9 million per
minute.”
Nielsen wire reports that
“estimated online advertising spending on the top social network and
blogging sites increased 119 percent, from approximately $49 million in August
2008 to approximately $108 million in August 2009 – all despite a recession.
Share of estimated spend on these sites has doubled, from 7 percent of online ad
spend in 2008 to 15 percent in 2009.”
The
unrivaled convenience, accessibility and selection of the Web have established
the channel as a mass consumer medium. Because the Internet is a ubiquitous
influence in our day-to-day lives, consumer expectations and demands continue to
rise.
By
supplying online engagement tools that facilitate real-time assistance and
personalized advice, iTrackr enables businesses and individual service providers
to connect with their target audience, as well as provide personalized customer
assistance to high-value customers. Creating more relevant, compelling and
personalized online experiences, our platform helps e-business organizations
meet the needs of demanding consumers while reinforcing their brand
promise.
Social
Networking
Social
technologies continue to grow substantially in 2009. Forrester Research reports
that three out of four Americans use social technology. Nielsen
reports that 2/3rd of the
global internet population visits social networks and that social sites are the
fourth most popular online activity ahead of personal email. Facebook
estimates to have 500 million active users, of whom half log in on any
given day, and of which more than 200 million active users access through
mobile devices.
By the
year 2013, 43% of global mobile internet users (607.5 million people worldwide)
will be accessing social networks from their mobile devices, according to
eMarketer, which characterizes mobile and social as still-emerging channels that
are each helping drive the adoption of the other. In the US, mobile social
networkers will total 56.2 million by 2013, and will account for nearly
half (45%) of the mobile internet user population.
Social
networking has dramatically reshaped the Internet landscape and is now
generating more than $1 billion annually. Industry giants such as Microsoft and
Google continue to court these social networking sites with the intention toward
establishing the mechanism for monetizing advertising content.
Mobile
data services (e.g. text messaging, ringtones, wallpaper) have become a hundred
billion dollar business worldwide. ABI Research estimates that between 2008 and
2014, the total market for mobile messaging will grow at a CAGR of nearly 8
percent, increasing from $132 billion in 2008 to $208 billion by
2014.
Government
Regulation
There are
an increasing number of laws and regulations pertaining to the Internet and
e-commerce over the Internet. Other laws or regulations may be adopted with
respect to online content regulation, user privacy, pricing, restrictions on
email solicitations, taxation and quality of products and services. Any new
legislation or regulation, or the application or interpretation of existing
laws, may decrease the growth in the use of the Internet, which could in turn
decrease the demand for our service, increase our cost of doing business or
otherwise have a material adverse effect on our prospects and
revenues.
29
Competition
Chat
and Online Customer Support
The
markets for online engagement technology and online consumer services are
intensely competitive and characterized by aggressive marketing, evolving
industry standards, rapid technology developments, and frequent new product
introductions.
Our
business solutions compete directly with companies focused on technology that
facilitates real-time sales, email management, searchable knowledgebase
applications and customer service interaction. These markets remain fairly
saturated with small companies that compete on price and features. iTrackr faces
competition from online interaction solution providers, including
software-as-a-service (SaaS) providers such as LivePerson, Art Technology Group,
Instant Service, RightNow Technologies and TouchCommerce. We face potential
competition from Web analytics and online marketing service providers, such as
Omniture. The most significant barriers to entry in this market are knowledge
of:
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Online
consumer purchasing habits;
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Methodologies
to correctly engage customers;
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Metrics
proving return on investment; and
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Technology
innovation opportunities.
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iTrackr
also faces potential competition from larger enterprise software companies such
as Oracle and SAP. In addition, established technology and/or consumer-oriented
companies such as Microsoft, Yahoo and Google may leverage their existing
relationships and capabilities to offer online engagement solutions that
facilitate real-time assistance and live advice.
Finally,
iTrackr competes with in-house online engagement solutions, as well as, to a
lesser extent, traditional offline customer service solutions, such as telephone
call centers.
iTrackr
believes that competition will increase as our current competitors increase the
sophistication of their offerings and as new participants enter the market.
Compared to iTrackr, some of our larger current and potential competitors
have:
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Stronger
brand recognition;
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A
wider range of products and services;
and
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Greater
financial, marketing and research and development
resources.
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Additionally,
some competitors may enter into strategic or commercial relationships with
larger, more established and better-financed companies, enabling them
to:
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Undertake
more extensive marketing campaigns;
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Adopt
more aggressive pricing policies;
and
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Make
more attractive offers to businesses to induce them to use their products
or services.
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Social
Networking and Online Retail Search
While our
business concept is unique, our revenue streams come from intensely competitive
markets. Our users can find, buy, sell and pay for similar items and services
through a variety of competing channels. These include, but are not limited to,
online and offline retailers, distributors, liquidators, import and export
companies, catalog and mail-order companies, classifieds, directories, search
engines, products of search engines, virtually all online and offline commerce
participants (consumer-to-consumer, business-to-consumer and
business-to-business), online and offline shopping channels and networks. As our
product offerings continue to broaden into new categories of items and new
commerce formats, we expect our competition to continue to broaden to include
other online and offline channels for those new offerings.
30
Whether
it is driving product sales to traditional businesses or providing targeted
marketing opportunities for derivative sales to a retailer’s consumer, iTrackr
is in the business of social merchandizing. Other social networking ventures,
such as MySpace and Facebook have seen tremendous growth over the last four
years in terms of the user community.
Facebook
has garnered more than 400 million users worldwide and My Space reportedly
has more than 110 million users. These numbers are impressive for building
social networking destinations, but the business behind these offerings still
relies on revenue primarily derived from online advertising. According to
comScore, Americans received 1 trillion display ads impressions online in Q1
2010, while Facebook led all online publishers with 176 billion. iTrackr
competes with these and other larger and more established social networking
sites for users, but we believe we are well positioned to excel at per
subscriber revenue generation given our multi-channel approach to revenue
generation. The major difference between iTrackr and sites like Facebook or
MySpace is that they offer blogs and pictures, and we focus on consumers and
merchandising.
Other
competitors include social shopping sites. Hearst Corporation acquired Kaboodle
for an estimated $40 million. Kaboodle is one of the new social shopping sites
started in the last few years. They had managed to grow their site to
2.2 million unique visitors by June 2007, prior to being purchased. Several
social shopping sites focus on a specific community segment. Stylehive is vying
to become a destination for women’s fashion. Crowdstorm is focusing exclusively
on online shopping. All of these sites are looking to establish a niche
community with retail extensions. Very few offerings have direct queries of
existing retailers, and none have in-stock checking or sell through capabilities
with existing retailers. iTrackr does complete point-of-sale transactions, and
provides sell through capabilities to our commercial partners.
A key
differentiator of our offering is our focus on mobile social networking and
merchandizing. Most mobile offerings only tie into existing sites like MySpace.
An example of this is the mobile offering from Earthlink and SK Telecom called
Helio. This is a premium service requiring a specific device and running as much
as $135 per month. While Helio is going after the premium content consumer, the
remainder of the mobile marketplace is unserved. iTrackr will change that with
our mobile community. A wide variety of mobile devices work with our community
utilities, and the service does not come with a premium price tag.
We are a
commerce facilitator. With other eCommerce sites, when you buy a product, you
have to wait for fulfillment which often takes weeks. Our service is designed
for consumers that want products today. Our consumers want to know where they
can find a product, if it is available and what is the best price for the
product. This is our service offering, and this is what both differentiates us
from eCommerce stores and what enables us to serve as a partner to brick and
mortar retailers.
Another
key differentiator of our service from others, is that we proactively notify
consumers when products or services that they are looking for become available
and from where. We are not a retailer, so we do not compete directly with other
retailers. Rather, we support them. iTrackr identifies groups of people who are
looking for a product or service, and we provide opportunities for our
commercial partners to fulfill their need. We identify further opportunities for
retailers to take advantage of derivative sales opportunities when the right mix
of consumer interest, product availability and pending purchase come
together.
Research
and Development Activities
We are a
technology company. Our estimated cash outlays for research and development
activities were approximately $84,000 and $175,000 in 2009 and 2008,
respectively. We anticipate that research and development costs will
continue to be a material component of our overall business expenditures for the
foreseeable future.
Patents
and Trademarks
We do not
own, either legally or beneficially, any patents or trademarks.
31
Some of
our products are also designed to include software or other intellectual
property licensed from third parties. While it may be necessary in
the future to seek or renew licenses relating to various aspects of our products
and business methods, based on past experience and industry practice we believe
that such licenses generally could be obtained on commercially reasonable
terms. However, there is no guarantee that such licenses could be
obtained at all. Because of technological changes in the portable
electronics industry, current extensive patent coverage and the rapid rate of
issuance of new patents, it is possible certain components of our products may
unknowingly infringe existing patents or intellectual property rights of
others.
Employees
At
September 30, 2010 we had 2 full-time employees. There are no collective
bargaining contracts covering any of our employees. We believe our
relationship with our employees is satisfactory.
Facilities
We
entered into a lease agreement with Regus in February 2009, where the initial
term was for a three month period through April 2009. According to the terms of
the lease agreement, the lease extends automatically for successive periods
equal to the initial term but no less than 3 months (or such other renewal term
that has been agreed between Regus and us) until brought to an end by us or
Regus.
Our lease
is for property located at 433 Plaza Road, Ste 275, Boca Raton Florida for a fee
of $800 per month. We believe our facilities are currently suitable and adequate
for our current needs.
LEGAL
PROCEEDINGS
The company is not currently party to
any legal proceedings. However, on February 16, 2010, the Company
settled a legal dispute as further described in Note J to the footnotes of our
September 30, 2010 and 2009 financial statements below.
MANAGEMENT
Executive
officers and directors
Our
executive offers and directors and their ages and positions as of September 30,
2010 are set forth below:
Name
|
Age
|
Position
|
Term
|
|||
John
Rizzo
|
48
|
Chairman
of the Board and Chief Executive Officer
|
January
12, 2010 thru Present
|
|||
Ramesh
Anand
Mihir
Sevak
|
46
28
|
Chief
Operating Officer
Chief
Technology Officer
|
January
12, 2009 thru Present
April
1, 2010 through Present
|
|||
Dave
Baesler
|
63
|
Director
|
January
12, 2009 thru Present
|
|||
Michael
Uhl
|
47
|
Director
|
January
12, 2009 thru Present
|
Ramesh Anand has served as
iTrackr’s COO since January, 2010. Mr. Anand currently also serves as VP of
Global Sales and Marketing for Advanced Contact Solutions, since April, 2009.
Prior to that, Mr. Anand served as Head of Sales, North America for HTMT
Global Solutions, Ltd for the period of 2006 through 2008, and as Head of Sales
of Hero ITES from 2005 through 2006. He has also served as VP Sales and Business
Development at IBM Daksh Business Process Services, Director of Global
Outsourcing of Ocwen Financial Corporation, and Founded Global E-Connect.
Mr. Anand has a Master of Management Studies from Birla Institute of
Technology and Science.
Mihir Sevak has served as
iTrackr’s CTO since April 1, 2010. Mr. Sevak currently also serves a
CEO and founder of Mediathena, Inc. since January 2009. Prior to
that, from 2003 through 2008, Mr. Sevak has held various technical positions,
including Embeded Linux Consultant for Data Protection Solution from January
2009 through August 2009, Sr. Software Engineer for Sezmi Corporation from
January 2008 through December 2008, Assistant CTO for Safemedia Corporation from
November 2005 through December 2007, Software Developer for Operating Systems
Support, Inc. from December 2004 through November 2005 and Software Engineer for
Motorola, Inc. from December 2003 through December 2004. Mr. Sevak
has a Bachelors degree in computer engineering from Florida Atlantic
University.
32
Michael Uhl was first elected
to the Board of Directors in March, 2007. Mr. Uhl has served as regional VP
of HelmsBriscoe since 2005. He previously served as Executive VP of Sales and
Marketing at Caesar’s Entertainment, wherein he directed convention and travel
industry sales for Bally’s Paris, Flamingo, Caesar’s Palace and the Las Vegas
Hilton since 2001 to 2005. Mr. Uhl has also held Director of Sales
positions with Walt Disney World Swan & Dolphin and New York
Hilton & Towers. Mr. Uhl holds a BBA from Hofstra University. In
terms of specific experience, qualifications and attributes that Mr. Uhl brings
to the Company, and led to our determination to appoint him as director, Mr. Uhl
has substantial sales and marketing experience, as demonstrated in positions
held with Caesar’s Entertainment, Walt Disney World Swan & Dolphin and New
York Hilton & Towers. Our business requires strategic sales and marketing
leadership in the development and execution of our business plan.
David Baesler was first
elected to the Board of Directors in November, 2007. Since 2000,
Mr. Baesler has served VP of Sales for the wireless division of Kyocera
Sanyo, and prior to that, since 1998 to 2000 as its VP/General Manager. In
addition to Kyocera Sanyo, Mr. Baesler has held executive positions at
several leading consumer electronics companies, including Executive VP of
Brother International; Group VP of Toshiba North America’s Consumer Products
Division; Senior VP of Pioneer Corporation’s Video Division; and VP of Sales for
Pioneer Electronics. Mr. Baesler served as an officer in the US Army and
holds a degree in mathematics and economics from North Dakota State University.
In terms of specific experience, qualifications and attributes that Mr. Baesler
brings to the Company, and led to our determination to appoint him as director,
Mr. Baesler has substantial experience in developing strategic sales channels,
and in business development. Our business requires strategic sales advisory and
oversight, as well as advisory and oversight contributions that Mr. Baesler can
offer in the development and execution of our business plan.
John Rizzo founded iTrackr in
May, 2006. Prior to founding iTrackr, Mr. Rizzo operated ERM Solutions, an IT
consulting firm which he founded in 1998. Mr. Rizzo has more than a decade
experience in the capital markets as well as maintaining key roles with start-up
and early stage businesses. He has been integral in the completion of several
successful transactions, including sale of a business to MasterCard and in
Siebel Systems’ 1996 Initial Public Offering. In terms of specific
experience, qualifications and attributes that Mr. Rizzo brings to the Company,
and led to our determination to appoint him as a director, Mr. Rizzo has
extensive technology and capital market expertise. Our business
requires experience in both areas.
Except as
noted above, the above persons do not hold any other directorships in any
company with a class of securities registered pursuant to Section 12 of the
Exchange Act or subject to the requirements of Section 15(d) of the Exchange
Act.
The
Board of Directors and Committees
Upon the
effectiveness of this prospectus, our board will consist of three directors.
Although we are not required, a majority of the directors will be “independent”
as defined under and required by applicable securities laws. At each annual
meeting our stockholders will elect our full Board of Directors and our
directors will serve until their successors are elected or appointed, unless
their office is vacated earlier. Directors may be removed at any time for cause
by the affirmative vote of the holders of a majority of the voting power then
entitled to vote.
Board
Leadership
Our Board of Directors has adopted a
Charter of the Lead Independent Director, providing that in circumstances where
the Chairman of the Board of Directors is not independent, our Board considers
it to be useful and appropriate to designate a Lead Independent Director to
coordinate activities of the other independent directors and to perform such
other duties and responsibilities as our Board may determine from time to time.
Because John Rizzo is our Chief Executive Officer, as well as Chairman of the
Board, we have designated a Lead Independent Director. Michael Uhl currently
serves as the Lead Independent Director.
33
The Lead Independent Director (if so
designated) is responsible for coordinating the activities of the independent
directors. The designation of a Lead Independent Director is intended to
facilitate communication between the independent directors and the
Chairman/Chief Executive Officer and not to diminish the ability of any other
independent director to communication directly with the Chairman/Chief Executive
Officer at any time. Our Board of Directors believes that this leadership
structure is best for the Company at the current time, as it appropriately
balances the need for the Chief Executive Officer to run the Company on a
day-to-day basis with significant involvement and authority vested in an outside
independent director member – the Lead Independent Director. The roles of our
Lead Independent Director are fundamental to our decision to maintain the
combination of the Chief Executive Officer and Chairman of the Board positions.
Under our Charter of the Lead Independent Director, our Lead Independent
Director must be independent. The specific responsibilities of the Lead
Independent Director include the following:
|
·
|
In
consultation with other independent directors, consult with the Chairman
as to an appropriate schedule of Board meetings, seeking to ensure that
the independent directors can perform their duties responsibly without
interfering with ongoing Company
operations;
|
|
·
|
Consult
with the Chairman regarding the information and agendas of the meetings of
the Board of Directors;
|
|
·
|
Advise
the Chairman as to the quality, quantity, and timeliness of information
submitted by management that is necessary or appropriate for the
independent directors to effectively and responsibly perform their
duties;
|
|
·
|
Call
meetings and prepare agendas for the independent directors, as
appropriate;
|
|
·
|
Serve
as the Chairman of, and prepare the agenda for the executive sessions of
the independent directors and its non-employee
directors;
|
|
·
|
Service
as the principal liaison between independent directors and the Chairman
and senior management;
|
|
·
|
Chair
the meetings of the Board of Directors when the Chairman is not present;
and
|
|
·
|
Respond
directly to stockholder and other stakeholder questions and comments that
are directed to the Lead Independent Director or to the independent
directors as a group, with such consultation with the Chairman and the
other directors as the Lead Independent Director may deem
appropriate.
|
Director
Qualifications
Each of
our directors brings to our Board extensive management and leadership experience
gained through their service in senior positions of diverse businesses. In these
roles, they have taken hands-on, day-to-day responsibility for strategy and
operations, including management of capital, risk and business cycles. In the
biographies of each of the directors provided above, we describe specific
individual qualifications and skills of our directors that contribute to the
overall effectiveness of our Board of Directors.
In
addition to the information presented above regarding each director’s specific
experience, qualifications, attributes and skills that led our Board of
Directors to the conclusion that he or she should serve as a director, we also
believe that all of our directors have a reputation for integrity, honesty and
adherence to high ethical standards. They each have demonstrated business acumen
and an ability to exercise sound judgment, as well as a commitment of service to
our company and our Board.
While we
do not have a formal diversity policy, our Board of Directors believes it’s
important for our Board to have diversity of knowledge base, professional
experience and skills, and takes age, gender and ethnic background into account
when considering director nominees. As part of its annual self-evaluation, our
Board will assess whether it properly considered diversity in identifying
director nominees.
Risk
Management
Our Board
of Directors is responsible for reviewing and assessing business enterprise risk
and other major risks facing the Company, and evaluating management’s approach
to addressing such risks. At each quarterly meeting, our Board reviews all key
risks facing the Company, management’s plans for addressing these risks and the
Company’s risk management practices overall. To assist the Board in this
oversight role, our Board of Directors seeks to have one or more directors with
experience managing enterprise risk.
34
Our
management is responsible for day-to-day risk management and regularly reports
on risks to our Board of Directors. Our management is also responsible to
fulfill primary monitoring and testing functions for company-wide policies and
procedures. Our Board of Directors is responsible to manage the oversight of the
risk management strategy for our ongoing business. This oversight includes
identifying, evaluating, and addressing potential risks that may exist at the
enterprise, strategic, financial, operational, and compliance and reporting
levels.
We
believe the division of risk management responsibilities described above is an
effective approach for addressing the risks facing our company and the
leadership structure of our Board of Directors supports this
approach.
Compensation
Risk Management
In
setting each element of executive compensation, our Board of Directors is also
mindful of the level of risk-taking that any element may promote. Our Board of
Directors believes it is important to incentivize our executive officers to
achieve annual Company and individual objectives, but balance promotion of such
short-term interests with incentives that promote building long-term stockholder
value. Our Board of Directors believes the amount of long-term equity incentives
included in our compensation packages mitigates the potential for excessive risk
taking. All of our named executive officers’ equity awards vest over a period of
time, rather than upon achievement of specific performance objectives, and our
Board of Directors has historically granted additional equity awards
annually, which incentivizes these officers to continue to focus on our
long-term interest.
Our Board
of Directors has conducted an internal assessment of our compensation policies
and practice in response to current public and regulatory concern about the link
between incentive compensation and excessive risk taking by corporations. We
concluded that our program does not motivate excessive risk-taking and any risks
involved in compensation are not reasonably likely to have a material adverse
effect on the company. Included in the analysis were such factors as the
behaviors being induced by our fixed compensation system, the absence of any
incentive awards, the oversight of our Board of Directors in the operation of
our incentive plans and the high level of Board involvement in approving
material investments and capital expenditures.
Board
Composition
iTrackr
did not pay any director compensation during the nine months ended September 30,
2010 or the fiscal year ended December 31, 2009. The Company may begin to
compensate its directors at some time in the future.
Board
Committees and Independence
We are
not required to have any independent members of the Board of Directors. The
board of directors has determined that (i) Mr. Rizzo has a relationship which,
in the opinion of the board of directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director and is
not an “independent director” as defined in the Marketplace Rules of The NASDAQ
Stock Market. As we do not have any board committees, the board as a
whole carries out the functions of audit, nominating and compensation
committees, and such “independent director” determination has been made pursuant
to the committee independence standards.
Our board
of directors has determined that it currently has two members who
qualify as “independent” as the term is used in Item 407 of Regulation S-K
as promulgated by the SEC and as that term is defined under NASDAQ Rule
4200(a)(15). The independent directors are Michael Uhl and David
Baesler.
35
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a)
of the Exchange Act requires the Company’s directors and officers, and persons
who beneficially own more than 10% of a registered class of the Company’s equity
securities, to file reports of beneficial ownership and changes in beneficial
ownership of the Company’s securities with the SEC on Forms 3, 4 and 5.
Officers, directors and greater than 10% stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms
they file. To the Company’s knowledge, all Section 16(a) filing
requirements applicable to its officers, directors and beneficial owners holding
greater than ten percent of the Company’s Common Stock have been complied with
during the period ended December 31, 2009.
Code
of Business Conduct and Ethics
Our board
of directors has adopted a code of ethics, which applies to all our directors,
officers and employees. Our code of ethics is intended to comply with the
requirements of Item 406 of Regulation S-K. A copy of our code of
ethics will be posted on our corporate website at
www.shenyangkeji.com. We will provide our code of ethics in print
without charge to any stockholder who makes a written request
to: Secretary, iTrackr Systems, Inc., 475 Plaza Real, Suite 275, Boca
Raton, FL 33432. Any waivers of the application and any amendments to our code
of ethics must be made by our board of directors. Any waivers of, and any
amendments to, our code of ethics will be disclosed promptly on our corporate
website.
COMPENSATION
DISCUSSION AND ANALYSIS
The
primary goals of iTrackr’s board of directors with respect to executive
compensation are to attract and retain the most talented and dedicated
executives possible, to tie annual and long-term cash and stock incentives to
achievement of specified performance objectives, and to align executives’
incentives with stockholder value creation.
To
achieve these goals, the Board of Directors recommends executive compensation
packages to that are generally based on a mix of salary, discretionary bonus and
equity awards. Although the Board of Directors has not adopted any formal
guidelines for allocating total compensation between equity compensation and
cash compensation, the Company intends to implement and maintain compensation
plans that tie a substantial portion of its executives’ overall compensation to
achievement of corporate goals and value-creating milestones such as the
development of the Company’s products, the establishment and maintenance of key
strategic relationships, reaching sales and marketing targets and the growth of
its customer base as well as its financial and operational performance, as
measured by metrics such as revenues and profitability.
The Board
of Directors performs reviews based on surveys of executive compensation paid by
peer companies in the customer support and Internet services industry, as well
as reviews other industries of similar age and size, as it sees fit, in
connection with the establishment of cash and equity compensation and related
policies.
Elements
of Compensation
The Board
of Directors evaluates individual executive performance with a goal of setting
compensation at levels the committee believes are comparable with executives in
other companies of similar size and stage of development operating in the
industry and are competitive and further the Company’s objectives of motivating
achievement of its short- and long-term financial performance goals and
strategic objectives, rewarding superior performance and aligning the interests
of its executives and shareholders. The compensation received by the Company’s
executive officers consists of the following elements:
|
·
|
Base
salary;
|
|
·
|
Discretionary
annual bonus;
|
|
·
|
Equity-based
long-term incentives, including stock appreciation rights and
performance-based restricted stock;
and
|
|
·
|
Options.
|
36
Base
Salary
General
Considerations
Base
salaries are reviewed annually, and adjusted from time to time taking into
account individual responsibilities, performance and
experience.
The
primary considerations the Board undertook when establishing Mr. Rizzo’s salary
were the amount of responsibilities that he has been accountable for, in
addition to the fact that he founded the company. These responsibilities
include: business development, oversight of operations, Chairman of the Board,
financing and capitalization initiatives and sales and marketing. Essentially,
Mr. Rizzo has performed all of these tasks since the inception of the business,
enabling the company to maintain a reduced headcount while in development
stages.
Annual
Incentive Compensation
Discretionary
Annual Bonus
In
addition to base salaries, the Board of Directors has the authority to award
discretionary annual bonuses to the Company’s executive officers. The annual
incentive bonuses are intended to compensate officers for achieving corporate
goals and for achieving what the committee believes to be value-creating
milestones.
Summary
Compensation Table for Fiscal Years 2009 and 2008
The
following table provides certain information for the fiscal years ended
December 31, 2009 and 2008 concerning compensation earned for services
rendered in all capacities by our named executive officers during the fiscal
years ended December 31, 2009 and 2008.
Name and Principal
Position (a)
|
Year
(b)
|
Salary
($) (c)
|
Bonus
($) (d)
|
Stock Awards
($) (e)
|
Option Awards
($) (f)
|
Non-Equity
Incentive Plan
Compensation
($) (g)
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($) (h)
|
All Other
Compensation
($) (i)
|
Total
($) (j)
|
|||||||||||||||||||||||||
John
Rizzo,
|
||||||||||||||||||||||||||||||||||
Chairman
and
|
2009
|
,179,500 | (2) | 0 | 0 | 0 | 0 | 0 | 0 | 179,500 | ||||||||||||||||||||||||
CEO
|
2008
|
300,000 | 0 | 0 | 0 | 0 | 0 | 36,000 | (3) | 336,000 | ||||||||||||||||||||||||
Stella
Gostfrand,
Former
Sole
|
||||||||||||||||||||||||||||||||||
Officer
and
|
2009
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
Director
(1)
|
2008
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
(1)
|
Stella Gostfrand submitted her
resignation as an officer and director, effective following the expiration
of the ten day period following the mailing of the information statement
required by Rule 14f-1 under the Exchange
Act.
|
(2)
|
$89,500 of Salary was accrued in
2009 and $90,000 related to Mr. Rizzo’s 2009 salary was paid in cash in
2009. All of Mr. Rizzo’s 2008 salary was
accrued.
|
(3)
|
Accrued reimbursement of unpaid
health insurance and rent.
|
Outstanding
Equity Awards at 2009 Fiscal Year End
In
June 2007 the Board of Directors of the Company adopted the 2007 Long-Term
Equity Incentive Plan. The purpose of this Plan is to attract and retain
directors, officers and other employees of the Company and its Subsidiary and to
provide to such persons incentives and rewards for
performance.
37
The
Company may issue each of the following under this Plan: Incentive Option,
Nonqualified Option, Stock Appreciation Right, Restricted Stock Award or
Performance Stock Award. The Plan was ratified at the 2007
shareholder’s meeting (the "Effective Date"). No Incentive Option,
Nonqualified Option, Stock Appreciation Right, Restricted Stock Award or
Performance Stock Award shall be granted pursuant to the Plan ten years after
the Effective Date. The total number of shares available under the
Plan is Fifteen Million (15,000,000). No Plan participant will be
granted the right, in the aggregate, for more than Two Million
(2,000,000) Common Shares during any calendar year.
Employment
Agreements
The
information provided below, including the share numbers and dollar amounts, is
after giving effect to the Reverse Merger and the change in control which will
become effective following the expiration of the ten day period following the
mailing of the information statement required by Rule 14f-1 under the
Exchange Act.
Ramesh
Anand
Under the
terms of Mr. Anand’s contract, entered into in January, 2010, in lieu of
cash payment for compensation, he received an option to purchase Two Hundred and
Fifty Thousand (250,000) fully vested shares of the Company’s common stock
at an exercise price of $0.25 and a life of five years. Mr. Anand is
entitled to four (4) weeks of paid vacation in each twelve (12) month
period during Executive’s employment hereunder which shall accrue on a monthly
basis during Executives employment hereunder. At the discretion of the Board and
in accordance with Company policy, Mr. Anand is eligible to participate in
benefits under any employee benefit plan or arrangement made available by the
Company now or in the future to its executives and its employees. As Chief
Operating Officer, Mr. Anand’s performance shall be reviewed by the Board
on a periodic basis (not less than once each fiscal year) and the Board may, in
its sole discretion, award such bonuses to Mr. Anand as shall be
appropriate or desirable based on Mr. Anand’s performance.
Mihir
Sevak
Under the
terms of Mr. Sevak’s contract, entered into in April 1, 2010, in lieu of
cash payment for compensation, Mr. Sevak is to receive 41,666 shares of the
Company’s common stock for each month of service. Mr. Sevak is
entitled to two (2) weeks of paid vacation in each twelve (12) month
period during Executive’s employment hereunder which shall accrue on a monthly
basis during Executives employment hereunder. At the discretion of the Board and
in accordance with Company policy, Mr. Sevak is eligible to participate in
benefits under any employee benefit plan or arrangement made available by the
Company now or in the future to its executives and its employees. As Chief
Technology Officer, Mr. Sevak’s performance shall be reviewed by the Board
on a periodic basis (not less than once each fiscal year) and the Board may, in
its sole discretion, award such bonuses to Mr. Sevak as shall be
appropriate or desirable based on Mr. Sevak’s performance.
John
Rizzo
Under the
terms of Mr. Rizzo’s contract, entered into in January, 2007, which held an
initial term of 3 years, and has been extended by the Company’s board of
Directors for an additional year, Mr. Rizzo is to be paid a base annual
salary at the rate of $250,000.00 dollars per year. Mr. Rizzo is entitled
to Twelve (12) weeks vacation during each year of employment. And his
family shall be eligible to participate in the Company’s paid health plan.
However, if Mr. Rizzo so chooses, he can maintain his own family health
plan and the Company will subsidize that plan in the amount of Net $1,000.00 per
month.
Director
Compensation
The
Company did not and does not currently have an established policy to provide
compensation to members of its board of directors for their services in that
capacity. The Company intends to develop such a policy in the near
future.
38
Equity
Compensation Plan Information
|
Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights
|
Weighted – average
exercise price of
outstanding options,
warrants and rights
|
Number of securities
remaining available
for future issuances
under equity
compensation plans
(excluding securities
reflected in column (a))
|
|||||||||
(a)
|
(b)
|
(c)
|
||||||||||
Equity
Compensation Plans Approved by Security Holders
|
-0- | n/a | -0- | |||||||||
Equity
Compensation Plans Not Approved by Security Holders (1)
|
-0- | n/a | 45,250,000 |
(1)
|
Includes shares issuable under
the 2007 Long-Term Incentive Plan (45,000,000), as described below, and
shares issuable under the Company’s employment agreement with Ramesh Anand
(250,000).
|
Securities
Authorized for Issuance under Equity Compensation Plans
Long-Term
Compensation- 2007 Long-Term Incentive Plan (“the Plan”)
The
purpose of the Plan is to further and promote the interests of iTrackr and its
stockholders by enabling iTrackr to attract, retain and motivate employees,
non-employee directors and consultants or those who will become employees,
non-employee directors or consultants, and to align the interests of those
individuals and iTrackr’s stockholders.
Notwithstanding
anything elsewhere in the Plan to the contrary, but subject as well to the other
limitations contained in this Section 3 and subject to adjustment as
provided in Section 13 of the Plan:
|
(i)
|
The aggregate number of Common
Shares actually issued or transferred by the Company upon the exercise of
Nonqualified Stock Options or Incentive Stock Options (after taking into
account forfeitures and cancellations) shall not exceed Fifteen Million
(15,000,000) Common Shares.
|
(ii)
|
The aggregate number of Common
Shares issued as Restricted Stock and Restricted Stock Units (after taking
into account any forfeitures and cancellations) shall not exceed Fifteen
Million (15,000,000) Common
Shares.
|
(iii)
|
The aggregate number of Common
Shares issued as Performance Shares and Performance Units and other awards
under Section 10 of this Plan (after taking into account any
forfeitures and cancellations) shall not exceed Fifteen Million
(15,000,000) Common
Shares.
|
Compensation
Committee Interlocks and Insider Participation
The
Company does not have a separate compensation committee. During the fiscal year
ended December 31, 2009, the sole officer and director of the Company,
Stella Gostfrand was individually responsible for deliberations of the board
concerning executive compensation.
39
SELLING
STOCKHOLDERS
The
common shares being offered for resale by the selling security holders consist
of the 19,629,893 shares of common stock held by 102 shareholders and consist of
the following:
|
·
|
9,215,054
shares issued upon debt conversion
|
|
·
|
4,207,500 shares
underlying options and warrants,
|
|
·
|
6,010,984
shares issued for services rendered
|
|
·
|
196,355
shares purchased for cash
|
Shares Issued
Upon Debt Conversion . Such shareholders include holders of
1,853,309 of the 3,721,257 shares issued from debt conversion in October, 2009;
holders of 7,240,413 shares issued from debt conversion on August 21, 2007, and
holders of the 121,332 shares issued on July 30, 2010 from debt converted on
February 16, 2010 at a conversion price of $0.35 per share.
Shares Underlying
Options and Warrants. Such shareholders include holders
of options to purchase 207,500 shares of up to 1,450,000 shares issued to the
company’s directors and officers, excluding Mr. Rizzo; holder of the 1,000,000
shares underlying the warrant sold on February 5, 2010 for $50,000, with an
exercise price of $0.40 per share; holder of a warrant to purchase up to
1,000,000 shares at an exercise price of $0.10 for services rendered to iTrackr
in March, 2010; holders of warrant to purchase up to 2,000,000 shares at an
exercise price of $0.10 for services rendered to iTrackr in July
2007;
Shares Issued for
Services. Such shareholders include holders of 20,000 shares
of 200,000 shares issued as employee bonuses on May 5, 2008; holder of 1,403 of
the 14,025 shares issued for services on February 20, 2008; holders of 5,075,000
of the 5,750,000 shares issued for services on July 1, 2007; holders of 30,000
of the 800,000 founders shares issued on October 26, 2006; holder of
408,955 shares of 1,022,388 issued pursuant to services rendered to Must Haves,
Inc.; holders of 360,000 shares issued as a settlement to a legal complaint in
February, 2010; holders of 75,000 shares of 150,000 shares issued for
services pursuant to this offering; and holders of 40,626 shares of 162,500
shares issued for services to Must Haves in 2009.
Shares Purchased
for Cash . Such shareholders include one accredited holder of
the 166,666 shares sold in our private offering pursuant to 4(2) of the
securities act of 1933 completed in March 2010 at an offering price of $0.30 per
share (See footnote 114 below) and holders of 29,689 of the 118,750 shares sold
in Must Haves private offering pursuant to Section 4(2) completed in the months
of March through May, 2007 and for which a Form D was filed on February 23,
2007
The
following table sets forth information with respect to the Selling Stockholders
including the number of shares of common stock and warrants beneficially owned
by each Selling Stockholder. The table identifies the number of shares of common
stock converted from debt, with respect to shares and options issued in
connection with services rendered that may be sold or disposed of under this
prospectus. When the Company refers to the “Selling Stockholders” in this
prospectus, it means those persons listed in the table below, as well as the
pledgees, donees, transferees or other successors-in-interest who later hold any
of the Selling Stockholders’ interests. The information is based on information
that has been provided to the Company by or on behalf of the Selling
Stockholders. The information provided below assumes all of the shares covered
hereby are sold or otherwise disposed of by the Selling Stockholders pursuant to
this prospectus. However, the Company does not know whether the
Selling Stockholders will in fact sell or otherwise dispose of the shares of
common stock listed next to their names below. In addition, the Selling
Stockholders may have sold, transferred or otherwise disposed of, or may sell,
transfer or otherwise dispose of, at any time and from time to time, the shares
of common stock in transactions exempt from the registration requirements of the
Securities Act, after the date on which they provided the information set forth
on the table below. Information concerning the Selling Stockholders may change
from time to time, and any changed information will be set forth if and when
required in prospectus supplements or other appropriate forms permitted to be
used by the SEC.
40
For the
purposes of the following table, the number of shares of the Company’s common
stock beneficially owned has been determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934 as of September 30, 2010, and such
information is not necessarily indicative of beneficial ownership for any other
purpose. Under Rule 13d-3, beneficial ownership includes any shares as to which
a Selling Stockholder has sole or shared voting power or investment power and
also any shares which that Selling Stockholder has the right to acquire within
60 days of the date of this prospectus through the exercise of any stock option,
restricted stock unit, warrant or other rights.
Name of Selling Shareholder
|
Number of Shares
Beneficially Owned
Prior to Offering
|
# of Shares
offered
|
# of Shares
beneficially owned
after Offering
|
% of common
stock beneficially
owned after the
Offering
|
||||||||||||
Jarem
Archer(1)
|
1,000,000 | 325,000 | 675,000 | 4.90 | % | |||||||||||
John
Rizzo(2)
|
7,250,000 | 4,750,000 | 2,500,000 | 32.50 | % | |||||||||||
John
Rizzo Cust FBO Olivia Nicole Rizzo UTMA/FL(2) (108)
|
100,000 | 100,000 | 0 | 0.50 | % | |||||||||||
John
Rizzo Cust FBO Mia Rachel Rizzo UTMA/FL(2) (108)
|
100,000 | 100,000 | 0 | 0.50 | % | |||||||||||
Madeline
Alison Lentini(3) (108)
|
100,000 | 100,000 | 0 | 0.50 | % | |||||||||||
Jinny
Kathleen Porto(4)(108)
|
155,000 | 100,000 | 55,000 | 0.80 | % | |||||||||||
Landmark
Inc. (5)(109)
|
104,279 | 104,279 | 0 | 0.50 | % | |||||||||||
Mark
Moran (6)(107)
|
1,061,760 | 1,061,760 | 0 | 5.20 | % | |||||||||||
Jan
Moran(7)(107)
|
1,061,760 | 1,061,760 | 0 | 5.20 | % | |||||||||||
William
Archer(8)(107)(109)
|
1,061,760 | 1,061,760 | 0 | 5.20 | % | |||||||||||
Offshore
Financial Products LTD(9)(107)(109)
|
200,000 | 200,000 | 0 | 1.00 | % | |||||||||||
Redrock
Strategies LTD(10)(107)
|
2,765,685 | 2,765,685 | 0 | 13.60 | % | |||||||||||
Beatrice
Ann Rizzo(11)(108)
|
585,169 | 585,169 | 0 | 2.90 | % | |||||||||||
Aleandro
Sintas(12)
|
100,000 | 10,000 | 90,000 | 0.50 | % | |||||||||||
Justin
Van Winkle(13)
|
100,000 | 10,000 | 90,000 | 0.50 | % | |||||||||||
Christopher
M Smith TTEE FBO
Christopher
M Smith Revoc Liv Tr DTD
3/27/1998(14) |
200,000 | 20,000 | 180,000 | 1.00 | % | |||||||||||
Mark
MacDougall(15)
|
100,000 | 10,000 | 90,000 | 0.50 | % | |||||||||||
Azcap
Fund, Inc. by Helen Azzara (16)(113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Bernard
J. Bannon(17) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Jeffrey
Beirl(18) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Ira
Blatt(19) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Todd
Bushnell(20) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Paul
J. Cammarata(21) (113)
|
2,500 | 625 | 1,875 | 0.00 | % |
41
Name of Selling Shareholder
|
Number of Shares
Beneficially Owned
Prior to Offering
|
# of Shares
offered
|
# of Shares
beneficially owned
after Offering
|
% of common
stock beneficially
owned after the
Offering
|
||||||||||||
Michael
J. Chaney(22) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Edward
Deicke(23) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
James
Flynn(24) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Peter
Garabedian(25) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Michael
Giamalvo (26) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Salvatore
Giamalvo (27) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Leonard
Giarraputo(28) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
David
Gostfrand(29) (113)
|
1,250 | 313 | 937 | 0.00 | % | |||||||||||
Maury
Gostfrand(30) (113)
|
1,250 | 313 | 937 | 0.00 | % | |||||||||||
Rose
Gostfrand(31) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Richard
Greene(32) (113)
|
1,250 | 313 | 937 | 0.00 | % | |||||||||||
Gayle
M. Hill(33) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Richard
Hull(34) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Robert
M. Jacobs(35) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Keith
E. Jacob Associates Inc. Pension Plan U/A Dtd 12/19/72(36)
(113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Loren
Killion(37) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
John
Kuhle (38) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Craig
Kulman(39) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Steven
Kunevich (40) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Marcello
Lattucia (41) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Laurence
E. White Trust U/A Dtd 1-20-07(42) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Paul
J. Lohbeck(43) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Tracy
McLuckie(44) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Terry
Moore(45) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Simon
M. Mundlak(46) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Kevin
Murray(47) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Frank
Nargentino(48) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Stanley
W. Pierce (49) (113)
|
2,500 | 625 | 1,875 | 0.00 | % |
42
Name of Selling Shareholder
|
Number of Shares
Beneficially Owned
Prior to Offering
|
# of Shares
offered
|
# of Shares
beneficially owned
after Offering
|
% of common
stock beneficially
owned after the
Offering
|
||||||||||||
Julie
B. Pronesti(50) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Thomas
M. Pronesti(51) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Robert
Samenka(52) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
David
Sasso(53) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Matthew
Semicola(54(113))
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Alan
Sims(54) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Daniel
Steinlauf(56) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Harvey
Sussman(57) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Thomas
M. Ponesti Irrevocable Trust Agreement FBO Blaise D. Pronesti Julie
Ponesti Trustee(58) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Amir
Uziel(59) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Edward
Wells (60) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Richard
M. Wexler(61) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
William
J. Whitener(62) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Zachariah
P. Zachariah(63) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Dennis
Zapp(64) (113)
|
2,500 | 625 | 1,875 | 0.00 | % | |||||||||||
Stella
Gostfrand(65)
|
1,022,388 | 408,955 | 613,433 | 5.00 | % | |||||||||||
Rocky
Stein (66)
|
125,000 | 31,250 | 93,750 | 0.60 | % | |||||||||||
Charles
Perlman (67)
|
18,750 | 4,688 | 14,063 | 0.10 | % | |||||||||||
Jamie
Mayersohn (68)
|
18,750 | 4,688 | 14,063 | 0.10 | % | |||||||||||
Mark
Falcone (69)
|
240,000 | 240,000 | 0 | 1.20 | % | |||||||||||
Alan
L. Frank (70)
|
108,000 | 108,000 | 0 | 0.50 | % | |||||||||||
Alexander
J. Palamarchuk (71)
|
12,000 | 12,000 | 0 | 0.10 | % | |||||||||||
Maplehurst
Investment Group(72) (111)
|
72,260 | 36,260 | 36,000 | 0.40 | % | |||||||||||
American
Capital Ventures Inc. (73) (111)
|
112,402 | 56,402 | 56,000 | 0.60 | % | |||||||||||
Jason
Lyons(74)(111)
|
42,003 | 28,670 | 13,333 | 0.20 | % | |||||||||||
Mitchell
S. Knapp(75)
|
1,000,000 | (100) | 1,000,000 | 0 | 4.70 | % | ||||||||||
Michael
Nielsen(76)(112)
|
82,165 | 16,433 | 65,732 | 0.40 | % | |||||||||||
Shirley
Harnick(77) (112)
|
116,693 | 23,339 | 93,354 | 0.60 | % |
43
Name of Selling Shareholder
|
Number of Shares
Beneficially Owned
Prior to Offering
|
# of Shares
offered
|
# of Shares
beneficially owned
after Offering
|
% of common
stock beneficially
owned after the
Offering
|
||||||||||||
Patricia
Scarpella(78) (112)
|
175,019 | 35,004 | 140,015 | 0.90 | % | |||||||||||
Dr.
Michael Gelbar(79) (112)
|
233,332 | 46,666 | 186,666 | 1.10 | % | |||||||||||
Sam
Maywood(80) (112)
|
11,562 | 2,312 | 9,250 | 0.10 | % | |||||||||||
Dawn
Maywood(81) (112)
|
11,562 | 2,312 | 9,250 | 0.10 | % | |||||||||||
Charle
A. Bonafede(82) (112)
|
11,366 | 2,273 | 9,093 | 0.10 | % | |||||||||||
Dominic
& Judy Aprile(83) (112)
|
57,758 | 11,552 | 46,206 | 0.30 | % | |||||||||||
Winston
Family Trust(84) (112)
|
69,261 | 13,852 | 55,409 | 0.30 | % | |||||||||||
Robert
Klinek & Susan Pack(85) (112)
|
114,277 | 22,855 | 91,422 | 0.60 | % | |||||||||||
Borg
Trust(86) (112)
|
111,688 | 22,338 | 89,350 | 0.50 | % | |||||||||||
Robert
Gleckman(87) (112)
|
221,649 | 44,330 | 177,319 | 1.10 | % | |||||||||||
Ted
Cooper(88) (112)
|
1,118,603 | 223,721 | 894,882 | 5.50 | % | |||||||||||
Maureen
Marant(89)
|
50,000 | 25,000 | 25,000 | 0.20 | % | |||||||||||
Todd
Pitcher(90)
|
50,000 | 25,000 | 25,000 | 0.20 | % | |||||||||||
Justin
Frere(91)
|
50,000 | 25,000 | 25,000 | 0.20 | % | |||||||||||
Steve
Danzo(92)
|
14,025 | 1,403 | 12,622 | 0.10 | % | |||||||||||
Mark
Whitney (93)
|
375,000 | (101) | 37,500 | 337,500 | 1.80 | % | ||||||||||
Michael
Uhl (94)
|
375,000 | (102) | 75,000 | 300,000 | 1.80 | % | ||||||||||
Vicksburg
(95)
|
2,000,000 | (103) | 2,000,000 | - | 9.00 | % | ||||||||||
Dave
Baesler (96)
|
450,000 | (104) | 45,000 | 405,000 | 2.20 | % | ||||||||||
Ramesh
Anand (97)
|
250,000 | (105) | 50,000 | 200,000 | 1.20 | % | ||||||||||
Delivery
Technologies Solutions, Inc. (98)(110)
|
1,386,322 | 1,386,322 | - | 6.80 | % | |||||||||||
Astia
LLD (99)
|
1,000,000 | (106) | 1,000,000 | - | 4.70 | % | ||||||||||
Chris Maggiore (114)
|
433,332 | 166,666 | 266,666 | 2.10 | % | |||||||||||
TOTAL
|
27,704,330 | 19,629,893 | 8,074,437 |
44
|
(1)
|
The
business address of Mr. Archer is 6298 NW 14th
Court Sunrise FL 3313. Mr. Archer was a founding member and employee of
iTrackr, Inc. Mr. Archer received 250,000 founder shares on
October 25, 2006 and another 750,000 on July 1,
2007.
|
45
|
(2)
|
The
business address of Mr. Rizzo is 20423 State Rd 7, Boca Raton, FL 33498.
Through his control of John Rizzo Custodian for Olivia Nicole Rizzo Unif
Tran Min Act FL and John Rizzo Custodian for Mia Rachel Rizzo Unif Tran
Min Act FL, Mr. Rizzo has voting and investment control over the portfolio
securities. Mr. Rizzo is a founding member, current President, CEO and
Chairman of the Company. Olivia Nicole Rizzo and Mia Rachel Rizzo are
relatives of Mr. Rizzo. The 7,250,000 shares listed above
consist of 1) 250,000 founder’s shares received on October, 25, 2006, 2)
5,000,000 shares received in lieu of salary of $250,000 for fiscal year
2007 and pursuant to his employment contract dated January 3, 2007 and 3)
2,000,000 stock options granted on July 1, 2007 with 1,000,000 having an
exercise price of $0.25 per share and 1,000,000 having an exercise price
of $0.40 per share and both grants expiring on July 1,
2017. The 100,000 shares each to Nicole Rizzo and Rachel
Rizzo were transferred from Beatrice Ann Rizzo as noted in footnote 108
below.
|
|
(3)
|
The
business address of Ms. Lentini is 17 Grandview St. Huntington, NY
11743. Ms. Lentini is the Mother of Mr. Rizzo, the founder,
President, CEO and Chairman of the Company. Ms. Lenti received
100,000 shares transferred from Beatrice Ann Rizzo as noted in footnote
108 below.
|
|
(4)
|
The
business address of Ms. Porto is 14 Village Drive, Huntington, NY
11743. Includes 55,000 shares issuable upon exercise of options
at an exercise price of $0.05 per share and 100,000 shares transferred
from Beatrice Ann Rizzo as noted in footnote 108
below.
|
|
(5)
|
The
business address of Landmark Inc. is 17904 Key Vista, Boca Raton, FL
33496. Through his control, Nick Lizzio has voting and investment control
over the portfolio securities.
|
|
(6)
|
The
business address of Mark Moran is 810 NW 127th
Ave. Coral Springs, FL 33071. Mr. Moran is a consultant to the
Company.
|
|
(7)
|
The
business address of Jan Moran is 810 NW 127th
Ave. Coral Springs, FL 33071. Ms. Moran is a consultant to the
Company.
|
|
(8)
|
The
business address of William Archer is 810 NW 127th
Ave. Coral Springs FL 33071.
|
|
(9)
|
The
business address of Offshore Financial Products LTD. 810 NW 127th
Ave. Coral Springs, FL 33071. Through her control, O’Lese Skelton has
voting and investment control over the portfolio
securities.
|
|
(10)
|
The
business address of Redrock Strategies LTD is No. 6, Floor 3, Quomar
Trading Building, Road Town, Tortola, British Virgin Islands. Redrock has
advised the company to issue its portfolio securities to: David S.
Nagleburg whose address is 939 Coast Blvd., Suite 21.DE, La Jolla CA
92037; Tina Marie Lieberman, whose address is Apt. 2601 8 Smithe Mews,
Vancouver B.C., V6BOA5; and George Ileav, whose address is Business Park
Sofia, Sofia BG.
|
|
(11)
|
The
business address of Beatrice Anne Rizzo is 50 East Road Apt. 9F Delray
Beach, FL 33483. Ms. Rizzo is married to Mr. Rizzo, the founder,
President, CEO and Chairman of the
Company.
|
|
(12)
|
The
business address of Alejandro Sintas is 1225 SW 94 Ave. Miami, FL 33174.
Mr. Sintas is a founder and former employee of the
Company. The 100,000 founders shares held by Mr. Sintas
were issued on October 25,
2006.
|
|
(13)
|
The
business address of Justin Van Winkle is 95 Grover Place, Cameron, NC
28326. Mr. Van Winkle was an employee of the Company. The
100,000 shares held by Mr. Van Winkle were issued for services on May 5,
2008.
|
|
(14)
|
The
business address of Christopher M Smith TTEE Christopher M Smith Revocable
Living Trust DTD Mar 27 1998 is 410 N. Ocean Blvd. Delray Beach, FL 33483.
Mr. Smith was a founder and employee of the Company. The
200,000 founder’s shares held by Mr. Smith were issued on October 25,
2006.
|
|
(15)
|
The
business address of Mark MacDougall is 17185 Herring Rd. Colorado Springs,
CO 80908. Mr. MacDougall was an employee of the
Company. The 100,000 shares held by Mr. MacDougall were
issued for services on May 5,
2008.
|
|
(16)
|
The
business address of Azcap Fund, Inc. is 223 Wall Street, Suite 290 New
York, NY 11743. Through her control, Helen Azzara has voting and
investment control over the portfolio
securities.
|
|
(17)
|
The
business address of Bernard J. Brannon is 132 Bley Parkway Port
Washington, WI 53074.
|
|
(18)
|
The
business address of Jeffrey Beirl is 1410 12th
Avenue West, Ashland WI, 54806.
|
|
(19)
|
The
business address of Ira Blatt is 494 H. Street, Arcata CA
95521.
|
|
(20)
|
The
business address of Todd Bushnell is 1724 Ridgeview Road, Lancaster, PA
17603.
|
|
(21)
|
The
business address of Paul J. Cammarata is 6 Fairway Road, N. Reading MA
01864.
|
|
(22)
|
The
business address of Michael J. Chaney is 538 Englewood Drive, Vicksburg,
MS 39180.
|
|
(23)
|
The
business address of Edward Deicke is 40 Shortridge Drive, Mineola, NY
11501.
|
|
(24)
|
The
business address of James Flynn is 301 S. Spring Street, Beaver Dam, WI,
53916.
|
|
(25)
|
The
business address of Peter Garabedian is 208 Austin Street, Worcester, MA
01609.
|
46
|
(26)
|
The
business address of Michael Giamvalvo is 119 Northgate Circle, Melville NY
11747.
|
|
(27)
|
The
business address of Salvatore Giamvalvo is 1868 Zena Court, Merrick,
NY.
|
|
(28)
|
The
business address of Leonard Giarraputo is 3 The Preserve Woodbury NY,
11797.
|
|
(29)
|
The
business address of David Gostfrand is 255 Evernia Street #611 West Palm
Beach, FL 33401.
|
|
(30)
|
The
business address of Maury Gostfrand is 245 E. 63rd
Street Apt. 505 New York, NY 20021.
|
|
(31)
|
The
business address of Rose Gostfrand is 2030 So. Ocean Drive #1609
Hallandale FL 33004.
|
|
(32)
|
The
business address of Richard Greene is 1 Brentwood Road, Tewkesbury, MA
01876.
|
|
(33)
|
The
business address of Gayle M. Hill is 150 Mt. Shasta Lane, Alpharetta, GA
30022.
|
|
(34)
|
The
business address of Richard Hull is 4775 Collins Avenue #1107, Miami
Beach, FL 33140.
|
|
(35)
|
The
business address of Robert M. Jacobs is 25 Shore Drive, Great Neck, NY
11024.
|
|
(36)
|
The
business address of Keith E. Jacob Associates, Inc. Pension Plan U/A Dtd
12/19/72.
|
|
(37)
|
The
business address of Loren Killion is 1019 E. 48th
Street, Kearney, Nebraska 68847.
|
|
(38)
|
The
business address of John Kuhle is 1210 S. Percival, Hazelgreen WI
53811.
|
|
(39)
|
The
business address of Craig Kulman is 9332 Carlyle Avenue, Surfside FL
33154.
|
|
(40)
|
The
business address of Steven Kunevich is 46 Pine Avenue, Randolph, MA
02368.
|
|
(41)
|
The
business address of Marcello Lattucia is 3 Corwin Court, Dix Hills, NY
11746.
|
|
(42)
|
The
business address of Laurence E. White Trust U/A Dtd 1-20-97 is 5560 Camino
Real Lane, Vero Beach, FL 32967.
|
|
(43)
|
The
business address of Paul J. Lohbeck is 838 Greentree Road, Lawrenceburg,
IN. 47025.
|
|
(44)
|
The
business address of Tracy McLuckie is 10 Ashford Lane, Huntington, FL
33019.
|
|
(45)
|
The
business address of Terry Moore is 240 McWarter Drive, Roselle, IL
60172.
|
|
(46)
|
The
business address of Simon M. Mundiak is 928 Captiva Drive, Hollywood, FL
33019.
|
|
(47)
|
The
business address of Kevin Murray is 14 Laurel Blvd., Collingwood Ontario,
L9Y 5A8, Canada.
|
|
(48)
|
The
business address of Frank Nargentino is 25 Clearwater Drive, Plainview NY
11803.
|
|
(49)
|
The
business address of Stanley W. Pierce is 3008 Willow Lane Drive,
Montgomery, AL 36109.
|
|
(50)
|
The
business address of July B. Pronesti is 1462 Commmodore Way, Hollywood, FL
33019.
|
|
(51)
|
The
business address of Thomas M. Pronesti is 1462 Commodore Way, Hollywood,
FL 33019.
|
|
(52)
|
The
business address of Robert Samenka is 11103 Dyer Road, Union City, PA
16438.
|
|
(53)
|
The
business address of David Sasso is 1040 Seminole Drive #962, Fort
Lauderdale, FL 33304.
|
|
(54)
|
The
business address of Matthew Senicola is 2270 Wynne Lane, Bellmore, NY
11710.
|
|
(55)
|
The
business address of Alan Sims is 2343 Palladio Avenue, Owensboro, KY
42301.
|
|
(56)
|
The
business address of Daniel Steinlauf is 1062 SW 156th
Avenue, Pembroke Pines, FL 33027.
|
|
(57)
|
The
business address of Harvey Sussman is 5643 Wellington Drive, Palm Harbor,
FL 34685.
|
|
(58)
|
The
business address of Thomas M. Pronesti Irrevocable Trust Agreement FBO
Blaise D. Pronesti is 1462 Commodore Way, Hollywood Florida
33019.
|
|
(59)
|
The
business address of Amir Uziel is 9 Hakormim Street, Rishon Lezion,
Israel, 75499.
|
|
(60)
|
The
business address of Edward Wells is 509 Nassau Avenue, Freeport, NY
11520.
|
|
(61)
|
The
business address of Richard M Wexler is 225 E. Street #2G New York, NY
11016.
|
|
(62)
|
The
business address of William J. Whitener is 852 Presidio Drive, Costa Mesa,
CA 92626.
|
|
(63)
|
The
business address of Zachariah P. Zachariah is 4725 N. Federal Highway,
Fort Lauderdale, FL 33308.
|
|
(64)
|
The
business address of Dennis Zapp is 57 Laurel Court, Shamone, NJ,
08088.
|
|
(65)
|
The
business address of Stella Gostfrand is 1507 Presidential Way, North Miami
Beach, FL 33179. Ms. Gostfrand was the founder and CEO of Must
Haves, Inc.
|
|
(66)
|
The
business address of Rocky Stein is 6520 Allison Road Miami, Beach, FL
33141. The 125,000 shares were received in February 2007 in
exchange for consulting services to Must Haves,
Inc.
|
|
(67)
|
The
business address of Charles Pearlman is 200 South Park Road, Suite 150,
Hollywood, FL 33021. The 18,750 shares were received in
February 2007 in exchange for consulting services to Must Haves,
Inc.
|
|
(68)
|
The
business address of Jamie Mayersohn is 1314 Camellia Lane, Weston, FL
33326. The 18,750 shares were received in February 2007 in
exchange for consulting services to Must Haves,
Inc.
|
|
(69)
|
The
business address of Marc Falcone is 2537 St. Victoria Drive,
Gilbertsville, PA 19524. Mr. Falcone was a business development consultant
to the Company. Mr. Falcone received his shares on March
11, 2010 pursuant to a settlement agreement whereby 360,000 shares were
issued See Note J “Legal Proceedings” on page F-18 of our September 30,
2010 financial statements.
|
|
(70)
|
The
business address of Alan L. Frank is 526 Long Lane, Huntingdon Valley, PA
19006. Mr. Frank received his shares on March 11, 2010 pursuant
to a settlement agreement whereby 360,000 shares were issued See Note J
“Legal Proceedings” on page F-18 of our September 30, 2010 financial
statements.
|
47
|
(71)
|
The
business address of Alexander J. Parlamachuck is 103-107 Church Street,
Philadelphia PA 19106. Mr. Parlamachuck received his shares on
March 11, 2010 pursuant to a settlement agreement whereby 360,000 shares
were issued See Note J “Legal Proceedings” on page F-18 of our September
30, 2010 financial statements.
|
|
(72)
|
The
business address of Maplehurst Investment Group LLC is 1015 Shore Lane,
Miami Beach, FL 33141 Through his control, Richard Hull has voting and
investment control over the portfolio securities. The 72,260 beneficial
shares consist of 1) 36,260 shares of common stock upon conversion of debt
(See Footnote 111) and 2) 36,000 warrants issued in connection with the
aforementioned debt, issued on January 19, 2010 expiring January 19, 2015
and exercisable into shares of common stock at an exercise price of $0.75
per share.
|
|
(73)
|
The
business address of American Capital Ventures, Inc. is 2875 NE 191st
St., Suite 904, Aventura, FL 33180. Through his control, Howard Gostfrand
has voting and investment control over the portfolio securities. Mr.
Gostfrand is married to a former executive officer of Must Haves,
Inc. The 112,402 beneficial shares consist of 1) 56,402 shares
of common stock upon conversion of debt (See Footnote 111) and 2) 56,000
warrants issued in connection with the aforementioned debt, issued on
January 19, 2010 expiring January 19, 2015 and exercisable into shares of
common stock at an exercise price of $0.75 per
share.
|
|
(74)
|
The
business address of Jason Lyons is 7239 San Salvadore Drive, Boca Raton,
FL 33433. The 42,003 beneficial shares consist of 1) 28 670
shares of common stock upon conversion of debt (See Footnote 111) and 2)
13,333 warrants issued in connection with the aforementioned debt, issued
on February 1, 2010 expiring February 1, 2015 and exercisable into shares
of common stock at an exercise price of $0.75 per
share.
|
|
(75)
|
The
business address of Mitchell S. Knapp is 947 Huron Road, Franklin Lakes,
New Jersey 07417 (See Footnote 100
below).
|
|
(76)
|
The
business address of Michael Nielsen is 511 Sonata Ct. Winter Springs, FL
32078 (See Footnote 112).
|
|
(77)
|
The
business address of Shirley Harnick is 400 East 70th
St. #2604 New York, NY 00021 (See Footnote
112).
|
|
(78)
|
The
business address of Patricia Scarpella is 36 Berry Hill Rd. Oyster Bay
Cove, NY 11771 (See Footnote
112).
|
|
(79)
|
The
business address of Dr. Michael Gelbar is 71 North Lake Dr., Stanford, CT,
06903 (See Footnote 112).
|
|
(80)
|
The
business address of Sam Maywood is 6105 Avenida Cresta, La Jolla CA 92037
(See Footnote 112).
|
|
(81)
|
The
business address of Dawn Maywood is 6105 Avenida Cresta, La Jolla CA 92037
(See Footnote 112).
|
|
(82)
|
The
business address of Charlie A Bonafede is 26A Huntington NY 11743 (See
Footnote 112).
|
|
(83)
|
The
business address of Dominic and Judy Aprile is 36 Milan Road, Woodbridge,
CT 06525 (See Footnote 112).
|
|
(84)
|
The
business address of Winston Family Trust is 6105 Avenida Cresta, La Jolla,
CA 90237. Through his control, Sam Maywood has voting and investment
control over the portfolio securities (See Footnote
112).
|
|
(85)
|
The
business address of Robert Klinek & Susan Pack is P.O. Box 157 15515
Las Planderas, Rancho Santa Fe, CA 92127 (See Footnote
112).
|
|
(86)
|
The
business address of Borg Trust is 7960 Endrada Lazjma San Diego,
92127. Through his control, Ian Mausner has voting and
investment control over the portfolio securities (See Footnote
112).
|
|
(87)
|
The
business address of Robert Gleckman is 18440 St. Maritz Tarzana, CA 91356
(See Footnote 112).
|
|
(88)
|
The
business address of Ted Cooper is P.O. Box 320956 (See Footnote
112).
|
|
(89)
|
The
business address of Maureen Maurant is 2001 SE 19th
St., Lauderdale by the Sea, FL 33062. Ms. Maurant was an administrative
consultant to the Company. Ms. Maurant received her shares on
April 28, 2010 in exchange for services performed in
2009.
|
|
(90)
|
The
business address of Todd Pitcher is 735 Leeward Ave. San Marcos, CA 92078.
Mr. Pitcher is an administrative consultant to the Company. Mr.
Pitcher received his shares on April 28, 2010 in exchange for services
performed in 2009.
|
|
(91)
|
The
business address of Justin Frere is 1525 10th
St. Los Osos, CA 93402. Mr. Frere is an administrative consultant to the
Company. Mr. Frere received his shares on April 28, 2010 in
exchange for services performed in
2009.
|
|
(92)
|
The
business address of Steve Danzo is 9912 North Lydia Ave. Kansas City, MO.
64155. Mr. Danzo was an administrative consultant to the
Company. Mr. Danzo received his 14,025 shares on April 28, 2010
in exchange for services performed in
2008.
|
|
(93)
|
The
business address of Mark Whitney is 55 Quail Run Rd., Henderson, NV 89014
(See Footnote 101).
|
48
(94)
|
The
business address of Michael Uhl is 301 Great Cable Drive, Las Vegas, NV
89123. Mr. Uhl is a director of the Company (See Footnote
102).
|
(95)
|
Unless
otherwise stated, the mailing address for Vicksburg is the Company’s
corporate address at 475 Plaza Real, Suite 275 Boca Raton, FL (See
Footnote 103).
|
(96)
|
The
business address of Dave Baesler is 500 Morris Avenue Suite 301,
Springfield, NJ, 07801. Mr. Baesler is a director of the Company (See
Footnote 104).
|
(97)
|
The
business address of Ramesh Anand is 16301 Via Venetia East, Delray Beach,
FL 33484 Mr. Ramesh is an officer of the Company (See Footnote
105).
|
(98)
|
The
business address of Delivery Technologies Solutions, Inc. (formerly Inflot
Holdings Corp.) is 433 Plaza Real Ste 277 Boca Raton FL 33442. Through
their control, Ryan Coblin and Lewis Plaut have voting and investment
control over the portfolio securities (See Footnote
110).
|
(99)
|
The
business address of Astia LLD is STR. Raiko Daskalov 53, Plovdiv. Through
his control, Konstantin Kerpechev has voting and investment control over
the portfolio securities (See Footnote
106).
|
(100)
|
Includes
1,000,000 shares issuable upon exercise of warrants at an exercise price
of $0.40 per share. Said warrants contain no performance
clauses and are exercisable at any time at the option of the
holder. They were issued on February 5, 2010 and expire on
December 31, 2015.
|
(101)
|
Includes
375,000 shares issuable upon exercise of options, 187,500 at an exercise
price of $0.05 per share, and 187,500 at an exercise price of $0.10 per
share which were issued for business advisory services rendered to the
Company. Said options were issued on July 1, 2007 and expire on
July 1, 2017.
|
(102)
|
Includes
375,000 shares issuable upon exercise of options, 187,500 at an exercise
price of $0.05 per share, and 187,500 at an exercise price of $0.10 per
share which were issued for Director services rendered to the
Company. Said options were issued on July 1, 2007 and expire on
July 1, 2017.
|
(103)
|
Includes
2,000,000 shares issuable upon exercise of options at an exercise price of
$0.10 per share which were issued in exchange for assistance in helping
the Company raise capital. Said options were issued on July 1,
2007 and expire on July 1,
2017.
|
(104)
|
Includes
450,000 shares issuable upon exercise of options at an exercise price of
$0.10 per share which were issued for Director services rendered to the
Company. Said options were issued on November 17, 2007 and
expire on November 17,
2017.
|
(105)
|
Includes
250,000 shares issuable upon exercise of options at an exercise price of
$0.25 per share which were issued for services rendered to the
Company. Said options were issued on November 17, 2007 and
expire on November 17,
2017.
|
(106)
|
Includes
1,000,000 shares issuable upon exercise of warrants at an exercise price
of $0.10 per share which were issued for professional services rendered to
the Company. Said warrants were issued on March 1, 2010 and
expire on October 31,
2011.
|
(107)
|
5,526,192
shares of common stock were issued on August 21, 2007 in exchange for
$110,524 of principle and interest converted at an exercise price of $0.02
per share.
|
(108)
|
985,169
shares of common stock were issued on August 21, 2007 in exchange for
$98,517 of principle and interest converted at an exercise price of $0.10
per share. 400,000 shares were subsequently distributed to
family leaving Beatrice Ann Rizzo with 585,169
shares.
|
(109)
|
729,052
shares of common stock were issued on August 21, 2007 in exchange for
$182,263 of principle and interest converted at an exercise price of $0.25
per share.
|
(110)
|
1,386,322
shares of common stock were issued on April 28, 2010 in exchange for
$270,000 of principle and interest converted at an exercise price of
$0.195 per share in October
2009.
|
(111)
|
121,332
shares of common stock were issued on July 30, 2010 in exchange for
$42,466 of principle and interest converted at an exercise price of $0.35
per share on February 16,
2010.
|
(112)
|
2,334,935
shares of common stock were issued on April 28, 2010 in exchange for
$1,167,468 of debt principle and interest converted at an exercise price
of $0.50 per share in October 2009. 466,987 of these shares are
being registered here.
|
(113)
|
Portion
of the 29,689 of the 118,750 shares sold in Must Haves private offering
pursuant to Section 4(2) completed in the months of March through May,
2007 and for which a Form D was filed on February 23,
2007.
|
(114)
|
The
business address of Chris Maggiore is 4788 Nobles Pond Dr. Nw, Canton, OH
44718. The 433,332 shares held by Mr. Maggiore consist of
1) 166,666 shares purchased on March 19, 2010, 2) 166,666 shares received
upon exercise of a warrant and 3) 100,000 received for business advisory
services performed in
2010.
|
49
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information, as of September 30, 2010, with
respect to the beneficial ownership of the outstanding common stock by
(i) any holder of more than five percent, (ii) each of the Company’s
executive officers and directors, and (iii) the Company’s directors and
executive officers as a group.
Name and address of the beneficial
owner(1)
|
Number of Shares Beneficially Owned(2)
|
Percent of
common stock
|
||||||
Ramesh
Anand (3)
16301
Via Venetia East
Delray
Beach, FL 33484
|
250,000 | 1.2 | % | |||||
Mihir
Sevak
2950
SW 22nd Circle, #4A
Delray
Beach, FL 33445
|
250,000 | 1.2 | % | |||||
Red
Rock Strategies, Ltd.
No.
6, Floor 3
Quomar
Trading Building
Road
Town, BVI
|
2,765,685 | 13.6 | % | |||||
John
Rizzo (4)
17597
Circle Pond Ct.
Boca
Raton FL 33496
|
7,250,000 | 32.5 | % | |||||
Michael
Uhl (5)
301
Great Gable Drive
Las
Vegas, NV 89123
|
375,000 | 1.8 | % | |||||
David
Baesler (6)
500
Morris Avenue Suite 301
Springfield,
NJ 07081
|
450,000 | 2.2 | % | |||||
Directors
and officers as a group
|
8,575,000 | 38.9 | % | |||||
Directors,
officers and 5%
shareholders
as a group
|
11,340,685 | 48.0 | % |
1)
|
Beneficial Ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect
to securities. Each of the beneficial owners listed above has direct
ownership of and sole voting power and investment power with respect to
the shares of Company common stock and except as indicated the address of
each beneficial owner is 433 Plaza Real, Suite 275, Boca Raton FL
33432.
|
(2)
|
Shares of common stock
beneficially owned and the respective percentages of beneficial ownership
of common stock assumes the exercise of all options, warrants and other
securities convertible into common stock beneficially owned by such person
or entity currently exercisable or exercisable within 60 days of September
30, 2010. Shares issuable pursuant to the exercise of stock options and
warrants exercisable within 60 days are deemed outstanding and held by the
holder of such options or warrants for computing the percentage of
outstanding common stock beneficially owned by such person, but are not
deemed outstanding for computing the percentage of outstanding common
stock beneficially owned by any other
person.
|
(3)
|
Including 250,000 shares of
common stock underlying the
Warrants.
|
(4)
|
Including 2,000,000 shares of
common stock underlying the
Warrants.
|
(5)
|
Including 375,000 shares of
common stock underlying the
Warrants.
|
(6)
|
Including 450,000 shares of
common stock underlying the
Warrants.
|
Based
upon a review of the forms furnished to iTrackr and written representations from
its executive officers and directors, the Company believes that during fiscal
2009 all Section 16(a) filing requirements applicable to its executive officers,
directors and beneficial owners of more than ten percent of its common stock
were complied with.
50
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related
Party Transactions Policy
The
Company has adopted a Code of Conduct and Professional Ethics, applicable to its
directors, officers and employees, including its Chief Executive Officer, Chief
Financial Officer and all of its other executives pursuant to which all
directors, officers and employees must promptly disclose to us, any material
transaction or relationship that reasonably could be expected to give rise to an
actual or apparent conflict of interest with iTrackr Systems, Inc. In approving
or rejecting the proposed agreement, the Board of Directors shall consider the
relevant facts and circumstances available and deemed relevant, including, but
not limited to the risks, costs and benefits to the Company, the terms of the
transaction, the availability of other sources for comparable services or
products, and, if applicable, the impact on a director’s independence. The Board
of Directors shall approve only those agreements that, in light of known
circumstances, are in, or are not inconsistent with, the Company’s best
interests, as the Board of Directors determines in the good faith exercise of
its discretion.
Merger
On
January 12, 2010, we completed a merger with a subsidiary of Must
Haves. On the Closing Date, iTrackr was merged with and into iTrackr
Acquisition, Inc., which is the surviving corporation and became a wholly-owned
subsidiary of Must Haves.
At the
closing of the Merger, subject to and pursuant to the terms and conditions of
the Agreement, each outstanding share of iTrackr common stock was converted into
one share of common stock of the Must Haves. Upon consummation of the Merger,
the shareholders of the iTrackr received an aggregate of 17,875,695 shares of
Must Haves common stock and thus owned 93.5% of the Must Have’s common stock.
Must Haves also assumed 6,555,000 options and warrants of iTrackr, which are
exercisable at prices from $0.01 to $0.40.
In
addition, pursuant to the Plan of Merger Agreement, Stella Gostfrand submitted
her resignation as an officer and director of the Company, and Michael Uhl, Dave
Baesler and John Rizzo were appointed to serve as members of the board of
directors of the Company. Upon the consummation of the Reverse Merger, Ramesh
Anand was appointed to serve as Chief Operating Officer.
Other
During
the year ended December 31, 2009, the Company issued a note in the amount
of $151,312 to Bluewater Advisors, a company owned by John Rizzo, CEO, in
exchange for a promissory note. During 2008 and 2009, the Bluewater
Advisors loaned the company $195,750 for working capital of which the Company
repaid $85,750 in 2009 and accrued $16,312 in interest. The amounts
loaned were not documented, but accrued interest at the rate of nine percent
(9%) per annum. The total of $151,312 of unpaid interest of $16,312
and principle of $135,000 were documented in a note dated December 31,
2009. The terms of the note call for interest to accrue at the rate
of nine percent (9%) per annum with no payments due until maturity on December
31, 2011. Upon default, one of the remedies is conversion in to
shares of the Company’s common stock at the rate of 50% of the average closing
stock price of iTrackr for the prior 10 trading days. From January 1,
2010 through the date of this prospectus, Mr. Rizzo loaned the Company an
additional $41,500 under the aforementioned Note.
Unrelated
to the above working capital loans from Bluewater Advisors to iTrackr, Mr. Rizzo
was not paid his salary during all of 2008 and only paid $90,000 of salary in
2009 and none of his salary during 2010. As a result the Company has
accrued $577,000 for unpaid salary and an additional $45,000 for unreimbursed
health insurance premiums.
51
Director
and Officer Indemnification
The
Company has entered into agreements to indemnify its directors and executive
officers to the fullest extent permitted under Florida law. In addition, the
Company’s certificate of incorporation to be in effect upon the completion of
this offering contains provisions limiting the liability of its directors and
its bylaws contain provisions requiring the Company to indemnify its officers
and directors. See “Description of Capital Stock—Limitation of Liability.”
DESCRIPTION
OF CAPITAL STOCK
The
Company is authorized to issue up to 110,000,000 shares of common stock, no par
value. As of September 30, 2010, there are 20,319,997 shares of
common stock issued and outstanding that are held by approximately 102
stockholders of record.
Common
Stock
The
holders of common stock are entitled to one vote per share on each matter
submitted to a vote of stockholders. In the event of liquidation, holders of
common stock are entitled to share ratably in the distribution of the remaining
assets, if any, after payment of liabilities. Holders of common stock have no
cumulative voting rights and holders of a majority of the outstanding shares
have the ability to elect all of the directors. Holders of common stock have no
preemptive rights or other rights to subscribe for shares and are entitled to
such dividends as may be declared by the board of directors out of funds legally
available for dividends.
Warrants
Of the
19,629,893 shares of common stock being registered, 2,000,000 shares are
issuable upon exercise by Selling Shareholders of certain warrants.
At
September 30, 2010, the Company had 2,905,333 Warrants outstanding entitling the
holder thereof the right to purchase one share of common stock for each warrant
held as follows:
Number
of
|
Exercise
|
||||||||||||
Issuance
|
Number
of
|
Warrants
|
Price
Per
|
Expiration
|
|||||||||
Date
|
Warrants
|
Registered
|
Warrant
|
Date
|
|||||||||
3/25/2008
|
400,000 | - | $ | 0.10 |
12/31/10
|
||||||||
3/25/2008
|
400,000 | - | $ | 0.10 |
12/31/10
|
||||||||
1/19/2010
|
36,000 | - | $ | 0.75 |
1/19/15
|
||||||||
1/19/2010
|
56,000 | - | $ | 0.75 |
1/19/15
|
||||||||
2/1/2010
|
13,333 | - | $ | 0.75 |
2/1/15
|
||||||||
2/5/2010
|
1,000,000 | 1,000,000 | $ | 0.40 |
12/31/15
|
||||||||
3/1/2010
|
1,000,000 | 1,000,000 | $ | 0.10 |
10/31/11
|
||||||||
Total
|
2,905,333 | 2,000,000 |
All the
warrants issued and outstanding require physical settlement, contain no
performance contingencies and are exercisable by the holder at any time through
the expiration date of the warrant.
Options
Of the 19,629,893 shares of common
stock being registered, 2,207,500 shares are issuable upon exercise by Selling
Shareholders of certain options.
At
September 30, 2010, the Company had 5,505,000 Options outstanding entitling the
holder thereof the
right to
purchase one share of common stock for each option held as
follows:
52
Number
|
Number
|
Number
|
Weighted
|
|||||||||||
Outstanding
|
Exerciseable
|
of Options
|
Average
|
|||||||||||
At September 30,
|
At September 30,
|
Being
|
Exercise
|
|||||||||||
2010
|
2010
|
Registered
|
Price
|
|||||||||||
1,000,000 | 1,000,000 | - | $ | 0.40 | ||||||||||
1,250,000 | 1,250,000 | 50,000 | 0.25 | |||||||||||
2,375,000 | 2,375,000 | 2,000,000 | 0.10 | |||||||||||
880,000 | 880,000 | 157,500 | 0.05 | |||||||||||
5,505,000 | 5,505,000 | 2,207,500 | $ | 0.18 |
Preferred Stock
The
Company is authorized to issue up to 10,000,000 shares of preferred stock, no
par value. As of the date of this report, there are no preferred shares issued
and outstanding. Our board of directors has the authority, without action by our
stockholders, to issue all or any portion of the authorized but unissued
preferred stock in one or more classes, and to determine the voting rights,
designations, preferences, limitations, restrictions and relative rights of any
class or series.
Stock
Transfer Agent
The
Transfer Agent and Registrar for the shares of the Company’s common stock is
Manhattan Transfer Registrar, 57 Eastwood Road, Miller Place NY
11764.
SHARES
ELIGIBLE FOR FUTURE SALE
The sale
of a substantial amount of iTrackr’s common stock in the public market after
this offering could adversely affect the prevailing market price of its common
stock. As of September 30, 2010, the Company had 20,319,997 shares of the
common stock outstanding, 15,000,000 shares of common stock available for future
issuance under its 2007 Long-Term Stock Incentive Plan and warrants/options to
purchase 8,410,333 shares outstanding. The 19,629,893 shares of common stock,
and shares of common stock underlying the warrants and options registered
pursuant to this Registration Statement will be freely tradable once this
Registration Statement is declared effective by the Securities and Exchange
Commission without restriction or further registration under the Securities Act,
unless the shares are purchased by “affiliates” as that term is defined in Rule
144 under the Securities Act. Any shares purchased by an affiliate may not be
resold except pursuant to an effective registration statement or an applicable
exemption from registration, including an exemption under Rule 144 of the
Securities Act. These restricted securities may be sold in the public market
only if they are registered or if they qualify for an exemption from
registration under Rule 144 or Rule 701 under the Securities Act. These rules
are summarized below.
Rule
144
In
general, under Rule 144 as currently in effect, a person who has beneficially
owned shares of the Company’s common stock for at least six months from the
later of the date those shares of common stock were acquired from the Company or
from an affiliate of ours would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
|
·
|
One
percent of the number of shares of common stock then outstanding;
or
|
|
·
|
The
average weekly trading volume of the common stock on Nasdaq during the
four calendar weeks preceding the filing of a notice on Form 144 with
respect to the sale of any shares of common
stock.
|
|
·
|
Sales
of shares of common stock under Rule 144 may also be subject to manner of
sale provisions and notice requirements and will be subject to the
availability of current public information about
us.
|
53
Under
Rule 701 of the Securities Act, each of the Company’s employees, consultants or
advisors who purchased shares from us in connection with a compensatory stock
plan or other written agreement is eligible to resell those shares in reliance
on Rule 144, but without compliance with some of the restrictions, including the
holding period, contained in Rule 144.
No
precise prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price of
the Company’s common stock prevailing from time to time. The Company is unable
to estimate the number of its shares that may be sold in the public market
pursuant to Rule 144 or Rule 701 because this will depend on the market price of
its common stock, the personal circumstances of the sellers and other factors.
Nevertheless, sales of significant amounts of the Company’s common stock in the
public market could adversely affect the market price of its common
stock.
PLAN
OF DISTRIBUTION
The
Selling Stockholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling shares of common stock or
interests in shares of common stock received after the date of this prospectus
from a Selling Stockholder as a gift, pledge, partnership distribution or other
transfer, may, from time to time, sell, transfer or otherwise dispose of any or
all of their shares of common stock in transactions at $0.25 per share until
such time as a market develops, and thereafter at prevailing market prices or
privately negotiated prices. ,
The
Selling Stockholders may use any one or more of the following methods when
disposing of shares or interests therein:
|
-
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
-
|
block
trades in which the broker-dealer will attempt to sell the shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
-
|
purchases
by a broker-dealer as principal and sale by the broker-dealer for its
account;
|
|
-
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
-
|
privately
negotiated transactions;
|
|
-
|
short
sales effected after the date the registration statement of which this
Prospectus is a part is declared effective by the
SEC;
|
|
-
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
-
|
broker-dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per share;
and
|
|
-
|
a
combination of any such methods of
sale.
|
The
Selling Stockholders may, from time to time, pledge or grant a security interest
in some or all of the shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock, from time to time, under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act amending the list of Selling
Stockholders to include the pledgee, transferee or other successors in interest
as Selling Stockholders under this prospectus. The Selling
Stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this
prospectus.
54
In
connection with the sale of our common stock or interests therein, the Selling
Stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The
Selling Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
aggregate proceeds to the Selling Stockholders from the sale of the common stock
offered by them will be the purchase price of the common stock less discounts or
commissions, if any. Each of the Selling Stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents. We will not receive any of the proceeds from this
offering.
The
Selling Stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act of 1933,
provided that they meet the criteria and conform to the requirements of that
rule.
The
Selling Stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities
Act. Any discounts, commissions, concessions or profit they earn on
any sale of the shares may be underwriting discounts and commissions under the
Securities Act. Selling Stockholders who are "underwriters" within
the meaning of Section 2(11) of the Securities Act will be subject to the
prospectus delivery requirements of the Securities Act.
To the
extent required, the shares of our common stock to be sold, the names of the
Selling Stockholders, the respective purchase prices and public offering prices,
the names of any agents, dealer or underwriter, 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 that includes this
prospectus.
In order
to comply with the securities laws of some states, if applicable, the common
stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the common stock may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
We have
advised the Selling Stockholders that the anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of shares in the market and to the
activities of the Selling Stockholders and their affiliates. In
addition, to the extent applicable we will make copies of this prospectus (as it
may be supplemented or amended from time to time) available to the Selling
Stockholders for the purpose of satisfying the prospectus delivery requirements
of the Securities Act. The Selling Stockholders may indemnify any
broker-dealer that participates in transactions involving the sale of the shares
against certain liabilities, including liabilities arising under the Securities
Act.
We have
agreed to indemnify the Selling Stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to the
registration of the shares offered by this prospectus.
We have
agreed with the Selling Stockholders to keep the registration statement of which
this prospectus constitutes a part effective until the earlier of (1) such time
as all of the shares covered by this prospectus have been disposed of pursuant
to and in accordance with the registration statement or (2) the date on which
the shares may be sold without restriction pursuant to Rule 144 of the
Securities Act.
LEGAL
MATTERS
The
validity of the common stock offered in this prospectus will be passed upon for
the Company by Roetzel & Andress, LPA, 350 East Las Olas Boulevard, Suite
1150, Fort Lauderdale, FL 33301, telephone: 954-759-2741. Roetzel
& Andress does not own any shares of common stock of the
Company.
55
EXPERTS
The
consolidated financial statements of iTrackr and its subsidiary as of the twelve
months ended December 31, 2009 and December 31, 2008 and the related
consolidated statements of operations, changes in stockholders’ deficit and cash
flows for each of the years then ended included herein, have been audited by
Bedinger and Company, an independent registered public accounting firm, as
stated in their report dated October 1, 2010, which is included
herein, and such consolidated financial statements have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
iTrackr
Systems, Inc. is a public company and files annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any document the Company files at the SEC’s
Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549.
You can request copies of these documents by writing to the SEC and paying a fee
for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information
about the operation of the public reference room. Our SEC filings are also
available to the public at the SEC’s web site at
“http://www.sec.gov.”
This
prospectus is only part of a Registration Statement on Form S-1/A that the
Company has filed with the SEC under the Securities Act of 1933 and therefore
omits certain information contained in the Registration Statement. The Company
has also filed exhibits and schedules with the Registration Statement that are
excluded from this prospectus, and you should refer to the applicable exhibit or
schedule for a complete description of any statement referring to any contract
or other document. You may:
|
·
|
Inspect
a copy of the Registration Statement, including the exhibits and
schedules, without charge at the public reference
room,
|
|
·
|
Obtain
a copy from the SEC upon payment of the fees prescribed by the SEC,
or
|
|
·
|
Obtain
a copy from the SEC web site.
|
56
ITrackr
Systems, Inc.
Unaudited
Financial Statements and Footnotes
For the
Three and Nine Months Ended
September
30, 2010 and 2009
57
TABLE OF
CONTENTS
PAGE
|
|
PART
I - FINANCIAL INFORMATION
|
|
Consolidated
Balance Sheets as of September 30, 2010 (Unaudited)
|
|
and
December 31, 2009
|
F-1
|
Consolidated
Statements of Operations (Unaudited) For the Three and
Nine
|
|
Months
Ended September 30, 2010 and 2009 and the Period May 10,
2006
|
|
(Date
of Inception) to September 30, 2010
|
F-2
|
Consolidated
Statement of Stockholders' Equity (Unaudited)
|
|
For
the Nine Months Ended September 30, 2010
|
F-3
|
Consolidated
Statements of Cash Flows (Unaudited)
|
|
For
the Three and Nine Months Ended September 30, 2010 and
2009
|
|
and
the Period May 10, 2006 (Date of Inception) to September 30,
2010
|
F-4
|
Notes
to Consolidated Financial Statements (Unaudited)
|
F-5-18
|
iTrackr Systems, Inc.
|
(A
Development Stage Company)(formerly Must Haves, Inc.)
|
Balance Sheets
|
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(Unaudited)
|
(Restated)
|
|||||||
Assets
|
||||||||
Current Assets
|
||||||||
Cash
|
$ | 8,197 | $ | 3,223 | ||||
Accounts
receivable
|
14,178 | 5,786 | ||||||
Other
current assets
|
7,500 | - | ||||||
Total
Current Assets
|
29,875 | 9,009 | ||||||
Fixed
assets (Note B)
|
206,211 | 206,211 | ||||||
Accumulated
depreciation
|
(133,588 | ) | (106,856 | ) | ||||
Net
fixed assets
|
72,623 | 99,355 | ||||||
Goodwill
(Note C)
|
92,697 | - | ||||||
Total
Assets
|
$ | 195,195 | $ | 108,364 | ||||
Liabilities and Stockholders'
Deficit
|
||||||||
Current Liabilities
|
||||||||
Accounts
payable & accrued expenses (Note D)
|
$ | 710,867 | $ | 524,879 | ||||
Convertible
promissory notes (Note E)
|
25,000 | 25,000 | ||||||
Promissory
notes - related party (Note E)
|
182,312 | 151,312 | ||||||
Total
Current Liabilities
|
918,179 | 701,191 | ||||||
Total
Liabilities
|
918,179 | 701,191 | ||||||
Stockholders' Deficit (Note
F)
|
||||||||
Common
stock, no par value 100,000,000 shares authorized; issued and outstanding
20,319,997 and 13,990,413 at September 30, 2010 and December 31, 2009,
respectively.
|
3,235,234 | 980,148 | ||||||
Common
stock payable
|
37,500 | 1,451,979 | ||||||
Deficit
accumulated during the development stage
|
(3,995,718 | ) | (3,024,954 | ) | ||||
Total
stockholders' deficit
|
(722,984 | ) | (592,827 | ) | ||||
Total
Liabilities and Stockholders' Deficit
|
$ | 195,195 | $ | 108,364 |
The
accompanying notes are an integral part of these financial
statements
F-1
iTrackr
Systems, Inc.
|
(A
Development Stage Company)(formerly Must Haves, Inc.)
|
Statements
of Operation (Unaudited)
|
For the Three and Nine Months Ended September 30,
2010 and 2009 and the Period May 10, 2006 (Inception) to September 30,
2010
|
May 10, 2006
|
||||||||||||||||||||
Three Months Ended
|
Nine Months Ended
|
(Inception) to
|
||||||||||||||||||
September 30, (Unaudited)
|
September 30, (Unaudited)
|
September 30,
|
||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
||||||||||||||||
Revenue
|
$ | 17,285 | $ | 307 | $ | 35,860 | $ | 1,667 | $ | 65,190 | ||||||||||
Operating
Expenses
|
||||||||||||||||||||
Personnel
|
75,668 | 109,914 | 227,460 | 310,777 | 1,554,256 | |||||||||||||||
Professional
fees
|
49,565 | 17,194 | 150,479 | 38,329 | 967,745 | |||||||||||||||
Stock
compensation
|
45,000 | 2,503 | 475,959 | 24,169 | 1,146,816 | |||||||||||||||
Travel
and entertainment
|
200 | - | 400 | - | 39,947 | |||||||||||||||
Facilities
|
- | - | - | - | 30,238 | |||||||||||||||
Communications
|
1,424 | 3,650 | 5,158 | 6,726 | 24,260 | |||||||||||||||
Marketing
|
- | - | - | 4,796 | 49,865 | |||||||||||||||
Website
|
13,141 | 14,875 | 30,779 | 24,942 | 157,274 | |||||||||||||||
Depreciation
|
8,808 | 8,737 | 26,731 | 26,582 | 133,587 | |||||||||||||||
General
|
2,498 | 115 | 11,001 | 14,458 | 40,279 | |||||||||||||||
Total
operating expenses
|
196,304 | 156,988 | 927,967 | 450,779 | 4,144,267 | |||||||||||||||
Loss
from operations
|
(179,019 | ) | (156,681 | ) | (892,107 | ) | (449,112 | ) | (4,079,077 | ) | ||||||||||
Other
Income and (Expense)
|
||||||||||||||||||||
Interest
expense
|
(3,996 | ) | (25,929 | ) | (11,157 | ) | (76,941 | ) | (187,374 | ) | ||||||||||
Other
expense
|
- | (138,000 | ) | - | (138,000 | ) | (173,000 | ) | ||||||||||||
Other
income
|
- | - | - | - | 443,733 | |||||||||||||||
Total
other income and (expense)
|
(3,996 | ) | (163,929 | ) | (11,157 | ) | (214,941 | ) | 83,359 | |||||||||||
NET
LOSS
|
$ | (183,015 | ) | $ | (320,610 | ) | $ | (903,264 | ) | $ | (664,053 | ) | $ | (3,995,718 | ) | |||||
Net
loss per common share basic and diluted
|
$ | (0.009 | ) | $ | (0.023 | ) | $ | (0.045 | ) | $ | (0.047 | ) | ||||||||
Weighted
average common shares outstanding basic and diluted
|
20,319,997 | 14,004,438 | 19,896,836 | 14,004,438 | ||||||||||||||||
The
average shares listed below were not included in the computation of
diluted losses per share because to do so would have been antidilutive for
the periods presented:
|
||||||||||||||||||||
Warrants
|
2,905,333 | 1,050,000 | 2,565,116 | 1,050,000 | ||||||||||||||||
Stock
options
|
5,505,000 | 5,255,000 | 5,505,000 | 5,980,926 | ||||||||||||||||
Convertible
promissory notes
|
- | 3,253,233 | - | 2,706,939 |
The
accompanying notes are an integral part of these financial
statements
F-2
iTrackr
Systems, Inc.
|
(A
Development Stage Company)(formerly Must Haves, Inc.)
|
Statement
of Stockholders' Equity (Deficit)
|
For the Nine Months Ended September 30, 2010
(Unaudited)
|
Deficit
|
||||||||||||||||||||
Accumulated
|
||||||||||||||||||||
Common Stock
|
during the
|
Total
|
||||||||||||||||||
Number of
|
Developmental
|
Stockholders'
|
||||||||||||||||||
Shares
|
Amount
|
Payable
|
Stage
|
(Deficit)
|
||||||||||||||||
BALANCES
December 31, 2009
|
13,990,413 | $ | 980,148 | $ | 1,519,479 | $ | (3,092,454 | ) | $ | (592,827 | ) | |||||||||
Stock
issued for conversion of debt
|
3,842,589 | 1,486,946 | (1,444,479 | ) | 42,467 | |||||||||||||||
Stock
issued for legal settlement
|
360,000 | 108,000 | 108,000 | |||||||||||||||||
Stock
issued for cash
|
333,332 | 100,000 | 100,000 | |||||||||||||||||
Stock
issued for services
|
389,025 | 142,500 | (37,500 | ) | 105,000 | |||||||||||||||
Stock
issued for accounts payable
|
101,000 | 32,000 | 32,000 | |||||||||||||||||
Fair
market value of warrants issued
|
320,459 | 320,459 | ||||||||||||||||||
Shares
issued in merger
|
1,303,638 | 65,181 | 65,181 | |||||||||||||||||
Net
loss
|
(903,264 | ) | (903,264 | ) | ||||||||||||||||
BALANCES
September 30, 2010
|
20,319,997 | $ | 3,235,234 | $ | 37,500 | $ | (3,995,718 | ) | $ | (722,984 | ) |
The
accompanying notes are an integral part of these financial
statements
F-3
iTrackr
Systems, Inc.
|
(A
Development Stage Company)(formerly Must Haves, Inc.)
|
Statements
of Cash Flows (Unaudited)
|
For the Three and Nine Months Ended September 30,
2010 and 2009 and the Period May 10, 2006 (Inception) to September 30,
2010
|
May 10, 2006
|
||||||||||||||||||||
Three Months Ended
|
Nine Months Ended
|
(Inception) to
|
||||||||||||||||||
September 30, (Unaudited)
|
September 30, (Unaudited)
|
September 30,
|
||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
||||||||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||||||
Net
loss
|
$ | (183,015 | ) | $ | (320,610 | ) | $ | (903,264 | ) | $ | (664,053 | ) | $ | (3,995,718 | ) | |||||
Adjustments
to reconcile net loss to net cash provided (used) by operating
activities:
|
||||||||||||||||||||
Depreciation
|
8,808 | 8,737 | 26,731 | 26,582 | 133,586 | |||||||||||||||
Asset
impairment
|
- | 138,000 | - | 138,000 | 138,000 | |||||||||||||||
Compensation
expense on fair market value of options issued
|
- | 2,503 | - | 24,169 | 178,844 | |||||||||||||||
Compensation
expense on fair value of warrants issued
|
- | - | 270,459 | - | 292,959 | |||||||||||||||
Stock
compensation expense
|
45,000 | - | 205,500 | - | 675,013 | |||||||||||||||
Common
stock issued for accrued interest
|
- | - | 466 | - | 163,237 | |||||||||||||||
Common
stock issued for accounts payable
|
- | - | 32,000 | - | 32,000 | |||||||||||||||
Changes
in operating accounts:
|
||||||||||||||||||||
Accounts
receivable
|
(9,153 | ) | - | (8,392 | ) | - | (14,178 | ) | ||||||||||||
Other
current assets
|
- | (7,718 | ) | 1,562 | (7,718 | ) | 1,562 | |||||||||||||
Accounts
payable and accrued expenses
|
73,390 | 63,762 | 156,817 | 113,764 | 681,696 | |||||||||||||||
Other
current liabilities
|
- | - | - | - | - | |||||||||||||||
CASH
(USED) BY OPERATING ACTIVITIES
|
(64,970 | ) | (115,326 | ) | (218,121 | ) | (369,256 | ) | (1,712,999 | ) | ||||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||||||
Loans
made to acqusition target
|
- | (34,860 | ) | - | (34,860 | ) | - | |||||||||||||
Cash
acquired in merger
|
- | - | 95 | - | 95 | |||||||||||||||
Acquisition
of furniture and equipment
|
- | - | - | - | (206,211 | ) | ||||||||||||||
Other
investing activities
|
- | - | - | - | (138,000 | ) | ||||||||||||||
CASH
PROVIDED (USED) BY INVESTING ACTIVITIES
|
- | (34,860 | ) | 95 | (34,860 | ) | (344,116 | ) | ||||||||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
Proceeds
from the issuance of stock warrants
|
- | - | 50,000 | - | 50,000 | |||||||||||||||
Issuance
of common stock for cash
|
- | - | 100,000 | - | 100,000 | |||||||||||||||
Repayment
of promissory notes
|
(25,000 | ) | - | (25,000 | ) | - | (25,000 | ) | ||||||||||||
Repayment
of related party notes
|
- | - | - | - | (85,750 | ) | ||||||||||||||
Proceeds
from promissory notes
|
50,000 | 192,000 | 67,000 | 267,000 | 1,758,000 | |||||||||||||||
Proceeds
from related party notes
|
30,000 | - | 31,000 | - | 268,062 | |||||||||||||||
CASH
PROVIDED BY FINANCING ACTIVITIES
|
55,000 | 192,000 | 223,000 | 267,000 | 2,065,312 | |||||||||||||||
NET
INCREASE (DECREASE) IN CASH
|
(9,970 | ) | 41,814 | 4,974 | (137,116 | ) | 8,197 | |||||||||||||
CASH,
beginning of period
|
18,167 | 4,214 | 3,223 | 183,144 | - | |||||||||||||||
CASH,
end of period
|
$ | 8,197 | $ | 46,028 | $ | 8,197 | $ | 46,028 | $ | 8,197 | ||||||||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||||||||||||||
CASH
PAID DURING THE YEAR FOR:
|
||||||||||||||||||||
Taxes
paid
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Interest
paid
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
NON-CASH
OPERATING ACTIVITIES:
|
||||||||||||||||||||
Value
of Common Stock issued in exchange for services
|
$ | 45,000 | $ | - | $ | 205,500 | $ | - | $ | 675,013 | ||||||||||
Value
of Common Stock issued for accrued interest
|
$ | - | $ | - | $ | 466 | $ | - | $ | 163,237 | ||||||||||
Value
of Common Stock issued for debt principle
|
$ | - | $ | - | $ | 42,000 | $ | - | $ | 1,708,000 | ||||||||||
Value
of Common Stock issued for accounts payable
|
$ | - | $ | - | $ | 32,000 | $ | - | $ | 32,000 | ||||||||||
Value
of warrants issued
|
$ | - | $ | - | $ | 270,459 | $ | - | $ | 292,959 |
The
accompanying notes are an integral part of these financial
statements
F-4
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
Note A-Organization and
Summary Of Significant Accounting Policies
Basis of
Presentation
The unaudited financial statements of
iTrackr Systems, Inc. as of September 30, 2010 and for the three and nine months
ended September 30, 2010and 2009 have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial reporting. Accordingly, they do not include all of the
disclosures required by accounting principles generally accepted in the United
States for complete financial statements and should be read in conjunction with
the audited consolidated financial statements and notes thereto for the year
ended December 31, 2009 as filed with the Securities and Exchange Commission as
part of our Form 10-K/A. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation of the interim financial information have been
included. The results of operations for any interim period are not
necessarily indicative of the results of operations for the entire
year.
Organization
iTrackr,
Inc. (the “Company” or “iTrackr”) was formed on May 10, 2006 to develop, market
and commercialize a product and inventory search application through a social
networking site designed to leverage the best of Internet and Mobile
technologies. iTrackr has taken several markets, including eCommerce,
social networking and mobile content, and developed a platform that drives value
to consumers, retailers and advertising and marketing firms.
iTrackr
intends to introduce Internet and Mobile social merchandizing technology
platforms. Social merchandizing applies the variety of traditional marketing
practices to promote products and services to a community of individuals via
social networking technologies. iTrackr is similar to MySpace and
Facebook; however, our members’ interests are not in diary or event blogging,
but in the timely location of products and services which can be acquired and
consumed on a local level.
iTrackr
enables consumers to search and track merchandise, letting the consumer know
which retail locations in a local zip code are stocking the queried merchandise,
as well as the comparative prices. In addition, if the item is not in stock, the
consumer can request that iTrackr notify them via mobile text message or email
when the item is delivered to a local retailer and where that retailer is
located.
In 2009,
iTrackr purchased online customers support software technology from ChatStat for
approximately $95,000. iTrackr has launched its customer support chat
software which facilitates real-time customer support and expert advice, and
paid transactions.
On
January 12, 2010, the Company closed a share exchange transaction pursuant to
which it (i) became the 100% parent of iTrackr, Inc., a Florida corporation
(“iTrackr”), (ii) assumed the operations of iTrackr, and (iii) changed its name
from Must Haves, Inc. to iTrackr Systems, Inc.
Going
Concern
The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America, which
contemplate continuation of the Company as a going concern. Since inception, the
Company has been engaged primarily in product development. In the
course of funding development activities, the Company has sustained operating
losses since inception and has an accumulated deficit of $ 3,995,718 and
$3,092,454 at September 30, 2010 and December 31, 2009,
respectively. In addition, the Company has negative working capital
of $888,304 and $723,147 at September 30, 2010 and December 31, 2009,
respectively.
The
Company has and will continue to use significant capital to commercialize its
products. These factors raise substantial doubt about the ability of
the Company to continue as a going concern. In this regard,
management is proposing to raise any necessary additional funds not provided by
operations through loans or through additional sales of their common
stock. There is no assurance that the Company will be successful in
raising this additional capital or in achieving profitable
operations. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might result from this
uncertainty.
F-5
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
Note A-Organization and
Summary Of Significant Accounting Policies
Accounting
estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Cash and cash
equivalents
For
purposes of the statement of cash flows, the Company considers all highly liquid
debt instruments purchased with an original maturity of three months or less to
be cash equivalents. Cash and cash equivalents may at times exceed
federally insured limits. To minimize this risk, the Company places
its cash and cash equivalents with high credit quality
institutions.
Accounts
Receivable
Accounts
receivable are reported at the customers' outstanding balances. The
Company does not have a history of significant bad debt and has not recorded any
allowance for doubtful accounts. Interest is not accrued on overdue
accounts receivable. The Company evaluates receivables on a regular
basis for potential reserve.
Fixed
assets
Fixed
assets are stated at cost. Major renewals and improvements are
charged to the asset accounts while replacements, maintenance and repairs, which
do not improve or extend the lives of the respective assets, are
expensed. At the time fixed assets are retired or otherwise disposed
of, the asset and related accumulated depreciation accounts are relieved of the
applicable amounts. Gains or losses from retirements or sales are
credited or charged to income.
Depreciation
of fixed assets is provided on the straight-line method over the estimated
useful lives of the assets. The estimated useful lives
used are 3 years for computer equipment, office equipment and
software. Accelerated methods of depreciation of fixed assets are
used for income tax purposes.
Revenue recognition
policy
Revenue
for our services is recognized when all of the following criteria are satisfied:
(i) persuasive evidence of an arrangement exists; (ii) the price is
fixed or determinable; (iii) collectibility is reasonably assured; and
(iv) services have been performed.
Deferred
Revenue: Revenue is deferred for any undelivered elements and is recognized upon
product delivery or when the service has been performed.
Cost of
sales
Cost of
sales includes costs related to fulfillment, customer service, commissions,
service personnel, telecommunications and data center costs.
Sales and marketing
costs
Sales and
marketing expenses include advertising expenses, seminar expenses, commissions
and personnel expenses for sales and marketing. Marketing and
advertising costs to promote the Company's products and services are expensed in
the period incurred. For the three months ended September 30, 2010
and 2009, the Company incurred no marketing and advertising
expense. For the nine months ended September 30, 2010 and 2009, the
Company incurred $0 and $4,796, respectively in marketing and advertising
expense.
Fair Value of Financial
Instruments
The
Company’s financial instruments include cash and accounts receivable. The
carrying amount of these financial instruments has been estimated by management
to approximate fair value.
F-6
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
Note A-Organization and
Summary Of Significant Accounting Policies
Fair Value of Financial
Instruments (Continued)
“Disclosures
about Fair Value of Financial Instruments,” requires disclosures of information
regarding the fair value of certain financial instruments for which it is
practicable to estimate the value. For purpose of this disclosure, the fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a
forced sale of liquidation.
The
company accounts for certain assets and liabilities at fair value. The hierarchy
below lists three levels of fair value based on the extent to which inputs used
in measuring fair value are observable in the market. We categorize each of
our fair value measurements in one of these three levels based on the lowest
level input that is significant to the fair value measurement in its entirety.
These levels are:
Level
1—inputs are based upon unadjusted quoted prices for identical instruments
traded in active markets. We have no Level 1 instruments as of December 31,
2009.
Level
2—inputs are based upon quoted prices for similar instruments in active markets,
quoted prices for identical or similar instruments in markets that are not
active, and model-based valuation techniques (e.g. the Black-Scholes model) for
which all significant inputs are observable in the market or can be corroborated
by observable market data for substantially the full term of the assets or
liabilities. Where applicable, these models project future cash flows and
discount the future amounts to a present value using market-based observable
inputs including interest rate curves, foreign exchange rates, and forward and
spot prices for currencies and commodities. We have no Level 2 instruments as of
December 31, 2009.
Level
3—inputs are generally unobservable and typically reflect management’s estimates
of assumptions that market participants would use in pricing the asset or
liability. The fair values are therefore determined using model-based
techniques, including option pricing models and discounted cash flow models. We
have no Level 3 instruments as of December 31, 2009.
Research and
Development
Expenses
related to present and future products are expensed as incurred.
Income
Taxes
The
Company accounts for income taxes under the asset and liability method, which
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements. Under this method, deferred tax assets and liabilities
are determined based on differences between financial statements and tax basis
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. The effect of a change
in tax rates on deferred tax assets and liabilities is recognized in income in
the period that includes the enactment date.
The
Company records net deferred tax assets to the extent the Company believes these
assets will more likely than not be realized. In making such
determination, the Company considers all available positive and negative
evidence, including future reversals of existing taxable temporary differences,
projected future taxable income, tax planning strategies and recent financial
operations. A valuation allowance is established against deferred tax
assets that do not meet the criteria for recognition. In the event
the Company were to determine that it would be able to realize deferred income
tax assets in the future in excess of their net recorded amount, we would make
an adjustment to the valuation allowance which would reduce the provision for
income taxes.
The
Company follows the accounting guidance which provides that a tax benefit from
an uncertain tax position may be recognized when it is more likely than not that
the position will be sustained upon examination, including resolutions of any
related appeals or litigation processes, based on the technical
merits. Income tax provisions must meet a more-likely-than-not
recognition threshold at the effective date to be recognized initially and in
subsequent periods. Also included is guidance on measurement,
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition.
F-7
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
Note A-Organization and
Summary Of Significant Accounting Policies
Earnings (Loss) per common
share
The
Company reports both basic and diluted earnings (loss) per
share. Basic loss per share is calculated using the weighted average
number of common shares outstanding in the period. Diluted loss per
share includes potentially dilutive securities such as outstanding options and
warrants, using the “treasury stock” method and convertible securities using the
“if-converted” method.
Impairment of Long-Lived
Assets
Accounting
for the Impairment or Disposal of Long-Lived Assets requires that long-lived
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the historical cost-carrying value of an asset may not be
recovered. The Company assesses recoverability of the carrying value
of an asset by estimating the fair value of the asset. If the fair
value is less than the carrying value of the asset, an impairment loss is
recorded equal to the difference between the asset's carrying value and fair
value. The Company has never recognized an impairment
charge.
Stock-Based
Compensation
The
Company accounts for all compensation related to stock, options or warrants
using a fair value based method whereby compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period. We use the Black-Scholes
pricing model to calculate the fair value of options and warrants issued to both
employees and non-employees. In calculating this fair value, there
are certain assumptions that we use consisting of the expected life of the
option, risk-free interest rate, dividend yield, volatility and forfeiture
rate. The use of a different estimate for any one of these components
could have a material impact on the amount of calculated compensation
expense.
We
periodically issue common stock as compensation. Pursuant to ASC
505-50-30-6 issuances are valued using the market price of the stock or value of
the services rendered on the date of the related agreement, whichever is more
readily determinable. To date, common stock granted and issued for
services has been issued free of obligation to the recipient and for no
consideration. The shares are valued at the price non-employees are
willing to accept as payment in lieu of cash, which, historically, has been the
price per share of recent sales of unregistered securities or value of debt
converted to common stock.
Recent Accounting
Pronouncements
On July
1, 2009, the FASB officially launched the FASB ASC 105 - Generally Accepted
Accounting Principles, which established the FASB Accounting Standards
Codification (“the Codification”), as the single official source of
authoritative, nongovernmental, U.S. GAAP, in addition to guidance issued by the
Securities and Exchange Commission. The Codification is designed to
simplify U.S. GAAP into a single, topically ordered structure. All
guidance contained in the Codification carries an equal level of
authority. The Codification is effective for interim and annual
periods ending after September 15, 2009. Accordingly, the Company
refers to the Codification in respect of the appropriate accounting standards
throughout this document as “FASB ASC”. Implementation of the
Codification did not have any impact on the Company’s consolidated financial
statements.
On June
30, 2009, the FASB issued Accounting Standard Update (ASU) No. 2009-01 (Topic
105) – Generally Accepted Accounting Principles – amendments based on –
Statement of Financial Accounting Standards No. 168 –The FASB Accounting and
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles. Beginning with this Statement the FASB will no longer
issue new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts. Instead, it will issue Accounting
Standard Updates. This ASU includes FASB Statement No. 168 in its
entirety. While ASU’s will not be considered authoritative in their
own right, they will serve to update the Codification, provide the bases for
conclusions and changes in the Codification, and provide background information
about the guidance. The Codification modifies the GAAP hierarchy to
include only two levels of GAAP: authoritative and
nonauthoritative. ASU No. 2009-01 is effective for financial
statements issued for the interim and annual periods ending after September 15,
2009, and the Company does not expect any significant financial impact upon
adoption.
F-8
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
Note A-Organization and
Summary Of Significant Accounting Policies
Recent Accounting
Pronouncements (Continued)
In August
2009, the FASB issued ASU No. 2009-05 – Fair Value Measurements and Disclosures
(Topic 820) – Measuring Liabilities at Fair Value. This ASU clarifies
the fair market value measurement of liabilities. In circumstances
where a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using one or
more of the following techniques: a technique that uses quoted price of the
identical or a similar liability or liabilities when traded as an asset or
assets, or another valuation technique that is consistent with the principles of
Topic 820 such as an income or market approach. ASU No. 2009-05 was
effective upon issuance and it did not result in any significant financial
impact on the Company upon adoption.
In
September 2009, the FASB issued ASU No. 2009-12 – Fair Value Measurements and
Disclosures (Topic 820) – Investments in Certain Entities That Calculate Net
Asset Value per Share (or its equivalent). This ASU permits use of a
practical expedient, with appropriate disclosures, when measuring the fair value
of an alternative investment that does not have a readily determinable fair
value. ASU No. 2009-12 is effective for interim and annual periods
ending after December 15, 2009, with early application
permitted. Since the Company does not currently have any such
investments, it does not anticipate any impact on its financial
statements.
In
February 2010, the FASB issued ASU No. 2010-09, “Subsequent Events (Topic 855);
Amendments to Certain Recognition and Disclosure Requirements.” This
Statement addresses accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or available to be
issued. FASB ASC 855 requires disclosure of the date through which an
entity has evaluated subsequent events and the basis for that date, the date
issued or date available to be issued. The Company adopted this
Statement in the second quarter of 2009. As a result the date through
which the Company has evaluated subsequent events and the basis for that date
have been disclosed in Note K, Subsequent Events.
In April
2009, the FASB issued an update to FASB ASC 820, “Fair Value Measurements and
Disclosures,” related to providing guidance on when the volume and level of
activity for the asset or liability have significantly decreased and identifying
transactions that are not orderly. The update clarifies the
methodology to be used to determine fair value when there is no active market or
where the price inputs being used represent distressed sales. The
update also reaffirms the objective of fair value measurement, as stated in FASB
ASC 820, which is to reflect how much an asset would be sold in and orderly
transaction, and the need to use judgment to determine if a formerly active
market has become inactive, as well as to determine fair values when markets
have become inactive. The Company adopted this Statement in the
second quarter of 2009 without significant financial impact.
In April
2009, the FASB ASC 320, “Investments – Debt and Equity,” amends current
other-than-temporary guidance for debt securities through increased consistency
in the timing of impairment recognition and enhanced disclosures related to
credit and noncredit components impaired debt securities that are not expected
to be sold. Also, the Statement increases disclosures for both debt
and equity securities regarding expected cash flows, securities with unrealized
losses, and credit losses. The Company adopted this Statement in the
second quarter of 2009 without significant impact to our financial
statements.
In April
2009, the FASB issued an update to FASB ASC 825, “Financial Instruments,” to
require interim disclosures about the fair value of financial
instruments.” This update enhances consistency in financial reporting
by increasing the frequency of fair value disclosures of those assets and
liabilities falling within the scope of FASB ASC 825. The Company adopted this
update in the second quarter of 2009 without significant impact to the financial
statements.
In April
2009, the FASB issued an update to FASB ASC 805, “Business Combinations,” that
clarifies and amends FASB ASC 805, as it applies to all assets acquired and
liabilities assumed in a business combination that arise from
contingencies. This update addresses initial recognition and
measurement issues, subsequent measurement and accounting, and disclosures
regarding these assets and liabilities arising from contingencies in a business
combination. The Company adopted this Statement in the second quarter
of 2009 without significant impact to the financial statements.
F-9
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
Note A-Organization and
Summary Of Significant Accounting Policies
Recent Accounting
Pronouncements (Continued)
In
November 2008, EITF issued new guidance under FASB ASC 350, “Intangibles –
Goodwill and Other on accounting for defensive intangible
assets.” The new guidance applies to all acquired intangible assets
in which the acquirer does not intend to actively use the asset but intends to
hold (lock up) the asset to prevent its competitors from obtaining or using the
asset (a defensive asset). This guidance was adopted by the Company
in January 2009 without impact to the financial statements.
In May
2008, the FASB issued an update to FASB ASC 470, “Debt,” with respect to
accounting for convertible debt instruments that may be settled in cash upon
conversion including partial cash settlement. This update applies to
convertible debt instruments that, by their stated terms, may be settled in cash
(or other assets) upon conversion, including partial cash settlement, unless the
embedded conversion option is required to be separately accounted for as a
derivative under FASB ASC 815, “Derivatives and
Hedging.” Additionally, this update specifies that issuers of such
instruments should separately account for the liability and equity components in
a manner that will reflect the entity’s nonconvertible debt borrowing rate when
interest cost recognized in subsequent periods. The update is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. The Company does not
currently have any debt instruments for which this update would
apply. This update was adopted in January 2009 without significant
financial impact.
In
December 2007, the FASB issued an update to FASB ASC 805, “Business
Combinations” which establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the acquiree,
and the goodwill acquired. SFAS 141R also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business
combination. SFAS 141R is effective for the Company with respect to business
combinations for which the acquisition date is on or after January 1,
2009. The Company adopted this SFAS in the first quarter of
2009.
In
December 2007, the FASB issued an update to FASB ASC 810, “Consolidation,” which
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of consolidated
net income attributable to the parent and to the noncontrolling interest,
changes in a parent’s ownership interest, and the valuation of retained
noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160
also establishes disclosure requirements that clearly identify and distinguish
between the interests of the parent and the interests of noncontrolling
owners. This update is effective for the Company as of
January 1, 2009. The Company adopted this update in January 2009
without significant impact on the consolidated financial position, results of
operations, and disclosures.
NOTE B – FIXED
ASSETS
Fixed
assets consisted of the following:
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Computers
and office equipment
|
78,974 | 78,974 | ||||||
Software
|
$ | 127,237 | $ | 127,237 | ||||
Total
fixed assets
|
206,211 | 206,211 | ||||||
Accumulated
depreciation
|
(133,588 | ) | (106,856 | ) | ||||
Fixed
assets, net
|
$ | 72,623 | $ | 99,355 |
During
the three months ended September 30, 2010 and 2009, the Company recognized
$8,808 and $8,737, respectively in depreciation expense. During the
nine months ended September 30, 2010 and 2009, the Company recognized $26,731
and $26,582, respectively in depreciation expense.
F-10
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
NOTE C –
GOODWILL
On
December 10, 2009, Must Haves, Inc., iTrackr Acquisition, Inc. and iTrackr,
Inc. entered into an Agreement and Plan of Merger which closed January 12,
2010. On the Closing Date, iTrackr was merged with and into iTrackr
Acquisition, Inc. which is the surviving corporation and became a wholly-owned
subsidiary of Must Haves, Inc. As a result, the Company recognized
$92,697 of goodwill (See Note J – MERGER).
NOTE D – ACCOUNTS PAYABLE
AND ACCRUED EXPENSES
Accounts
payable and accrued expenses at September 30, 2010 consisted of $622,000 due to
John Rizzo, CEO for unpaid salary and health insurance, $18,412 of professional
services, $10,793 of accrued interest and $59,662 of trade
payables.
Accounts
payable and accrued expenses at December 31, 2009 consisted of $425,500 due to
John Rizzo, CEO for unpaid salary and health insurance, $25,000 of accrued legal
settlements, $15,126 of professional services, $102 of accrued interest, $40,000
remaining due to ChatStat for our technology purchase and $19,151 of trade
payables.
NOTE E –
NOTES
Promissory Notes –
3rd Party
During
the year ended December 31, 2009, the Company received $292,000 of convertible
promissory notes from third parties. The Company converted $1,300,000
of principle and $137,467 of accrued interest into 3,721,257 shares of
restricted common stock. As of December 31, 2009, the Company had
outstanding $25,102 related to 3rd party
notes, including $25,000 of principle and $102 of accrued interest.
During
the nine months ended September 30, 2010, the Company 1) received $17,000 in
exchange for two convertible notes that were also converted along with the
$25,102 of notes outstanding on December 31, 2009, 2) received a short term loan
for $25,000 that was repaid seven days later, and 2) received $25,000 in
exchange for a promissory note that accrues interest at nine (9%) per annum and
matures one year from issue on July 31, 2011 and is currently
outstanding. In total, during the nine months ended September 30,
2010, the Company received $67,000 of notes, repaid $25,000 and converted
$42,466, including $42,000 of principle and $466 of accrued interest into
121,332 shares of common stock.
Promissory Notes - Related
Party
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Note payable convertible into common stock (conversion price 50%
below the previous 10 day average closing price) upon default, bears
interest at 9% per year, Matures December
31, 2010
|
$ | 182,312 | $ | 151,312 |
During
the year ended December 31, 2009, the Company received $25,000 from Bluewater
Advisors and issued a new note for $151,312 or $135,000 of principle and $16,312
of accrued interest.
During
the nine months ended September 30, 2010, the Company received $31,000 from
Bluewater Advisors on the same terms as the note above.
Accrued
Interest
During
the three months ended September 30, 2010 and 2009, the Company recognized
$3,996 and $25,929, respectively related to all our outstanding notes
payable. During the nine months ended September 30, 2010 and 2009,
the Company recognized $11,157 and $76,941, respectively related to all our
outstanding notes payable. As of September 30, 2010, the Company had
outstanding $10,793 of accrued interest.
F-11
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
NOTE F – STOCKHOLDERS
EQUITY
Preferred
Stock
The
Company has authorized 10,000,000 shares of no par value preferred stock
available for issuance. No shares of preferred stock have been issued
as of September 30, 2010.
Stock Issued for Debt
Repayment
During
the year ended December 31, 2009, the Company converted $1,300,000 of principle
and $137,467 of accrued interest into 3,721,257 shares of restricted common
stock which were issued on April 28, 2010.
During
the nine months ended September 30, 2010, the Company converted $42,000 of
principle and $466 of accrued interest into 121,332 shares of restricted common
stock.
Stock Issued for
Cash
During
the nine months ended September 30, 2010, the Company received $50,000 as a
direct purchase and issued 166,666 shares of restricted common
stock.
During
the nine months ended September 30, 2010, the Company received $50,000 upon the
exercise of warrants to purchase 166,666 shares of restricted common stock which
was issued on July 30, 2010.
Stock Issued for
Services
During
the year ended December 31, 2009, the Company agreed to issue 150,000 shares of
restricted common stock in exchange for professional services rendered in 2009
and valued at $75,000. As of December 31, 2009 the stock had not been
issued and is recorded in the equity portion of our balance sheet as common
stock payable. The shares were issued on April 28, 2010.
During
the nine months ended September 30, 2010, the Company finalized a legal
settlement with Marc Falcone whereby in exchange for $108,000 or $0.30 per share
the Company issued 360,000 shares of restricted common stock.
During
the nine months ended September 30, 2010, the Company:
1) Issued
100,000 shares of restricted common stock for services valued at $30,000 or
$0.30 per share. The shares were issued for services to be provided
through the end of 2010 and are being recognized to expense
ratably.
2) Issued
125,000 shares valued at $37,500, or $0.30 per share. The shares were
issued for services performed during the quarter and have been fully
expensed.
3) Is
obligated to issue 125,000 shares which are valued at $37,500, or $0.30 per
share and included in common stock payable.
Stock issued for Accounts
Payable
During
the nine months ended September 30, 2010, the Company issued 101,000 shares of
restricted common stock at $0.32 per share to settle $32,000 of accounts
payable.
Stock Options (See footnote
I)
During
the year ended December 31, 2009, the Company canceled 1 million options due to
termination.
During
the nine months ended September 30, 2010, no option activity
occurred.
NOTE G -
COMMITMENTS
The
Company has no commitments as of September 30, 2010.
F-12
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
NOTE H –
WARRANTS
At
September 30, 2010, the Company had 2,905,333 Warrants outstanding entitling the
holder thereof the right to purchase one share of common stock for each warrant
held as follows:
Exercise
|
|||||||||
Issuance
|
Number of
|
Price Per
|
Expiration
|
||||||
Date
|
Warrants
|
Warrant
|
Date
|
||||||
3/25/2008
|
400,000 | $ | 0.10 |
12/31/10
|
|||||
3/25/2008
|
400,000 | $ | 0.10 |
12/31/10
|
|||||
1/19/2010
|
36,000 | $ | 0.75 |
1/19/15
|
|||||
1/19/2010
|
56,000 | $ | 0.75 |
1/19/15
|
|||||
2/1/2010
|
13,333 | $ | 0.75 |
2/1/15
|
|||||
2/5/2010
|
1,000,000 | $ | 0.40 |
12/31/15
|
|||||
3/1/2010
|
1,000,000 | $ | 0.10 |
10/31/11
|
|||||
Total
|
2,905,333 |
During
the year ended December 31, 2009, the Company canceled 250,000 warrants issued
to Marc Falcone as a result of the settlement agreement dated February 16,
2010. No warrants were issued or exercised in 2009.
During
the Nine Months ended September 30, 2010, the Company:
|
·
|
Issued
2,271,999 warrants to purchase one share of common stock for each warrant
issued.
|
|
·
|
Received
$50,000 upon the exercise of a warrant and issued 166,666 shares of
restricted common stock.
|
|
·
|
Received
$50,000 upon the sale of a warrant to an accredited
investor.
|
All the
warrants issued in through September 30, 2010 are classified as equity on our
balance sheet as they require physical settlement, contain no performance
contingencies, have a fixed exercise price and are exercisable by the holder at
any time through the expiration date of the warrant. Each warrants
fair value was calculated on the date of grant using the Black-Scholes Option
Pricing Model using the following inputs: volatility; 250% based on the Dow
Jones Internet Composite Index, risk free interest rate; 3.71%, spot price;
$0.15, and the exercise price attributable to that warrant. The fair
value of the warrants issued was $320,459 offset by the $50,000 warrant sale
resulting in $270,459 of net stock compensation expense.
NOTE I – 2007 LONG-TERM
EQUITY INCENTIVE PLAN
In
June 2007 the Board of Directors of the Company adopted the 2007 Long-Term
Equity Incentive Plan. The purpose of this Plan is to attract and retain
directors, officers and other employees of the Company and to provide to such
persons incentives and rewards for performance.
The
Company may issue each of the following under this Plan: Incentive Option,
Nonqualified Option, Stock Appreciation Right, Restricted Stock Award or
Performance Stock Award. The Plan was ratified at the 2007
shareholder’s meeting (the "Effective Date"). No Incentive Option,
Nonqualified Option, Stock Appreciation Right, Restricted Stock Award or
Performance Stock Award shall be granted pursuant to the Plan ten years after
the Effective Date. The total number of shares available under the
Plan is Fifteen Million (15,000,000). No Plan participant will be
granted the right, in the aggregate, for more than Two Million
(2,000,000) Common Shares during any calendar year.
Stock
Options
During
the year ended December 31, 2009 1 million options were canceled due termination
of the people to whom they were granted and their failure to exercise according
to the terms of the option grant.
During
the nine months ended September 30, 2010, the Company granted 250,000 fully
vested common stock options.
F-13
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
NOTE I – 2007 LONG-TERM
EQUITY INCENTIVE PLAN (Continued)
Stock Options
(Continued)
The
following table summarizes the Company's stock option activity for the nine
months ended September 30, 2010:
September 30, 2010
|
||||||||
Weighted Average
|
||||||||
Shares
|
Exercise Price
|
|||||||
Outstanding
at beginning of year
|
5,255,000 | $ | 0.18 | |||||
Granted
|
250,000 | 0.25 | ||||||
Forfeited
|
- | - | ||||||
Exercised
|
- | - | ||||||
Outstanding
at end of quarter
|
5,505,000 | $ | 0.18 | |||||
Options
exerciseable at March 31, 2010
|
5,505,000 |
The
following table summarizes information about the Company's stock options
outstanding at September 30, 2010:
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||
Number
|
Weighted
|
Weighted
|
Weighted
|
|||||||||||||||||
Range of
|
Outstanding
|
Average
|
Average
|
Average
|
||||||||||||||||
Exercise
|
At September 30,
|
Contractural
|
Exercise
|
Number
|
Exercise
|
|||||||||||||||
Prices
|
2010
|
Life (years)
|
Price
|
Outstanding
|
Price
|
|||||||||||||||
$ | 0.40 | 1,000,000 | - | $ | 0.40 | 1,000,000 | $ | 0.07 | ||||||||||||
0.25 | 1,250,000 | - | 0.25 | 1,250,000 | 0.06 | |||||||||||||||
0.10 | 2,375,000 | - | 0.10 | 2,375,000 | 0.04 | |||||||||||||||
0.05 | 880,000 | - | 0.05 | 880,000 | 0.01 | |||||||||||||||
Total
|
5,505,000 | - | $ | 0.18 | 5,505,000 | $ | 0.18 |
The
Company measures the fair market value of stock options granted using the
Black-Scholes Option Pricing Model on the date of grant and recognizes related
compensation expense ratably over the options vesting period for all future
grants.
During
the nine months ended September 30, 2010 and 2009, the Company recognized $0 and
$24,169, respectively, of compensation expense related to stock
options. From inception to date, the Company has recognized $178,844
of compensation expense related to stock options.
NOTE J –
MERGER
On
December 10, 2009, Must Haves, Inc., iTrackr Acquisition, Inc. and iTrackr,
Inc. entered into an Agreement and Plan of Merger which closed January 12,
2010. On the Closing Date, iTrackr was merged with and into iTrackr
Acquisition, Inc. which is the surviving corporation and became a wholly-owned
subsidiary of Must Haves, Inc. In accordance with the merger
agreement, iTrackr’s stockholder’s received restricted common stock at the rate
of 1:1 share for each of their 17,875,695 shares issued and outstanding in
exchange for 100 percent of the outstanding capital stock of
iTrackr. In total 19,169,333 shares are outstanding following the
closing of the merger.
The
Merger was accounted for as a “reverse merger,” as the stockholders of iTrackr,
Inc. owned a majority of the outstanding shares of Must Haves, Inc. common stock
immediately following the Merger. iTrackr, Inc. was deemed to be the
acquirer in the reverse merger. Consequently, the assets and
liabilities and the historical operations of iTrackr, Inc. prior to the Merger
are reflected in the financial statements and have been recorded at the
historical cost basis of iTrackr, Inc. Our financial statements,
after completion of the Merger, include the assets and liabilities of both Must
Haves, Inc. and iTrackr, Inc. Our historical operating statements
include the operations of iTrackr, Inc. from the Effective Date of the
Merger.
F-14
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
NOTE J – MERGER
(Continued)
Following
is a breakdown of the purchase price paid by iTrackr, Inc. for the
merger:
January 12, 2010
|
||||
Assets
acquired:
|
||||
Current
assets
|
$ | 1,657 | ||
Total
assets acquired
|
1,657 | |||
Stock
issued
|
65,182 | |||
Debt
assumed:
|
||||
Accounts
payable
|
29,172 | |||
Total
cost
|
94,354 | |||
GOODWILL
|
$ | 92,697 |
The
following unaudited financial information has been developed by application of
pro forma adjustments to the historical financial statements of iTrackr, Inc.
appearing elsewhere in this Current Report. The unaudited pro forma
information gives effect to the Merger which has been assumed to have occurred
on January 1, 2008 for purposes of the statement of
operations. The Company evaluated the existence of intangible assets
that should be recognized in business combinations, pursuant to ASC
805-20-25-4. No intangible assets were identified during the
evaluation.
The
unaudited pro forma financial information is presented for informational
purposes only and does not purport to represent what the results of operations
or financial position of iTrackr Systems, Inc. would have been had the
transactions described above actually occurred on the dates indicated, nor do
they purport to project the financial condition of iTrackr Systems, Inc. for any
future period or as of any future date. The unaudited pro forma
financial information should be read in conjunction with the iTrackr Systems,
Inc. financial statements and notes thereto included elsewhere in this Current
Report.
The
summarized assets and liabilities of the purchased company (Must Haves, Inc.) on
January 12, 2010 were as follows:
Cash
|
$ | 95 | ||
Other
current assets
|
1,562 | |||
$ | 1,657 | |||
Current
liabilities
|
$ | 29,172 | ||
Total
stockholders’ equity
|
(27,515 | ) | ||
$ | 1,657 |
F-15
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
NOTE J – MERGER
(Continued)
The
condensed pro forma results of operations for the year ended December 31, 2009
and 2008 are as follows:
iTrackr
Systems, Inc.
|
Unaudited
Pro Forma Statements of Operations
|
For the Year ended December 31, 2009 and
2008
|
Year Ended
|
Year Ended
|
|||||||||||||||||||||||
December 31, 2009
|
December 31, 2008
|
|||||||||||||||||||||||
Must
|
Must
|
|||||||||||||||||||||||
iTrackr, Inc.
|
Haves, Inc.
|
iTrackr, Inc.
|
Haves, Inc.
|
|||||||||||||||||||||
Actual
|
Actual
|
Pro
Forma
|
Actual
|
Actual
|
Pro
Forma
|
|||||||||||||||||||
REVENUES
|
||||||||||||||||||||||||
Sales
|
$ | 7,493 | $ | 130 | $ | 7,623 | $ | 4,419 | $ | 3,757 | $ | 8,176 | ||||||||||||
Cost
of revenue
|
- | - | - | - | 1,018 | 1,018 | ||||||||||||||||||
Gross
profit
|
7,493 | 130 | 7,623 | 4,419 | 2,739 | 7,158 | ||||||||||||||||||
OPERATING
EXPENSES
|
610,973 | 31,997 | 642,970 | 1,274,718 | 51,765 | 1,326,483 | ||||||||||||||||||
Income
(loss) from operations
|
(603,480 | ) | (31,867 | ) | (635,347 | ) | (1,270,299 | ) | (49,026 | ) | (1,319,325 | ) | ||||||||||||
OTHER
INCOME AND EXPENSES
|
||||||||||||||||||||||||
Interest
expense
|
(90,462 | ) | (2,312 | ) | (92,774 | ) | (58,574 | ) | (2,335 | ) | (60,909 | ) | ||||||||||||
Other
expense
|
(163,000 | ) | - | (163,000 | ) | - | - | - | ||||||||||||||||
Total
other income and expenses
|
(253,462 | ) | (2,312 | ) | (255,774 | ) | (58,574 | ) | (2,335 | ) | (60,909 | ) | ||||||||||||
NET
INCOME (LOSS)
|
$ | (856,942 | ) | $ | (34,179 | ) | $ | (891,121 | ) | $ | (1,328,873 | ) | $ | (51,361 | ) | $ | (1,380,234 | ) | ||||||
Weighted
average shares outstanding
|
||||||||||||||||||||||||
Basic
and diluted
|
14,632,513 | 14,632,513 | 13,934,023 | 13,934,023 | ||||||||||||||||||||
Shares
to be issued for acquisition
|
1,303,638 | 1,303,638 | 1) | 1,303,638 | 1,303,638 | |||||||||||||||||||
Total
Weighted average common shares outstanding
|
15,936,151 | 15,237,661 | ||||||||||||||||||||||
Net
(loss) per common share (basic and diluted)
|
$ | (0.06 | ) | $ | (0.09 | ) |
1)
Represents Must Haves, Inc. pre merger shares outstanding.
F-16
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
NOTE J – MERGER
(Continued)
The
condensed pro forma balance sheet as of December 31, 2009 is as
follows:
iTrackr
Systems, Inc.
|
Unaudited
Pro Forma Balance Sheet
|
As of December 31,
2009
|
Must
|
||||||||||||||||
iTrackr, Inc.
|
Haves, Inc.
|
Merger
|
||||||||||||||
Actual
|
Actual
|
Adjustments
|
Pro Forma
|
|||||||||||||
ASSETS
|
||||||||||||||||
CURRENT
ASSETS
|
||||||||||||||||
Cash
|
$ | 3,223 | $ | 95 | $ | - | $ | 3,318 | ||||||||
Accounts
receivable, net
|
5,786 | 1,562 | - | 7,348 | ||||||||||||
TOTAL
CURRENT ASSETS
|
9,009 | 1,657 | - | 10,666 | ||||||||||||
Fixed
assets
|
||||||||||||||||
Cost
|
206,211 | - | - | 206,211 | ||||||||||||
Accumulated
Depreciation
|
(106,856 | ) | - | - | (106,856 | ) | ||||||||||
Net
|
99,355 | - | - | 99,355 | ||||||||||||
Goodwill
|
92,697 | 92,697 | ||||||||||||||
TOTAL
ASSETS
|
$ | 108,364 | $ | 1,657 | $ | 92,697 | $ | 202,718 | ||||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||||||||||
CURRENT
LIABILITIES
|
||||||||||||||||
Accounts
payable and accrued expenses
|
$ | 524,777 | $ | 29,172 | $ | - | $ | 553,949 | ||||||||
Accrued
interest payable
|
102 | - | - | 102 | ||||||||||||
Convertible
promissory notes
|
25,000 | - | - | 25,000 | ||||||||||||
Shareholder
loans
|
151,312 | - | - | 151,312 | ||||||||||||
TOTAL
CURRENT LIABILITIES
|
701,191 | 29,172 | - | 730,363 | ||||||||||||
COMMITMENT
|
- | - | - | - | ||||||||||||
STOCKHOLDERS'
EQUITY (DEFICIT)
|
||||||||||||||||
Common
stock payable
|
1,451,979 | - | - | 1,451,979 | ||||||||||||
Common
stock
|
980,148 | 189,416 | 1) | (124,234 | ) | 1,045,330 | ||||||||||
Accumulated
earnings (deficit)
|
(3,024,954 | ) | (216,931 | ) | 216,931 | (3,024,954 | ) | |||||||||
TOTAL
STOCKHOLDERS' EQUITY (DEFICIT)
|
(592,827 | ) | (27,515 | ) | 92,697 | (527,645 | ) | |||||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
$ | 108,364 | $ | 1,657 | $ | 92,697 | $ | 202,718 |
1)
|
Reverse
merger requirement to treat Must Haves, Inc. as the puchased company
requires the recognition of the issuance of 1,303,638 shares of already
outstanding shares of Must Haves, Inc. as newly issued adjusted down by
$189,416 which represents Must Haves historical common stock
balance.
|
F-17
ITRACKR
SYSTEMS, INC
|
(A
Development Stage Company) (formerly Must Haves, Inc.)
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
NOTE J – LEGAL
PROCEEDINGS
As of
December 31, 2009, the Company was party to a lawsuit brought by Marc
Falcone. In this action, Mr. Falcone asserted numerous claims against
certain defendants arising out of his former service to iTrackr, Inc. as a
contracted consultant. The Company asserted numerous defenses and
affirmative defenses, including, but not limited to, the fact that Falcone
failed to fulfill his obligations under the agreement. On February
16, 2010, the Company and Mr. Falcone executed a settlement agreement without
either side admitting fault. The terms of the settlement agreement
call for the payment of $25,000 and the issuance of 360,000 shares of common
stock in exchange for a full release of all claims. As of September
30, 2010, the Company has paid all monies and issued all stock related to this
settlement.
NOTE K – SUBSEQUENT
EVENTS
Pursuant
to FASB Accounting Standards Codification 855, Subsequent Events, Including ASC
855-10-S99-2, the Company evaluated subsequent events through December 17,
2010.
Our
Chairman and CEO, John Rizzo has loaned the Company $10,500 pursuant to the
terms of Note E, NOTES above.
We have
entered into a licensing agreement with RespondQ as described under Management’s
Discussion and Analysis of Financial Condition and Results of Operations;
Results of Operations above.
F-18
iTrackr,
Inc.
(Restated)
Financial Statements and Footnotes
For the
Years Ended
December
31, 2009 and 2008
F-19
TABLE OF
CONTENTS
Page
|
|
Report
of Independent Registered Public Accountant
|
F-21
|
Balance
Sheets as of December 31, 2009 (Restated) and December 31,
2008
|
F-22
|
Statements
of Operations for the Years Ended
|
|
December
31, 2009 (Restated)and 2008 and the Period May 10, 2006
|
|
(Date
of Inception) to December 31, 2009 (Restated)
|
F-23
|
Statements
of Stockholders Equity for the Years Ended
|
|
December
31, 2009 (Restated) and 2008 and the Period May 10, 2006
|
|
(Inception)
to December 31, 2009 (Restated)
|
F-24
|
Statements
of Cash Flows for the Years Ended December 31, 2009
(Restated)
|
|
and
2008 (Restated) and the Period May 10, 2006 (Date of Inception)
to
|
|
December
31, 2009 (Restated)
|
F-25
|
Notes
to Financial Statements
|
F-27-41
|
F-20
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors
iTrackr,
Inc.
We have
audited the accompanying balance sheets of iTrackr, Inc. (the “Company”), as of
December 31, 2009 and 2008 and the related statements of operations,
stockholders’ equity, and cash flows for the years ended December 31, 2009 and
2008. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits. We did not audit the
financial statements of iTrackr, Inc. (A Development Stage Company) for the
period May 10, 2006 (Date of Inception) to December 31, 2007.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our
opinion, based on our audits, the financial statements referred to above present
fairly, in all material respects, the financial position of iTrackr, Inc. as of
December 31, 2009 and 2008 and the related statements of operations,
stockholders’ equity, and cash flows for the years ended December 31, 2009 and
2008, in conformity with accounting principles generally accepted in the United
States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. However, the Company has suffered recurring
losses from operations that raises substantial doubt about its ability to
continue as a going concern. Management plans in regards to these matters are
described in Note A. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/
Bedinger & Company
|
Certified
Public Accountants
|
Concord,
California
|
October
1,
2010
|
F-21
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Balance
Sheets
|
December 31,
|
||||||||
2009
|
2008
|
|||||||
(Restated)
|
||||||||
Assets
|
||||||||
Current Assets
|
||||||||
Cash
|
$ | 3,223 | $ | 183,144 | ||||
Accounts
receivable
|
5,786 | - | ||||||
Total
Current Assets
|
9,009 | 183,144 | ||||||
Fixed
assets (Note B)
|
206,211 | 107,357 | ||||||
Accumulated
depreciation
|
(106,856 | ) | (73,347 | ) | ||||
Net
fixed assets
|
99,355 | 34,010 | ||||||
Other
assets (Note C)
|
- | 138,000 | ||||||
Total
Assets
|
$ | 108,364 | $ | 355,154 | ||||
Liabilities and Stockholder's
(Deficit)
|
||||||||
Current Liabilities
|
||||||||
Accounts
payable & accrued expenses (Note D)
|
$ | 524,777 | $ | 356,755 | ||||
Accrued
interest payable
|
102 | 60,419 | ||||||
Convertible
promissory notes (Note E)
|
25,000 | 1,033,000 | ||||||
Promissory
notes - related party (Note E)
|
151,312 | 110,000 | ||||||
Total
Current Liabilities
|
701,191 | 1,560,174 | ||||||
Total
Liabilities
|
701,191 | 1,560,174 | ||||||
Stockholder's (Deficit)(Note
F)
|
||||||||
Common
stock, par value $.001, 110,000,000 shares authorized; issued and
outstanding 13,990,413 at December 31, 2009 and 2008.
|
13,991 | 13,991 | ||||||
Common
stock payable
|
1,519,479 | 7,013 | ||||||
Additional
paid-in capital
|
966,157 | 941,988 | ||||||
Deficit
accumulated during the development stage
|
(3,092,454 | ) | (2,168,012 | ) | ||||
Total
Stockholder's (Deficit)
|
(592,827 | ) | (1,205,020 | ) | ||||
Total
Liabilities and Stockholder's (Deficit)
|
$ | 108,364 | $ | 355,154 |
SEE NOTES
TO FINANCIAL STATEMENTS
F-22
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Statements
of Operation
|
For the Years Ended December 31, 2009 (Restated)
and 2008 and the Period May 10, 2006 (Inception) to December 31, 2009
(Restated)
|
May 10, 2006
|
||||||||||||
Year Ended December 31,
|
(Inception) to
|
|||||||||||
2009
|
2008
|
December 31, 2009
|
||||||||||
(Restated)
|
(Restated)
|
|||||||||||
Revenue
|
$ | 7,493 | $ | 4,419 | $ | 29,330 | ||||||
Operating
Expenses
|
||||||||||||
Personnel
|
390,984 | 573,910 | 1,326,796 | |||||||||
Professional
fees
|
84,345 | 384,942 | 817,266 | |||||||||
Stock
compensation
|
99,169 | 206,936 | 670,857 | |||||||||
Travel
and entertainment
|
- | 9,514 | 39,547 | |||||||||
Facilities
|
- | 17,550 | 30,238 | |||||||||
Communications
|
9,089 | 4,779 | 19,102 | |||||||||
Marketing
|
4,796 | 19,523 | 49,865 | |||||||||
Website
|
41,286 | 18,186 | 126,495 | |||||||||
Depreciation
|
33,508 | 34,947 | 106,856 | |||||||||
General
|
15,296 | 4,431 | 29,278 | |||||||||
Total
operating expenses
|
678,473 | 1,274,718 | 3,216,300 | |||||||||
Loss
from operations
|
(670,980 | ) | (1,270,299 | ) | (3,186,970 | ) | ||||||
Other
Income and (Expense)
|
||||||||||||
Interest
expense
|
(90,462 | ) | (58,574 | ) | (176,217 | ) | ||||||
Other
expense
|
(163,000 | ) | - | (173,000 | ) | |||||||
Other
income
|
- | - | 443,733 | |||||||||
Total
other income and (expense)
|
(253,462 | ) | (58,574 | ) | 94,516 | |||||||
NET
LOSS
|
(924,442 | ) | (1,328,873 | ) | (3,092,454 | ) | ||||||
Net
loss per common share basic and diluted
|
$ | (0.063 | ) | $ | (0.095 | ) | ||||||
Weighted
average common shares outstanding basic and diluted
|
14,632,513 | 13,934,023 | ||||||||||
The
average shares listed below were not included in the computation of
diluted losses per share because to do so would have been antidilutive for
the periods presented:
|
||||||||||||
Warrants
|
1,050,000 | 741,233 | ||||||||||
Stock
options
|
5,255,000 | 6,509,795 | ||||||||||
Convertible
promissory notes
|
3,242 | 1,305,843 |
SEE
NOTES TO FINANCIAL STATEMENTS
F-23
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Statement
of Stockholder's Equity (Deficit)
|
For the Years Ended December 31, 2009 (Restated)
and 2008
|
Deficit
|
||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||
Common Stock
|
Additional
|
during the
|
Total
|
|||||||||||||||||||||
Number of
|
Paid-in
|
Developmental
|
Stockholders'
|
|||||||||||||||||||||
Shares
|
Amount
|
Payable
|
Capital
|
Stage
|
(Deficit)
|
|||||||||||||||||||
BALANCES
December 31, 2007
|
$ | 13,790,413 | $ | 13,791 | $ | - | $ | 742,265 | $ | (839,139 | ) | $ | (83,083 | ) | ||||||||||
Stock
issued for services
|
200,000 | 200 | 7,013 | 99,800 | 107,013 | |||||||||||||||||||
Stock
options expense
|
77,423 | 77,423 | ||||||||||||||||||||||
Warrants
issued for services
|
22,500 | 22,500 | ||||||||||||||||||||||
Net
loss
|
$ | (1,328,873 | ) | (1,328,873 | ) | |||||||||||||||||||
BALANCES
December 31, 2008
|
13,990,413 | $ | 13,991 | $ | 7,013 | $ | 941,988 | $ | (2,168,012 | ) | $ | (1,205,020 | ) | |||||||||||
Stock
to be issued for conversion of debt
|
1,437,466 | 1,437,466 | ||||||||||||||||||||||
Stock
issued for services
|
75,000 | 75,000 | ||||||||||||||||||||||
Stock
options expense
|
24,169 | 24,169 | ||||||||||||||||||||||
Net
loss
|
$ | (924,442 | ) | (924,442 | ) | |||||||||||||||||||
BALANCES
December 31, 2009 (Restated)
|
13,990,413 | $ | 13,991 | $ | 1,519,479 | $ | 966,157 | $ | (3,092,454 | ) | $ | (592,827 | ) |
SEE
NOTES TO FINANCIAL STATEMENTS
F-24
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Statements
of Cash Flows (Restated)
|
For the Years Ended December 31, 2009 and 2008 and
the Period May 10, 2006 (Inception) to December 31,
2009
|
May 10, 2006
|
||||||||||||
Year Ended December 31,
|
(Inception) to
December 31,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
(Restated)
|
(Restated)
|
(Restated)
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net
Earnings <loss>
|
$ | (924,442 | ) | $ | (1,328,873 | ) | $ | (3,092,454 | ) | |||
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
||||||||||||
Depreciation
|
33,508 | 34,947 | 106,855 | |||||||||
Asset
impairment
|
138,000 | - | 138,000 | |||||||||
Compensation
expense on fair market value of options issued
|
24,169 | 77,423 | 178,844 | |||||||||
Compensation
expense on fair value of warrants issued
|
- | 22,500 | 22,500 | |||||||||
Common
stock issued for services
|
75,000 | 107,013 | 469,513 | |||||||||
Common
stock issued for accrued interest
|
137,467 | - | 162,771 | |||||||||
Changes
in operating accounts:
|
||||||||||||
Accounts
receivable
|
(5,786 | ) | - | (5,786 | ) | |||||||
Prepaid
expenses
|
- | 50,000 | - | |||||||||
Other
assets
|
- | (137,250 | ) | (138,000 | ) | |||||||
Accounts
payable and accrued expenses
|
107,705 | 379,690 | 524,879 | |||||||||
CASH
PROVIDED (USED) BY OPERATING ACTIVITIES
|
(414,379 | ) | (794,550 | ) | (1,632,878 | ) | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Acquisition
of furniture and equipment
|
(98,854 | ) | (5,485 | ) | (206,211 | ) | ||||||
CASH
PROVIDED (USED) BY INVESTING ACTIVITIES
|
(98,854 | ) | (5,485 | ) | (206,211 | ) | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Repayment
of related party notes
|
- | (85,750 | ) | (85,750 | ) | |||||||
Proceeds
from promissory notes
|
292,000 | 773,000 | 1,691,000 | |||||||||
Proceeds
from related party notes
|
41,312 | 195,750 | 237,062 | |||||||||
CASH
PROVIDED (USED) BY FINANCING ACTIVITIES
|
333,312 | 883,000 | 1,842,312 | |||||||||
NET
INCREASE (DECREASE) IN CASH
|
(179,921 | ) | 82,965 | 3,223 | ||||||||
CASH,
beginning of period
|
183,144 | 100,179 | - | |||||||||
CASH,
end of period
|
$ | 3,223 | $ | 183,144 | $ | 3,223 | ||||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||||||
CASH
PAID DURING THE YEAR FOR:
|
||||||||||||
Taxes
paid
|
$ | - | $ | - | $ | - | ||||||
Interest
paid
|
$ | - | $ | - | $ | - | ||||||
NON-CASH
OPERATING ACTIVITIES:
|
||||||||||||
Value
of Common Stock issued in exchange for services
|
$ | 75,000 | $ | 107,013 | $ | 469,513 | ||||||
Value
of Common Stock issued for accrued interest
|
$ | 137,467 | $ | - | $ | 162,771 | ||||||
Value
of Common Stock issued for debt principle
|
$ | 1,300,000 | $ | - | $ | 1,666,000 |
SEE
NOTES TO FINANCIAL STATEMENTS
F-25
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Statements
of Cash Flows (Restated)
|
For
the Years Ended December 31, 2009 and 2008 and the Period May 10, 2006
(Inception) to December 31,
2009
|
Year Ended December 31,
|
May 10, 2006
(Inception) to
December 31,
|
|||||||||||
2009
|
2008
|
2009
|
||||||||||
(Restated)
|
(Restated)
|
(Restated)
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net
Earnings <loss>
|
$ | (924,442 | ) | $ | (1,328,873 | ) | $ | (3,092,454 | ) | |||
Adjustments
to reconcile net loss
|
||||||||||||
to
net cash used by operating activities:
|
||||||||||||
Depreciation
|
33,508 | 34,947 | 106,855 | |||||||||
Asset
impairment
|
138,000 | - | 138,000 | |||||||||
Compensation
expense on fair market value of options issued
|
24,169 | 77,423 | 178,844 | |||||||||
Compensation
expense on fair value of warrants issued
|
- | 22,500 | 22,500 | |||||||||
Common
stock issued for services
|
75,000 | 107,013 | 469,513 | |||||||||
Common
stock issued for accrued interest
|
137,467 | - | 162,771 | |||||||||
Changes
in operating accounts:
|
||||||||||||
Accounts
receivable
|
(5,786 | ) | - | (5,786 | ) | |||||||
Prepaid
expenses
|
- | 50,000 | - | |||||||||
Other
assets
|
- | (137,250 | ) | (138,000 | ) | |||||||
Accounts
payable and accrued expenses
|
107,705 | 379,690 | 524,879 | |||||||||
CASH
PROVIDED (USED) BY OPERATING ACTIVITIES
|
(414,379 | ) | (794,550 | ) | (1,632,878 | ) | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Acquisition
of furniture and equipment
|
(98,854 | ) | (5,485 | ) | (206,211 | ) | ||||||
CASH
PROVIDED (USED) BY INVESTING ACTIVITIES
|
(98,854 | ) | (5,485 | ) | (206,211 | ) | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Repayment
of related party notes
|
- | (85,750 | ) | (85,750 | ) | |||||||
Proceeds
from promissory notes
|
292,000 | 773,000 | 1,691,000 | |||||||||
Proceeds
from related party notes
|
41,312 | 195,750 | 237,062 | |||||||||
CASH
PROVIDED (USED) BY FINANCING ACTIVITIES
|
333,312 | 883,000 | 1,842,312 | |||||||||
NET
INCREASE (DECREASE) IN CASH
|
(179,921 | ) | 82,965 | 3,223 | ||||||||
CASH,
beginning of period
|
183,144 | 100,179 | - | |||||||||
CASH,
end of period
|
$ | 3,223 | $ | 183,144 | $ | 3,223 | ||||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||||||
CASH
PAID DURING THE YEAR FOR:
|
||||||||||||
Taxes
paid
|
$ | - | $ | - | $ | - | ||||||
Interest
paid
|
$ | - | $ | - | $ | - | ||||||
NON-CASH
OPERATING ACTIVITIES:
|
||||||||||||
Value
of Common Stock issued in exchange for services
|
$ | 75,000 | $ | 107,013 | $ | 469,513 | ||||||
Value
of Common Stock issued for accrued interest
|
$ | 137,467 | $ | - | $ | 162,771 | ||||||
Value
of Common Stock issued for debt principle
|
$ | 1,300,000 | $ | - | $ | 1,666,000 |
SEE
NOTES TO FINANCIAL STATEMENTS
F-26
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
Note A-Organization and
Summary Of Significant Accounting Policies
Organization
iTrackr,
Inc. (the “Company” or “iTrackr”) was formed on May 10, 2006 to develop, market
and commercialize a product and inventory search application through a social
networking site designed to leverage the best of Internet and Mobile
technologies. iTrackr has taken several markets, including eCommerce,
social networking and mobile content, and developed a platform that drives value
to consumers, retailers and advertising and marketing firms.
iTrackr
intends to introduce Internet and Mobile social merchandizing technology
platforms. Social merchandizing applies the variety of traditional marketing
practices to promote products and services to a community of individuals via
social networking technologies. iTrackr is similar to MySpace and
Facebook; however, our members’ interests are not in diary or event blogging,
but in the timely location of products and services which can be acquired and
consumed on a local level.
iTrackr
enables consumers to search and track merchandise, letting the consumer know
which retail locations in a local zip code are stocking the queried merchandise,
as well as the comparative prices. In addition, if the item is not in stock, the
consumer can request that iTrackr notify them via mobile text message or email
when the item is delivered to a local retailer and where that retailer is
located.
In 2009,
iTrackr purchased online customers support software technology from ChatStat for
approximately $95,000. iTrackr has launched its customer support chat
software which facilitates real-time customer support and expert advice, and
paid transactions.
Going
Concern
The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America, which
contemplate continuation of the Company as a going concern. Since inception, the
Company has been engaged primarily in product development. In the
course of funding development activities, the Company has sustained operating
losses since inception and has an accumulated deficit of $3,092,954 and
$2,168,012 at December 31, 2009 and 2008, respectively. In addition,
the Company has negative working capital of $667,182 and $1,377,030 at December
31, 2009 and 2008, respectively.
The
Company has and will continue to use significant capital to commercialize its
products. These factors raise substantial doubt about the ability of
the Company to continue as a going concern. In this regard,
management is proposing to raise any necessary additional funds not provided by
operations through loans or through additional sales of their common
stock. There is no assurance that the Company will be successful in
raising this additional capital or in achieving profitable
operations. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might result from this
uncertainty
Accounting
estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Cash and cash
equivalents
For
purposes of the statement of cash flows, the Company considers all highly liquid
debt instruments purchased with an original maturity of three months or less to
be cash equivalents. Cash and cash equivalents may at times exceed
federally insured limits. To minimize this risk, the Company places
its cash and cash equivalents with high credit quality
institutions.
F-27
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
Note A-Organization and
Summary Of Significant Accounting Policies
Accounts
Receivable
Accounts
receivable are reported at the customers' outstanding balances. The
Company does not have a history of significant bad debt and has not recorded any
allowance for doubtful accounts. Interest is not accrued on overdue
accounts receivable. The Company evaluates receivables on a regular
basis for potential reserve.
Inventories
Inventories
are valued at the lower of cost or market. Cost is determined on a first-in,
first-out method. Management performs periodic assessments to
determine the existence of obsolete, slow moving and non-salable inventories,
and records necessary provisions to reduce such inventories to net realizable
value.
Fixed
assets
Fixed
assets are stated at cost. Major renewals and improvements are
charged to the asset accounts while replacements, maintenance and repairs, which
do not improve or extend the lives of the respective assets, are
expensed. At the time fixed assets are retired or otherwise disposed
of, the asset and related accumulated depreciation accounts are relieved of the
applicable amounts. Gains or losses from retirements or sales are
credited or charged to income.
Depreciation
of fixed assets is provided on the straight-line method over the estimated
useful lives of the assets. Accelerated methods of depreciation of
fixed assets are used for income tax purposes.
Revenue recognition
policy
Revenue
for our services is recognized when all of the following criteria are satisfied:
(i) persuasive evidence of an arrangement exists; (ii) the price is
fixed or determinable; (iii) collectibility is reasonably assured; and
(iv) services have been performed.
Deferred
Revenue: Revenue is deferred for any undelivered elements and is recognized upon
product delivery or when the service has been performed.
Cost of
sales
Cost of
sales includes costs related to fulfillment, customer service, commissions,
service personnel, telecommunications and data center costs.
Sales and marketing
costs
Sales and
marketing expenses include advertising expenses, seminar expenses, commissions
and personnel expenses for sales and marketing. Marketing and
advertising costs to promote the Company's products and services are expensed in
the period incurred. For the years ended December 31, 2009 and 2008,
the Company incurred approximately $4,796 and $19,523, respectively in marketing
and advertising expense.
Earnings (Loss) per common
share
The
Company reports both basic and diluted earnings (loss) per
share. Basic loss per share is calculated using the weighted average
number of common shares outstanding in the period. Diluted loss per
share includes potentially dilutive securities such as outstanding options and
warrants, using the “treasury stock” method and convertible securities using the
“if-converted” method.
Income
Taxes
The
Company accounts for income taxes under the asset and liability method, which
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements. Under this method, deferred tax assets and liabilities
are determined based on differences between financial statements and tax basis
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. The effect of a change
in tax rates on deferred tax assets and liabilities is recognized in income in
the period that includes the enactment date.
F-28
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
Note A-Organization and
Summary Of Significant Accounting Policies
Income Taxes
(Continued)
The
Company records net deferred tax assets to the extent the Company believes these
assets will more likely than not be realized. In making such
determination, the Company considers all available positive and negative
evidence, including future reversals of existing taxable temporary differences,
projected future taxable income, tax planning strategies and recent financial
operations. A valuation allowance is established against deferred tax
assets that do not meet the criteria for recognition. In the event
the Company were to determine that it would be able to realize deferred income
tax assets in the future in excess of their net recorded amount, we would make
an adjustment to the valuation allowance which would reduce the provision for
income taxes.
The
Company follows the accounting guidance which provides that a tax benefit from
an uncertain tax position may be recognized when it is more likely than not that
the position will be sustained upon examination, including resolutions of any
related appeals or litigation processes, based on the technical
merits. Income tax provisions must meet a more-likely-than-not
recognition threshold at the effective date to be recognized initially and in
subsequent periods. Also included is guidance on measurement,
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition.
Impairment of Long-Lived
Assets
Accounting
for the Impairment or Disposal of Long-Lived Assets requires that long-lived
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the historical cost-carrying value of an asset may not be
recovered. The Company assesses recoverability of the carrying value
of an asset by estimating the fair value of the asset. If the fair
value is less than the carrying value of the asset, an impairment loss is
recorded equal to the difference between the asset's carrying value and fair
value. The Company has never recognized an impairment
charge.
Stock-Based
Compensation
The
Company accounts for all compensation related to stock, options or warrants
using a fair value based method whereby compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period. We use the Black-Scholes
pricing model to calculate the fair value of options and warrants issued to both
employees and non-employees. In calculating this fair value, there
are certain assumptions that we use consisting of the expected life of the
option, risk-free interest rate, dividend yield, volatility and forfeiture
rate. The use of a different estimate for any one of these components
could have a material impact on the amount of calculated compensation
expense.
We
periodically issue common stock as compensation. Pursuant to ASC
505-50-30-6 issuances are valued using the market price of the stock or value of
the services rendered on the date of the related agreement, whichever is more
readily determinable. To date, common stock granted and issued for
services has been issued free of obligation to the recipient and for no
consideration. The shares are valued at the price non-employees are
willing to accept as payment in lieu of cash, which, historically, has been the
price per share of recent sales of unregistered securities or value of debt
converted to common stock.
Recent Accounting
Pronouncements
On July
1, 2009, the FASB officially launched the FASB ASC 105 - Generally Accepted
Accounting Principles, which established the FASB Accounting Standards
Codification (“the Codification”), as the single official source of
authoritative, nongovernmental, U.S. GAAP, in addition to guidance issued by the
Securities and Exchange Commission. The Codification is designed to
simplify U.S. GAAP into a single, topically ordered structure. All
guidance contained in the Codification carries an equal level of
authority. The Codification is effective for interim and annual
periods ending after September 15, 2009. Accordingly, the Company
refers to the Codification in respect of the appropriate accounting standards
throughout this document as “FASB ASC”. Implementation of the
Codification did not have any impact on the Company’s consolidated financial
statements.
F-29
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
Note A-Organization and
Summary Of Significant Accounting Policies
Recent Accounting
Pronouncements (Continued)
On June
30, 2009, the FASB issued Accounting Standard Update (ASU) No. 2009-01 (Topic
105) – Generally Accepted Accounting Principles – amendments based on –
Statement of Financial Accounting Standards No. 168 –The FASB Accounting and
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles. Beginning with this Statement the FASB will no longer
issue new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts. Instead, it will issue Accounting
Standard Updates. This ASU includes FASB Statement No. 168 in its
entirety. While ASU’s will not be considered authoritative in their
own right, they will serve to update the Codification, provide the bases for
conclusions and changes in the Codification, and provide background information
about the guidance. The Codification modifies the GAAP hierarchy to
include only two levels of GAAP: authoritative and
nonauthoritative. ASU No. 2009-01 is effective for financial
statements issued for the interim and annual periods ending after September 15,
2009, and the Company does not expect any significant financial impact upon
adoption.
In August
2009, the FASB issued ASU No. 2009-05 – Fair Value Measurements and Disclosures
(Topic 820) – Measuring Liabilities at Fair Value. This ASU clarifies
the fair market value measurement of liabilities. In circumstances
where a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using one or
more of the following techniques: a technique that uses quoted price of the
identical or a similar liability or liabilities when traded as an asset or
assets, or another valuation technique that is consistent with the principles of
Topic 820 such as an income or market approach. ASU No. 2009-05 was
effective upon issuance and it did not result in any significant financial
impact on the Company upon adoption.
In
September 2009, the FASB issued ASU No. 2009-12 – Fair Value Measurements and
Disclosures (Topic 820) – Investments in Certain Entities That Calculate Net
Asset Value per Share (or its equivalent). This ASU permits use of a
practical expedient, with appropriate disclosures, when measuring the fair value
of an alternative investment that does not have a readily determinable fair
value. ASU No. 2009-12 is effective for interim and annual periods
ending after December 15, 2009, with early application
permitted. Since the Company does not currently have any such
investments, it does not anticipate any impact on its financial statements upon
adoption.
In May
2009, the FASB issued FASB ASC 855, “Subsequent Events.” This
Statement addresses accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or available to be
issued. FASB ASC 855 requires disclosure of the date through which an
entity has evaluated subsequent events and the basis for that date, the date
issued or date available to be issued. The Company adopted this
Statement in the second quarter of 2009. As a result the date through
which the Company has evaluated subsequent events and the basis for that date
have been disclosed in Note K, Subsequent Events.
In April
2009, the FASB issued an update to FASB ASC 820, “Fair Value Measurements and
Disclosures,” related to providing guidance on when the volume and level of
activity for the asset or liability have significantly decreased and identifying
transactions that are not orderly. The update clarifies the
methodology to be used to determine fair value when there is no active market or
where the price inputs being used represent distressed sales. The
update also reaffirms the objective of fair value measurement, as stated in FASB
ASC 820, which is to reflect how much an asset would be sold in and orderly
transaction, and the need to use judgment to determine if a formerly active
market has become inactive, as well as to determine fair values when markets
have become inactive. The Company adopted this Statement in the
second quarter of 2009 without significant financial impact.
In April
2009, the FASB ASC 320, “Investments – Debt and Equity,” amends current
other-than-temporary guidance for debt securities through increased consistency
in the timing of impairment recognition and enhanced disclosures related to
credit and noncredit components impaired debt securities that are not expected
to be sold. Also, the Statement increases disclosures for both debt
and equity securities regarding expected cash flows, securities with unrealized
losses, and credit losses. The Company adopted this Statement in the
second quarter of 2009 without significant impact to our financial
statements.
F-30
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
Note A-Organization and
Summary Of Significant Accounting Policies
Recent Accounting
Pronouncements (Continued)
In April
2009, the FASB issued an update to FASB ASC 825, “Financial Instruments,” to
require interim disclosures about the fair value of financial
instruments.” This update enhances consistency in financial reporting
by increasing the frequency of fair value disclosures of those assets and
liabilities falling within the scope of FASB ASC 825. The Company adopted this
update in the second quarter of 2009 without significant impact to the financial
statements.
In April
2009, the FASB issued an update to FASB ASC 805, “Business Combinations,” that
clarifies and amends FASB ASC 805, as it applies to all assets acquired and
liabilities assumed in a business combination that arise from
contingencies. This update addresses initial recognition and
measurement issues, subsequent measurement and accounting, and disclosures
regarding these assets and liabilities arising from contingencies in a business
combination. The Company adopted this Statement in the second quarter
of 2009 without significant impact to the financial statements.
In
November 2008, EITF issued new guidance under FASB ASC 350, “Intangibles –
Goodwill and Other on accounting for defensive intangible
assets.” The new guidance applies to all acquired intangible assets
in which the acquirer does not intend to actively use the asset but intends to
hold (lock up) the asset to prevent its competitors from obtaining or using the
asset (a defensive asset). This guidance was adopted by the Company
in January 2009 without impact to the financial statements.
In May
2008, the FASB issued an update to FASB ASC 470, “Debt,” with respect to
accounting for convertible debt instruments that may be settled in cash upon
conversion including partial cash settlement. This update applies to
convertible debt instruments that, by their stated terms, may be settled in cash
(or other assets) upon conversion, including partial cash settlement, unless the
embedded conversion option is required to be separately accounted for as a
derivative under FASB ASC 815, “Derivatives and
Hedging.” Additionally, this update specifies that issuers of such
instruments should separately account for the liability and equity components in
a manner that will reflect the entity’s nonconvertible debt borrowing rate when
interest cost recognized in subsequent periods. The update is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. The Company does not
currently have any debt instruments for which this update would
apply. This update was adopted in January 2009 without significant
financial impact.
In
December 2007, the FASB issued an update to FASB ASC 805, “Business
Combinations” which establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the acquiree,
and the goodwill acquired. SFAS 141R also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business
combination. SFAS 141R is effective for the Company with respect to business
combinations for which the acquisition date is on or after January 1,
2009. The Company adopted this SFAS in the first quarter of
2009.
In
December 2007, the FASB issued an update to FASB ASC 810, “Consolidation,” which
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of consolidated
net income attributable to the parent and to the noncontrolling interest,
changes in a parent’s ownership interest, and the valuation of retained
noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160
also establishes disclosure requirements that clearly identify and distinguish
between the interests of the parent and the interests of noncontrolling
owners. This update is effective for the Company as of
January 1, 2009. The Company adopted this update in January 2009
without significant impact on the consolidated financial position, results of
operations, and disclosures.
F-31
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
NOTE B – FIXED
ASSETS
Fixed
assets consisted of the following:
December
31,
|
||||||||
2009
|
2008
|
|||||||
Computers
and office equipment
|
$ | 78,974 | $ | 78,974 | ||||
Software
|
127,237 | 28,383 | ||||||
Total
PP&E
|
206,211 | 107,357 | ||||||
Accumulated
depreciation
|
(106,856 | ) | (73,347 | ) | ||||
Fixed
assets, net
|
$ | 99,355 | $ | 34,010 |
During
the year ended December 31, 2008, the Company purchased $5,485 of computer
equipment.
During
the year Ended December 31, 2009, the Company purchased $98,854 of software. On
November 16, 2009, the Company and ChatStat Technologies Incorporated
(“ChatStat”) entered into an agreement whereby the Company acquired a copy of
the source code and documentation to the ChatStat “Live Chat Software” and owns
the copy “separately, globally and mutually until the end of
time”. In exchange for the software ownership, the Company agreed to
forgive $34,861 of debt owing the Company by ChatStat and to pay ChatStat
$60,000 in 6 equal monthly installments beginning November 20,
2009.
Depreciation
expense for the years ended December 31, 2009 and 2008 was $33,509 and $34,947,
respectively. Depreciation expense from May 10, 2006 (Inception) to December 31,
2008 was $106,856.
NOTE C – OTHER
ASSETS
On
December 22, 2008, for $138,000, the Company purchased approximately 79% of the
then issued and outstanding common stock, or 33,400,000 shares of Inflot
Holdings, Inc. a Pink Sheet listed public company. Inflot had no assets or
liabilities as of the date of purchase. The purpose of the stock
purchase was to gain control of a shell company for the purpose of reverse
merging with the Company. During the year ended December 31, 2009,
Inflot executed a 1,000:1 reverse split and subsequently issued 7.5 million
shares thereby significantly diluting the value of the Company’s investment
which was written off during the third quarter of 2009.
NOTE D – ACCOUNTS PAYABLE
AND ACCRUED EXPENSES
Accounts
payable and accrued expenses at December 31, 2009 consisted of $425,500 due to
John Rizzo, CEO for unpaid salary and health insurance, $25,000 of accrued legal
settlements, $15,126 of professional services, $40,000 remaining due to ChatStat
for our technology purchase and $19,151 of trade payables.
Accounts
payable and accrued expenses at December 31, 2008 consisted of $346,189 due to
John Rizzo, CEO for unpaid salary and health insurance, and $10,566 of trade
payables.
NOTE E –
NOTES
Promissory Notes -
3rd Party
Promissory
notes at December 31, 2009 and 2008 are as follows:
F-32
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
NOTE E – NOTES
(Continued)
Promissory Notes
(Continued)
December
31,
|
||||||||
2009
|
2008
|
|||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures September 25,
2008
|
$ | 35,000 | ||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures November 14,
2008
|
50,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures November 15,
2008
|
75,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures November 16,
2008
|
100,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures January 31,
2009
|
5,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures January 31,
2009
|
5,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures January 31,
2009
|
3,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures November 6,
2009
|
25,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures February 13,
2009
|
30,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures April 1,
2009
|
50,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures April 25,
2009
|
5,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures July 14,
2009
|
50,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures August 18,
2009
|
100,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.50
|
||||||||
upon
default, bears interest at 9% per year, matures September 1,
2009
|
500,000 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.35
|
||||||||
upon
default, bears interest at 9% per year, matures March 14,
2010
|
12,500 | |||||||
Note
payable convertible into common stock at a conversioin price of
$0.35
|
||||||||
upon
default, bears interest at 9% per year, matures March 15,
2010
|
12,500 | |||||||
$ | 25,000 | $ | 1,033,000 |
During
the year ended December 31, 2008, the Company received $773,000 of convertible
promissory notes and made no repayments.
During
the year ended December 31, 2009, the Company received $292,000 of convertible
promissory notes from third parties. The Company converted $1,300,000
of principle and $137,467 of accrued interest into 3,721,257 shares of
restricted common stock.
F-33
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
NOTE E – NOTES
(Continued)
Promissory Notes - Related
Party
December
31,
|
||||||||
2009
|
2008
|
|||||||
Note
payable on demand, bears interest at 9% per year.
|
$ | 110,000 | ||||||
Note
payable convertible into common stock (conversion price 50%
below
|
||||||||
the
previous 10 day average closing price) upon default, bears interest
at
|
||||||||
9%
per year, Matures December 31, 2010
|
$ | 151,312 | ||||||
During
the year ended December 31, 2008, the Company received $195,750 from Bluewater
Advisors a company owned my John Rizzo, CEO. $85,750 was
repaid.
During
the year ended December 31, 2009, the Company received $25,000 from Bluewater
Advisors and issued a new note for $151,312 or $135,000 of principle and $16,312
of accrued interest.
Accrued
Interest
During
the years ended December 31, 2009 and 2008 and the period May 10, 2006
(Inception) to December 31, 2009, the Company incurred $90,462, $58,574 and
$176,217, respectively, of interest expense related to convertible promissory
notes and related party promissory notes below.
As of
December 31, 2009, accrued interest payable and the principle of our notes are
$102 and $176,312, respectively.
NOTE F – STOCKHOLDERS
EQUITY
Preferred
Stock
The
Company has authorized 10,000,000 shares preferred stock available for
issuance. No shares of preferred stock have been issued as of
December 31, 2009.
Stock Issued for Debt
Repayment
During
the year ended December 31, 2008, the Company did not issue any stock for debt
repayment.
During
the year ended December 31, 2009, the Company converted $1,300,000 of principle
and $137,467 of accrued interest into 3,721,257 shares of restricted common
stock. As of December 31, 2009 the stock had not been issued and was
recorded in the equity portion of our balance sheet as common stock
payable. The stock was issued subsequent to year end (See note
L).
Stock Issued for
Services
During
the year ended December 31, 2008, the Company issued 200,000 shares in exchange
for services valued at $100,000, based on a fair value of $0.50 per share, and
accrued a payable of $7,013 in stock for services performed in 2009, based on a
fair value of $0.50 per share. The stock was issued subsequent to
year end (See Note L).
During
the year ended December 31, 2009, the Company agreed to issue 150,000 shares of
restricted common stock in exchange for professional services rendered in 2009
and valued at $75,000. As of December 31, 2009 the stock had not been
issued and was recorded in the equity portion of our balance sheet as common
stock payable. The stock was issued subsequent to year end (See Note
L).
Stock Options (See footnote
I)
During
the year ended December 31, 2008, the Company granted 2 million Common Stock
options with an exercise price of $0.50 and canceled 1 million due to
termination.
F-34
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
NOTE F – STOCKHOLDERS EQUITY
(Continued)
Stock Options (See footnote
I) (Continued)
During
the year ended December 31, 2009, the Company cancelled 1 million options due to
termination.
NOTE G -
COMMITMENTS
The
Company has no commitments as of December 31, 2009.
NOTE H –
WARRANTS
At
December 31, 2009, the Company had 800,000 Warrants outstanding entitling the
holder thereof the right to purchase one share of common stock for each warrant
held as follows:
Exercise
|
|||||||||
Issuance
|
Number
of
|
Price
Per
|
Expiration
|
||||||
Date
|
Warrants
|
Warrant
|
Date
|
||||||
3/25/2008
|
400,000 | $ | 0.10 |
12/31/10
|
|||||
3/25/2008
|
400,000 | $ | 0.10 |
12/31/10
|
|||||
Total
|
800,000 |
During
the year ended December 31, 2008, the Company issued 1,050,000 warrants to
outside individuals. The warrants issued on March 25, 2008 were fully
vested on the date of grant. No compensation expense was recognized
for these warrants as their fair value is immaterial to these financial
statements. The 250,000 warrant grant had a three month vesting
period and fair value was calculated using the Black-Scholes Option Pricing
Model with the following inputs: volatility of 214.65% based on the Dow Jones
Internet Composite Index, risk free interest rate of 3.99%, spot price of $0.10,
and exercise price of $0.01 resulting in $22,500 of expense during the year
ended December 31, 2008.
During
the year ended December 31, 2009, the Company canceled 250,000 warrants issued
to Marc Falcone as a result of the settlement agreement dated February 16, 2010
(See Note L, Subsequent Events). No warrants were issued or exercised
in 2009.
NOTE I – 2007 LONG-TERM
EQUITY INCENTIVE PLAN
In June
2007 the Board of Directors of the Company adopted the 2007 Long-Term Equity
Incentive Plan. The purpose of this Plan is to attract and retain directors,
officers and other employees of iTrackr and to provide to such persons
incentives and rewards for performance.
The
Company may issue each of the following under this Plan: Incentive Option,
Nonqualified Option, Stock Appreciation Right, Restricted Stock Award or
Performance Stock Award. The Plan was ratified at the 2007
shareholder’s meeting (the "Effective Date"). No Incentive Option,
Nonqualified Option, Stock Appreciation Right, Restricted Stock Award or
Performance Stock Award shall be granted pursuant to the Plan ten years after
the Effective Date. The total number of shares available under the
Plan is Fifteen Million (15,000,000). No Plan participant will be
granted the right, in the aggregate, for more than Two Million
(2,000,000) Common Shares during any calendar year.
F-35
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
NOTE I – 2007 LONG-TERM
EQUITY INCENTIVE PLAN (Continued)
Stock
Options
During
the year ended December 31, 2008, the Company granted 2 million Common Stock
options with an exercise price of $0.50. Of these grants, 1 million
were canceled due to termination of the people to whom they were granted and
their failure to exercise according to the terms of the option
grant. Expense related to these grants was based on their fair value
as calculated using the Black-Scholes Option Pricing Model with the following
inputs: volatility of 214.65% based on the Dow Jones Internet Composite Index,
risk free interest rate of 3.49%, spot price of $0.05, and exercise price of
$0.50.
During
the year ended December 31, 2009 1 million options were canceled due termination
of the people to whom they were granted and their failure to exercise according
to the terms of the option grant.
The
following table summarizes the Company's stock option activity for the year
ended December 31, 2009 and 2008:
2009
|
2008
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Shares
|
Exercise
Price
|
Shares
|
Exercise
Price
|
|||||||||||||
Outstanding
at beginning of year
|
6,255,000 | $ | 0.23 | 5,255,000 | $ | 0.128 | ||||||||||
Granted
|
- | - | 2,000,000 | 0.500 | ||||||||||||
Forfeited
|
(1,000,000 | ) | 0.50 | (1,000,000 | ) | 0.500 | ||||||||||
Exercised
|
- | - | - | - | ||||||||||||
Outstanding
at end of quarter
|
5,255,000 | $ | 0.18 | 6,255,000 | $ | 0.229 | ||||||||||
Options
exerciseable at December 31, 2009
|
5,255,000 | 4,586,250 |
The
following table summarizes information about the Company's stock options
outstanding at December 31, 2009:
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||||
Number
|
Weighted
|
Weighted
|
Weighted
|
|||||||||||||||||||
Range
of
|
Outstanding
|
Average
|
Average
|
Average
|
||||||||||||||||||
Exercise
|
At
December 31,
|
Contractural
|
Exercise
|
Number
|
Exercise
|
|||||||||||||||||
Prices
|
2009
|
Life (years)
|
Price
|
Outstanding
|
Price
|
|||||||||||||||||
$ | 0.40 | 1,000,000 | - | $ | 0.40 | 1,000,000 | $ | 0.08 | ||||||||||||||
0.25 | 1,000,000 | - | 0.25 | 1,000,000 | 0.05 | |||||||||||||||||
0.10 | 2,375,000 | - | 0.10 | 2,375,000 | 0.05 | |||||||||||||||||
0.05 | 880,000 | - | 0.05 | 880,000 | 0.01 | |||||||||||||||||
Total
|
5,255,000 | - | $ | 0.18 | 5,255,000 | $ | 0.18 |
The
following table summarizes information about the Company's stock options
outstanding at December 31, 2008:
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||||
Number
|
Weighted
|
Weighted
|
Weighted
|
|||||||||||||||||||
Range
of
|
Outstanding
|
Average
|
Average
|
Average
|
||||||||||||||||||
Exercise
|
At
December 31,
|
Contractural
|
Exercise
|
Number
|
Exercise
|
|||||||||||||||||
Prices
|
2008
|
Life (years)
|
Price
|
Outstanding
|
Price
|
|||||||||||||||||
$ | 0.50 | 1,000,000 | 0.17 | $ | 0.50 | 187,500 | $ | 0.02 | ||||||||||||||
0.40 | 1,000,000 | - | 0.40 | 500,000 | 0.04 | |||||||||||||||||
0.25 | 1,000,000 | 0.07 | 0.25 | 1,000,000 | 0.05 | |||||||||||||||||
0.10 | 2,375,000 | 0.03 | 0.10 | 2,187,500 | 0.05 | |||||||||||||||||
0.05 | 880,000 | 0.05 | 0.05 | 711,250 | 0.01 | |||||||||||||||||
- | ||||||||||||||||||||||
Total
|
6,255,000 | 0.31 | $ | 0.23 | 4,586,250 | $ | 0.17 |
F-36
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
NOTE I – 2007 LONG-TERM
EQUITY INCENTIVE PLAN (Continued)
Stock Options
(Continued)
The
Company measures the fair market value of stock options granted using the
Black-Scholes Option Pricing Model on the date of grant and recognizes related
compensation expense ratably over the options vesting period for all future
grants.
During
the year ended December 31, 2009 and 2008, the Company recognized $24,169 and
$77,423, respectively, of compensation expense related to stock
options. From inception to date, the Company has recognized $178,844
of compensation expense related to stock options.
NOTE J – LEGAL
PROCEEDINGS
As of
December 31, 2009, the Company was party to a lawsuit brought by Marc
Falcone. In this action, Mr. Falcone asserted numerous claims against
certain defendants arising out of his former service to iTrackr, Inc. as a
contracted consultant. The Company asserted numerous defenses and
affirmative defenses, including, but not limited to, the fact that Falcone
failed to fulfill his obligations under the agreement. On February
16, 2010, the Company and Mr. Falcone executed a settlement agreement without
either side admitting fault. The terms of the settlement agreement
call for the payment of $25,000 and the issuance of 360,000 shares of common
stock in exchange for a full release of all claims. The Company has
accrued $25,000 as of December 31, 2009 and canceled the 250,000 warrants with
exercise price f $.01 as a result of this liability.
NOTE K – INCOME
TAXES
For the
year ended December 31, 2009, the Company incurred net operating losses and,
accordingly, no provision for income taxes has been recorded. In addition, no
benefit for income taxes has been recorded due to the uncertainty of the
realization of any tax assets. At December 31, 2009 and 2008, the Company had
approximately $2,249,354 and $1,535,924, respectively of accumulated federal net
operating losses. The net operating loss carryforwards, if not utilized, will
begin to expire in 2026.
The
components of the Company’s deferred tax asset are as follows:
As of December 31,
|
||||||||
2009
|
2008
|
|||||||
Deferred
tax assets:
|
||||||||
Net
operating loss carryforwards
|
$ | 2,249,354 | $ | 1,535,924 | ||||
Total
deferred tax assets
|
2,249,354 | 1,535,924 | ||||||
Net
deferred tax assets before valuation allowance
|
2,249,354 | 1,535,924 | ||||||
Less:
Valuation allowance
|
(2,249,354 | ) | (1,535,924 | ) | ||||
Net
deferred tax assets
|
$ | - | $ | - |
For
financial reporting purposes, the Company has incurred a loss since its
inception. Based on the available objective evidence, management believes it is
more likely than not that the net deferred tax assets will not be fully
realizable. Accordingly, the Company provided for a full valuation allowance
against its net deferred tax assets at December 31, 2009.
A
reconciliation between the amounts of income tax benefit determined by applying
the applicable U.S. and State statutory income tax rate to pre-tax loss is as
follows:
F-37
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
NOTE K – INCOME TAXES
(Continued)
|
Year Ended December 31,
|
|||||||
2009
|
2008
|
|||||||
Federal
and statutory rate
|
15 | % | 15 | % | ||||
Change
in valuation allowance on deferred tax assets
|
$ | 713,430 | $ | 1,093,926 |
NOTE L – SUBSEQUENT
EVENTS
On
December 10, 2009, Must Haves, Inc., iTrackr Acquisition, Inc. and iTrackr,
Inc. entered into an Agreement and Plan of Merger which closed January 12,
2010. iTrackr, Inc. was merged with and into iTrackr Acquisition,
Inc. which is the surviving corporation and became a wholly-owned subsidiary of
Must Haves, Inc. which changed its name to iTrackr Systems, Inc. In
accordance with the merger agreement, iTrackr’s stockholder’s received
restricted common stock at the rate of 1:1 share for each of their 17,875,695
shares issued and outstanding in exchange for 100 percent of the outstanding
capital stock of iTrackr. In total 19,169,333 shares are outstanding
following the closing of the merger.
The
Merger is being accounted for as a “reverse merger”. iTrackr is
deemed to be the acquirer in the reverse merger. Consequently, the assets
and liabilities and retained deficit of iTrackr prior to the Merger will be
reflected in the financial statements.
In
January and February 2010, in conjunction with three promissory notes totaling
$25,000 that were issued on December 14th and
15th, and
$17,000 loaned to the Company in January 2010, the Company issued 105,333
warrants to purchase an equal amount of shares of common stock. The
warrants have an exercise price of $0.75 and expire five years from the date of
issue. Using the Black-Scholes Option Pricing Model and the following
inputs: volatility; 250% based on the Dow Jones Internet Composite Index, risk
free interest rate; 3.71%, spot price; $0.15, and exercise price; $0.75, the
Company recorded $15,642 of compensation expense to record the fair value of
these warrants.
On
February 16, 2010, the Company, without admitting fault, entered into a
settlement agreement to settle a dispute with Marc Falcone over unpaid salary
and stock (See Note J, Legal Proceedings). The amount has been
recorded in the accompanying financial statements in accounts payable and
accrued expenses (See Note D)
During
February and March 2010, the Company issued three warrants for the purchase of
2,166,666 shares of common stock as follows: 1) One warrant was issued on
February 5, 2010 for the purchase of 1,000,000 shares of common stock at an
exercise price of $0.40 and expiration date of December 31, 2015, 2) One warrant
was issued on March 1, 2010 for the purchase of 1,000,000 shares of common stock
at an exercise price of $0.10 and expiration date of October 31, 2011, and 3)
One warrant was issued on March 15, 2010 for the purchase of 166,666 shares of
common stock at an exercise price of $0.30 and expiration date of March 15,
2011. In exchange for the 1,000,000 share Warrant issued on February
5, 2010, the Company was paid $50,000. Using the Black-Scholes Option
Pricing Model and the following inputs: volatility; 250% based on the Dow Jones
Internet Composite Index, risk free interest rate; 3.71%, spot price; $0.15, and
the exercise price attributable to that warrant, the Company recorded $254,817
of compensation expense to record the fair value of these
warrants.
On April
28, 2010, the Company issued 4,051,948 shares of common stock that was recorded
to common stock payable in the amount of $1,501,980 as of March 31,
2010.
F-38
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
NOTE M –
RESTATEMENT
The 2009
and 2008 financial statements have been restated as a result of the re audit of
our financial statements by Bedinger and Company. Our 2009 and 2008
financial statements were required to be re audited as a result of the
revocation of the registration of the former auditor by the Public Company
Accounting Oversight Board (“PCAOB”) because of deficiencies in the conduct of
certain of its audits and procedures. Accordingly, we have updated
this Form 10-K/A to reflect the following:
|
1.
|
To
re report the financial statements of iTrackr, Inc. for the years ended
December 31, 2009 and 2008 after being audited by Bedinger and Company and
including their audit opinion.
|
|
2.
|
To
restate our financial statements for the year ended December 31, 2009 and
2008 as a result of the following adjustments and
reclassifications:
|
|
a.
|
An
additional $67,500 of stock compensation expense related to 150,000 shares
of common stock issued for services in December
2009.
|
|
b.
|
To
reclassify in the Statement of Cash Flows for the year ended December 31,
2008 the amounts received and paid to related parties under Financing
Activities.
|
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Balance
Sheet (Restated)
|
December 31, 2009
|
||||||||||||
(Originally
|
||||||||||||
Reported)
|
(Restated)
|
(Difference)
|
||||||||||
Total
Assets
|
$ | 108,364 | $ | 108,364 | $ | - | ||||||
Total
Liabilities
|
701,191 | 701,191 | - | |||||||||
Stockholder's (Deficit)
|
||||||||||||
Common
stock, par value $.001, 110,000,000 shares authorized; issued and
outstanding 13,990,413 at December 31, 2009 and 2008.
|
13,991 | 13,991 | - | |||||||||
Common
stock payable
|
1,451,979 | 1,519,479 | 67,500 | |||||||||
Additional
paid-in capital
|
966,157 | 966,157 | - | |||||||||
Deficit
accumulated during the development stage
|
(3,024,954 | ) | (3,092,454 | ) | (67,500 | ) | ||||||
Total
Stockholder's (Deficit)
|
(592,827 | ) | (592,827 | ) | - | |||||||
Total
Liabilities and Stockholder's (Deficit)
|
$ | 108,364 | $ | 108,364 | $ | - |
F-39
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Statements
of Operation
|
For
the Years Ended December 31, 2009 and the Period May 10, 2006 (Inception)
to December 31, 2009
|
Year
Ended December 31, 2009
|
May
10, 2006 to December 31, 2009
|
|||||||||||||||||||||||
(Originally
|
(Originally
|
|||||||||||||||||||||||
Reported)
|
(Restated)
|
(Difference)
|
Reported)
|
(Restated)
|
(Difference)
|
|||||||||||||||||||
Revenue
|
$ | 7,493 | $ | 7,493 | $ | - | $ | 29,330 | $ | 29,330 | $ | - | ||||||||||||
Operating
expenses
|
610,973 | 678,473 | 67,500 | 3,148,800 | 3,216,300 | 67,500 | ||||||||||||||||||
Loss
from operations
|
(603,480 | ) | (670,980 | ) | (67,500 | ) | (3,119,470 | ) | (3,186,970 | ) | (67,500 | ) | ||||||||||||
Total
other income and (expense)
|
(253,462 | ) | (253,462 | ) | - | 94,516 | 94,516 | - | ||||||||||||||||
NET
LOSS
|
$ | (856,942 | ) | $ | (924,442 | ) | $ | (67,500 | ) | $ | (3,024,954 | ) | $ | (3,092,454 | ) | $ | (67,500 | ) | ||||||
Net
loss per common share basic and diluted
|
$ | (0.059 | ) | $ | (0.063 | ) | $ | (0.005 | ) | |||||||||||||||
Weighted
average common shares outstanding basic and diluted
|
14,632,513 | 14,632,513 |
NOTE M – RESTATEMENT
(Continued)
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Statement
of Stockholder's Equity (Restated)
|
For
the Year Ended December 31,
2009
|
(Originally
|
||||||||||||
Reported)
|
(Restated)
|
(Difference)
|
||||||||||
Common
Stock:
|
||||||||||||
Shares
to be issued for conversion of debt:
|
||||||||||||
Shares
|
- | - | - | |||||||||
Amount
|
$ | - | $ | - | $ | - | ||||||
Payable
|
1,437,466 | 1,437,466 | - | |||||||||
Additional
Paid in Capital
|
- | - | - | |||||||||
Shares
issued for services:
|
||||||||||||
Shares
|
- | - | - | |||||||||
Amount
|
- | - | - | |||||||||
Payable
|
7,500 | 75,000 | 67,500 | |||||||||
Additional
Paid in Capital
|
- | - | - | |||||||||
Stock
option expense
|
24,169 | 24,169 | - | |||||||||
Net
(Loss)
|
(856,942 | ) | (924,442 | ) | (67,500 | ) | ||||||
Prior
period:
|
||||||||||||
Common
stock amount
|
13,991 | 13,991 | - | |||||||||
Common
stock payable
|
7,013 | 7,013 | - | |||||||||
Additional
paid in capital
|
941,988 | 941,988 | - | |||||||||
Accumulated
deficit
|
(2,168,012 | ) | (2,168,012 | ) | - | |||||||
Total
shareholder's (Deficit)
|
$ | (592,827 | ) | $ | (592,827 | ) | $ | - |
F-40
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Notes
to Financial Statements
|
For
the Years Ended December 31, 2009 and
2008
|
NOTE M – RESTATEMENT
(Continued)
iTrackr,
Inc.
|
(A
Development Stage Company)
|
Statements
of Cash Flows (Restated)
|
For
the Years Ended December 31, 2009 and 2008 and the Period May 10, 2006
(Inception) to December 31,
2009
|
Year
Ended December 31, 2009
|
Year
Ended December 31, 2008
|
May
10, 2006 to December 31, 2009
|
||||||||||||||||||||||||||||||||||
(Originally
|
(Originally
|
(Originally
|
||||||||||||||||||||||||||||||||||
Reported)
|
(Restated)
|
(Difference)
|
Reported)
|
(Restated)
|
(Difference)
|
Reported)
|
(Restated)
|
(Difference)
|
||||||||||||||||||||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||||||||||||||||||||||
Net
Earnings <loss>
|
$ | (856,942 | ) | $ | (924,442 | ) | $ | (67,500 | ) | $ | (1,328,873 | ) | $ | (1,328,873 | ) | $ | - | $ | (3,024,954 | ) | $ | (3,092,454 | ) | $ | (67,500 | ) | ||||||||||
Adjustments
to reconcile net loss
|
||||||||||||||||||||||||||||||||||||
to
net cash used by operating activities:
|
||||||||||||||||||||||||||||||||||||
Depreciation
|
33,508 | 33,508 | - | 34,947 | 34,947 | - | 106,855 | 106,855 | - | |||||||||||||||||||||||||||
Asset
impairment
|
138,000 | 138,000 | - | - | - | - | 138,000 | 138,000 | - | |||||||||||||||||||||||||||
Compensation
expense on fair market value of options issued
|
24,169 | 24,169 | - | 77,423 | 77,423 | - | 178,844 | 178,844 | - | |||||||||||||||||||||||||||
Compensation
expense on fair value of warrants issued
|
- | - | - | 22,500 | 22,500 | - | 22,500 | 22,500 | - | |||||||||||||||||||||||||||
Common
stock issued for services
|
7,500 | 75,000 | 67,500 | 107,013 | 107,013 | - | 402,013 | 469,513 | 67,500 | |||||||||||||||||||||||||||
Common
stock issued for accrued interest
|
137,467 | 137,467 | - | - | - | - | 162,771 | 162,771 | - | |||||||||||||||||||||||||||
Changes
in operating accounts:
|
- | - | - | |||||||||||||||||||||||||||||||||
Accounts
receivable
|
(5,786 | ) | (5,786 | ) | - | - | - | - | (5,786 | ) | (5,786 | ) | - | |||||||||||||||||||||||
Prepaid
expenses
|
- | - | - | 50,000 | 50,000 | - | - | - | - | |||||||||||||||||||||||||||
Other
assets
|
- | - | - | (137,250 | ) | (137,250 | ) | - | (138,000 | ) | (138,000 | ) | - | |||||||||||||||||||||||
Accounts
payable and accrued expenses
|
107,705 | 107,705 | - | 379,690 | 379,690 | - | 524,879 | 524,879 | - | |||||||||||||||||||||||||||
CASH
PROVIDED (USED) BY OPERATING ACTIVITIES
|
(414,379 | ) | (414,379 | ) | - | (794,550 | ) | (794,550 | ) | - | (1,632,878 | ) | (1,632,878 | ) | - | |||||||||||||||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||||||||||||||||||||||
Acquisition
of furniture and equipment
|
(98,854 | ) | (98,854 | ) | - | (5,485 | ) | (5,485 | ) | - | (206,211 | ) | (206,211 | ) | - | |||||||||||||||||||||
CASH
PROVIDED (USED) BY INVESTING ACTIVITIES
|
(98,854 | ) | (98,854 | ) | - | (5,485 | ) | (5,485 | ) | - | (206,211 | ) | (206,211 | ) | - | |||||||||||||||||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||||||||||||||||||
Repayment
of promissory notes
|
- | - | - | (45,000 | ) | - | 45,000 | (45,000 | ) | - | 45,000 | |||||||||||||||||||||||||
Repayment
of related party notes
|
- | - | - | (40,750 | ) | (85,750 | ) | (45,000 | ) | (40,750 | ) | (85,750 | ) | (45,000 | ) | |||||||||||||||||||||
Proceeds
from promissory notes
|
292,000 | 292,000 | - | 968,750 | 773,000 | (195,750 | ) | 1,886,750 | 1,691,000 | (195,750 | ) | |||||||||||||||||||||||||
Proceeds
from related party notes
|
41,312 | 41,312 | - | - | 195,750 | 195,750 | 41,312 | 237,062 | 195,750 | |||||||||||||||||||||||||||
CASH
PROVIDED (USED) BY FINANCING ACTIVITIES
|
333,312 | 333,312 | - | 883,000 | 883,000 | - | 1,842,312 | 1,842,312 | - | |||||||||||||||||||||||||||
NET
INCREASE (DECREASE) IN CASH
|
(179,921 | ) | (179,921 | ) | - | 82,965 | 82,965 | - | 3,223 | 3,223 | - | |||||||||||||||||||||||||
CASH,
beginning of period
|
183,144 | 183,144 | - | 100,179 | 100,179 | - | - | - | - | |||||||||||||||||||||||||||
CASH,
end of period
|
$ | 3,223 | $ | 3,223 | $ | - | $ | 183,144 | $ | 183,144 | $ | - | $ | 3,223 | $ | 3,223 | $ | - | ||||||||||||||||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||||||||||||||||||||||||||||||
CASH
PAID DURING THE YEAR FOR:
|
||||||||||||||||||||||||||||||||||||
Taxes
paid
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
Interest
paid
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
NON-CASH
OPERATING ACTIVITIES:
|
||||||||||||||||||||||||||||||||||||
Value
of Common Stock issued in exchange for services
|
$ | 7,500 | $ | 75,000 | $ | 67,500 | $ | 107,013 | $ | 107,013 | $ | - | $ | 402,013 | $ | 469,513 | $ | 67,500 | ||||||||||||||||||
Value
of Common Stock issued for accrued interest
|
$ | 137,467 | $ | 137,467 | $ | - | $ | - | $ | - | $ | - | $ | 162,771 | $ | 162,771 | $ | - | ||||||||||||||||||
Value
of Common Stock issued for debt principle
|
$ | 1,300,000 | $ | 1,300,000 | $ | - | $ | - | $ | - | $ | - | $ | 1,666,000 | $ | 1,666,000 | $ | - |
F-41
19,629,893
Shares of Common Stock
ITRACKR
SYSTEMS, INC.
Prospectus
No
dealer, salesperson or any person is authorized to give any information or make
any representations in connection with this offering other than those contained
in this prospectus and, if given or made, the information or representations
must not be relied upon as having been authorized by us. This prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
security other than the securities offered by the prospectus, or an offer to
sell or a solicitation of an offer to buy any securities by anyone in any
jurisdiction in which the offer or solicitation is not authorized or is
unlawful.
Dealer
Prospectus Delivery Obligation
Until
[ ],
all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers’ obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
The
date of this Prospectus is December 20, 2010
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution
The
following table sets forth the Company’s estimates (other than the SEC
registration fee) of the expenses in connection with the sale and distribution
of the securities being registered, all of which will be paid by the
Company.
Item
|
Amount
|
|||
SEC
Registration Fee
|
$ | 2,000 | ||
Legal
Fees and Expenses
|
$ | 20,000 | ||
Accounting
Fees and Expenses
|
$ | 15,000 | ||
Printing
Fees and Expenses
|
$ | 5,000 | ||
Miscellaneous
Fees and Expenses
|
$ | 1,000 | ||
Total
|
$ | 43,000 |
Item
14. Indemnification of Directors and Officers
The
Company’s bylaws provide for the indemnification of its directors, officers,
employees and agents to the fullest extent permitted by the laws of the State of
Florida. Section 607.0850 of the Florida Statutes
permits a corporation to indemnify any of its directors, officers, employees or
agents against expenses actually and reasonably incurred by such person in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil criminal, administrative or investigative (except for an action by
or in right of the corporation) by reason of the fact that such person is or was
a director, officer, employee or agent of the corporation; provided, that it is
determined that such person acted in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
II-1
Section 607.0850 of the Florida Statutes
requires that the determination that indemnification is proper in a specific
case must be made by: (1) the stockholders, (2) the board of directors
by majority vote of a quorum consisting of directors who were not parties to the
action, suit or proceeding, or (3) independent legal counsel in a written
opinion, if a majority vote of a quorum consisting of disinterested directors is
not possible, or if such opinion is requested, by a quorum consisting of
disinterested directors.
The
bylaws provide that we will indemnify our directors and officers and may
indemnify our employees and agents to the fullest extent permitted by law
against liabilities and expenses incurred in connection with litigation in which
they may be involved because of their offices with the Company. However, nothing
in the Company’s charter or bylaws protects or indemnifies a director, officer,
employee or agent against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her
office.
Any
amendment to or repeal of the Company’s bylaws will not adversely affect any
right or protection of any of the Company’s directors or officers for, or with
respect to, any acts or omissions of such director or officer occurring prior to
such amendment.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions or otherwise, the Company has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Item
15. Recent Sales of Unregistered Securities.
|
·
|
On
June 30, 2010, the Company issued 101,000 shares of common stock to
ChatStat in exchange for the settlement of $32,000 owing from the purchase
of their chat software
technology.
|
|
·
|
On
June 30, 2010, the Company issued 100,000 shares of common stock to Chris
Maggiore in exchange for services value at $30,000 (See “Selling
Stockholders” Footnote 114
above).
|
|
·
|
On
June 5, 2010, the Company issued 125,000 shares of common stock to Mihir
Sevak, Chief Technology Officer of iTrackr in exchange for services value
at $37,500.
|
|
·
|
On
March 11, 2010, the Company issued 360,000 shares of common stock valued
at $108,000 as a result of a legal settlement with Marc Falcone a former
business development consultant to the Company. Said shares
were distributed to Marc Falcone (240,000 shares), Alan Frank (108,000
shares) and Alexander Palamarchuk (12,000 shares) (See “Selling
Stockholders” Footnote 69-71 above). The Company relied on
Section 4(2) of the Securities
Act.
|
|
·
|
On
March 15, 2010, the Company received $50,000 in exchange for the issuance
of 166,666 shares of common stock to Chris Maggiore. In
addition, on June 3, 2010, Mr. Maggiore exercised a warrant to purchase an
additional 166,666 shares of common stock in exchange for
$50,000. Mr. Maggiore provides business advisory services to
the Company (See “Selling Stockholders” Footnote 114
above). The Company relied on Section 4(2) of the Securities
Act.
|
|
·
|
On February 16, 2010, the
Company converted $42,466.48 of shareholder loans to 119,999 shares of
common stock which were distributed to Maplehurst Investment Group (36,260
shares), American Capital Ventures, Inc. (56,402 shares) and Jason Lyons
(28,670 shares) (See “Selling Stockholders” Footnote 72-74
above). The Company relied on Section 4(2) of the Securities
Act.
|
|
·
|
On February 5, 2010, the
Company sold a warrant to an accredited investor for $50,000. Under the
terms of the warrant, the investor has the right to purchase up to
1,000,000 shares of the Company’s common stock at an exercise price of
$0.40 per share (See “Selling Stockholders” Footnote 75 and 100
above). The Company relied on Section 4(2) of the Securities
Act.
|
|
·
|
During December, 2009, the
Company converted $29,944 of shareholder loans due to Stella Gostfrand,
founder and former CEO of Must Haves, Inc. to 59,888 shares of common
stock (See “Selling Stockholders” Footnote 65 above). The
Company relied on Section 4(2) of the Securities
Act.
|
II-2
|
·
|
On October 31, 2009,
Delivery Technology Solutions (formerly Inflot Holdings Corp.) converted
$270,000 of convertible debt principle and interest into 1,386,322 shares
of common stock (See “Selling Stockholders” Footnote 98 and 110
above). The Company relied on Section 4(2) of the Securities
Act.
|
|
·
|
On October 31, 2009, Ted
Cooper converted $559,302 of convertible debt principle and interest into
1,118,603 shares of common stock (See “Selling Stockholders” Footnote 88
and 112 above). The Company relied on Section 4(2) of the
Securities Act.
|
|
·
|
On October 31, 2009,
Robert Gleckman converted $110,825 of convertible debt principle and
interest into 221,649 shares of common stock (See “Selling Stockholders”
Footnote 87 and 112 above). The Company relied on Section 4(2)
of the Securities Act.
|
|
·
|
On October 31, 2009, The
Borg Trust converted $55,844 of convertible debt principle and interest
into 111,688 shares of common stock (See “Selling Stockholders” Footnote
86 and 112 above). The Company relied on Section 4(2) of the
Securities Act.
|
|
·
|
On October 31, 2009,
Robert Klinek & Susan Pack converted $57,139 of convertible debt
principle and interest into 114,277 shares of common stock (See “Selling
Stockholders” Footnote 85 and 112 above). The Company relied on
Section 4(2) of the Securities
Act.
|
|
·
|
On October 31, 2009, The
Winston Family Trust converted $34,631 of convertible debt principle and
interest into 69,261 shares of common stock (See “Selling Stockholders”
Footnote 84 and 112 above). The Company relied on Section 4(2)
of the Securities Act.
|
|
·
|
On October 31, 2009,
Dominick & Judy Aprile converted $28,879 of convertible debt
principle and interest into 57,758 shares of common stock (See “Selling
Stockholders” Footnote 83 and 112 above). The Company relied on
Section 4(2) of the Securities
Act.
|
|
·
|
On October 31, 2009,
Charlie Bonafede converted $5,683 of convertible debt principle and
interest into 11,366 shares of common stock (See “Selling Stockholders”
Footnote 82 and 112 above). The Company relied on Section 4(2)
of the Securities Act.
|
|
·
|
On October 31, 2009, Dawn
Maywood converted $5,781 of convertible debt principle and interest into
11,562 shares of common stock (See “Selling Stockholders” Footnote 81 and
112 above). The Company relied on Section 4(2) of the
Securities Act.
|
|
·
|
On October 31, 2009, Sam
Maywood converted $5,781 of convertible debt principle and interest into
11,562 shares of common stock (See “Selling Stockholders” Footnote 80 and
112 above). The Company relied on Section 4(2) of the
Securities Act.
|
|
·
|
On October 31, 2009,
Dr. Michael Gelbar converted $116,666 of convertible debt principle
and interest into 233,332 shares of common stock (See “Selling
Stockholders” Footnote 79 and 112 above). The Company relied on
Section 4(2) of the Securities
Act.
|
|
·
|
On October 31, 2009,
Patricia Scarpella converted $87,510 of convertible debt principle and
interest into 175,019 shares of common stock (See “Selling Stockholders”
Footnote 78 and 112 above). The Company relied on Section 4(2)
of the Securities Act.
|
|
·
|
On October 31, 2009,
Shirley Harnick converted $58,347 of convertible debt principle and
interest into 116,693 shares of common stock (See “Selling Stockholders”
Footnote 77 and 112 above). The Company relied on Section 4(2)
of the Securities Act.
|
|
·
|
On October 31, 2009,
Michael Nielsen converted $41,083 of convertible debt principle and
interest into 82,165 shares of common stock (See “Selling Stockholders”
Footnote 76 and 112 above). The Company relied on Section 4(2)
of the Securities Act.
|
|
·
|
On May 5, 2008, Mark
MacDougal received 100,000 shares of common stock as an employee bonus
valued at $50,000 (See “Selling Stockholders” Footnote 15
above). The Company relied on Section 4(2) of the Securities
Act.
|
|
·
|
On May 5, 2008, Justin
Van Winkle received 100,000 shares of common stock as an employee bonus
valued at $50,000 (See “Selling Stockholders” Footnote 13
above). The Company relied on Section 4(2) of the Securities
Act.
|
|
·
|
On February 20, 2008,
Steve Danzo earned 14,025 shares of common stock in exchange for services
valued at $7,013 (See “Selling Stockholders” Footnote 92
above). The Company relied on Section 4(2) of the Securities
Act.
|
|
·
|
On August 21, 2007, Red
Rock Strategies Ltd. converted $55,313.70 of convertible debt principle
and interest into 2,765,685 shares of common stock at an exercise price of
$0.02 per share (See “Selling Stockholders” Footnote 107
above). The Company relied on Section 4(2) of the Securities
Act.
|
|
·
|
On August 21, 2007, New
Link Ltd. Corp converted two notes totaling $211,403.29 of convertible
debt principle and interest into 3,385,280 shares of common
stock. Note 1 total principle and interest was $156,193 and
converted into 624,773 shares of common stock at an exercise price of
$0.25 per share (See “Selling Stockholders” Footnote 109
above). Note 2 total principle and interest was $55,210 and
converted into 2,760,507 shares of common stock at an exercise price of
$0.02 per share (See “Selling Stockholders” Footnote 107
above). The Company relied on Section 4(2) of the Securities
Act.
|
II-3
|
·
|
On August 21, 2007,
Landmark, Inc. converted $26,069.86 of convertible debt principle and
interest into 104,279 shares of common stock at an exercise price of $0.25
per share (See “Selling Stockholders” Footnote 109 above) The
Company relied on Section 4(2) of the Securities
Act.
|
|
·
|
On August 21, 2007,
Beatrice Anne Rizzo, wife of John Rizzo, CEO and Chairman of iTrackr
Systems, Inc. converted $98,516.85 of convertible debt principle and
interest into 985,169 shares of common
stock.
|
|
·
|
On July 1, 2007 (See
“Selling Stockholders” Footnote 11 and 108 above) The Company
relied on Section 4(2) of the Securities
Act.
|
|
·
|
Jarem
Archer, founder of iTrackr, Inc. received 750,000 shares of common stock
on July 1, 2007 in lieu of salary valued at $37,500 (See “Selling
Stockholders” Footnote 1 above) The Company relied on Section 4(2) of the
Securities Act.
|
|
·
|
On July 1, 2007, John
Rizzo received 5,000,000 shares of common stock in lieu of salary valued
at $250,000 (See “Selling Stockholders” Footnote 2 above) The
Company relied on Section 4(2) of the Securities
Act.
|
|
·
|
On October 26, 2006, The
John Rizzo Family Trust received 250,000 shares of founder’s common stock
at no value; Jarem Archer received 250,000 shares of founder’s common
stock at no value; the Christopher Smith Family Trust received 200,000
shares of founder’s common stock at no value; and Alejandro Sintas
received 100,000 shares of founder’s common stock at no
value.
|
All funds
received from the sale of our shares were used for working capital
purposes.
All
shares bear a legend restricting their disposition.
The
foregoing securities may not be offered or sold in the United States unless
registered under the Act, or pursuant to an exemption from
registration.
The
shares were issued in reliance upon an exemption from registration pursuant to
Section 4(2) of the Securities Act. Each investor took his securities
for investment purposes without a view to distribution and had access to
information concerning us and our business prospects, as required by the
Securities Act. In addition, there was no general solicitation or
advertising for the purchase of our shares. Our securities were sold
only to an accredited investor and a limited number of sophisticated investors,
as defined in the Securities Act with whom we had a direct personal preexisting
relationship, and after a thorough discussion. Finally, our stock
transfer agent has been instructed not to transfer any of such shares, unless
such shares are registered for resale or there is an exemption with respect to
their transfer.
Each
purchaser was provided with access to our filings with the SEC, including the
following:
· Our
annual report to stockholders for the most recent fiscal year, the definitive
proxy statement filed in connection with that annual report, and, if requested
by the purchaser in writing, a copy of our most recent Form 10-K/A under the
Exchange Act.
· The
information contained in an annual report on Form 10-K/A under the Exchange
Act.
· The
information contained in any reports or documents required to be filed by
iTrackr Systems under sections 13(a), 14(a), 14(c), and 15(d) of the Exchange
Act since the distribution or filing of the reports specified
above.
· A
brief description of the securities being offered, the use of the proceeds from
the offering, and any material changes in iTrackr Systems’ affairs that are not
disclosed in the documents furnished.
II-4
Item
16. Exhibits
The
Exhibits listed on the Exhibit Index of this Registration Statement are filed
herewith or are incorporated herein by reference to other filings.
Item
17. Undertakings
The
undersigned Registrant hereby undertakes:
(a)
|
1. To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
|
i.
|
To
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
|
|
ii.
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. 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 prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20.0% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the
effective registration statement.
|
2. That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
4. That,
for the purpose of determining liability under the Securities Act of 1933 to any
purchaser:
|
i.
|
If
the registrant is subject to Rule 430C, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering,
other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of
and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such date of first use.
|
|
(b)
|
Insofar
as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
the Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such
issue.
|
II-5
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies that
it has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Boca Raton, Florida on the 20th day of
December, 2010.
iTrackr,
Inc.
|
||
By:
|
/s/
John Rizzo
|
|
John
Rizzo
|
||
Chief
Executive Officer, Principal Financial
Officer
and Principal Accounting 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.
Name
|
Title
|
Date
|
||
/s/ John Rizzo
|
Chairman,
Chief Executive Officer,
|
|||
John
Rizzo
|
Principal
Financial Officer and
|
|||
Principal
Accounting Officer
|
December
20, 2010
|
|||
/s/ Dave Baesler
|
Director
|
December
20, 2010
|
||
Dave
Baesler
|
||||
/s/ Michael Uhl
|
Director
|
December
20, 2010
|
||
Michael
Uhl
|
|
|
EXHIBIT
INDEX
Exhibit
|
||
Number
|
Description
|
|
3.1
|
Amended
and Restated Articles of Incorporation of Must Haves, Inc. Previously
filed as Exhibit Number 3.2 with Form 10-SB12G Registration Statement,
September 14, 2007, Commission File No. 000-52810; incorporated herein by
reference.
|
|
3.2
|
Amendments
to Articles of Incorporation filed as Exhibit to the Company’s Quarterly
Report Form 10-Q on November 24, 2009, incorporated herein by
reference.
|
|
3.3*
|
Amendments
to Articles of Incorporation filed with Florida Secretary of State on
March 9, 2010.
|
|
3.4
|
Bylaws
of Must Haves, Inc. Previously filed as Exhibit Number 3.3 with Form
10-SB12G Registration Statement on September 14, 2007, Commission File
No. 000-52810; incorporated herein by
reference
|
|
4
|
Form
of Share Certificate
|
II-6
5
|
Legal
opinion of Roetzel and Andress, LPA.
|
|
10.1
|
Agreement
and Plan of Merger. Previously filed as Exhibit 2.1 with Form 8-K on
December 16, 2009, Commission File No. 000-21810; incorporated herein by
reference.
|
|
10.2
|
Form
of 2010 Employment Agreement entered into with John Rizzo (incorporated by
reference from Exhibit 10.1 to the Current Report on Form 8-K filed with
the Securities and Exchange Commission on January 19,
2010).
|
|
10.3
|
Form
of 2010 Employment Agreement entered into with Ramesh Anand (incorporated
by reference from Exhibit 10.3 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on January 19,
2010).
|
|
10.4
|
Form
of 2007 Long-Term Equity Incentive Plan (incorporated by reference from
Exhibit 10.7 to the current Report on Form 8-K filed with the Securities
and Exchange Commission on January 19, 2010).
|
|
10.5
|
Saveology
Contract. Previously filed in the Company’s S-1/A on August 17,
2010, incorporated herein by reference.
|
|
10.6
|
Bluewater
note pursuant to Item 601(b)(10)(i) and (ii)(A) of Regulation
S-K. Previously filed in the Company’s S-1/A on August 17,
2010, incorporated herein by reference.
|
|
10.7
|
Respond
Q, LLC Contract.
|
|
14
|
Code
of Ethics. Previously filed as Exhibit 14.1 with Form 10-K, on March 31,
2008, incorporated herein by reference.
|
|
21
|
iTrackr
Systems, Inc. subsidiary - iTrackr, Inc.
|
|
23
|
Consent
of Auditor
|
|
23.2
|
|
Legal
Consent
|
*
|
Previously
filed in the Company’s S-1 on April 23,
2010.
|
II-7