Ocean Thermal Energy Corp - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Ocean Thermal Energy Corp	Financial_Report.xls
EX-31.01 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13A-14 - Ocean Thermal Energy Corp	ex3101q033112.htm
EX-32.01 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER) - Ocean Thermal Energy Corp	ex3201q033112.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________ to ___________

Commission File Number 033-19411-C

TetriDyn Solutions, Inc.
(Exact name of registrant as specified in its charter)

Nevada		20-5081381
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1651 Alvin Ricken Drive, Pocatello, ID 83201
(Address of principal executive offices, including zip code)

(208) 232-4200
(Registrant’s telephone number, including area code)

n/a
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer ¨
Non-accelerated filer o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 14, 2012, issuer had 23,031,863 outstanding shares of common stock, par value $0.001.

TABLE OF CONTENTS

Item	Description	Page

	PART I – FINANCIAL INFORMATION
Item 1	Financial Statements	3
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Operations (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3	Quantitative and Qualitative Disclosures about Market Risk	14
Item 4	Controls and Procedures	14

	PART II – OTHER INFORMATION
Item 3	Defaults upon Securities	15
Item 6	Exhibits	15
	Signature	16

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31,		December 31,
		2012		2011
		(Unaudited)
ASSETS
Current Assets
Cash		$	1,048	$	18,609
Accounts receivable			13,806		2,563
Prepaid expenses			7,932		11,888
Total Current Assets			22,786		33,060
Property and Equipment, net			18,522		22,319
Total Assets		$	41,308	$	55,379

LIABILITIES
Current Liabilities
Accounts payable		$	393,878	$	388,298
Accrued liabilities			177,833		159,591
Customer deposits			20,106		24,663
Notes payable, current portion			105,677		99,614
Total Current Liabilities			697,494		672,166
Long-Term Liabilities
Notes payable, net of current portion			200,866		209,667
Convertible note payable to related party			315,000		275,000
Total Long-Term Liabilities			515,866		484,667
Total Liabilities			1,213,360		1,156,833

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
Preferred stock - $0.001 par value
Authorized:	5,000,000 shares
Issued and outstanding:	1,200,000 shares and
	1,200,000 shares, respectively		1,200		1,200
Common stock - $0.001 par value
Authorized:	100,000,000 shares
Issued and outstanding:	23,031,863 shares and
	23,031,863 shares, respectively		23,032		23,032
Additional paid-in capital			2,896,351		2,896,351
Accumulated deficit			(4,092,635)		(4,022,037)
Total Stockholders' Deficit			(1,172,052)		(1,101,454)

Total Liabilities and Stockholders' Deficit		$	41,308	$	55,379

See the accompanying notes to condensed consolidated unaudited financial statements.

TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		For the Three Months Ended
		March 31,
		2012		2011
Revenue	$	49,077	$	211,008
Cost of Revenue		5,259		103,223
Gross Profit		43,818		107,785
Operating Expenses
General and administrative		45,183		78,133
Professional fees		14,529		14,509
Selling and marketing		6,271		30,352
Research and development		26,462		44,803
Total Operating Expenses		92,445		167,797
Net Loss from Operations		(48,627)		(60,012)
Other Income (Expenses)
Interest Expense		(21,971)		(21,531)
Total Other Income (Expenses)		(21,971)		(21,531)
Net Loss from Operations before
Provision for Income Taxes		(70,598)		(81,543)
Provision for Income Taxes		-		-
Net Loss		(70,598)		(81,543)

Total Basic and Diluted Loss Per Common Share	$	-	$	-

Basic and Diluted Weighted-Average
Common Shares Outstanding		23,031,863		21,881,863

See the accompanying notes to condensed consolidated unaudited financial statements.

TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	For the Three Months Ended
	March 31,
	2012		2011
Cash Flows from Operating Activities
Net Loss	$	(70,598)	$	(81,543)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		3,797		3,900
Changes in operating assets and liabilities:
Accounts receivable		(11,243)		(3,864)
Prepaid expenses		3,956		5,062
Accrued expenses		18,242		28,278
Accounts payable		5,580		12,111
Customer deposits		(4,557)		(7,265)
Net Cash Used in Operating Activities		(54,823)		(43,321)
Cash Flows from Investing Activities
Purchase of property and equipment		-		-
Net Cash Used in Investing Activities		-		-
Cash Flows from Financing Activities
Proceeds from borrowing under related party convertible note payable		40,000		25,000
Principal payments on notes payable		(2,738)		(9,903)
Net Cash Provided by Financing Activities		37,262		15,097
Net Decrease in Cash		(17,561)		(28,224)
Cash at Beginning of Period		18,609		65,007
Cash at End of Period	$	1,048	$	36,783

Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes	$	-	$	-
Cash paid for interest expense and lines of credit	$	17,166	$	11,212

See the accompanying notes to condensed consolidated unaudited financial statements.

TETRIDYN SOLUTIONS, INC., AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made that are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year. The interim condensed consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2011, including the financial statements and notes thereto.

Note 2 – Organization and Summary of Significant Accounting Policies

Nature of Business – TetriDyn Solutions, Inc. (the “Company”), specializes in providing business information technology (IT) solutions to its customers. The Company optimizes business and IT processes by utilizing systems engineering methodologies, strategic planning, and system integration to add efficiency and value to its customers’ business processes and to help its customers identify critical success factors in their business.

Principles of Consolidation – The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, an Idaho corporation also named TetriDyn Solutions, Inc. (“TetriDyn-Idaho”). Intercompany accounts and transactions have been eliminated in consolidation.

Business Segments – The Company has only one business segment for the three months ended March 31, 2012 and 2011.

Use of Estimates – In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates.

Cash and Cash Equivalents – For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

Revenue Recognition – Revenue from software licenses, related installation, and support services is recognized when earned and realizable. Revenue is earned and realizable when persuasive evidence of an arrangement exists; services, if requested by the customers, have been rendered and are determinable; and collectability is reasonably assured. Amounts received from customers prior to these criteria being met are deferred. Revenue from the sale of software is recognized when delivered to the customer or upon installation of the software if an installation contract exists. Revenue from post-contract support service is recognized as the services are provided, which is determined on an hourly basis. The Company recognizes the revenue received for unused support hours under support service contracts that have had no support activity after two years. Revenue applicable to multiple-element fee arrangements is divided among the software, the installation, and post-contract support service contracts using vendor-specific objective evidence of fair value, as evidenced by the prices charged when the software and the services are sold as separate products or arrangements.

The Company had three customers that represented more than 10% of sales for the three-month period ended March 31, 2012, and three customers that represented more than 10% of sales for the three-month period ended March 31, 2011, as follows:

	Three Months Ended March 31, 2012	Three Months Ended March 31, 2011
Customer A	10%	20%
Customer B	46%	--
Customer C	11%	--
Customer D	--	16%
Customer E	--	12%

Going Concern– The accompanying condensed consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern. As reflected in the accompanying condensed consolidated financial statements, the Company had a net loss $70,598 and used $54,823 of cash in operating activities for the three months ended March 31, 2012. The Company had a working capital deficiency of $674,708 and a stockholders’ deficiency of $1,172,052 as of March 31, 2012. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on its ability to increase sales and obtain external funding for its product development. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

Income Taxes – The Company accounts for income taxes under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740-10-25, “Income Taxes.” Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Fair Value of Financial Instruments – The carrying amounts of the Company’s current portion of accounts receivable, prepaid expenses, accounts payable, accrued liabilities, unearned revenue, notes payable, and related-party convertible note payable approximate fair value due to the relatively short period to maturity for these instruments.

Property and Equipment – Property and equipment are recorded at cost. Maintenance, repairs, and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful life of the asset, which is set at five years for computing equipment and vehicles and seven years for office equipment. Gains or losses on dispositions of property and equipment are included in the results of operations when realized.

Inventory – Inventory is recorded at cost and the Company utilizes the First-In, First-Out (FIFO) cost flow method. Gains or losses on dispositions of inventory are included in the results of operations when realized.

Net Profit (Loss) Per Common Share – Basic and diluted net profit (loss) per common share are computed based upon the weighted-average stock outstanding as defined by FASB ASC 260, “Earnings Per Share.” As of March 31, 2012 and 2011, 3,378,000 and 3,465,000, respectively, of common share equivalents for granted stock options were antidilutive and not used in the calculation of diluted net loss per share. Additionally, as of March 31, 2012 and 2011, 105,000,000 and 6,250,000, respectively, of common share equivalents for convertible note payables were antidilutive and not used in the calculation of diluted net loss per share.

Stock-Based Compensation – On June 17, 2009, at the Company’s annual shareholders meeting, the Company’s shareholders approved the 2009 Long-Term Incentive Plan under which up to 4,000,000 shares of common stock may be issued. The 2009 plan is to be administered either by the board of directors or by the appropriate committee to be appointed from time to time by such board of directors. Awards granted under the 2009 plan may be incentive stock options (“ISOs”) (as defined in the Internal Revenue Code), appreciation rights, options that do not qualify as ISOs, or stock bonus awards that are awarded to employees, officers, and directors who, in the opinion of the board or the committee, have contributed or are expected to contribute materially to the Company’s success. In addition, at the discretion of the board of directors or the committee, options or bonus stock may be granted to individuals who are not employees, officers, or directors, but contribute to the Company’s success.

Equity instruments issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB ASC 505, “Share-Based Payment.” Emerging Issues Task Force, or EITF, Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” defines the measurement date and recognition period for such instruments. In general, the measurement date is when either: (a) a performance commitment, as defined, is reached; or (b) the earlier of: (i) the non-employee performance is complete; or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the EITF.

Effective January 1, 2006, the Company adopted the provisions of FASB ASC 505 for its stock-based compensation plan. Under FASB ASC 505, all employee stock-based compensation is measured at the grant date, based on the fair value of the option or award, and is recognized as an expense over the requisite service period, which is typically through the date the options or awards vest. The Company adopted FASB ASC 505 using the modified prospective method. Under this method, for all stock-based options and awards granted prior to January 1, 2006, that remain outstanding as of that date, compensation cost is recognized for the unvested portion over the remaining requisite service period, using the grant-date fair value measured under the original provisions of FASB ASC 505 for pro forma and disclosure purposes. Furthermore, compensation costs will also be recognized for any awards issued, modified, repurchased, or cancelled after January 1, 2006.

Reclassifications – Certain amounts in the 2011 information have been reclassified to conform to the 2012 presentation. These reclassifications had no impact on the Company’s net loss or cash flows.

Note 3 – Investments

As of March 31, 2012 and March 31, 2011, the Company had an approximately 40% minority interest in an entity that is developing electronic livestock tracking systems. The Company has no management or financial control over this entity and therefore accounted for the investment using the cost method. The value of the investment was $0 as of March 31, 2012 and 2011.

Note 4 – Accounts Payable and Accrued Liabilities

As of March 31, 2012, the Company had $393,878 in accounts payable, $350,919 of which is due under multiple revolving credit arrangements with varying rates of interest between 5.25% and 27.24%.

As of March 31, 2012, the Company had $177,833 in accrued liabilities. The accrued liabilities included $133,327 that represents unpaid salaries, including accrued payroll taxes, for two of its officers.

Note 5 – Convertible Notes Payable to Related Party

In February 2012, the Company borrowed $40,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $4,000 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2014.

As of March 31, 2012, the Company had $315,000 in convertible notes payable to related party with $23,604 in accrued interest.

Note 6 – Notes Payable

As of October 25, 2011, a loan from one economic development entity was in default. The loan principal was $50,000 with accrued interest of $3,785 through March 31, 2012. The Company plans to work with the entity to arrange for an extension on the loan.

As of March 31, 2012, the Company was delinquent in payments on two loans to a second economic development entity. The Company owed this economic entity $7,183 in late payments with an outstanding balance of $164,287 and accrued interest of $7,780 as of March 31, 2012. Both loans are guaranteed by two of the Company’s officers. One loan is secured by liens on intangible software assets and the other loan is secured by the officers’ personal property. The Company is working with this entity to bring the payments current as soon as cash flow permits.

As of March 31, 2012, the Company was delinquent in payments on a loan to a third economic development entity. The Company owed the third economic entity $4,000 in late payments with an outstanding balance of $85,821 and accrued interest of $1,498 as of March 31, 2012. This loan is secured by a junior lien on all the Company’s assets and shares of founders’ common stock. The Company is working with this entity to bring the payments current as soon as cash flow permits.

Note 7 – Commitments and Contingencies

In March 2012, the executive compensation committee set the annual salaries for the Chief Executive Officer and the Deputy Chief Executive Officer to be $50,000 and $50,000, respectively, through calendar year 2012 and for subsequent calendar years until otherwise modified in a subsequent Executive Compensation Committee resolution.

In November 2011, a customer filed a complaint against the Company in order to receive a refund on a nonrefundable custom software product, purchased in September 2010. McKesson, the manufacturer of the software product, was also named in the complaint. The Company submitted a response rejecting the complaint. A court date was set for June 2012, but the customer requested a continuance of 30 to 60 days. The Company considers the potential litigation contingency to be without merit due to the clearly-stated and acknowledged non-return policy and the shared responsibility with the software manufacturer. It is too early in the process for management to reasonably estimate the outcome of this matter.

Note 8 – Subsequent Events

The Company has evaluated all subsequent events through May 15, 2012 for disclosure in preparing these condensed consolidated financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes to our financial statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors discussed elsewhere in this report.

Certain information included herein contains statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, such as statements relating to our anticipated revenues, gross margin and operating results, estimates used in the preparation of our financial statements, future performance and operations, plans for future expansion, capital spending, sources of liquidity, and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include those relating to our liquidity requirements, the continued growth of the software and IT services industries, the success of our product development, marketing and sales activities, vigorous competition in the software industry, dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), domestic or global economic conditions, the inherent uncertainty and costs of prolonged arbitration or litigation, and changes in federal or state tax laws or the administration of such laws.

Overview

We optimize business and IT processes by utilizing systems engineering methodologies, strategic development, and integration to add efficiency and value to our customers’ business processes and to help our customers identify critical success factors in their business.

We provide business IT solutions to the healthcare industry. We are expanding our service offerings into selected other professional industries as those markets develop and as we develop new applications for our integrated system of radio frequency identification and software solutions for tracking, management, and diagnostic systems.

Description of Expenses

General and administrative expenses consist of salaries and related costs for accounting, administration, finance, human resources, and information systems for internal use.

Professional fees expenses consist of fees related to legal and auditing services.

Selling and marketing expenses consist of advertising, promotional activities, trade shows, travel, and personnel-related expenses.

Research and development expenses consist of payroll and related costs for software engineers, management personnel, and the costs of materials and equipment used by these employees in the development of new or enhanced product offerings.

In accordance with FASB ASC 985, “Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,” development costs incurred in the research and development of new software products to be sold, leased, or otherwise marketed are expensed as incurred until technological feasibility in the form of a working model has been established. Internally generated, capitalizable software development costs have not been material to date. We have charged our software development costs to research and development expense in our statements of operations.

Property and equipment are recorded at cost. Maintenance, repairs, and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Gains or losses on dispositions of property and equipment are included in the results of operations when realized.

Results of Operations

Comparison of Three Months Ended March 31, 2012 and 2011

Revenues

Our revenue was $49,077 for the three months ended March 31, 2012, compared to $211,008 for the three months ended March 31, 2011, representing a decrease of $161,931, or 77%, for the three-month period. The decrease in revenues was due to the discontinuation of pursuing computing hardware sales and associated services.

Cost of Revenue

Our cost of revenue was $5,259 for the three months ended March 31, 2012, compared to $103,223 for the three months ended March 31, 2011, representing a decrease of $97,964, or 95%, for the three-month period. The gross margin percentage on revenue was 89% for the three months ended March 31, 2012, and 51% for the three months ended March 31, 2011. The increase in the gross margin percentage for the three months ended March 31, 2012, from the three months ended March 31, 2011, was due to the discontinuation of pursuing computing hardware sales and associated services. Hardware sales have a significantly lower profit margin than service sales.

Although the net changes and percent changes with respect to our revenues and our cost of revenue for the three months ended March 31, 2012 and 2011, are summarized above, the trends contained therein are limited and should not be viewed as a definitive indication of our future results.

Operating Expenses

General and Administrative — General and administrative expenses, including noncash compensation expense, were $45,183 for the three months ended March 31, 2012, compared to $78,133 for the three months ended March 31, 2011, representing a decrease of $32,950, or 42%, in 2012. The decrease in our general and administrative expenses for the three-month period ended March 31, 2012, as compared to the three months ended March 31, 2011, reflects the decrease in overhead related to a reduction of staff for the three months ended March 31, 2012, as compared to the three months ended March 31, 2011.

Professional Fees — Professional fees expenses were $14,529 for the three months ended March 31, 2012, compared to $14,509 for the three months ended March 31, 2011, representing a decrease of $20, or 0%, for the three-month period. The decrease in our professional fees expenses for the three-month period ended March 31, 2012, as compared to the three months ended March 31, 201, was immaterial.

Selling and Marketing — Selling and marketing expenses were $6,271 for the three months ended March 31, 2012, compared to $30,352 for the three months ended March 31, 2011, representing a decrease of $24,081, or 79%, for the three-month period. The decrease in our selling and marketing expenses for the three-month period ended March 31, 2012, as compared to the three months ended March 31, 201, reflects the reduction of staff for the three months ended March 31, 2012, as compared to the three months ended March 31, 2011.

Research and Development — Research and development expenses were $26,462 for the three months ended March 31, 2012, compared to $44,803 for the three months ended March 31, 2011, representing a decrease of $18,341, or 41%, for the three-month period. The decrease in research and development expenses reflects the reduction of staff for the three months ended March 31, 2012, as compared to the three months ended March 31, 2011.

Interest expense was $21,971 for the three months ended March 31, 2012, as compared to $21,531 for the three months ended March 31, 2011, representing an increase of $440, or 2%, for the three-month period. The increase in interest expense was immaterial.

Liquidity and Capital Resources

At March 31, 2012, our principal source of liquidity consisted of $1,048 of cash, as compared to $18,609 of cash at December 31, 2011. In addition, our stockholders’ deficit was $1,172,052 at March 31, 2012, compared to stockholders’ deficit of $1,101,454 at December 31, 2011, an increase in the deficit of $70,598.

Our operations used $54,823 of net cash during the three months ended March 31, 2012, as compared to the $43,321 of net cash used by our operations during the three months ended March 31, 2011. The $11,502 increase in the net cash used by our operating activities was due a reduced accrual rate for our accrued expenses during the three-month period ended March 31, 2012, compared to the three-month period ended March 31, 2011.

Investing activities for the three months ended March 31, 2012 and 2011, used no net cash.

Financing activities for our operations provided net cash of $37,262 during the three months ended March 31, 2012, compared to providing net cash of $15,097 during the three months ended March 31, 2011. The increase of $22,165 of net cash provided by financing activities is the result of reduced principal payments on notes payable while securing a related-party loan in 2012.

We are focusing our efforts on increasing revenue while we explore external funding alternatives as our current cash is insufficient to fund operations for the next 12 months. We expect that additional sales will enable us to increase our payments on indebtedness and support the development of other products. Although our independent auditors have expressed substantial doubt about our ability to continue as a going concern, we feel that our revenues are sufficient for our IT business solutions segment to continue as a going concern. However, in order to expand our product offerings, we expect that we will require additional investments and sales.

As we continue development of new products and identify specific commercialization opportunities, we will focus on those product markets and opportunities for which we might be able to get external funding through joint venture agreements, strategic partnerships, or other direct investments.

We have no significant contractual obligations or commercial commitments not reflected on our balance sheet as of this date.

Critical Accounting Policies

We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with no need for management’s judgment in its application. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the notes to the December 31, 2011, consolidated financial statements. Note that our preparation of the condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Revenue Recognition

Revenue from software licenses and related installation and support services is recognized when earned and realizable. Revenue is earned and realizable when persuasive evidence of an arrangement exists; services, if requested by the customers, have been rendered and are determinable; and ability to collect is reasonably assured. Amounts billed to customers prior to these criteria being met are deferred. Revenue from the sale of software is recognized when delivered to the customer or upon installation of the software if an installation contract exists. Revenue from post-contract telephone support service contracts is recognized as the services are provided, determined on an hourly basis.

Revenue applicable to multiple-element fee arrangements is divided among the software, the installation, and post-contract support service contracts using vendor-specific objective evidence of fair value, as evidenced by the prices charged when the software and the services are sold as separate products or arrangements.

Income Taxes

We account for income taxes under FASB ASC 740-10-25, “Income Taxes.” Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities.”

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit to the Securities and Exchange Commission under the Securities Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that information is accumulated and communicated to our management, including our principal executive and principal financial officer (whom we refer to in this periodic report as our Certifying Officer), as appropriate to allow timely decisions regarding required disclosure. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management evaluated, with the participation of our Certifying Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act) as of March 31, 2012, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Based upon that evaluation, our Certifying Officer concluded that, as of March 31, 2012, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. There has been no change in our internal control over financial reporting during the three months ended March 31, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our Certifying Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. 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 the controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Our Certifying Officer conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, he concluded that our internal control over financial reporting was effective as of March 31, 2012.

PART II – OTHER INFORMATION

ITEM 3. DEFAULTS ON SECURITIES

As of October 25, 2011, a loan from one economic development entity was in default. The loan principal was $50,000 with accrued interest of $3,785 through March 31, 2012. We plan to work with the entity to arrange for an extension on the loan.

As of March 31, 2012, we were delinquent in payments on two loans to a second economic development entity. We owed this economic entity $7,183 in late payments with an outstanding balance of $164,287 and accrued interest of $7,780 as of March 31, 2012. Both loans are guaranteed by two of our officers. One loan is secured by liens on intangible software assets and the other loan is secured by the officers’ personal property. We are working with this entity to bring the payments current as soon as cash flow permits.

As of March 31, 2012, we were delinquent in payments on a loan to a third economic development entity. We owed the second economic entity $4,000 in late payments with an outstanding balance of $85,821 and accrued interest of $1,498 as of March 31, 2012. This loan is secured by a junior lien on all our assets and shares of founders’ common stock. We are working with this entity to bring the payments current as soon as cash flow permits.

ITEM 6. EXHIBITS

The following exhibits are filed as a part of this report:

Exhibit Number*	Title of Document	Location

Item 10	Material Contracts
10.16	Promissory Note dated February 10, 2012	Incorporated by reference from the current report on Form 8-K filed February 16, 2012

10.17	Promissory Note dated February 22, 2012	Incorporated by reference from the current report on Form 8-K filed February 28, 2012

Item 31	Rule 13a-14(a)/15d-14(a) Certifications
31.01	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14	Attached

Exhibit Number*	Title of Document	Location

Item 32	Section 1350 Certifications
32.01	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer and Chief Financial Officer)	Attached

_______________

*	All exhibits are numbered with the number preceding the decimal indicating the applicable SEC reference number in Item 601 and the number following the decimal indicating the sequence of the particular document. Omitted numbers in the sequence refer to documents previously filed as an exhibit.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TETRIDYN SOLUTIONS, INC.
	(Registrant)


Date: May 15, 2012	By:	/s/ David W. Hempstead
		David W. Hempstead, President, Chief Executive Officer, and Principal Financial Officer

Ocean Thermal Energy Corp - FORM 10-Q - May 15, 2012

Attached files

Ocean Thermal Energy Corp Reports