INTREorg SYSTEMS INC. - FORM 10-Q

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EX-32.1 - INTREorg SYSTEMS INC.	iorg10qex321093013.htm

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

o 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

INTREorg Systems, Inc.

(Exact name of registrant as specified in its charter)

Texas		45-0526215
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

2600 E. Southlake Blvd., Suite 120-366

Southlake, TX 76092

817-491-8611

(Issuer's telephone number)

(Former address)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 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 o No X

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 "larger accelerated filer," “accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer			Accelerated Filer
Non-accelerated filer			Smaller reporting company	X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) Yes o No X

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 (Sec. 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 o No X

As of October 29, 2014, the Registrant has 13,054,872 shares of common stock outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements	4

Unaudited Balance Sheets at September 30, 2013 and December 31, 2012	4

Unaudited Statements of Operations for the three and nine months ended September 30, 2013 and 2012 and the period from November 3, 2003 (Inception) to September 30, 2013	5

Unaudited Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 and the period from November 3, 2003 (Inception) to September 30, 2013	6

Unaudited Notes to Financial Statements	7

PART II – OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	14

Item 5. Exhibits	15

INTRODUCTORY NOTE

Unless specifically set forth to the contrary, when used in this report the terms “INTREorg,” "we", "our", the "Company" and similar terms refer to INTREorg Systems, Inc., a Texas corporation.

Special Note Regarding Forward-Looking Statements

This report contains forward-looking statements and information that are based on the beliefs of our management as well as assumptions made by and information currently available to us. Such statements should not be unduly relied upon. When used in this report, forward-looking statements include, but are not limited to, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions, as well as statements regarding new and existing products, technologies and opportunities, statements regarding market and industry segment growth and demand and acceptance of new and existing products, any projections of sales, earnings, revenue, margins or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements regarding future economic conditions or performance, uncertainties related to conducting business, any statements of belief or intention, and any statements or assumptions underlying any of the foregoing. These statements reflect our current view concerning future events and are subject to risks, uncertainties and assumptions. There are important factors that could cause actual results to vary materially from those described in this report as anticipated, estimated or expected, including, but not limited to: competition in the industry in which we operate and the impact of such competition on pricing, revenues and margins, volatility in the securities market due to the general economic downturn; Securities and Exchange Commission (the “SEC”) regulations which affect trading in the securities of “penny stocks,” and other risks and uncertainties. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward- looking statements, even if new information becomes available in the future. Depending on the market for our stock and other conditional tests, a specific safe harbor under the Private Securities Litigation Reform Act of 1995 may be available. Notwithstanding the above, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) expressly state that the safe harbor for forward-looking statements does not apply to companies that issue penny stock. Because we may from time to time be considered to be an issuer of penny stock, the safe harbor for forward-looking statements may not apply to us at certain times.

Item 1. Financial Statements.

INTREorg Systems, Inc.
(A Development Stage Company)
Balance Sheets
(Unaudited)
	September 30,			December 31,
	2013			2012

ASSETS:
Current Assets:
Cash	$	-		$	26,060
Prepaid expenses		5,198
Advances - related party		-			20,000
Total Current Assets		5,198			46,060

Licensing agreement		28,125			37,500

TOTAL ASSETS	$	33,323		$	83,560

LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable	$	465,287		$	286,068
Accounts payable - related party		172,070			35,743
Accrued interest and other liabilities		315,395			283,742
Accrued contingencies		453,290			453,290
Revolving line of credit - -related party		174,144			-
Notes payable		521,000			521,000
Total Current Liabilities		2,101,186			1,579,843

Long-Term Liabilities
Revolving line of credit - related party		-			121,693
Total Liabilities		2,101,186			1,701,536

Commitments and Contingencies

Stockholders' Deficit

Preferred Stock, no par value; 10,000,000 shares authorized
none issued and outstanding
at September 30, 2013 and December 31, 2012, respectively		-			-

Common Stock, no par value; 100,000,000 shares authorized
12,565,366 and 12,202,266 shares issued and outstanding
at September 30, 2013 and December 31, 2012, respectively		1,744,413			1,653,913

Additional paid in capital		231,189			140,648

Deficit accumulated during the development stage		(4,043,465	)		(3,412,537	)

Total stockholders' deficit		(2,067,863	)		(1,617,976	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	33,323		$	83,560

The accompanying notes are an integral part of these financial statements.

INTREorg Systems, Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)

													November 3, 2003
	For the Three Months Ended						For the Nine Months Ended						(Inception) to
	September 30,						September 30,						September 30,
	2013			2012			2013			2012			2013

Revenue	$	-		$	-		$	-		$	-		$	750

Depreciation		-			-			-			-			15,585
General and administrative		175,097			37,742			586,948			84,830			3,711,391

Total Expenses		175,097			37,742			586,948			84,830			3,726,976

Operating Loss		(175,097	)		(37,742	)		(586,948	)		(84,830	)		(3,726,226	)

Other Income / (Expense)

Forgiveness of debt		-			-			-			-			166,902
Interest Expense		(14,872	)		(19,969	)		(43,980	)		(60,305	)		(484,141	)

Total other income / (expense)		(14,872	)		(19,969	)		(43,980	)		(60,305	)		(317,239	)

Net Loss	$	(189,969	)	$	(57,711	)	$	(630,928	)	$	(145,135	)	$	(4,043,465	)

Net Income/Loss per share of common
stock	$	(0.02	)	$	(0.01	)	$	(0.05	)	$	(0.01	)
Weighted average number of common
shares outstanding		12,478,937			10,596,320			12,375,877			10,585,490

The accompanying notes are an integral part of these financial statements.

INTREorg Systems, Inc.
(A Development Stage Company)
Statement of Cash Flows
(Unaudited)

							November 3, 2003
	For the Nine Months Ended						(Inception) to
	September 30,						September 30,
	2013			2012			2013

Cash Flows from Operating Activities
Net Loss	$	(630,928	)	$	(145,135	)	$	(4,043,465	)
Adjustments to reconcile net loss to net cash used
by operating activities
Common stock and options issued for services		181,041			-			745,630
Amortization		9,375			-			25,747
Reserve for investment		-			-			1,000
Changes in operating assets and liabilities								-
(Increase) Prepaid expenses		(5,198	)		-			(5,198	)
Advances / (repayment) - related party		20,000			-			-
Increase in accounts payable and accrued expenses		210,872			(13,374	)		1,279,704
Decrease in accounts payable related party		136,327			21,986			205,698
Increase / (decrease) in accrued contingencies		-			-			453,290

Net Cash Flows Used by Operating Activities		(78,511	)		(136,523	)		(1,337,594	)

Cash Flows from Investing Activities
Acquisition of Fixed Assets		-			-			(16,372	)
Acquisition of Investments		-			-			(1,000	)

Net Cash Flows used by Investing Activities		-			-			(17,372	)

Cash Flows from Financing Activities
Receipt of capital contribution		-			9,222			9,222
Increase in loans payable		-			-			521,000
Increase / (decrease) in related party revolving line of credit		52,451			(25,000	)		174,144
Proceeds from sale of common stock		-			250,000			403,500
Issuance of Preferred A Stock		-			-			247,100

Net Cash Flows Provided by Financing Activities		52,451			234,222			1,354,966

Net (Decrease) Increase in Cash		(26,060	)		97,699			-

Cash at Beginning of Period		26,060			33			-

Cash at End of Period	$	-		$	97,732		$	-

Supplemental Disclosure of Cash Flow Informantion

Cash paid for interest	$	-		$	-		$	32,008
Cash paid for taxes	$	-		$	-		$	-

Supplemental Disclosure of Non-Cash Flow Information

Debt converted to Convertible Notes Payable	$	-		$	-		$	471,202
Debt and accued interest converted to Common Stock	$	-		$	-		$	532,650
Common Stock issued for licensing agreement	$	-		$	-		$	37,500

The accompanying notes are an integral part of these financial statements.

INTREORG SYSTEMS, INC.

(A Development Stage Company)

Notes to the Financial Statements

September 30, 2013

(Unaudited)

NOTE 1. ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

Organization

INTREOrg Systems, Inc. (the “Company”) was incorporated under the laws of the State of Texas on November 3, 2003. The Company was organized for the purpose of providing internet consulting and "back office" services to companies. The Company's fiscal year end is December 31st.

Basis of Presentation

Interim Accounting

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's annual report for the year ended December 31, 2012 as filed with the SEC on Form 10-K on April 16, 2013. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2012 as reported in Form 10-K have been omitted.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.

Development Stage Company

The Company has not earned significant revenues from limited principal operations. Accordingly, the Company's activities have been accounted for as those of a Development Stage Enterprise. Among the disclosures required are that the Company's financial statements be identified as those of a development stage company, and that the statements of operations, stockholders' deficit and cash flows disclose activity since the date of the Company's inception.

Going Concern

The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company's current liabilities exceed the current assets by $2,095,988 at September 30, 2013. During the nine months ended September 30, 2013, the Company did not generate any revenues. At September 30, 2013, the Company had a deficit accumulated during its development stage of $4,043,465.

The Company is in the development stage and has not earned revenues from operations. The Company's ability to continue as a going concern is dependent upon its ability to raise the necessary capital to further implement its business plan, launch its operations and ultimately achieve profitable operations. There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash flow from operations. Management believes that actions presently being taken provide the opportunity for the Company to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Summary of Significant Accounting Policies

Recent Accounting Pronouncements

Management has evaluated accounting standards and interpretations issued but not yet effective as of September 30, 2013, and does not expect such pronouncements to have a material impact on the Company’s financial position, operations, or cash flows.

NOTE 2. RELATED PARTY TRANSACTIONS.

Line of Credit

On June 19, 2011, the Company entered into a revolving line of credit with J.H. Brech, LLC (“Brech”); a related party, to provide access to funding for our operations (the "Line of Credit"). Under the terms of the 8% Line of Credit, we have access of up to $500,000. Advances under this Line of Credit were in abeyance for approximately 12 months, between August of 2011 and August of 2012; however, the Line of Credit is open again and we may take advances out pursuant to the terms summarized herein. As of the date of this Report, since the abeyance was lifted, the Company has taken $262,679 in advances under this Line of Credit.

Interest accrues at 8% per annum on the outstanding principal amount due under the revolving Line of Credit and is payable semi-annually on June 30 and December 31 of each year commencing June 30, 2011. The principal and any accrued but unpaid is due on the earlier of:

	•	June 19, 2014, or

	•	the date on which we receive at least $1.5 million in gross proceeds through one or a series of transactions.

At the Company’s sole discretion, we can pay the interest in shares of our common stock valued as follows:

	•	if our common stock is not listed for trading on an exchange or quoted for trading on the OTC Bulletin Board or the OTC Markets Group (formerly the Pink Sheets), interest shares are valued at the greater of $1.00 per share or the fair market value as determined in good faith by us based upon the most recent arms-length transaction, or
	•	if our common stock is listed for trading on an exchange or quoted for trading on the OTC Bulletin Board or the OTC Markets Group, interest shares will be valued at the greater of (A) the closing price of our common stock on the trading day immediately preceding the date the interest payment is due and payable, or (B) the average closing price of the common stock for the five trading days immediately preceding the date the interest payment is due and payable.

The Company may prepay the note at any time without penalty. Upon an event of default, Brech has the right to accelerate the note. Events of default include:

	•	our failure to pay the interest and principal when due,
	•	a default by us under the terms of the note,
	•	appointment of a receiver, filing of a bankruptcy provision, a judgment or levy against our company exceeding $50,000 or a default under any other indebtedness exceeding $50,000,
	•	a liquidation of our company or a sale of all or substantially all of our assets, or
	•	a change of control of our company as defined in the note.

On August 25, 2014, we entered into an amendment to the Line of Credit to provide that the conversion price shall be revised from $1.00 per share to $0.25 per share. The parties also acknowledged and agreed that no payment of principal of the Line of Credit has been made and received, and accordingly, the amended conversion price applies to both the interest and principal of the Line of Credit.

At September 30, 2013, the Company owed JH Brech, a related party, $174,144 for amounts advanced to the Company for working capital expenses.

The maturity date on the Line of Credit was not amended. The balance is past due and has been reclassified to current liabilities as of September 30, 2013. As of the date of this Report, J.H. Brech, LLC has not declared a default on the Line of Credit.

NOTE 3. NOTES PAYABLE

The Company’s notes payable totaling $521,000 bear interest at 6% to 10% per annum. Accrued and unpaid interest at September 30, 2013 amounted to approximately $255,725 and is included with accrued interest and other liabilities in the accompanying financial statements. All of the Company’s notes payable are past due and in default.

NOTE 4. ACCRUED CONTINGENCIES.

As of September 30, 2013, management estimated $453,290, as amounts for liabilities incurred by former management of the Company.

NOTE 5. CAPITAL STOCK.

From the beginning of this fiscal year to September 30, 2013, the Company authorized the issuance of 185,600 shares valued at $47,200 to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them.

From the beginning of this fiscal year to September 30, 2013, the Company authorized the issuance 145,000 shares valued at $36,800 to Kevin A. Carreno in settlement of outstanding invoices for legal services and for legal services provided.

From the beginning of this fiscal year to September 30, 2013, the Company authorized the issuance of 32,500 shares valued at $6,500 to Ryan Buchman for website maintenance services.

While we have not issued the certificates for these shares as of September 30, 2013, the issuance of the certificate is considered a ministerial act and we have reflected these shares as issued and outstanding at September 30, 2013. The shares have been issued as of the date of this Report.

2010 Stock Option and Award Incentive Plan

On June 29, 2010, the Company’s shareholders approved the adoption of the Company’s 2010 Stock Option and Award Incentive Plan (the “Plan”). The Plan, which provides for the grant of stock options to the Company’s directors, officers, employees, consultants, and advisors of the Company, is administered by a committee consisting of members of the Board of Directors (the "Stock Option Committee"), or in its absence, the Board of Directors. The Plan provides for a total of 2,000,000 shares of common stock to be reserved for issuance subject to options.

Pursuant to the Software Development and Ongoing Maintenance Agreement we entered into with Central Coast Technology Associates ("Central Coast") on June 13, 2013, we issued Central Coast options to purchase up to 1,000,000 shares of our common stock at an exercise price of $0.25 per share. The options vest in stages based on completion of work pursuant to the Software Development Agreement and also contain provisions for cashless exercise. If Central Coast fails to fully complete such services, we have the right to purchase such options for $1,000 and terminate the Software Development Agreement; provided however, that if Central Coast fails to complete only part of such services, we can purchase up to 50% of the options for $500.

A summary of option activity as of September 30, 2013 and changes during the period then ended are presented below:

Options	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value

Balance January 1, 2013		1,060,000		$	3.00		2.75	$	3,180,000

Granted		-			-		-		-
Exercised		-			-				-
Expired		(160,000	)		4.25		-		(680,000	)

Balance September 30, 2013		900,000			2.33		2.00	$	2,097,000

Options exercisable at September 30, 2013		750,000			2.33		2.00	$	1,747,500

During the period ended September 30, 2013, no stock options were granted. Options outstanding total 900,000 shares vest over one year from the date of grant. The stock options have an average exercise price of $2.33 per share and will expire 3 years from the date of grant. The options are estimated to have had a value of approximately $119,388 on the date of grant. The options vest ratably over the vesting period of one year and stock compensation expense of $90,541 was expensed during the nine months ended September 30, 2013.

NOTE 6. SUBSEQUENT EVENTS

On October 1, 2013, the Company authorized the issuance of 214,706 shares valued at $42,941 to Vincent J. D’Antonio for legal services.

During the quarter ended December 31, 2013, the Company authorized the issuance of 5,000 shares valued at $1,250 to Keven A. Carreno for legal services.

During the quarter ended December 31, 2013, the Company authorized the issuance of 60,000 shares valued at $14,800 to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them.

During the quarter ended March 31, 2014, the Company authorized the issuance of 69,800 shares valued at $22,940 to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them.

On April 29, 2014, the Company authorized the issuance of 20,000 shares valued at $6,200 to PT Platinum Consulting, LLC for professional services related to financial reporting and accounting.

During the quarter ended June 30, 2014, the Company authorized the issuance of 60,000 shares valued at $18,800 to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them.

On July 31, 2014, the Company authorized the issuance of 20,000 shares valued at $5,000 to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them.

On August 31, 2014, the Company authorized the issuance of 20,000 shares valued at $4,000 to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them.

On September 30, 2014, the Company authorized the issuance of 20,000 shares valued at $6,000 to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them.

On October 5, 2013, we engaged Darren Dunckel as a consultant for the Company. On January 10, 2014, our Board of Directors appointed Mr. Darren Dunckel as the Company's President.

As of the date of this Report, all the shares included above have been physically issued, except for the shares authorized during the quarters ended June 30, 2014 and September 30, 2014.

Item 2. DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements.

Overview

We are a development stage company that was organized for the purpose of providing consulting and "back office" services to other companies. Our business plan is to become an integrated provider of Software as a Service (SaaS) applications, Stock Transfer Analytics (“STA”) software application and consulting. Our target market is publicly-traded, emerging growth companies. Our business plan is to engage customers using our proprietary STA software to help customers with compliance, fund raising and investor relations. We believe this will lead to additional opportunities to provide consulting services and/or SaaS for these companies.

Since inception we have been evaluating different models to carry out our business plan and develop the services and software we seek to offer to our customers. We have conducted years of test marketing and spent hundreds of hours of research and development. Over the years, between the trials of a new business and the slowing economy, we experienced managerial and employee turnover and have not always been able to afford to carry out our plans. However, we continued to maintain our SEC reporting and work on finding products and services that meets our criteria. We believe we have finally established the right business model, products and services, and management group to begin to implement our business plan.

We have been exploring providing consulting services for publicly traded companies focusing on data and information regarding their shareholder base and trading activities. There have been preliminary meetings with possible vendors, clients and data providers, but no formal or definitive agreements (other than those described herein) have been entered as of the date of this filing. Since January 1, 2011, we have been focused on obtaining the licensing for software from PISA (as further described below), which is crucial for providing the consulting services we intend to offer and for researching the viability of pricing structures within the industry.

In October 2012, we executed an Intellectual Property License and Consulting Agreement (the “PISA Agreement”) with Public Issuer Stock Analytics, LLC (“PISA”) that provides us the exclusive right to market and sell services associated with certain proprietary intellectual property owned by PISA. PISA further agreed to act as a consultant to us, providing the actual services associated with the certain proprietary intellectual property. The term of the PISA Agreement is for three years. Under the PISA Agreement, PISA is entitled to the following compensation: 250,000 shares of Common Stock when the PISA Agreement was executed; 20,000 shares per month based on the closing price of our Common Stock on the last business day of each respective month (the "Share Royalty"); and 1%, 2% or 3% of gross sales, due on a quarterly basis, up and until the second anniversary, third anniversary or termination of the agreement, respectively (the "Gross Sales Royalty"). If no gross sales exist for a given period, PISA's only compensation for such period shall be the Share Royalty. The Gross Sales Royalty may be paid in cash or restricted shares of Common Stock; if paid in Common Stock, such stock shall be issued based on the market close on the last business day of each month in each quarter as such market close is found in Bloomberg. As of the date of this Report, PISA has received the initial 250,000 shares of common stock due upon execution of the agreement and an aggregate of 750,000 shares as Share Royalty.

As described later in this section, our ability to fully implement our business plan is dependent both on implementing the licensing agreement with the related party as well as raising sufficient capital to fund the further development of our company. Going forward, we expect that our efforts will be focused on parallel courses to achieve both of these goals. While we have raised funds in private offerings, there are no assurances, however, that we will be able to raise all of the necessary capital and without access to funding we will be unable to pursue other aspects of our business development.

Recent Events

On June 13, 2013, we signed a Software Development and Ongoing Maintenance Agreement with Central Coast Technology Associates ("Central Coast"). Pursuant to the Software Development Agreement, Central Coast shall help us design, develop and deploy software platforms for our services, for which we agreed to compensate Central Coast $100 for each full hour expended in satisfaction of Central Coast's contractually agreed to duties; provided however, that initially, the maximum hours to be compensated under the Software Development Agreement shall be 1,000, which is subject to adjustment upon proper notification and consent. Central Coast is responsible for keeping accurate records of time spent on services to be provided under the Software Development Agreement and shall be paid upon the completion of certain duties. In addition to the $100 per hour compensation described above, we also agreed to pay Central Coast an ongoing development fee of $250 for each full hour spent performing such services for our platform.

Central Coast also agreed that during the term of the Software Development Agreement and for the three year period thereafter, it shall not provide software development services to our competitors.

Central Coast secured its obligation to complete its services to us with the options granted to it concurrently with the Software Development Agreement. Pursuant to the terms of the Option Agreement, Central Coast holds an option purchase up to 1,000,000 shares of our common stock at an exercise price of $0.25 per share. The options vest in stages based on completion of work pursuant to the Software Development Agreement and also contain provisions for cashless exercise. If Central Coast fails to fully complete such services, we have the right to purchase such options for $1,000 and terminate the Software Development Agreement; provided however, that if Central Coast fails to complete only part of such services, we can purchase up to 50% of the options for $500.

The Software Development Agreement shall continue in perpetuity until terminated, by giving written notice to the other party. Either party may terminate the Software Development Agreement at any time because of a material breach of the terms of the Software Development Agreement, failure to pay fees owed, mutual consent to terminate the agreement or if either party enters into liquidation or becomes unable to pay its debts. Our damages, if any, are limited to the amount of compensation we paid during the term of the Software Development Agreement. The Software Development Agreement also contains indemnification provisions.

Going Concern

We have incurred net losses of approximately $4 million since inception through September 30, 2013. The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2012 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our operating losses and need to raise additional capital. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our interim financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to increase our revenues and report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.

Results of Operations

For the Three Months Ended September 30, 2013 Compared to the Three Months Ended September 30, 2012

During the fiscal quarters ended September 30, 2013 and 2012, we did not recognize any revenue from our operational activities. We do not expect to recognize revenues from our operational activities in 2013, as management is focused on the securing the licensing agreement with the related party as well as raising sufficient capital to fund the further development of our company.

During the fiscal quarter ended September 30, 2013, we recognized operational expenses of $175,097, compared to $37,742 during the same quarter in 2012. The increase of $137,355 or 364% was a result of the increase in professional fees.

We expect that these expenses will continue to increase during 2013 as we begin to further implement our business plan, although we are unable at this time to quantify the actual amount of this anticipated increase as it will be based upon our varying level of operations.

During the three months ended September 30, 2013, we recognized a net loss of $189,969, compared to $57,711 for the same quarter in 2012. The increase of $132,258 was primarily attributable to the increase in professional fees.

For the Nine months Ended September 30, 2013 Compared to the Nine months Ended September 30, 2012

During the nine months ended September 30, 2013 and 2012, we did not recognize any revenue from our operational activities. We do not expect to recognize revenues from our operational activities in 2013, as management is focused on the securing the licensing agreement with the related party as well as raising sufficient capital to fund the further development of our company.

During the nine months ended September 30, 2013, we recognized operational expenses of $586,948 compared to $84,830 during the same period in 2012. The increase of $502,118 or 592% was a result of the increase in professional fees.

During the nine months ended September 30, 2013, we recognized a net loss of $630,928 compared to $145,135 for the same period in 2012. The increase of $485,793 was primarily attributable to the increase in professional fees.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. At September 30, 2013, we had a working capital deficit of $2,095,988 as compared to a working capital deficit of $1,533,783 at December 31, 2012. Historically we have relied upon debt funding and advances and loans from related parties to fund our cash needs. Our current liabilities increased by $521,343 at September 30, 2013 from December 31, 2012 primarily related to increases in accounts payable, accrued interest and other liabilities, and the reclassification of the revolving line of credit to a related party because it was past due. Accounts payable and related party accounts payable increased $315,546, while accrued interest and other liabilities increased $31,653.

During the nine months ended September 30, 2013, J.H. Brech, LLC made working capital advances totaling of $52,451. At September 30, 2013, we owe a total of $174,144 under the working capital line of credit.

Our balance sheet at September 30, 2013, includes $453,290 of accrued contingencies. This amount represents an estimate of certain operating liabilities which may have been incurred by prior management that we are unable to confirm.

At September 30, 2013, we have $521,000 principal amount and $255,725 of accrued interest due under the terms of various promissory notes to third parties. These notes, which are unsecured, are all in default and we do not have sufficient funds to repay these obligations. As a result of the default, the note holders could enforce their rights under these notes at any time.

Net cash used in operating activities for the nine months ending September 30, 2013 was $78,511 as compared to net cash used in operating activities of $136,523 for the nine months ending September 30, 2012. We did not generate or use any cash from investing activities during the nine months ended September 30, 2013 and 2012. Cash flows provided by financing activities included an increase of $52,451 from a line of credit to a related party for the nine months ended September 30, 2013 and a capital contribution of $9,222, a principal reduction on the line of credit to a related party of $25,000, and proceeds from the sale of common stock of $250,000 for the nine months ended September 30, 2012.

We have not generated any revenues and we are dependent upon advances from a related party to fund our ongoing general and administrative expenses and satisfy our obligations. We need to initially raise $500,000 to fund the initial launch of our business plan, in addition to funds necessary to satisfy our current obligations. In March 2011, we raised $100,000 in a private placement of our securities and we continue to seek the additional necessary capital. We do not, however, have any agreements or understanding with any third party to provide this financing. Until we can raise the necessary funds, we will be unable to further implement our business plan. Given the development stage nature of our company and the thinly traded nature of the public market for our common stock, there are no assurances we will be able to raise the necessary capital. If we are unable to raise capital as necessary, our ability to continue as a going concern is in jeopardy and investors could lose their entire investment in our company.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A summary of significant accounting policies is included in Note 1 to the financial statements included in this report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.

Item 4. CONTROLS AND PROCEDURES

The Company has failed to timely file its quarterly reports on Form 10-Q and the annual report on Form 10-K for the fiscal year ending December 31, 2013, and quarterly reports on Form 10-Q for the first two quarters of the fiscal year ending December 31, 2014, which demonstrates that its Disclosure Controls and Procedures have been inadequate. However, the Company has been working diligently to file all outstanding reports and intends to file the outstanding quarterly reports by the end of this fiscal year ending December 31, 2014.

Evaluation of Disclosure Controls and Procedures

As of December 31, 2012 and September 30, 2013, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, management concluded that our disclosure controls and procedures were not effective as of December 31, 2012 or September 30, 2013, to cause the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by SEC, and that such information is accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Going forward from this filing, the Company intends to re-establish and maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, 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, 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. The design of any system of controls 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.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting during the three month period ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Information on any and all equity securities we have sold during the period covered by this Report that were not registered under the Securities Act of 1933, as amended and not included in a previously filed Current Report on Form 8-K is set forth below:

During the quarter ended September 30, 2013, the Company authorized the issuance of 60,000 shares valued at $12,400 to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them.

During the quarter ended September 30, 2013, the Company authorized the issuance 15,000 shares valued at $3,100 to Kevin A. Carreno in settlement of outstanding invoices for legal services.

During the quarter ended September 30, 2013, the Company authorized the issuance of 32,500 shares valued at $6,500 to Ryan Buchman for legal services.

All of the transactions listed above were made pursuant to the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of the Securities Act for sales not involving a public offering or Rule 506(b). The securities issued have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

ITEM 5. EXHIBITS

The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.

10.1		Form of Agreement with Central Coast Technology Associates (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8K filed on June 18, 2013)

10.2		Form of Option Agreement for Central Coast Technology (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8K filed on June 18, 2013)

10.3		Consulting Agreement with Darren Dunckel (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8K filed on January 14, 2014)

10.4		Form of First Letter of Addendum and First Amendment to $500,000 8% Revolving Credit Note by and between the Company and J.H. Brech, LLC (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8K filed on August 28, 2014)


31.1		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **

31.2		Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **

32.1		Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

32.2		Certification of the Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

101.INS		XBRL INSTANCE DOCUMENT **
101.SCH		XBRL TAXONOMY EXTENSION SCHEMA **
101.CAL		XBRL TAXONOMY EXTENSION CALCULATION LINKBASE **
101.DEF		XBRL TAXONOMY EXTENSION DEFINITION LINKBASE **
101.LAB		XBRL TAXONOMY EXTENSION LABEL LINKBASE **
101.PRE		XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE **

** Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INTREorg Systems, Inc.

Dated: October 29, 2014

By: /s/ Darren Dunckel

Darren Dunckel

President and CEO

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