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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K



(Mark One)


þ  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2014


¨  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934


Commission file number 333-139045



[f20141231ptss10kfinal001.jpg]


PEARTRACK SECURITY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)


Nevada

26-1875304

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

  

1327 Ocean Avenue, Suite B, Santa Monica, California

90401

(Address of principal executive offices)

(Zip Code)

  

  

Registrant's telephone number, including area code:

310-899-3900


Securities registered pursuant to Section 12(b) of the Act:

N/A

N/A

Title of Each Class

Name of Each Exchange On Which Registered


Securities registered pursuant to Section 12(g) of the Act:


N/A

(Title of class)


 

 

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act.

Yes ¨ No þ

 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ¨ No þ

 

 

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 last 90 days.

Yes þ No ¨

 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 registration statement was required to submit and post such files).

Yes þ No ¨

 

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Yes ¨ No þ

 

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer

¨

 

Accelerated filer

¨

 

 

Non-accelerated filer

¨

 

Smaller reporting company

þ

 

 

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

Yes ¨ No þ

 

 

 

 


The aggregate market value of Common Stock held by non-affiliates of the Registrant as of June 30, 2014 was $1,039,672 based on a closing price of $0.37 for the Common Stock on June 30, 2014, the last business day of the registrant’s most recently completed second fiscal quarter. For purposes of this computation, all executive officers and directors have been deemed to be affiliates. Such determination should not be deemed to be an admission that such executive officers and directors are, in fact, affiliates of the Registrant.


Indicate the number of shares outstanding of each of the registrant’s

classes of common stock as of the latest practicable date.


65,788,046 Common Shares issued and outstanding as of March 31, 2015.






TABLE OF CONTENTS

  

ITEM 1.

BUSINESS

2

  

  

  

ITEM 1A.

RISK FACTORS

12

  

  

  

ITEM 2.

PROPERTIES

12

  

  

  

ITEM 3.

LEGAL PROCEEDINGS

12

  

  

  

ITEM 4.

MINE SAFETY STANDARDS

12

  

  

  

ITEM 5 .

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

13

  

  

  

ITEM 6.

SELECTED FINANCIAL DATA

14

  

  

  

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

14

  

  

  

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

21

  

  

  

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

22

  

  

  

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

23

  

  

  

ITEM 9A.

CONTROLS AND PROCEDURES

23

  

  

  

ITEM 9B.

OTHER INFORMATION

24

  

  

  

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

25

  

  

  

ITEM 11.

EXECUTIVE COMPENSATION

28

  

  

  

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

30

  

  

  

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

30

  

  

  

ITEM 14.

PRINCIPAL ACCOUNTANTS FEES AND SERVICES

31

  

  

  

ITEM 15.

EXHIBITS, FINANCIAL STATEMENTS SCHEDULES

32



1



PART I


ITEM 1.

BUSINESS


This annual report contains forward-looking statements. These statements relate to future events or the Company’s future financial performance. In some cases, forward-looking statements can be identified by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause the Company’s or its industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.


Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.


The Company’s financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.


In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars and all references to “common shares” refer to the common shares in the Company’s capital stock.


As used in this annual report, the terms "we", "us", "our," “the Company” and "PearTrack" mean PearTrack Security Systems, Inc., and its wholly-owned subsidiaries, PearTrack Systems Group, Ltd. (“PTSG”), Ecologic Car Rentals, Inc. and Ecologic Products, Inc., unless otherwise indicated.


Corporate Overview


The Company’s principal executive office is located at 1327 Ocean Avenue, Suite B, Santa Monica, California, 90401. The Company’s telephone number is 310-899-3900. The Company’s wholly owned subsidiary, PearTrack Systems Group, Ltd. is headquartered in the San Francisco Bay area of California, with offices in Manchester, England.


The Company’s website is www.peartrack.com.


The Company’s common stock is quoted on the OTC Bulletin Board and the OTCQB under the symbol “PTSS”.


Corporate History


PearTrack Security Systems, Inc. (the “Company” or “PearTrack”), incorporated in Nevada on September 30, 2005, is a security and logistics company headquartered in Santa Monica, CA. The Company is currently structured with three wholly owned subsidiaries: PearTrack Systems Group, Ltd., Ecologic Products, Inc., and Ecologic Car Rentals, Inc., all Nevada corporations.  PearTrack Systems Group, Ltd. (“PTSG”), is headquartered in the San Francisco Bay area of California, with offices in Manchester, England.  The Company’s current business activities are diversified into two specific markets: remote/mobile asset tracking and environmental transportation and products.  


The Company’s primary focus is on the development and commercialization of its proprietary battery system in conjunction with its GPS tracking and management technologies. The Company’s vertically integrated activities, spanning from hardware design, software development, marketing and sales, to project implementation and system operations, aim to make logistics chains more secure and increase operational efficiency.  The Company continues to pursue wholesale distribution opportunities for the Ecologic Shine® product, including product placement into major retail automotive chains. The Company is also developing a business plan for the retail distribution of the Ecologic Shine® product line in anticipation of spinning the operating subsidiary out to Shareholders.


On September 26, 2014, in connection with the conversion of related party convertible debt in the amount of $1,127,657 (including principal and interest), and third party convertible debt in the principal amount of $381,359, an aggregate sum of $1,501,016 was converted into 30,180,321 restricted shares of the Company’s common stock, at a strike price of $0.05 per share. As a result, the Company’s total issued and outstanding common stock was increased to 57,065,061 shares.


On October 17, 2014, the Company effected a 10-for-1 reverse stock split, whereby one (1) new share of the Company’s common stock was issued for each 10 shares of common stock held, thereby reducing the total issued and outstanding shares from 57,065,061 shares to 5,706,506 shares. In addition, the Company increased its authorized preferred stock to 25,000,000 shares, and its authorized common stock to 250,000,000 shares.


On October 17, 2014, pursuant to the Agreement and Plan of Merger dated October 9, 2014, PearTrack Acquisition Corp., a Nevada corporation (“PTAC”), the Company’s wholly owned subsidiary, merged with PTSG, with PTSG as the surviving entity (the “Merger”).  As a result, PTSG became the Company’s wholly owned subsidiary.  As part of the agreement, the Company issued an aggregate of 51,358,555 restricted shares of the Company’s common stock to the former PTSG shareholders on a 5.13586 for 1 basis.  The issuance, representing approximately 90% of the Company’s issued and outstanding shares of common stock, increased the total issued and outstanding common shares from 5,706,506 shares to 57,065,061 shares. In addition, the Company changed its name to PearTrack Security Systems, Inc. and its trading symbol to OTCQB.PTSS.


In connection with the Merger, effective October 17, 2014, Mr. William B. Nesbitt resigned as President and CEO, and Mr. Edward W. Withrow Jr., the President of PTSG and a member of the Company’s Board of Directors (the “Board”), was appointed Mr. Nesbitt’s successor. Mr. Nesbitt remains a member of the Board, as well as President and CEO the Company’s subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc.  In addition, Mr. Arran de Moubray, Mr. Paul B. Burke and Mr. John D. Macey, formerly directors of PTSG, were appointed to the Board.


On January 21, 2015, the "Company executed an Assignment and Licensed Rights Agreement (the “Agreement”) with PearLoxx Limited (“PearLoxx”) dated December 19, 2014, for the exclusive license in perpetuity of certain patented intellectual property (the “Licensed Property”), as defined in the section “Intellectual Property” below. As consideration, the Company shall pay PearLoxx a percentage of gross receipts generated from the sale of the Licensed Property.  On March 9, 2015, the Company amended the License Agreement to include, among other things,  as part of the consideration for the Licensed Product, the right for Pearloxx to purchase 5,706,506 shares of the Company’s common stock, valued at $1,711,952, for cash in the amount of $5,707.  


On February 20, 2015, Mr. Philip J. Woolas was appointed as a Board member, to serve until the next annual meeting of the shareholders and/or until his successor is duly appointed.



2


Current Business


The Company is currently structured with three wholly owned subsidiaries: PearTrack Systems Group, Ltd., Ecologic Car Rentals, Inc. and Ecologic Products, Inc., all Nevada corporations. The Company’s current business activities are diversified into two specific markets: remote/mobile asset tracking and environmental transportation and products.


·

Through its wholly owned subsidiary, PearTrack Systems Group, Ltd., the Company intends to provide a suite of products in the M2M telematics and remote/mobile asset tracking and management industry, including a GPS tracking system and tracking devices with a proprietary long-life battery system for non-powered assets.


·

Through its wholly owned subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc., the Company continues its pursuits for viable environmental rental car opportunities, and its marketing and distribution endeavors for its environmental products.  The Company anticipates that it will spin-out Ecologic Car Rentals and Ecologic Products, Inc. to its shareholders prior to the end of 2015.


Remote/Mobile Asset Tracking


PearTrack Systems Group, Ltd.


Through its wholly owned subsidiary, PearTrack Systems Group, Ltd., the Company’s focus is primarily on the development and commercialization of its proprietary battery system in conjunction with its global positioning system (“GPS”) tracking and management technologies. The Company is geared to offer market-leading proprietary solutions in the mobile to mobile (“M2M”) telematics and remote/mobile asset tracking and management industries.


Key components of PearTrack Tracking Products:


·

Battery Powered GPS Asset Tracking and Monitoring Systems with up to 10-year battery life for just about any remote asset, regardless of power supply.

·

Asset monitoring and alarm units ranging from a Personal Tracking device with a 30 day rechargeable battery, to a Container Security and Tracking Unit with a 10 year battery.

·

PT-700 or PT-1000: self-contained, wireless, concealable and easily fitted GPS enabled Asset Monitoring and Alert Systems with unique covert antenna kit, providing international GPS tracking (via GSM networks), temperature monitoring and door opening alerts sent directly to cell phone and/or email account.

·

PT Tracking Unit: a powerful Fault Monitoring and Service Management Tool that monitors Generators, Chillers, Reefers, Irrigation Pumps, and Heavy Plant operating conditions, providing automatic alerts for critical events such as Low Oil Pressure, Engine Over-Temperature, Grid Failure, Low Output Flow, Low Fuel Level, Battery Failure, and Out of Temperature Range.

·

PearTrack TeleAsset: a remote Asset Management, GPS Tracking and Monitoring System providing critical real-time event-driven GPS enhanced Event Alerts and Usage information, and enables superior remote asset management through a single web-based portal.

·

PearTrack TeleAsset Platform: provides an end-to-end solution including:

·

GPS enabled M2M interface hardware fitted discretely to each asset that monitors alarms, gathers data, and communicates information to the PearTrack web portal using GPRS via the GSM mobile networks.

·

Centrally managed asset data software to process alarms and alerts.

·

Web portal internet-based user interface accessible using a standard web browser from any Internet enabled PC or handheld device.


·

Customization, hosting and system integration to provide tailored solutions to meet specific customer needs.


The Company intends to enhance its tracking products, and is assessing the areas of growth, with particular emphasis on the intermodal container market.  The Company’s vertically integrated activities, spanning from hardware design, software development, marketing and sales, to project implementation and system operations, aim to make logistics chains more secure and increase operational efficiency.


Business Strategy


The board of directors of the Company has approved the authorization of a capital raise of between three million ($3,000,000) dollars and five million ($5,000,000) dollars that will be used to grow the PearTrack business with the goal of generating shareholder value.


The Company’s intended strategy will be a multi-pronged approach:


1.

Enhance and expand the existing product line;

2.

Expand intellectual property through licensing;

3.

Identify potential business acquisitions; and

4.

Develop new facilities for the manufacturing and distribution of the PearTrack portfolio on a global scale.


Trailer and cargo container tracking is often a part of a fleet management solution that includes both the truck and trailer, and is a natural subset of asset tracking. With this in mind, the Company’s Board of Directors (“Board”) approved the establishment of PearTrack Container Group (“PearTrack Container Group”) in the 4th quarter of 2014, and has developed a strategic plan that encompasses intermodal container tracking, reporting and security, providing a real-time tracking solution that incorporates data logging, satellite positioning and data communication to a back office application.  


The PearTrack product portfolio is specifically designed for tracking commercial assets utilizing market leading wire-free autonomous technology. The extensive PearTrack product range, combined with proprietary enterprise management software, enables the business to engage with existing telematics markets while simultaneously establishing a strategic plan to target the maritime security market with its PT-Tracker Smart Container System.


The execution of the Company’s business strategy will be contingent upon and require significant financing. There can be no assurance that such financing will become available or, if it does, that it will be offered to the Company on favorable terms. The Company’s ultimate goal is to achieve a national presence in the M2M and remote/mobile asset tracking market.



Table of Contents

3



Products and Technology


Overview


The PearTrack product line supplies battery powered GPS asset tracking and monitoring systems with up to 10-year battery life for just about any remote asset, regardless of whether it has a power supply or has no power at all. PearTrack’s asset monitoring and alarm units, the PT Trackers, range from a personal tracking device with a 30-day rechargeable battery, to a cargo container security and tracking unit with a battery life up to 10-years.


The PT Tracker GPS enabled asset monitoring and alert units are very easy to fit. In their basic form they are fully self-contained with no external wires or connections, and can be fitted in minutes to any trailer, or concealed within the contents of a pallet. Alternatively, with a unique covert antenna kit, the PT-700 or PT-1000 can be concealed within a shipping container to provide international GPS tracking (via GSM networks), temperature monitoring and door opening alerts sent directly to a cell phone and/or email account.


When a PT Tracker is connected to mobile/remote engineering equipment, the unit becomes a powerful fault-monitoring and service management system. Generators, chillers, reefers, irrigation pumps, and heavy plant operating conditions can all be monitored, providing automatic alerts to warn asset managers of critical events such as low oil pressure, engine over-temperature, grid failure, low output flow, low fuel level, battery failure, and out of temperature range, thereby allowing preventative maintenance to be carried out and the fault corrected, often preventing costly repairs and downtime.


There are currently two PL Trackers tracking units containing the patented PearLoxx secure locking technology, along with PearTrack’s unique and proven long life battery solutions. The PearLoxx secure locking technology (www.pearloxx.com), has a built-in GPS tracking system that enables a shipping container be both sealed securely and tracked using the same device.

The PearTrack TeleAsset is a remote asset management; GPS tracking and monitoring system that enables organizations to better manage their remote assets. These TeleAsset systems can provide critical time sensitive information such as GPS enhanced event alerts and usage information, allowing the user to effectively manage all its assets from a single web-based portal. This information assists users in making informed management decisions based on up to the minute event-driven alerts and information regarding its PearTrack equipped assets.


The PearTrack TeleAsset platform provides an end-to-end solution comprising:


·

Hardware GPS enabled M2M interface fitted discretely to each asset that monitors alarms, gathers data, and communicates this information to the PearTrack web portal using GPRS via the GSM mobile networks.

·

Software centrally manages asset data, processes alarms and alerts authorized users of critical information regarding their assets.

·

Web Portal internet based user interface which can be accessed using a standard web browser from any Internet enabled PC or handheld device.

·

Services include customization, hosting and system integration services to provide tailored solutions to meet specific customer needs.


PT-Trackers


With the Company’s PT Trackers, PearTrack has a full range of GPS, GSM battery powered units ranging from 30 day rechargeable to up to 10 years without a battery replacement, all containing tracking and reporting capabilities, thus providing a wide variety of vertical markets.


PearTrack product portfolio is comprised of several battery options powering GSM/GPS based asset location and monitoring devices. The product range consists mainly of non-rechargeable units, with operating durations of up to 3, 5, 7, and 10 years, in various sizes and footprints. In addition to these, a number of miniaturized rechargeable devices are due to be launched in the coming months, and will be specifically targeted at short-term hire and consignment applications.


The three, five, seven and ten year devices have multiple alarm input capability, and can interface with additional modules including temperature, movement, door opening, and angle sensors, which makes them applicable to both standard tracking and specialist reporting applications.


PearLoxx Secure Locking Technology


As part of its strategy, the Company licensed in perpetuity a patented container locking technology from PearLoxx Ltd., a United Kingdom company. The PearLoxx secure locking technology (www.pearloxx.com), has a built-in GPS tracking system that enables a shipping container to be both sealed securely and tracked using the same device. The PearLoxx unit can be fitted in less than a minute with no drilling, which provides significant value to the PearLoxx proposition. PearLoxx will operate as a unit of PearTrack Container Group.


The PL Tracker, the Company’s next-generation GPS cargo tracking system and solution, with intermodal real-time container and rail car transport security tracking, will provide a proprietary end-to-end supply chain security and tracking solution. PearLoxx locking systems integrate elements from the Sweloxx patented physical container locking system, which provide a proprietary electronic control and deadlock system, with the PearTrack tracking and communication system. The PearLoxx unit and system will provide an electronically operated shipping container security lock that can signal operation and location updates via the PearTrack system. Principal generic features of the PL Tracker include:   


·

Electronically operated secure locking system using patented mechanical design.

·

Tamper and drill resistant design

·

Local 5-digit code emergency access, and emergency power options.

·

GPS global tracking with GSM 2G/3G communication using PearTrack tracking unit.

·

Automatic notification of lock operation and unlocking / locking events.

·

Local user one-touch re-locking

·

C. 90 day rechargeable or up to 10 year primary battery versions based


There are currently two PL Trackers:

·

PL-1000:  With up to a 10-year battery life, will give 4 positions a day.

·

PL-90: 3-month battery life, rechargeable unit has all the features of the PT-1000. The PL-90 will last many times longer than any rechargeable GPS tracking unit currently on the market.


There is also a third unit, the PL-1100, that the Company is planning to develop, similar to the PL-1000, that would be designed to be fitted into the shipping container, becoming an integral and permanent part of the container.



4


Software


The PearTrack software enables the end-user to configure and monitor their tracking units, utilizing mapping, geo fencing, lock-down, and switching tools to provide the basis for powerful asset management and security functions. The PearTrack back-office system is dedicated to its own hardware solutions, and is designed totally in-house. This ensures complete compatibility with all hardware with a fully optimized turnkey solution. PearTrack’s philosophy is ‘Quality by Design’ and, as such, designs aviation-class software, which is constructed to be self-monitoring and does not require reboot. With the PearTrack cloud-based upgradeable firmware, the Company is able to add new features and upgrades without unnecessary cost or inconvenience to the end user.


Battery Management


A number of factors can affect battery life, e.g. ambient temperature, GPS availability, communication method (and availability), reporting frequency, external monitoring, and the period over which the units are actually operating (longer operating periods will result in greater quiescent power usage, and be impacted by losses within the battery chemistry). In order to standardize performance figures, the PearTrack products have quoted expected battery life based on normal conditions and reporting 4 events per day at typical room temperature The PearTrack back-office system records the number of reporting events accumulated for each device, which enables the monitoring of actual battery performance. The Company is able to provide end users with suggestions to maximize battery life, if indications arise that a particular installation is not performing at optimal operating conditions.

Web Portal


In addition to the standard tracking and reporting functions, PearTrack’s end-user software provides leading enterprise management solutions of all tracking devices, including geo-fencing. The PearTrack tracking portal utilizes multiple mapping data and GIS engines. By default, the web portal currently interfaces with the Microsoft Virtual Earth map engine, which provides road, aerial and birds-eye views over almost the entire globe.

The PearTrack web portal enables the full administration, and functionality, of all tracking units, within a completely user-friendly environment. Further, with centralized monitoring capabilities, PearTrack is able to easily extend the initial contract terms, by way of an “extension” or ‘unlocking’ of existing units (subject to available battery performance data), or the ‘activation’ of additional installed units. In addition, performance monitoring is administered through the web portal, which provides functionality parameters for each tracked unit.

Target Market


The PearTrack business focuses on security and remote/mobile asset tracking, its management and communication. The history of fleet management solutions goes back several decades while tracking and monitoring of shipping containers came in focus after 9/11. Today, mobile and satellite networks can provide ubiquitous online connectivity at a reasonable cost, and mobile computing and sensor technologies that deliver high performance and excellent usability. All of these components combined enable the delivery of supply chain management, security management and operations management applications linking trailers, containers, cargo and enterprise IT systems.


The Company’s target market includes the transportation of high value assets, remote locations and transportation of these assets, and the utilization of intermodal containers, from shipper origin to customer delivery and pickup.  The Company provides an important service to its customers that involves not only the protection of their assets, but of their brands; and in the case of intermodal container border security, PearTrack’s technology platform and services may protect against threats of terrorism, theft of goods and/or theft and replacement of goods with counterfeit goods.


The Company’s primary target market, intermodal shipping containers, offers a unique opportunity that it is positioned to exploit.  The Company is targeting markets that have both early adoption combined with enormous need, and increasing adoption driven by fundamental market factors. The container tracking and security market is projected to grow at an annual rate of 35 percent. The container tracking market drivers are:


·

Supply chain efficiency and container utilization;

·

Cargo Theft: Worldwide cargo thefts account for $30-$50 billion in losses annually.

·

Counterfeit goods: Pharmaceutical, technology products, petroleum products;

·

Terrorism: The threat of terrorist using containers to breach security and cause destruction of property and lives; and

·

Human Cargo: Traffickers use containers to transport people for forced labor, sex trade, etc.


The PearTrack business model, specifically its container initiative, includes organic sales growth and proprietary research and development, as well as acquisitions of companies and/or intellectual property deemed strategic to its business, in an effort to differentiate PearTrack amongst its competitors.


As part of PearTrack’s globally integrated supply chain security and monitoring system, its next-generation container transport tracking solution will provide end-to-end real-time intermodal container and rail car cargo transport access, intrusion tracking and market leading battery life enhancement using its proprietary active PT3 System container security tracking technologies.


Target Market Drivers


·

Improved Supply Chain Management resulting in increased ROI and operational efficiencies;

·

Reduced theft and asset loss;

·

Reduced Insurance and liability risks;

·

Reduced exposure to counterfeit products being delivered as opposed to genuine articles.  Counterfeit products cost over $30 billion annually in lost revenue;

·

Reduced harm to humans who use counterfeit drugs with over one million people become sick with a large population dying from use of counterfeit drugs; and

·

Reduced threat of terrorist attacks that can be launched by having a “dirty bomb” or nuclear bomb hidden inside an Intermodal Container.



Table of Contents

5



Intellectual Property


On October 17, 2014, the Company acquired the PearTrack technology and intellectual property portfolio, consisting of an extensive range of proprietary electronic, software, firmware, and mechanical designs, along with detailed specifications, protocols, and process information, details of which can be found in the PearTrack IP Register, in summary:  

·

Firmware: Embedded firmware for version 1 non-rechargeable products (current manufacture), and Gen2 hardware platforms (rechargeable and non-rechargeable products).

·

Hardware: Electronic and schematic designs; and manufacturing data for version 1 products (current manufacture); and Gen2 hardware platforms, along with a range of secondary interfaces and accessories.

·

Mechanical: Mechanical designs and production tooling relating to version 1 non-rechargeable products (current manufacture), and in the case of the PT-90 and PT-30 design, transferrable to the Gen2 hardware variants.

·

Software: Software includes but is not limited to: software applications, interfaces, and tools (i.e. web portal tracking platform), back-office services, and hardware programming tools. Software may be in the form of pre or post-complied code. System architecture, designs, and source code as used to construct and deploy the PearTrack tracking portal and associated services, including but not limited to: user interface, security controls, data access layer, communications, geo-parsing, database management, web services, reporting and administration.

·

Specifications: Detailed product and system specifications, approaches, communication protocols, and manuals relating to version 1 and Gen2 products, and supporting systems.


Patents


On June 30, 2014, the Company entered into a non-exclusive License Agreement, in perpetuity, with AudioEye Communications, Inc., a communications and technology company that owns a family of patents in the area of audio technology. Proprietary materials consist of the following licensor-produced intellectual property used in the development of the technology and implementation of product:


US Patent

Description

8,046,229

Method and apparatus for website navigation by the visually impaired” Abstract: The system involves creating an audible website corresponding to an original website by utilizing voice talent to read and describe web content.

8,296,150

System and method for audio content navigation” Abstract: A system and method for communicating one or more audio files through a network.

7,966,184

System and method for audio content navigation” Abstract: Systems and methods for an audio-based content management, navigation and retrieval system are provided.

8,260,616

System and method for audio content generation” Abstract: A system and method for generating audio content. Content is automatically retrieved from an original website according to a predetermined schedule to generate retrieved content.

8,589,169

System and method for creating audio files” Abstract: A system and method for creating one or more audio files.

 

 

US Patent Pending

Description

13/483,758

System and method for audio content generation.

113/280,184

US12/61,620

WO2013063066

Includes numerous international filings. System and method for audio content management.

14/055,366

System and method for communicating audio files.


The Company is developing a proprietary system of secure and encrypted communication that will allow the reporting PearTrack systems to be delivered through the web portal in an audio format with multiple linguistic capabilities. In addition, PearTrack has plans to develop an audio technology in conjunction with AudioEye, Inc., that will allow the end user to interact with the security and tracking device vocally, and will enable the end user to ask specific questions aloud, in sequential or non-sequential order, and accelerate the gathering and assimilation of information and collection of data.


On March 9, 2015 the Company completed the acquisition, through aassignment of an exclusive License in perpetuity, of the PearLoxx, Ltd. system that has USPTO and EP Patent with a priority date of March 13, 2006.


US Patent

Description

US 8,245,546

EP 1 845 225 B1

Container Lock and Method for Locking of Container Door.


The EP Patent describes the PearLoxx system as follows: The invention relates to a container lock, a method for locking a container with at least one door, and a container provided with a lock, said door having a first frame edge portion, and said container having a second frame edge portion positioned adjacent to said first frame edge portion in a closed position of the door, wherein said container lock comprises: an interior blocking portion, having a body adapted to extend over said first and second frame edge portions, and an engaging abutment and an extension portion extending out from said body so that, when said interior portion is arranged on the inside of said second frame edge portion, said engaging abutment and extension portion provide interacting engagement of opposite side surfaces of said second frame edge portion, and said extension portion extends from the interior of the container to the exterior of the container, and an exterior blocking means for lockable interaction with said extension portion.



6


PearLoxx Product Overview


The PearLoxx locking systems (the “PearLoxx Product”) integrate elements from the Sweloxx patents physical container locking system, with proprietary electronic control and deadlock system, and the PearTrack tracking and communication system. The system provides an electronically operated security lock for shipping containers that signals operation and location updates via the PearTrack system.


The Company has developed a system that integrates the patented locking system with the PearTrack technology and is at the final stages of the new products’ development.  Principal generic features of the PearLoxx Product include:

  

·

Electronically operated secure locking system using patented mechanical design.

·

Tamper and drill resistant design

·

Local 5-digit code emergency access and emergency power options.

·

GPS global tracking with GSM 2G/3G communication using PearTrack tracking unit.

·

Automatic notification of lock operation and unlocking / locking events.

·

Local user one-touch re-locking

·

Approximate 90 day rechargeable (PL-90) or up to 10 year primary battery (PL-1000) versions based


CodeLoxx


The PearLoxx lock assembly (“CodeLoxx”) is operated by a microcontroller based lock control circuit. This electronic circuit is able to accept either remote open commands via the PearTrack system or a 5 digit local code, which is input via a single button and LED combination. The deadlock bolt is operated using a motor driven gear/rack, and once the deadbolt is retracted a user can manually operate the lock. Lock open status is signaled via the PearTrack tracking unit, and re-locking is automatically inhibited while the lock bolt is open to prevent jamming.


PL-90


The PL-90 is the rechargeable battery version with a predicted operating life of up to 3 months. It operates from a single Lithium Polymer battery, which is used to power the PearTrack GPS/GSM tracking unit and operate the CodeLoxx lock control circuit. The battery is charged using power derived from an external USB connector and controlled by the GPS/GSM tracking unit. The total assembly is designed to be resistant up to IP67.


PL-1000


The PL-1000 is the fixed battery version with a predicted operating life of up to 10 years. It operates from an eight ‘D’ cell primary power pack, which is used to power the PearTrack GPS/GSM tracking unit, and provides charge power for a small lithium polymer battery which is used to operate the CodeLoxx lock control circuit. The total assembly is designed to be resistant up to IP67.


Future IP Strategy


The Company’s plan for new product is based on a combination of internally developed product and service offerings, modification, enhancement or new indication of existing proprietary technologies and the licensing and or acquisition of technologies and or companies that fit into the overall thesis of the PearTrack and can be integrated into its strategic plan.




Table of Contents

7



Competition


Telematics Industry Players


Following is an analysis of select companies offering similar products:


Company

Positioning

Penetration

Customer Added Value

GSM

CDMA

Satellite/

Iridium

Locking

Feature

Battery

Life

PearTrack

Provides leading battery life and extensive data services with GPS tracking through GSM, CDMA and Iridium Networks

Over 30 industry segments

· leading battery life in the industry

· multimode communication technology

· container security equipment optional (Pearloxx)

· fitted and convert options

X

X

X

X

30 days

To

10 years

Kirsen Global Technology

Provides multi-modal container monitoring systems (CMS), monitoring the position and security of cargo containers with a global network that tracks and responds to incidents

Freight forwarders, 3PLs, shipping lines, shippers, insurances, packaging companies, terminal operators, and government entities

· offers a range of products to meet certain customer needs, from purely tracking containers to tracking with all sensors and capabilities

X

 

 

 

1 year

Honeywell Global Tracking

Offers commercial satellite-based asset tracking and monitoring provided by Inmarsat as well as fully integrated search and rescue solutions backed by international certifications that are Cospas-Sarsat compliant

Transportation, maritime, oil and gas industries, as well as logistics operations for military, governmental and NGO's around the world.

· use of Inmarsat satellites.

· offers solutions for situations when GPS and GSM communications are not available, such as custom mapping data

X

 

 

 

1 year

To

10 years

SKyBitz/ Telular

Provides remote asset tracking and information management services, specializing in realtime decision-making tools for companies with unpowered assets.

Trucking and logistics, oil and gas, intermodal

· launched DARPAfunded technology into private, government and international markets

X

 

 

 

"Multiyears,"

Otherwise

 Not specified

Globe Tracker

Provider of data sharing, data analytics, and global asset tracking and monitoring services

Not provided

· provides lifetime guarantee.

· partnership with Vodafone for global GSM connectivity

X

 

 

 

5 years +

External Power

Option

Starcom Systems

Provides real-time GPS fleet management and vehicle security applications, personal tracking, merchandise tracking, containers tracking and management and an online application.

Parented by Triton Container International Limited, exposure to Intermodal Leasing industry

· offers multi-lingual applications

· magnet installation

· low power mode

· Triton container leasing services

X

X

 

 

Not

specified

OnAsset Intelligence

Specializes in the air cargo industry and is the first FAA compliant and operator approved real-time tracking device with automatic "airplane mode." Provides  freight protection, chain of custody supervision and supply chain security

Emirates Sky Cargo, Virgin Atlantic Cargo, Cathay Pacific, American Airlines Cargo, AT&T, Envirotainer

· offers different mounting options as well as iridium coverage

· color coded data

X

X

X

 

30 days

To

75 days

CSB Technology

Provides a plug and play solution targeting container security issues with the use of solar power

Kuhne + Nagel, Bosch Sicherheitssysteme, DSV Air and Sea, Bavaria Egypt, Bayer Healthcare, EPSa GmbH

· solar power available

X

 

 

 

 

Global Tracking

Technologies, LLC

Provides high performance and ease of use GPS tracking device featuring real-time tracking, and supply chain monitoring across land, sea and air

PBS&J an Atkins Company, DeepWaterWind, Fred.Olsen Marine Service AS, Pepsico, Shiseido, WWF

· offers temperature monitoring function

X

 

 

 

1 week

To

7 years

Loksys Solutions

Focuses on freight security and container tracking in the container logistics market, designed specifically for intermodal transportation.

Not specified

· efficient installation with different set-up options that provide both physical and electronic security

X

 

 

X

Not

specified

Track4C

Provides tracking and monitoring functions already fixed in the containers.

New company, currently establishing network

· customization in reporting sensors with a long battery life, pricing solutions tailored to customer needs (pay-as-you-use model)

· link easily to existing ERP platforms

X

 

 

 

18 months

To

24 months

CallPass M2M Solutions

Provides affordable Internet-based tracking and monitoring assets, container, fleet and trailer.

New company, currently establishing network

· affordable and a wide variety of products for both individuals and businesses

X

X

 

 

Not

specified

Traklok International

Provides robust physical security, multi-sensor alarm, and GPS tracking.

Chemical, electronics, pharma, food and beverage, government, tobacco

· durable lock

· tracking and security functions in one device

X

 

 

X

1 month

To

3 months

Envotech

Manufactures mechanical security seals and RFID E-seals

New market entrant looking to penetrate airline, intermodal shipping, banking, transportation, chemical, manufacturing, pharmaceutical, and healthcare industries

· leading RFID Seals and Services, the SLM-i product offers Iridium failover features

X

 

X

 

3 months

To

9 months




Table of Contents

9



Government Regulations


PearTracks management believes that the container and tracking market has the potential to be  influenced by legislation from various authorities worldwide, as well as the outcome of discussions around mutual recognition of C-PAT and AEO, the results of full container scanning trials and the announced Container Security Device requirements from the US DHS.


Safe Port Act of 2006


SAFE Port Act was introduced as a bill on March 14, 2006, under the 109th US Congress, 2005–2006.  The bill calls for 100% of US-bound ocean containers to be scanned at the foreign port of origin. The bill was enacted and signed by former President George W Bush on Oct 13, 2006.  The bill became the law numbered Pub.L. 109-347.


The Department of Homeland Defense (“DHS”) has delayed until 2016 the implementation of key sections of the SAFE Port Act of 2006.


Container Security Initiative


The Container Security Initiative (the “CSI”) was launched in 2002 by the U.S. Bureau of Customs and Border Protection (“CBP”), an agency of the Department of Homeland Security. Its purpose was to increase security for container cargo shipped to the United States. The CSI allows CBP, working with host government Customs Services, to examine high-risk maritime containerized cargo at foreign seaports, before they are loaded on board vessels destined for the United States.


The CSI consists of four core elements:


·

Using intelligence and automated information, identify and target containers that pose a risk for terrorism.

·

Pre-screen containers that pose a risk at the port of departure before they arrive at U.S. ports.

·

Using detection technology, such as gamma ray detectors, quickly pre-screen containers that pose a risk.

·

Use smarter, tamper-evident containers.


The initial CSI program has focused on implementation at the top 20 ports that ship approximately two-thirds of the container volume to the United States. Smaller ports, however, have been added to the program at their instigation, and participation is open to any port meeting certain volume, equipment, procedural, and information-sharing requirements. Future plans include expansion to additional ports based on volume, location, and strategic concerns.


The Company’s operations will be subject to various federal, state and local laws, regulations, and controls including the leasing and sale of used cars, licensing, charge card operations, reservation policies, privacy and personal data protection, environmental protection, labor matters, insurance, prices, and advertising. The Company believes it is in compliance with any such regulations affecting the Company’s business.


Sales, Marketing, and Advertising


The Company’s primary marketing objective is to convey to its customers and to consumers in general that its product is of superior quality, and provides a proprietary long-life battery that surpasses any in the global asset tracking market. The Company is seeking to appeal to customers by emphasizing the interrelated security and economic benefits of the Company’s tracking units, in conjunction with the Company’s online control portal infrastructure.


The Company intends to:


·

exploit the differentiation of PearTrack from other asset tracking company brands.

·

use direct sales and education to the US Military, Department of Homeland Defense, the US Coast Guard, and state and municipal government agencies, and corporations committed to anti-terrorism threats.

·

employ strategic use of electronic and internet distribution, employing state of the art technology to target  customers seeking intermodal container security.


Other than as disclosed above, the Company’s current sales, marketing, and advertising efforts are minimal due to the Company’s size and limited financial resources.


Manufacturing


The Company currently works with independent tier 2 UK manufacturing companies to source the components and build assemblies, and then performs the systems integration and final assembly of the PearTrack product line.  The Company has entered into discussions with a large outsource manufacturer that will handle all of the manufacturing of its products as the Company commences with the commercialization of its products and services.  


Current Suppliers for the PT Tracker and PL Tracker Units


·

VC Electronics (UK CEM)

·

United EMS (UK CEM)

·

Centirion (Germany) - GSM for Gen2 products

·

uBlox (Switzerland) - GPS chipset for Gen2 products

·

San Jose Navigation (Taiwan) - GPS antenna & Receiver for PT-xxx

·

Toaglas (USA, Taiwan, and UK) – GPS antenna supplier for Gen2 products

·

Tekfun (Taiwan) - GSM antenna (all models)

·

Eve Battery Co (China) - PT-xxx battery packs

·

EEMB (China) - PT-30 & PT-90 battery

·

HK Salt (Hong Kong) - CPU's for both product groups

·

Shenzhen Shanghai Technology Ltd (China) - PT-xxx GSM module

·

Fibox (EU) - PT 700 & PT-1000 enclosures

·

Pheonix Mechano (EU) - PT-500 enclosure


Facilities


The Company’s principal executive office is located at 1327 Ocean Avenue, Suite B, Santa Monica, California, 90401. The Company’s telephone number is 310-899-3900, and fax number (888) 899-1433.


The Company’s wholly owned subsidiary, PearTrack Systems Group, Inc. is headquartered in Alameda, California, with offices in Manchester, England.


The Company’s website is www.peartrack.com.



10



Employees


As of December 31, 2014, the Company had two employees, excluding the Company’s directors and executive officers. The Company currently has two employees, excluding the Company’s directors and executive officers. The majority of those working with the Company are engaged as consultants under Consulting Agreements.


Research and Development


During the last two years, the Company has spent $48,600 and $0, respectively, on research and development of its product line.


Environmental Transportation and Products


Ecologic Car Rentals, Inc.


Through its wholly owned subsidiary, Ecologic Car Rentals, Inc., the Company continues to focus on the development of an environmental car rental operation. The Company is currently pursuing viable opportunities within the car rental industry to develop and establish its own brand as a premier “green” car rental company offering environmentally-friendly vehicles.


The Company plans to acquire existing profitable independent car rental operations on a multi-regional basis and convert their operations to an Ecologic platform. The Company has identified certain independent car rental operations that would provide a multi-regional presence, and that can be used as a platform to become the only large “green” independent car rental operation in the U.S.


The Company believes that the growth in demand for environmentally friendly cars, and the increase in major automakers’ production of new eco-friendly car models, has created a unique opportunity for an environmentally-friendly transportation company. The strategy is to identify and acquire existing profitable independent car rental operations on a multi-regional basis, and convert their operations to an Ecologic platform.  By initially co-branding with acquired companies for a limited period of time, the rebranding transition to “green” outlets as “Ecologic Car Rentals” can ultimately be completed. The comprehensive business strategy, which capitalizes on this unique opportunity, and the business model supports growth, while holding true to its planet-friendly mission.


Ecologic Products, Inc.


Through its wholly owned subsidiary, Ecologic Products, Inc., the Company continues its development of ecologically friendly products. Initially, the Company’s product line will be focused on transportation and its ancillary markets. The Company has developed Ecologic Shine®, a device and system for near-waterless car washing that delivers cleaning comparable to normal washing without the use of any harmful chemicals.  The Ecologic Shine® products and services are:

 

·

Good for the environment

·

Good for the vehicle

·

Good for the customer

·

Good for the bottom line


Ecologic Products, Inc. has had some success in its 3-year waterless car wash trial, undertaken in conjunction with Park N Fly in Atlanta, GA and Los Angeles CA, at Hartfield International Airport and LAX International Airport, respectively.


On February 27, 2014, the Company negotiated the sale of approximately 440 gallons of its Eco Shine, Eco Wash and Eco Prep products, representing approximately 2,640 car washes, to CISA Lubes NC, LLC, a North Carolina operator of 33 quick auto lube operations in North Carolina.  


Ecologic Products, Inc. has expanded its business objectives beyond the scope of sustainable water practices through its Eco Shine operations to sustainable products that target corporate and government markets and has pursued several technologies at various stages of development.  


On June 12, 2014, the Company entered into a non-disclosure Agreement with SEaB Energy, Ltd., a Southampton, United Kingdom, Waste-to-Energy Company.  SEaB Energy develops Waste-to-Energy systems deploying a containerized advanced digestion (AD) process. The process will, by stabilizing organic wastes, generate biogas (that will be combusted within CHP engines to generate electricity) and a digestate that will be employed as an organic fertilizer.  In June 2014, the Company’s Chairman and SEaB’s CEO met in London to discuss ways in which the Company could develop a business for SEaB’s two primary products, the Muckbuster® and the Flexibuster©, in the United States.  The Company worked to develop a plan to install the Muckbuster® product at Kennesaw State University, located in the greater Atlanta, Georgia, area.  After review, discussion and due diligence it was decided that the quantity of bio waste that could be utilized by the Muckbuster® system was not large enough in daily volume to make the economics work.  The Company will continue to seek to identify opportunities for the SEaB product line, and will review its efforts at the end of the 2nd quarter 2015.


On June 15, 2014, the Company entered into a non-disclosure agreement with SheerWind, Inc., a Minnesota based innovative wind turbine company.  The discussions with SheerWind were preliminary and did not move past the exchange of private information.  


On June 26, 2014, the Company entered into a non-disclosure agreement with AquaFuel, Ltd., a Kent, United Kingdom based fuel technology company that has developed the first diesel generator to run on glycerin. Management negotiated, drafted and presented a Memorandum of Understanding to acquire an exclusive license for the United States.  The Company’s Chairman visited the AquaFuel headquarters for the purpose of demonstration of the AquaFuel generators and related due diligence. The Company’s due diligence indicated that the current development of glycerin as a fuel was unlikely to be attractive to the marketplace.  The Company is researching alternative bio fuel products that could work with the AquaFuel generators.


The Company continues to pursue wholesale distribution opportunities for the Ecologic Shine® product, including the product placement into major retail automotive chains. The Company is also developing a business plan for the retail distribution of the Ecologic Shine® product line in anticipation of spinning the operating subsidiary out to Shareholders.


Planned Spin Offs


Although the Company continues to develop its environmental transportation business through Ecologic Car Rentals, Inc. and Ecologic Products, Inc., the Company and its board of directors feel the subsidiaries will be able to operate more effectively independently, with the goal of attracting new capital and exploiting their existing business, and will have the flexibility to establish new relationships in order to achieve their respective goals of generating shareholder value.



Table of Contents

11



As such, the Company intends to effect spin-offs of its wholly owned subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc. The terms of the spin-offs include the distribution of a stock dividend of 57,065,061 shares of Ecologic Car Rentals, Inc. common stock, and 57,065,061 shares of Ecologic Products, Inc. common stock, to the Company’s shareholders of record (excluding the former shareholders of PTSG) on the Record Date of December 15, 2014 on a pro rata basis.  Subsequent to the spin-offs, Ecologic Car Rentals, Inc. and Ecologic Products, Inc. will operate as entities independent of the Company, under the leadership of Mr. William B. Nesbitt, who will serve as President and CEO of the companies.


The Company believes that, as independent companies, Ecologic Products, Inc. and Ecologic Car Rentals, Inc. can promote and brand themselves so as to operate successfully.  Mr. William B. Nesbitt will remain as President and CEO of both companies.


Reports to Security Holders


The Company is not required to deliver an annual report to its stockholders, but will voluntarily send an annual report, together with the Company’s annual consolidated audited financial statements upon request. The Company is required to file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission. The Company’s Securities and Exchange Commission filings are available to the public over the Internet at the SEC's website at http://www.sec.gov.


The public may read and copy any materials filed by the Company with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company is an electronic filer. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Internet address of the site is http://www.sec.gov.


ITEM 1A.

RISK FACTORS


The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.


ITEM 2.

PROPERTIES


The Company’s corporate headquarters are located at 1327 Ocean Avenue Suite B, Santa Monica, California  90401. The Company leases its headquarters on a month to month basis (suites B and M) for rent in the amount of $5,600 per month. The Company also leases its office space located in the San Francisco Bay area on a month-to-month basis for $647 per month.


The Company believes its current premises are adequate for the Company’s current operations and the Company does not anticipate that it will require any additional premises in the foreseeable future. When and if the Company requires additional space, the Company intends to move at that time. The Company does not foresee any significant difficulties in obtaining any required facilities. The Company currently does not rent or own any real property.


ITEM 3.

LEGAL PROCEEDINGS


The Company knows of no material existing or pending legal proceedings against it, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of the Company’s directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to the Company.


ITEM 4.

MINE SAFETY STANDARDS


Not applicable.



12


PART II


ITEM 5.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


In the United States, the Company’s common shares are traded on the OTC Quotation Board “OTCQB – U.S. Registered” under the symbol “EGCT.” The following table sets forth the high and low bid prices for its common stock per quarter as reported by the OTCQB. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.


The high and low prices of the Company’s common shares for the periods indicated below are as follows:


Quarter Ended (1) (2)

High

Low

December 31, 2014

$0.23

$0.23

September 30, 2014

$0.75

$0.50

June 30, 2014

$0.37

$0.37

March 31, 2014

$0.35

$0.35

December 31, 2013

$0.60

$0.60

September 30, 2013

$0.80

$0.80

June 30, 2013

$1.20

$1.20

March 31, 2013

$2.00

$2.00

(1) As of October 17, 2014, the Company’s trading symbol changed to PTSS. There has been intermittent trading of shares of the Company’s common stock since the Company was approved for quotation.

(2) As adjusted for 10-to-1 reverse stock split effected 10/17/2014.


The Company’s common stock is subject to rules adopted by the Commission regulating broker dealer practices in connection with transactions in “penny stocks.” Those disclosure rules applicable to “penny stocks” require a broker dealer, prior to a transaction in a “penny stock” not otherwise exempt from the rules, to deliver a standardized list disclosure document prepared by the Securities and Exchange Commission. That disclosure document advises an investor that investment in “penny stocks” can be very risky and that the investor’s salesperson or broker is not an impartial advisor but rather paid to sell the shares. The disclosure contains further warnings for the investor to exercise caution in connection with an investment in “penny stocks,” to independently investigate the security, as well as the salesperson with whom the investor is working and to understand the risky nature of an investment in this security. The broker dealer must also provide the customer with certain other information and must make a special written determination that the “penny stock” is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Further, the rules require that, following the proposed transaction, the broker provide the customer with monthly account statements containing market information about the prices of the securities.


Record Holders


The Company’s common shares are issued in registered form. Island Stock Transfer, 100 Second Avenue South, Suite 705S, St. Petersburg, FL, 33701 (Telephone 727-289-0010, Facsimile 727-289-0069) is the registrar and transfer agent for the Company’s common shares.


On, December 31, 2014, the shareholders' list of the Company’s common shares pursuant to Island Stock Transfer showed 213 registered shareholders and 57,065,088 shares outstanding. The total number of shares outstanding stated in the Island Stock Transfer list of 57,065,088 includes 27 shares issued due to rounding, and does not include 2,900,000 shares issued to various consultants for services provided in 2014.


Dividends


The Company has not declared any dividends on its common stock since the Company’s inception on December 16, 2008. There is no restriction in the Company’s Articles of Incorporation and Bylaws that will limit the Company’s ability to pay dividends on its common stock. However, the Company does not anticipate declaring and paying dividends to its shareholders in the near future.


Equity Compensation Plan Information


During the years ended December 31, 2014 and 2013, respectively, the Company expensed a total of $60,000 and $60,000 in stock option compensation. There remained $0 and $60,000 in deferred stock option compensation at December 31, 2014 and 2013, respectively.


Purchase of Equity Securities by the Issuer and Affiliated Purchasers


The Company did not purchase any of its shares of common stock or other securities during the year ended December 31, 2014.


Recent Sales of Unregistered Securities


The following represents all unregistered securities issued by the registrant during the current period, including sales of reacquired securities, as well as new issues, securities issued in exchange for property, services, or other securities, and new securities resulting from the modification of outstanding securities:


The following reflect the effects of the 10-to-1 reverse stock split that occurred on October 17, 2014:


On September 26, 2014, in connection with a certain Notice to Convert received from a non-related party, $381,359 in debt was converted at a price of $0.05 per share into 762,718 restricted shares of the Company’s common stock.


On September 26, 2014, in connection with certain Notice(s) to Convert received from four (4) related parties, $1,127,657 in debt was converted at a price of $0.05 per share into 2,255,314 restricted shares of the Company’s common stock.


On October 17, 2014, in connection with the Merger, the Company issued 51,358,555 shares of restricted common stock to the thirteen (13) former shareholders of PearTrack Systems Group, Ltd.


On October 30, 2014, in connection with certain consulting agreements, the Company granted two consultants the right to purchase 400,000 shares of its restricted common stock at $0.001 per share.  The shares, valued at $100,000, were purchased for cash in the amount of $400, and $99,600 was recorded as deferred compensation.


On October 31, 2014, in connection with a certain consulting agreement, the Company granted the consultant the right to purchase 1,000,000 shares of its restricted common stock at $0.001 per share.  The shares, valued at $250,000, were purchased for cash in the amount of $1,000, and $249,000 was recorded as deferred compensation.



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13



On October 31, 2014, in connection with a certain stock purchase agreement, the Company granted a consultant the right to purchase 100,000 shares of its restricted common stock at $0.001 per share.  The shares, valued at $25,000, were purchased for cash in the amount of $100, and $24,900 was recorded as compensation expense.


On November 21, 2014, in connection with a certain stock purchase agreement, the Company granted a consultant the right to purchase 150,000 shares of its restricted common stock at $0.001 per share.  The shares, valued at $49,500, were purchased for cash in the amount of $150, and. $49,850 was recorded as compensation expense.


On December 1, 2014, in connection with certain consulting agreements, the Company granted two consultants the right to purchase 750,000 shares of its restricted common stock at $0.10 per share, and 500,000 shares at $0.001 per share.  The shares, valued at $375,000, were purchased for cash in the amount of $75,500, and $299,500 was recorded as deferred compensation.


Exemption From Registration. The shares of Common Stock referenced herein were issued in reliance upon an exemption from registration afforded either under Section 4(2) of the Securities Act for transactions by an issuer not involving a public offering, or Regulation D promulgated thereunder, or Regulation S for offers and sales of securities outside the U.S.


ITEM 6.

SELECTED FINANCIAL DATA


The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.


ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Forward-Looking Statements


This annual report contains forward-looking statements. These statements relate to future events or the Company’s future financial performance. In some cases, forward-looking statements can be identified by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause the Company’s or the Company’s industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.


The Company’s consolidated audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with the Company’s consolidated audited financial statements and the related notes for the years ended December 31, 2014 and 2013 that appear elsewhere in this annual report.


As used in this annual report, the terms "we", "us", "our," “the Company”  and "PearTrack" mean PearTrack Security Systems, Inc., and its wholly-owned subsidiaries, PearTrack Systems Group, Ltd. (“PTSG”), Ecologic Car Rentals, Inc. and Ecologic Products, Inc., unless otherwise indicated.


Corporate History


PearTrack Security Systems, Inc., incorporated in Nevada on September 30, 2005, is a security and logistics company headquartered in Santa Monica, CA. The Company is currently structured with three wholly owned subsidiaries: PearTrack Systems Group, Ltd., Ecologic Products, Inc., and Ecologic Car Rentals, Inc., all Nevada corporations.  PearTrack Systems Group, Ltd. (“PTSG”), is headquartered in the San Francisco Bay area of California, with offices in Manchester, England.  The Company’s current business activities are diversified into two specific markets: remote/mobile asset tracking  and environmental transportation and products .  


The Company’s primary focus is on the development and commercialization of its proprietary battery system in conjunction with its GPS tracking and management technologies. The Company’s vertically integrated activities, spanning from hardware design, software development, marketing and sales, to project implementation and system operations, aim to make logistics chains more secure and increase operational efficiency.  The Company continues to pursue wholesale distribution opportunities for the Ecologic Shine® product, including product placement into major retail automotive chains. The Company is also developing a business plan for the retail distribution of the Ecologic Shine® product line in anticipation of spinning the operating subsidiary out to Shareholders.


On September 26, 2014, in connection with the conversion of related party convertible debt in the amount of $1,127,657 (including principal and interest), and third party convertible debt in the principal amount of $381,359, an aggregate sum of $1,501,016 was converted into 30,180,321 restricted shares of the Company’s common stock, at a strike price of $0.05 per share. As a result, the Company’s total issued and outstanding common stock was increased to 57,065,061 shares.


On October 17, 2014, the Company effected a 10-for-1 reverse stock split, whereby one (1) new shares of the Company’s common stock was issued for each 10 shares of common stock held, thereby reducing the total issued and outstanding shares from 57,065,061 shares to 5,706,506 shares. In addition, the Company increased its authorized preferred stock to 25,000,000 shares, and its authorized common stock to 250,000,000 shares.


On October 17, 2014, pursuant to the Agreement and Plan of Merger dated October 9, 2014, PearTrack Acquisition Corp., a Nevada corporation (“PTAC”), the Company’s wholly owned subsidiary, merged with PTSG, with PTSG as the surviving entity (the “Merger”).  As a result, PTSG became the Company’s wholly owned subsidiary.  As part of the agreement, the Company issued an aggregate of 51,358,555 restricted shares of the Company’s common stock to the former PTSG shareholders on a 5.13586 for 1 basis.  The issuance, representing approximately 90% of the Company’s issued and outstanding shares of common stock, increased the total issued and outstanding common shares from 5,706,506 shares to 57,065,061 shares. In addition, the Company changed its name to PearTrack Security Systems, Inc. and its trading symbol to OTCQB.PTSS.


In connection with the Merger, effective October 17, 2014, Mr. William B. Nesbitt resigned as President and CEO, and Mr. Edward W. Withrow Jr., the President of PTSG and a member of the Company’s Board of Directors (the “Board”), was appointed Mr. Nesbitt’s successor. Mr. Nesbitt remains a member of the Board, as well as President and CEO the Company’s subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc.  In addition, Mr. Arran de Moubray, Mr. Paul B. Burke and Mr. John D. Macey, formerly directors of PTSG, were appointed to the Board.



14


On January 21, 2015, the "Company executed an Assignment and Licensed Rights Agreement (the “Agreement”) with PearLoxx Limited (“PearLoxx”) dated December 19, 2014, for the exclusive license in perpetuity of certain patented intellectual property (the “Licensed Property”), as defined in the section “Intellectual Property” below. As consideration, the Company shall pay PearLoxx a percentage of gross receipts generated from the sale of the Licensed Property.  On March 9, 2015, the Company amended the License Agreement to include, among other things,  as part of the consideration for the Licensed Product, the right for Pearloxx to purchase 5,706,506 shares of the Company’s common stock, valued at $1,711,952, for cash in the amount of $5,707.  


On February 20, 2015, Mr. Philip J. Woolas was appointed as a Board member, to serve until the next annual meeting of the shareholders and/or until his successor is duly appointed.


Current Business


The Company is currently structured with three wholly owned subsidiaries: PearTrack Systems Group, Ltd., Ecologic Car Rentals, Inc. and Ecologic Products, Inc., all Nevada corporations. The Company’s current business activities are diversified into two specific markets: environmental transportation and products, and remote/mobile asset tracking.  


·

Through its wholly owned subsidiary, PearTrack Systems Group, Ltd., the Company intends to provide a suite of products in the M2M telematics and remote/mobile asset tracking and management industry, including a GPS tracking system and tracking devices with a proprietary long-life battery system for non-powered assets.


·

Through its wholly owned subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc., the Company continues its pursuits for viable environmental rental car opportunities, and its marketing and distribution endeavors for its environmental products. The Company anticipates that it will spin-out Ecologic Car Rentals and Ecologic Products, Inc. to its shareholders prior to the end of 2015.

  

Remote/Mobile Asset Tracking


PearTrack Systems Group, Ltd.


Through its wholly owned subsidiary, PearTrack Systems Group, Ltd., the Company’s focus is primarily on the development and commercialization of its proprietary battery system in conjunction with its global positioning system (“GPS”) tracking and management technologies. The Company is geared to offer market-leading proprietary solutions in the mobile to mobile (“M2M”) telematics and remote/mobile asset tracking and management industries.


Key components of PearTrack Tracking Products:


·

Battery Powered GPS Asset Tracking and Monitoring Systems with up to 10-year battery life for just about any remote asset, regardless of power supply.

·

Asset monitoring and alarm units ranging from a Personal Tracking device with a 30 day rechargeable battery, to a Container Security and Tracking Unit with a 10 year battery.

·

PT-700 or PT-1000: self-contained, wireless, concealable and easily fitted GPS enabled Asset Monitoring and Alert Systems with unique covert antenna kit, providing international GPS tracking (via GSM networks), temperature monitoring and door opening alerts sent directly to cell phone and/or email account.

·

PT Tracking Unit: a powerful Fault Monitoring and Service Management Tool that monitors Generators, Chillers, Reefers, Irrigation Pumps, and Heavy Plant operating conditions, providing automatic alerts for critical events such as Low Oil Pressure, Engine Over-Temperature, Grid Failure, Low Output Flow, Low Fuel Level, Battery Failure, and Out of Temperature Range.

·

PearTrack TeleAsset: a remote Asset Management, GPS Tracking and Monitoring System providing critical real-time event-driven GPS enhanced Event Alerts and Usage information, and enables superior remote asset management through a single web-based portal.

·

PearTrack TeleAsset Platform: provides an end-to-end solution including:

·

GPS enabled M2M interface hardware fitted discretely to each asset that monitors alarms, gathers data, and communicates information to the PearTrack web portal using GPRS via the GSM mobile networks.

·

Centrally managed asset data software to process alarms and alerts.

·

Web portal internet-based user interface accessible using a standard web browser from any Internet enabled PC or handheld device.

·

Customization, hosting and system integration to provide tailored solutions to meet specific customer needs.


The Company intends to enhance its tracking products, and is assessing the areas of growth, with particular emphasis on the intermodal container market.  The Company’s vertically integrated activities, spanning from hardware design, software development, marketing and sales, to project implementation and system operations, aim to make logistics chains more secure and increase operational efficiency.


Environmental Transportation and Products


Ecologic Car Rentals, Inc.


Through its wholly owned subsidiary, Ecologic Car Rentals, Inc., the Company continues to focus on the development of an environmental car rental operation. The Company is currently pursuing viable opportunities within the car rental industry to develop and establish its own brand as a premier “green” car rental company offering environmentally-friendly vehicles.


The Company plans to acquire existing profitable independent car rental operations on a multi-regional basis and convert their operations to an Ecologic platform. The Company has identified certain independent car rental operations that would provide a multi-regional presence, and that can be used as a platform to become the only large “green” independent car rental operation in the U.S.


The Company believes that the growth in demand for environmentally friendly cars, and the increase in major automakers’ production of new eco-friendly car models, has created a unique opportunity for an environmentally-friendly transportation company. The strategy is to identify and acquire existing profitable independent car rental operations on a multi-regional basis, and convert their operations to an Ecologic platform.  By initially co-branding with acquired companies for a limited period of time, the rebranding transition to “green” outlets as “Ecologic Car Rentals” can ultimately be completed. The comprehensive business strategy, which capitalizes on this unique opportunity, and the business model supports growth, while holding true to its planet-friendly mission.



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15



Ecologic Products, Inc.


Through its wholly owned subsidiary, Ecologic Products, Inc., the Company continues its development of ecologically friendly products. Initially, the Company’s product line will be focused on transportation and its ancillary markets. The Company has developed Ecologic Shine®, a device and system for near-waterless car washing that delivers cleaning comparable to normal washing without the use of any harmful chemicals.  The Ecologic Shine® products and services are:


·

Good for the environment

·

Good for the vehicle

·

Good for the customer

·

Good for the bottom line


The Company continues to pursue wholesale distribution opportunities for the Ecologic Shine® product, including the product placement into major retail automotive chains. The Company is also developing a business plan for the retail distribution of the Ecologic Shine® product line in anticipation of spinning the operating subsidiary out to Shareholders.


Ecologic Products, Inc. has had some success in its 3-year waterless car wash trial, undertaken in conjunction with Park ’N Fly in Atlanta, GA and Los Angeles CA, at Hartfield International Airport and LAX International Airport, respectively.


On February 27, 2014, the Company negotiated the sale of approximately 440 gallons of its Eco Shine, Eco Wash and Eco Prep products, representing approximately 2,640 car washes, to CISA Lubes NC, LLC, a North Carolina operator of 33 quick auto lube operations in North Carolina.  


Ecologic Products, Inc. has expanded its business objectives beyond the scope of sustainable water practices through its Eco Shine operations to sustainable products that target corporate and government markets and has pursued several technologies at various stages of development.  


On June 12, 2014, the Company entered into a non-disclosure Agreement with SEaB Energy, Ltd., a Southampton, United Kingdom Waste-to- Energy Company.  SEaB Energy develops Waste-to-Energy systems deploying a containerized advanced digestion (AD) process. The process will, by stabilizing organic wastes, generate biogas (that will be combusted within CHP engines to generate electricity) and a digestate that will be employed as an organic fertilizer.  In June 2014, the Company’s Chairman and SEaB’s CEO met in London to discuss ways in which the Company could develop a business for SEaB’s two primary products, the Muckbuster® and the Flexibuster©, in the United States.  The Company worked to develop a plan to install the Muckbuster® product at Kennesaw State University, located in the greater Atlanta, Georgia, area.  After review, discussion and due diligence it was decided that the quantity of bio waste that could be utilized by the Muckbuster® system was not large enough in daily volume to make the economics work.  The Company will continue to seek to identify opportunities for the SEaB product line, and will review its efforts at the end of the 2nd quarter 2015.


On June 15, 2014, the Company entered into a non-disclosure agreement with SheerWind, Inc., a Minnesota based innovative wind turbine company.  The discussions with SheerWind were preliminary and did not move past the exchange of private information.  


On June 26, 2014, the Company entered into a non-disclosure agreement with AquaFuel, Ltd., a Kent, United Kingdom based fuel technology company that has developed the first diesel generator to run on glycerin. Management negotiated, drafted and presented a Memorandum of Understanding to acquire an exclusive license for the United States.  The Company’s Chairman visited the AquaFuel headquarters for the purpose of demonstration of the AquaFuel generators and related due diligence. The Company’s due diligence indicated that the current development of glycerin as a fuel was unlikely to be attractive to the marketplace.  The Company is researching alternative bio fuel products that could work with the AquaFuel generators.


Planned Spin Offs


Although the Company continues to develop its environmental transportation business through Ecologic Car Rentals, Inc. and Ecologic Products, Inc., the Company and its board of directors feel the subsidiaries will be able to operate more effectively independently, with the goal of attracting new capital and exploiting their existing business, and will have the flexibility to establish new relationships in order to achieve their respective goals of generating shareholder value.


As such, the Company intends to effect spin-offs of its wholly owned subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc. The terms of the spin-offs include the distribution of a stock dividend of 57,065,061 shares of Ecologic Car Rentals, Inc. common stock, and 57,065,061 shares of Ecologic Products, Inc. common stock, to the Company’s shareholders of record (excluding the former shareholders of PTSG) on the Record Date of December 15, 2014 on a pro rata basis.  Subsequent to the spin-offs, Ecologic Car Rentals, Inc. and Ecologic Products, Inc. will operate as entities independent of the Company, under the leadership of Mr. William B. Nesbitt, who will serve as President and CEO of the companies.


The Company believes that, as independent companies, Ecologic Products, Inc. and Ecologic Car Rentals, Inc. can promote and brand themselves so as to operate successfully.  Mr. William B. Nesbitt will remain as President and CEO of both companies.



16


Results of Operations


The financial information provided represents the combined balances of the Company and the previously separate entity, PearTrack Systems Group, Ltd., as if the merger took place December 7, 2013 (the date in which the companies were under common control).


The following summary of the Company’s results of operations should be read in conjunction with the Company’s consolidated audited financial statements for the years ended December 31, 2014 and 2013, which are included herein.


 

For the Year Ended

  

  

December 31, 2014

 

December 31, 2013

  

Revenue

$

264,895

 

$

2,513

 

 

 

 

 

 

 

 

Cost of Sales

$

23,253

 

$

538

 

 

 

 

 

 

 

 

Gross profit  

$

241,642

 

$

1,975

 

 

 

 

 

 

 

 

General and administrative expenses

$

1,885,669

 

$

1,521,145

 

 

 

 

 

 

 

 

Interest income

$

2

 

$

11

 

 

 

 

 

 

 

 

Refunds and claims

$

71,149

 

$

––

 

 

 

 

 

 

 

 

Interest expense

$

(245,151

)

$

(92,039

)

 

 

 

 

 

 

 

Loss on disposal of asset

$

(2,782

)

$

––

 

 

 

 

 

 

 

 

Loss from continuing operations

$

(1,820,809

)

$

(1,611,198

)

 

 

 

 

 

 

 

Loss from discontinued operations, net of tax

$

––

 

$

(4,010

)

 

 

 

 

 

 

 

Net loss

$

(1,820,809

)

$

(1,615,208

)

 

 

 

 

 

 

 

Gain on foreign currency exchange

$

4,314

 

$

178

 

 

 

 

 

 

 

 

Unrealized gain (loss) on securities

$

(103,731

)

$

108,577

 

 

 

 

 

 

 

 

Net comprehensive income (loss)

$

(99,417

)

$

108,735

 

 

 

 

 

 

 

 

Net loss and comprehensive loss

$

(1,920,226

)

$

(1,506,473

)


Revenue


For the years ending December 31, 2014 and 2013, revenue from continuing operations in the amount of $264,895 and $2,513, respectively, consisted of limited sales resulting from test marketing, as follow: $34,250 and $2,307, respectively, of PearTrack tracking products; $5,375 and $206, respectively, of Ecologic Shine® car washing products; and $225,000 and $0, respectively, in consulting fees.


Cost of sales


For the years ending December 31, 2014 and 2013, cost of sales from continuing operations in the amount of $23,253 and $538, respectively, consisted of manufacturing, packaging and shipping costs in the amount of $20,091 and $368 for the PearTrack tracking product sales; and $3,162 and $170 for the Ecologic Shine® car washing products sales.


General and Administrative Expenses

 

For the year ended

 

 

 

 

December 31,

 

 

  

 

2014

 

2013

 

Variance

  

Amortization of stock options/awards granted

$

185,000

 

$

70,417

 

$

114,583

 

Amortization of deferred stock compensation/stock compensation

 

161,429

 

 

129,500

 

  

31,929

 

Depreciation and amortization

 

119,723

 

 

7,565

 

 

112,158

 

Legal, accounting and professional fees

 

122,876

 

 

65,685

 

 

57,191

 

Management consulting services

 

865,425

 

 

497,083

 

  

368,342

 

Other outside services

 

99,000

 

 

650,000

 

  

(551,000

)

Office supplies and miscellaneous expenses

 

255,952

 

 

39,100

 

  

216,852

 

Rent expense

 

76,264

 

 

61,795

 

 

14,469

 

Total  general and administrative expenses

$

1,885,669

 

$

1,521,145

 

$

364,524

 


General and administrative expenses from continuing operations in the amount of $1,885,669 for the year ended December 31, 2014, were comprised of $346,429 of amortization of stock options and stock compensation, $119,723 of depreciation and amortization, $122,876 of legal and accounting fees, $964,425 of management and consulting fees, $76,264 of rent, and $255,952 of office overhead and other general and administrative expenses.


General and administrative expenses from continuing operations in the amount of $1,521,145 for the year ended December 31, 2013, were comprised of $199,917 in amortization of stock options and stock compensation, $7,565 of depreciation and amortization, $65,685 of legal and accounting fees, $1,147,083 of management and consulting fees, $61,795 of rent, and $39,100 of office overhead and other general and administrative expenses.


General and administrative expenses from continuing operations for the year ended December 31, 2014 were $1,885,669, as compared to $1,521,145 for the year ended December 31, 2013, which resulted in an increase in general and administrative expenses for the current period of $364,524.



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17



Significant changes in general and administrative expenses of $364,524 for continuing operations during the years 2014 compared to 2013 were attributable to the following items:


·

an increase  in amortization of stock options of $114,583, primarily due to a restricted stock award granted in the prior year, resulting in amortization of $125,000 for the current year, compared to one month of amortization of $10,417 for the prior year;


·

an increase in amortization of deferred stock compensation of $31,929, primarily due to certain stock compensation fully expensed in the current year of $74,250, compared to $129,500 in the prior year; and certain deferred compensation resulting in amortization of $87,179 in the current year, compared to none in the prior year;


·

an increase in depreciation and amortization of $112,158, primarily due to an increase in intangible property resulting in amortization expense of $119,471 in the current year, compared to $6,965 in the prior year; and the disposal of certain fixed assets, resulting in partial year depreciation in the current year of $252, compared to a full year’s depreciation of $600 in the prior year.


·

an increase in legal, accounting and professional fees of $57,191, primarily due to an increase in general legal fees of $4,668; a decrease in accounting fees of $1,167 due to the Company’s change in auditor; and an increase of $24,190 resulting from additional services provided by UK accounting firm during the current year, and an increase in general accounting services of $29,500 resulting from an increase in work load;


·

an increase in management consulting fees of $368,342 primarily due an increase of $329,342 in resulting from a change in existing executive management; an increase of $71,500 resulting from an addition to executive management, and a decrease in miscellaneous management fees of $32,500 resulting from a reduction in staff;


·

a decrease in other outside services of $551,000 primarily due to a decrease of $605,000 resulting from $45,000 in consulting and advisory services provided to the Company in the current year, compared to $650,000 for the prior year; and an increase in miscellaneous one-time fees of $54,000 in the current year compared to none in the prior year; and


·

an increase in other general and administrative expenses of $231,321 due to an increase in rent expense of $14,469; an increase in bad debt expense of $141,770 resulting from uncollectible receivables; an increase in travel of $37,540, an increase in research & development of $15,400; a decrease in filing fees of $3,575; a decrease in publicity & promotion of $3,870, and an increase in other general office expenses of $29,587.


General and administrative expenses for both 2014 and 2013 were incurred primarily for the purpose of advancing the Company closer to its goals in the M2M telematics and remote/mobile asset tracking and management industry.

 

Net Loss


During the year ended December 31, 2014, the Company incurred a net loss from continuing operations of $1,820,809compared with a net loss from continuing operations of $1,611,198 for the year ended December 31, 2013. The increase in net loss of $85,003 is attributable to an increase in revenue of $262,382, an increase in cost of goods sold of $22,715, an increase in general and administrative expenses of $364,524, a decrease in interest income of $9, an increase in refunds and claims income of $71,149, an increase in interest expense of $153,112, and an increase in loss on disposal of assets of $2,782.


Liquidity and Capital Resources


Working capital

 

 

 

 

 

 

  

December 31, 2014

 

December 31, 2013

 

Increase (decrease)

 

Current assets

$

81,361

 

$

176,141

 

$

(94,780

)

Current liabilities

 

3,388,652

 

  

3,083,817

 

 

304,835

 

Working capital (deficit)

$

(3,307,291

)

$

(2,907,676

)

$

(399,615

)


As of December 31, 2014, the Company had cash in the amount of $64,753, compared to $65,446 as of December 31, 2013.


The Company had a working capital deficit of $3,307,291 as of December 31, 2014, compared to a working capital deficit of $2,907,676 at December 31, 2013.  The increase in working capital deficit of $399,615 is primarily attributable to a decrease in cash of $693; a decrease in related party receivables of $82,800; a decrease in refunds and claims receivable of $12,003; an increase in prepaid expenses of $716; an increase in accounts payable and accrued expenses of $154,148; an increase in deferred revenue of $225,000; a decrease in short-term related party convertible notes payable of $775,601; an increase in other short-term notes payable of $639,807; and an increase in related party payable of $61,481.


Cash Flows

For the year ended

 

  

December 31, 2014

 

December 31, 2013

  

Net cash provided by (used in) operating activities

$

418,386

 

$

(81,270

)

Net cash provided by (used in ) investing activities

 

(450,000

)

 

80,238

 

Net cash provided by financing activities

 

26,607

 

 

40,479

  

Effect of exchange rate changes on cash

 

4,314

 

 

2,098

 

Net cash provided by (used in) continuing operations

 

(693

)

 

41,545

 

Net cash provided by discontinued operations

 

––

 

 

514

 

Net increase (decrease) in cash

$

(693

)

$

42,059

 


Cash Flows from Operating Activities


During the year ended December 31, 2014, the Company was provided with $418,386 of cash flow for operating activities, compared with using $81,270 for the year ended December 31, 2013. The increase in cash provided by operating activities of $499,656 is primarily attributable to an increase in the net loss from operations of $209,611, an increase in stock compensation/amortization of deferred stock compensation of $114,512, an increase in accruals converted to related party loans of $181,559, a decrease in depreciation of $348, an increase in amortization of $112,506, an increase in discount amortization of $81,291, an increase in the loss on disposal of assets of $2,782, an decrease in refunds and claims receivable of $14,642, an increase in prepaid expenses of $716, an increase in other assets of $1,447, a decrease in accounts payable and accrued expenses of $275,210, an increase deferred revenue of $225,000; and an increase in related party payables of $254,696.



18


Cash Flows from Investing Activities


During the year ended December 31, 2014, the Company used $450,000 of cash flow for investing activities, compared with being provided with $80,238 for the year ended December 31, 2013.  The increase in cash used for investing activities of $530,238 is attributable to the $450,000 fee paid for the license of certain intellectual property during the current year, compared to none in the prior year; and cash received in connection with a business combination in the prior year of $80,238, compared to none in the current year.


Cash Flows from Financing Activities


During the year ended December 31, 2014, the Company was provided with $26,607 of cash flow from financing activities compared with $40,479 during the year ended December 31, 2013. The decrease in cash flows provided by financing activities of $13,872 is attributable to an increase in loan payments of $48,948, an increase in proceeds from the issuance of common stock of $75,550, and an increase in subscriptions received of $5, all compared to none during the prior year; and related party loans of $40,479 received in the prior year, compared to none in the current year.


As at December 31, 2014, affiliates and related parties are due a total of $3,193,780, which is comprised of loans to the Company of $2,896,199, unpaid compensation of $118,500, and unpaid reimbursable expenses of $179,082.  During the year ended December 31, 2014, loans to the Company increased by $561,580, unpaid compensation decreased by $67,838 and reimbursable expenses increased by $212,121.  The loans bear interest at the rate of between 5% and 7% per annum, are both secured and unsecured, are payable one year from demand or by November 15, 2015, and are convertible into the Company’s common stock at a price of $0.05 to $0.40 per share.


The Company’s principal sources of funds have been from sales of the Company’s common stock and loans from related parties.


Future Financings


The Company has suffered recurring losses from operations. The continuation of the Company’s operations is dependent upon the Company’s attaining and maintaining profitable operations and raising additional capital as needed. The Company anticipates that it will have to raise additional funds through private placements of the Company’s equity securities and/or debt financing to complete its business plan.


The Company will require additional financing in order to enable the Company to proceed with the Company’s plan of operations, as discussed above, including approximately $2,000,000 over the next 12 months to pay for the Company’s ongoing expenses. These cash requirements include working capital, selling, general and administrative expenses, expansion of the PearTrack product line, and the pursuit of acquisitions. These cash requirements are in excess of the Company’s current cash and working capital resources. Accordingly, the Company will require additional financing in order to continue operations and to repay the Company’s liabilities. There is no assurance that any party will advance additional funds to the Company in order to enable the Company to sustain its plan of operations or to repay the Company’s liabilities. There is no assurance that the financing will be completed as planned or at all. If the Company is unable to secure adequate capital to continue the Company’s planned operations, the Company’s shareholders may lose some or all of their investment and the Company’s business may fail.


The Company anticipates continuing to rely on equity sales of the Company’s common stock in order to continue to fund the Company’s business operations. Issuances of additional shares will result in dilution to the Company’s existing stockholders. There is no assurance that the Company will achieve any additional sales of its equity securities or arrange for debt or other financing to fund the Company’s planned business activities.


Personnel


As of December 31, 2014, the Company had two employees, excluding its directors and executive officers. Currently, the Company has two employees excluding its directors and executive officers. The majority of those working with the Company are engaged as consultants under Consulting Agreements.


Contractual Obligations


The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.


Going Concern


The Company has incurred losses since inception resulting in an accumulated deficit of $11,695,730, and further losses are anticipated in the development of its business. The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, which may not be available at commercially reasonable terms  There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations and the Company may cease operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.


The consolidated audited financial statements included with this annual report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that the Company’s assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the consolidated audited financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.


Off-Balance Sheet Arrangements


The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.


Critical Accounting Policies


The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. The Company believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of the Company’s financial statements is critical to an understanding of the Company’s financial statements.



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19



Principles of Consolidation:

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, PearTrack Systems Group, Ltd., Ecologic Products, Inc. and Ecologic Car Rentals, Inc.  


The financial information of previously separated entity, PearTrack Systems Group, Ltd. has been combined with the Company’s financial statements as of and for the year ended December 31, 2014, and retrospectively as of and for the year ended December 31, 2013.  All significant inter-company accounts and transactions have been eliminated.


Foreign Currency Translation:

Items included in the financial statements of the Company’s subsidiary are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in US Dollars, which is the Company’s reporting currency.


The results and financial position of PearTrack Systems Group, Ltd., the Company’s wholly owned subsidiary, has a functional currency different from the reporting currency, and is translated into the reporting currency as follows:


(i)

assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii)

income and expenses for each income statement are translated at average exchange rates on a monthly basis; and

(iii)

all resulting exchange differences are recognized as a separate component of equity.


Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement as other comprehensive income. On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to stockholders’ equity. As of December 31, 2014 and 2013, exchange differences of $4,314 and $178, respectively, have been accumulated.


Use of Estimates:

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount 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. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying consolidated financial statements include the, estimates related to asset impairments of long lived assets and investments, classification of expenditures as either an asset or an expense, valuation of deferred tax assets, and the likelihood of loss contingencies. Management bases its estimates and judgments on historical experience and on various other factors 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. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results could differ from these estimates.


Net Income (Loss) Per Common Share:

The Company calculates net income (loss) per share as required by ASC 450-10, "Earnings per Share."  Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period.  Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods when anti-dilutive, common stock equivalents, if any, are not considered in the computation.


Comprehensive Income (Loss): ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at December 31, 2014 and 2013, the Company has recognized ($99,417) and $108,735 in comprehensive income (loss), and has included these amounts within the Company’s statement of operations in the financial statements.


Revenue Recognition: The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured.  As at December 31, 2014, the Company has not commenced its principal operations.


The Company has made limited sales of its Ecologic Shine®  product, and has continuing revenue from limited customer contracts for its PearTrack tracking system. In addition, the Company provides consulting services as an additional revenue source.


Stock Based Compensation

The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.


Recent Accounting Pronouncements: The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (“FASB”), the US Securities and Exchange Commission (“SEC”), and the Emerging Issues Task Force (“EITF”), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:


Adopted:


In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance is the culmination of the FASB’s deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The adoption of this update did not have a material impact on its consolidated financial statements.



20


In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendments in this standard is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. The adoption of this update did not have a material impact on its consolidated financial statements.


In July 2013, the FASB issued ASU No 2013-11, Presentation of an Unrecognized Tax Benefit When Net Operating Loss Carryforward Exists.  The objective of ASU 2013-11 is to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits, and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and interim reporting periods therein. Early adoption is permitted. The adoption of this update did not have a material impact on its consolidated financial statements.


In June 2014, the FASB issued ASU No, 2014-10, Elimination of Certain Financial Reporting Requirements for Development Stage Entities.  The objective of ASU 2014-10 is to reduce the cost and complexity associated with the incremental reporting requirements for development stage entities.  This Update removes all incremental financial reporting requirements, and eliminates an exception provided to development stage entities in Topic 810.  The amendments in this standard are effective retrospectively for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted.


Not Yet Adopted:


In April 2014, the FASB issued ASU No. 2014-08 Presentation of Financial Statements (Topic 205): Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity.  The objective of ASU No. 2014-08 is to clarify the criteria for determining which disposals can be presented as discontinued operations and also modifies related disclosure requirements. The standard is required to be adopted by public business entities in annual periods beginning on or after December 15, 2014, and interim periods within those annual periods.  Early adoption is permitted for new disposals beginning in the first quarter of 2014, provided financial statements have not been issued before the release of this standard. The Company is evaluating the effect, if any, adoption of ASU No. 2014-08 will have on its consolidated financial statements.


In August 2014, the FASB issued ASU No 2014-15 Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The objective of ASU 2014-15 is to provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.  The Company is evaluating the effect, if any, adoption of ASU No. 2014-15 will have on its consolidated financial statements.


In November 2014, the FASB issued ASU No. 2014-17 Business Combinations (Topic 805): Pushdown Accounting. The objective of ASU 2014-17 is to provide guidance on whether and at what threshold an acquired entity that is a business or nonprofit activity can apply pushdown accounting in its separate financial statements. The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle. The Company is evaluating the effect, if any, adoption of ASU No. 2014-17 will have on its consolidated financial statements.


In January 2015, the FASB issued ASU 2015-01 Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This Update eliminates from GAAP the concept of extraordinary items. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The effective date is the same for both public business entities and all other entities. The Company is evaluating the effect, if any, adoption of ASU No. 2015-01 will have on its consolidated financial statements.


Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.


ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.



Table of Contents

21




ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


The Company’s consolidated audited financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.


The financial information of the previously separated entity, PearTrack Systems Group, Ltd. has been combined with the Company’s consolidated audited financial statements as of and for the year ended December 31, 2014 and retrospectively as of and for the year ended December 31, 2013.  


The following consolidated audited financial statements are filed as part of this annual report:


Report of Independent Registered Public Accounting Firm

F-1

  

 

Consolidated Balance Sheets as at December 31, 2014 and 2013

F-2

  

 

Consolidated Statements of Operations for the years ended December 31, 2014 and 2013

F-3

  

 

Consolidated Statements of Changes in Stockholders' deficit for the period from January 1, 2013  to December 31, 2014

F-4

  

 

Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013

F-5

  

 

Notes to the Consolidated Financial Statements for the years ended December 31, 2014 and 2013

F-6



22




[f20141231ptss10kfinal002.jpg]

PCAOB Registered Auditors – www.sealebeers.com



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of

PearTrack Security Systems, Inc.



We have audited the accompanying consolidated balance sheets of Peartrack Security Systems, Inc. as of December 31, 2013 and 2014, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2014. Peartrack Security Systems Inc’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Peartrack Security Systems, Inc. as of December 31, 2013 and 2014, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2014, 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.  As discussed in Note 1 to the financial statements, the Company has no revenues, has negative working capital at December 31, 2014, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ Seale and Beers, CPAs



Seale and Beers, CPAs

Las Vegas, Nevada

April 15, 2015



8250 W. Charleston Blvd., Suite 100 - Las Vegas, NV 89117 Phone: (888)727-8251 Fax: (888)782-2351



F-1



PEARTRACK SECURITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

December 31, 2014

 

December 31, 2013

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

  

  

 

Cash and cash equivalents

$

64,753

 

$

65,446

 

Related party receivable

 

––

 

 

82,800

 

Refunds and claims receivable

 

15,892

 

 

27,895

 

Prepaid expenses

 

716

 

 

––

 

Total current assets

 

81,361

 

 

176,141

 

 

 

 

 

 

 

 

Investment in securities

 

16,887

 

 

120,619

 

Property and equipment, net

 

––

 

 

3,034

 

Intangible assets, unencumbered, net

 

435,000

 

 

––

 

Intangible assets, pledged to creditors, net

 

1,455,624

 

 

1,560,095

 

Other assets

 

6,447

 

 

5,800

 

 

 

 

 

 

 

 

TOTAL ASSETS

$

1,995,319

 

$

1,865,689

 

  

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

  

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and accrued expenses

$

1,165,990

 

$

1,011,842

 

Deferred revenue

 

225,000

 

 

––

 

Related party payables

 

297,581

 

 

236,100

 

Notes payable-short-term convertible-related party

 

787,837

 

 

1,563,438

 

Notes and loans payable-short-term

 

912,244

 

 

272,437

 

Total current liabilities

 

3,388,652

 

 

3,083,817

 

  

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

Notes payable-long-term convertible-related party, net of unamortized discount

 

2,108,362

 

 

1,794,341

 

Notes payable-long-term convertible-other

 

––

 

 

500,000

 

Total long-term liabilities

 

2,108,362

 

 

2,294,341

 

Total liabilities

 

5,497,014

 

 

5,378,158

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

Preferred stock, $0.001 par value, 25,000,000 shares authorized,

none issued and outstanding

 

––

 

 

––

 

Common stock, $0.001 par value, 250,000,000 shares authorized,

59,965,091 and 2,688,474 issued and outstanding as of

December 31, 2014 and 2013, respectively

 

59,965

 

 

2,688

 

Additional paid in capital

 

8,126,703

 

 

6,251,385

 

Subscriptions receivable

 

(1,600

)

 

(5

)

Accumulated deficit

 

(11,695,730

)

 

(9,874,921

)

Accumulated comprehensive income

 

8,967

 

 

108,384

 

Total stockholders' deficit

 

(3,501,695

)

 

(3,512,469

)

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$

1,995,319

 

$

1,865,689

 


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



Table of Contents

F-2



PEARTRACK SECURITY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

For the year ended

 

  

December 31, 2014

 

December 31, 2013

 

Revenue

$

264,895

 

$

2,513

 

Cost of sales

 

23,253

 

 

538

 

Gross profit

 

241,642

 

 

1,975

 

  

 

 

 

 

 

 

General and administrative expenses

 

1,885,669

 

 

1,521,145

 

 

 

 

 

 

 

 

Operating loss

 

(1,644,027

)

 

(1,519,170

)

 

 

 

 

 

 

 

Interest income

 

2

 

 

11

 

Refunds and claims

 

71,149

 

 

––

 

Interest expense

 

(245,151

)

 

(92,039

)

Loss on disposal of asset

 

(2,782

)

 

––

 

Net loss from continuing operations

 

(1,820,809

)

 

(1,611,198

)

  

 

 

 

 

 

 

Net loss from discontinued operations, net of tax

 

––

 

 

(4,010

)

 

 

 

 

 

 

 

Net loss

 

(1,820,809

)

 

(1,615,208

)

 

 

 

 

 

 

 

Comprehensive income (loss):

 

 

 

 

 

 

Unrealized gain (loss) on currency translation

 

4,314

 

 

178

 

Unrealized gain (loss) on securities

 

(103,731

)

 

108,557

 

Net comprehensive income (loss)

 

(99,417

)

 

108,735

 

 

 

 

 

 

 

 

Net loss and comprehensive income (loss)

$

(1,920,226

)

$

(1,506,473

)

 

 

 

 

 

 

 

Net loss per share, basic and diluted:

 

 

 

 

 

 

Continuing operations

 $

(0.13

)

$

(0.60

)

Discontinued operations

 $

––

 

$

(0.00

)

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic and diluted

 

14,439,419

 

 

2,670,795

 



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



F-3



PEARTRACK SECURITY SYSTEMS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

PERIOD FROM JANUARY 1, 2012 TO DECEMBER 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

    

 

 

    

 

 

 

 

 

 

 

 

 

 

 

ACCUMULATED

 

 

    

 

  

COMMON STOCK

 

PAID IN

 

DEFERRED

 

SUBSCRIPTIONS

 

ACCUMULATED

 

COMPREHENSIVE

 

 

 

 

  

SHARES

 

AMOUNT

 

CAPITAL

 

COMPENSATION

 

RECEIVABLE

 

DEFICIT

 

INCOME (LOSS)

 

TOTAL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2012

2,667,474

 

$

2,667

 

$

6,120,161

 

$

(120,000

)

$

-

 

$

(8,259,713

)

$

(351

)

$

(2,257,236

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for cash

5,000

 

 

5

 

 

3,500

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

3,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for services

16,000

 

 

16

 

 

37,984

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of deferred compensation

 

 

 

 

 

 

120,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

120,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of stock options

 

 

 

 

 

 

 

 

 

60,000

 

 

 

 

 

 

 

 

 

 

 

60,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grant of restricted stock award

 

 

 

 

 

 

 

 

 

(250,000

)

 

 

 

 

 

 

 

 

 

 

(250,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of restricted stock award

 

 

 

 

 

 

 

 

 

10,417

 

 

 

 

 

 

 

 

 

 

 

10,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Combination of subsidiary equity

 

 

 

 

 

 

269,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

269,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,615,208

)

 

108,735

 

 

(1,506,473

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2013

2,688,474

 

$

2,688

 

$

6,550,968

 

$

(299,583

)

$

(5

)

$

(9,874,921

)

$

108,384

 

$

(3,512,469

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of related party debt

2,255,314

 

 

2,255

 

 

1,125,402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,127,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of third party debt

762,718

 

 

763

 

 

380,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

381,359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon merger

51,358,555

 

 

51,359

 

 

(51,359

)

 

 

 

 

 

 

 

 

 

 

 

 

 

––

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash

250,000

 

 

250

 

 

74,250

 

 

 

 

 

(250

)

 

 

 

 

 

 

 

74,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock to consultants

2,650,000

 

 

2,650

 

 

722,350

 

 

(648,100

)

 

(76,900

)

 

 

 

 

 

 

 

––

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriptions received

 

 

 

 

 

 

 

 

 

 

 

 

75,555

 

 

 

 

 

 

 

 

75,555

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of restricted stock award

 

 

 

 

 

 

 

 

 

125,000

 

 

 

 

 

 

 

 

 

 

 

125,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of stock options

 

 

 

 

 

 

 

 

 

60,000

 

 

 

 

 

 

 

 

 

 

 

60,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of deferred compensation

 

 

 

 

 

 

 

 

 

87,179

 

 

 

 

 

 

 

 

 

 

 

87,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,820,809

)

 

(99,417

)

 

(1,920,226

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2014

59,965,061

 

$

59,965

 

$

8,802,207

 

$

(675,504

)

$

(1,600

)

$

(11,695,730

)

$

8,967

 

$

(3,501,695

)



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



F-3



PEARTRACK SECURITY SYSTEMS, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

For the year ended

 

  

December 31, 2014

 

December 31, 2013

 

Cash flow from operating activities:

 

 

 

 

 

 

Net loss

$

(1,820,809

)

$

(1,615,208

)

Net loss from discontinued operations

 

––

 

 

4,010

 

Net loss from continuing operations

 

(1,820,809

)

 

(1,611,198

)

 

 

 

 

 

 

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock compensation/amortization of deferred compensation

 

346,429

 

 

231,917

 

Accruals converted to related party loans

 

833,626

 

 

652,067

 

Depreciation

 

252

 

 

600

 

Amortization

 

119,471

 

 

6,965

 

Discount amortization

 

86,505

 

 

5,214

 

Loss on disposal of asset

 

2,782

 

 

––

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

(Increase) decrease in refunds and claims receivable

 

12,003

 

 

(2,639

)

(Increase) in prepaid expenses

 

(716

)

 

––

 

(Increase) decrease in other assets

 

(647

)

 

800

 

Increase in accounts payable and accrued expenses

 

291,572

 

 

566,782

 

Increase in deferred revenue

 

225,000

 

 

––

 

Increase in related party payables

 

322,918

 

 

68,222

 

Net cash provided by (used in) operating activities

 

418,386

 

 

(81,270

)

 

 

 

 

 

 

 

Cash flow from investing  activities:

 

 

 

 

 

 

Cash received from acquisition

 

––

 

 

80,238

 

License of intellectual property

 

(450,000

)

 

––

 

Net cash provided by (used in) investing activities

 

(450,000

)

 

80,238

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

Proceeds from related party loans

 

––

 

 

40,479

 

Repayment of loans payable

 

(48,948

)

 

––

 

Proceeds from issuance of capital stock

 

75,550

 

 

––

 

Common stock subscriptions received

 

5

 

 

––

 

Net cash provided by financing activities

 

26,607

 

 

40,479

 

  

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

4,314

 

 

2,098

 

 

 

 

 

 

 

 

Net cash provided by (used in) continuing operations

 

(693

)

 

41,545

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

Net cash provided by operating activities

 

––

 

 

514

 

Net cash provided by discontinued operations

 

––

 

 

514

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

(693

)

 

42,059

 

 

 

 

 

 

 

 

Cash - beginning of period

 

65,446

 

 

23,387

 

 

 

 

 

 

 

 

Cash - end of period

$

64,753

 

$

65,446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONCASH ACTIVITIES

 

 

 

 

 

 

Change from related party debt to non-related party debt

$

188,755

 

$

––

 

Common stock subscriptions receivable

$

1,600

 

$

5

 

Conversion of debt into common stock

$

1,509,016

 

$

––

 

Conversion of related party payable to related party convertible note payable

$

872,508

 

$

652,067

 

Discount on related party convertible debt

$

427,726

 

$

––

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

Interest paid

$

137,423

 

$

––

 

Income taxes paid

$

––

 

$

––

 

 

 

 

 

 

 

 



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



Table of Contents

F-4


PEARTRACK SECURITY SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014


NOTE 1. OVERVIEW


PearTrack Security Systems, Inc. (the “Company” or “PearTrack”), incorporated in Nevada on September 30, 2005, is a security and logistics company headquartered in Santa Monica, CA. The Company is currently structured with three wholly owned subsidiaries: PearTrack Systems Group, Ltd., Ecologic Products, Inc., and Ecologic Car Rentals, Inc., all Nevada corporations.  PearTrack Systems Group, Ltd. (“PTSG”), is headquartered in the San Francisco Bay area of California, with offices in Manchester, England.  The Company’s current business activities are diversified into two specific markets: remote/mobile asset tracking and environmental transportation and products.  


·

Through its wholly owned subsidiary, PearTrack Systems Group, Ltd., the Company intends to provide a suite of products in the M2M telematics and remote/mobile asset tracking and management industry, including a Global Positioning System (“GPS”) tracking system and tracking devices with a proprietary long-life battery system for non-powered assets.


·

Through the subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc., the Company continues its pursuits for viable environmental rental car opportunities, and its marketing and distribution endeavors for its environmental products. The Company anticipates that it will spin-out Ecologic Car Rentals and Ecologic Products, Inc. to its shareholders prior to the end of 2015.

  

The Company’s primary focus is on the development and commercialization of its proprietary battery system in conjunction with its GPS tracking and management technologies. The Company’s vertically integrated activities, spanning from hardware design, software development, marketing and sales, to project implementation and system operations, aim to make logistics chains more secure and increase operational efficiency.  The Company continues to pursue wholesale distribution opportunities for the Ecologic Shine® product, including product placement into major retail automotive chains. The Company is also developing a business plan for the retail distribution of the Ecologic Shine® product line in anticipation of spinning the operating subsidiary out to Shareholders.


On October 17, 2014, pursuant to the Agreement and Plan of Merger dated October 9, 2014, PearTrack Acquisition Corp., a Nevada corporation (“PTAC”), the Company’s wholly owned subsidiary, merged with PTSG with PTSG as the surviving entity (the “Merger”).  As a result, PTSG became the Company’s wholly owned subsidiary. As part of the agreement, the Company issued an aggregate of 51,358,555 restricted shares of the Company’s common stock to the former PTSG shareholders on a 5.13586 for 1 basis.  The issuance, representing approximately 90% of the Company’s issued and outstanding shares of common stock, increased the total issued and outstanding common shares from 5,706,506 shares to 57,065,061 shares. In addition, the Company changed its name to PearTrack Security Systems, Inc. and its trading symbol to OTCQB.PTSS.


In connection with the Merger, effective October 17, 2014, Mr. William B. Nesbitt resigned as President and CEO, and Mr. Edward W. Withrow Jr., the President of PTSG and a member of the Company’s Board of Directors (the “Board”), was appointed Mr. Nesbitt’s successor. Mr. Nesbitt remains a member of the Board, as well as President and CEO the Company’s subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc.  In addition, Mr. Arran de Moubray, Mr. Paul B. Burke and Mr. John D. Macey, formerly directors of PTSG, were appointed to the Board.


Going Concern


The Company has incurred losses since inception resulting in an accumulated deficit of $11,695,730, and a working capital deficit of $3,307,291, and further losses are anticipated. The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, which may not be available at commercially reasonable terms  There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations and the Company may cease operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.


The consolidated financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue as a going concern.


NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of Presentation: This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements.  These accounting policies conform to accounting principles, generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.


The Company’s fiscal year end is December 31.


Principles of Consolidation:  The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, PearTrack Systems Group, Ltd., Ecologic Products, Inc. and Ecologic Car Rentals, Inc.  The financial information of previously separated entity, PearTrack Systems Group, Ltd. has been combined with the Company’s financial statements as of and for the year ended December 31, 2014, and retrospectively as of and for the year ended December 31, 2013 (Note 13).  All significant inter-company accounts and transactions have been eliminated.


Cash and Cash Equivalents: The Company considers cash in banks, deposits in transit, and highly-liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents. As of December 31, 2014 and 2013, the Company had no cash equivalents.


Foreign Currency Translation:  Items included in the financial statements of the Company’s subsidiary are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in US Dollars, which is the Company’s reporting currency.


The results and financial position of PearTrack Systems Group, Ltd., the Company’s wholly owned subsidiary, has a functional currency different from the reporting currency, and is translated into the reporting currency as follows:


(i)

assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii)

income and expenses for each income statement are translated at average exchange rates on a monthly basis; and

(iii)

all resulting exchange differences are recognized as a separate component of equity.


Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement as other comprehensive income. On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to stockholders’ equity. As of December 31, 2014 and 2013, respectively, exchange differences of $4,314 and $178 have been accumulated.



F-5


Use of Estimates: The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount 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. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying consolidated financial statements include the, estimates related to asset impairments of long lived assets and investments, classification of expenditures as either an asset or an expense, valuation of deferred tax assets, and the likelihood of loss contingencies. Management bases its estimates and judgments on historical experience and on various other factors 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. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results could differ from these estimates.


Net Income (Loss) Per Common Share:  The Company calculates net income (loss) per share as required by ASC 450-10, "Earnings per Share."  Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period.  Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods when anti-dilutive, common stock equivalents, if any, are not considered in the computation.


Comprehensive Income (Loss): ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at December 31, 2014 and 2013, the Company has recognized ($99,417) and $108,735 in comprehensive income (loss), and has included these amounts as part of other comprehensive income (loss) on the accompanying statement of operations.


Revenue Recognition: The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured.  As at December 31, 2014, the Company has not commenced its principal operations.


The Company has made limited sales of its Ecologic Shine®  product, and has continuing revenue from limited customer contracts for its PearTrack tracking system.   In addition, the Company provides consulting services as an additional revenue source.


Property and Equipment: Property and equipment is carried at the cost of acquisition or construction and depreciated over the estimated useful lives of the assets. Costs associated with repairs and maintenance are expensed as incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of the Company’s property and equipment are capitalized and depreciated over the remaining life of the related asset. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are 5 to 7 years.


Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of: In accordance with ASC 350-30, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable.  When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount.  Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.  The Company currently believes there is no impairment of its long-lived assets.  There can be no assurance, however, that market conditions will not change or demand for the Company’s products will continue.  Either of these could result in future impairment of long-lived assets.


Due to the Company’s recurring losses, its intellectual properties were evaluated for impairment and it was determined that future cash flows were sufficient for recoverability of the assets.


Income Taxes: Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.


The Company has net operating loss carryforwards available to reduce future taxable income. Future tax benefits for these net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. To the extent that the Company will not realize a future tax benefit, a valuation allowance is established.


Stock Based Compensation: The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.


Fair Value Measurements: Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:


Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.


The Company’s financial instruments consist principally of cash, accounts payable, and accrued liabilities. Pursuant to ASC 820 and 825, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.


Investments in Securities: Investments in securities are accounted for using the equity method if the investment provides the Company the ability to exercise significant influence, but not control, over an investee.  Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee between 20% and 50%, although other factors, such as representation on the investee's Board of Directors, are considered in determining whether the equity method is appropriate.  All other equity investments, which consist of investments for which the Company does not possess the ability to exercise significant influence, are accounted for under the mark to market method.  Under the mark to market method of accounting, investments are marked to market, with unrealized gains and losses being excluded from earnings and reflected as a component of other comprehensive income.



Table of Contents

F-6


Recent Accounting Pronouncements: The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (“FASB”), the US Securities and Exchange Commission (“SEC”), and the Emerging Issues Task Force (“EITF”), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:


Adopted:


In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance is the culmination of the FASB’s deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The adoption of this update did not have a material impact on its consolidated financial statements.


In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendments in this standard is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. The adoption of this update did not have a material impact on its consolidated financial statements.


In July 2013, the FASB issued ASU No 2013-11, Presentation of an Unrecognized Tax Benefit When Net Operating Loss Carryforward Exists.  The objective of ASU 2013-11 is to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits, and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and interim reporting periods therein. Early adoption is permitted. The adoption of this update did not have a material impact on its consolidated financial statements.


In June 2014, the FASB issued ASU No, 2014-10, Elimination of Certain Financial Reporting Requirements for Development Stage Entities.  The objective of ASU 2014-10 is to reduce the cost and complexity associated with the incremental reporting requirements for development stage entities.  This Update removes all incremental financial reporting requirements, and eliminates an exception provided to development stage entities in Topic 810.  The amendments in this standard are effective retrospectively for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted.


Not Yet Adopted:


In April 2014, the FASB issued ASU No. 2014-08 Presentation of Financial Statements (Topic 205): Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity.  The objective of ASU No. 2014-08 is to clarify the criteria for determining which disposals can be presented as discontinued operations and also modifies related disclosure requirements. The standard is required to be adopted by public business entities in annual periods beginning on or after December 15, 2014, and interim periods within those annual periods.  Early adoption is permitted for new disposals beginning in the first quarter of 2014, provided financial statements have not been issued before the release of this standard. The Company is evaluating the effect, if any, adoption of ASU No. 2014-08 will have on its consolidated financial statements.


In August 2014, the FASB issued ASU No 2014-15 Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The objective of ASU 2014-15 is to provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.  The Company is evaluating the effect, if any, adoption of ASU No. 2014-15 will have on its consolidated financial statements.


In November 2014, the FASB issued ASU No. 2014-17 Business Combinations (Topic 805): Pushdown Accounting. The objective of ASU 2014-17 is to provide guidance on whether and at what threshold an acquired entity that is a business or nonprofit activity can apply pushdown accounting in its separate financial statements. The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle. The Company is evaluating the effect, if any, adoption of ASU No. 2014-17 will have on its consolidated financial statements.


In January 2015, the FASB issued ASU 2015-01 Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This Update eliminates from GAAP the concept of extraordinary items. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The effective date is the same for both public business entities and all other entities. The Company is evaluating the effect, if any, adoption of ASU No. 2015-01 will have on its consolidated financial statements.


Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.


NOTE 3. INVESTMENT IN SECURITIES


As of December 31, 2014 and 2013, the Company held 12,061,854 shares of Amazonas Florestal, Ltd. (“AZFL”) common stock (the “AZFL Shares”) with a fair value of $16,887 and $120,619, respectively. Management’s intent is to distribute the AZFL Shares in the form of a dividend, to the Company’s shareholders of record on March 16, 2012 (the effective date of the Merger), once AZFL has filed an S1 Registration and registers the AZFL Shares. The date by which the Form S1 was to be filed was extended by mutual agreement to January 31, 2013.  AZFL has not, to the Company’s knowledge, caused to register the AZFL shares by filing a Form S1, and is in default of its agreement with the Company.  The Company has requested that AZFL complete the registration so the stock distribution can be completed.



F-7


NOTE 4. PROPERTY AND EQUIPMENT


Property and equipment consists of the following:  

 

December 31, 2014

 

December 31, 2013

 

Office equipment

$

5,258

 

$

5,258

 

Accumulated depreciation

 

(2,476

)

 

(2,224

)

Property and equipment, net, before disposals

 

2,782

 

 

3,034

 

Less: disposal of equipment

 

(2,782

)

 

––

 

Property and equipment, net

$

––

 

$

3,034

 


As of December 31, 2014, the Company disposed of its equipment, valued at $0, and recognized a loss in the amount of $2,782.  


Depreciation expense totaled $252 and $600 for the year ended December 31, 2014 and 2013, respectively.


NOTE 5. INTANGIBLE ASSETS


Intangible assets consists of the following:  

 

December 31, 2014

 

December 31, 2013

 

Intellectual property, unencumbered

$

450,000

 

$

––

 

Accumulated amortization

 

(15,000

)

 

––

 

Intellectual property, unencumbered, net

 

435,000

 

 

––

 

 

 

 

 

 

 

 

Intellectual property, pledged to creditors

 

1,567.060

 

 

1,567.060

 

Accumulated amortization

 

(111,436

)

 

(6,965

)

Intellectual property, pledged to creditors, net

$

1,455,624

 

$

1,560,095

 


Amortization expense totaled $119,471 and $6,965 for the year ended December 31, 2014 and 2013, respectively.


NOTE 6. DEFERRED REVENUE


On June 30, 2014, the Company entered into a Service Agreement (“Service Agreement”) for consulting services to be provided by the Company in the corporate and government target markets. The Service Agreement is for a term of twelve (12) months commencing June 30, 2014, and includes compensation of $450,000 for services rendered. As of December 31, 2014, the Company has recognized $225,000 as revenues earned, and has deferred $225,000, to be earned over the next six month period.


NOTE 7. NOTES AND LOANS PAYABLE


Notes and loans payable consists of the following:

 

December 31, 2014

 

December 31, 2013

 

 

 

 

 

 

 

 

Loans payable

$

98,489

 

$

147,437

 

Notes payable-short term

\

125,000

 

$

125,000

 

Notes payable-short-term-convertible

 

688,755

 

 

––

 

Total notes and loans payable-short term

 

912,244

 

 

272,437

 

 

 

 

 

 

 

 

Total notes payable-long term-convertible

 

––

 

 

500,000

 

 

 

 

 

 

 

 

Total notes and loans payable

$

912,244

 

$

772,437

 


Notes payable consists of unsecured promissory notes issued in the principal sum of $912,244 and $772,437 as of December 31, 2014 and 2013, respectively.  The notes bear interest at a rate of between 5% and 15% per annum, and are due within one (1) year of written demand or by December 31, 2015.


During the year ended December 31, 2013, the Company issued a convertible promissory note in the principal sum of $500,000 for advisory services rendered to the Company.  The note bears interest at a rate of 5% per annum, is due by December 31, 2015, and is convertible into the Company’s common stock at a price of $0.25 per share. No modifications to existing notes were made during 2013.


During the year ended December 31, 2014, modifications were made to a certain note to increase the principal amount by $570,114, and to provide a conversion feature, whereby the principal sum of $570,114 is convertible into the Company’s common stock at a strike price of $0.05 per share. On September 26, 2014, the Company received a Notice to Convert for the conversion of $381,359 in principal. As a result, 7,627,180 restricted shares of the Company’s common stock were issued.  As of December 31, 2014, the principal balance owed under the note was $188,755.


As of December 31, 2014, notes payable includes the following convertible promissory notes:


Principal

Interest Rate

Conversion Rate

Maturity Date

 

 

 

 

$188,755

7%

$0.05

1 year from demand

$500,000

5%

$0.25

12/31/2015


Loans payable consists of monies loaned to the Company by a third-party for the purpose of overhead advances and product development.  The loan is unsecured, bears no interest, and is payable upon demand. As of December 31, 2014 and 2013, respectively, $98,489 and $147,437 is outstanding, and no demand has been made.


As of December 31, 2014 and 2013, interest in the amount of $163,177 and $90,923, respectively, has been accrued and is included as part of accrued expenses on the accompanying balance sheet.



Table of Contents

F-8


NOTE 8. RELATED PARTY TRANSACTIONS


Related party transactions consists of the following:

 

December 31, 2014

 

December 31, 2013

 

 

 

 

 

 

 

 

Notes payable-short-term

$

787,837

 

$

1,563,438

 

 

 

 

 

 

 

 

Notes payable-long-term-senior

 

2,000,000

 

 

2,000,000

 

Less: unamortized discount

 

(341,221

)

 

(427,726

)

Total long-term notes payable, senior, net of discount

 

1,658,779

 

 

1,572,274

 

Notes payable-long-term-subordinate

 

449,583

 

 

222,067

 

Total long-term notes payable

 

2,108,362

 

 

1,794,341

 

Total notes payable

 

2,896,199

 

 

3,357,779

 

 

 

 

 

 

 

 

Accrued compensation

 

118,500

 

 

186,338

 

Reimbursed expenses payable (receivable)

 

179,081

 

 

(33,039

)

Total related party payable

 

297,581

 

 

153,299

 

 

 

 

 

 

 

 

Total related party transactions

$

3,193,780

 

$

3,511,078

 


Related party notes payable consists of the following convertible notes payable at December 31, 2014:  


Description

Principal

Interest Rate

Conversion Rate

Maturity Date

 

 

 

 

 

 

Note payable-long-term-senior

$

2,000,000

5%

$0.40

12/09/2018

Less: unamortized discount

 

(341,221

)

 

 

Note payable-long-term-senior, net of discount

 

1,658,779

 

 

 

 

 

 

 

 

 

Note payable-short term

 

313,913

7%

$0.05

1 yr demand

Note payable-short-term

 

100,000

7%

$0.07

1 yr demand

Note payable-short term

 

373,924

5%

$0.05

Funding

Note payable-long-term

 

449,583

5%

$0.25

12/31/2017

 

 

 

 

 

 

Total

$

2,896,199

 

 

 


All outstanding related party notes payable bear interest at the rate of 5% to 7% per annum, are due and payable within between one (1) year of written demand and by December 9, 2018, or upon certain equity funding, and are convertible into the Company’s common stock at a price of between $0.05 and $0.40 per share.


On September 30, 2010, a convertible note payable was issued to a related party for unpaid compensation of $172,500 and for cash loans made to the Company in the amount of $213,859. The note bears interest at a rate of seven percent (7%) per annum, is due within one (1) year of written demand, and is convertible into the Company’s common stock. Further modifications to the note were made through December 31, 2014 to increase the principal amount for additional unpaid compensation of $780,000, and to assign a portion of debt in the amount of $661,359 to other parties (the “Assigned Principal”), and to change the conversion strike price from $0.07 to $0.05.  A portion of the Assigned Principal was in default by the assignee, and $100,000 reverted back to the note holder, including accrued interest of $3,671.  On September 26, 2014, the Company received a Notice to Convert for the conversion of $557,661, representing principal in the amount of $445,000 and accrued interest in the amount of $112,661. As a result, 11,153,232 restricted shares of the Company’s common stock were issued.  As of December 31, 2014 and 2013, the principal balance owing under the note was $160,000 and $906,359, respectively. Interest in the amount of $5,416 and $77,696, respectively, has been accrued as of December 31, 2014 and 2013, and is included as part of accrued expenses on the accompanying balance sheets.


On December 31, 2011, a senior convertible promissory note was issued to a related party for unpaid compensation in the amount of $30,000. The note bears interest at a rate of five percent (5%) per annum, is payable upon certain equity funding goals, and is convertible into the Company’s common stock. Modifications to the note have been made between January 1, 2012 and October 17, 2014 to modify the principal amount for additional unpaid compensation of $623,091, and to change the conversion strike price from $0.07 to $0.05. On September 26, 2014, the Company received a Notice to Convert for the conversion of $294,532, representing principal in the amount of $279,167 and accrued interest in the amount of $15,365. As a result, 5,890,634 restricted shares of the Company’s common stock were issued.  As of December 31, 2014 and 2013, the principal balance owing under the note was $373,924 and $454,166, respectively. Interest in the amount of $32,529 and $20,813 has been accrued as of December 31, 2014 and 2013, respectively, and is included as part of accrued expenses on the accompanying balance sheets.


On November 15, 2013, the Company issued a convertible promissory note in the amount of $150,000 to a related party of the Company, for consulting services rendered to the Company.  The note bears interest at a rate of five percent (5%) per annum, matures on November 15, 2015, and is convertible into the Company’s common stock. On August 31, 2014, a modification to the note was made to change the conversion strike price from $0.08 to $0.05.  On September 26, 2014, the Company received a Notice to Convert for the conversion of $155,938, representing principal in the amount of $150,000 and accrued interest in the amount of $5,938. As a result, 3,118,768 restricted shares of the Company’s common stock were issued, and the note has been paid in full.  Interest in the amount of $0 and $945 has been accrued as of December 31, 2014 and 2013, respectively, and is included as part of accrued expenses on the accompanying balance sheets.


On November 15, 2013, the Company issued a convertible promissory note in the amount of $72,067 to a related party for unpaid compensation.  Modifications to the note were made between November 16, 2013 and August 31, 2014, to increase the principal to $116,067, to include additional unpaid compensation, and to change the conversion strike price from $0.08 to $0.05. The note bears interest at a rate of five percent (5%) per annum, matures on November 15, 2015, and is convertible into the Company’s common stock. On September 26, 2014, the Company received a Notice to Convert for the conversion of $119,525, representing principal in the amount of $116,067 and accrued interest in the amount of $3,458. As a result, 2,390,507 restricted shares of the Company’s common stock were issued, and the note has been paid in full.  Interest in the amount of $0 and $454, has been accrued as of December 31, 2014 and 2013, respectively, and is included as part of accrued expenses on the accompanying balance sheets.


On December 4, 2013, the Company, through its wholly owned subsidiary, PTSG, entered into an Employment Agreement with Edward W. Withrow Jr., for his services as President and Chief Executive Officer of the Company (the “Agreement”). The initial term of the Agreement is for a period of two (2) years, and is automatically renewed annually unless terminated by either party. The Agreement provides for initial compensation of $175,000 per year.  In addition, the Agreement provides for expense reimbursements, and an initial stock award of 1,000,000 restricted shares of the Company’s common stock. On December 31, 2014, a convertible promissory note was issued for unpaid compensation owing under this agreement in the amount of $189,583. The note bears interest at a rate of five percent (5%) per annum, is due within two (2) years, and is convertible into the Company’s common stock at a strike price of $0.25 per share. No interest has been accrued as of December 31, 2014.


On December 4, 2013, the Company, through its wholly owned subsidiary, PTSG, entered into a consulting agreement with Huntington Chase Financial Group, a Nevada corporation (“HCFG”), a related party. The consulting agreement provides for HCFG to perform certain advisory and consulting functions for compensation in the amount of $20,000 per month for a period of three (3) years until December 4, 2017. On December 31, 2014, a convertible promissory note was issued for unpaid compensation owing under this agreement in the amount of $260,000. The note bears interest at a rate of five percent (5%) per annum, is due within two (2) years, and is convertible into the Company’s common stock at a strike price of $0.25 per share. No interest has been accrued as of December 31, 2014.



F-9


On December 9, 2013, the Company, through its wholly owned subsidiary, PTSG, entered into a consulting agreement with John D. Macy, a member of the board of directors, for his services in the area of technology, sales and marketing.  The consulting agreement, commencing January 1, 2014,  provides for compensation in the amount of $60,000 per year for a period of two (2) years, until December 4, 2016.


On December 9, 2013, the Company, through its wholly owned subsidiary, PTSG, issued a Zero Coupon Senior Secured Convertible Note (the “Convertible Note”) to seven (7) shareholders, of which two (2) shareholders are also directors of the Company  (the “Note Holders”), in the aggregate sum of $2,000,000.  The Convertible Note holds senior position above all other debt, bears no interest, is due within five (5) years, or by December 9, 2018 (the “Maturity Date”), and is secured by an Intellectual Property Pledge and Security Agreement (the “Security Agreement”). Pursuant to terms and conditions of the Convertible Note, principal payments may be made pro rata to the Note Holders prior to Maturity Date without penalty when/if the Company meets certain funding and earnings goals (Note 9).  In accordance with the Security Agreement, certain intellectual property licensed to the Company shall be pledged as collateral to secure punctual payment. In the event of default, the Company has the right to repurchase the intellectual property, for which the proceeds shall be paid to the Note Holders to satisfy the default.  The non-interest bearing Convertible Note has been recorded at its present value on the date of issuance using an imputed interest rate of 5%.  The difference between the face value and its present value has been recorded as a discount of $432,940, to be amortized over the term of the note. As of December 31, 2014 and 2013, the Company has amortized $86,505 and $5,214, respectively, as interest expense.  There remains $341,221 and $427,726 in unamortized discount as of December 31, 2014 and 2013, respectively, to be expensed over the next 35 months.


On December 31, 2013, the Company, through its wholly owned subsidiary, Ecologic Products, Inc., issued a modification to consolidate all promissory notes payable to Huntington Chase Ltd. in the aggregate principal sum of $153,912, for cash loans made to the Company between 2009 and 2013, and to assign the note in its entirety, including accrued interest of $27,368, to Huntington Chase Financial Group.  The note bears interest at a rate of seven percent (7%) per annum, is due within one (1) year of written demand, and is convertible into the Company’s common stock at a strike price of $0.07 per share. Interest in the amount of $38,143 and $27,369 has been accrued as of December 31, 2014 and 2013, respectively, and is included as part of accrued expenses on the accompanying balance sheets.


On January 5, 2014, a related party was assigned $100,000 of a convertible promissory note issued by the Company.  The note bears interest at a rate of 7% per annum, is due within one (1) year of written demand, and is convertible into the Company’s common stock at a strike price of $0.07 per share. Interest in the amount of $4,932 has been accrued as of December 31, 2014, and is included as part of accrued expenses on the accompanying balance sheets.


As at December 31, 2014 and 2013, respectively, affiliates and related parties are due a total of $3,193,780 and $3,511,078, which is comprised of loans to the Company of $2,896,199 and $3,357,779, accrued compensation of $118,500 and $186,338, and reimbursed expenses of $179,081 and $(33,039), for a net decrease of $317,298. During the year ended December 31, 2014, loans to the Company increased by $461,580, unpaid compensation decreased by $67,838 and reimbursable expenses increased by $212,120.


The Company’s decrease in loans to the Company of $461,580 is due to an increase in unpaid compensation owed to related parties in the amount of $872,508 which has been converted to convertible notes payable; a decrease in unamortized discount of $86,505; a decrease of $990,234 due to the conversion of debt into common stock; and a decrease of $430,359 resulting from the assignment/reclassification of debt to non-related parties.


The Company’s decrease in unpaid compensation of $67,838 is due to an increase in unpaid compensation of $71,917 due to related parties; and a decrease of $139,755 which was converted into notes payable and transferred to non-related party notes payable.


The Company’s expenses reimbursable to related parties increased by $212,120 and $33,996 during the year ended December 31, 2014 and 2013, respectively.


During the year ended December 31, 2014 and 2013, accrued interest increased by $81,712 and $64,956, respectively. In connection with the conversion of certain debt during the current year, accrued interest was reduced by $137,423.  As of December 31, 2014 and 2013, accrued interest payable to related parties was $81,020 and $136,731, respectively, and is included as part of accrued expenses on the accompanying balance sheets.


NOTE 9. COMMITMENTS AND CONTINGENCIES


On December 9, 2013, the Company, through its wholly owned subsidiary, PTSG, issued a Zero Coupon Senior Secured Convertible Note (the “Convertible Note”) in the aggregate sum of $2,000,000. Pursuant to terms and conditions of the Convertible Note, principal payments may be made pro rata to the Note Holders prior to Maturity Date without penalty when/if the Company meets certain funding and earnings goals as follows: 1) 10% of any equity investment of $2,100,000 or more; or 2) $250,000 each year the Company’s retained earnings reaches or exceeds $1,500,000; or 3) $250,000 each year the Company’s EBITDA reaches or exceeds $3,000,000. As of December 31, 2014 and 2013, no contingent payments have been made.


On June 30, 2014, the Company entered into two (2) License Agreements (“License Agreements”) for the non-exclusive license to the Company in perpetuity of certain patented technology (the “Licensed Product”) in the private sector corporate and enterprise markets, and the public sector government markets. In accordance with the License Agreements, an initial licensing fee of $450,000, or $225,000 per agreement, was payable upon execution. In addition, royalty payments equal to 12% of gross revenues generated from the sale, lease or licensing of the Licensed Product are payable to the licensor. As of December 31, 2014, the Company has not commenced sales of the Licensed Product.


NOTE 10. CAPITAL STOCK


On October 17, 2014, the total number of authorized shares of common stock that may be issued by the Company was increased to 250,000,000 with a par value of $0.001 per share; and the total number of authorized preferred stock was increased to 25,000,000 shares with a par value of $0.001. In addition, the Company effected a 10-for-1 reverse stock split, whereby one (1) new share of the Company’s common stock was issued for each 10 shares of common stock held, thereby reducing the total issued and outstanding shares from 57,065,061 shares to 5,706,506 shares.


The following reflect the effects of the 10-to-1 reverse stock split that occurred on October 17, 2014:


On September 26, 2014, in connection with a certain Notice to Convert received from a non-related party, $381,359 in debt was converted at a price of $0.05 per share into 762,718 restricted shares of the Company’s common stock.  As a result, $380,596 was recorded as additional paid in capital.


On September 26, 2014, in connection with certain Notice(s) to Convert received from four (4) related parties, $1,127,657 in debt was converted at a price of $0.05 per share into 2,255,314 restricted shares of the Company’s common stock.  As a result, $1,125,402 was recorded as additional paid in capital.


On October 17, 2014, in connection with the Merger, the Company issued 51,358,555 shares of restricted common stock to the thirteen (13) former shareholders of PearTrack Systems Group, Ltd.  As a result, additional paid in capital was reduced by $51,359.


On October 30, 2014, in connection with certain consulting agreements, the Company granted two consultants the right to purchase 400,000 shares of its restricted common stock at $0.001 per share.  The shares, valued at $100,000, were purchased for cash in the amount of $400.  As a result, $99,600 has been recorded to additional paid in capital, and $99,600 has been recorded as deferred compensation.


On October 31, 2014, in connection with a certain consulting agreement, the Company granted the consultant the right to purchase 1,000,000 shares of its restricted common stock at $0.001 per share.  The shares, valued at $250,000, were purchased for cash in the amount of $1,000.  As a result, $249,000 has been recorded to additional paid in capital, and $249,000 has been recorded as deferred compensation.


On October 31, 2014, in connection with a certain stock purchase agreement, the Company granted a consultant the right to purchase 100,000 shares of its restricted common stock at $0.001 per share.  The shares, valued at $25,000, were purchased for cash in the amount of $100.  As a result, $24,900 has been recorded to additional paid in capital.



Table of Contents

F-10


On November 21, 2014, in connection with a certain stock purchase agreement, the Company granted a consultant the right to purchase 150,000 shares of its restricted common stock at $0.001 per share.  The shares, valued at $49,500, were purchased for cash in the amount of $150.  As a result, $49,350 has been recorded to additional paid in capital.


On December 1, 2014, in connection with certain consulting agreements, the Company granted two consultants the right to purchase 750,000 shares of its restricted common stock at $0.10 per share, and 500,000 shares at $0.001 per share.  The shares, valued at $375,000, were purchased for cash in the amount of $75,500.  As a result, $373,750 has been recorded to additional paid in capital, and $299,500 has been recorded as deferred compensation.


During the years ended December 31, 2014 and 2013, respectively, a total of $272,179 and $70,417 in deferred stock compensation was expensed. Deferred stock compensation expense of $675,504 and $239,583 remained at December 31, 2014 and 2013, respectively, to be amortized over the next 23 months.


As of December 31, 2014 and 2013, respectively, the Company had 59,965,061 and 2,688,474 shares of common stock issued and outstanding.


NOTE 11. WARRANTS AND OPTIONS


The following reflect the effects of the 10-to-1 reverse stock split that occurred on October 17, 2014:


During the year ended December 31, 2014, 228,755 stock options issued in 2009 expired, and 5,000 stock options issued in 2010 were cancelled. As of December 31, 2014 and 2013, respectively, the Company has no warrants and 366,000 and 599,755 options issued and outstanding.   


Outstanding and Exercisable Options

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

Exercise Price

 

 

 

 

 

Number of

 

Contractual Life

 

times Number

 

Weighted Average

 

Exercise Price

 

Shares

 

(in years)

 

of Shares

 

Exercise Price

 

$4.73

 

38,500

 

0.50

 

$

182,105

 

 

$3.70

 

$3.20

 

75,000

 

1.25

 

 

240,000

 

 

$3.50

 

$3.20

 

102,500

 

6.25

 

 

328,000

 

 

$3.50

 

$2.00

 

150,000

 

2.00

 

 

300,000

 

 

$3.10

 

 

 

366,000

 

 

 

$

1,050,105

 

 

$3.10

 


Options Activity

Number

 

Weighted Average

 

 

Of Shares

 

Exercise Price

 

Outstanding at December 31, 2013

599,755

 

 

$3.10

 

Issued

––

 

 

––

 

Exercised

––

 

 

––

 

Expired / Cancelled

(233,755

)

 

$2.50

 

Outstanding at December 31, 2014

366,000

 

 

$3.10

 


During the year ended December 31, 2014 and 2013, respectively, the Company expensed a total of $60,000 and $60,000 in stock option compensation. There remained $0 and $60,000 in deferred stock option compensation at December 31, 2014 and 2013, respectively.


NOTE 12. RESTRICTED STOCK AWARDS


On December 4, 2013, in connection with a certain Employment Agreement, the Company’s President was awarded the right to purchase 1,000,000 shares of restricted common stock (the “Restricted Stock Units”, “RSUs”) at a per share price of $0.0001 (the “Stock Award”).  The Stock Award, valued at $250,000, vests immediately upon execution of the Employment Agreement, but is returnable in the event of early termination, in proportion to the length of employment. In connection with the Stock Award, a total of $250,000 has been recorded as deferred compensation, of which $125,000 and $10,417 has been expensed during the years ended December 31, 2014 and 2013, respectively. There remains $114,583 of deferred compensation as of December 31, 2014, to be amortized over the next 11 months.


As of December 31, 2014, the Company has awarded a total of 1,000,000 Restricted Stock Units. During the years ended December 31, 2014 and 2013, respectively, the Company expensed a total of $125,000 and $10,417 in deferred compensation. There remained $114,583 and $239,583 in deferred compensation at December 31, 2014 and 2013, respectively.


NOTE 13. ACQUISITIONS


On October 17, 2014, the Company’s wholly owned subsidiary, PearTrack Acquisition Corp. (“PTAC”), merged with PearTrack Systems Group, Inc. (“PTSG”), both Nevada corporations, with PTSG as the surviving entity. As a result, PTSG became the Company’s wholly owned subsidiary. As part of the merger agreement, the Company issued an aggregate of 51,358,555 restricted common shares, representing 90% of the Company’s issued and outstanding shares of common stock, to the former PTSG shareholders on a 5.13586 for 1 basis. The common shares issued had a total fair value of $28,247,205 based on the closing market price of $0.55 per share on October 17, 2014, the acquisition date.  No change in control took place and no goodwill has been recognized as a result of the merger.


In connection with the presentation of the financial statements, the following gross revenues and net losses of PTSG have been combined with the Company’s gross revenues and net losses for the periods indicated to present the Company’s consolidated information as if the business combination had occurred on December 7, 2013 (the date in which the companies were under common control):


 

December 31, 2014

 

December 31, 2013

 

 

 

 

 

(audited)

 

Revenues

$

259,520

 

$

2,307

 

 

 

 

 

 

 

 

Net income (loss)

 

(751,330

)

 

(68,451

)

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

4,314

 

 

178

 



F-11


The following table summarizes the amounts of identified assets acquired and liabilities assumed at October 17, 2014, the acquisition date, as well as the amounts combined at December 31, 2013:


 

October 17, 2014

 

December 31, 2013

 

Assets:

 

 

 

 

 

 

Cash

$

3,037

 

$

65,446

 

Accounts receivable

 

2,569

 

 

––

 

Refunds and claims receivable

 

15,138

 

 

27,895

 

Related party receivable

 

––

 

 

82,800

 

Property and equipment, net

 

––

 

 

1,009

 

Intellectual property, net, unencumbered

 

441,166

 

 

––

 

Intellectual property, net, pledged

 

1,477,099

 

 

1,560,095

 

 

 

1,939,009

 

 

1,737,245

 

Liabilities:

 

 

 

 

 

 

Accounts payable

 

75,661

 

 

17,127

 

Intercompany advances

 

54,147

 

 

––

 

Loans payable

 

101,643

 

 

147,437

 

Related party payables

 

460,452

 

 

38,940

 

Deferred revenue

 

318,145

 

 

––

 

Note payable, related party, net of discount

 

1,640,767

 

 

1,572,274

 

 

 

2,650,815

 

 

1,775,778

 

 

 

 

 

 

 

 

Net assets acquired

$

(711,806

)

 

(38,533

)


NOTE 14. DISCONTINUED OPERATIONS


On December 1, 2012, the Company discontinued all operations related to the former activities involving the three year test market with Park N Fly, Inc. for the Company’s car wash product and system, Ecologic Shine®. The 3-year test market with Park N Fly resulted in an accumulated deficit of $82,697 through December 31, 2013.  In addition, certain advances were made to Ecologic Products, Inc. for the purpose of overhead expenses that were not directly attributable to the Park N Fly segment of operations.  As a result, additional cash funds are required the in order to satisfy the accounts payable remaining.  As of December 31, 2013, the Company had the following assets and liabilities relating to its discontinued operations:


 

December 31, 2013

 

Assets

 

 

 

Intercompany advances

$

72,302

 

 

 

 

 

Liabilities and accumulated deficit

 

 

 

Accounts payable and accrued expenses

$

154,999

 

Net assets of discontinued operations

$

82,697

 


The results of discontinued operations are summarized as follows:

Cumulative from

September 1, 2009 to

December 31, 2013

 

Revenue

$

1,192,191

 

Cost of goods sold

 

1,168,796

 

Gross profit

 

23,395

 

General and administrative expenses

 

(91,200

)

Interest expense

 

(15,192

)

Gain on sale of equipment

 

300

 

Net loss from discontinued operations

$

(82,697

)


NOTE 15. INCOME TAXES

 

Temporary differences are differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is recorded when the ultimate realization of a deferred tax as the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2014 and 2013, are presented below:

 

December 31, 2014

 

December 31, 2013

 

Deferred tax assets:

 

 

 

 

 

 

Continuing operations:

 

 

 

 

 

 

Net operating loss carry forwards

$

3,863,000

 

$

3,244,000

 

Less valuation allowance

 

(3,863,000

)

 

(3,244,000

)

Net deferred tax asset - continuing operations

$

––

 

$

––

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

Net operating loss carry forwards

$

25,000

 

$

25,000

 

Less valuation allowance

 

(25,000

)

 

(25,000

)

Net deferred tax asset - discontinued operations

$

––

 

$

––

 


A reconciliation of income taxes computed at the US federal statutory income tax rate to the change in valuation allowance is as follows:

 

For the year ended

 

 

December 31, 2014

 

December 31, 2013

 

Income (loss) before taxes:

 

 

 

 

 

 

Continuing operations

$

(1,920,226

)

$

(1,502,463

)

Discontinued operations

 

––

 

 

(4,010

)

Total income (loss) before taxes

 

(1,920,226

)

 

(1,506,473

)

Statutory rate

 

34%

 

 

34%

 

 

 

 

 

 

 

 

Computed expected tax payable (recovery)

$

653,000

 

$

513,000

 

Non-recognizable income (loss)

 

(34,000

)

 

37,000

 

Non-deductible expenses

 

––

 

 

––

 

Change in valuation allowance

 

(619,000

)

 

(550,000

)

Reported income taxes

$

––

 

$

––

 



Table of Contents

F-12


At this time, the Company is unable to determine if it will be able to benefit from its deferred tax asset. There are limitations on the utilization of net operating loss carry forwards, including a requirement that losses be offset against future taxable income, if any. In addition, there are limitations imposed by certain transactions which are deemed to be ownership changes. Accordingly, a valuation allowance has been established for the entire deferred tax asset. The increase in the valuation allowance for continuing operations was approximately $619,000 and $550,000 for the year ended December 31, 2014 and 2013, respectively.  


As of December 31, 2014, the Company had cumulative net operating loss carryforwards of approximately $11,435,000, and $9,408,000 for federal and state income tax purposes, respectively, which begin to expire in the year 01/01/2029. Section 382 of the Internal Revenue Code of 1986 provides for an annual limitation of approximately $67,000 on the utilization of net operating loss carryforwards as the company underwent an ownership change in 2008, as defined in Section 382.  This limitation has been reflected in the US federal and state net operating loss carryforwards. The Company has elected to forgo any carryback of its net operating losses.


The Company adopted uncertain tax position in accordance with ASC 740 on January 1, 2007, and has not recognized any material increase in the liability for unrecognized income tax benefits as a result of the implementation.  The Company estimates that the unrecognized tax benefit will not change within the next twelve months.  The Company will continue to classify income tax penalties and interest, if any, as part of interest and other expenses in its consolidated statements of operations.  The Company has incurred no interest or penalties as of December 31, 2014 and 2013.


The amount of income taxes the Company pays is subject to ongoing examinations by federal and state tax authorities. To date, there have been no reviews performed by federal or state tax authorities on any of the Company’s previously filed returns. The Company’s 2008 and later tax returns are still subject to examination.


NOTE 16. SUBSEQUENT EVENTS


The Company has evaluated the events and transactions for recognition or disclosure subsequent to December 31, 2014, and has determined that there have been no events that would require disclosure, with the exception of the following:


During the period January 1, 2015 through March 31, 2015, the Company increased its loans from related parties by $208,603, from a total of $3,193,780 at December 31, 2014 to $3,402,383 at March 31, 2015. The increase represents an increase in accrued compensation of $178,749, a decrease in unamortized discount of $21,330, and a decrease in reimbursable expenses of $8,523.  All outstanding related party notes payable bear interest at the rate of 5% to 7% per annum, are due and payable between one (1) year of written demand and December 9, 2018, or upon certain equity funding, and are convertible into the Company’s common stock at a price of between $0.05 and $0.40 per share.


On March 9, 2015, the Company amended the License Agreement executed January 21, 2015 (“License Agreement”) by and between the Company and PearLoxx Ltd. (“Pearloxx”) for the license to the Company of certain Pearloxx patented technology (the “Licensed Product”) in perpetuity. As part of the consideration for the Licensed Product, Pearloxx was granted the right to purchase 5,706,506 shares of the Company’s common stock at $0.001 per share.  The shares, valued at $1,711,952, were purchased for cash in the amount of $5,707.  As a result, $1,706,245 has been recorded to additional paid in capital.


On March 15, 2015, in connection with a certain stock purchase agreement, the Company issued 1,883,147 shares of its restricted common stock at $0.02 per share.  The shares, valued at $564,944, were purchased for cash in the amount of $37,663.  As a result, $563,061 has been recorded to additional paid in capital.


*       *       *       *       *



F-13



ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


Effective May 23, 2013, Anton & Chia, LLP (“ANC”) no longer acted as the Company’s independent registered public accounting firm, pursuant to a mutually agreed upon decision made by the Company’s Audit Committee and ANC, which was approved by the Company’s Board of Directors.


The reports of ANC regarding the Company’s financial statements for the fiscal year ended December 31, 2012 did not contain any adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit report of ANC on the Company’s financial statements for fiscal year ended December 31, 2012 contained an explanatory paragraph which noted that there was substantial doubt about the Company’s ability to continue as a going concern.


During the year ended December 31, 2012, and during the period from December 31, 2012 to May 23, 2013, the date of dismissal, (i) there were no disagreements with ANC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of ANC would have caused it to make reference to such disagreement in its reports; and (ii) there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.


The Company has provided ANC with a copy of the foregoing disclosures and requested that ANC furnish the Company with a letter addressed to the SEC stating whether or not it agrees with the above statements. A copy of such letter is filed as Exhibit 16.4 to the Company’s Current Report on Form 8-K filed June 10, 2013.


The Company received communications on April 10, 2014, from ANC, wherein ANC has made certain claims with regards to their independence pertaining to the Company’s audit engagement with them for the December 31, 2012 fiscal year end. The Company is in disagreement with ANC, and is disputing their claim, but has removed their audit opinion from this filing until such time as this dispute is resolved by legal authority.


Effective May 24, 2013, the Board of Directors of the Company engaged Seale & Beers, CPAs (“S&B”) as its independent registered public accounting firm.


During each of the Company’s two most recent fiscal years and through the interim periods preceding the engagement of S&B, the Company (a) has not engaged S&B as either the principal accountant to audit the Company’s financial statements, or as an independent accountant to audit a significant subsidiary of the Company and on whom the principal accountant is expected to express reliance in its report; and (b) has not consulted with S&B regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and no written report or oral advice was provided to the Company by S&B concluding there was an important factor to be considered by the Company in reaching a decision as to an accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event, as that term is described in Item 304(a)(1)(v) of Regulation S-K.


ITEM 9A.

CONTROLS AND PROCEDURES


Management’s Report on Disclosure Controls and Procedures


The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s president, chief executive officer and chief financial officer to allow for timely decisions regarding required disclosure. In designing and evaluating the Company’s disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Company’s management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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.



23



As of December 31, 2014, the end of the Company’s fiscal year covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s president, chief executive officer and chief financial officer of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Company’s president, chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this annual report.


Management’s Report on Internal Control over Financial Reporting


The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of the Company’s control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. The Company’s management has concluded that, as of December 31, 2014, the Company’s internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Company generally accepted accounting principles. The Company’s management reviewed the results of their assessment with the Company’s Board of Directors.


This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.


Inherent limitations on effectiveness of controls


Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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.


Changes in Internal Control over Financial Reporting


There have been no changes in the Company’s internal controls over financial reporting that occurred during the year ended December 31, 2014 that have materially or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.


ITEM 9B.

OTHER INFORMATION


None



Table of Contents

24


PART III


ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


Identification of Directors and Executive Officers


The following table represents the directors and executive officers of the Company as of March 31, 2015:

Name

Position Held with the Company

Age

Date First
Elected or
Appointed

Edward W. Withrow Jr.

President and Chief Executive Officer

Director

77

October 17, 2014

July 2, 2009

Calli R. Bucci

Chief Financial Officer

Secretary

50

August 16, 2011

November 1, 2011

Edward W. Withrow III

Chairman of the Board and Director

51

July 2, 2009

John L. Ogden

Director

61

March 3, 2008

William B. Nesbitt

Director

75

November 6, 2011

Dr. Martin A. Blake

Director

58

August 12, 2010

Arran de Moubray

Director

44

October 17, 2014

John D. Macey

Director

52

October 17, 2014

Paul B. Burke

Director

59

October 17, 2014

Philip J. Woolas

Director

55

February 20, 2015


Term of Office


The Board of Directors elects officers and their terms of office are at the discretion of the Board of Directors.  Each officer serves until the earlier occurrence of the election of his or her successor at the next meeting of stockholders, death, resignation or removal by the Board of Directors.  At the present time, members of the board of directors are not compensated for their services to the board.  Each Director shall hold office until the next annual meeting of stockholders and until his/her successor shall have been duly elected and qualified.


Background and Business Experience


The following is a brief account of the education and business experience of each director and executive officer during at least the past five years, indicating each person's principal occupation during the period, and the name and principal business of the organization by which he was employed.


Edward W. Withrow Jr., Director


Mr. Withrow earned his Master’s in Business Administration from Harvard University, with a concentration in Investment Banking. He has a bachelor’s degree in Business, with a concentration in Finance and Accounting, from the University of Colorado. He served twenty-four years on active duty in the U.S. Navy as a professional logistician, retiring with the rank of Captain. He spent approximately 20 years as a financial professional with Drexel Burnham Lambert, Paine Webber, Merrill Lynch and Wells Fargo.


Mr. Withrow has been very active in civic leadership for the past 20 years serving in a number of elected and appointed positions, including Mayor of Alameda, California. He is currently serving as the regionally elected President of the Governing Board of The Peralta Colleges, an institution consisting of 2,000 faculty and staff and approximately 30,000 students.


Calli Bucci, Secretary and Chief Financial Officer


Ms. Bucci has over 30 years experience in the field of finance and business management. Prior to holding the position of Chief Financial Officer for PearTrack Security Systems, Inc., Ms. Bucci was Controller of the Company since January 2010, and was responsible for general ledger, quarterly certified reviews, annual audits, preparation for SEC filings, customer billing and invoicing, multi-state payroll, licenses and consolidated corporate income taxes.

 

Before joining the Company, Ms. Bucci held the position of Chief Financial Officer at InstaSave, Inc., a promotional incentive company, from December 2007, where she was responsible for financial reporting, capital structure strategy and modeling, financial transactions with consumers, consumer product goods companies and retailers, investor relations, audits, payroll and corporate income taxes.


In addition to her public accounting background, Ms. Bucci held the position of Manager/Senior Accountant at Gelfand Rennert & Feldman, a division of PriceWaterhouseCoopers, where she was responsible for all financial transactions for high net worth clientele, was liaison for annual audits, general ledger reviews and annual tax preparation.


Ms. Bucci held the position of Director of Accounting and Contract Administration at Intercontinental Releasing Corporation (IRC), a Los Angeles based Motion Picture Distribution Company.  Ms. Bucci was responsible for all functions within the company’s accounting department, from financial statements and forecasting, to annual audits and corporate taxes. During her tenure with IRC, Ms. Bucci also designed and implemented a custom computerized availabilities system for the film rights of over 35 film properties distributed to foreign territories throughout the world. She was also responsible for the administration and facilitation of all client contracts, dealing heavily in foreign currencies and international import regulations.


Ms. Bucci attended the University of California at Berkley, majoring in Accounting.


Edward W. Withrow III, Chairman of the Board of Directors


Mr. Withrow has over 20 years of experience as a financier, wherein he has developed an expertise in finding small undervalued and under-funded companies and creating value with them. In 1992 Mr. Withrow created Box Office Partners I, II, & III, a series of funds that provided off-balance sheet financing for foreign film distributors. In 1994 Mr. Withrow became a pioneer in the development of sell-thru educational entertainment video into grocery stores chains which led to the creation of Family Store Entertainment, LLC an educational entertainment company involved in production, licensing, acquisition and distribution of children’s entertainment. In 1998 Mr. Withrow co-founded Simplyfamily.com an Internet based an integrated affinity community.


In 2000, Mr. Withrow founded Huntington Chase Financial Group, LLC and Huntington Chase, Ltd. to engage in venture capital and merchant banking activities. From 2000 until the present, Mr. Withrow acquired, restructured, merged, created and was a senior advisor to 10 companies. From 2002 to 2004, Mr. Withrow was the CEO of Reward Enterprises, Inc., a public company and early adopter of VOIP telecommunications in the international market with operations in North Africa and India. In 2003 to 2004 Mr. Withrow founded Symphony Card, LLC a stored value debit card targeting the West African nation of Nigeria in partnership with Fountain Trust Bank, PLC.



25


From 2004 to 2005, Mr. Withrow became the CEO of Addison-Davis Diagnostics, Ltd, a leading edge point-of-care diagnostic company. From 2005 to present, Mr. Withrow co-founded Eaton Scientific Systems, Ltd., a biotechnology company and co-authored a patent pending non-hormonal treatment for women in menopause and post cancer treatments. From 2006 to present, Mr. Withrow was a co-founder of Montecito Bio Sciences, Ltd. an innovative diagnostic company. He is the author of several patents in the life sciences space. In 2006 Mr. Withrow became a Managing Director of Orient Financial Group, Ltd a Hong Kong registered financial advisory firm headquartered in Hong Kong with representative offices in Geneva, Delhi and Los Angeles.


Mr. Withrow co-founded Save the Company’s Children a non-profit organization that assisted in fundraising activities for charities that focused on child abuse and since 1999 has been actively involved with Planet Hope a non-profit organization that helps homeless mothers and their children.


John L. Ogden, Director


Mr. Ogden has more than 30 years’ experience in energy corporate finance, international negotiations, corporate and asset acquisition, business development and energy company management. Since 1995 he has been a principal and managing director of Wood Roberts, LLC, an energy corporate financial advisory firm based in Houston, Texas. Between 1985 and 1995, he managed an independent corporate financial consulting business specializing in domestic and international energy issues, providing M&A advice, and strategic corporate financial consulting services. Mr. Ogden graduated from the University of Leeds, England, with a Bachelor of Laws (honors) and is qualified as a Barrister-at-Law in England.


William B. Nesbitt, Director, former President and Chief Executive Officer


Mr. Nesbitt is a graduated from Cornell University with a BS degree in Hotel and Service Industry Management from the School of Hotel Administration.  He started a car rental company in New York City called Olin’s Rent A Car which grew into a major presence in New York and subsequently opened branches in Florida to utilize its off season fleet and serve its vacationing New York customers. Olin’s strategy was as a market niche company avoiding the airports and focusing on local neighborhoods and businesses.


Mr. Nesbitt left Olin’s for an opportunity to work for Walter Wriston at Citibank where he participated in the development of the Automatic Teller Machine and a major reduction on branch cost and footprint, with a very substantial increase in customer convenience and deposits.


Mr. Nesbitt rejoined his old company in Florida which had changed its name to Alamo Rent A Car. He was initially responsible for branches and for fleet utilization. He developed a capacity planning system to help predict the numbers of reservations, pricing potential and no show expectations. This allowed the company to achieve fleet utilization far above the competition. He later led the expansion of Alamo across the country and into foreign markets. With expansion complete, Bill focused on marketing and sales to major wholesale suppliers and partners such as the airlines, travel consortiums, cruise lines and large corporations.


Since the sale of Alamo, Mr. Nesbitt has focused on several successful company startup and acquisition projects as well as developing customer loyalty retail marketing programs for Harley Davidson dealerships and marine products companies.


Mr. Nesbitt comes to the Company with 40+ years of experience not only in the car rental business, but wide experience in company building, corporate expansion and controls. The Company looks forward to his contributions to the Company’s efforts to build and maintain a world class environmental transportation business.


Mr. Nesbitt resigned his position as President and Chief Executive Officer of the parent company, PearTrack Security Systems, Inc., on October 17, 2014, but remains as President and Chief Executive Officer of the Company’s subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc.  He is succeeded by Mr. Edward W. Withrow Jr.


Dr. Martin A. Blake, Director


Dr. Blake is a sustainability expert with over 25 years experience developing strategic plans and influencing high profile stakeholders within governments, NGOs as well as the postal, construction, healthcare, oil and gas and charity sectors.


From 2004 to the present, Dr. Blake has been the Head of CSR, Sustainability and Social Policy for the Royal Mail Group plc, London, UK’s postal service company and largest single employer, with more than 195,000 employees, 14,000 retail outlets and a fleet of 35,000 vehicles.


From 2001 to 2004, Dr. Blake was Director of Change, Performance and Risk Management of local authority proving public services for Suffolk Coastal District Council, Suffolk, UK. He successfully designed and directed the implementation of a major transformational change management program.


Since 1988, Dr. Blake has also held the positions of Interim Managing Director of InterVest Group (BVI) Limited, Bahrain, an international financial services and venture capital provider and Director of Community Infrastructure Development for Saudi Arabian Oil Company, KSA, Saudi Arabia, the largest oil producing, refining and shipping company in the world.


Arran de Moubray, Director


Mr. de Moubray joins the Company with 20+ years’ experience in the construction and renewable energy sectors. The last seven years have seen Mr. de Moubray overseeing the financing and development of large scale renewable energy deals in the EU and US both as consultant and principal. During this period, he has advised three governments and a number of listed companies on both renewable energy and energy efficiency, as well as leading the fundraising for a number of clean tech companies in the US and EU. He is currently leading a team for a large non-profit in order to develop a range of program for rural electrification in Africa and Asia, using a range of technologies


Mr. de Moubray has a degree in Architecture from Kent University, and resides in the United Kingdom.


John D. Macey, Director


Mr. Macey’s career started in electronic engineering, and although still an engineer at heart he has for the past 20 years been a Senior Executive specializing in technology and solution delivery. He has worked in both new businesses and public entities, and in recent years provided specialist technology management consultancy to such clients as Vodafone and Promethean Plc.


As CTO and founding Executive Board Member of Minorplanet Systems Plc, Mr. Macey was responsible for development, manufacturing and operational aspects of the business from inception until 2004. MPS are considered to be one of the industry forebears and soon after forming became listed on the London Stock Exchange with an international business which grew to employ some 1,200 staff globally.


Mr. Macey has a proven track record in Product Development, NPI, and Manufacturing, and has extensive experience in Hardware, Firmware, and Software Design, Mechanical Engineering, Systems Integration, and Vendor/Supply Chain management.



Table of Contents

26


Paul B. Burke, Director


Mr. Burke has been involved with cutting-edge technology since he joined IBM in the mid-seventies and has worked with industry standards such as ISO 9000 and previously BS standards.  He has been directly involved with the development of high tech products, their production and manufacture and marketing.  Since 1984 he has been responsible for establishing national sales forces and creating a marketing strategy for innovative products, which have been both revolutionary and new to the global market.


In his early career, Mr. Burke’s co-founded Guardian Security Systems, which operated for a number of years before merging with ATI to become ATI Guardian Security, the largest installer of wireless intruder equipment in the UK.  Mr. Burke led the the Sales and Marketing for the group and, in 1986, ATI was acquired by Stephen Boler’s Brown & Jackson PLC, a UK-listed company. Mr. Burke was also co-founder of Minorplanet Ltd., which evolved into Minorplanet Systems Plc.


Mr. Burke also has extensive experience in the import/export markets between the Far East and the UK and the EU.  In 2009, Mr. Burke formed Pear Track Systems Ltd. in the United Kingdom, and began a successful product testing campaign for the PearTrack tracking product and system.


Philip J. Woolas, Director


Mr. Woolas is a principal and co-founder of Wellington Street Partners, Ltd., a political and business consultancy firm headquartered in the United Kingdom.  Prior to his position with Wellington, Mr. Woolas was the Labor Member of Parliament for 13 years, holding the seat of Oldham East & Saddleworth. He also served as Parliamentary Private Secretary to the Minister of State for Transport, Lord Commissioner of the Treasury, deputy leader of the House of Commons, Minister of State for Local Government and Regeneration, Minister of State for Civil Contingency, Minister of State for Environment, and Minister of State for Immigration and Customs. Mr. Woolas also served as Minister for the North West of England, and was a leading member of the Tony Blair and Gordon Brown Governments.


Prior to his time in Parliament, in 1984 Mr. Woolas was President of the United Kingdom National Union of Students and went on to a successful career in television where he worked initially as a researcher and investigative journalist for ITV and subsequently as a producer for BBC Newsnight and Channel Four News. He then entered politics as Head of Communications and Campaigns for the GMB trade union. He has also published numerous articles and essays and is a Fellow of the Royal Society of Arts.


Family Relationships


There are no family relationships among its directors or executive officers, with the exception of the following:


Mr. Edward W. Withrow, Jr. is the father of Mr. Edward W. Withrow III.


Involvement in Certain Legal Proceedings


The Company’s directors, executive officers and control persons have not been involved in any of the following events during the past five years:


1.

any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

2.

any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

3.

being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

4.

being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.


Audit Committee and Audit Committee Financial Expert


Currently the Company’s audit committee consists of Mr. Edward W. Withrow Jr. and Mr. John L. Ogden. Mr. Ogden is chair of the audit committee. The Company currently does not have nominating, compensation committees or committees performing similar functions. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination for directors.


During the calendar year 2014, aside from quarterly review teleconferences, there were no meetings held by this committee. The business of the audit committee was conducted though these teleconferences and by resolutions consented to in writing by all the members and filed with the minutes of the proceedings of the audit committee. Audit Committee meetings were held in conjunction with Board of Director’s meetings.


Code of Ethics


The Company has adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K of the Securities Exchange Act of 1934. The Code of Ethics applies to directors and senior officers, such as the principal executive officer, principal financial officer, controller, and persons performing similar functions.


Compliance with Section 16(a) of the Exchange Act


Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of change in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company under Rule 16a-3(e) during the year ended December 31, 2014, Forms 5 and any amendments thereto furnished to the Company with respect to the year ended December 31, 2014, and the representations made by the reporting persons to the Company, the Company believes that during the year ended December 31, 2014, its executive officers and directors and all persons who own more than ten percent of a registered class of the Company’s equity securities complied with all Section 16(a) filing requirements.



27



ITEM 11.

EXECUTIVE COMPENSATION


Summary Compensation Table


The table below summarizes the compensation paid by the Company to the following persons:


(a)

its principal executive officer;

(b)

each of the Company’s two most highly compensated executive officers who were serving as executive officers at the end of the years ended December 31, 2014 and 2013; and

(c)

up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as the Company’s executive officer at the end of the years ended December 31, 2014 and 2013.


No disclosure is provided for any named executive officer, other than the Company’s principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year:


SUMMARY COMPENSATION TABLE

 

 

Salary

Bonus

Stock Award

Option Awards

Non-Equity Incentive Plan Compensation

Change in Pension Value and Nonqualified Deferred Compensation Earnings

All Other Compensation

Total

Name and Principal Position

Year

($)

($)

($)

($)

($)

($)

($)

($)

Edward W. Withrow Jr. (1)

2014

175,000

(1)

None

$125,000

 

None

(1)

None

None

None

 

300,000

President, CEO, and Director

2013

14,583

(1)

None

$10,417

 

None

(1)

None

None

None

 

25,000

Edward W. Withrow III (2)

2014

420,000

(2)

None

None

 

None

 

None

None

None

 

420,000

Chairman of the Board and Director

2013

200,000

(2)

None

None

 

101,250

(2)

None

None

None

 

301,250

John L. Ogden (3)

2014

None

 

None

None

 

None

 

None

None

None

 

None

Director

2013

None

 

None

None

 

None

 

None

None

150,000

(3)

150,000

William B. Nesbitt (4)

2014

198,925

(4)

None

None

 

60,000

(4)

None

None

None

 

258.925

Director, former President and CEO

2013

250,000

(4)

None

$75,000

(4)

60,000

(4)

None

None

None

 

310,000


(1)

Pursuant to Mr. Withrow Jr.’s employment agreement, $175,000 and $14,583, in compensation has been expensed during 2014 and 2013, respectively.  In addition, he was awarded 1,000,000 restricted stock units, with a total value of $250,000.  As of December 31, 2014 and 2013, respectively, $125,000 and $10,417 was vested.  As of December 31, 2014, $189,583 of Mr. Withrow Jr.’s salary was converted into a convertible promissory note, maturing December 31, 2016, accruing interest at 5% per annum, and convertible into the Company’s common stock at $0.25 per share.

 

 

(2)

Pursuant to the Company’s consulting agreement with Huntington Chase Financial Group, for services provided by Mr. Withrow, $420,000 and $200,000 in consulting fees has been expensed in 2014 and 2013, respectively.  As of December 31, 2014, $260,000 in consulting fees owed under this agreement has been converted into a convertible promissory note, maturing December 31, 2016, accruing interest at 5% per annum, and convertible into the Company’s common stock at $0.25 per share. In addition, $160,000 in consulting fees was converted into a convertible promissory note, due upon demand, accruing interest at 7% per annum, and convertible into the Company’s common stock at $0.05 per share.

 

 

(3)

Mr. Ogden provided consulting services to the Company through November 15, 2013, exclusive of his position as a member of the board of directors, for a consulting fee of $150,000.  On November 15, 2013, the consulting fee of $150,000 was converted into a convertible promissory note, maturing November 15, 2015, accruing interest at 5% per annum, and convertible into the Company’s common stock at $0.05 per share.

 

 

(4)

Pursuant to Mr. Nesbitt’s employment agreement, he was granted 1,500,000 options, with a total value of $180,000.  As of December 31, 2014, $180,000 was vested.  In addition, during 2013, Mr. Nesbitt was granted the right to purchase 500,000 shares of the Company’s common stock, with a total value of $75,000.  As of December 31, 2014, $373,924 of Mr. Nesbitt’s salary is payable in the form of a convertible promissory note, due once the Company meets certain funding goals, accruing interest at 5% per annum, and convertible into the Company’s common stock at $0.05 per share.


Employment Contracts and Termination of Employment and Change in Control Arrangements


On October 17, 2014, Mr. William B. Nesbitt resigned his position as President and Chief Executive Officer of the Company. As a result, the Employment Agreement dated November 1, 2011 was terminated.  An employment agreement for Mr. Nesbitt’s position as President and Chief Executive Officer of the Company’s subsidiaries is in negotiations.


On December 4, 2013, the Company, through its wholly owned subsidiary, PTSG, entered into an Employment Agreement with Edward W. Withrow Jr., for his services as President and Chief Executive Officer of the Company (the “Agreement”). The initial term of the Agreement is for a period of two (2) years, and is automatically renewed annually unless terminated by either party. The Agreement provides for initial compensation of $175,000 per year.  In addition, the Agreement provides for expense reimbursements, and an initial stock award of 1,000,000 restricted shares of the Company’s common stock.


On December 4, 2013, the Company, through its wholly owned subsidiary, PTSG, entered into a consulting agreement with Huntington Chase Financial Group, a Nevada corporation (“HCFG”), a related party. The consulting agreement provides for HCFG to perform certain advisory and consulting functions for compensation in the amount of $20,000 per month for a period of three (3) years, until December 4, 2017.


On December 9, 2013, the Company, through its wholly owned subsidiary, PTSG, entered into a consulting agreement with John D. Macy, a member of the board of directors, for his services in the area of technology, sales and marketing.  The consulting agreement, commencing January 1, 2014,  provides for compensation in the amount of $60,000 per year for a period of two (2) years, until December 4, 2016.


There are no other employment contracts, compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or its subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.


There are no agreements or understandings for any executive officer to resign at the request of another person. None of the Company’s executive officers acts or will act on behalf of or at the direction of any other person.


Equity Compensation Plan


The Company maintains the 2009 Stock Option Plan ("the 2009 Plan"), wherein 20,000,000 restricted shares of common stock were reserved for issuance. The 2009 Plan is intended to assist the Company in securing and retaining key employees, directors and consultants by allowing them to participate in the Company's ownership and growth through the grant of incentive and non-qualified options. Under the 2009 Plan, the Company may grant incentive stock options only to key employees and employee directors, or the Company may grant non-qualified options to employees, officers, directors and consultants. Subject to the provisions of the 2009 Plan, the board of directors will determine who shall receive options, the number of shares of common stock that may be purchased under the options.  As of December 31, 2014, the Company has granted options to purchase a total of 366,000 restricted shares of the Company’s common stock.



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28


Stock Options/SAR Grants


No options were granted to the Company’s directors and officers during the years ended December 31, 2014 and 2013.


Aggregated Option Exercised in Last Fiscal Year and Fiscal Year-End Values


There were no options exercised during the Company’s fiscal years ended December 31, 2014 or 2013, by any officer or director of the Company.


Outstanding Equity Awards at Fiscal Year End


Name

Number of Options

Granted

Number of Options Unexercisable

Number of Options

Exercisable

Exercise Price

Expiration Date

John L. Ogden

8,000

––

8,000

$4.73

6/30/2015

Edward W. Withrow Jr.

8,000

––

8,000

$4.73

6/30/2015

Shelley Meyers

8,000

––

8,000

$4.73

6/30/2015

Myles Lambert

6,000

––

6,000

$4.73

6/30/2015

Paul Christensen

5,000

––

5,000

$4.73

6/30/2015

Allen Scott

3,500

––

3,500

$4.73

6/30/2015

Edward W. Withrow III

75,000

––

75,000

$3.20

4/19/2016

William B. Nesbitt

150,000

––

150,000

$2.00

11/1/2016

Kyle W. Withrow

25,000

––

25,000

$3.20

4/19/2021

John L. Ogden

15,000

––

15,000

$3.20

4/19/2021

Edward W. Withrow Jr.

15,000

––

15,000

$3.20

4/19/2021

Shelley Meyers

15,000

––

15,000

$3.20

4/19/2021

Myles Lambert

10,000

––

10,000

$3.20

4/19/2021

Paul Christensen

10,000

––

10,000

$3.20

4/19/2021

Calli R. Bucci

5,000

––

5,000

$3.20

4/19/2021

Martin A. Blake

5,000

––

5,000

$3.20

4/19/2021

Rodolfo Madrigal

2,500

––

2,500

$3.20

4/19/2021

 

366,000

––

366,000

 

 


During the years ended December 31, 2014 and 2013, respectively, the Company expensed a total of $60,000 and $60,000 in stock option compensation. There remained $0 and $60,000 in deferred stock option compensation at December 31, 2014 and 2013, respectively.


Compensation of Directors


The Company reimburses its directors for expenses incurred in connection with attending board meetings. The Company has not paid any director's fees or other cash compensation for services rendered as a director since the Company’s inception to December 31, 2014.


The Company has no formal plan for compensating its directors for their service in their capacity as directors. However, the Company’s directors and certain officers have received stock options to purchase common shares under the Company’s 2009 Stock Option Plan, and may receive additional stock options at the discretion of the Company’s board of directors or (as to future stock options) a compensation committee which may be established under the Plan in the future. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Company’s board of directors. The Company’s board of directors may award special remuneration to any director undertaking any special services on the Company’s behalf other than services ordinarily required of a director. No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.


Pension, Retirement or Similar Benefit Plans


As of December 31, 2014, the Company had no pension plans or compensatory plans or other arrangements which provide compensation in the event of termination of employment or change in control of us. There are no arrangements or plans in which the Company provides pension, retirement or similar benefits for directors or executive officers. The Company has no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to its directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.


The Company’s directors and certain officers have received stock options under the Company’s 2009 Stock Option Plan and may receive additional stock options at the discretion of the Company’s board of directors under the Plan in the future.


Compensation Committee


The Company currently does not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.



29



ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


The following table sets forth, as of December 31, 2014, certain information with respect to the beneficial ownership of the Company’s common stock by each stockholder known by the Company to be the beneficial owner of more than 5% of the Company’s common stock and by each of the Company’s current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.


Name and Address of Beneficial Owner

Amount and Nature of

Beneficial Ownership [1]

Percentage of Shares

 of Common Stock [1]

Withrow Sinclair & Co.
1327 Ocean Ave. Suite B
Santa Monica, CA 90401

16,461,909

 

25.02%

 

 

 

Phyllis Dionne De Moubray

Chester Mountain Street

Chilham Kent CT48DQ UK

7,713,783

[2]

11.73%

 

 

 

Edward W. Withrow III
1327 Ocean Ave. Suite B
Santa Monica, CA 90404

6,692,552

[2]

10.17%

75,000

[3]

ESOP

Brook Invest & Finance

PO Box 146

Road Town, BVI

5,706,506

 

8.67%

 

 

 

Edward W. Withrow Jr.
133 Cumberland Way
Alameda, CA 94502

5,170,855

[2]

7.86%

23,000

[3]

ESOP

John D. Macey

Parkfield, Park Road

Willaston Neston Cheshire CH64 1TJ UK

3,851,892

 

5.86%

 

 

 

Paul B. Burke

Heron House, Withinlee Road

Prestbury, Cheshire SK10 4AT UK

3,851,892

 

5.86%

 

 

 

Adrian Pegler

4 Highmoor View

Waterhead, Oldham OL4 2SL UK

3,821,076

 

5.81%

 

 

 

John L. Ogden
675 Bering Drive, Suite 675
Houston, TX 77057

2,926,384

[2]

4.45%

23,000

[3]

ESOP

MJ Management Services, Inc.
1327 Ocean Avenue, Suite B
Santa Monica, CA 90401

1,801,058

[2]

2.74%

5,000

[3]

ESOP

William B. Nesbitt
549 Carcaba Road
Saint Augustine, FL  32084

664,063

 

1.01%

150,000

[3]

ESOP

Martin A. Blake
Harbor House, Forres
Morayshire, UK IV36 3YE

5,000

[3]

ESOP

 

 

 

Total

58,661,971

 

89.18%

281,000

 

ESOP

  

[1]

Based upon 65,788,046 shares issued and outstanding at March 31, 2015. The number and percentage of shares beneficially owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose.

[2]

Includes direct and indirect ownership

[3]

Stock options granted under 2009 ESOP, fully vested

 

 

 

 

 

 

Directors and officers as a group (8 shareholders)

32,672,480

 

49.68%

 

More than 5% ownership (3 shareholders)

25,989,491

 

39.50%

 

Total

58,661,971

 

89.18%



Changes in Control


The Company is unaware of any contract or other arrangement or provisions of the Company’s Articles or Bylaws the operation of which may at a subsequent date result in a change of control of the Company. There are not any provisions in the Company’s Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of the Company.


ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


Related Party Transactions


None of the directors or executive officers of the Company, nor any person who owned of record or was known to own beneficially more than 5% of the Company’s outstanding shares of its Common Stock, nor any associate or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction that has occurred during the year ended December 31, 2014, or in any proposed transaction, which has materially affected or will affect the Company, with the exception of the following:


On September 30, 2010, a convertible note payable was issued to a related party for unpaid compensation of $172,500 and for cash loans made to the Company in the amount of $213,859. The note bears interest at a rate of seven percent (7%) per annum, is due within one (1) year of written demand, and is convertible into the Company’s common stock. Further modifications to the note were made through December 31, 2014 to increase the principal amount for additional unpaid compensation of $780,000, and to assign a portion of debt in the amount of $661,359 to other parties (the “Assigned Principal”), and to change the conversion strike price from $0.07 to $0.05.  A portion of the Assigned Principal was in default by the assignee, and $100,000 reverted back to the note holder, including accrued interest of $3,671.  On September 26, 2014, the Company received a Notice to Convert for the conversion of $557,661, representing principal in the amount of $445,000 and accrued interest in the amount of $112,661. As a result, 11,153,232 restricted shares of the Company’s common stock were issued.  As of December 31, 2014 and 2013, the principal balance owing under the note was $160,000 and $906,359, respectively. Interest in the amount of $5,416 and $77,696, respectively, has been accrued as of December 31, 2014 and 2013.



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30


On December 31, 2011, a senior convertible promissory note was issued to a related party for unpaid compensation in the amount of $30,000. The note bears interest at a rate of five percent (5%) per annum, is payable upon certain equity funding goals, and is convertible into the Company’s common stock. Modifications to the note have been made between January 1, 2012 and October 17, 2014 to modify the principal amount for additional unpaid compensation of $623,091, and to change the conversion strike price from $0.07 to $0.05. On September 26, 2014, the Company received a Notice to Convert for the conversion of $294,532, representing principal in the amount of $279,167 and accrued interest in the amount of $15,365. As a result, 5,890,634 restricted shares of the Company’s common stock were issued.  As of December 31, 2014 and 2013, the principal balance owing under the note was $373,924 and $454,166, respectively. Interest in the amount of $32,529 and $20,813 has been accrued as of December 31, 2014 and 2013, respectively.


On November 15, 2013, the Company issued a convertible promissory note in the amount of $150,000 to a related party of the Company, for consulting services rendered to the Company.  The note bears interest at a rate of five percent (5%) per annum, matures on November 15, 2015, and is convertible into the Company’s common stock. On August 31, 2014, a modification to the note was made to change the conversion strike price from $0.08 to $0.05.  On September 26, 2014, the Company received a Notice to Convert for the conversion of $155,938, representing principal in the amount of $150,000 and accrued interest in the amount of $5,938. As a result, 3,118,768 restricted shares of the Company’s common stock were issued, and the note has been paid in full.  Interest in the amount of $0 and $945 has been accrued as of December 31, 2014 and 2013, respectively.


On November 15, 2013, the Company issued a convertible promissory note in the amount of $72,067 to a related party for unpaid compensation.  Modifications to the note were made between November 16, 2013 and August 31, 2014, to increase the principal to $116,067, to include additional unpaid compensation, and to change the conversion strike price from $0.08 to $0.05. The note bears interest at a rate of five percent (5%) per annum, matures on November 15, 2015, and is convertible into the Company’s common stock. On September 26, 2014, the Company received a Notice to Convert for the conversion of $119,525, representing principal in the amount of $116,067 and accrued interest in the amount of $3,458. As a result, 2,390,507 restricted shares of the Company’s common stock were issued, and the note has been paid in full.  Interest in the amount of $0 and $454, has been accrued as of December 31, 2014 and 2013, respectively.


On December 31, 2014, a convertible promissory note was issued for unpaid compensation owed to Edward W. Withrow Jr., the Company’s President and Chief Executive Officer, in the amount of $189,583. The note bears interest at a rate of five percent (5%) per annum, is due within two (2) years, and is convertible into the Company’s common stock at a strike price of $0.25 per share. No interest has been accrued as of December 31, 2014.


On December 31, 2014, a convertible promissory note was issued for unpaid compensation owed to Huntington Chase Financial Group, a Nevada corporation, a related party, in the amount of $260,000. The note bears interest at a rate of five percent (5%) per annum, is due within two (2) years, and is convertible into the Company’s common stock at a strike price of $0.25 per share. No interest has been accrued as of December 31, 2014.


On December 9, 2013, the Company, through its wholly owned subsidiary, PTSG, issued a Zero Coupon Senior Secured Convertible Note (the “Convertible Note”) to seven (7) shareholders, of which two (2) shareholders are also directors of the Company  (the “Note Holders”), in the aggregate sum of $2,000,000.  The Convertible Note holds senior position above all other debt, bears no interest, is due within five (5) years, or by December 9, 2018 (the “Maturity Date”), and is secured by an Intellectual Property Pledge and Security Agreement (the “Security Agreement”). Pursuant to terms and conditions of the Convertible Note, principal payments may be made pro rata to the Note Holders prior to Maturity Date without penalty when/if the Company meets certain funding and earnings goals (Note 9).  In accordance with the Security Agreement, certain intellectual property licensed to the Company shall be pledged as collateral to secure punctual payment. In the event of default, the Company has the right to repurchase the intellectual property, for which the proceeds shall be paid to the Note Holders to satisfy the default.  The non-interest bearing Convertible Note has been recorded at its present value on the date of issuance using an imputed interest rate of 5%.  The difference between the face value and its present value has been recorded as a discount of $432,940, to be amortized over the term of the note. As of December 31, 2014 and 2013, the Company has amortized $86,505 and $5,214, respectively, as interest expense.  There remains $341,221 and $427,726 in unamortized discount as of December 31, 2014 and 2013, respectively, to be expensed over the next 35 months.


On December 31, 2013, the Company, through its wholly owned subsidiary, Ecologic Products, Inc., issued a modification to consolidate all promissory notes payable to Huntington Chase Ltd. in the aggregate principal sum of $153,912, for cash loans made to the Company between 2009 and 2013, and to assign the note in its entirety, including accrued interest of $27,368, to Huntington Chase Financial Group.  The note bears interest at a rate of seven percent (7%) per annum, is due within one (1) year of written demand, and is convertible into the Company’s common stock at a strike price of $0.07 per share. Interest in the amount of $38,143 and $27,369 has been accrued as of December 31, 2014 and 2013, respectively.


On January 5, 2014, a related party was assigned $100,000 of a convertible promissory note issued by the Company.  The note bears interest at a rate of 7% per annum, is due within one (1) year of written demand, and is convertible into the Company’s common stock at a strike price of $0.07 per share. Interest in the amount of $4,932 has been accrued as of December 31, 2014, and is included as part of accrued expenses on the accompanying balance sheets.


All outstanding related party notes payable bear interest at the rate of 5% to 7% per annum, are due and payable within between one (1) year of written demand and by December 9, 2018, or upon certain equity funding, and are convertible into the Company’s common stock at a price of between $0.05 and $0.40 per share.


As at December 31, 2014 and 2013, respectively, affiliates and related parties are due a total of $3,193,780 and $3,511,078, which is comprised of loans to the Company of $2,896,199 and $3,357,779, accrued compensation of $118,500 and $186,338, and reimbursed expenses of $179,081 and $(33,039), for a net decrease of $317,298. . During the year ended December 31, 2014, loans to the Company increased by $461,580, unpaid compensation decreased by $67,838 and reimbursable expenses increased by $212,120.


The Company’s decrease in loans to the Company of $461,580 is due to an increase in unpaid compensation owed to related parties in the amount of $872,508 which has been converted to convertible notes payable; a decrease in unamortized discount of $86,505; a decrease of $990,234 due to the conversion of debt into common stock; and a decrease of $430,359 resulting from the assignment/reclassification of debt to non-related parties.


The Company’s decrease in unpaid compensation of $67,838 is due to an increase in unpaid compensation of $71,917 due to related parties; and a decrease of $139,755 which was converted into notes payable and transferred to non-related party notes payable.


The Company’s expenses reimbursable to related parties increased by $212,120 and $33,996 during the year ended December 31, 2014 and 2013, respectively.


During the year ended December 31, 2014 and 2013, accrued interest increased by $81,712 and $64,956, respectively. In connection with the conversion of certain debt during the current year, accrued interest was reduced by $137,423.  As of December 31, 2014 and 2013, accrued interest payable to related parties was $81,020 and $136,731, respectively, and is included as part of accrued expenses on the accompanying balance sheets.


Director Independence


For purposes of determining director independence, the Company have applied the definitions set out in NASDAQ Rule 5605(a)(2).  The OTCQB on which shares of Common Stock are quoted does not have any director independence requirements.  The NASDAQ definition of “Independent Officer” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company's Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.


The Company currently acts with nine directors, consisting of Edward W. Withrow Jr., Edward W. Withrow III, John L. Ogden, William B. Nesbitt, John D. Macey, Paul B. Burke, Arran de Moubray, Dr. Martin A. Blake and Philip J. Woolas. The Company has determined that Mr. Philip J. Woolas and Dr. Martin A. Blake are “independent director(s)” as defined in NASDAQ Marketplace Rule 4200(a)(15).



31



ITEM 14.

PRINCIPAL ACCOUNTANTS FEES AND SERVICES


The aggregate fees billed or to be billed for the most recently completed fiscal years ended December 31, 2014December 31, 2014 and 2013, for professional services rendered by the principal accountant for the audit of the Company’s annual financial statements and review of the financial statements included in the Company’s quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:


  

Year Ended December 31,

 

2014
$

 

2013
$

Audit Fees

15,250

 

19,250

Audit Related Fees

46

 

236

Tax Fees

-

 

-

All Other Fees

0

 

0

Total

15,296

 

19,486


The Company’s board of directors pre-approves all services provided by the Company’s independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.


The Company’s board of directors has considered the nature and amount of fees billed by the Company’s independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining the Company’s independent auditors’ independence.





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32


PART IV


ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES


Exhibits required by Item 601 of Regulation S-B


Exhibit

Number

Description

Filing Reference

(2)

Plan of Purchase, Sale, Reorganization, Arrangement, Liquidation or Succession

 

2.1

Letter of Intent between the Company and ACE Rent A Car, Inc. dated August 2, 2012

Filed with the SEC on November 19, 2012 as part of the Company’s Quarterly Report on Form 10-Q

2.2

Letter of Intent between the Company and PearTrack Systems Group, Ltd. dated September 26, 2014

Filed with the SEC on October 2, 2014 as part of the Company’s Current Report on Form 8-K

2.3

Agreement and Plan of Merger between the Company, PearTrack Systems Group Limited and PearTrack Acquisition Corp effective October 17, 2014

Filed with the SEC on October 23, 2014 as part of the Company’s Current Report on Form 8-K

(3)

Articles of Incorporation and Bylaws

 

3.1

Articles of Incorporation

Filed with the SEC on November 30, 2006 as part of the Company’s registration statement on form SB-2

3.2

Bylaws

Filed with the SEC on November 30, 2006 as part of the Company’s registration statement on form SB-2

3.3

Certificate of Change filed with the Secretary of State of Nevada on April 2, 2008

Filed with the SEC on April 21, 2008 as part of the Company’s Current Report on Form 8-K

3.4

Articles of Merger

Filed with the SEC on June 26, 2008 as part of the Company’s Current Report on Form 8-K

3.5

Certificate of Change filed with the Secretary of State of Nevada on August 29, 2008 with respect to the reverse stock split

Filed with the SEC on September 17, 2008 as part of the Company’s Current Report on Form 8-K

3.6

Articles of Merger

Filed with the SEC on June 11, 2009 as part of the Company’s Current Report on Form 8-K

3.7

Certificate of Change filed with the Secretary of State of Nevada on May 15, 2009 with respect to the reverse stock split

Filed with the SEC on June 11, 2009 as part of the Company’s Current Report on Form 8-K

3.8

Articles of Merger filed with the Secretary of State of Nevada on June 2, 2009 with respect to the merger between the Company’s wholly owned subsidiary, Ecological Acquisition Corp. and Ecologic Sciences, Inc.

Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K

3.9

Certificate of Change filed with the Secretary of State of Nevada on May 15, 2009, effective June 9, 2009 with respect to the merger between the Company’s wholly owned subsidiary, Ecological Acquisition Corp., and Ecologic Sciences, Inc.

Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K

3.10

Certificate of Amendment filed with the Secretary of State of Nevada on September 29, 2014, effective October 17, 2014 with respect to the authorized shares and name change

Filed with the SEC on October 2, 2014 as part of the Company’s Current Report on Form 8-K

(10)

Material Contracts

 

10.1

Agreement and Plan of Merger dated April 26, 2009

Filed with the SEC on April 30, 2009 as part of the Company’s Current Report on Form 8-K

10.2

Employment agreement dated January 30, 2009 between the Company and Mr. Plamondon

Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K

10.3

Agreement dated April 28, 2009 between the Company and Audio Eye, Inc.

Filed with the SEC on July 9, 2009as part of the Company’s Current Report on Form 8-K

10.4

Agreement dated May 15, 2009 between the Company and Audio Eye, Inc.

Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K

10.5

Employment agreement dated June 29, 2009 between the Company and Mr. Keppler.

Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K

10.6

Memorandum of Understanding dated May 12, 2009 between the Company and Green Solutions & Technologies, LLC

Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K

10.7

Form of Debt Settlement Subscription Agreement dated July 1, 2009 between the Company and John L. Ogden

Filed with the SEC on July 9, 2009 as part of the Company’s Current Report on Form 8-K

10.8

Service Agreement dated September 24, 2009 between Ecologic Products, Inc. and Park ‘N Fly Inc. 

Filed with the SEC on September 29, 2009 as part of the Company’s Current Report on Form 8-K

10.9

Agreement dated September 29, 2009 between the Company and North Sea Securities LP.

Filed with the SEC on April 14, 2010 as part of the Company’s Annual Report on Form 10-K

10.10

Consulting Agreement with Matrix Advisors, LLC dated October 1, 2009

Filed with the SEC on April 14, 2010 as part of the Company’s Annual Report on Form 10-K

10.11

Consulting Agreement with Huntington Chase Ltd. for Advisory Services dated October 12, 2009

Filed with the SEC on April 14, 2010 as part of the Company’s Annual Report on Form 10-K

10.12

Advisory Agreement for Executive Services of Norman A. Kunin dated as of January 1, 2010

Filed with the SEC on August 16, 2010 as part of the Company’s Current Quarterly Report on Form 10-Q

10.13

Independent Consulting Agreement between the Company and Prominence Capital, LLC effective as of April 5, 2010

Filed with the SEC on August 16, 2010 as part of the Company’s Current Quarterly Report on Form 10-Q

10.14

Agreement dated November 23, 2010 with BMO Capital Markets

Filed with the SEC on April 16, 2012 as part of the Company’s Annual Report on Form 10-K

10.15

Independent Consulting Agreement between the Company and Oracle Capital Partners, LLC effective as of April 1, 2011.

Filed with the SEC on August 15, 2011 as part of the Company’s Current Quarterly Report on Form 10-Q

10.16

Placement Agent Agreement between the Company and View Trade Securities, Inc. effective as of April 12, 2011

Filed with the SEC on August 15, 2011 as part of the Company’s Current Quarterly Report on Form 10-Q

10.17

Employment Agreement between the Company and William B. Nesbitt effective as of November 1, 2011

Filed with the SEC on April 16, 2012 as part of the Company’s Annual Report on Form 10-K

10.18

Share Exchange Agreement and Plan of Merger dated March 16, 2012

Filed with the SEC on March 22, 2012 as part of the Company’s Current Report on Form 8-K

10.19

Consulting Agreement between the Company and Greg Suess dated July 5, 2012

Filed with the SEC on November 19, 2012 as part of the Company’s Quarterly Report on Form 10-Q

10.20

Consulting Agreement between the Company and NUF Enterprises LLC dated July 5, 2012

Filed with the SEC on November 19, 2012 as part of the Company’s Quarterly Report on Form 10-Q

10.21

Engagement Letter between the Company and Wellington Shields & Co., LLC dated September 12, 2012

Filed with the SEC on November 19, 2012 as part of the Company’s Quarterly Report on Form 10-Q

10.22

Engagement Letter between the Company and Wellington Shields & Co., LLC dated September 12, 2012

Filed with the SEC on November 19, 2012 as part of the Company’s Quarterly Report on Form 10-Q

10.23

Modification Agreement between the Company and Huntington Chase Financial Group dated October 12, 2012  

Filed with the SEC on April 1, 2013 as part of the Company’s Annual Report on Form 10-K

10.24

Assignment and Licensed Rights Agreement between the Company and PearLoxx Limited dated December 19, 2014

Filed wih the SEC on January 26, 2015 as part of the Company’s Current Report on form 8-K

10.25

Amendment to the Assignment and Licensed Rights Agreement between the Company and PearLoxx Limited dated Marcy 9, 2015

Filed wih the SEC on April 11, 2015 as part of the Company’s Current Report on form 8-K

(16)

Auditors Letters

 

16.4

Letter dated June 7, 2013 from Anton & Chia LLC  

Filed with the SEC on June 10, 2013 as part of the Company’s Current Report on Form 8-K

(21)

Subsidiaries of the Registrant

 

21.1

PearTrack Systems Group, Ltd.

Ecologic Car Rentals, Inc.

Ecologic Products, Inc.

 

(23)

Consents

 

23.1

Letter from Seale and Beers, CPA’s dated April 15, 2014

Filed with the SEC on April 15, 2014 as part of the Company’s Annual Report on Form 10-K

23.2*

Letter from Seale and Beers, CPA’s dated April 15, 2015

Filed herewith.

(31)

Section 302 Certifications

 

31.1*

Section 302 Certification of Edward W. Withrow Jr.

Filed herewith.

31.2*

Section 302 Certification of Calli R. Bucci

Filed herewith.

(32)

Section 906 Certifications

 

32.1*

Section 906 Certification of Edward W. Withrow Jr.

Filed herewith.

32.2*

Section 906 Certification of Calli R. Bucci

Filed herewith.

(101)

Interactive Data Files

 

101.INS**

XBRL Instance Document

 

101.SCH**

XBRL Taxonomy Extension Schema Document

 

101.CAL**

XBRL Taxonomy Extension Calculation Linkbase Document

 

101.DEF**

XBRL Taxonomy Extension Definition Linkbase Document

 

101.LAB**

XBRL Taxonomy Extension Label Linkbase Document

 

101.PRE**

XBRL Taxonomy Extension Presentation Linkbase Document

 


*

Filed herewith.

**

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.



33


SIGNATURES


In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


  

PEARTRACK SECURITY SYSTEMS, INC.

  

  

  

  

Dated: April 15, 2015

/s/ Edward W. Withrow Jr.

  

Edward W. Withrow Jr.

  

President, Chief Executive Officer, and Director

  

  

  

  

Dated: April 15, 2015

/s/ Calli R. Bucci

  

Calli R. Bucci

  

Chief Financial Officer, Secretary


In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


  

PEARTRACK SECURITY SYSTEMS, INC.

  

  

  

  

Dated: April 15, 2015

/s/ Edward W. Withrow Jr.

  

Edward W. Withrow Jr.

  

President, Chief Executive Officer, and Director

  

  

 

 

Dated: April 15, 2015

/s/ Calli R. Bucci

  

Calli R. Bucci

  

Chief Financial Officer, Secretary

 

 

 

 

Dated: April 15, 2015

/s/ Edward W. Withrow III

  

Edward W. Withrow III

  

Director

  

  

  

  

Dated: April 15, 2015

/s/ John L. Ogden

  

John L. Ogden

  

Director

  

  

  

  

Dated: April 15, 2015

/s/ William B. Nesbitt

  

William B. Nesbitt

  

Director

  

  

  

  

Dated: April 15, 2015

/s/ Dr. Martin A. Blake

  

Dr. Martin A. Blake

  

Director

  

  

  

  

Dated: April 15, 2015

/s/ Arran de Moubray

  

Arran de Moubray

  

Director

  

  

  

  

Dated: April 15, 2015

/s/ John D. Macey

  

John D. Macey

  

Director

  

  

  

  

Dated: April 15, 2015

/s/ Paul B. Burke

  

Paul B. Burke

  

Director

  

  

  

  

Dated: April 15, 2015

/s/ Philip J. Woolas

  

Philip J. Woolas

  

Director




Table of Contents

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