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EX-32.1 - EXHIBIT 32.1 - INTREorg SYSTEMS INC.ex32-1.htm


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-K

 

(Mark One)

 

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

 

For the fiscal year ended December 31, 2014

 

or

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________________ to __________________________

Commission file number: 0-53262

 

INTREORG SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

 

TEXAS

45-0526215

(State or other jurisdiction of incorporation or organization)

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

 

556 SILICON DRIVE, SUITE 103

76092

(Address of principal executive offices)

(Zip Code)

 

Registrant's telephone number, including area code:

(817) 416-6846

 

Securities registered under Section 12(b) of the Act:

 

Title of each class

Name of each exchange on which registered

NONE

NOT APPLICABLE

 

Securities registered under Section 12(g) of the Act:

 

COMMON STOCK, NO PAR VALUE

(Title of class)

 

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

Yes No

 

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

 

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

Yes 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 (§232.4.05 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  

Yes No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the 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.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company:

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

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

Yes No

 

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant as of June 30, 2014 (the last business day of the Registrant’s most recently completed second fiscal quarter) was approximately $2,270,112. 

 

As of July 7, 2015, the Registrant has 14,079,419 shares of common stock outstanding.

 

 
 

 

 

TABLE OF CONTENTS

 

  

  

Page No.

Part I

Item 1.

Business.

4

Item 1A.

Risk Factors.

7

Item 1B.

Unresolved Staff Comments.

14

Item 2.

Properties.

15

Item 3.

Legal Proceedings.

15

Item 4.

Mine Safety Disclosure.

15

Part II

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

15

Item 6.

Selected Financial Data.

16

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

16

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

20

Item 8.

Financial Statements and Supplementary Data.

21

Item 9.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

33

Item 9A.

Controls and Procedures.

33

Item 9B.

Other Information.

35

Part III

Item 10.

Directors, Executive Officers and Corporate Governance.

35

Item 11.

Executive Compensation.

37

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

39

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

40

Item 14.

Principal Accounting Fees and Services.

42

Part IV

Item 15.

Exhibits, Financial Statement Schedules.

43

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

This report contains forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  These forward-looking statements include, among others, the following:

 

 

our ability to raise sufficient working capital necessary to continue to implement our business plan and satisfy our obligations,

our ability to continue as a going concern,

our ability to develop revenue producing operations,

our ability to establish our brand and effectively compete in our target market, and

risks associated with the external factors that impact our operations, including economic and leisure trends.

 

Forward-looking statements are typically identified by use of terms such as “may”, “could”, “should”, “expect”, “plan”, “project”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “pursue”, “target” or “continue”, the negative of such terms or other comparable terminology, although some forward-looking statements may be expressed differently.  The forward-looking statements contained in this report are largely based on our expectations, which reflect estimates and assumptions made by our management.  These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors.  Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control.  In addition, management’s assumptions about future events may prove to be inaccurate.  Management cautions all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur.  Actual results may differ materially from those anticipated or implied in the forward-looking statements.   You should consider the areas of risk described in connection with any forward-looking statements that may be made herein.  You should also consider carefully the statements under “Risk Factors” and other sections of this report, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, including the risks described in "Item 1A. - Risk Factors".  Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.  These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

 

 
 

 

 

Unless specifically set forth to the contrary, when used in this Report the terms “INTREorg,” "we"", "our", the "Company" and similar terms refer to INTREorg Systems, Inc., a Texas corporation.  In addition, when used herein and unless specifically set forth to the contrary, “2013” refers to the year ended December 31, 2013, and “2014” refers to the year ended December 31, 2014.

 

PART I

 

ITEM 1.                      DESCRIPTION OF BUSINESS.

 

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

 

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

 

Publicly traded companies, have an unfulfilled need to track and analyze market data of trading in the entity’s own stock. This creates a market opportunity for INTREORG to provide accurate and timely reporting on stock movement data. Due to the dynamic and ever changing nature of the market, executives of public traded companies should be evaluating stock movement information for compliance, fund raising and investor relations purposes. Collecting and compiling this information has resulted in numerous challenges that have forced public companies to move toward electronic monitoring and management of their stock sales and purchases to gain better insight and control. The ultimate goal for all public companies is the ability to accurately gauge the movement of shares in the market, validate compliance, track those movements “over time”, and analyze this data to accurately report and well the executive team. There are numerous challenges associated with this goal and to facilitate a solution is a very complex and data intensive process but necessary for successful financial advantage. INTREORG has created a proprietary data delivery software tool that provides data mining, reporting and a technical understanding to be able to help our clients. Our software can provide information that can be used for:

 

 

Compliance

 

o

Identify Large Shareholder Liquidations

 

o

Related Accounts

 

o

Notify Counsel of unreported Insider transactions

 

o

Illegal Distribution of Unregistered Shares

 

Fund Raising

 

o

Pricing & Timing for Capital Raises

 

o

Investor Sources

 

Investor Relations

 

o

Investor Demographics

 

o

IR Effectiveness

 

 
4

 

 

Our software tool provides a sophisticated analysis track and report changes in share movements to our clients. INTREORG Systems Inc. provides SaaS and consulting service for publically traded companies using their proprietary Stock Transfer Analytics (STA) software. The company is built on the knowledge and experience of over five decades of capital markets exposure. INTREORG’s services play a vital role in helping companies understand broker-dealer, clearing firm and shareholder position movements and how they impact a company’s market value.

 

Market Trading Analysis for Publicly Traded Companies.

 

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

 

Stock Transfer Analytics “STA” software application

 

“Stock Transfer Analytics” refers to a process of analyzing data sources about a public company’s shareholders and shareholdings to generate new knowledge and gain insights about otherwise vague or difficult-to-understand aspects of a public company’s public stock. We believe that the knowledge and insights which may be gained from Stock Transfer Analytics will be valuable to the financial management of public companies, and would be particularly useful to CEOs, CFOs, corporate counsel, and investor relations (IR) professionals as they monitor their corporate status.

 

Stock Transfer Analytics Services

 

The Stock Transfer Analytics software can be used as the enabling technology of a financial services consultancy, or as the technology driven fee-for-access web site. Specific services include:

 

 

Stock inventory modeling;

 

Monitoring for Regulation FD (Fair Disclosure) compliance:When an issuer, or person acting on its behalf, discloses material nonpublic information to certain enumerated persons (in general, securities market professionals and holders of the issuer's securities who may well trade on the basis of the information), the issuer must make public disclosure of that information; during the normal course of data-mining, Regulation FD issues may be identified so long as insiders and persons possessing material, non-public information are made known to the issuer.If any such compliance issue is found, the client company of the software would be immediately notified via electronic communication detailing the individual and the transaction believed to constitute the compliance issue.

 

Enforce lock-ups; and,

 

Improved investor relations.

 

On October 30, 2012, we executed an Intellectual Property License and Consulting Agreement (the “PISA Agreement”) with Public Issuer Stock Analytics, LLC (“PISA”) that provides us the exclusive right to market and sell services associated with certain proprietary intellectual property owned by PISA. PISA further agreed to act as a consultant to us, providing the actual services associated with the certain proprietary intellectual property. The term of the PISA Agreement is for three years. Under the PISA Agreement, PISA is entitled to the following compensation: 250,000 shares of Common Stock when the PISA Agreement was executed; 20,000 shares per month based on the closing price of our Common Stock on the last business day of each respective month (the "Share Royalty"); and 1%, 2% or 3% of gross sales, due on a quarterly basis, up and until the second anniversary, third anniversary or termination of the agreement, respectively (the "Gross Sales Royalty"). If no gross sales exist for a given period, PISA's only compensation for such period shall be the Share Royalty. The Gross Sales Royalty may be paid in cash or restricted shares of Common Stock; if paid in Common Stock, such stock shall be issued based on the market close on the last business day of each month in each quarter as such market close is found in Bloomberg. Through December 31, 2014, PISA has received the initial 250,000 shares of common stock due upon execution of the agreement and has received or was due an aggregate of 534,600 shares.

 

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

 

 
5

 

 

Information Based Sales and Marketing Efforts.

 

We have developed a set of metrics that we believe permits us to assess each client's needs and its potential profitability based on such company's publicly available information.  Accordingly, we intend to focus our sales and marketing efforts on companies with readily available public information, such as those who file reports with the SEC.  We believe that this approach will allow us to focus our sales and marketing efforts on a legitimate group of potential clients and reduce wasted sales and marketing expenses.

 

We expect to finalize our marketing strategies, and hire and train either in house marketing personnel or engage independent contractors who have expertise in our target markets, at such time as we begin offering our products and services, which we anticipate will occur within the next 6 months to a year, to provide additional capital and resources.  Until such time, our marketing strategy will remain as in-person client development meetings with the management teams of public companies.

 

We currently maintain a master service agreement with one client, which provides a good example of the services we can provide to our clients.  For instance, pursuant to the terms of the agreement, we will create a dynamic database that logically aggregates, compiles, and rationalizes all disparate and available broker-dealer and shareholder data from known reporting entities and all available relevant sources, including but not limited to, The Depository Trust and Clearing Corporation (DTCC), Cede & Co., Company’s Transfer Agent and Broadridge Financial Solutions, Inc. This is the first step in turning static reporting entity, broker-dealer and shareholder data into a useful and dynamic archival/historic repository.

 

In addition to the services described above, our consulting team will be available to provide trusted advisor related consulting services to the client in conjunction with the software they are using.

 

Recent Events

 

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

 

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

 

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

 

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

 

 
6

 

 

Competition

 

Once we begin our operations, we will be engaged in a highly competitive industry and we will compete with many companies, a number of which are larger, better capitalized, more established and have greater access to resources necessary to produce a competitive advantage.  Our competitors will include large, international companies as well as regional and local companies that provide computer software programs.  Although we may compete with other entities that provide some of the services we provide, we do not believe that there is any other entity that currently provides the entire suite of services and software that we intend to provide to our clients.  We believe that most competitors provide some of the services we intend to provide as separate stand alone services and that our ability to combine these services with our software will enhance the demand for our offerings.

 

Because of all the inherent limitations with any new organization, there are no assurances that we will ever be able to effectively compete in our target business.  However, once we obtain additional financing and can carry out our business goals, we believe that our core values as described above will provide us with competitive strengths.

 

Customers

 

Over the past two fiscal years, we have signed one client - Rangeford Resources, Inc. (“Rangeford”) - and use the Public Issuer Stock Analytics technology for our own shareholder base. Accordingly, the loss of this customer will have a material adverse effect on our business and operations. We currently intend that our clients will consist of smaller, emerging reporting companies that are trying to gain insight on their capitalization to better evaluate their status and the types of corporate actions they may pursue.

 

On October 30, 2012, we entered into a Master Services Agreement with Rangeford pursuant to which we will provide services relating to the Public Issuer Stock Analytics software for an annual fee of $30,000 (based on our license agreement with PISA, up to 3% of these fees will be paid to PISA for the first three years of the Rangeford Agreement).  The term of the Agreement is one year, and thereafter the agreement renews automatically and remains “evergreen” for succeeding one year terms, unless terminated according to the termination provisions in the agreement. (See, "Certain Relationships and Related Transactions,” and “Director Independence")

 

Intellectual Property

 

We do not currently have any registered trademarks nor do we own any patents.  However, we intend to apply for the appropriate protection if it becomes necessary.

 

Employees

 

As of December 31, 2014, we had one full time employee.  Our executive officer provides certain services dedicated to current corporate and business development activities on an as needed, part-time basis.

 

FOR ADDITIONAL INFORMATION

 

We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC.  For further information with respect to the Company, you may read and copy its reports, proxy statements and other information, at the SEC public reference rooms at 100 F.  Street, N.E., Washington, D.C. 20549. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost.  Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference rooms.  The Company’s SEC filings are also available at the SEC’s web site at http://www.sec.gov.

 

Copies of Company’s Annual Reports on Form 10K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are all available on our website (www.intreorg.com) free of charge, within a week after we file same with the SEC or by sending a request for a paper copy to our outside securities counsel: Hunter Taubman Weiss LLP, 130 W. 42nd Street, Suite 1050, New York, NY 10036 (the information provided on our website at is not part of this Report).

 

ITEM 1A.                      RISK FACTORS.

 

Although we are not required to provide this information since we are a smaller reporting company, we are voluntarily providing such information in light of the risks associated with our company and our lack of revenue. Before you invest in our securities, you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included in this annual report before you decide to purchase our securities. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected.

 

 
7

 

 

OUR AUDITORS HAVE RAISED SUBSTANTIAL DOUBTS AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.

 

Our financial statements have been prepared assuming we will continue as a going concern. Since inception we have experienced recurring losses from operations, which losses have caused an accumulated deficit of $4,817,583 as of December 31, 2014. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.  We anticipate that we will continue to incur losses in future periods until we begin reporting generating revenues.  There are no assurances that we will be able to raise our revenues to a level which supports profitable operations and provides sufficient funds to pay our obligations.  If we are unable to meet those obligations, we could be forced to cease operations in which event investors would lose their entire investment in our company.

 

WE HAVE NOT GENERATED ANY REVENUES AND OUR ABILITY TO PAY OUR OPERATING EXPENSES IS DEPENDENT UPON ADVANCES FROM RELATED PARTIES.

 

For the fiscal year ended December 31, 2014, we reported a net loss of $555,208. We had a working capital deficit of $2,693,395 at December 31, 2014.  We have not yet begun generating revenue from our operations and are dependent upon a line of credit or other informal advances from a related party to pay our operating expenses and the continued development of our business plan.  There are no assurances this related party will continue to advance funds to us that will satisfy our working capital needs until such time as we are able to raise additional capital or generate sufficient revenues to fund our operating expenses. While we seek ways to continue to operate by securing additional financing resources or alliances or other partnership agreements, we do not at this time have any commitments or agreements that provide for additional capital resources. Our financial condition and the going concern emphasis paragraph may also make it more difficult for us to maintain existing customer relationships and to initiate and secure new customer relationships.

 

IF WE ARE UNABLE TO FILE OUR OUTSTANDING DELINQUENT PERIODIC REPORTS, OUR REGISTRATION MAY BE REVOKED AND WE MAY BE SUBJECT TO A TRADING SUSPENSION.

 

Due to capital constraints, we were not able to timely file all of our periodic reports during the past three fiscal years; however, we have been working towards resolving that deficiency and will only be deficient with regards to our fiscal 2015 reports following the filing of this Annual Report on Form 10-K for the year ended December 31, 2014. We informed the SEC that we shall file all outstanding delinquent reports on or before June 23, 2015, but it does not seem that we will be able to file the final outstanding delinquent report, which would be the Quarterly Report on Form 10-Q for the quarter ending March 31, 2015 by such time. Although there can be no guarantee, we hope that by filing all the other delinquent reports by such date and the outstanding 10-Q soon thereafter, will prevent the SEC from initiating an administrative proceeding to revoke our registration under the Securities Exchange Act of 1934 (the "Exchange Act") pursuant to Section 12(j) of the Exchange Act. If the SEC initiates a 12(j) proceeding, our stock may be subject to a trading suspension pursuant to Section 12(k) of the Exchange Act. If the SEC initiates a 12(j) or 12(k) proceeding, it will significantly impair our ability to raise additional financings, could force us to expend significant financial resources to defend ourselves, could divert the attention of our management from our core business and could harm our reputation.

 

WE HAVE HISTORICALLY BEEN, AND MAY CONTINUE TO BE, HEAVILY RELIANT UPON FINANCING FROM RELATED PARTIES, WHICH PRESENTS POTENTIAL CONFLICTS OF INTEREST THAT MAY ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

We have historically obtained financing from related parties, including major shareholders, directors and officers, in the form of debt, debt guarantees and issuances of equity securities, to finance working capital growth. These related parties have the ability to exercise significant control over our financing decisions, which may present conflicts of interest regarding the choice of parties from whom we obtain financing, as well as the terms of financing.  No assurance can be given that the terms of financing transactions with related parties are or will be as favorable as those that could be obtained in arms’ length negotiations with third parties.

 

 
8

 

 

WE HAVE A SIGNIFICANT AMOUNT OF DEBT WHICH COULD IMPACT OUR ABILITY TO CONTINUE TO IMPLEMENT OUR BUSINESS PLAN.

 

We have incurred indebtedness totaling $2,693,395 at December 31, 2014, which includes $496,078 in accounts payable, $295,253 in accounts payable to related parties, $468,020 in accrued interest and other liabilities, $453,290 in accrued contingencies, $521,000 in notes payable which are past due and a revolving line of credit with a related party with an outstanding balance as of December 31, 2014 of $459,754.  We do not have adequate funds to satisfy the outstanding obligations. The outstanding notes provide that as a result of a default - failure to pay when due, the note holders could declare the notes immediately due and payable.  Unless we are able to restructure some or all of this debt, and raise sufficient capital to fund our continued development, our current operations do not generate sufficient cash to pay these obligations, when due. Accordingly, there can be no assurance that we will be able to pay these or other obligations which we may incur in the future and t is unlikely we will be able to continue as a going concern.

 

WE HAVE LIMITED HISTORY AND WE CANNOT ASSURE YOU THAT OUR BUSINESS MODEL WILL BE SUCCESSFUL IN THE FUTURE OR THAT OUR OPERATIONS WILL BE PROFITABLE.

 

Our company was formed in 2003 but we have yet to begin generating revenues from our operations.  Accordingly, investors have no operating history upon which to evaluate our business model.  There can be no assurances whatsoever that we will be able to successfully implement our business model, penetrate our target markets or attain a wide following for our services.  We are subject to all the risks inherent in an early stage enterprise and our prospects must be considered in light of the numerous risks, expenses, delays, problems and difficulties frequently encountered in those businesses.

 

WE ARE DELINQUENT IN OUR TAX FILINGS.

 

We failed to file federal tax returns for the fiscal years ended December 31, 2009 through 2013 and they are open for review by the various tax jurisdictions. We are also required to file Franchise Tax Reports in Texas and we have filed all the required tax forms in Texas. We cannot assure you that we will not incur fines and penalties for failure to file such our federal tax returns.

 

THE COMPANY COMPETES WITH MANY LARGER, WELL CAPITALIZED COMPANIES

 

We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include Broadridge, Deloitte, KPMG Accenture etc.  INTREORG also faces competition from many other types of service providers, including SHAREINTEL.  Due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can.  Our ability to compete successfully depends on a number of factors, including, among other things:

 

 

The ability to develop, maintain and build upon long-term customer relationships based on top quality service, high ethical standards and safe, sound assets;

 

The ability to expand our market position;

 

The rate at which we introduce new products and services relative to our competitors;

 

Customer satisfaction with our level of service;

 

Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.

 

OUR SOLE OFFICER DOES NOT DEVOTE ALL OF HIS TIME TO OUR BUSINESS, WHICH MAY IMPACT OUR ABILITY TO CARRY OUT OUR BUSINESS IN THE MOST EFFICIENT MANNER

 

Our sole officer does not allocate his full time to our business thereby resulting in potential conflicts of interest in his determination as to how much time to devote to our affairs, and this conflict of interest could have a negative impact on our ability to implement our business plan.

 

Our sole officer devotes only approximately 50% of his time and attention to our business and he is engaged in other business endeavors which are unrelated to our company.  If his other business affairs require him to devote more substantial amounts of time to such affairs, it could limit his ability to devote time to our affairs and could have a negative impact on our ability to implement our business plan. We cannot assure you that these potential conflicts of interest will be resolved in our favor.

 

 
9

 

 

WE WILL NEED ADDITIONAL FINANCING WHICH WE MAY NOT BE ABLE TO OBTAIN ON ACCEPTABLE TERMS IF AT ALL.

 

Our current operations are not sufficient to fund our operating expenses and we will need to raise additional working capital to continue to implement our business model, to provide funds for marketing to support our efforts to increase our revenues and for general overhead expenses, including those associated with our reporting obligations under Federal securities laws.  Generally, small businesses such as ours which for which there is only a limited public market for their securities face significant difficulties in their efforts to raise equity capital.  While to date we have relied upon the relationships of our executive officers and shareholders in our capital raising efforts, there are no assurances that these resources will continually be available to us or provide us with sufficient funding.

 

We do not have any commitments to provide additional capital and there are no assurances we will be able to raise capital upon terms which are favorable to our company.  Even if we are able to raise capital, the structure of that capital raise could impact our company and our shareholders in a variety of ways.  If we raise additional capital through the issuance of debt, this will result in interest expense.  If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our company held by existing shareholders will be reduced and those shareholders may experience significant dilution.  In addition, new securities may contain certain rights, preferences or privileges that are senior to those of our common stock.  We cannot assure you that we will be able to raise the working capital as needed in the future on terms acceptable to us, if at all.  If we do not raise funds as needed, we may not be able to continue to implement our business plan and it is likely that you would lose your entire investment in our company.

 

WE RELY ON THIRD PARTY TECHNOLOGIES AND IF WE ARE UNABLE TO USE OR INTEGRATE THESE TECHNOLOGIES, OUR PRODUCT AND SERVICE DEVELOPMENT MAY BE DELAYED AND OUR OPERATING RESULTS NEGATIVELY IMPACTED.

 

We rely on certain software that we acquire from third parties, including software that is used to perform key functions. These third-party software licenses may not continue to be available on commercially reasonable terms, and the software may not be appropriately supported, maintained or enhanced by the licensors or manufacturers. The loss of licenses or access to, or inability to support, maintain and enhance any such software could result in increased costs, or in delays or reductions in product shipments until equivalent products can be developed, identified, licensed and integrated, which would likely harm our business.

 

IF WE ARE DEEMED TO BE AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT, WE MAY BE REQUIRED TO INSTITUTE BURDENSOME COMPLIANCE REQUIREMENTS AND OUR ACTIVITIES MAY BE RESTRICTED, WHICH MAY MAKE IT DIFFICULT FOR US TO COMPLETE A BUSINESS COMBINATION.

 

The regulatory scope of the Investment Company Act of 1940, as amended (the "Investment Company Act"), which was enacted principally for the purpose of regulating vehicles for pooled investments in securities, extends generally to companies engaged primarily in the business of investing, reinvesting, owning, holding or trading in securities. The Investment Company Act may, however, also be deemed to be applicable to a company which does not intend to be characterized as an investment company but which, nevertheless, engages in activities which may be deemed to be within the definitional scope of certain provisions of the Investment Company Act.  We do not believe that our principal activities will subject us to regulation under the Investment Company Act. However, because our business model provides for, and encourages, us to accept stock of our client companies rather than cash as compensation for our services, there can be no assurance that we will not be deemed to be an investment company. If we are deemed to be an investment company, we may become subject to certain restrictions relating to our activities, including restrictions on the nature of our investments and the issuance of securities, which may create difficulties for future financings.  In addition, the Investment Company Act imposes certain requirements on companies deemed to be within its regulatory scope, including registration as an investment company, adoption of a specific form of corporate structure and compliance with certain burdensome reporting, record keeping, voting, proxy, disclosure and other rules and regulations. In the event we are characterized as an investment company, our inability to satisfy such regulatory requirements, whether on a timely basis or at all, would, under certain circumstances, have a material adverse effect on us.  If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to consummate a business combination.

 

 
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WE DO NOT CARRY BUSINESS INTERRUPTION OR OTHER INSURANCE, SO WE HAVE TO BEAR LOSSES OURSELVES.

 

We are subject to risk inherent to our business, including equipment failure, theft, natural disasters, industrial accidents, labor disturbances, business interruptions, property damage, product liability, personal injury and death. We do not carry any business interruption insurance or third-party liability insurance or other insurance to cover risks associated with our business. As a result, if we suffer losses, damages or liabilities, including those caused by natural disasters or other events beyond our control and we are unable to make a claim again a third party, we will be required to bear all such losses from our own funds, which could have a material adverse effect on our business, financial condition and results of operations.

 

OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY, AND THE POSSIBILITY THAT OUR TECHNOLOGY COULD INADVERTENTLY INFRINGE TECHNOLOGY OWNED BY OTHERS, MAY ADVERSELY AFFECT OUR ABILITY TO COMPETE.

 

We rely on a combination of trade secret laws and confidentiality procedures to protect the technological know-how that comprise much of our intellectual property. We protect our technological know-how pursuant to non-disclosure and non-competition provisions contained in our third party agreements, and agreements with them to keep confidential all information relating to our customers, methods, business and trade secrets. Third parties are also required to acknowledge and recognize that all inventions, trade secrets, works of authorship, developments and other processes made by them during their service term with us are our property.

 

A successful challenge to the ownership of our intellectual property could materially damage our business prospects. Our competitors may assert that our technologies or products infringe on their patents or proprietary rights. We may be required to obtain from others licenses that may not be available on commercially reasonable terms, if at all. Problems with intellectual property rights could increase the cost of our products or delay or preclude our new product development and commercialization. If infringement claims against us are deemed valid, we may not be able to obtain appropriate licenses on acceptable terms or at all. Litigation could be costly and time-consuming but may be necessary to defend against infringement claims.

 

WE RELY ON THE LICENSE FROM PISA TO PROVIDE SOME OF OUR KEY SERVICES; ANY DETERIORATION OF OUR RELATIONSHIP WITH PISA'S MANAGEMENT COULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS OPERATIONS.

 

On October 30, 2012, we entered in to an Intellectual Property License and Consulting agreement with Public Issuer Stock Analytics, LLC (“PISA”), a related party, that provides us with the exclusive right to market and sell certain of PISA's proprietary intellectual property/software.   The PISA software is crucial for us to provide the type of consulting services we intend to offer and for researching the viability of pricing structures within the industry.   Although we have a good relationship with PISA's management, there is not guarantee that we will be able to renew the license when the term expires with substantially similar terms or at all.

 

WE LICENSE TECHNOLOGY FROM THIRD PARTIES. IF WE ARE UNABLE TO MAINTAIN THESE LICENSES, OUR OPERATIONS AND FINANCIAL CONDITION MAY BE NEGATIVELY IMPACTED.

 

We currently license technology from a related party, but intend to license additional technologies from other third parties. The loss of, our inability to maintain, or changes in material terms of these licenses could result in increased cost or delayed sales of our software and services, or may cause us to remove features from our products or services. We anticipate that we will continue to license technology from third parties in the future. This technology may not continue to be available on commercially reasonable terms, if at all. The impairment of these third-party relationships, especially if this impairment were to occur in unison, could result in delays in the delivery of our software and services until equivalent technology, if available, is identified, licensed and integrated. This delay could adversely affect our operating results and financial condition.

  

THE TECHNOLOGY UNDERLYING OUR PRODUCTS AND SERVICES IS COMPLEX AND MAY CONTAIN UNKNOWN DEFECTS THAT COULD HARM OUR REPUTATION, RESULT IN PRODUCT LIABILITY OR DECREASE MARKET ACCEPTANCE OF OUR PRODUCTS.

 

The technology underlying our products is complex and includes software that is internally developed and software licensed from third parties. These products have, and will in the future, contain errors or defects, particularly when first introduced or when new versions or enhancements are released. We may not discover defects that affect our current or new applications or enhancements until after they are sold and our insurance coverage may not be sufficient to cover our complete liability exposure. Any defects in our products and services could:

 

 

Damage our reputation

 

 
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Cause our customers to initiate product liability suits against us

 

 

Increase our product development resources

 

 

Cause customers to cancel orders or potential customers to purchase competitive products or services

 

 

Delay release or market acceptance of our products, or otherwise adversely impact our relationships with our customers or

 

 

Cause us to allocate valuable engineering resources to fix our existing products, which may cause us to allocate fewer resources toward developing new products, or toward adding features to our existing products.

 

WE BEAR THE RISK OF LOSS OF MAJOR CLIENTS, NONPAYMENT FROM OUR CLIENTS AND THE POSSIBLE EFFECTS OF BANKRUPTCY FILINGS BY CLIENTS, WHICH COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

We intend to focus our business strategy on serving large corporate customers. While our strategy is intended to enable us to increase our revenues and earnings from our major corporate customers, the strategy also exposes us to increased risks arising from the possible loss of major customer accounts. If a large client experiences financial difficulty, or is otherwise unable to meet its obligations as they become due, our financial condition and results of operations could be adversely affected. Given the difficult economic environment, there is an increased risk of clients failing to pay or delaying payment. Once we begin to service more clients, if there is a significant amount of uncollected accounts receivables or customer defaults it would have a material adverse effect on our earnings and financial condition. In addition, we would have charge backs on existing accounts receivable and invoices on future sales of accounts receivable generated by such clients under our accounts receivable purchase agreements.

 

IF A SUFFICIENT NUMBER OF CUSTOMERS DO NOT ACCEPT OUR PRODUCTS, OUR BUSINESS MAY NOT SUCCEED.

 

We cannot predict how the market for our products and services will develop, and part of our strategic challenge will be to convince enterprise customers of the productivity, improved analysis suitability and other benefits of our services. As of the date of this filing, we only have one customer.  Our future revenue and revenue growth rates will depend in large part on our success in delivering these services effectively, creating market acceptance for these services and meeting customer’s needs for new or enhanced services. If we fail to do so, our services will not achieve widespread market acceptance, and we may not generate sufficient revenue to offset our product development and selling and marketing costs, which will hurt our business.

 

WE MAY NOT BE ABLE TO INNOVATE TO MEET THE NEEDS OF OUR TARGET MARKET.

 

Our future success will continue to depend upon our ability to develop new products, product enhancements or service offerings that address future needs of our target markets and to respond to these changing standards and practices. The success of new products, product enhancements or service offerings depend on several factors, including the timely completion, quality and market acceptance of the product, enhancement or service. Our revenue could be reduced if we do not capitalize on our current market leadership by timely developing innovative new products, product enhancements or service offerings that will increase the likelihood that our products and services will be accepted in preference to the products and services of our current and future competitors.

 

IF OUR MARKETING AND LEAD GENERATION EFFORTS ARE NOT SUCCESSFUL, OUR BUSINESS WILL BE HARMED.

 

We believe that continued marketing efforts will be critical to achieve widespread acceptance of our products. Our marketing campaigns may not be successful given the expense required. For example, failure to adequately generate and develop sales leads could cause our future revenue growth to decrease. In addition, our inability to generate and cultivate sales leads into large organizations, where there is the potential for significant use of our products, could have a material effect on our business. We may not be able to identify and secure the number of strategic sales leads necessary to help generate marketplace acceptance of our services. If our marketing or lead-generation efforts are not successful, our business and operating results will be harmed.

 

 
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PROVISIONS OF OUR ARTICLES OF INCORPORATION MAY DELAY OR PREVENT A TAKE-OVER WHICH MAY NOT BE IN THE BEST INTERESTS OF OUR STOCKHOLDERS.

 

Our Articles of Incorporation authorize the issuance of up to 10,000,000 shares of preferred stock with such rights and preferences as maybe determined from time to time by our board of directors. Our board of directors may, without shareholder approval, issue additional classes of preferred stock with dividends, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock.

 

IF THE MATERIAL WEAKNESSES OR OTHER DEFICIENCIES IN OUR INTERNAL ACCOUNTING PROCEDURES ARE NOT REMEDIATED, WE WILL NOT COMPLY WITH THE RULES UNDER THE SARBANES-OXLEY ACT RELATED TO ACCOUNTING CONTROLS AND PROCEDURES OR OUR STOCK PRICE COULD DECLINE SIGNIFICANTLY.

 

Section 404 of the Sarbanes-Oxley Act required annual management assessments of the effectiveness of our internal controls over financial reporting commencing December 31, 2007. Our management concluded the financial statements included in our Annual Report on Form 10-K for the two-years ended December 31, 2014 and 2013, fairly present in all material respects our financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the U.S.

 

Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2014 and 2013 based on the control criteria established in a report entitled Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded our internal control over financial reporting was not effective as of December 31, 2014 and 2013. During its evaluation, as of December 31, 2014 our management identified material weaknesses in our internal control over financial reporting and other deficiencies as described in our annual report on Form 10-K for the years then ended. As a result, our investors could lose confidence in us, which could result in a decline in our stock price.

 

We are taking steps to remediate our material weaknesses. However, if we fail to achieve and maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude in the future that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our stock could decline significantly. In addition, we cannot be certain that additional material weaknesses or other significant deficiencies in our internal controls will not be discovered in the future.

 

Risks Relating to Our Securities

 

LACK OF LIQUIDITY

 

There is currently only a limited public market for the Company’s Common Stock and there can be no assurance that a more robust trading market will develop further or be maintained in the future.

 

OUR COMMON STOCK IS A “PENNY STOCK” AND MAY BE DIFFICULT TO SELL.

 

The SEC has adopted regulations which generally define a “penny stock” to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock is less than $5.00 per share and, therefore, it may be designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect the ability of investors to sell their shares.

 

 
13

 

 

THE MARKET FOR PENNY STOCKS HAS EXPERIENCED NUMEROUS FRAUDS AND ABUSES WHICH COULD ADVERSELY IMPACT INVESTORS IN OUR STOCK.

 

Penny stocks are frequent targets of fraud or market manipulation. Patterns of fraud and abuse include:

 

 

Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

 

Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

 

Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

 

Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

 

Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses

 

Our management is aware of the abuses that have occurred historically in the penny stock market.

 

OUR STOCK PRICE IS VOLATILE, WHICH COULD ADVERSELY AFFECT YOUR INVESTMENT.

 

Our stock price, like that of other computer software companies, is highly volatile. Our stock price may be affected by such factors as:

 

 

product development announcements by us or our competitors;

 

regulatory matters;

 

announcements in the software community;

 

intellectual property and legal matters; and

 

broader industry and market trends unrelated to our performance

 

In addition, if our revenues or operating results in any period fail to meet the investment community’s expectations, there could be an immediate adverse impact on our stock price.

 

OUR PUBLICLY FILED REPORTS ARE SUBJECT TO REVIEW BY THE SEC, AND ANY SIGNIFICANT CHANGES OR AMENDMENTS REQUIRED AS A RESULT OF ANY SUCH REVIEW MAY RESULT IN MATERIAL LIABILITY TO US AND MAY HAVE A MATERIAL ADVERSE IMPACT ON THE TRADING PRICE OF THE COMPANY’S COMMON STOCK.

 

The reports of publicly traded companies are subject to review by the SEC from time to time for the purpose of assisting companies in complying with applicable disclosure requirements, and the SEC is required to undertake a comprehensive review of a company’s reports at least once every three years under the Sarbanes-Oxley Act of 2002. SEC reviews may be initiated at any time. We could be required to modify, amend or reformulate information contained in prior filings as a result of an SEC review. Any modification, amendment or reformulation of information contained in such reports could be significant and result in material liability to us and have a material adverse impact on the trading price of the Company’s common stock.

 

STOCKHOLDER OWNERSHIP INTEREST IN OUR COMPANY MAY BE DILUTED AS A RESULT OF FUTURE FINANCINGS OR ADDITIONAL ACQUISITIONS.

 

As previously stated, we need to raise additional capital to carry out our business plans.  We may seek to raise these funds in public or private issuances of equity and such financings may take place in the near future or over the longer term. Sales of our securities offered through future equity offerings may result in substantial dilution to the interests of our current shareholders. The sale of a substantial number of securities to investors, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. In addition, we have issued shares of our common stock for various consulting services or license agreements in the past and may do so in the future, which may also result in substantial dilution to the interests of our current shareholders.

 

ITEM 1B.             UNRESOLVED STAFF COMMENTS.

 

Although this item is not applicable to smaller reporting companies like us, management believes it is important to disclose the following information to you. 

 

 
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Due to capital constraints, we were not able to timely file all of our periodic reports during the past three fiscal years; however, we have been working towards resolving that deficiency and will only be deficient with regards to our fiscal 2015 reports following the filing of this Annual Report on Form 10-K for the year ended December 31, 2014. We informed the SEC that we shall file all outstanding delinquent reports on or before June 23, 2015, but it does not seem that we will be able to file the final outstanding delinquent report, which would be the Quarterly Report on Form 10-Q for the quarter ending March 31, 2015 by such time. Although there can be no guarantee, we hope that by filing all the other delinquent reports by such date and the outstanding 10-Q soon thereafter, will prevent the SEC from initiating an administrative proceeding to revoke our registration under the Securities Exchange Act of 1934 (the "Exchange Act") pursuant to Section 12(j) of the Exchange Act.

 

ITEM 2.                DESCRIPTION OF PROPERTY.

 

Our principal executive offices are located at the offices of Pt Platinum Consulting, LLC, who provides consulting services to us. We do not currently pay monthly rent for the use of this office and the use of these facilities are included in our consulting arrangement with the consultant. We expect to continue to use these facilities until such time as we begin generating revenues from our operations.

 

ITEM 3.                LEGAL PROCEEDINGS.

 

We are not a party to any pending or threatened litigation.

 

ITEM 4.               MINE SAFETY DISCLOSURES.

 

Not applicable to our operations.

 

PART II

 

ITEM 5.                MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

 

Market Price of and Dividends on Common Equity and Related Stockholder Matters

 

Our common stock currently trades on the OTC Pink Market under the symbol, "IORG."  

 

The reported high and low last sale prices for the common stock are shown below for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions.

 

   

High

   

Low

 

2013

               

First quarter ended March 31, 2013

  $ 0.40     $ 0.23  

Second quarter ended June 30, 2013

  $ 0.40     $ 0.06  

Third quarter ended September 30, 2013

  $ 0.35     $ 0.18  

Fourth quarter ended December 31, 2013

  $ 0.51     $ 0.17  
                 

2014

               

First quarter ended March 31, 2014

  $ 0.40     $ 0.20  

Second quarter ended June 30, 2014

  $ 0.42     $ 0.15  

Third quarter ended September 30, 2014

  $ 0.32     $ 0.12  

Fourth quarter ended December 31, 2014

  $ 0.45     $ 0.15  
                 

2015

               

First quarter ended March 31, 2015

 

$

0.40    

$

0.17  

 

The last sale price of our common stock as reported on the OTC Pink Market was $0.14 on July 7, 2015.  As of July 7, 2015, there were approximately 117 record owners of our common stock.

 

Dividend Policy

 

We have never paid cash dividends on our common stock.  Under Texas law, we are prohibited from paying dividends on our common stock if (1) our surplus is less than the amount required by Section 21.313 of the Texas Business Organizations Code to be transferred to stated capital at the time the share dividend is made; or (2) the share dividend will be made to a holder of shares of any other class or series, unless (A) our Articles of Incorporation provide for the dividend; or (B) the share dividend is authorized by the holders of at least a majority of the outstanding shares of the class or series in which the share dividend is to be made.  We have no present intention to declare or pay dividends on shares of our common stock.

 

 
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Recent Sales of Unregistered Securities

 

Information regarding any equity securities we have sold during the period covered by this Report that were not registered under the Securities Act of 1933, as amended, is set forth below.  Each such transaction was exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D promulgated by the SEC. Unless stated otherwise: (i) the securities were offered and sold only to accredited investors; (ii) there was no general solicitation or general advertising related to the offerings; (iii) each of the persons who received these unregistered securities had knowledge and experience in financial and business matters which allowed them to evaluate the merits and risk of the receipt of these securities, and that they were knowledgeable about our operations and financial condition; (iv) no underwriter participated in, nor did we pay any commissions or fees to any underwriter in connection with the transactions; and, (v) each certificate issued for these unregistered securities contained a legend stating that the securities have not been registered under the Securities Act and setting forth the restrictions on the transferability and the sale of the securities.

 

During the year ended December 31, 2014, the Company authorized the issuance of 249,800 shares valued at $72,540 to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them.

 

On April 25, 2014, the Company authorized the issuance of 20,000 shares valued at $6,000 to PT Platinum Consulting, LLC for professional services related to financial reporting and accounting.

 

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

 

ITEM 6.                SELECTED FINANCIAL DATA.

 

Not applicable to a smaller reporting company.

 

ITEM 7.                MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion of our financial condition and results of operation for 2014 and 2013 should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Item 1A. Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Form 10-K.  We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

 

Overview

 

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

 

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

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

 

In October 2012, we executed an Intellectual Property License and Consulting Agreement (the “PISA Agreement”) with Public Issuer Stock Analytics, LLC (“PISA”) that provides us the exclusive right to market and sell services associated with certain proprietary intellectual property owned by PISA. PISA further agreed to act as a consultant to us, providing the actual services associated with the certain proprietary intellectual property. The term of the PISA Agreement is for three years. Under the PISA Agreement, PISA is entitled to the following compensation: 250,000 shares of Common Stock when the PISA Agreement was executed; 20,000 shares per month based on the closing price of our Common Stock on the last business day of each respective month (the "Share Royalty"); and 1%, 2% or 3% of gross sales, due on a quarterly basis, up and until the second anniversary, third anniversary or termination of the agreement, respectively (the "Gross Sales Royalty"). If no gross sales exist for a given period, PISA's only compensation for such period shall be the Share Royalty. The Gross Sales Royalty may be paid in cash or restricted shares of Common Stock; if paid in Common Stock, such stock shall be issued based on the market close on the last business day of each month in each quarter as such market close is found in Bloomberg. As of December 31, 2014, PISA has received the initial 250,000 shares of common stock due upon execution of the agreement and has received or is due an aggregate of 534,600 shares.

 

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

 

Recent Events

 

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

 

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

 

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

 

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

 

 
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Going Concern

 

We have incurred accumulated losses of $4,817,583 as of December 31, 2014.  The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2014 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our operating losses and need to raise additional capital.  These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.  There are no assurances we will be successful in our efforts to increase our revenues and report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.

 

Plan of Operations

 

To date, we have funded our activities through debt as well as through working capital advances from related parties.  To fully organize our company and implement the first phase of our business model, we will need to raise approximately $2.5 million in addition to the funds necessary to satisfy our existing obligations.  Over the past four years, we have only raised approximately $350,000 in private financings; we continue to seek the additional necessary capital, but there can be no assurance that we will receive financing on acceptable terms, or at all.

 

Given the nature of our company and the current status of the capital markets, there are no assurances we will be able to raise all of the necessary capital.  Even if we are ultimately able to raise the capital, there are no assurances that our business model will be successful or that we will ever generate revenues from our operations.

 

Results of Operations

 

For the Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

 

During the years ended December 31, 2014 and 2013, we did not recognize any revenue from our operational activities.  We do not expect to recognize revenues from our operational activities in 2013, as management is focused on the securing the licensing agreement with the related party as well as raising sufficient capital to fund the further development of our company.

 

During the year ended December 31, 2014, we recognized operational expenses of $475,172 consisting of general and administrative expenses of $390,132 and consulting fees-related parties of $85,040, compared to operational expenses of $789,040 during the year ended December 31, 2013.  The decrease of $313,868 or 31% was a result of the decrease in professional fees.

 

We expect that these expenses will increase during 2015 as we begin to further implement our business plan, although we are unable at this time to quantify the actual amount of this anticipated increase as it will be based upon our varying level of operations.

 

During the year ended December 31, 2014, we recognized a net loss of $555,208 compared to $849,838 for the year ended December 31, 2013.  The decrease of $294,630 or 35% was attributable to the decrease in professional fees.

 

Liquidity and Capital Resources

 

At December 31, 2014, we had a working capital deficit of $2,693,395. Historically, we have relied upon debt funding, advances and loans from related parties to fund our cash needs.

 

At December 31, 2014, we owe a total of $459,754 under the working capital line of credit.

 

Our balance sheet at December 31, 2014 includes $453,290 of accrued contingencies.  This amount represents an estimate of certain operating liabilities which may have been incurred by prior management that we are unable to confirm.

 

At December 31, 2014 we have $521,000 principal amount and $308,613 of accrued but unpaid interest due under the terms of various promissory notes to third parties.  These notes, which are unsecured, are all in default and we do not have sufficient funds to repay these obligations.  As a result of the default, the note holders could enforce their rights under these notes at any time.

 

 
18

 

 

Line of Credit

 

On June 19, 2011, the Company entered into a revolving line of credit with J.H. Brech, LLC (“Brech”), a related party, to provide access to funding for our operations. Under the terms of the 8% line of credit, we have access of up to $500,000. Advances under this line of credit were in abeyance for approximately 12 months, between August of 2011 and August of 2012; however, the line of credit is open again and we may take advances out pursuant to the terms summarized herein. On August 26, 2014, the line of credit was amended to decrease the conversion price.

 

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

 

●     June 19, 2014 (the revolver has not been formally extended, however, the Company continues to borrow under the revolver), or

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

 

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

 

●     if our common stock is not listed for trading on an exchange or quoted for trading on the OTC Bulletin Board or the OTC Markets Group (formerly the Pink Sheets), interest shares are valued at the greater of $1.00 per share or the fair market value as determined in good faith by us based upon the most recent arms-length transaction, or

●     if our common stock is listed for trading on an exchange or quoted for trading on the OTC Bulletin Board or the OTC Markets Group, interest shares will be valued at the greater of (A) the closing price of our common stock on the trading day immediately preceding the date the interest payment is due and payable, or (B) the average closing price of the common stock for the five trading days immediately preceding the date the interest payment is due and payable.

 

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

 

●     our failure to pay the interest and principal when due,

●     a default by us under the terms of the note,

●     appointment of a receiver, filing of a bankruptcy provision, a judgment or levy against our company exceeding $50,000 or a default under any other indebtedness exceeding $50,000,

●     a liquidation of our company or a sale of all or substantially all of our assets, or

●     a change of control of our company as defined in the note.

 

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

 

As of December 31, 2014, the Company owed JH Brech, a related party, $459,754 for amounts advanced to the Company for working capital expenses. The maturity date on the Line of Credit was not amended. The balance is past due and is included in current liabilities as of December 31, 2014 and 2013. As of the date of this Report, J.H. Brech, LLC has not declared a default on the Line of Credit.

 

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

 

 
19

 

 

Conversion of Debt to Equity

 

On October 31, 2012, J.H. Brech converted a total of $471,201 of convertible notes payable and accrued interest of $61,449 into 532,650 shares of common stock at a price of $1.00 per share.  The underlying common stock issued has not been registered under the Securities Act and may not be offered or sold absent registration or an applicable exemption from registration requirements.

 

Critical Accounting Policies

 

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

 

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

 

ITEM 7A.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable for a smaller reporting company.

 

 
20

 

 

ITEM 8.                FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors of

INTREorg Systems, Inc.

 

We have audited the accompanying balance sheets of INTREorg Systems, Inc. (the “Company”) as of December 31, 2014 and 2013, and the related statements of operations, stockholders' deficit, and cash flows for each of the years in the two-year period ended December 31, 2014. INTREorg 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 INTREorg Systems, Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

As discussed in Note 1 to the financial statements, the Company's absence of significant revenues, recurring losses from operations, and its need for additional financing in order to fund its projected loss in 2015 raise substantial doubt about its ability to continue as a going concern. The 2014 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ LBB & Associates Ltd., LLP

LBB & Associates Ltd., LLP

Houston, Texas

July 7, 2015 

 

 
21

 

 

INTREorg Systems, Inc.

Balance Sheets

 

    December 31,  
   

2014

   

2013

 
                 

ASSETS:

               
                 

Current Assets:

               

Cash

  $ -     $ 51  

Prepaid expenses

    -       3,573  

Total Current Assets

    -       3,624  
                 

Licensing agreement, net

    12,500       25,000  

TOTAL ASSETS

  $ 12,500     $ 28,624  
                 
                 

LIABILITIES & STOCKHOLDERS' DEFICIT

               
                 

Current Liabilities

               

Accounts payable

  $ 496,078     $ 458,803  

Accounts payable - related parties

    295,253       149,962  

Accrued interest and other liabilities

    468,020       378,120  

Accrued contingencies

    453,290       453,290  

Notes payable

    521,000       521,000  

Revolving line of credit - related party

    459,754       295,231  

Total Current Liabilities

    2,693,395       2,256,406  
                 

Commitments and Contingencies

               
                 

Stockholders' Deficit

               

Preferred Stock, no par value; 10,000,000 shares authorized none issued and outstanding

    -       -  
                 

Common Stock, no par value; 100,000,000 shares authorized 13,114,872 and 12,845,072 shares issued and outstanding at December 31, 2014 and December 31, 2013, respectively

    1,881,944       1,803,404  
                 

Additional paid in capital

    254,744       231,189  
                 

Accumulated deficit

    (4,817,583 )     (4,262,375 )
                 

Total stockholders' deficit

    (2,680,895 )     (2,227,782 )
                 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

  $ 12,500     $ 28,624  

 

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

 

 
22

 

 

 

INTREorg Systems, Inc.

Statements of Operations

 

   

For the Years Ended

December 31,

 
   

2014

   

2013

 
                 
                 

General and administrative expenses

  $ 390,132     $ 714,540  

Consulting fees- related parties

    85,040       74,500  

Interest Expense

    42,335       42,324  

Interest expense- related party

    37,701       18,474  

Total operating expenses

    555,208       849,838  
                 

Net loss

  $ (555,208 )   $ (849,838 )
                 
                 

Net loss per share of common stock

  $ (0.04 )   $ (0.07 )
                 

Weighted average number of common shares outstanding

    12,976,579       12,464,909  

 

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

 

 
23

 

 

INTREorg Systems, Inc.

Statements of Cash Flows

 

   

For the Years Ended

 
   

December 31,

 
   

2014

   

2013

 
                 

Cash Flows from Operating Activities

               

Net Loss

  $ (555,208 )   $ (849,838 )

Adjustments to reconcile net loss to net cash used by operating activities

               

Common stock and options issued for services

    102,095       233,532  

Amortization

    16,073       12,500  

Changes in operating assets and liabilities

               

(Increase)/decrease in Prepaid expenses

    -       2,927  

Advances / (repayment) - related party

    -       20,000  

Increase in Accounts Payable and accrued expenses

    37,275       283,059  

Increase in accounts payable related parties

    145,291       98,473  

Increase in accrued interest and other liabilities

    89,900       -  

Net Cash Flows Used by Operating Activities

    (164,574 )     (199,347 )
                 
                 

Net Cash Flows Provided (Used) by Investing Activities

    -       -  
                 

Cash Flows from Financing Activities

               

Increase / (decrease) in related party revolving line of credit

    164,523       173,338  

Net Cash Flows Provided by Financing Activities

    164,523       173,338  
                 

Net (Decrease) Increase in Cash

    (51 )     (26,009 )
                 

Cash at Beginning of Period

    51       26,060  
                 

Cash at End of Period

  $ -     $ 51  
                 

Supplemental Disclosure of Cash Flow Informantion

               
                 

Cash paid for interest

  $ -     $ -  

Cash paid for taxes

  $ -     $ -  

Common stock issued for prepaid expenses

  $ -     $ 6,500  

 

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

 

 
24

 

 

INTREorg SYSTEMS, INC.

Statements of Stockholders' Deficit

For the years ended December 31, 2014 and 2013

 

                    Preferred A            

Additional

                 
   

Comon Stock

           

 Stock

           

Paid in

   

Accumulated

         
   

# of Shares

   

Amount

   

# of Shares

   

Amount

   

Capital

   

Deficit

   

Totals

 
                                                         

Balance - January 1, 2013

    12,202,266     $ 1,653,913       -     $ -     $ 140,648     $ (3,412,537 )   $ (1,617,976 )
                                                         

Options issued for Directors fees

    -       -       -       -       90,541       -       90,541  

Common stock issued for legal services

    100,000       25,000       -       -       -       -       25,000  

Common stock issued for legal services

    50,000       13,050       -       -       -       -       13,050  

Common Stock issued for web design

    32,500       6,500       -       -       -       -       6,500  

Common Stock issued for legal services

    214,706       42,941       -       -       -       -       42,941  

Common stock issued for consulting services

    245,600       62,000       -       -       -       -       62,000  

Net Loss

    -       -       -       -       -       (849,838 )     (849,838 )

Balance - December 31, 2013

    12,845,072       1,803,404       -       -       231,189       (4,262,375 )     (2,227,782 )
                                                         

Options issued for Directors fees

    -       -       -       -       23,555       -       23,555  

Common stock issued for consulting services

    269,800       78,540       -       -        -       -       78,540  

Net Loss

    -       -       -       -       -       (555,208 )     (555,208 )

Balance - December 31, 2014

    13,114,872     $ 1,881,944       -     $ -     $ 254,744     $ (4,817,583 )   $ (2,680,895 )

 

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

 

 
25

 

 

INTREORG SYSTEMS, INC.

Notes to the Financial Statements

For the Years Ended December 31, 2014 and 2013

 

 

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

 

Organization

 

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

 

Reclassifications

 

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

 

Going Concern

 

The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company's current liabilities exceed the current assets by $2,693,395at December 31, 2014. During the year ended December 31, 2014, the Company did not generate any revenues. At December 31, 2014, the Company had an accumulated deficit of $4,817,583.

 

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

 

Summary of Significant Accounting Policies

 

Cash and Cash Equivalents

 

The Company considers all highly-liquid debt instruments, with an original maturity of three months, to be cash equivalents.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Income Taxes

 

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

 

 
26

 

 

Net Loss Per Share

 

Net loss per share is based on the weighted average number of common shares outstanding during the period. This number has not been adjusted for outstanding options since the average would be anti-dilutive.

 

Property and Equipment

 

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided for using the straight-line method over the useful life of the assets.

 

Long-Lived Assets

 

Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and undiscounted cash flows estimated to be generated by those assets are less than assets’ carrying amount.

 

Amortization

 

The Company is amortizing its license agreement over its three year estimated useful life beginning in January 2013, the date placed in service.

 

Fair Value Estimates

 

Pursuant to the ASC 820, “Fair Value Measurements and Disclosures”, the Company records its financial assets and liabilities at fair value. ASC 820 provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. ASC 820 establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

 

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

 

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the asset/liability’s anticipated life.

 

Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

 

The carrying values for cash and cash equivalents, accounts receivable, prepaid assets, accounts payable and accrued liabilities approximate their fair value due to their short maturities.

 

Share Based Compensation

 

The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors based on estimated fair values, as required by FASB ASC 718.

 

Common stock, stock options and common stock warrants issued to other than employees or directors are recorded on the basis of their fair value, as required by FASB ASC 505. In accordance with ASC 505, the stock options or common stock warrants are valued using the Black-Scholes option pricing model on the basis of the market price of the underlying common stock on the “valuation date,” which for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period. Where expense must be recognized prior to a valuation date, the expense is computed under the Black-Scholes option pricing model on the basis of the market price of the underlying common stock at the end of the period, and any subsequent changes in the market price of the underlying common stock up through the valuation date is reflected in the expense recorded in the subsequent period in which that change occurs.

 

 
27

 

 

Recent Accounting Pronouncements

 

In August 2014, the FASB issued a new Accounting Standards Update, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15). ASU 2014-15 provides guidance on management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern within one year of the date the financial statements are issued, and, if such conditions exist, to provide related footnote disclosures. The guidance is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted. The Company expects to adopt this guidance when effective and is currently evaluating the effect that the updated standard will have on its financial statements and related disclosures.

 

NOTE 2.    RELATED PARTY TRANSACTIONS.

 

Line of Credit

 

On June 19, 2011, the Company entered into a revolving line of credit with J.H. Brech, LLC (“Brech”), a related party, to provide access to funding for our operations.  Under the terms of the 8% line of credit, we have access of up to $500,000.  Advances under this line of credit were in abeyance for approximately 12 months, between August of 2011 and August of 2012; however, the line of credit is open again and we may take advances out pursuant to the terms summarized herein.  On August 26, 2014, the line of credit was amended to decrease the conversion price.

 

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

 

 

 ·

June 19, 2014 (the revolver has not been formally extended, however, the Company continues to borrow under the revolver), or 

 

 ·

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

 

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

 

  

if our common stock is not listed for trading on an exchange or quoted for trading on the OTC Bulletin Board or the OTC Markets Group (formerly the Pink Sheets), interest shares are valued at the greater of $1.00 per share or the fair market value as determined in good faith by us based upon the most recent arms-length transaction, or

  

if our common stock is listed for trading on an exchange or quoted for trading on the OTC Bulletin Board or the OTC Markets Group, interest shares will be valued at the greater of (A) the closing price of our common stock on the trading day immediately preceding the date the interest payment is due and payable, or (B) the average closing price of the common stock for the five trading days immediately preceding the date the interest payment is due and payable.

 

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

   

  

our failure to pay the interest and principal when due,

  

a default by us under the terms of the note,

  

appointment of a receiver, filing of a bankruptcy provision, a judgment or levy against our company exceeding $50,000 or a default under any other indebtedness exceeding $50,000,

  

a liquidation of our company or a sale of all or substantially all of our assets, or

  

a change of control of our company as defined in the note.

 

On August 25, 2014, we entered into an amendment to the Line of Credit to provide that the conversion price shall be revised from $1.00 per share to $0.25 per share. The parties also acknowledged and agreed that no payment of principal of the Line of Credit has been made and received, and accordingly, the amended conversion price applies to both the interest and principal of the Line of Credit. Accrued and unpaid interest on the Line of Credit at December 31, 2014 totaled $71,717.

 

As of December 31, 2014, the Company owed JH Brech, a related party, $459,754 for amounts advanced to the Company for working capital expenses. The maturity date on the Line of Credit was not amended. The balance is past due and is classified as a current liability as of December 31, 2014 and 2013. As of the date of this Report, J.H. Brech, LLC has not declared a default on the Line of Credit.

  

 
28

 

 

Cicerone Consulting Agreement

 

As of December 31, 2014 and 2013, Cicerone Corporate Development, LLC ("Cicerone") is owed $29,946 for reimbursable expenses on behalf of the Company, under the terms of the Company's 2011 consulting agreement with Cicerone, which was terminated in 2011.   

 

 

Board Compensation

 

On May 1, 2014, the Company granted Michael Farmer, a member of the board of directors, options to purchase 200,000 shares of the Company’s common stock at $3.00 per share and options to purchase 100,000 shares of the Company’s common stock at $1.00 per share. 25% of the options vest at the one year anniversary of the day of grant and 2.0833% each month thereafter. The options expire on May 1, 2017 and had an estimated grant date fair value of $105,997, which is recognized in expense over the three year vesting period. The Company used the Black Scholes option model to value the option awards. During the year ended December 31, 2014 the Company recognized an expense of $23,555 relating to this award. None was recognized in the prior year period.

 

On October 1, 2013, the Company entered into a consulting agreement with its Chief Executive Officer and President, Darren Dunckel.   Pursuant to the consulting agreement, Mr. Dunckel is entitled to $7,000 per month and 25% of the revenue generated by his gross sales of our products and services; additionally, the Company shall reimburse him for all pre-approved and reasonable expenses Mr. Dunckel incurs while carrying out his consulting duties. The consulting agreement shall continue in place and Mr. Dunckel shall remain entitled to the same compensation until such time as the Company enters into a new agreement with him as President.

 

Payable to the Chief Executive Officer and President

 

On February 3, 2014, Darren Dunckel paid certain legal, accounting and other invoices on behalf of the Company aggregating $33,837. Such advances have not been repaid and are included in accounts payable- related parties.

 

NOTE 3.    NOTES PAYABLE.

 

The Company's notes total $521,000 at December 31, 2014 and 2013 and bear interest at rates ranging for 6% to 10% per annum.  Accrued and unpaid interest at December 31, 2014 and 2013 amounted to approximately $308,613 and $266,278 and is included with accrued interest and other liabilities in the accompanying financial statements.  All of the Company's notes payable are past due and in default.

 

NOTE 4.    COMMITMENTS AND CONTINGENCIES.

 

At December 31, 2014 and 2013, management estimates there is a potential liability of $453,290 related to the operations under the former management of the Company.  The contingent amount is recorded as a contingent liability in the accompanying financial statements and relates primarily to compensation in years prior to 2009. Management is not aware of any pending or threatened litigation involving the Company as of December 31, 2014 or since, through the date of these financial statements.

 

 

NOTE 5.    CAPITAL STOCK.

 

  

On October 31, 2012, the Company entered into an intellectual property license and consulting agreement with, Public Issuer Stock Analytics, a related party. The following are the terms:

 

1.  

Upon the execution and as of the effective date of this Agreement, two hundred and fifty thousand 250,000 shares of restricted common stock.

2.  

Thereafter and until the second anniversary, twenty thousand 20,000 shares of restricted common stock monthly, and one percent (1%) of Gross Sales of products and/or services on quarterly gross sales being payable in the form of cash or restricted common stock, with the amount of all restricted common stock being based on the market close on the last business day of each month in each quarter as it is found in Bloomberg.

3.  

Thereafter and until the third anniversary, twenty thousand 20,000 shares of restricted common stock solely for the purposes of compensation for licensor’s Consulting Services, and two percent 2% of Gross Sales of products and/or services on quarterly gross sales being payable in the form of cash or restricted common stock, with the amount of all restricted common stock being based on the market close on the last business day of each month in each quarter as it is found in Bloomberg.

4.  

Following the third anniversary, twenty thousand 20,000 shares of restricted common stock solely for the purposes of compensation for licensor’s Consulting Services, and three percent 3 % of Gross Sales of products and/or services on quarterly gross sales being payable in the form of cash or restricted common stock, with the amount of all restricted common stock amount based on the market close on the last business day of each month in each quarter as it is found in Bloomberg.

5.  

In the event that no Gross Sales exist for any given period compensation will solely be the issuance of twenty thousand 20,000 shares of restricted common stock, with such issuance being based on the market close on the last business day of each month in each quarter as such market close is found in Bloomberg.

 

 
29

 

 

As of December 31, 2014, PISA has received 250,000 shares of common stock issued upon execution of the agreement, valued at $37,500 ($.15 per share) the fair market value on the date of issuance. During 2014, PISA earned an aggregate of 249,800 shares related to the monthly compensation, valued at $72,540 ($.20 to $.40 per share) the fair market value on the date of issuance.

 

On April 25, 2014, the Company authorized the issuance of 20,000 shares valued at $6,000 to PT Platinum Consulting, LLC for professional services related to financial reporting and accounting.

 

As of December 31, 2014, a total of 140,000 shares authorized, but not issued, are shown as outstanding as the issuance of such shares is deemed as a ministerial act.

 

During 2013, PISA earned an aggregate of 245,600 shares related to the monthly compensation, valued at $64,240 the fair market value on the date of issuance. These shares are shown as outstanding at December 31, 2013 as the issuance of such shares is deemed a ministerial act. Such shares were issued in 2014.

 

2010 Stock Option and Award Incentive Plan

 

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

 

Pursuant to the Software Development and Ongoing Maintenance Agreement we entered into with Central Coast Technology Associates ("Central Coast") on June 13, 2013, we issued Central Coast options to purchase up to 1,000,000 shares of our common stock at an exercise price of $0.25 per share. The options vest in stages based on completion of work pursuant to the Software Development Agreement and also contain provisions for cashless exercise. If Central Coast fails to fully complete such services, we have the right to purchase such options for $1,000 and terminate the Software Development Agreement; provided however, that if Central Coast fails to complete only part of such services, we can purchase up to 50% of the options for $500. The Company recognizes an expense for the fair value of the award at the date of grant at the earlier of the vesting of the options or when achievement of the performance objective has been met or is reasonably assured. As of December 31, 2014 none of these criteria had been met.

 

On May 1, 2014, the Company granted Michael Farmer, a member of the board of directors, options to purchase 200,000 shares of the Company’s common stock at $3.00 per share and options to purchase 100,000 shares of the Company’s common stock at $1.00 per share. 25% of the options vest at the one year anniversary of the day of grant and 2.0833% each month thereafter. The options expire on May 1, 2017 and had an estimated grant date fair value of $105,997, which is recognized in expense over the three year vesting period. The Company used the Black Scholes option model to value the option awards. During the year ended December 31, 2014, the Company recognized an expense of $23,555 relating to this award. None was recognized in the prior year periods.

 

 
30

 

 

The grant date fair value of options granted for the years ended December 31, 2014 and 2013 were based on the Black Scholes model using the following assumptions:

 

   

Year ended December 31,

 
   

2014

   

2013

 

Weighted average fair value per option granted during the period

  $ 0.35     $ 0.15  

Assumptions:

               

Weighted average stock price volitility

    430 %     420 %

Dividends

    -       -  

Weighted average risk free rate of return

    0.30 %     1.1 %

Weighted average estimated forfeiture rate

    -       -  

Weigthed average expected term (years)

    3       5  

 

 

 

A summary of option activity for the years ended December 31, 2014 and 2013 are presented below:

 

 

Options

 

Number of Options

   

Weighted Average Exercise Price

   

Weighted Average Remaining Contractual Term (in years)

   

Aggregate Intrinsic Value

 
                                 

Balance January 1, 2013

    1,000,000       0.25       3.50       250,000  
                                 

Granted

    300,000       2.33       2.33       700,000  

Exercised

    -       -       -       -  

Expired

    -       -       -       -  
                                 

Balance December 31, 2014

    1,300,000       0.95       3.20     $ 2,097,000  
                                 

Options exercisable at December 31, 2014

    -       -       -     $ -  

 

 
31

 

 

NOTE 6.    INCOME TAXES.

 

The deferred tax asset as of December 31, 2014 and 2013 was approximately $627,000 and $473,000, respectively, offset by valuation allowances of the same amount resulting in a deferred tax assets of December 31, 2014 and 2014 of $0.  There is no income tax provision for either year due to the change in valuation allowance.  The difference between the effective rate and the statutory rate is the result of the change in the valuation allowance.  At December 31, 2014 the Company had an unused net operating loss carry over approximating $1,845,000 that is potentially available to offset future taxable income, it expires beginning 2026.

 

The Company has not filed its Federal tax returns for 2009-2014 and could be subject to penalty for its delinquency.  Additionally, the availability of its net operating loss may be subject to adjustment.

 

NOTE 7.   SUBSEQUENT EVENTS.

 

During the period January 1, 2015 through April 2015, the Company authorized the issuance of 20,000 shares per month to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them. The grants aggregated 80,000 shares valued at the closing price as of the date of grant for a total of $25,000.

 

In March 2015, the Company issued shares required to be issued for various series rendered to the Company resulting in the issuance of 1,024,547 shares.

 

 
32

 

 

ITEM 9.                CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

Not applicable.

 

ITEM 9A.             CONTROLS AND PROCEDURES.

 

As further explained elsewhere in this Report, the Company failed to timely file its periodic reports for the fiscal years ended December 31, 2013 and December 31, 2014, as well as the Quarterly Report on Form 10-Q for the quarter ending March 31, 2015 (the “March 2015 10Q”), which demonstrates that its Disclosure Controls and Procedures have been inadequate. However, the Company has been working diligently to file all outstanding reports and the only delinquent report following the filing of this Annual Report will be the March 2015 10Q.

 

Evaluation of Disclosure Controls and Procedures

 

As of December 31, 2014, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, management concluded that our disclosure controls and procedures were not effective as of December 31, 2014, to cause the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by SEC, and that such information is accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

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

 

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Management's Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

 

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 

 

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors; and

 

 

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

 

 
33

 

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on this assessment, management concluded that our internal control over financial reporting was not effective as of December 31, 2014 due to the existence of the material weaknesses as of December 31, 2014, discussed below. A material weakness is a control deficiency, or a combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected in the following areas:

 

 

Inadequate segregation of duties within an account or process. Management has determined that it does not have appropriate segregation of duties within our internal controls that would ensure the consistent application of procedures in our financial reporting process by existing personnel. This control deficiency could result in a misstatement of substantially all of our financial statement accounts and disclosures that would result in a material misstatement to the annual or interim financial statements.

 

☐ 

Inadequate Policies & Procedures.  Management has determined that its existing policies and procedures are limited and/or inadequate in scope to provide staff with guidance or framework for accounting and disclosing financial transactions.  This deficiency could result in unintended, misleading entries being made in the financial system and precluding sufficient disclosure of complex transactions.

 

☐ 

Lack of sufficient subject matter expertise.  Management has determined that it lacks certain subject matter expertise relating to accounting for complex transactions and the disclosure of complex transactions related to accounting for income taxes. Our financial staff currently lacks sufficient training or experience in accounting for complex transactions and the required disclosure therein.

 

This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting due to permanent exemptions for smaller reporting companies.

 

Remediation Plan for Material Weaknesses

 

The material weaknesses described above in "Material Weaknesses in Internal Control Over Financial Reporting" comprise control deficiencies that we discovered during the financial closing process for the December 31, 2014 fiscal year and although we have been implementing the remediation plan described below, the deficiencies have not yet been fully resolved.

 

Management has formulated and continued to implement a remediation plan that will continue through fiscal 2015, which includes: (i) developing a centralized set of policies and procedures to address inadequacies described above; and (ii) augmenting and allowing for additional training and education for select members of our financial staff.  In addition, efforts will be made to segregate the data initiation and preparation processes from the data entry process in order to ensure that different employees prepare data as compared to those who enter data into the financial system.

 

We believe that these measures, if effectively implemented and maintained, will remediate the material weaknesses discussed above.

 

 

Changes in Internal Control Over Financial Reporting

 

We are currently undertaking the measures discussed above to remediate the material weaknesses discussed under “Material Weaknesses in Internal Control over Financial Reporting” above. Those measures, described under “Remediation Plan for Material Weaknesses,” will continue to be implemented during fiscal 2015, and are reasonably likely to materially affect our internal control over financial reporting.

 

Other than as described above, there have been no changes in our internal control over financial reporting during the fourth quarter of 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
34

 

 

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.

 

ITEM 9B.             Other Information.

 

Not applicable.

PART III

 

ITEM 10.             DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

The following table and text set forth the names and ages of all directors and executive officers as of July 7, 2015

 

As of October 5, 2013, our former President and Chairman of the Board of Directors, Mr. Steven R. Henson resigned from all of his positions - including his directorship - with our Company due to personal matters.  Unfortunately, Mr. Henson does not believe that he has sufficient time to dedicate to our company given his current personal and professional schedule. Mr. Henson did not resign due to any disagreement(s) with us. Pursuant to his resignation, Mr. Henson agreed to terminate all of his outstanding agreements with the Company and any of our future compensatory liabilities to Mr. Henson were thereby void ab initio.

 

Immediately prior to tendering his resignation, Mr. Henson appointed Mr. Darren Dunckel to replace Mr. Henson as the Company's President; the Board approved the appointment on January 10, 2014.  Mr. Dunckel is now our sole executive officer.    

 

There are no family relationships among our directors and executive officers. Each director is elected at our annual meeting of shareholders and holds office until the next annual meeting of shareholders, or until his successor is elected and qualified. Also provided herein are brief descriptions of the business experience of each director, executive officer and advisor during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws. None of our officers or directors is a party adverse to us or has a material interest adverse to us.

 

Name

Age

Position

Darren C. Dunckel

46

CEO and President

Redgie Green

62

Director

Michael Farmer

54

Director

 

Darren C. Dunckel.  Mr. Dunckel served as Chief Executive Officer and Director at Forex International Trading Corp. from 2010 to 2011. Under his direction, Forex International Trading went from a development stage shell corporation to a fully reporting operating company. From 2005 to 2010, Mr. Dunckel served as the President of several privately owned companies. As President, he oversaw management of real estate acquisitions, development and sales in the United States and overseas. In addition, from September 2007 to April 2009 Mr. Dunckel served on the Board of Directors of Emvelco Corp., a publically traded company. From 2004 to 2010, Mr. Dunckel served as the President of My Daily Corporation, a financial services company. From 2002 through 2004, Mr. Dunckel was Vice President, Regional Director for the Newport Group managing a territory for financial and consulting services. Mr. Dunckel has spent 20+ years in the financial services industry having worked for Lehman Brothers, Smith Barney, UBS and New York Life Investment Management. He has held a series 3, 7, 63, 65 securities licenses and a California Insurance License. He is trained as an Accredited Investment Fiduciary. Mr. Dunckel has consulted over 350 companies in a broad range of industries and from start up to Fortune 500. Mr. Dunckel earned a bachelor’s degree in International Relations from the University of Southern California.

 

Redgie Green.   Mr. Green has served as a member of our Board of Directors since March 2008.  Mr. Green became a director of Golden Dragon Holdings Corp in March 2006. Mr. Green has served as the Chief Executive Officer and a Director of Legacy Technology Holdings, Inc. since October 2010 and as a Director of Momentum BioFuels, Inc. since May 2012.  Mr. Green served as the Chief Executive Officer of Sun River Energy, Inc. from January 2009 through August 3, 2010. From January 2009 through October 2009, he served as the President of Sun River Energy, Inc. He has served as a director of Sun River Energy, Inc. from 1998 through October 2010. He served as a director of ASPI, Inc. from 2006 through the fall of 2009 and was appointed as an officer and director of Captech Financial, Inc. in May 2006. He served as a director of Baymark Technologies, Inc. 2005-2006. Mr. Green was co-owner and operator of Green's B&R Enterprises, a wholesale donut baker from 1983 to 1990. He has been an active investor in small capital and high-tech adventures since 1987.  He was Secretary, Treasurer and Director of Baymark Technologies, Inc. and was appointed as a director of Aspeon, Inc. (now Aspi, Inc.) from March 2006 until October 2009. Mr. Green serves as a director of IntreOrg Systems, Inc. and International Paintball, Inc.  Mr. Green received a B.S. in Business Administration from the University of Colorado.

 

 
 35

 

 

Michael Farmer.  Mr. Farmer is an experienced entrepreneur and business owner with a track record of developing and leading organizations to profitable growth.  Mr. Farmer is President and CEO of GlobalOne Pet, Inc., an innovative pet food company that he co-founded in 2008.  Mr. Farmer is also a director of INTREOrg Systems, Inc., and the American Pet Products Association.  In 2001, Mr. Farmer co-founded FIRSTRAX, Inc., which became the leading innovator in pet accessory products.  As President and CEO, he led the company to rapid growth as it developed patented pet containment products which were distributed throughout the world.  The company was sold to United Pet Group in early 2005.  Prior to co-founding FIRSTRAX, Mr. Farmer was the Executive Vice President for Doskocil (Petmate), a market leader in non-food pet products from 1998 to 2001.  In 1994, Mr. Farmer joined Dogloo, a market leader in plastic pet shelters as the Vice President of Sales and Marketing.  Mr. Farmer was promoted to Executive Vice President and General Manager in 1997.  Mr. Farmer spent the first 11 years of his career with the Coleman Company, the world leader in outdoor recreational products.  While at Coleman, Mr. Farmer served in a variety of capacities including Director of Operations, Design Director, Director of Engineering and Materials Management, and Director of Marketing and Product Development.  Mr. Farmer has a Bachelor of Science degree in Industrial Technology from Emporia State University, where he earned All American academic and basketball honors.  He also earned an MBA from Wichita State University.

 

Corporate Governance

 

Our Board of Directors has three directors and has not established Audit, Compensation, and Nominating or Governance Committees as standing committees. The Board does not have an executive committee or any committees performing a similar function. We are not currently listed on a national securities exchange or in an inter-dealer quotation system that has requirements that a majority of the board of directors be independent. The Board has determined that 2 members of the Board are independent.

 

Due to our lack of operations and size, we do not have an Audit Committee. Furthermore, since we are not currently listed on a national securities exchange, we are not subject to any listing requirements mandating the establishment of any particular committees.  For these same reasons, we did not have any other separate committees during fiscal 2013; all functions of a nominating committee, audit committee and compensation committee were performed by our whole board of directors.  Our board of directors intends to appoint such persons and form such committees as are required to meet the corporate governance requirements imposed by the national securities exchanges as necessary. Therefore, we intend that a majority of our directors will eventually be independent directors and at least one director will qualify as an “audit committee financial expert.”

 

We do not have a policy regarding the consideration of any director candidates which may be recommended by our shareholders, including the minimum qualifications for director candidates, nor has our Board of Directors established a process for identifying and evaluating director nominees. Further, when identifying nominees to serve as director, while we do not have a policy regarding the consideration of diversity in selecting directors, our Board seeks to create a Board of Directors that is strong in its collective knowledge and has a diversity of skills and experience with respect to accounting and finance, management and leadership, vision and strategy, business operations, business judgment, industry knowledge and corporate governance.  We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our shareholders, including the procedures to be followed.  Our Board has not considered or adopted any of these policies as we have never received a recommendation from any shareholder for any candidate to serve on our Board of Directors.  Given our relative size and lack of directors and officers insurance coverage, we do not anticipate that any of our shareholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all members of our Board will participate in the consideration of director nominees.  In considering a director nominee, it is likely that our Board will consider the professional and/or educational background of any nominee with a view towards how this person might bring a different viewpoint or experience to our Board.

 

Board Leadership Structure and the Board’s Role in Risk Oversight.   

 

Although the Company currently does not have a Chairman of the Board of Directors, the Board of Directors is set up to maintain a structure that separates the roles of Chief Executive Officer of the Company with Chairman of the Board of Directors, as the Company believes it is in the best interests of the Company and our shareholders to have the two roles separated.

 

 
36

 

  

The Board believes that there is no one best leadership structure model that is most effective in all circumstances and retains the authority to adjust the board leadership structure in the future if such change is determined to be in our best interests and the best interests of our shareholders.

 

Our Board of Directors comprises of two independent directors, without a designated independent lead director.

 

The Board of Directors does not have a specific role in risk oversight of the Company. The Chairman, President and Chief Executive Officer and, as needed, other executive officers and employees of the Company provide the Board of Directors with information regarding the Company’s risks.

 

Compliance with Section 16(a) of the Exchange Act

 

Section 16(a) of the Exchange Act requires our officers, directors and persons who own more than 10% of any class of our securities registered under Section 12(g) of the Exchange Act to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

 

The table below accounts for the missed Form 3, Form 4 and Form 5s of each person subject to Section 16(a); all other persons subject to Section 16(a) reporting have filed their reports. We have reminded these persons about their obligations and it is our understanding that if they have not already, they will file all beneficial ownership forms required to date in the coming weeks.

 

Name

 

# of Late Reports

   

Transactions Not Timely Reported

   

Known Failures to File a Required Form

 

Mr. Dunckel

    1       1       1  

Mr. Farmer

    1       1       1  

Mr. Green

    1       1       1  

 

Code of Business Conduct, Code of Ethics and Code of Ethics for Financial Professionals

 

In 2007, our Board of Directors adopted a Code of Business Conduct which applies to our directors, officers, employees and representatives.  The Code of Business Conduct sets forth guidelines for public communications, conflicts of interest policies, anti-competitive activities, our policies regarding confidential and proprietary information, information on insider trading restrictions and policies regarding financial investments by the covered persons, and includes a code of ethics for our employees.   In 2007 our Board also adopted a Code of Ethics that applies to our Board members and sets out our policies related to conflicts of interest, confidentiality, legal compliance, competition and corporate opportunities, and reporting illegal or unethical behavior.  Lastly, in 2007 our Board also adopted a Code of Ethics for Financial Professionals which provides additional guidelines for our chief executive officer, chief financial officer, controller and any other person providing similar functions to us. Our codes of ethics are attached as exhibits to this Form and can be found on our website, www.intreorg.com.  Additionally, we will provide a copy, without charge, to any person desiring a copy of the Code of Business Conduct, the Code of Ethics and/or the Code of Ethics for Financial Professionals, by written request to, 556 Silicon Drive, Suite 103, Southlake, Texas  76092.

 

ITEM 11.             EXECUTIVE COMPENSATION.

 

The following discussion summarizes all compensation awarded to, earned by, or paid to our principal executive officer, each other executive officer serving as such whose annual compensation exceeded $100,000, and up to two additional individuals for whom disclosure would have been made but for the fact that the individual was not serving as an executive officer of our company at December 31, 2014, for all services rendered in all capacities to us for the latest two fiscal years ended December 31, 2014 and 2013.

 

 
37

 

 

Although compensation exceeds $100,000, as disclosed below, the Company is no longer required to pay such compensation and therefore, we believe we can omit an executive compensation table pursuant to Instruction 4 of Item 402(m)(2).

 

We entered into a Corporate Officer Consulting Engagement Agreement with Dr. Henson, which was effective as of September 5, 2012, whereby Dr. Henson agreed to act in the capacity of Chief Executive Officer for the Company in return for $120,000 per annum, as well as a monthly issuance of 20,000 shares of common stock and 20,000 warrants to purchase common stock. In March 2013, we corrected the Corporate Officer Consulting Engagement Agreement with Dr. Henson to accurately reflect the parties’ intention when they entered into the agreement.  Accordingly, Dr. Henson was only entitled to cash compensation of $120,000 per year for his services as our Chief Executive Officer.  However, we agreed that he could keep the 20,000 shares of common stock he received when he signed the agreement.  Dr. Henson was also eligible to receive other forms of compensation for additional services provided depending on the nature of the engagement and upon mutual agreement between Dr. Henson and the Company. In light of our cash position, Dr. Henson agreed that all salaries owed to him under the agreement shall only be paid once we complete a financing or when we are otherwise more cash flow positive; if such funds were not available by October 2013, he shall receive the cash compensation in the form of options.  On October 5, 2013, Mr. Henson resigned from all of his positions including his directorship with the Company. Pursuant to his resignation, Mr. Henson agreed to terminate all of his outstanding agreements with the Company and any of our future compensatory liabilities to Mr. Henson were thereby void ab initio.

 

On October 1, 2013, immediately prior to Mr. Henson’s tender of his resignation, he appointed Mr. Darren C. Dunckel as the Company’s President, which was approved by the Board on January 10, 2014. Prior to becoming the Company’s President, Mr. Dunckel was providing the Company with consulting services regarding software development, marketing and general corporate planning; in October 2013, the Company formalized the consulting relationship with a consulting agreement.  Pursuant to the consulting agreement, Mr. Dunckel is entitled to $7,000 per month and 25% of the revenue generated by his gross sales of our products and services; additionally, the Company shall reimburse him for all pre-approved and reasonable expenses Mr. Dunckel incurs while carrying out his consulting duties.  The consulting agreement shall continue in place and Mr. Dunckel shall remain entitled to the same compensation until such time as the Company enters into a new agreement with him as President.  

 

Outstanding Equity Awards at Fiscal Year-End

 

Dr. Henson and Mr. Dunckel, who are the only persons required to be included in the outstanding equity awards table, did not have any outstanding equity awards that are required to be reported in such table for the fiscal year covered by this Report.

 

Executive and Director Compensation

 

The following table sets forth certain information concerning compensation paid to our directors for services as directors during the fiscal year ended December 31, 2014:

 

Name

 

Fees earned

or paid

in cash

($)

   

Stock

awards ($)

   

Option

awards ($)

   

Non-equity

incentive plan

compensation ($)

   

Non-qualified

deferred

compensation

earnings

($)

   

All other

compensation ($)

   

Total

($)

 
                                                         

Redgie Green

    24,000               0       0       0       0       24,000  
                                                         

Michael Farmer

    24,000               105,997       0       0       0       129,997  

 

 

On October 30, 2012, we entered into an agreement with each of Dr. Henson and Messrs. Green and Farmer, whereby they each agreed to serve on our Board of Directors in return for an annual director’s fee of $24,000.  In light of our cash position, Dr. Henson and Mssrs. Green and Farmer agreed that all cash salaries owed under his respective agreement shall only be paid once we complete a financing or when we are otherwise more cash flow positive.  As of December 31, 2014, none of the $129,565 in Board fees were paid and are included in accrued interest and other liabilities.

 

 
38

 

 

Compensation Policies and Practices as they Relate to Risk Management

 

We believe that our compensation policies and practices do not encourage excessive or unnecessary risk-taking and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us.  The design of our compensation policies and practices encourages our employees to remain focused on both our short- and long-term goals.

 

ITEM 12.             SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The following table sets forth certain information regarding beneficial ownership of our Common Stock as of July 7, 2015 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent (5%) of the outstanding shares of our Common Stock, (ii) each director, executive officer and director nominee, and (iii) all of our directors, executive officers and director nominees as a group. As of July 7, 2015, we had 14,079,419 shares of Common Stock issued and outstanding and 0 shares of Preferred Stock outstanding.

  

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of July 7, 2015.  For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of July 7, 2015 is deemed to be outstanding for such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership. 

 

Unless otherwise indicated, the business address of each person listed is in care of 556 Silicon Drive, Suite 103, Southlake, Texas 76092. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.

 

Name of Beneficial Owner

 

Amount and Nature of

Beneficial Ownership

   

% of Class

 

Darren Dunckel

    -       0 %

Redgie Green

    120,000       0.85 %

Michael Farmer

    820,000 (1)     5.82 %

All officers and directors as a group (three persons)

    940,000       6.68 %

 

J.H. Brech, LLC

    264,017       1.88 %

Harry McMillan(2)

    1,034,017       7.34 %

C.E. McMillan Family Trust (2)(3)

    1,034,017       7.34 %

 

(1) Includes 700,000 shares held of record by JBK Management, LLC, an entity controlled by Mr. Farmer and over which he has voting and dispositive control of the shares of the Company’s common stock held by such entity, 20,000 shares he received for his director services and 100,000 options that have vested but whose strike price is lower than the current market price for our common stock.

 

(2) Includes 264,017 shares held by J.H. Brech, LLC ("JHB") and 770,000 shares held by Public Issuers Stock Analytics, LLC ("PISA"). McMillan, on behalf of the CE McMillan Family Trust (the "McMillan Trust"), is the manager of JHB, CCD and PISA (JHB, CCD and PISA are collectively referred to herein as the "Entities").  Mr. McMillan is the Trustee of the McMillan Trust, for the benefit of his wife and their children.  McMillan, as trustee of the McMillan Trust and the McMillan Trust may each be deemed to beneficially own the shares of common stock beneficially owned by the Entities.  Each disclaims beneficial ownership of such shares.

 

(3)  The McMillan Trust, which owns PISA, and McMillan, as Managing Member of PISA and trustee of the McMillan Trust, may each be deemed to beneficially own the shares of common stock owned by PISA.  Each disclaims beneficial ownership of such shares.

 

 
39

 

 

Securities Authorized for Issuance under Equity Compensation Plans

 

The following table sets forth securities authorized for issuance under any equity compensation plans approved by our shareholders as well as any equity compensation plans not approved by our shareholders as of December 31, 2014.

 

  

Number of

securities to be

issued upon

exercise of

 outstanding

options, warrants

and rights (a)

Weighted

average exercise

price of

outstanding

options, warrants

 and rights (b)

Number of

securities

remaining

available for future

issuance under

equity

compensation plans

(excluding securities

reflected in column (a)) (c)

Plan category

  

  

  

  

  

  

  

Plans approved by our shareholders:

  

  

  

2010 Stock Option and Award Incentive Plan

200,000

$2.50

1,800,000

Plans not approved by shareholders:

0

n/a

n/a

 

ITEM 13.             CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Other than the relationships and transactions discussed below, we are not a party to, nor are we proposed to be a party, to any transaction since the beginning of the fiscal year ending December 31, 2013 involving an amount that exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years and in which a related person, as such term is defined by Item 404 of Regulation S-K, had or will have a direct or indirect material interest.

 

On June 19, 2011, the Company entered into a revolving line of credit with J.H. Brech, LLC ("JHB") to provide access to funding for our operations.  Under the terms of the 8% revolving credit note, we have access of up to $500,000.   JHB is managed by Harry McMillan on behalf of the C.E. McMillan Family Trust (the "McMillan Trust"), over which Harry McMillan is the trustee; as a result of this management, among other things, each of Mr. McMillan and the C.E. McMillan Family Trust indirectly own approximately 16.42% of our common stock and are therefore deemed Beneficial Owners as such term is defined in Item 403 of Regulation S-K.  Advances under this line of credit were in abeyance for approximately 12 months, between August of 2011 and August of 2012; however, the line of credit is open again and we may take advances out pursuant to the terms summarized herein.

 

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

 

  

June 19, 2014, or 

 

  

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

 

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

 

  

if our common stock is not listed for trading on an exchange or quoted for trading on the OTC Bulletin Board or the OTC Markets Group (formerly the Pink Sheets), interest shares are valued at the greater of $1.00 per share or the fair market value as determined in good faith by us based upon the most recent arms-length transaction, or

 

  

if our common stock is listed for trading on an exchange or quoted for trading on the OTC Bulletin Board or the OTC Markets Group, interest shares will be valued at the greater of (A) the closing price of our common stock on the trading day immediately preceding the date the interest payment is due and payable, or (B) the average closing price of the common stock for the five trading days immediately preceding the date the interest payment is due and payable.

 

 
40

 

 

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

 

  

our failure to pay the interest and principal when due,

 

  

a default by us under the terms of the note,

 

  

appointment of a receiver, filing of a bankruptcy provision, a judgment or levy against our company exceeding $50,000 or a default under any other indebtedness exceeding $50,000,

 

  

a liquidation of our company or a sale of all or substantially all of our assets, or

 

  

a change of control of our company as defined in the note.

 

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

 

As of December 31, 2014, the Company owed JHB, a related party, $459,754 for amounts advanced to the Company for working capital expenses. The maturity date on the Line of Credit was not amended. The balance is recorded in current liabilities as of December 31, 2014. As of the date of this Report, JHB has not declared a default on the Line of Credit. Accrued and unpaid interest on the Line of Credit at December 31, 2014 totaled $71,717.

 

In May 2009, we also entered into a Consulting Agreement with JHB under which it agreed to act as a consultant and provide us with a variety of services including strategic planning, assistance in business development, internal capital structuring, and structuring new debt and equity offerings.  JHB did not receive compensation under this Agreement, other than reimbursement for expenses. The agreement was terminated on May 7, 2011.

 

Convertible notes payable to a related party consist of three notes totaling $471,202, and were extended on April 4, 2011 to a maturity date of April 21, 2012, accrue interest of 6% per annum, and provide for payments of the accrued interest to be made on an annual basis. If the Company defaults on the interest payments, it incurs a daily $50 late fee for a maximum of 10 days. If the default is not cured, the interest rate on the unpaid principal is increased to 18% per annum, compounding annually and due on demand.  At the discretion of the note holder, all or any part of the outstanding principal and accrued but unpaid interest due under the notes is convertible into shares of the Company's common stock at $1.00 per share.  

 

As stated elsewhere in this Report, on October 30, 2012, we entered in to an Intellectual Property License and Consulting agreement with Public Issuer Stock Analytics, LLC (“PISA”).  The McMillan Trust, one of our Beneficial Owners as such term is defined in Item 403 of Regulation S-K, owns PISA and Mr. McMillan is the Managing Member of PISA.   The term of the PISA agreement is for three years and entitles PISA to the following compensation: 250,000 shares of Common Stock upon execution of the PISA Agreement; 20,000 shares per month based on the closing price of the Common Stock on the last business day of each respective month (the "Share Royalty"); and, 1%, 2% or 3% of gross sales, due on a quarterly basis, up and until the second anniversary, third anniversary or termination of the agreement, respectively (the "Gross Sales Royalty").  If no gross sales exist for a given period, PISA's only compensation for such period shall be the Share Royalty.  The Gross Sales Royalty may be paid in cash or restricted shares of Common Stock; if paid in Common Stock, such stock shall be issued based on the market close on the last business day of each month in each quarter as such market close is found in Bloomberg.  As of December 31, 2014 and as of the date of this Report, PISA has received the initial 250,000 shares of common stock due upon execution of the agreement and has received or is due an aggregate of 534,600 shares.

 

 
41

 

 

Effective May 23, 2011, the Company entered into a Consulting Agreement (the “Cicerone Agreement”) with Cicerone Corporate Development, LLC, one of the Company’s principal shareholders (“Cicerone”). Pursuant to the Cicerone Agreement, Cicerone will provide consulting services relating to the implementation of corporate strategies, achievement of market listing standards, debt and equity financings, and corporate governance and shareholder matters. The Cicerone Agreement was effective until December 12, 2011.  As its consulting fee under the Cicerone Agreement, Cicerone was entitled to receive, on a monthly basis, 20,000 shares of common stock and 20,000 warrants with a term of two years from the date of issuance; the exercise price of the warrants were based on the closing market price on the day of issuance and provide for a cashless exercise. Under the Cicerone Agreement, the Company agreed to reimburse Cicerone’s pre-approved reasonable and necessary expenses incurred in connection with providing its consulting services. As of December 31, 2011, Cicerone was owed $36,817 for reimbursable expenses, but all such expenses have since been repaid.  As of December 31, 2011, Cicerone was due an aggregate of 100,000 shares of common stock under the terms of the Cicerone Agreement, with a grant date fair value of approximately $58,000.  Although we have not physically issued the certificates to Cicerone, we have reflected these shares as issued and outstanding at December 31, 2011.  We also issued a total of 160,000 warrants to Cicerone pursuant to the Cicerone Agreement as of December 31, 2011.  In February 2013, the 20,000 shares we issued to Cicerone were returned to Treasury.

 

In August 2008, we received a bridge loan from our then CEO, Dr. Henson.  The bridge note was due and payable in February 2009, but remains unpaid.  Under the terms of the related note, the note retains interest at the rate of 9% per annum and is convertible at a conversion price equal to $1.00 per share.  As of December 31, 2014, the entire principal and interest due and owing is $31,421.  In light of our relationship with Dr. Henson, he has not demanded payment of this note as of the date of this Report.

 

Although the annual amount may not exceed the required thresholds, due to some of the relationships, we believe that Rangeford Resources, Inc. is a related party.  On October 30, 2012, we entered into a Master Services Agreement with Rangeford pursuant to which we will provide services relating to the PISA software for an annual fee of $30,000 (based on our license agreement with PISA, up to 3% of these fees will be paid to PISA for the first three years of the Rangeford Agreement).  The term of the Agreement is one year, and thereafter the agreement renews automatically and remains “evergreen” for succeeding one-year terms, unless terminated according to the termination provisions contained in the agreement.

 

As disclosed elsewhere in this Report, in October 2013 we appointed Mr. Dunckel as our President and CEO; prior to such appointment, we had a consulting agreement with Mr. Dunckel pursuant to which he was entitled to compensation, the terms of which are still active until such time as we enter into a formal officer agreement with him. (See, Item 11 "Executive Compensation").

 

Payable to the Chief Executive Officer and President

 

On February 3, 2014, Darren Dunckel paid certain legal, accounting and other invoices on behalf of the Company aggregating $33,837. Such advances have not been repaid and are included in accounts payable- related parties.

 

Promoters and Certain Control Persons

 

None of our management or other control persons were “promoters” (within the meaning of Rule 405 under the Securities Act), and none of such persons took the initiative in the formation of our business or in connection with the formation of our business and received 10% of our debt or equity securities or 10% of the proceeds from the sale of such securities in exchange for the contribution of property or services, during the last five years.

 

Director Independence

 

Our board of directors has determined that we have two board members that qualify as “independent” as defined by Rule 4200(a)(15) of the NASDAQ Marketplace Rules.  Messrs. Green and Farmer are our independent directors.

 

ITEM 14.                      PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

LBB & Associates, Ltd., LLP served as our independent registered public accounting firm for 2014 and 2013.  The following table shows the fees that were billed for the audit and other services provided by this firm for 2014 and 2013.

 

   

2014

   

2013

 
                 

Audit Fees

  $ 20,300     $ 21,800  

Audit-Related Fees

    -       -  

Tax Fees

    -       -  

All Other Fees

    -       -  

Total

  $ 20,300     $ 21,800  

 

 
42

 

 

Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.

 

Audit-Related Fees — This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.

 

Tax Fees — This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.

 

All Other Fees — This category consists of fees for other miscellaneous items.

 

Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm.  Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services.  Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board.  Any such approval by the designated member is disclosed to the entire Board at the next meeting.  The audit and tax fees paid to the auditors were pre-approved by the entire Board of Directors.

 

ITEM 15.                      EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 

Exhibit No.

Description

3.1

Articles of Incorporation ( Incorporated by reference to the registration statement on Form 10, SEC File No. 000-53262, as amended)

3.2

Articles of Amendment to our Articles of Incorporation (Incorporated by reference to the registration statement on Form 10, SEC File No. 000-53262, as amended).

3.3

Bylaws (Incorporated by reference to the registration statement on Form 10, SEC File No. 000-53262, as amended)

10.1

Form of Convertible Promissory Note in the principal amount of $406,960.90 dated April 21, 2009 from INTREorg Systems, Inc. to J.H. Brech LLC (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2010.)

10.2

Form of Convertible Promissory Note in the principal amount of $29,841.56 dated April 21, 2009 from INTREorg Systems, Inc. to Charles J. Webb (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2010.)

10.3

Form of Convertible Promissory Note in the principal amount of $34,400 dated April 21, 2009 from INTREorg Systems, Inc. to J.H. Brech LLC and form of extension (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2010.)

10.4

Consulting Agreement dated May 15, 2009 by and among INTREorg Systems, Inc. and J.H. Brech LLC. (Incorporated by reference to the Current Report on Form 8-K as filed on May 26, 2009) 

10.5

INTREorg Systems, Inc. 2010 Stock Option and Award Incentive Plan (Incorporated by reference to the definitive proxy statement on Schedule 14A as filed with the SEC on June 7, 2010.)

10.6

Form of bridge note and forms of extension agreements (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2010.)

10.7

Funding/Financing Referral/Placement Agency Agreement with Eurpoa Securities, LLC. (Incorporated by reference to the Current Report on Form 8-K as filed on October 8, 2010.)

10.8

Form of extension for J.H. Brech notes (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2010.)

10.9

Corporate Officer Consulting Engagement Agreement with Dr. Henson, dated October 31, 2012 (Incorporated by Reference to Exhibit 10.1 of the Current Report on Form 8-K filed on November 29, 2012)

10.10

Board of Directors Agreement with Dr. Henson, dated as of September 5, 2012 (Incorporated by Reference to Exhibit 10.1 of the Current Report on Form 8-K filed on November 29, 2012)

10.11

Board of Directors Agreement with Dr. Henson, dated as of September 5, 2012 (Incorporated by Reference to Exhibit 10.1 of the Current Report on Form 8-K filed on November 29, 2012)

10.12

Board of Directors Agreement with Redgie Green, dated as of September 5, 2012 (Incorporated by Reference to Exhibit 10.1 of the Current Report on Form 8-K filed on November 29, 2012)

 

 
43

 

 

10.13

Board of Directors Agreement with Michael Farmer, dated as of September 5, 2012 (Incorporated by Reference to Exhibit 10.1 of the Current Report on Form 8-K filed on November 29, 2012)

10.14

Consulting Agreement with Darren C. Dunckel, dated as of October 1, 2013 (Incorporated by Reference to Exhibit 10.0 of the Current Report on Form 8-K filed on January 14, 2014)

14.1

Code of Business Conduct, Code of Ethics and Code of Ethics for Financial Professionals (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2010.)

31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer *

31.2

Rule 13a-14(a)/15d-14(a) Certification of principal financial and accounting officer *

32.1

Section 1350 Certification of Chief Executive Officer and principal financial and accounting officer *

101.INS

XBRL INSTANCE DOCUMENT *

101.SCH

XBRL TAXONOMY EXTENSION SCHEMA *

101.CAL

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE *

101.DEF

XBRL TAXONOMY EXTENSION DEFINITION LINKBASE *

101.LAB

XBRL TAXONOMY EXTENSION LABEL LINKBASE *

101.PRE

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE *

 

 

*              filed herewith

 

 
44

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

July 9, 2015

 

INTREorg Systems, Inc.

 

By: /s/ Darren Dunckel

Darren Dunckel, Chief Executive Officer

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

 

 

Name

Positions

Date

/s/ Darren Dunckel

Darren Dunckel

Chief Executive Officer, President,

principal executive officer

and principal financial and

accounting officer

July 9, 2015

/s/ Redgie Green

Redgie Green

Director

July 9, 2015

/s/ Michael Farmer

Michael Farmer

Director

July 9, 2015

 

 

 45