Attached files
file | filename |
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EX-31 - EX 31.1 SEC 302 CERT-CEO - ENIGMA-BULWARK, LTD | ex311section302certification.htm |
EX-32 - EX 32.2 SEC 906 CERT-CFO - ENIGMA-BULWARK, LTD | ex322section906certification.htm |
EX-32 - EX 32.1 SEC 906 CERT-CEO - ENIGMA-BULWARK, LTD | ex321section906certification.htm |
EX-31 - EX 31.2 SEC 302 CERT-CFO - ENIGMA-BULWARK, LTD | ex312section302certification.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2015
or
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to _________
Commission File Number 333-139045
PEARTRACK SECURITY SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Nevada | 26-1875304 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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1327 Ocean Avenue, Suite B, Santa Monica, California | 90401 |
(Address of principal executive offices) | (Zip Code) |
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Registrant's telephone number, including area code: | 310-899-3900 |
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.
x YES o NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
x YES o NO
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o |
| Accelerated filer | o |
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| Non-accelerated filer | o |
| Smaller reporting company | x |
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| (Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.
o YES x NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
69,454,714 common shares issued and outstanding as of August 15, 2015
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The Companys unaudited interim consolidated financial statements for the three month period ended June 30, 2015, form part of this quarterly report. They are stated in United States Dollars (US$), and are prepared in accordance with United States generally accepted accounting principles.
These financial statements should be read in conjunction with the audited financial statements and notes included thereto for the year ended December 31, 2014, on Form 10-K, as filed with the Securities and Exchange Commission on April 15, 2015.
1
PEARTRACK SECURITY SYSTEMS, INC. | ||||||
CONSOLIDATED BALANCE SHEETS | ||||||
(Unaudited) | ||||||
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| June 30, 2015 |
| December 31, 2014 |
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ASSETS |
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Current assets |
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Cash and cash equivalents | $ | 239,941 |
| $ | 64,753 |
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Accounts receivable |
| 3,000 |
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Refunds and claims receivable |
| 4,754 |
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| 15,892 |
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Prepaid expenses |
| 179 |
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| 716 |
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Total current assets |
| 247,874 |
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| 81,361 |
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Investment in securities |
| 1,206 |
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| 16,887 |
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Intangible assets, unencumbered, net |
| 2,077,297 |
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| 435,000 |
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Intangible assets, pledged to creditors, net |
| 1,403,388 |
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| 1,455,624 |
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Other assets |
| 6,447 |
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| 6,447 |
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TOTAL ASSETS | $ | 3,736,212 |
| $ | 1,995,319 |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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LIABILITIES |
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Current liabilities |
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Accounts payable and accrued expenses | $ | 1,226,303 |
| $ | 1,165,990 |
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Deferred revenue |
| 225,000 |
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| 225,000 |
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Related party payables |
| 344,372 |
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| 297,581 |
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Notes payable-short-term convertible-related party |
| 787,837 |
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| 787,837 |
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Notes and loans payable-short-term |
| 894,594 |
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| 912,244 |
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Total current liabilities |
| 3,478,106 |
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| 3,388,652 |
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Long-term liabilities |
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Notes payable-long-term convertible-related party, net of unamortized discount |
| 2,338,007 |
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| 2,108,362 |
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Total long-term liabilities |
| 2,338,007 |
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| 2,108,362 |
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Total liabilities |
| 5,816.113 |
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| 5,497,014 |
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STOCKHOLDERS' DEFICIT |
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Preferred stock, $0.001 par value, 25,000,000 shares authorized, none issued and outstanding |
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Common stock, $0.001 par value, 250,000,000 shares authorized, 69,454,714 and 59,965,091 issued and outstanding as of June 30, 2015, and December 31, 2014, respectively |
| 69,455 |
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| 59,965 |
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Additional paid in capital |
| 10,620,552 |
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| 8,126,703 |
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Subscriptions receivable |
| (100 | ) |
| (1,600 | ) |
Accumulated deficit |
| (12,762,582 | ) |
| (11,695,730 | ) |
Accumulated comprehensive income (loss) |
| (7,226 | ) |
| 8,967 |
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Total stockholders' deficit |
| (2,079,901 | ) |
| (3,501,695 | ) |
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 3,736,212 |
| $ | 1,995,319 |
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The accompanying notes are an integral part of these consolidated financial statements
2
The accompanying notes are an integral part of these consolidated financial statements
3
PEARTRACK SECURITY SYSTEMS, INC. | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
(Unaudited) | ||||||
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| For the six months ended |
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| June 30, 2015 |
| June 30, 2014 |
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Cash flow from operating activities: |
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Net loss and comprehensive income (loss) | $ | (1,083,045 | ) | $ | (492,529 | ) |
Comprehensive income (loss) |
| (16,193 | ) |
| (84,433 | ) |
Net loss |
| (1,066,852 | ) |
| (408,096 | ) |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization of deferred stock compensation |
| 356,899 |
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| 30,000 |
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Accruals converted to related party loans |
| 207,498 |
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| 251,000 |
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Depreciation and amortization |
| 116,184 |
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| 100 |
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Discount amortization |
| 42,897 |
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Loss on disposal of asset |
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| (1,925 | ) |
Changes in operating assets and liabilities: |
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Increase in accounts receivable |
| (3,000 | ) |
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Decrease in refunds and claims receivable |
| 11,139 |
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Decrease in prepaid expenses |
| 537 |
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Increase in accounts payable and accrued expenses |
| 60,313 |
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| 78,243 |
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Increase in related party payables |
| 46,790 |
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| 46,828 |
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Net cash provided by (used in) operating activities |
| (227,595 | ) |
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Cash flow from financing activities: |
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Repayment of loans payable |
| (17,650 | ) |
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Proceeds from issuance of common stock |
| 1,150 |
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Subscriptions received |
| 418,519 |
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Net cash provided by financing activities |
| 402,019 |
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Effect of exchange rate changes |
| 90 |
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Net increase (decrease) in cash |
| 175,188 | ) |
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Cash - beginning of period |
| 64,753 |
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Cash - end of period | $ | 239,941 |
| $ | |
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NONCASH ACTIVITIES |
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Common stock subscriptions receivable | $ | 100 |
| $ | |
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Conversion of related party payable to related party convertible note payable | $ | 207,498 |
| $ | 251,000 |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
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Interest paid | $ | |
| $ | |
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Income taxes paid | $ | |
| $ | |
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The accompanying notes are an integral part of these consolidated financial statements
4
PEARTRACK SECURITY SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2015
NOTE 1. OVERVIEW
The accompanying unaudited consolidated financial statements of PearTrack Security Systems, Inc., (the Company or PearTrack) have been prepared in accordance with generally accepted accounting principles. 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 that effect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2014. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements have been omitted.
PearTrack Security Systems, Inc., incorporated in Nevada on September 30, 2005, is a security and logistics company headquartered in Santa Monica, CA. The Company is currently structured with three wholly owned subsidiaries: PearTrack Systems Group, Ltd., Ecologic Products, Inc., and Ecologic Car Rentals, Inc., all Nevada corporations. PearTrack Systems Group, Ltd. (PTSG), is headquartered in the San Francisco Bay area of California, with offices in Manchester, England. The Companys current business activities are diversified into two specific markets: remote/mobile asset tracking and environmental transportation and products.
·
Through its wholly owned subsidiary, PearTrack Systems Group, Ltd., the Company intends to provide a suite of products in the M2M telematics and remote/mobile asset tracking and management industry, including a Global Positioning System (GPS) tracking system and tracking devices with a proprietary long-life battery system for non-powered assets.
·
Through the subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc., the Company continues its pursuits for viable environmental rental car opportunities, and its marketing and distribution endeavors for its environmental products. The Company anticipates that it will spin-out Ecologic Car Rentals and Ecologic Products, Inc. to its shareholders prior to the end of 2015.
The Companys primary focus is on the development and commercialization of its proprietary battery system in conjunction with its GPS tracking and management technologies. The Companys vertically integrated activities, spanning from hardware design, software development, marketing and sales, to project implementation and system operations, aim to make logistics chains more secure and increase operational efficiency. The Company continues to pursue wholesale distribution opportunities for the Ecologic Shine® product, including product placement into major retail automotive chains. The Company is also developing a business plan for the retail distribution of the Ecologic Shine® product line in anticipation of spinning the operating subsidiary out to Shareholders.
Going Concern
The Company has incurred losses since inception resulting in an accumulated deficit of $12,762,582, and a working capital deficit of $3,230,232, and further losses are anticipated. The Companys ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, which may not be available at commercially reasonable terms. There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations and the Company may cease operations. These factors, among others, raise substantial doubt about the Companys ability to continue as a going concern.
The consolidated financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue as a going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: This summary of significant accounting policies is presented to assist in understanding the Companys financial statements. These accounting policies conform to accounting principles, generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.
The Companys fiscal year end is December 31.
Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, PearTrack Systems Group, Ltd., Ecologic Products, Inc. and Ecologic Car Rentals, Inc. All significant inter-company accounts and transactions have been eliminated.
Cash and Cash Equivalents: The Company considers cash in banks, deposits in transit, and highly-liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents. As of June 30, 2015, and December 31, 2014, the Company had no cash equivalents.
Foreign Currency Translation: Items included in the financial statements of the Companys subsidiary are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in US Dollars, which is the Companys reporting currency.
The results and financial position of PearTrack Systems Group, Ltd., the Companys wholly owned subsidiary, has a functional currency different from the reporting currency, and is translated into the reporting currency as follows:
(i) | assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; |
(ii) | income and expenses for each income statement are translated at average exchange rates on a monthly basis; and |
(iii) | all resulting exchange differences are recognized as a separate component of equity. |
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement as other comprehensive income. On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to stockholders equity. As of June 30, 2015, and December 31, 2014, respectively, exchange differences of $(512) and $4,314 have been accumulated.
5
Use of Estimates: The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying consolidated financial statements include the, estimates related to asset impairments of long lived assets and investments, classification of expenditures as either an asset or an expense, valuation of deferred tax assets, and the likelihood of loss contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results could differ from these estimates.
Net Income (Loss) Per Common Share: The Company calculates net income (loss) per share as required by ASC 450-10, "Earnings per Share." Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods when anti-dilutive, common stock equivalents, if any, are not considered in the computation.
Comprehensive Income (Loss): ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at June 30, 2015, and December 31, 2014, the Company has recognized $16,193 and $99,417 in comprehensive losses, and has included these amounts as part of other comprehensive income (loss) on the accompanying statement of operations.
Revenue Recognition: The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured. As at June 30, 2015, the Company has not commenced its principal operations.
The Company has continuing revenue from limited customer contracts for its PearTrack tracking units and system, and has made limited sales of its Ecologic Shine® product. In addition, the Company provides consulting services as an additional revenue source.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of: In accordance with ASC 350-30, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. The Company currently believes there is no impairment of its long-lived assets. There can be no assurance, however, that market conditions will not change or demand for the Companys products will continue. Either of these could result in future impairment of long-lived assets.
Due to the Companys recurring losses, its intellectual properties were evaluated for impairment and it was determined that future cash flows were sufficient for recoverability of the assets.
Income Taxes: Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.
The Company has net operating loss carryforwards available to reduce future taxable income. Future tax benefits for these net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. To the extent that the Company will not realize a future tax benefit, a valuation allowance is established.
Stock Based Compensation: The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Fair Value Measurements: Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 | Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. |
Level 2 | Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. |
Level 3 | Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. |
The Companys financial instruments consist principally of cash, accounts payable, and accrued liabilities. Pursuant to ASC 820 and 825, the fair value of cash is determined based on Level 1 inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Investments in Securities: Investments in securities are accounted for using the equity method if the investment provides the Company the ability to exercise significant influence, but not control, over an investee. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee between 20% and 50%, although other factors, such as representation on the investee's Board of Directors, are considered in determining whether the equity method is appropriate. All other equity investments, which consist of investments for which the Company does not possess the ability to exercise significant influence, are accounted for under the mark to market method. Under the mark to market method of accounting, investments are marked to market, with unrealized gains and losses being excluded from earnings and reflected as a component of other comprehensive income.
6
Recent Accounting Pronouncements: The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (FASB), the US Securities and Exchange Commission (SEC), and the Emerging Issues Task Force (EITF), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:
Adopted:
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance is the culmination of the FASBs deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The adoption of this update did not have a material impact on its consolidated financial statements.
In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendments in this standard is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. The adoption of this update did not have a material impact on its consolidated financial statements.
In July 2013, the FASB issued ASU No 2013-11, Presentation of an Unrecognized Tax Benefit When Net Operating Loss Carryforward Exists. The objective of ASU 2013-11 is to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits, and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and interim reporting periods therein. Early adoption is permitted. The adoption of this update did not have a material impact on its consolidated financial statements.
In June 2014, the FASB issued ASU No, 2014-10, Elimination of Certain Financial Reporting Requirements for Development Stage Entities. The objective of ASU 2014-10 is to reduce the cost and complexity associated with the incremental reporting requirements for development stage entities. This Update removes all incremental financial reporting requirements, and eliminates an exception provided to development stage entities in Topic 810. The amendments in this standard are effective retrospectively for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted.
Not Yet Adopted:
In April 2014, the FASB issued ASU No. 2014-08 Presentation of Financial Statements (Topic 205): Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity. The objective of ASU No. 2014-08 is to clarify the criteria for determining which disposals can be presented as discontinued operations and also modifies related disclosure requirements. The standard is required to be adopted by public business entities in annual periods beginning on or after December 15, 2014, and interim periods within those annual periods. Early adoption is permitted for new disposals beginning in the first quarter of 2014, provided financial statements have not been issued before the release of this standard. The Company is evaluating the effect, if any, adoption of ASU No. 2014-08 will have on its consolidated financial statements.
In August 2014, the FASB issued ASU No 2014-15 Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern. The objective of ASU 2014-15 is to provide guidance in GAAP about managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern and to provide related footnote disclosures. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is evaluating the effect, if any, adoption of ASU No. 2014-15 will have on its consolidated financial statements.
In November 2014, the FASB issued ASU No. 2014-17 Business Combinations (Topic 805): Pushdown Accounting. The objective of ASU 2014-17 is to provide guidance on whether and at what threshold an acquired entity that is a business or nonprofit activity can apply pushdown accounting in its separate financial statements. The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle. The Company is evaluating the effect, if any, adoption of ASU No. 2014-17 will have on its consolidated financial statements.
In January 2015, the FASB issued ASU 2015-01 Income StatementExtraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This Update eliminates from GAAP the concept of extraordinary items. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The effective date is the same for both public business entities and all other entities. The Company is evaluating the effect, if any, adoption of ASU No. 2015-01 will have on its consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03 Interest-Imputation of Interest (Subtopic 835-30: Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 is part of the Simplification Initiative, and its objective of to simplify the presentation of debt issuance costs. This Update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. The amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company is evaluating the effect, if any, adoption of ASU No. 2015-03 will have on its consolidated financial statements.
Recently Issued Accounting Standards Updates: Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.
NOTE 3. INVESTMENT IN SECURITIES
As of June 30, 2015, and December 31, 2014, the Company held 12,061,854 shares of Amazonas Florestal, Ltd. common stock with a fair value of $1,206 and $16,887, respectively.
7
NOTE 4. INTANGIBLE ASSETS
Intangible assets consists of the following:
| June 30, 2015 |
| December 31, 2014 |
| ||
Intellectual property, unencumbered | $ | 2,156,245 |
| $ | 450,000 |
|
Accumulated amortization |
| (78,948 | ) |
| (15,000 | ) |
Intellectual property, unencumbered, net |
| 2,077,297 |
|
| 435,000 |
|
|
|
|
|
|
|
|
Intellectual property, pledged to creditors |
| 1,567.060 |
|
| 1,567.060 |
|
Accumulated amortization |
| (163,672 | ) |
| (111,436 | ) |
Intellectual property, pledged to creditors, net | $ | 1,403,388 |
| $ | 1,455,624 |
|
Amortization expense totaled $116,184 and $0 for the six months ended June 30, 2015 and 2014, respectively.
NOTE 5. DEFERRED REVENUE
In connection with a certain Service Agreement dated June 30, 2014, revenue received in the amount of $450,000 has been deferred, to be recognized over the term of the agreement, or twelve (12) months. Due to certain events beyond the Companys control, no services were performed during the six months ended June 30, 2015 . As a result, no revenues have been recognized during the six months ended June 30, 2015. As of June 30, 2015, and December 31, 2014, the Company has recognized $0 and $225,000 as revenues earned, and has deferred $225,000, to be earned in the future.
NOTE 6. NOTES AND LOANS PAYABLE
Notes and loans payable consists of the following:
| June 30, 2015 |
| December 31, 2014 |
| ||
|
|
|
|
|
|
|
Loans payable | $ | 80,839 |
| $ | 98,489 |
|
Notes payable-short term |
| 125,000 |
|
| 125,000 |
|
Notes payable-short-term-convertible |
| 688,755 |
|
| 688,755 |
|
Total notes and loans payable | $ | 894,594 |
| $ | 912,244 |
|
Notes payable includes the following convertible promissory notes at June 30, 2015 :
Principal | Interest Rate | Conversion Rate | Maturity Date |
|
|
|
|
$188,755 | 7% | $0.05 | 1 year from demand |
$500,000 | 5% | $0.25 | 12/31/2015 |
Notes payable consists of unsecured promissory notes issued in the principal sum of $894,594 and $912,244 as of June 30, 2015, and December 31, 2014, respectively. The notes bear interest at a rate of between 5% to 15% per annum, and are due within one (1) year of written demand or by December 31, 2015.
Loans payable consists of monies loaned to the Company by a third-party for the purpose of overhead advances and product development. The loan is unsecured, bears no interest, and is payable upon demand. As of June 30, 2015, and December 31, 2014, respectively, $80,839 and $98,489 is outstanding, and no demand has been made.
As of June 30, 2015, and December 31, 2014, interest in the amount of $195,516 and $163,177, respectively, has been accrued and is included as part of accrued expenses on the accompanying balance sheets.
NOTE 7. RELATED PARTY TRANSACTIONS
Related party transactions consists of the following:
| June 30, 2015 |
| December 31, 2014 |
| ||
|
|
|
|
|
|
|
Notes payable-short-term | $ | 787,837 |
| $ | 787,837 |
|
|
|
|
|
|
|
|
Notes payable-long-term-senior |
| 2,000,000 |
|
| 2,000,000 |
|
Less: unamortized discount |
| (298,324 | ) |
| (341,221 | ) |
Total long-term notes payable, senior, net of discount |
| 1,701,676 |
|
| 1,658,779 |
|
|
|
|
|
|
|
|
Notes payable-long-term-subordinate |
| 657,081 |
|
| 449,583 |
|
Less: unamortized discount |
| (20,750 | ) |
| |
|
Total long-term notes payable, subordinate, net of discount |
| 636,331 |
|
| 449,583 |
|
Total long-term notes payable |
| 2,338,007 |
|
| 2,108,362 |
|
Total notes payable |
| 3,125,844 |
|
| 2,896,199 |
|
|
|
|
|
|
|
|
Accrued compensation |
| 264,550 |
|
| 118,500 |
|
Reimbursed expenses payable |
| 79,822 |
|
| 179,081 |
|
Total related party payable |
| 344,372 |
|
| 297,581 |
|
|
|
|
|
|
|
|
Total related party transactions | $ | 3,470,216 |
| $ | 3,193,780 |
|
Related party notes payable consists of the following convertible notes payable at June 30, 2015 :
Description | Principal | Interest Rate | Conversion Rate | Maturity Date | |
|
|
|
|
|
|
Note payable-long-term-senior | $ | 2,000,000 | 5% | $0.40 | 12/09/2018 |
Less: unamortized discount |
| (298,324 | ) |
|
|
Note payable-long-term-senior, net of discount |
| 1,701,676 |
|
|
|
|
|
|
|
|
|
Note payable-short term |
| 313,913 | 7% | $0.05 | 1 yr demand |
Note payable-short-term |
| 100,000 | 7% | $0.07 | 1 yr demand |
Note payable-short term |
| 373,924 | 5% | $0.05 | Funding |
Note payable-long-term, net of discount |
| 636,331 | 5% | $0.25 | 12/31/2017 |
|
|
|
|
|
|
Total | $ | 3,125,844 |
|
|
|
All outstanding related party notes payable bear interest at the rate of 5% to 7% per annum, are due and payable within between one (1) year of written demand and by December 9, 2018, or upon certain equity funding, and are convertible into the Companys common stock at a price of between $0.05 to $0.40 per share.
8
As at June 30, 2015, and December 31, 2014, respectively, affiliates and related parties are due a total of $3,470,216 and $3,193,780, which is comprised of loans to the Company of $3,125,844 and $2,896,199, accrued compensation of $264,550 and $118,500, and reimbursed expenses of $79,822 and $179,081, for a net increase of $276,436. During the six months ended June 30, 2015, loans to the Company increased by $229,645, unpaid compensation increased by $146,050 and reimbursable expenses decreased by $99,259.
The Companys increase in loans to the Company of $229,645 is due to an increase in unpaid compensation owed to related parties in the amount of $207,498 which has been converted to convertible notes payable; and a decrease in unamortized discount of $22,147.
The Companys increase in unpaid compensation of $146,050 is due to an increase in unpaid compensation of $353,548 due to related parties, of which $207,498 was converted into convertible notes payable.
The Companys expenses reimbursable to related parties decreased by $99,259 during the six months ended June 30, 2015 .
As of June 30, 2015, and December 31, 2014, accrued interest payable to related parties was $112,919 and $81,020, respectively, and is included as part of accrued expenses on the accompanying balance sheets.
NOTE 8. COMMITMENTS AND CONTINGENCIES
On January 5, 2015, the Company entered into a Consulting Agreement (Consulting Agreement) for services provided to the Company in the area of business planning and marketing. The Consulting Agreement is for a term of one (1) year, includes deferred cash compensation in the amount of $1,250 per month, and stock compensation in the amount of 250,000 shares. As of June 30, 2015, cash compensation of $7,250 has been deferred.
On January 21, 2015, the Company entered into an Assignment and Licensed Rights Agreement (Assignment and License Agreement) by and between the Company and PearLoxx Ltd. (PearLoxx) for the assignment and exclusive license to the Company of certain PearLoxx patented technology (the Product) in perpetuity. Pursuant to the terms and conditions of the Assignment and License Agreement, royalties are payable to PearLoxx on certain revenues generated from the Product as follows: 5% up to $5,000,000; 3% between $5,000,001 and $10,000,000; and 2.5% thereafter. On March 9, 2015, the Assignment and License Agreement was amended to, among other things, include as part of the consideration for the Product, the right for PearLoxx to purchase 5,706,506 shares of the Companys common stock at $0.001 per share, valued at $1,711,952.
On March 9, 2015, the Company entered into a Consulting Agreement (Consulting Agreement) for services provided to the Company in the area of international sales. The Consulting Agreement commences April 1, 2015, is for a term of five (5) years, and includes compensation in the form of commissions on certain revenues generated from the PearTrack and/or PearLoxx product, as follows: 50% up to $500,000,000; and 30% thereafter. As of June 30, 2015, no commissionable sales have been made under this Consulting Agreement.
NOTE 9. CAPITAL STOCK
The total number of authorized shares of common stock that may be issued by the Company is 250,000,000 shares with a par value of $0.001; and the total number of authorized preferred stock is 25,000,000 shares with a par value of $0.001.
On May 1, 2015, in connection with a certain stock purchase agreement, 1,000,000 shares of the Companys restricted common stock were purchased at $0.25 per share, for cash in the amount of $250,000. As a result, $249,000 has been recorded to additional paid in capital.
On May 1, 2015, in connection with a certain stock purchase agreement, 150,000 shares of the Companys restricted common stock were purchased at $0.001 per share, for cash in the amount of $150. As a result, $150 has been recorded to additional paid in capital.
On May 8, 2015, in connection with a certain stock purchase agreement, 500,000 shares of the Companys restricted common stock were purchased at $0.25 per share, for cash in the amount of $125,000. As a result, $124,500 has been recorded to additional paid in capital.
During the six months ended June 30, 2015, and the year ended December 31, 2014, respectively, a total of $356,899 and $272,179 in deferred stock compensation was expensed. Deferred stock compensation of $375,855 and $675,504 remains at June 30, 2015, and December 31, 2014, respectively, to be amortized over the next 17 months.
As of June 30, 2015, and December 31, 2014, respectively, the Company had 69,454,714 and 59,965,091 shares of common stock issued and outstanding.
NOTE 10. WARRANTS AND OPTIONS
As of June 30, 2015, and December 31, 2014, respectively, the Company has no warrants and 366,000 options issued and outstanding.
Outstanding and Exercisable Options |
|
|
|
|
|
|
| ||||
|
|
|
| Remaining |
| Exercise Price |
|
|
| ||
|
| Number of |
| Contractual Life |
| times Number |
| Weighted Average |
| ||
Exercise Price |
| Shares |
| (in years) |
| of Shares |
| Exercise Price |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
$3.20 |
| 75,000 |
| 0.75 |
| $ | 240,000 |
|
| $3.50 |
|
$3.20 |
| 102,500 |
| 5.75 |
|
| 328,000 |
|
| $3.50 |
|
$2.00 |
| 150,000 |
| 1.50 |
|
| 300,000 |
|
| $3.10 |
|
|
| 327,500 |
|
|
| $ | 868,000 |
|
| $3.10 |
|
Options Activity | Number |
| Weighted Average |
| |
| Of Shares |
| Exercise Price |
| |
|
|
|
|
|
|
Outstanding at December 31, 2014 | 366,000 |
|
| $3.10 |
|
Issued | |
|
| |
|
Exercised | |
|
| |
|
Expired / Cancelled | (38,500 | ) |
| $3.70 |
|
Outstanding at June 30, 2015 | 327,500 |
|
| $3.10 |
|
During the six months ended June 30, 2015, and the year ended December 31, 2014, respectively, the Company expensed a total of $0 and $60,000 in stock option compensation. There remains no deferred stock option compensation at June 30, 2015, and December 31, 2014, respectively.
9
NOTE 11. RESTRICTED STOCK AWARDS
As of June 30, 2015, and December 31, 2014, the Company has awarded a total of 1,000,000 Restricted Stock Units, for which a total of $250,000 has been recorded as deferred compensation. During the six months ended June 30, 2015, and the year ended December 31, 2014, respectively, the Company expensed a total of $62,499 and $125,000 in deferred compensation. There remains $52,084 and $114,583 in deferred compensation at June 30, 2015, and December 31, 2014, respectively.
NOTE 12. INCOME TAXES
The significant portions of the deferred tax assets at June 30, 2015, and December 31, 2014, are presented below:
| June 30, 2015 |
| December 31, 2014 |
| ||
Deferred tax assets: |
|
|
|
|
|
|
Net operating loss carry forwards | $ | 4,228,000 |
| $ | 3,863,000 |
|
Less valuation allowance |
| (4,228,000 | ) |
| (3,863,000 | ) |
Net deferred tax asset | $ | |
| $ | |
|
A reconciliation of income taxes computed at the US federal statutory income tax rate to the change in valuation allowance is as follows:
| For the six months ended |
| For the year ended |
| ||
| June 30, 2015 |
| December 31, 2014 |
| ||
|
|
|
|
|
|
|
Income (loss) before taxes |
| (1,083,044 | ) |
| (1,920,226 | ) |
Statutory rate |
| 34% |
|
| 34% |
|
|
|
|
|
|
|
|
Computed expected tax payable (recovery) | $ | 366,000 |
| $ | 653,000 |
|
Non-recognizable income (loss) |
| (4,000 | ) |
| (34,000 | ) |
Non-deductible expenses |
| |
|
| |
|
Change in valuation allowance |
| (362,000 | ) |
| (619,000 | ) |
Reported income taxes | $ | |
| $ | |
|
The increase in the valuation allowance for continuing operations was approximately $362,000 and $619,000 for the six months ended June 30, 2015, and the year ended December 31, 2014, respectively.
As of December 31, 2014, the Company had cumulative net operating loss carryforwards of approximately $11,943,000 for federal income tax purposes, and $9,916,000 for state income tax purposes, which begin to expire in the year 01/01/2029.
NOTE 13. SUBSEQUENT EVENTS
The Company has evaluated the events and transactions for recognition or disclosure subsequent to June 30, 2015, and has determined that there have been no events that would require disclosure.
* * * * *
10
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This quarterly report contains forward-looking statements. These statements relate to future events or the Companys future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause the Companys or the Companys industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
The Companys unaudited consolidated financial statements are stated in United States Dollars (US$), and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with the Companys financial statements and the related notes that appear elsewhere in this quarterly report.
The following discussion contains forward-looking statements that reflect the Companys plans, estimates and beliefs. The Companys actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common shares" refer to the common shares of the Companys capital stock.
As used in this quarterly report and unless otherwise indicated, the terms we, us, our, our company and PearTrack refer to PearTrack Security Systems, Inc., and its subsidiaries, unless otherwise indicated.
Corporate History
PearTrack Security Systems, Inc., incorporated in Nevada on September 30, 2005, is a security and logistics company headquartered in Santa Monica, CA. The Company is currently structured with three wholly owned subsidiaries: PearTrack Systems Group, Ltd., Ecologic Products, Inc., and Ecologic Car Rentals, Inc., all Nevada corporations. PearTrack Systems Group, Ltd. (PTSG), is headquartered in the San Francisco Bay area of California, with offices in Manchester, England. The Companys current business activities are diversified into two specific markets: remote/mobile asset tracking and environmental transportation and products.
The Companys primary focus is on the development and commercialization of its proprietary battery system in conjunction with its GPS tracking and management technologies. The Companys vertically integrated activities, spanning from hardware design, software development, marketing and sales, to project implementation and system operations, aim to make logistics chains more secure and increase operational efficiency. The Company continues to pursue wholesale distribution opportunities for the Ecologic Shine® product, including product placement into major retail automotive chains. The Company is also developing a business plan for the retail distribution of the Ecologic Shine® product line in anticipation of spinning the operating subsidiary out to Shareholders.
On January 21, 2015, the Company entered into an Assignment and Licensed Rights Agreement (Assignment and License Agreement) by and between the Company and PearLoxx Ltd. (PearLoxx) for the assignment and exclusive license to the Company of certain PearLoxx patented technology (the Product) in perpetuity. Pursuant to the terms and conditions of the Assignment and License Agreement, royalties are payable to PearLoxx on Adjusted Gross Revenue (AGR) generated by the Product as follows: 5% of AGR up to $5,000,000; 3% of AGR between $5,000,001 and $10,000,000; and 2.5% of AGR thereafter. On March 9, 2015, the Assignment and License Agreement was amended to, among other things, include as part of the consideration for the Product, the right for PearLoxx to purchase 5,706,506 shares of the Companys common stock at $0.001 per share, valued at $1,711,952.
On February 20, 2015, Mr. Philip J. Woolas was appointed as a Board member, to serve until the next annual meeting of the shareholders and/or until his successor is duly appointed.
Current Business
The Company is currently structured with three wholly owned subsidiaries: PearTrack Systems Group, Ltd., Ecologic Car Rentals, Inc. and Ecologic Products, Inc., all Nevada corporations. The Companys current business activities are diversified into two specific markets: environmental transportation and products, and remote/mobile asset tracking.
·
Through its wholly owned subsidiary, PearTrack Systems Group, Ltd., the Company intends to provide a suite of products in the M2M telematics and remote/mobile asset tracking and management industry, including a GPS tracking system and tracking devices with a proprietary long-life battery system for non-powered assets.
·
Through its wholly owned subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc., the Company continues its pursuits for viable environmental rental car opportunities, and its marketing and distribution endeavors for its environmental products. The Company anticipates that it will spin-out Ecologic Car Rentals and Ecologic Products, Inc. to its shareholders prior to the end of 2015.
Remote/Mobile Asset Tracking
PearTrack Systems Group, Ltd.
Through its wholly owned subsidiary, PearTrack Systems Group, Ltd., the Companys focus is primarily on the development and commercialization of its proprietary battery system in conjunction with its global positioning system (GPS) tracking and management technologies. The Company is geared to offer market-leading proprietary solutions in the M2M telematics and remote/mobile asset tracking and management industries.
11
Key components of PearTrack Tracking Products:
·
Battery Powered GPS Asset Tracking and Monitoring Systems with up to 10-year battery life for just about any remote asset, regardless of power supply.
·
Asset monitoring and alarm units ranging from a Personal Tracking device with a 30 day rechargeable battery, to a Container Security and Tracking Unit with a 10 year battery.
·
PT-700 or PT-1000: self-contained, wireless, concealable and easily fitted GPS enabled Asset Monitoring and Alert Systems with unique covert antenna kit, providing international GPS tracking (via GSM networks), temperature monitoring and door opening alerts sent directly to cell phone and/or email account.
·
PT Tracking Unit: a powerful Fault Monitoring and Service Management Tool that monitors Generators, Chillers, Reefers, Irrigation Pumps, and Heavy Plant operating conditions, providing automatic alerts for critical events such as Low Oil Pressure, Engine Over-Temperature, Grid Failure, Low Output Flow, Low Fuel Level, Battery Failure, and Out of Temperature Range.
·
PearTrack TeleAsset: a remote Asset Management, GPS Tracking and Monitoring System providing critical real-time event-driven GPS enhanced Event Alerts and Usage information, and enables superior remote asset management through a single web-based portal.
·
PearTrack TeleAsset Platform: provides an end-to-end solution including:
·
GPS enabled M2M interface hardware fitted discretely to each asset that monitors alarms, gathers data, and communicates information to the PearTrack web portal using GPRS via the GSM mobile networks.
·
Centrally managed asset data software to process alarms and alerts.
·
Web portal internet-based user interface accessible using a standard web browser from any Internet enabled PC or handheld device.
·
Customization, hosting and system integration to provide tailored solutions to meet specific customer needs.
The Company intends to enhance its tracking products, and is assessing the areas of growth, with particular emphasis on the intermodal container market. The Companys vertically integrated activities, spanning from hardware design, software development, marketing and sales, to project implementation and system operations, aim to make logistics chains more secure and increase operational efficiency.
Environmental Transportation and Products
Ecologic Car Rentals, Inc.
Through its wholly owned subsidiary, Ecologic Car Rentals, Inc., the Company continues to focus on the development of an environmental car rental operation. The Company is currently pursuing viable opportunities within the car rental industry to develop and establish its own brand as a premier green car rental company offering environmentally-friendly vehicles.
The Company plans to acquire existing profitable independent car rental operations on a multi-regional basis and convert their operations to an Ecologic platform. The Company has identified certain independent car rental operations that would provide a multi-regional presence, and that can be used as a platform to become the only large green independent car rental operation in the U.S.
The Company believes that the growth in demand for environmentally friendly cars, and the increase in major automakers production of new eco-friendly car models, has created a unique opportunity for an environmentally-friendly transportation company. The strategy is to identify and acquire existing profitable independent car rental operations on a multi-regional basis, and convert their operations to an Ecologic platform. By initially co-branding with acquired companies for a limited period of time, the rebranding transition to green outlets as Ecologic Car Rentals can ultimately be completed. The comprehensive business strategy capitalizes on this unique opportunity, and the business model supports growth, while holding true to its planet-friendly mission.
Ecologic Products, Inc.
Through its wholly owned subsidiary, Ecologic Products, Inc., the Company continues its development of ecologically friendly products. Initially, the Companys product line will be focused on transportation and its ancillary markets. The Company has developed Ecologic Shine®, a device and system for near-waterless car washing that delivers cleaning comparable to normal washing without the use of any harmful chemicals. The Ecologic Shine® products and services are:
· | Good for the environment |
· | Good for the vehicle |
· | Good for the customer |
· | Good for the bottom line |
The Company continues to pursue wholesale distribution opportunities for the Ecologic Shine® product, including the product placement into major retail automotive chains. The Company is also developing a business plan for the retail distribution of the Ecologic Shine® product line in anticipation of spinning the operating subsidiary out to Shareholders.
Ecologic Products, Inc. has had some success in its 3-year waterless car wash trial, undertaken in conjunction with Park N Fly in Atlanta, GA, and Los Angeles, CA, at Hartsfield International Airport and LAX International Airport, respectively.
On February 27, 2014, the Company negotiated the sale of approximately 440 gallons of its Eco Shine, Eco Wash and Eco Prep products, representing approximately 2,640 car washes, to CISA Lubes NC, LLC, a North Carolina operator of 33 quick auto lube operations in North Carolina.
Ecologic Products, Inc. has expanded its business objectives beyond the scope of sustainable water practices through its Eco Shine operations to sustainable products that target corporate and government markets and has pursued several technologies at various stages of development.
12
On June 12, 2014, the Company entered into a non-disclosure Agreement with SEaB Energy, Ltd., a Southampton, United Kingdom Waste-to-Energy Company. SEaB Energy develops Waste-to-Energy systems deploying a containerized advanced digestion (AD) process. The process will, by stabilizing organic wastes, generate biogas (that will be combusted within CHP engines to generate electricity) and a digestate that will be employed as an organic fertilizer. In June 2014, the Companys Chairman and SEaBs CEO met in London to discuss ways in which the Company could develop a business for SEaBs two primary products, the Muckbuster® and the Flexibuster©, in the United States. The Company worked to develop a plan to install the Muckbuster® product at Kennesaw State University, located in the greater Atlanta, Georgia, area. After review, discussion and due diligence it was decided that the quantity of bio waste that could be utilized by the Muckbuster® system was not large enough in daily volume to make the economics work. The Company will continue to seek to identify opportunities for the SEaB product line, and will review its efforts at the end of the 2nd quarter 2015.
On June 15, 2014, the Company entered into a non-disclosure agreement with SheerWind, Inc., a Minnesota based innovative wind turbine company. The discussions with SheerWind were preliminary and did not move past the exchange of private information.
On June 26, 2014, the Company entered into a non-disclosure agreement with AquaFuel, Ltd., a Kent, United Kingdom based fuel technology company that has developed the first diesel generator to run on glycerin. Management negotiated, drafted and presented a Memorandum of Understanding to acquire an exclusive license for the United States. The Companys Chairman visited the AquaFuel headquarters for the purpose of demonstration of the AquaFuel generators and related due diligence. The Companys due diligence indicated that the current development of glycerin as a fuel was unlikely to be attractive to the marketplace. The Company is researching alternative bio fuel products that could work with the AquaFuel generators.
Planned Spin Offs
Although the Company continues to develop its environmental transportation business through Ecologic Car Rentals, Inc. and Ecologic Products, Inc., the Company and its board of directors feel the subsidiaries will be able to operate more effectively independently, with the goal of attracting new capital and exploiting their existing business, and will have the flexibility to establish new relationships in order to achieve their respective goals of generating shareholder value.
As such, the Company intends to effect spin-offs of its wholly owned subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc. The terms of the spin-offs include the distribution of a stock dividend of 57,065,061 shares of Ecologic Car Rentals, Inc. common stock, and 57,065,061 shares of Ecologic Products, Inc. common stock, to the Companys shareholders of record (excluding the former shareholders of PTSG) on the Record Date of December 15, 2014, on a pro rata basis. Subsequent to the spin-offs, Ecologic Car Rentals, Inc. and Ecologic Products, Inc. will operate as entities independent of the Company, under the leadership of Mr. William B. Nesbitt, who will serve as President and CEO of the companies.
The Company believes that, as independent companies, Ecologic Products, Inc. and Ecologic Car Rentals, Inc. can promote and brand themselves so as to operate successfully. Mr. William B. Nesbitt will remain as President and CEO of both companies.
Results of Operations
Three and six months ended June 30, 2015, compared to three and six months ended June 30, 2014.
The following summary of the Companys results of operations should be read in conjunction with the Companys unaudited consolidated financial statements for the quarter ended June 30, 2015, which are included herein.
| For the three months ended |
| For the six months ended |
| ||||||||
| June 30, 2015 |
| June 30, 2014 |
| June 30, 2015 |
| June 30, 2014 |
| ||||
Revenue | $ | 3,886 |
| $ | |
| $ | 6,274 |
| $ | 5,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales | $ | 1,854 |
| $ | |
| $ | 5,867 |
| $ | 3,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss) | $ | 2,032 |
| $ | |
| $ | 407 |
| $ | 2,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses | $ | 500,363 |
| $ | 158,678 |
| $ | 958,339 | ) | $ | 322,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense | $ | (57,256 | ) | $ | (45,146 | ) | $ | (109,356 | ) | $ | (85,914 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain on currency translation | $ | (131 | ) | $ | |
| $ | 436 |
| $ | |
|
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|
|
|
|
|
|
|
|
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|
|
Loss on disposal of asset | $ | |
| $ | |
| $ | |
| $ | (1,925 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss | $ | (555,718 | ) | $ | (203,824 | ) | $ | (1,066,852 | ) | $ | (408,096 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net comprehensive income (loss) | $ | (3,847 | ) | $ | (137,505 | ) | $ | (16,193 | ) | $ | (84,433 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss and comprehensive income (loss) | $ | (559,565 | ) | $ | (341,329 | ) | $ | (1,083,045 | ) | $ | (492,529 | ) |
Revenue
For the three month period ended June 30, 2015, revenue in the amount of $3,886 consisted of limited continuing customer tracking revenue for the PearTrack product line.
For the three month period ended June 30, 2014, no revenue was generated.
For the six month period ended June 30, 2015, revenue in the amount of $6,274 consisted of limited continuing customer tracking revenue for the PearTrack product line.
For the six month period ended June 30, 2014, revenue in the amount of $5,375 consisted of limited sales of car washing products to third-party retailers.
Cost of sales
For the three month period ended June 30, 2015, cost of sales in the amount of $1,854 consisted of limited product and system costs related to the PearTrack product line.
For the three month period ended June 30, 2014, no cost of sales were incurred.
For the six month period ended June 30, 2015, cost of sales in the amount of $5,867 consisted of limited product and system costs related to the PearTrack product line.
For the six month period ended June 30, 2014, cost of sales in the amount of $3,162 consisted of limited purchases of car washing products from wholesale manufacturer.
13
General and Administrative Expenses
| Three months ended |
| Six months ended |
| variances |
| ||||||||||||
| June 30, 2015 |
| June 30, 2014 |
| June 30, 2015 |
| June 30, 2014 |
| 3-month |
| 6-month |
| ||||||
Amortization of stock options granted | $ | |
| $ | 15,000 |
| $ | |
| $ | 30,000 |
| $ | (15,000 | ) | $ | (30,000 | ) |
Amortization of deferred stock compensation |
| 178,449 |
|
| |
|
| 356,899 |
|
| |
|
| 178,449 |
|
| 356,899 |
|
Depreciation and amortization |
| 70,329 |
|
| |
|
| 116,184 |
|
| 100 |
|
| 70,329 |
|
| 116,084 |
|
Legal, accounting and professional fees |
| 33,629 |
|
| 13,750 |
|
| 66,129 |
|
| 28,513 |
|
| 19,879 |
|
| 37,616 |
|
Management consulting services |
| 153,249 |
|
| 107,500 |
|
| 306,498 |
|
| 215,000 |
|
| 45,749 |
|
| 91,948 |
|
Other consulting fees |
| 4,750 |
|
| |
|
| 8,500 |
|
| |
|
| 4,750 |
|
| 8,500 |
|
Office supplies and miscellaneous expenses |
| 41,206 |
|
| 5,627 |
|
| 66,636 |
|
| 15,257 |
|
| 35,578 |
|
| 51,380 |
|
Rent expense |
| 18,751 |
|
| 16,800 |
|
| 37,492 |
|
| 33,600 |
|
| 1,951 |
|
| 3,892 |
|
Total general and administrative expenses | $ | 500,363 |
| $ | 158,677 |
| $ | 958,339 |
| $ | 322,470 |
| $ | 341,686 |
| $ | 635,869 |
|
General and administrative expenses in the amount of $500,363 for the three months ended June 30, 2015, were comprised of $178,449 of amortization of stock compensation, $70,329 of depreciation and amortization, $33,629 of legal and accounting fees, $157,999 of management and other consulting fees, $41,206 of office overhead and other general and administrative expenses, and $18,751 of rent expense.
General and administrative expenses in the amount of $158,677 for the three months ended June 30, 2014, were comprised of $15,000 of amortization of stock options, $13,750 of legal and accounting fees, $107,500 of management and other consulting fees, $5,627 of office, overhead and other general and administrative expenses, and $16,800 of rent expense.
General and administrative expenses for the three month period ended June 30, 2015, of $500,363 as compared to $158,677 for the three month period ended June 30, 2014, resulted in an increase in general and administrative expenses for the current period of $341,686.
Significant changes in general and administrative expenses for the three month period ended June 30, 2015, compared to the three month period ended June 30, 2014, were attributable to the following items:
·
a decrease in amortization of stock options of $15,000, due to certain deferred stock option compensation fully expensed in the prior period, resulting in no expense in the current period;
·
an increase in amortization of deferred stock compensation of $178,449, due to certain stock grants and awards in 2014, resulting in an increase in deferred stock compensation, of which $178,449 was expensed in the current period, compared to no expense for the same period in the prior year;
·
an increase in depreciation and amortization expense of $70,329, due to the acquisition of certain intellectual property, resulting in amortization expense in the current period of $70,329, compared to no expense for the same period in the prior year; and a decrease in depreciation expense of $100, for ;property disposed of in the prior year, resulting in no expense in the current year;
·
an increase in legal, accounting and professional fees of $19,879, primarily due to an increase in miscellaneous legal services of $1,129; an increase in audit fees of $750, and an increase in internal accountant fees of $18,000;
·
an increase in management and other consulting fees of $50,499, primarily due to a change in officers, resulting in a decrease of $18,751; an increase in certain monthly compensation by $5,000 per month, resulting in an increase of $15,000; and an increase of $4,750 resulting from a new consulting agreement entered into in the current period; compared to no such expense in the prior period;
·
an increase in other general and administrative expenses of $35,578, due to an increase in OTC market fees of $10,000, computer and internet expense of $1,623, miscellaneous professional fees of $3,600, travel of $11,158, and other office supplies and miscellaneous expenses of $9,197; and
·
an increase in rent expense of $1,951 due to additional leased office space.
General and administrative expenses in the amount of $958,339 for the six months ended June 30, 2015, were comprised of $358,699 of amortization of stock compensation, $116,184 of depreciation and amortization, $66,129 of legal and accounting fees, $314,998 of management and other consulting fees, $66,636 of office overhead and other general and administrative expenses, and $37,492 of rent expense.
General and administrative expenses in the amount of $322,470 for the six months ended June 30, 2014, were comprised of $30,000 of amortization of stock options, $28,513 of legal and accounting fees, $215,000 of consulting, $15,357 of office, overhead and other general and administrative expenses, and $33,600 of rent expense.
General and administrative expenses for the six month period ended June 30, 2015, of $958,339 as compared to $322,470 for the six month period ended June 30, 2014, resulted in an increase in general and administrative expenses for the current period of $635,869.
Significant changes in general and administrative expenses for the six month period ended June 30, 2015, compared to the six month period ended June 30, 2014, were attributable to the following items:
·
a decrease in amortization of stock options of $30,000, due to certain deferred stock option compensation fully expensed in the prior period, resulting in no expense in the current period;
·
an increase in amortization of deferred stock compensation of $356,899, due to certain stock grants and awards in 2014, resulting in an increase in deferred stock compensation, of which $356,899 was expensed in the current period, compared to no expense for the same period in the prior year;
·
an increase in depreciation and amortization expense of $116,084, due to the acquisition of certain intellectual property, resulting in amortization expense in the current period of $116,184, compared to no expense for the same period in the prior year; and a decrease in depreciation expense of $100, for ;property disposed of in the prior year, resulting in no expense in the current year;
·
an increase in legal, accounting and professional fees of $37,616, primarily due to a decrease in miscellaneous legal services of $139; an increase in audit fees of $1,477, and an increase in internal accountant fees of $36,000;
·
an increase in management and other consulting fees of $99,998, primarily due to a change in officers, resulting in a decrease of $37,502; an increase in certain monthly compensation by $5,000 per month, resulting in an increase of $30,000; and an increase of $8,500 resulting from a new consulting agreement entered into in the current period, compared to no such expense in the prior period;
·
an increase in other general and administrative expenses of $51,380, due to an increase in OTC market fees of $10,000, computer and internet expense of $3,627, miscellaneous professional fees of $3,600, travel of $21,554 and other office supplies and miscellaneous expenses of $12,598; and
·
an increase in rent expense of $3,892 due to additional leased office space.
General and administrative expenses for the three and six month period ended June 30, 2015, were incurred primarily for the purpose of advancing the Company closer to its financing and operating goals.
Net Loss
During the six months ended June 30, 2015, the Company incurred a net loss of $1,066,852, compared with a net loss of $408,096 for the six months ended June 30, 2014. The increase in net loss of $658,756 is attributable to an increase in revenue of $899, an increase in cost of goods sold of $2,705, an increase in general and administrative expenses of $635,869, an increase in interest expense of $23,442, an increase in realized gains on foreign currency changes of $436, and a decrease in losses from the disposal of assets of $1,925.
Liquidity and Capital Resources
Working capital |
|
|
|
|
|
| |||
| June 30, 2015 |
| December 31, 2014 |
| Increase (decrease) |
| |||
Current assets | $ | 247,874 |
| $ | 81,361 |
| $ | 166,513 |
|
Current liabilities |
| 3,478,106 |
|
| 3,388,652 |
|
| 89,454 |
|
Working capital (deficit) | $ | (3,230,232 | ) | $ | (3,307,291 | ) | $ | 77,059 |
|
As of June 30, 2015, and December 31, 2014, respectively, the Company had $239,941 and $64,753 in cash.
The Company had a working capital deficit of $3,230,232 as of June 30, 2015, compared to a working capital deficit of $3,307,291 at December 31, 2014. The decrease in working capital deficit of $77,059 is primarily attributable to an increase in cash of $175,188, an increase in accounts receivable of $3,000, a decrease in refunds and claims receivable of $11,138, a decrease in prepaid insurance of $537, an increase in accounts payable and accrued expenses of $60,313, an increase in related party payable of $46,791, and a decrease in other short term notes payable of $17,650.
Cash Flows | For the six months ended |
| ||||
| June 30, 2015 |
| June 30, 2014 |
| ||
Net cash provided by (used in) operating activities | $ | (227,595 | ) | $ | |
|
Net cash provided by investing activities |
| 674 |
|
| |
|
Net cash provided by financing activities |
| 402,019 |
|
| |
|
Effects of exchange rate changes |
| 90 |
|
| |
|
Net increase (decrease) in cash | $ | (175,188 | ) | $ | |
|
14
Cash Flows from Operating Activities
During the six months ended June 30, 2015, the Company used $227,595 of cash flow from operating activities, compared with $0 provided by operating activities for the six months ended June 30, 2014. The increase in cash used in operating activities of $227,595 is primarily attributable to an increase in the net loss from operations of $658,756, an increase in stock compensation/stock option amortization of $326,899, a decrease in accruals converted to related party loans of $43,502, an increase in depreciation and amortization of $116,084, an increase in discount amortization of $42,897, a decrease in losses from the disposal of assets of $1,925, an increase in accounts receivable of $3,000, a decrease in refunds and claims receivable of $11,139, a decrease in prepaid expenses of $537, a decrease in accounts payable and accrued expenses of $17,930, and a decrease in related party payables of $38.
Cash Flows from Investing Activities
During the six months ended June 30, 2015, the company had $674 of cash flows from investing activities, compared to no cash flows from investing activities for the six months ended June 30, 2014. The increase in cash provided by investing activities is primarily attributable to $674 in cash received from a subsidiary.
Cash Flows from Financing Activities
During the six months ended June 30, 2015, the Company was provided with $402,019 of cash flows from financing activities, compared with $0 during the six months ended June 30, 2014. The increase in cash flows provided by financing activities of $402,019 is attributable to a decrease in related party loans of $17,650, subscriptions received of $1,150, and an increase in proceeds from the issuance of common stock of $418,519.
As at June 30, 2015, affiliates and related parties are due a total of $3,470,216, which is comprised of loans to the Company of $3,125,844, accrued compensation of $264,550, and reimbursed expenses of $79,822, for a net increase of $276,436. During the six months ended June 30, 2015, loans to the Company increased by $229,645, unpaid compensation increased by $146,050 and reimbursable expenses decreased by $99,259. All outstanding related party notes payable bear interest at the rate of 5% to 7% per annum, are due and payable within between one (1) year of written demand and by December 9, 2018, or upon certain equity funding, and are convertible into the Companys common stock at a price of between $0.05 and $0.40 per share.
The Companys principal sources of funds have been from sales of the Companys common stock and loans from related parties.
Contractual Obligations
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
Going Concern
The Company has incurred losses since inception resulting in an accumulated deficit of $12,762,582, and a working capital deficit of $3,230,232, and further losses are anticipated. The Companys ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, which may not be available at commercially reasonable terms. There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations and the Company may cease operations. These factors, among others, raise substantial doubt about the Companys ability to continue as a going concern.
The unaudited consolidated financial statements included with this quarterly report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that the Companys assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the unaudited consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Companys financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
The discussion and analysis of the Companys financial condition and results of operations are based upon the Companys consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by managements application of accounting policies. The Company believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of the Companys financial statements is critical to an understanding of the Companys financial statements.
Net Income (Loss) Per Common Share
The Company computes earnings per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (ASC 260-10). Net earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon conversion of convertible preferred shares and the exercise of the Companys stock options and warrants.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying consolidated financial statements include the, estimates related to asset impairments of long lived assets and investments, classification of expenditures as either an asset or an expense, valuation of deferred tax assets, and the likelihood of loss contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results could differ from these estimates.
Revenue Recognition
Revenue is recognized when all applicable recognition criteria have been met, which generally include (a) persuasive evidence of an existing arrangement; (b) fixed or determinable price; (c) delivery has occurred or service has been rendered; and (d) collectability of the sales price is reasonably assured.
15
The Companys revenue stream has been from Ecologic Shine®, the initial product marketed through the Companys subsidiary Ecologic Products, Inc. The Company has made limited sales to certain retail automobile maintenance chains for the purpose of product testing.
Stock Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Recent Accounting Pronouncements
The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (FASB), the US Securities and Exchange Commission (SEC), and the Emerging Issues Task Force (EITF), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:
Adopted:
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance is the culmination of the FASBs deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The adoption of this update did not have a material impact on its consolidated financial statements.
In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendments in this standard is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. The adoption of this update did not have a material impact on its consolidated financial statements.
In July 2013, the FASB issued ASU No 2013-11, Presentation of an Unrecognized Tax Benefit When Net Operating Loss Carryforward Exists. The objective of ASU 2013-11 is to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits, and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and interim reporting periods therein. Early adoption is permitted. The adoption of this update did not have a material impact on its consolidated financial statements.
In June 2014, the FASB issued ASU No, 2014-10, Elimination of Certain Financial Reporting Requirements for Development Stage Entities. The objective of ASU 2014-10 is to reduce the cost and complexity associated with the incremental reporting requirements for development stage entities. This Update removes all incremental financial reporting requirements, and eliminates an exception provided to development stage entities in Topic 810. The amendments in this standard are effective retrospectively for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted.
Not Yet Adopted:
In April 2014, the FASB issued ASU No. 2014-08 Presentation of Financial Statements (Topic 205): Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity. The objective of ASU No. 2014-08 is to clarify the criteria for determining which disposals can be presented as discontinued operations and also modifies related disclosure requirements. The standard is required to be adopted by public business entities in annual periods beginning on or after December 15, 2014, and interim periods within those annual periods. Early adoption is permitted for new disposals beginning in the first quarter of 2014, provided financial statements have not been issued before the release of this standard. The Company is evaluating the effect, if any, adoption of ASU No. 2014-08 will have on its consolidated financial statements.
In August 2014, the FASB issued ASU No 2014-15 Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern. The objective of ASU 2014-15 is to provide guidance in GAAP about managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern and to provide related footnote disclosures. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is evaluating the effect, if any, adoption of ASU No. 2014-15 will have on its consolidated financial statements.
In November 2014, the FASB issued ASU No. 2014-17 Business Combinations (Topic 805): Pushdown Accounting. The objective of ASU 2014-17 is to provide guidance on whether and at what threshold an acquired entity that is a business or nonprofit activity can apply pushdown accounting in its separate financial statements. The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle. The Company is evaluating the effect, if any, adoption of ASU No. 2014-17 will have on its consolidated financial statements.
In January 2015, the FASB issued ASU 2015-01 Income StatementExtraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This Update eliminates from GAAP the concept of extraordinary items. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The effective date is the same for both public business entities and all other entities. The Company is evaluating the effect, if any, adoption of ASU No. 2015-01 will have on its consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03 Interest-Imputation of Interest (Subtopic 835-30: Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 is part of the Simplification Initiative, and its objective of to simplify the presentation of debt issuance costs. This Update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. The amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company is evaluating the effect, if any, adoption of ASU No. 2015-03 will have on its consolidated financial statements.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.
16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Managements Report on Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Companys reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Companys management, including the Companys president, chief executive officer and chief financial officer to allow for timely decisions regarding required disclosure. In designing and evaluating the Companys disclosure controls and procedures, the Companys management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Companys management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of June 30, 2015, the end of the Companys period covered by this quarterly report, the Company carried out an evaluation, under the supervision and with the participation of the Companys president, chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based on the foregoing, the Companys president, chief executive officer and chief financial officer concluded that the Companys disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
Changes in Internal Control over Financial Reporting
There have been no changes in the Companys internal controls over financial reporting that occurred during the three month period ended June 30, 2015, that have materially or are reasonably likely to materially affect, the Companys internal controls over financial reporting.
17
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company knows of no material existing or pending legal proceedings against us, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of the Companys directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to the Company.
ITEM 1A. RISK FACTORS
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY STANDARDS
Not Applicable
ITEM 5. OTHER INFORMATION
18
ITEM 6. EXHIBITS
Exhibit Number | Description | Filing Reference |
(2) | Plan of Purchase, Sale, Reorganization, Arrangement, Liquidation or Succession |
|
2.1 | Letter of Intent between the Company and ACE Rent A Car, Inc. dated August 2, 2012 | Filed with the SEC on November 19, 2012 as part of the Companys Quarterly Report on Form 10-Q |
2.2 | Letter of Intent between the Company and PearTrack Systems Group, Ltd. dated September 26, 2014 | Filed with the SEC on October 2, 2014 as part of the Companys Current Report on Form 8-K |
2.3 | Agreement and Plan of Merger between the Company, PearTrack Systems Group Limited and PearTrack Acquisition Corp. effective October 17, 2014 | Filed with the SEC on October 23, 2014 as part of the Companys Current Report on Form 8-K |
(3) | Articles of Incorporation and Bylaws |
|
3.1 | Articles of Incorporation | Filed with the SEC on November 30, 2006 as part of the Companys registration statement on form SB-2 |
3.2 | Bylaws | Filed with the SEC on November 30, 2006 as part of the Companys registration statement on form SB-2 |
3.3 | Certificate of Change filed with the Secretary of State of Nevada on April 2, 2008 | Filed with the SEC on April 21, 2008 as part of the Companys Current Report on Form 8-K |
3.4 | Articles of Merger | Filed with the SEC on June 26, 2008 as part of the Companys Current Report on Form 8-K |
3.5 | Certificate of Change filed with the Secretary of State of Nevada on August 29, 2008 with respect to the reverse stock split | Filed with the SEC on September 17, 2008 as part of the Companys Current Report on Form 8-K |
3.6 | Articles of Merger | Filed with the SEC on June 11, 2009 as part of the Companys Current Report on Form 8-K |
3.7 | Certificate of Change filed with the Secretary of State of Nevada on May 15, 2009 with respect to the reverse stock split | Filed with the SEC on June 11, 2009 as part of the Companys Current Report on Form 8-K |
3.8 | Articles of Merger filed with the Secretary of State of Nevada on June 2, 2009 with respect to the merger between the Companys wholly owned subsidiary, Ecological Acquisition Corp. and Ecologic Sciences, Inc. | Filed with the SEC on July 9, 2009 as part of the Companys Current Report on Form 8-K |
3.9 | Certificate of Change filed with the Secretary of State of Nevada on May 15, 2009, effective June 9, 2009 with respect to the merger between the Companys wholly owned subsidiary, Ecological Acquisition Corp., and Ecologic Sciences, Inc. | Filed with the SEC on July 9, 2009 as part of the Companys Current Report on Form 8-K |
3.10 | Certificate of Amendment filed with the Secretary of State of Nevada on September 29, 2014, effective October 17, 2014 with respect to the authorized shares and name change | Filed with the SEC on October 2, 2014 as part of the Companys Current Report on Form 8-K |
(10) | Material Contracts |
|
10.1 | Agreement and Plan of Merger dated April 26, 2009 | Filed with the SEC on April 30, 2009 as part of the Companys Current Report on Form 8-K |
10.2 | Employment agreement dated January 30, 2009 between the Company and Mr. Plamondon | Filed with the SEC on July 9, 2009 as part of the Companys Current Report on Form 8-K |
10.3 | Agreement dated April 28, 2009 between the Company and Audio Eye, Inc. | Filed with the SEC on July 9, 2009as part of the Companys Current Report on Form 8-K |
10.4 | Agreement dated May 15, 2009 between the Company and Audio Eye, Inc. | Filed with the SEC on July 9, 2009 as part of the Companys Current Report on Form 8-K |
10.5 | Employment agreement dated June 29, 2009 between the Company and Mr. Keppler. | Filed with the SEC on July 9, 2009 as part of the Companys Current Report on Form 8-K |
10.6 | Memorandum of Understanding dated May 12, 2009 between the Company and Green Solutions & Technologies, LLC | Filed with the SEC on July 9, 2009 as part of the Companys Current Report on Form 8-K |
10.7 | Form of Debt Settlement Subscription Agreement dated July 1, 2009 between the Company and John L. Ogden | Filed with the SEC on July 9, 2009 as part of the Companys Current Report on Form 8-K |
10.8 | Service Agreement dated September 24, 2009 between Ecologic Products, Inc. and Park N Fly Inc. | Filed with the SEC on September 29, 2009 as part of the Companys Current Report on Form 8-K |
10.9 | Agreement dated September 29, 2009 between the Company and North Sea Securities LP. | Filed with the SEC on April 14, 2010 as part of the Companys Annual Report on Form 10-K |
10.10 | Consulting Agreement with Matrix Advisors, LLC dated October 1, 2009 | Filed with the SEC on April 14, 2010 as part of the Companys Annual Report on Form 10-K |
10.11 | Consulting Agreement with Huntington Chase Ltd. for Advisory Services dated October 12, 2009 | Filed with the SEC on April 14, 2010 as part of the Companys Annual Report on Form 10-K |
10.12 | Advisory Agreement for Executive Services of Norman A. Kunin dated as of January 1, 2010 | Filed with the SEC on August 16, 2010 as part of the Companys Current Quarterly Report on Form 10-Q |
10.13 | Independent Consulting Agreement between the Company and Prominence Capital, LLC effective April 5, 2010 | Filed with the SEC on August 16, 2010 as part of the Companys Current Quarterly Report on Form 10-Q |
10.14 | Agreement dated November 23, 2010 with BMO Capital Markets | Filed with the SEC on April 16, 2012 as part of the Companys Annual Report on Form 10-K |
10.15 | Independent Consulting Agreement between the Company and Oracle Capital Partners, LLC effective as of April 1, 2011. | Filed with the SEC on August 15, 2011 as part of the Companys Current Quarterly Report on Form 10-Q |
10.16 | Placement Agent Agreement between the Company and View Trade Securities, Inc. effective as of April 12, 2011 | Filed with the SEC on August 15, 2011 as part of the Companys Current Quarterly Report on Form 10-Q |
10.17 | Employment Agreement between the Company and William B. Nesbitt effective as of November 1, 2011 | Filed with the SEC on April 16, 2012 as part of the Companys Annual Report on Form 10-K |
10.18 | Share Exchange Agreement and Plan of Merger dated March 16, 2012 | Filed with the SEC on March 22, 2012 as part of the Companys Current Report on Form 8-K |
10.19 | Consulting Agreement between the Company and Greg Suess dated July 5, 2012 | Filed with the SEC on November 19, 2012 as part of the Companys Quarterly Report on Form 10-Q |
10.20 | Consulting Agreement between the Company and NUF Enterprises LLC dated July 5, 2012 | Filed with the SEC on November 19, 2012 as part of the Companys Quarterly Report on Form 10-Q |
10.21 | Engagement Letter between the Company and Wellington Shields & Co., LLC dated September 12, 2012 | Filed with the SEC on November 19, 2012 as part of the Companys Quarterly Report on Form 10-Q |
10.22 | Engagement Letter between the Company and Wellington Shields & Co., LLC dated September 12, 2012 | Filed with the SEC on November 19, 2012 as part of the Companys Quarterly Report on Form 10-Q |
10.23 | Modification Agreement between the Company and Huntington Chase Financial Group dated October 12, 2012 | Filed with the SEC on April 1, 2013 as part of the Companys Annual Report on Form 10-K |
10.24 | Assignment and Licensed Rights Agreement between the Company and PearLoxx Limited dated December 19, 2014 | Filed with the SEC on January 26, 2015 as part of the Companys Current Report on form 8-K |
10.25 | Amendment to the Assignment and Licensed Rights Agreement between the Company and PearLoxx Limited dated March 9, 2015 | Filed with the SEC on May 20, 2015 as part of the Companys Quarterly Report on form 10-Q |
(16) | Auditors Letters |
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16.4 | Letter dated June 7, 2013 from Anton & Chia LLC | Filed with the SEC on June 10, 2013 as part of the Companys Current Report on Form 8-K |
(21) | Subsidiaries of the Registrant |
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21.1 | PearTrack Systems Group, Ltd. Ecologic Car Rentals, Inc. Ecologic Products, Inc. |
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(23) | Consents |
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23.1 | Letter from Seale and Beers, CPAs dated April 15, 2014 | Filed with the SEC on April 15, 2014 as part of the Companys Annual Report on Form 10-K |
23.2 | Letter from Seale and Beers, CPAs dated April 15, 2015 | Filed with the SEC on April 15, 2015 as part of the Companys Annual Report on Form 10-K |
(31) | Section 302 Certifications |
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Filed herewith. | ||
Filed herewith. | ||
(32) | Section 906 Certifications |
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Filed herewith. | ||
Filed herewith. | ||
(101) | Interactive Data Files |
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101.INS** | XBRL Instance Document |
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101.SCH** | XBRL Taxonomy Extension Schema Document |
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101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB** | XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document |
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*
Filed herewith.
**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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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.
| PEARTRACK SECURITY SYSTEMS, INC. |
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Dated: August 27, 2015 | /s/ Edward W. Withrow Jr. |
| Edward W. Withrow Jr. |
| President and CEO |
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Dated: August 27, 2015 | /s/ Calli Bucci |
| Calli Bucci |
| Chief Financial Officer |
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