Item1. FINANCIAL STATEMENTS.
The accompanying financial statements are an integral part of these financial statements.
NOTE 1. ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Organization
INTREOrg Systems, Inc. (the “Company”) was incorporated under the laws of the State of Texas on November 3, 2003. The Company was organized for the purpose of providing internet consulting and "back office" services to companies. The Company's fiscal year end is December31st.
Reclassifications
Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.
Going Concern
The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company's current liabilities exceed the current assets by $3,100,958 at March 31, 2016. During the three month period ended March 31, 2016, the Company did not generate any revenues. At March 31, 2016, the Company had an accumulated deficit of $5,903,993.
The Company has not earned revenues from operations. The Company's ability to continue as a going concern is dependent upon its ability to raise the necessary capital to further implement its business plan, launch its operations and ultimately achieve profitable operations. There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash flow from operations. Accordingly, there is substantial doubt as to our ability to continue as a going concern. However, management believes that actions presently being taken provide the opportunity for the Company to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Basis of Presentation
Interim Accounting
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended December 31, 2015 as filed with the SEC on September 20, 2018. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2015 as reported in Form 10-K have been omitted.
Summary of Significant Accounting Policies
Recent Accounting Pronouncements
In August 2014, the FASB issued a new Accounting Standards Update, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15). ASU 2014-15 provides guidance on management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern within one year of the date the financial statements are issued, and, if such conditions exist, to provide related footnote disclosures. The guidance is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted. The Company expects to adopt this guidance when effective and is currently evaluating the effect that the updated standard will have on its financial statements and related disclosures.
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INTREORG SYSTEMS, INC.
Notes to the Financial Statements March 31, 2016
(Unaudited)
NOTE 2. RELATED PARTY TRANSACTIONS.
Line of Credit
On June 19, 2011, the Company entered into a revolving line of credit with J.H. Brech, LLC (“Brech”); a related party, to provide access to fund our operations (the "Line of Credit")
As of March 31, 2016, and December 31, 2015, the Company owed Brech $537,045 and $597,754, respectively for amounts advanced to the Company for working capital expenses. The outstanding balance is past due and is classified as a current liability as of March 31, 2016 and December 31, 2015. As of the date of this Report, Brech, has not declared a default on the Line of Credit.
Accrued and unpaid interest on the Line of Credit at March 31, 2016 and December 31, 2015 totaled $57,551 and $45,629. Interest expense related to the Line of Credit was $51,473 and $37,701 for the periods ended March 31, 2016 and 2015, respectively.
Cicerone Consulting Agreement
As of March 31, 2016 and December 31, 2015, Cicerone Corporate Development, LLC ("Cicerone") is owed $29,946 for company reimbursable expenses, under the terms of the Company's 2011 consulting agreement with Cicerone, which was terminated in 2011.
Payable to the Chief Executive Officer and President
On February 3, 2014, Darren Dunckel paid certain legal, accounting and other invoices on behalf of the Company aggregating $33,837. Such advances have not been repaid and are included in accounts payable- related parties. In addition, Mr. Dunckel is owed $174,657 and $153,657 in unpaid consulting fees as of March, 31, 2016 and December 31, 2015, respectively. During the periods ending March 31, 2016 and 2015, the Company expensed $21,000 and $21,000, respectively in consulting fees to Mr. Dunckel.
Licensing Agreement
On October 30, 2012, the Company entered in to an Intellectual Property License and Consulting Agreement with Public Issuer Stock Analytics, LLC (PISA) a Texas Limited Liability Corporation, whose managing member is a shareholder, granting the Company an exclusive license to develop and use the Licensed Technology and to fully exploit the Licensed Technology by selling products and/or services. Upon signing of the agreement, the company paid PISA 250,000 shares of restricted common stock and thereafter and until the second anniversary 20,000 shares monthly of restricted common stock monthly and 1% of the gross sales of products and/or services. Thereafter and until the third anniversary, 20,000 shares monthly of restricted common stock and 2% of Gross Sales of products and/or services. Following the third anniversary, 20,000 shares monthly of restricted common stock and 3% of Gross Sales. The Company expensed $67,700 and $85,040 for the periods ending March 31, 2016 and 2015, respectively, related to this agreement.
Payable to shareholder
As of March 31, 2016 and December 31, 2015, the Company has accrued $76,876 and $76,876, respectively, for accounting services from a shareholder, PT Platinum. This amount is included in accounts payable-related parties. During the three month periods ended March 31, 2016 and 2015, the Company expensed $0 and $23,850, respectively in fees to PT Platinum.
Payable to former President and Chairman of the Board
As of March 31, 2016 and December 31, 2015, the Company has a payable of $86,000 to a former President and Chairman of the Board for consulting services rendered in prior years.
NOTE 3. NOTES PAYABLE
The Company’s notes payable totaling $521,000 bear interest at 6% to 10% per annum. Accrued and unpaid interest at March 31, 2016 and December 31, 2015 amounted $391,223 and $359,448, respectively, and is included with accrued interest and other liabilities in the accompanying financial statements. All of the Company’s notes payable are past due and in default.
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INTREORG SYSTEMS, INC.
Notes to the Financial Statements March 31, 2016
(Unaudited)
NOTE 4. COMMITMENTS AND CONTINGENCIES.
At March 31, 2016 and December 31, 2015, management estimates there is a potential liability of $453,290 related to the operations under the former management of the Company. The contingent amount is recorded as a contingent liability in the accompanying financial statements and relates primarily to compensation in years prior to 2009. Management is not aware of any pending or threatened litigation involving the Company as of March 31, 2016 or since, through the date of these financial statements.
NOTE 5. CAPITAL STOCK.
During the quarter ended March 31, 2016, the Company authorized the issuance of 20,000 shares per month to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them. The grants aggregated 60,000 shares valued at the closing price as of the date of grant for a total of $39,800. While we have not issued the certificates for certain of these shares as of March 31, 2016, the issuance of the certificate is considered a ministerial act and we have reflected these shares as issued and outstanding at March 31, 2016. The shares have been issued as of the date of this Report.
During the quarter ended March 31, 2016, $62,000 of the line of credit was converted to 250,000 common shares.
In March 2015, the Company issued 250,000 shares of common stock in full settlement of legal bills outstanding with a law firm. At the date of settlement, the fair value of the Company’s common stock approximated $85,000, which exceeded the recorded value of the outstanding legal bills. The Company recognized a loss of $32,587 on the transaction in 2015.
2010 Stock Option and Award Incentive Plan
On June 29, 2010, the Company’s shareholders approved the adoption of the Company’s 2010 Stock Option and Award Incentive Plan (the “Plan”). The Plan, which provides for the grant of stock options to the Company’s directors, officers, employees, consultants, and advisors of the Company, is administered by a committee consisting of members of the Board of Directors (the "Stock Option Committee"), or in its absence, the Board of Directors. The Plan provides for a total of 2,000,000 shares of common stock to be reserved for issuance subject to options.
A summary of option activity as of March 31, 2016 and changes during the period then ended are presented below:
Options
|
|
Number of
Options
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
(in years)
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2016
|
|
2,300,000
|
$
|
0.46
|
|
2.31
|
$
|
-
|
Granted
|
|
-
|
|
-
|
|
-
|
|
-
|
Exercised Expired
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2016
|
|
2,300,000
|
$
|
0.46
|
|
2.19
|
$
|
364,800
|
|
|
|
|
|
|
|
|
|
Options exercisable at March 31, 2016
|
|
648,250
|
$
|
.62
|
|
2.18
|
$
|
285,000
|
During the three months ended March 31, 2016, no stock options were granted.
Stock option expense of $8,833 and $8,833 was recorded for the periods ended March 31, 2016 and 2015.
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INTREORG SYSTEMS, INC.
Notes to the Financial Statements March 31, 2016
(Unaudited)
NOTE 6. SUBSEQUENT EVENTS
Board of Directors:
On October 1, 2016, Mr. Thomas E. Lindholm was named Executive Director and Interim CEO to act as the company’s sole officer. Mr. Lindholm’s Director Agreement compensation included director fees and stock options. Mr. Lindholm was granted an option to purchase up to 500,000 shares at $.20 per share. The options fully vest on September 30, 2017 and have a 3-year term. Mr. Lindholm was issued 170,000 shares of common stock on December 13, 2017 which converted $34,000 in accrued director fees and was also issued an additional 50,000 shares of common stock related to this Director Agreement. On January 27, 2017, Mr. Michael Farmer resigned as Director. On March 31, 2017 Mr. Farmer exercised his stock option and requested past director fees be converted into common stock, the Company Executive Director denied the request. Mr. Redgie Green resigned on October 11, 2017 and a copy of his resignation letter is an exhibit hereto. On October 16, 2017 Mr. John Devlin Jr. was named Director and died on March 8, 2018. Mr. Devlin was issued 50,000 shares of common stock upon appointment to the Board. On March 13, 2018, Mr. Robert Flynn was appointed to the Board as Director, Secretary and Treasurer. Mr. Flynn was issued 50,000 shares of common stock upon appointment to the Board. A copy of the Director Agreements attached hereto as an exhibit.
Management:
On August 19, 2016, Mr. Darren Dunkel was terminated as President and Chief Executive Officer by the Board of Directors. On October 1, 2016, Mr. Thomas E. Lindholm was named interim Chief Executive Officer and executive director to act as the company’s sole officer until a new executive officer could be hired. On April 20, 2017, Mr. David Beach was named President and Chief Executive Officer and subsequently resigned on June 29, 2017. On March 13, 2018, Mr. Robert Flynn was named Vice President / General Counsel. Messrs. Lindholm and Flynn entered into management consulting agreements for one year. 377,247 shares were issued to Messrs. Lindholm and Flynn on April 3, 2018 related to these agreements.
Public Stock Issuer Analytics, Inc. (“PISA”):
On March 1, 2017, the PISA License Agreement was extended to September 30, 2017. On November 11, 2017, the PISA Intellectual Property License Agreement was extended ten years from September 30, 2017 through September 30, 2027. Pursuant to the terms of the intellectual property license, the Company issued 586,545 shares through August 31, 2018 to Public Issuer Stock Analytics.
J.H. Brech Revolving 8% Credit Note:
The balance on the line of credit as of September 4, 2018 was $215,796.
Other:
Effective July 15, 2016, 355,547 shares of common stock issued in 2015 in conjunction with a Christopher Roberts consulting agreement were retired, due to failure by Mr. Roberts to perform his consulting agreement, to the Company's treasury. On October 15, 2017, management sold its Radiant Oil and Gas, Inc. common shares in a private sale for $9,000.
On June 27, 2018, the Company named Mr. Richard M. Nummi, Director and Chairman of the Executive Compensation Committee. Subject to vesting requirements, the Company granted 50,000 shares of common stock to Mr. Nummi on the date of this agreement.
On September 12, 2018, the Company issued 1,185,000 shares of common stock for $237,000
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