UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
| x | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 |
For the fiscal year ended December 31,
2013
OR
| ¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For the transition period from_____________
to _____________.
Commission file number 000-54012
InterCore,
Inc.
(Exact name of registrant as specified in
its charter)
Delaware |
27-2506234 |
(State or other jurisdiction of |
(I.R.S. Employer |
incorporation or organization) |
Identification No.) |
|
|
1615 South Congress Avenue - Suite 103 |
|
Delray Beach, FL |
33445 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number,
including area code (561) 900-3709
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Name of each exchange on which registered |
|
|
|
None |
|
None |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001
(Title of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨
No x
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨
No x
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes o
No x
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to and post such files). Yes o
No x
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨ |
Accelerated filer ¨ |
|
|
Non-accelerated filer ¨ |
Smaller reporting company x |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨
No x
Aggregate
market value of the voting stock held by non-affiliates: $85,134,000 based upon the closing stock price of $6.25 on
November 10, 2014. The voting stock held by non-affiliates on that date consisted of 13,621,450 shares of common stock.
Applicable Only to Registrants Involved
in Bankruptcy Proceedings During the Preceding Five Years:
Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨
No ¨
Indicate the
number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As
of November 10, 2014, there were 40,649,465 shares of common stock, par value $0.0001, issued and outstanding.
Documents Incorporated by Reference
List hereunder the
following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document
is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed
pursuant to rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification
purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None.
InterCore, Inc.
TABLE OF CONTENTS
PART I
Explanatory Note
This Annual Report includes forward-looking
statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based
on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements
include the information concerning possible or assumed future results of operations of the Company set forth under the heading
“Management's Discussion and Analysis of Financial Condition or Plan of Operation.” Forward-looking statements also
include statements in which words such as “expect,” “anticipate,” “intend,” “plan,”
“believe,” “estimate,” “consider,” or similar expressions are used.
Forward-looking statements are not guarantees
of future performance. They involve risks, uncertainties, and assumptions. The Company's future results and shareholder values
may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance
on any forward-looking statements.
ITEM 1 – BUSINESS
Corporate History
We were incorporated in Delaware as I-Web
Media, Inc., on April 29, 2010. The corporation was formed under the Plan of Reorganization in the Chapter 11 bankruptcy proceedings
of AP Corporate Services, Inc. This Plan of Reorganization was approved by the U.S. Bankruptcy Court. At the time of our incorporation
we were a website design service company, but we never had any material operations as a website design company.
Share and per share amounts in the following
paragraphs reflect the effect of a nine for one forward split of our common shares which was effective on May 16, 2012 and a one
for one hundred reverse stock split of our common shares which was effective on December 31, 2013.
On October 28, 2010, the holder of the
majority of our common stock, as well as one of our officers and directors, Mr. Kenneth S. Barton, entered into an Agreement to
Purchase Common Stock with Rockland Group, LLC, (“Rockland”), under which Rockland agreed to purchase an aggregate
of 900,000 shares of our common stock from Mr. Barton for $250,000. These shares represented approximately 90% of our outstanding
common stock at that time. The transaction closed November 3, 2010. As a result of the Agreement to Purchase Common Stock between
Mr. Barton and Rockland, all of our officers and one of our directors resigned immediately, and we appointed one new director and
retained new executive officers. In addition, we changed our business focus from a website design service company to one focusing
on investments and acquisition opportunities primarily in products and companies involved in the emerging and important market
segments of clean and renewable energy, medical technology, nanotechnology, and environmentally-friendly (green) waste management.
Effective December 29, 2010, we amended
our Articles of Incorporation to i) change our name to Heartland Bridge Capital, Inc., to better reflect our intended business
operations, and ii) increase our authorized common stock to 250,000,000 shares, par value $0.0001 per share. On the same date we
approved amended and restated Bylaws and changed our fiscal year end from March 31st to December 31st. Detailed information regarding
these corporate actions can be found in our Definitive Information Statement on Schedule 14-C, filed with the Commission on December
7, 2010.
As further described in the following paragraphs,
during 2010 we purchased two assets that gave us material operations: i) a portion of the proceeds from sales of the Myself®
pelvic muscle trainer; and ii) a patent application for a novel medical applicator capable of delivering medicants and internal
devices within the body in an atraumatic fashion (without producing injury or damage). During 2011 we made the first of several
investments in companies with operations in our niche markets, namely HepatoChem, Inc. ("HepatoChem") and Legends and
Heroes, Inc.("Legends") and acquired the operations of the iSafe Imaging group of companies ("iSafe"). During
2012 we made the first of a series of investments in Epec Biofuels Holdings, Inc. ("Epec") During 2013, we acquired SRG International, Inc. ("SRG") with operations primarily consisting of researching, developing, and testing the Driver Alertness Detection
System ("DADS™ "). The DADS™ is designed around proprietary alertness detection technologies, and helps individuals
modulate their work activity based on real time assessment of their actual state of alertness. Simultaneously with consummating
the transaction with SRG, we closed on a transaction with HLBC Distribution Company, Inc. ("HLBCDC") wherein the majority
of the assets we owned prior to the acquisition of SRG were transferred to HLBCDC in exchange for HLBCDC assuming the majority
of our liabilities and receiving common shares and a warrant for the purchase of common shares.
Acquisition of Myself® Cash Flow
Asset
On December 8, 2010, we entered into an
Asset Purchase Agreement with New Horizon, Inc., (the “New Horizon Agreement” and "New Horizon", respectively)).
On December 9, 2010, , we acquired certain assets from New Horizon, including the right to receive any proceeds New Horizon was
entitled to receive from the sale of the Myself® pelvic muscle trainer. The calculation of the amounts we were entitled to
receive from the sales of the Myself® pelvic muscle trainer are listed on Exhibit A to the New Horizon Agreement, which is
incorporated herein as Exhibit 10.8.
Under the New Horizon Agreement, we issued
to New Horizon the following: (i) a convertible promissory note in the principal amount of Two Million Dollars ($2,000,000), convertible
into our common stock at the conversion price of Sixteen Dollars Sixty Seven Cents ($16.67) per share, with the option by us to
pay the note with our common stock in lieu of cash at the rate of eleven and eleven hundredths (11.11) shares of our common stock
per One Dollar ($1) being paid (see Exhibit 10.2, attached hereto); (ii) Three Hundred Sixty Thousand (360,000) shares of our common
stock, restricted in accordance with Rule 144; and (iii) Three Million (3,000,000) shares of a new series of preferred stock (the
“Series B Convertible Preferred Stock”) to be created by us, restricted in accordance with Rule 144, with the following
rights and preferences: (a) dividend rights equal to the dividend rights of our common stock (as adjusted for the stock splits
described above); (b) liquidation preference over our common stock and equal to that of our Series A Convertible Preferred Stock;
(c) each share of Series B Convertible Preferred Stock will be convertible into forty-five hundredths (0.45) of a share of our
common stock; (d) no redemption rights; (e) no call rights by us; and (f) each share of Series B Convertible Preferred Stock will
have nine hundredths (0.09) of a vote on all matters validly brought to our common stockholders, with the other rights and preferences
to be determined by the our Board of Directors. On August 31, 2012 and under the terms of the New Horizon Agreement, we issued
an additional 1,500,000 and 180,000 shares of Series B Convertible Preferred and Common Stock, respectively, as the average closing
price of our Common Stock did not meet a specified price threshold during July 2012.
Acquisition of Medical Applicator Asset
On December 10, 2010, we entered into an
Asset Purchase Agreement with RWIP, LLC (the “RWIP Agreement” and "RWIP", respectively). On December 13,
2010, we acquired certain assets from RWIP, including a patent for a novel medical applicator. The description of the assets is
listed on Exhibit A to the RWIP Agreement, which is incorporated herein as Exhibit 10.11.
Under the RWIP Agreement, we issued
the following: (i) a convertible promissory note in the principal amount of One Hundred Twenty Five Thousand Dollars
($125,000), convertible into our common stock at the conversion ratio of Thirteen and One Half Cents ($0.135) per share, and
payable at the option of the Company in common stock in lieu of cash (ii) a warrant to purchase One Million Three Hundred
Fifty Thousand (1,350,000) shares of our common stock, restricted in accordance with Rule 144, with an exercise price of
Twenty Two Dollars ($22.22) per share, and (iii) royalties equal to twenty percent (20%) of the net income (revenue minus
expenses) received by us in connection with the assets purchased from RWIP.
HepatoChem Investment
On September 15, 2011, we entered into
a Series A Convertible Preferred Stock Purchase Agreement with HepatoChem under which we agreed to purchase up to 40,000 shares
of HepatoChem’s Series A Convertible Preferred Stock for up to $400,000. Pursuant to this agreement, on October 13, 2011
we purchased 10,000 shares of HepatoChem Series A Convertible Preferred Stock for $100,000. The original funding schedule contemplated
in the agreement was modified and subsequently on February 17, 2012 and March 20, 2012, we purchased an additional 3,500 and 7,500
shares of HepatoChem Series A Convertible Preferred Stock for $35,000 and $75,000, respectively. We also had the right to purchase
an additional 19,000 shares of HepatoChem Series A Convertible Preferred Stock for $190,000. HepatoChem’s Series A Convertible
Preferred Stock had liquidation preference over HepatoChem’s common stock, was convertible into HepatoChem’s common
stock, had voting rights, and had certain protective voting provisions to help maintain its preferential position.
HepatoChem (www.hepatochem.com) was a privately
held company that offers pharmaceutical and biotech companies a reliable and efficient means of accessing small molecule metabolites
in quantities needed in the drug development process.
Legends & Heroes Investment
On December 1, 2011 and as subsequently
modified on March 7, 2012, we entered into a Letter of Intent with Legends under which we would purchase 25%, on a fully diluted
basis, of the outstanding common stock of Legends for a total purchase price of $1,250,000 plus shares of our common stock and/or
warrants in an amount to be determined. The purchase price was to be paid in tranches: i) $250,000 in cash in exchange for 2.5%
of Legends’s common stock; ii) $200,000 in cash in equal weekly installments beginning on March 12, 2012 ending on April
30, 2012 in exchange for 2.0% of Legends’s common stock; iii) $800,000 in cash upon executing definitive transaction documents
and closing the transaction in exchange for 8% of Legends’s common stock; and iii) a combination of our common stock and
warrants in amounts to be determined, restricted in accordance with Rule 144, upon executing definitive transaction documents and
closing the transaction in exchange for 12.5% of Legends’s common stock. The first tranche, $250,000 for 2.5% of Legends’s
common stock was binding on both parties and the $250,000 was paid to Legends on December 7, 2011. The second tranche, $200,000
for 2.0% of Legends' common stock was binding on both parties and, as required, payments aggregating $75,000 were paid through
March 26, 2012. The third and the fourth tranches for the remaining 20.5% of Legends’s common stock was non-binding and dependent
upon the parties executing definitive transaction documents, which the parties agreed to exert reasonable efforts to conclude during
the second quarter of 2012. Additionally, if the parties consummated the entire transaction and we acquired 25% of Legends’s
common stock we would have had the right to appoint a majority of the directors to serve on Legends’s Board of Directors
for at least the next three years after the close of the transaction.
Legends were the maker of Skineez Skincarewear™
which were comfortable and highly effective garments that constantly delivered healthy and natural cosmetic ingredients to the
skin while individuals wore them.
iSafe Transaction
On March 21, 2011, we entered into a Reorganization
and Stock Purchase Agreement (the “Agreement”) with iSafe Imaging Canada Ltd., a Canadian corporation, iSafe Imaging,
LP and eMediSafe, LP (together the “iSafe Entities”), and the individuals and entities which were owners of the iSafe
Entities (the “iSafe Holders”). On March 22, 2011, acquired all of the outstanding securities and ownership interests
of the iSafe Entities. The iSafe Entities provided digital file conversion services that converted legacy information of various
formats into valuable, usable information. Services included document imaging, tape copying and transcription, data replication,
and disaster recovery. Additional services provided by the iSafe Entities included physical storage and management of hard copy
records and paper materials, document retention planning, and document disposal. These services enabled the iSafe Entities to create
unique and comprehensive data and information management solutions that delivered maximum value to their business and user communities.
In exchange for the securities and ownership
interests of the iSafe Entities, we issued the iSafe Holders forty-five thousand (45,000) shares of our common stock, restricted
in accordance with Rule 144, and warrants to purchase four thousand five hundred (4,500) shares of our common stock at an exercise
price of Thirty-Three Dollars Eighty Nine Cents ($33.89) per share.
On August 11, 2011, we filed an amended
Current Report on Form 8-K/A with the audited financial statements of the iSafe Entities for the year ended December 31, 2012.
According to those audited financial statements, the iSafe Entities had combined revenues of approximately $1.3 million in 2010,
an increase of approximately 50% over the 2009 revenues of approximately $0.9 million. Major customers of the iSafe Entities’
included companies in the energy, telecommunications, engineering, and medical sectors.
On November 22, 2011, we sold the iSafe
Entities to a company controlled by our majority shareholder for a cash payment of $250,000 plus 11,700 shares of our common stock
(restricted under Rule 144) and warrants for the purchase of 4,500 shares of our common stock with an exercise price of $33.89.
We realized a gain of approximately $163,000 in connection with that transaction.
Effective March 31, 2012, we decided to
further intensify our focus in the energy sector and the related opportunities within and, to that end, we elected to change the
name of the Company to InterCore Energy, Inc. Simultaneously, our Board unanimously adopted, and stockholders holding a majority
of the common stock approved, a resolution to effect a nine-for-one (9:1) forward stock split of our outstanding common stock and
to increase the number of authorized shares of Common Stock from 250,000,000 to 750,000,000. These actions were effective May 16,
2012.
Epec Transaction
On May 21, 2012, we entered into a Common
Stock Purchase Agreement with Epec under which we agreed to purchase Twenty Million (20,000,000) shares of Epec’s common
stock, par value $0.0001 per share, at a purchase price of Five Cents ($0.05) per Share, for total consideration of One Million
Dollars ($1,000,000), (the “Consideration”) payable as follows: (i) One Hundred Fifty Thousand Dollars ($150,000) paid
upon execution thereof, (ii) Six Hundred Thousand Dollars ($600,000) paid in installments of $150,000 each on each of June 15,
2012, June 30, 2012, July 15, 2012, and July 31, 2012 (the “Installment Payments”) pursuant to the terms of a promissory
note, and (iii) Two Hundred Two Thousand Five Hundred (202,500) shares of our common stock, restricted in accordance with Rule
144. The shares purchased by us represented approximately 20% of Epec’s then-outstanding common stock, on a fully diluted
basis. Under the Agreement we had the right to appoint one person to Epec’s Board of Directors upon execution of the agreement
and a second director upon payment of the fourth Installment Payment. After several amendments to the promissory note, we issued
Epec a total of three million one hundred fifty thousand (3,150,000) shares of our common stock and paid Epec a total of $275,000
in exchange for a total of Twelve Million Five Hundred Thousand (12,500,000) shares of Epec’s common stock. As of December
31, 2013, we owed Epec $150,000 under the terms of this series of agreements, as amended.
SRG Transaction
On January 23, 2013, we closed on a transaction
with SRG International, Inc., a Quebec Province corporation, (“SRG”) and the shareholders of SRG pursuant to which
the holders of 100% of the outstanding common stock of SRG transferred to us all of the common stock of SRG in exchange
for the issuance of 5,000,000 shares of our newly created Series C Convertible Preferred Stock for the purpose of acquiring
SRG's in-process research and development. We accounted for this acquisition as the purchase of a business. Immediately
after a reverse split of our common stock, which occurred on December 31, 2013, all of the then outstanding shares of
Series C Convertible Preferred Stock automatically converted into 80% of the then outstanding shares of our common stock.
The holders of the Series C Convertible Preferred Stock did not originally perfect their interest in such securities due to non-performance
of certain provisions of the acquisition agreement. On October 28, 2013, we waived such provisions.
As a result of this transaction and a transaction
with HLBCDC (whereby we sold our assets and operations in exchange for relief from certain debt obligations, as described earlier
and in greater detail below), SRG became our wholly-owned subsidiary and we became a holding company with all of our current operations
conducted through SRG.
Those operations consisted primarily of
researching, developing, and testing the Driver Alertness Detection System ("DADS™"). DADS™ is designed around
proprietary alertness detection technologies, which enables individuals to modulate their work activity based on real time assessment
of their actual state of alertness. The DADS™ methodology employs a unique approach for assessing sleepiness and low alertness
levels via the observed behavior of individuals in real work conditions.
Assignment and Assumption Agreement
Simultaneously with consummating the transaction
with SRG, we closed a transaction contemplated by an Assignment and Assumption Agreement between us and HLBCDC pursuant to which
the majority of the assets we owned prior to the acquisition of SRG were transferred to HLBCDC in exchange for HLBCDC assuming
the majority of our liabilities along with our common shares and a warrant for the purchase of additional common shares. The assets
we transferred to HLBCDC were the shares we owned in Legends and Epec as well as the intangible rights associated with the Myself™
pelvic muscle trainer and a novel medical applicator referred to as the “Soft and Smooth Assets.” In addition to transferring
those assets, we issued to HLBDC 402,038 shares of our common stock (the “HLBCDC Shares”) and warrants to purchase
500,000 shares of our common stock at the exercise price of $0.55 per share (the fair market value of our common stock as of the
date of the Agreement) (the “HLBCDC Warrant”). In exchange for those assets, the HLBCDC Shares, and the HLBCDC Warrant,
HLBCDC agreed to assume liabilities valued at $985,948 consisting of fees owed to management, notes payables, and trade payables.
Asset Purchase Agreement
Immediately in advance of consummating
the transaction with SRG, we closed a transaction contemplated by an Asset Purchase Agreement with Rockland, our majority shareholder.
and an entity controlled by one of our Directors Pursuant to that agreement, we sold the shares we owned in HepatoChem to Rockland
in exchange for Rockland agreeing to forgive $579,938 of debt owed to it by us.
MeliaLife Agreement
On March 12, 2013, we entered into a Distribution
Agreement (the “Distribution Agreement”) with MeliaLife International, Inc. (“MeliaLife”), pursuant to
which we were awarded the rights to distribute and sell various natural supplement products produced by MeliaLife. Under the terms
of the Distribution Agreement we would be the exclusive distributor to sell certain products as described therein (the “Products”).
The duration of the Distribution Agreement is the lesser of five (5) years, or when we purchase Products in an amount by which
the MeliaLife has received $30 million, representing 50% of the total product value of the Products purchased by us, whichever
happens first. At the end of this contract, MeliaLife would assign its rights in all the Products to us for 4% of future net profits
(total product value minus direct costs related to the Products), calculated and paid monthly, generated by the sale by us of those
Products worldwide.
During the term of the Distribution Agreement,
MeliaLife would grant us 4% of its net profit (total product value minus direct costs related to the Products), calculated and
paid monthly, generated by sales in the areas set out in the Distribution Agreement. For each order we would place with MeliaLife,
we would pay MeliaLife the total manufacturing cost for the products ordered on the date of the order, and would pay 50% of the
total product value to the manufacturer on the date of delivery of the products.
Our relationship with MeliaLife as been
inactive since the date of the Distribution Agreement and we expect it to expire with the passage of time of its own accord.
Business Overview
As a result of the SRG Transaction, the
Assignment and Assumption Agreement, and the Asset Purchase Agreement, SRG became our wholly-owned subsidiary and we became a holding
company with all of our operations conducted through SRG, which consists of researching, developing, and testing of the DADS™
technology. We are no longer in the business of developing a novel medical applicator, providing document management services,
or advising the companies where we had investments, including HepatoChem, Legends, and Epec.
Products and Services
DADS™ is designed around proprietary
alertness detection technologies which enable individuals to modulate their work activity based on real time assessment of their
actual state of alertness. The DADS™ methodology employs a unique approach for assessing sleepiness and low alertness levels
via the observed behavior of individuals in real work conditions.
In development for more than a decade,
DADSTM utilizes biometric monitoring of 524 points of the driver's head – such as the eyes, face, ears, and chin
– to evaluate when the performance of the driver is becoming impaired. It then alerts the driver and, if desired, selected
third parties (such as trucking dispatch centers in commercial applications or, in private applications, friends or parents) of
the impending loss of alertness. The alert is designed to be given sufficiently in advance – from 45 to 120 minutes before
the onset of sleep – so that appropriate action can be taken before the driver becomes a hazard on the road. For fleet operators,
this would provide sufficient time for dispatch to direct the driver to a safe location to pull off and take a rest.
The original test version of the DADSTM
technology was deployed in specifically designed and constructed stand-alone units mounted on truck dashboards, similar to an after-market
Global Positioning System (GPS) device. In the current generation of the technology, DADSTM is deployed as a smartphone
app, which eliminates the need for independent device manufacturing and drastically increases the rate at which DADSTM
can be deployed. The initial deployment of DADSTM as a smartphone app for Blackberry phones commenced in September 2013.
We expected to rollout our Apple iPhone DADS™ app very shortly thereafter, but Apple's release of iOS7 in September 2013
required major changes to the iPhone app interface, including rewriting more than 500,000 lines of code. As a result, deployment
of the iPhone app was unavoidably delayed. However, we took this occasion to strengthen the security of DADS™ and modified
the encryption module to support more than one million DADS™ applications running simultaneously. The commercial version
of the iPhone application was released to the Canadian trucking industry in May 2014 in a 5,000 unit demonstration program and
we expect to release the consumer version through Apple's online store in the fall of 2014.
We will also be developing versions of
the app for the Android and other smart phones later this year.
Potential Marketplace and Customers
Due to the catastrophic consequences that
can occur if the operator of a motorized vehicle is seriously fatigued and/or falls asleep, we believe the potential marketplace
for DADSTM is any motorized vehicle, including cars, buses, trucks, and trains, with our initial focus being in commercial
trucking.
In late May 2013, a commercial insurance
brokerage company in Canada commenced a 100-vehicle test of DADS™. In July 2013, based on the results of just the first month,
the test was expanded to 150 vehicles. During the first forty days of the trial program, over 600 incidents were reported, the
majority of which were in the period of initial detection 45 minutes to two hours in advance. There were also at least 17 "red
alerts" detected by DADSTM signaling that the driver needed to stop for a nap, all of which were confirmed by the
drivers.
In September 2013, at the request of an
insurance advisory firm, we deployed the BlackBerry smartphone app version of DADSTM in 1,500 trucks insured by a major
insurance company. The insurance company was pleased with the results and in May 2014, we commenced deployment of the iPhone smartphone
app version of DADSTM to the first 5,000 of an estimated 80,000 trucks. We expect the use of DADSTM to rapidly
expand in the trucking industry and we have intentions of marketing it to other industry segments as well as the consumer marketplace
during the next twelve to twenty-four months.
Competition
A number of competitive fatigue identification
and management technologies exist, but none have the ease of use, advance warning capability, and reliability provided by DADS™.
Specifically, some technologies rely upon
individuals' physiological data such as electroencephalogram (brain wave) measurements while others rely upon individual's behavioral
data such as eye blink rates while yet others rely upon vehicle behavioral data such as lane departure. Such technologies are either
impractical to implement (such as electroencephalogram measurements) or can only detect the onset of sleep or lane departure when
it actually occurs. The latter technologies issue warnings to the vehicle operators "after the fact" leaving them with
only a few seconds to react to a hazard or an imminent accident.
As illustrated above, competing technologies
are reactive in nature. DADS™, on the contrary, is able to detect the first signs of fatigue as early as 45
to 120 minutes before the onset of sleep is imminent and, therefore, is predictive in nature. It is the only technology
capable of warning operators before they have become cognitively impaired or incapacitated. Therefore, the DADS™
approach to the problem of fatigue detection is unique and considerably more effective than any other technology.
Intellectual Property
We own all the intellectual property associated
with DADS™ and it is protected by international software copyright laws. The proprietary algorithms contained within are
based upon information contained within our databases which have been accumulated over several years of development efforts and
the source code is exclusively held by us with access tightly controlled and limited.
Government Approvals and Regulations
The sale and use of DADS™ does not
require governmental approvals nor is it subject to governmental regulations.
However, governmental authorities in the
United States and countries around the world have shown interest in requiring the application of fatigue management systems in
a broad spectrum of activities consisting of the operation of cars, trucks, buses, heavy machinery, mining vehicles, and other
applications. This will undoubtedly lead to the implementation of laws and regulations that require the use of such systems. For
example, Australia has already passed laws that oblige transportation operators to implement fatigue management programs, but has
not defined what those systems should be or how they should be implemented.
We are not aware of any trends with respect
to governmental approvals or regulations anywhere in the world that would be unfavorable to the implementation and use of the DADS™
and the growth of our business.
Research and Development Activities
Research and development activities are
ongoing and will continue for the foreseeable future. During 2013 and 2014 to date they have consisted of supporting trial deployments
of DADS™, adapting the iPhone app interface for Apple's release of iOS7, and strengthening the security of DADS™, by
modifying the encryption module to support more than one million DADS™ applications running simultaneously. During the balance
of 2014 and beyond, research and development activities will consist of adapting DADS™ to other smartphone platforms and
making modifications and/or enhancements as deemed appropriate.
Compliance with Environmental Laws and
Regulations
There is no information required to be disclosed under this
Item.
Employees
We currently have 27
employees, of which three are our officers and directors. We believe that our relationship with our staff is good.
Description of Property
In January 2014, we commenced leasing 3,250
square feet of office space for our operations in Montreal, Quebec, under a three year lease at the rate of approximately $90,000
per year. Currently, we do not lease office space for our corporate activities in the United States, but maintain a virtual office
at a cost of approximately $3,000 per year. This provides us with a physical address, a phone number with a live answering service,
and use of office facilities as needed.
Available Information
We are a fully reporting issuer, subject
to the Securities Exchange Act of 1934. Our Quarterly Reports, Annual Reports, and other filings can be obtained from the SEC’s
Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m.
You may also obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The
Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the Commission at http://www.sec.gov.
Our Internet website address is http://www.icorinc.com.
ITEM 1A. – RISK FACTORS.
As a smaller reporting company we are not
required to provide a statement of risk factors. However, we believe this information may be valuable to our shareholders and have
chosen to include a statement of risk factors in this filing. However, we reserve the right to omit a statement of risk factors
in future filings.
Our primary risk factors and other considerations
include, but are not necessarily limited to:
We have a limited operating history
and limited historical financial information upon which you may evaluate our performance.
You should consider, among other factors,
our prospects for success in light of the risks and uncertainties encountered by companies that, like us, have a limited operating
history. We may not successfully address these risks and uncertainties or successfully market our existing and new products. If
we fail to do so, such failure could materially harm our business and impair the value of our common stock. Even if we accomplish
our objectives, we may not generate the revenues, positive cash flows, or profits we anticipate. To date we have generated revenues
of $411,000 and currently our future revenues are dependent upon DADSTM. Unanticipated problems, expenses, and delays
are frequently encountered in establishing and developing new products in the software and smartphone device application field.
These include, but are not limited to, inadequate funding, lack of consumer acceptance, competition, product development setbacks,
and inadequate sales and marketing. The failure by us to address satisfactorily any of these conditions could have a material adverse
effect upon us and could force us to reduce or curtail operations. No assurance can be given that we can or will ever operate profitably.
We may not be able to meet our future
capital needs.
Presently, we have no meaningful cash liquidity
or capital resources. Our future capital requirements will depend on many factors, including our ability to develop our intellectual
property, our ability to generate positive cash flow from operations, and the effect of competing market developments. It is likely
that we will need additional capital in the near future. Any equity financings may result in dilution to our then-existing stockholders.
Sources of debt financing may result in high interest expense. Any financing, if available, may be on terms that some might deem
unfavorable.
If we are unable to meet our future
capital needs, we may be required to reduce or curtail operations.
To date, we have primarily relied on financing
from investors and our officers and directors to fund operations. We have limited cash liquidity and capital resources. Our future
capital requirements will depend on many factors, including our ability to market our products successfully, our ability to generate
positive cash flow from operations, and our ability to obtain financing in the capital markets. In the short term, our business
plan anticipates disbursements in excess of cash flows expected from our current operations. Consequently, although we currently
have no specific plans or arrangements for financing, we intend to raise funds through private placements, public offerings, or
other such means. Any equity financings would result in dilution to our then-existing stockholders. Sources of debt financing may
result in higher interest expense and may expose us to liquidity problems. Any financing, if available, may be on terms deemed
unfavorable. If adequate funds are not obtained, we may be required to reduce or curtail operations.
If we are unable to attract and retain
key personnel, we may not be able to compete effectively in our market.
Our success will depend, in part, on our
ability to attract and retain key management personnel, both including and in addition to what we have today. We will attempt to
enhance our management and technical expertise by recruiting qualified individuals who possess desired skills and experience in
certain targeted areas. Any inability to retain staff and to attract and retain sufficient additional employees, and the requisite
information technology, engineering, and technical support resources, could have a material adverse effect on our business, financial
condition, results of operations, and cash flows. The loss of key personnel could limit our ability to develop and market our products.
Competition could have a material
adverse effect on our business.
DADSTM currently is our sole
product. The alertness detection industry is highly competitive and DADSTM may not compete well in the marketplace,
which could cause our revenues to be less than expected and/or cause us to increase the number of our personnel or our advertising
or promotional expenditures to maintain our competitive position or for other reasons.
An increase in government regulations
could have a material adverse effect on our business.
The sale and use of DADS™ does not
require governmental approvals nor is it subject to governmental regulations.
We are not aware of any trends with respect
to governmental approvals or regulations anywhere in the world that would be unfavorable to the implementation and use of the DADS™
and the growth of our business. However, new or revised regulations or increased licensing fees, requirements, or taxes could have
a material adverse effect on our financial condition or results of operations.
We may be unable to adequately protect
our proprietary rights.
Our ability to compete partly depends on
the superiority, uniqueness, and value of our intellectual property and technology. To protect our proprietary rights, we will
rely on a combination of patent, copyright, and trade secret laws, confidentiality agreements with our employees and third parties,
and protective contractual provisions. Despite these efforts, any of the following occurrences may reduce the value of our intellectual
property:
| · | Our applications for patents relating to our business may not be granted or, if granted, may be
challenged or invalidated; |
| · | Issued patents may not provide us with any competitive advantages; |
| · | Our efforts to protect our intellectual property rights may not be effective in preventing misappropriation
of our technology; |
| · | Our efforts may not prevent the development and design by others of products or technologies similar
to, competitive with, or superior to, those we develop; or |
| · | Another party may obtain a blocking patent and we would need to either obtain a license or design
around the patent in order to continue to offer the contested feature or service in our products. |
We may be forced to litigate to defend
our intellectual property rights, or to defend against claims by third parties against us relating to intellectual property rights.
We may be forced to litigate to enforce
or defend our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of other parties’
proprietary rights. Any such litigation could be expensive and could distract our management from focusing on operating our business.
The existence and/or outcome of any such litigation could harm our business.
We may not be able to effectively manage our growth and
operations, which could have a material adverse effect on our business.
We may experience rapid growth and development
in a relatively short period of time. Should this happen, the management of this growth could require, among other things, continued
development of our financial and management controls and management information systems, stringent control of costs, increased
marketing activities, the ability to attract and retain qualified management personnel, and the training of new personnel. We intend
to retain additional personnel as appropriate to manage our expected growth and expansion. Failure to successfully manage our possible
growth and development could have a material adverse effect on our business and the value of our common stock.
Our future research and development
projects may not be successful.
The successful development of our technology
can be affected by many factors. Products, services, or technologies that appear to be promising at their early phases of research
and development may fail to be commercialized for various reasons.
There is no assurance that any of our future
research and development projects will be successful or completed within the anticipated time frame or budget or that these newly
developed products, services, or technologies will achieve commercial success. Even if such products, services, or technologies
can be successfully commercialized, they may not achieve the level of market acceptance that we expect.
Any products, services, or technologies
that we develop, acquire, or invest in may not achieve or maintain widespread market acceptance.
The success of any products, services,
or technologies that we develop, acquire, or invest in will be highly dependent on market acceptance. We believe that market acceptance
of any products, services, or technologies will depend on many factors including, but not limited to:
| · | The perceived advantages of our products, services, or technologies over competing products and
the availability and success of competing products; |
| · | The effectiveness of our sales and marketing efforts; |
| · | Our product, services, or technologies pricing and cost effectiveness; |
| · | The safety and effectiveness of our products, services, or technologies; and |
| · | Publicity concerning our products, services, or technologies, or competing products, services,
or technologies. |
If our products, services, or technologies
fail to achieve or maintain market acceptance, or if new products, services, or technologies are introduced by others that are
more favorably received than ours, are more cost effective, or otherwise render our products, services, or technologies less attractive
or obsolete, we may experience a decline in demand for our products. If we are unable to market and sell any products we develop
successfully, our business, financial condition, results of operations, and future growth would be adversely affected.
Developments by competitors may render
our products, services, or technologies obsolete or non-competitive.
Our industry is intensely competitive and
subject to rapid and significant technological changes. Other companies are pursuing the development of devices, products, services,
and technologies for markets that we are targeting. In addition, companies pursuing different but related fields may represent
substantial competition. Many of the companies competing with us have substantially greater capital resources, larger research
and development staffs and facilities, longer device development history, and greater marketing capabilities. These organizations
also compete with us to attract qualified personnel and parties for acquisitions, joint ventures, or other collaborations.
If we fail to maintain an effective
system of internal controls or discover material weaknesses in our internal controls over financial reporting, we may not be able
to report our financial results accurately or timely or to detect fraud, which could have a material adverse effect on our business.
An effective internal control environment
is necessary for us to produce reliable financial reports and is an important part of our effort to prevent financial fraud. We
are required to periodically evaluate the effectiveness of the design and operation of our internal controls over financial reporting.
Based on these evaluations, we may conclude that enhancements, modifications, or changes to internal controls are necessary or
desirable. While management evaluates the effectiveness of our internal controls on a regular basis, these controls may not always
be effective. There are inherent limitations on the effectiveness of internal controls, including collusion, management override,
and failure of human judgment. In addition, control procedures are designed to reduce rather than eliminate business risks. If
we fail to maintain an effective system of internal controls, or if management or our independent registered public accounting
firm discovers material weaknesses in our internal controls, we may be unable to produce reliable financial reports or prevent
fraud, which could have a material adverse effect on our business, including subjecting us to sanctions or investigation by regulatory
authorities, such as the Securities and Exchange Commission. Any such actions could result in an adverse reaction in the financial
markets due to a loss of confidence in the reliability of our financial statements, which could cause the market price of our common
stock to decline or limit our access to capital.
Our common stock may be affected
by limited trading volume and may fluctuate significantly.
There has been a limited public market
for our common stock and there can be no assurance that an active trading market for our common stock will develop. This could
adversely affect our shareholders’ ability to sell our common stock in short time periods or possibly at all. Our common
stock has experienced and is likely to continue to experience significant price and volume fluctuations that could adversely affect
the market price of our common stock without regard to our operating performance. Our stock price could fluctuate significantly
in the future based upon any number of factors such as: general stock market trends; announcements of developments related to our
business; fluctuations in our operating results; announcements of technological innovations, new products, or enhancements by us
or our competitors; general conditions in the U.S. and/or global economies; developments in patents or other intellectual property
rights; and developments in our relationships with our customers and suppliers. Substantial fluctuations in our stock price could
significantly reduce the price of our stock.
Our common stock is quoted for
trading on OTC Markets, OTC Pink tier of OTC Link ATS, which may make it more difficult for investors to resell their shares
due to suitability requirements.
Our common stock is currently quoted
for trading on OTC Markets, OTC Pink tier of OTC Link ATS where we expect it to remain for the foreseeable future.
Broker-dealers often decline to trade in Over-The-Counter (OTC) stocks given that the market for such securities is
often limited, the stocks are often more volatile, and the risk to investors is often greater. In addition, OTC stocks are
often not eligible to be purchased by mutual funds and other institutional investors. These factors may reduce the potential
market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in
our common stock to sell shares to third parties or to otherwise dispose of their shares. This could cause our stock price to
decline.
The report of our Independent Registered
Public Accounting Firm regarding our financial statements as of and for the years ended December 31, 2013 and 2012 expresses substantial
doubt about our ability to continue as a going concern.
The report of our Independent Registered
Public Accounting Firm regarding our financial statements as of and for the years ended December 31, 2013 and 2012 expresses substantial
doubt about our ability to continue as a going concern. Consequently, this may adversely affect our ability to obtain debt and/or
equity financing to support future operations. If we are not able to obtain adequate financing with reasonable terms, we may be
required to reduce or curtail operations.
We do not have current financial information available.
We have not yet filed our Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2014 and June 30, 2014, the Report on Form 8-K containing the financial statements of SRG International,
Inc. as of and for the period ended December 31, 2012, and do not expect to file the Quarterly Report on Form 10-Q for the quarter
ended September 30, 2014 in a timely manner (collectively, the “Delayed SEC Reports”). Until we file the Delayed SEC
Reports and are otherwise current in our SEC filing requirements, there is a lack of current publicly available information concerning
the consolidated results of operations and financial condition of the Company.
Therefore, investors must make decisions with respect to our
securities in light of the lack of current financial information. Accordingly, for so long as we are not current in our SEC reporting
obligations, any investment in our securities involves a greater degree of risk. The lack of current public information may have
an adverse impact on investor confidence, which could lead to a reduction in our stock price and market capitalization and an increase
in our cost of capital.
ITEM 1B – UNRESOLVED STAFF COMMENTS
This Item is not applicable to us as we
are not an accelerated filer, a large accelerated filer, or a well-seasoned issuer; however, on or about August 21, 2013, we did receive a written comment from the Commission staff to our Current
Report filed with the Commission on January 29, 2013, related to the fact we have not filed financial statements and pro forma
information related to our acquisition of SRG International, Inc. We plan to file a Current Report on Form 8-K/A with the required financial
statements shortly.
ITEM 2 – PROPERTIES
Beginning in January 2014, we commenced
leasing 3,250 square feet of office space for our operations in Montreal, Quebec, under a three year lease at the rate of approximately
$90,000 per year. Currently, we do not lease office space for our corporate activities in the United States, but maintain a virtual
office, at the rate of approximately $3,000 per year, that provides us with a physical address, a phone number with a live answering
service, and use of office facilities as needed.
ITEM 3 - LEGAL PROCEEDINGS
We are not a party to or otherwise involved
in any legal proceedings.
In the ordinary course
of business, we may from time to time be involved in various pending or threatened legal actions. The litigation process is inherently
uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition
and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending
or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
ITEM 4 – MINE SAFETY DISCLOSURES
There is no information required to be disclosed under this
Item.
PART II
ITEM 5 - MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is quoted for
trading on OTC Markets, OTC Pink tier of OTC Link ATS. Our current trading symbol is “ICOR.” Since our stock has
been listed there have been a limited number of trades of our common stock.
The following table sets forth the high
and low bid information for each quarter within the fiscal years ended December 31, 2013 and December 31, 2012, as best estimated
by the company, adjusted to reflect the effect of the nine for one forward split of our common shares which was effective on May
16, 2012 and the 1-for-100 reverse stock split of our common stock effective December 31, 2013. The information reflects prices
between dealers, and does not include retail markup, markdown, or commission, and may not represent actual transactions.
Fiscal Year Ended | |
| |
Bid Prices | |
December 31, | |
Period | |
High | | |
Low | |
| |
| |
| | |
| |
2012 | |
First Quarter | |
$ | 36.33 | | |
$ | 22.22 | |
| |
Second Quarter | |
$ | 40.00 | | |
$ | 11.33 | |
| |
Third Quarter | |
$ | 25.00 | | |
$ | 0.75 | |
| |
Fourth Quarter | |
$ | 1.70 | | |
$ | 0.45 | |
| |
| |
| | | |
| | |
2013 | |
First Quarter | |
$ | 1.13 | | |
$ | 0.27 | |
| |
Second Quarter | |
$ | 1.70 | | |
$ | 0.40 | |
| |
Third Quarter | |
$ | 1.65 | | |
$ | 0.40 | |
| |
Fourth Quarter | |
$ | 1.28 | | |
$ | 0.85 | |
The Securities Enforcement and Penny Stock
Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock
defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity security
that has a market price of less than $5.00 per share, subject to a few exceptions which we do not meet. Unless an exception is
available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining
the penny stock market and the risks associated therewith.
Holders
As of November 10, 2014, there were
40,649,465 shares of our common stock outstanding held by approximately 403 holders of record and numerous shares held in
brokerage accounts. Of these shares, 13,621,450 are held by non-affiliates and 8,691,886 were free-trading. On the cover page
of this filing we value those 13,621,450 shares held by non-affiliates at $85,134,000. These shares were valued at $6.25 per
share, based on recent trades of our common stock as quoted for trading on OTC Markets, OTCPink tier of OTC Link ATS.
Warrants
On December 15, 2010, our Board of
Directors approved the issuance of warrants to purchase our common stock to certain of our officers, directors, and
consultants to reward and compensate them for their service to the company. As a result, on December 29, 2010, we issued
warrants to purchase up to 31,500 shares at $16.67 per share. These warrants and the underlying shares are restricted in
accordance with Rule 144. The warrants were fully vested as of December 15, 2011 and expire on December 29, 2014. The
issuance of the warrants was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and the
recipients were either accredited or sophisticated and familiar with our operations.
In connection with the
asset purchase agreement with RWIP, LLC, we issued warrants to RWIP to purchase an aggregate of 150,000 shares of our common stock
at an exercise price of $22.22 per share. These warrants were transferred to other non-affiliated parties and may be exercised at
any time within four (4) years from the issuance date. These warrants contain a cashless exercise provision.
Additionally, on April
29, 2010, pursuant to the Plan of Reorganization of AP Corporate Services, Inc. (the “Debtor”) we issued warrants to
purchase 5,000,000 shares of our common stock, to certain creditors of the Debtor as part of the confirmed Plan of Reorganization.
The warrants consist of 1,000,000 “A Warrants” each convertible into one share of our common stock at an exercise price
of $1.00; 1,000,000 “B Warrants” each convertible into one share of our common stock at an exercise price of $2.00;
1,000,000 “C Warrants” each convertible into one share of our common stock at an exercise price of $3.00; 1,000,000
“D Warrants” each convertible into one share of our common stock at an exercise price of $4.00; and 1,000,000 “E
Warrants” each convertible into one share of our common stock at an exercise price of $5.00. The “A” through
“E” warrants are currently exercisable and may be exercised at any time prior to January 4, 2014. The “A”
through “E” warrants contain a limitation providing that the warrants cannot be exercised if such exercise will cause
the holder to own more than 4.9% of our then outstanding common stock.
On April 13, 2012, our
Board of Directors approved, and we entered into a Warrant Repricing Agreement with the persons listed on Exhibit A to the
Warrant Repricing Agreement to reprice and reissue warrants to purchase 9,000,000 shares of our common stock (the “Repriced
Warrants”). The warrants to be repriced and reissued, were for the purchase of 9,000,000 shares of our common stock at $0.55
per share (the “Existing Warrants”). The parties to the Warrant Repricing Agreement agreed to cancel the Existing Warrants
and exchange them, on a one to one basis, for new warrants to purchase shares of the common stock (the “Repriced Warrants”)
of the Company. The Repriced Warrants have an exercise price per share of $0.056 with the remaining terms of the warrants staying
the same. All stock and dollar amounts adjusted for our stock split that went effective May 16, 2012.
On May 14, 2012, our
Board of Directors approved, and we entered into a Warrant Repricing Agreement with the persons listed on Exhibit A to the
Warrant Repricing Agreement to reprice and reissue warrants to purchase 18,000,000 shares of our common stock (the “Repriced
Warrants”). The warrants to be repriced and reissued, were for the purchase of 9,000,000 shares (pre-split) of our common
stock at $0.44 per share and 9,000,000 shares of our common stock at $0.33 per share (the “Existing Warrants”). The
parties to the Warrant Repricing Agreement agreed to cancel the Existing Warrants and exchange them, on a one to one basis, for
new warrants to purchase shares of the common stock (the “Repriced Warrants”) of the Company. The Repriced Warrants
have an exercise price per share of $0.056 with the remaining terms of the warrants staying the same. All stock and dollar amounts
adjusted for our stock split that went effective May 16, 2012.
On July 20, 2012, our Board of Directors
approved the issuance of warrants to purchase an aggregate of 235,000 shares of our common stock to certain of our officers,
directors and consultants to reward and compensate them for their outstanding service to the company. We have not yet issued the
warrants, but our Board of Directors approved the following warrants:
Name | |
Total No. of Warrants | | |
$12.00 Exercise Price | | |
$20.00 Exercise Price | | |
$30.00 Exercise Price | |
| |
| | |
| | |
| | |
| |
James F. Groelinger | |
| 75,000 | | |
| 25,000 | | |
| 25,000 | | |
| 25,000 | |
Frederick Larcombe | |
| 55,000 | | |
| 18,333 | | |
| 18,333 | | |
| 18,334 | |
Frederick Voight | |
| 40,000 | | |
| 13,333 | | |
| 13,333 | | |
| 13,334 | |
Wayne LeBlanc | |
| 30,000 | | |
| 10,000 | | |
| 10,000 | | |
| 10,000 | |
Harry Pond | |
| 25,000 | | |
| 8,333 | | |
| 8,333 | | |
| 8,334 | |
Steven H. Gifis | |
| 10,000 | | |
| 3,333 | | |
| 3,333 | | |
| 3,334 | |
These warrants and the underlying shares
are restricted in accordance with Rule 144. All of the warrants vested on January 23, 2013 in connection with the SRG transaction
described in the preceding pages. The warrants expire in July 2022 and have a cashless exercise provision. The issuance of the
warrants was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and the recipients were either accredited
or sophisticated and familiar with our operations.
Dividends
There
have been no cash dividends declared on our common stock, and we do not anticipate paying cash dividends in the foreseeable future.
Dividends are declared at the sole discretion of our Board of Directors.
Securities Authorized for Issuance Under
Equity Compensation Plans
As of December 31, 2013, we did not have
any equity compensation plans. Therefore, there were no outstanding options or warrants to purchase shares of our common stock
under any equity compensation plans as of that date.
On February 3, 2014, our Board of Directors
approved the InterCore, Inc. 2014 Non-Qualified Stock Option Plan (the “Plan”). The Plan is intended to aid us in maintaining
and developing a management team, attracting qualified officers and employees capable of assisting in our future business, and
to reward those individuals who have contributed to our success. Under the Plan, our Board of Directors may issue options to purchase
up to an aggregate of six million (6,000,000) shares of common stock to individuals, including, but not limited to, our Board of
Directors and/or our executive management, that the Board believes have assisted us in achieving our business goals or will assist
us in achieving such goals. Any options issued under the Plan will be the subject of a stock option agreement between us and the
holder. As of the date of this filing, we had options outstanding entitling the holders to purchase 4,625,000 shares of our common
stock at $1.00 per share.
Recent Issuance of Unregistered Securities
The following securities were issued by us in the fourth quarter
of 2013:
Pursuant to the terms of our Series C Preferred
Stock, ll outstanding shares of Series C Preferred Stock automatically converted into eighty percent (80%) of our then outstanding
common stock immediately after the 1-for-100 reverse split of our common stock on December 31, 2013. As a result, on December 31,
2013, we issued a total of 29,882,413 shares of our common stock (post-stock split), restricted in accordance with Rule 144, to
the holders of all shares of Series C Preferred Stock (a total of 19 holders). Of the 29,882,413 shares of common stock we issued,
19,211,301 shares were issued to affiliates of ours or entities controlled by affiliates of ours, namely, 588,369 shares to Claude
Brun, our then-Chief Executive Officer, or entities controlled by Mr. Brun, 353,021 to Ms. Danielle Beauchamp, our then-Secretary,
and 18,269,911 shares to Mr. Frederick Voight, one of our Directors, or entities controlled by Mr. Voight, The issuances were exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933, due to the fact the Series C Preferred stockholders are
either accredited or sophisticated investors, exiting shareholders of ours, and are familiar with our operations.
Under the terms of four promissory notes
issued by us for an aggregate of $1,155,000 consisting of two notes aggregating $600,000 to Topside Partners, LP, one note in the
amount of $500,000 to Sussex Associates, LP, and one note in the amount of $55,000 to Fandeck Associates, Inc. (the “Notes”),
such Notes were convertible into an aggregate of 7.74% of our then outstanding common stock, on a fully diluted basis, once we
could confirm we had sufficient authorized but unissued common stock to effect the conversions. Immediately after the reverse stock
split referenced above we had sufficient shares of authorized but unissued common stock to effect the conversions of the Notes
into shares of our common stock. As a result, on December 31, 2013, we issued an aggregate of 3,242,159 shares consisting of 1,683,913
shares to Topside Partners, LP, 1,403,260 shares to Sussex Associates, LP, and 154,986 shares to Fandeck Associates, Inc. The issuances
were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, because Topside Partners, LP, Sussex Associates,
LP, and Fandeck Associates, Inc. (an affiliate of ours as it is controlled by Mr. Voight) were either accredited or sophisticated
investors familiar with our operations.
In August 2013, our Board of Directors
approved creation of the “Series D Preferred Stock”, enabling us to raise up to $5,000,000 through the sale of Series
D Preferred Stock. Our Series D Preferred Stock has the following rights and preferences: (i) For each $200,000 invested in 20,000
shares of Series D Preferred Stock at $10 per share, the holders of such shares are entitled to payments equal to: a) one percent
of our gross revenue until $1,000,000 has been paid to such holders; and then b) one half of one percent of our gross revenue until
an additional $1,000,000 has been paid to such holders. Such payments are due on a quarterly basis and once payments totaling $2,000,000
have been made to such holders, those shares will cease earning payments and are to be returned to us for no additional consideration;
(ii) no dividend rights; (iii) no liquidation rights other than with respect to what is owed in connection with the terms described
in “(i)” above; (iv) no conversion rights; (v) no redemption rights; (v) no call rights by us; and (vi) no voting rights.
On various dates from August 8, 2013 to December 31, 2013, we issued 142,000 shares of our Series D Preferred Stock to 16 investors
in exchange for $1,420,000, with us receiving net proceeds of $1,339,000. The difference of $81,000 represented a finder's fee
and was paid to Mr. Voight, an affiliate of ours and a member of our Board of Directors. The issuances are exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 because the investors are either accredited or sophisticated investors familiar
with our operations.
If
our stock is listed on an exchange we will be subject to the Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock.
The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of
less than $5.00 per share, subject to a few exceptions which we do not meet. Unless an exception is available, the regulations
require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market
and the risks associated therewith.
ITEM 6 – SELECTED FINANCIAL DATA
As a smaller reporting company we are not
required to provide the information required by this Item.
ITEM 7 - MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Rounding
All dollar amounts in this section have been rounded to the
nearest thousand.
Forward-Looking Statements
This annual report on Form 10-K of InterCore,
Inc. for the years ended December 31, 2013 and 2012 contains forward-looking statements, principally in this Section and “Business.”
Generally, you can identify these statements because they use words like “anticipates,” “believes,” “expects,”
“future,” “intends,” “plans,” and similar terms. These statements reflect only our current
expectations. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we
cannot guarantee their accuracy and actual results may differ materially from those we anticipated due to a number of uncertainties,
many of which are unforeseen, including, among others, the risks we face as described in this filing. You should not place undue
reliance on these forward-looking statements which apply only as of the date of this annual report. To the extent that such statements are
not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and
uncertainties. In any forward-looking statement where we express an expectation or belief as to future results or events, such
expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the
statement of expectation of belief will be accomplished.
We believe it is important to communicate
our expectations to our investors. There may be events in the future; however, that we are unable to predict accurately or over
which we have no control. The risk factors listed in this filing, as well as any cautionary language in this annual report, provide
examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe
in our forward-looking statements. Factors that could cause actual results or events to differ materially from those anticipated,
include, but are not limited to: changes in investment and business strategies; general economic, financial and business conditions;
changes in and compliance with governmental regulations; changes in various tax laws; and the availability of key management and
other personnel.
Critical Accounting Policies
Our consolidated financial statements are
prepared in accordance with accounting principles generally accepted in the United States, which requires us to make estimates
and assumptions in certain circumstances that affect amounts reported. In preparing these financial statements, management has
made its best estimates and judgments of certain amounts, giving due consideration to materiality. We believe that of our significant
accounting policies (more fully described in Notes to the Consolidated Financial Statements), the following are particularly important
to the portrayal of our results of operations and financial position and may require the application of a higher level of judgment
by our management, and as a result are subject to an inherent degree of uncertainty. Understanding our accounting policy with respect
to share-based compensation is critical in fully understanding and evaluating our financial statements.
Recent Accounting Pronouncements
In June 2011, the Financial Accounting
Standards Board issued Accounting Standards Update No. 2011-05, “Presentation of Comprehensive Income". This update
provides companies two options for presenting Other Comprehensive Income (“OCI”) which currently is included as part
of the statement of stockholders’ equity. An OCI statement can now be included within the income statement, which together
will make a statement of total comprehensive income. Alternatively, companies can also present an OCI statement that is separate
from an income statement, but the two statements must appear consecutively within a financial report. This statement was effective
for fiscal quarters and years beginning after December 15, 2011. The effect of adopting this statement had no impact on the Company’s
financial position or results of operations.
Overview
Corporate History Prior to December
31, 2012
We were incorporated under the laws of
the State of Delaware on April 29, 2010. Through March 20, 2012, we focused upon investments and acquisition opportunities
primarily in products and companies involved in the market segments of clean and renewable energy, medical technology, nanotechnology,
and environmentally-friendly (green) waste management.
On March 30, 2012, we decided to further
intensify our focus in the energy sector and the related opportunities within and, to that end, we elected to change the name of
the Company to InterCore Energy, Inc.
Through December 31, 2012 and as more fully
described in our Annual Report on Form 10-K for the year then ended as filed with the Commission on June 25, 2013, we assembled
a portfolio of investments in the life sciences and energy arenas. However, we found this approach to be lacking in appeal to investors,
thereby making it difficult to raise capital to fund investments once we identified them and to fund the operations of the Company.
Corporate History Subsequent to December
31, 2012
| a) | Acquisition of SRG International, Inc. |
On January 23, 2013, we consummated
a transaction with SRG, and the shareholders of SRG who were the owners of 100% of the outstanding common stock of SRG, pursuant
to which the shareholders of SRG transferred to us all of the common stock of SRG in exchange for 5,000,000 shares of our Series
C Convertible Preferred Stock, which shares were convertible into 80% of our then outstanding common stock immediately after consummation
of a reverse stock split. The holders of the Series C Convertible Preferred Stock did not originally perfect their interest in such
securities due to nonperformance of certain provisions of the acquisition agreement. On October 28, 2013, the Company waived such
provisions. As a result of this transaction and a transaction with HLBCDC (whereby we sold our assets and operations
in exchange for relief from certain debt obligations, as described earlier and in greater detail below), SRG became our wholly-owned
subsidiary and we became a holding company with all of our current operations conducted through SRG.
Those operations consisted primarily
of researching, developing, and testing the Driver Alertness Detection System ("DADS™"). DADS™ is designed
around proprietary alertness detection technologies, which enables individuals to modulate their work activity based on real time
assessment of their actual state of alertness. The DADS™ methodology employs a unique approach for assessing sleepiness and
low alertness levels via the observed behavior of individuals in real work conditions.
| b) | Assignment and Assumption Agreement |
Simultaneously with consummating
the transaction with SRG, we closed a transaction contemplated by an Assignment and Assumption Agreement between us and HLBCDC
pursuant to which the majority of the assets we owned prior to the acquisition of SRG were transferred to HLBCDC in exchange for
HLBCDC assuming the majority of our liabilities along with our common shares and a warrant for the purchase of additional common
shares. The assets we transferred to HLBCDC were the shares we owned in Legends and Epec as well as the intangible rights associated
with the Myself™ pelvic muscle trainer and a novel medical applicator referred to as the “Soft and Smooth Assets.”
In addition to transferring those assets, we issued to HLBDC 402,038 shares of our common stock (the “HLBCDC Shares”)
and warrants to purchase 500,000 shares of our common stock at the exercise price of $0.55 per share (the fair market value of
our common stock as of the date of the Agreement) (the “HLBCDC Warrant”). In exchange for those assets, the HLBCDC
Shares, and the HLBCDC Warrant, HLBCDC agreed to assume liabilities valued at $985,948 consisting of fees owed to management, notes
payables, and trade payables.
| c) | Asset Purchase Agreement |
Immediately in advance of consummating
the transaction with SRG, we closed a transaction contemplated by an Asset Purchase Agreement with Rockland, our majority shareholder.
and an entity controlled by one of our Directors Pursuant to that agreement, we sold the shares we owned in HepatoChem to Rockland
in exchange for Rockland agreeing to forgive $579,938 of debt owed to it by us.
On March 12, 2013, we entered
into a Distribution Agreement (the “Distribution Agreement”) with MeliaLife International, Inc. (“MeliaLife”),
pursuant to which we were awarded the rights to distribute and sell various natural supplement products produced by MeliaLife.
Under the terms of the Distribution Agreement we would be the exclusive distributor to sell certain products as described therein
(the “Products”). The duration of the Distribution Agreement is the lesser of five (5) years, or when we purchase Products
in an amount by which the MeliaLife has received $30 million, representing 50% of the total product value of the Products purchased
by us, whichever happens first. At the end of this contract, MeliaLife would assign its rights in all the Products to us for 4%
of future net profits (total product value minus direct costs related to the Products), calculated and paid monthly, generated
by the sale by us of those Products worldwide.
Our relationship with MeliaLife
as been inactive since the date of the Distribution Agreement and we expect it to expire with the passage of time of its own accord.
Going Concern
These financial statements were prepared
under the assumption that we will continue as a going concern. Our ability to do so is dependent upon our ability to obtain additional
equity or debt financing, reduce expenditures, and/or generate revenue. These financial statements do not include any adjustments
that might result from the outcome of that uncertainty.
Current cash and working capital resources,
including funds recently received from the sale of equity securities, are not sufficient to support our activities. We plan to
fund our activities through the sale of equity securities as more fully described in the Liquidity and Capital Resources
section in the following paragraphs.
Liquidity and Capital Resources
We had cash of $23,000 at December 31,
2013 compared to $54,000 at December 31, 2012. This net decrease of $31,000 consisted of:
$ | 2,689,000 | | |
Proceeds from financing activities |
| 241,000 | | |
Cash provided by investing activities |
| (2,961,000 | ) | |
Cash used in operating activities, net of the effect of foreign currency exchange rates |
$ | (31,000 | ) | |
Net decrease |
We have incurred significant losses and
negative cash flows from operations since our inception in April 2010. We have an accumulated deficit of $14,108,000 and a working
capital deficiency of $1,707,000 as of December 31, 2013. These conditions raise substantial doubt about our ability to continue
as a going concern. We have historically financed our activities through the private placement of equity securities. To date, we
have dedicated most of our financial resources to general and administrative expenses in the pursuit of the business plan described
in the preceding paragraphs.
We plan to fund our development and commercialization
activities beyond December 31, 2013 primarily through the sale of debt and/or equity securities. We cannot be certain that such
funding will be available on acceptable terms or available at all. To the extent that we secure additional debt or raise funds
by issuing equity securities, our stockholders may experience significant dilution. If we are unable to raise funds when required
or on acceptable terms, we may have to: a) Significantly delay, scale back, or discontinue the development and/or commercialization
of one or more product candidates; b) Seek collaborators for product candidates at an earlier stage than would otherwise be desirable
and/or on terms that are less favorable than might otherwise be available; or c) Relinquish or otherwise dispose of rights to technologies,
product candidates, products, or services that we would otherwise seek to develop or commercialize ourselves.
We can give no assurance that such financing
will be available on reasonable terms or available at all or that it can generate revenue. Should we not be successful in obtaining
the necessary financing or generate revenue to fund our operations, we would need to curtail or cease operational activities. The
accompanying condensed consolidated financial statements do not include any adjustments that might be necessary should we be unable
to continue as a going concern.
Critical Accounting Policies
The following accounting policies are critical in fully understanding
and evaluating our financial statements:
| a) | Valuation and recovery of intangible and investment assets;
and |
| b) | Stock-based compensation. |
Our accounting policies are described in
Note 3(a) to the financial statements for the year ended December 31, 2013 contained elsewhere in this Report.
Results of Operations for the
year ended December 31, 2013 compared to the year ended December 31, 2012
Revenues
Revenues of $411,000 reported for the year
ended December 31, 2013 are attributable to fees earned related to the trials and testing of DADS™. Revenues of $6,000 reported
for the year ended December 31, 2012 are attributable to the licensing of development and marketing rights to a novel medical applicator.
As previously discussed in the Overview section, that asset was transferred to HLBCDC effective January 23, 2013. Consequently,
there will be no such revenues recognized in the future.
Research and Development Expense
Research and development expense for the
year ended December 31, 2013 was $2,694,000 compared to $151,000 for the comparable period in the prior year. Such expenses during
2013 were exclusively related to the development of DADS™ and are expected to continue at comparable levels in 2014. Such
expenses during 2012 were exclusively related to the development of a novel medical applicator and, as previously indicated, that
asset was transferred to HLBCDC effective January 23, 2013.
Charge for Acquired Research and
Development Expense
As previously indicated, we acquired SRG
on January 23, 2013 and its operations consist primarily of research, development, testing, and commercialization of DADS™.
We accounted for the acquisition of SRG under the purchase method of accounting whereby assets acquired and liabilities were recorded
at their estimated fair values as of the date of the acquisition. A total of $1,468,000 was allocated to acquired in-process research
and development and, in conformity with generally accepted accounting practices to expense such costs as incurred, that amount
was immediately charged to expense. There was no comparable expense in the prior year.
General and Administrative Expense
General and administrative expense for
the year ended December 31, 2013 was $413,000 compared to $933,000 for the comparable period in the prior year. This decrease
of $520,000 consisted primarily of a decrease of $88,000 in management compensation and a decrease of $322,000 in professional
fees for cost reductions in legal, financial advisory, and investor relations activities. The remaining decrease of $110,000 relates
to general operating activities.
Other Income (Expense)
Other income (expense) for the year ended
December 31, 2013 was $2,053,000 compared to $250,000 for the comparable period in the prior year. This increase of $1,803,000
consisted of a number of charges related to transactions executed in advance of the acquisition of SRG on January 23, 2013. In
those transactions we divested ourselves of a number of assets which were not complimentary to our stated goal of developing DADS™
and would hamper our ability to raise funds in that regard.
In summary and as shown in the Statement of Operations, the change
in the Other Income (Expense) caption consisted of:
$ | 188,000 | | |
Cash and common shares issued to Epec in connection with concluding our commitment to make further investments in that entity |
| | | |
|
| 884,000 | | |
The fair value of shares in excess of the carrying value of a note payable due to the Rockland Group, one of our major shareholder and an entity controlled by one of the members of our Board of Directors, as an inducement for Rockland to convert that note into common stock. |
| | | |
|
| 171,000 | | |
The fair value of shares in excess of the book value of accounts payable due to several vendors as an inducement for them to convert those amounts into common stock. |
| | | |
|
| 327,000 | | |
The fair value of shares of common stock and warrants in excess of the net book value of certain assets and liabilities assumed by HLBCDC as an inducement for that entity to enter into that transaction. It is intended that New Horizon, Inc. and certain member of ICOR's Board of Directors and management team will collectively receive 78% of any future economic benefit derived from the management of those assets by HLBCDC after the satisfaction of the assumed liabilities. |
| | | |
|
| 183,000 | | |
Interest expense related to a short-term $50,000 note payable to Fandeck Associates which accrued interest at 18% per annum and is convertible into Series C Convertible Preferred Stock at $0.001 per share. This note was issued with warrants valued at $154,000 which resulted in a 100% discount to its face value and earns a service fee of $25,000. Consequently, interest expense related to this note consisted of: |
| | | |
$ | 104,000 | | |
The value of the warrant in excess of the face amount of the note ($154,000 less $50,000) |
| | | |
| 50,000 | | |
Amortization of the debt discount |
| | | |
| 25,000 | | |
Accrual of the service fee |
| | | |
| 3,896 | | |
Accrued interest at 18% on the face value of the note |
| | | |
$ | 182,896 | | |
|
| 300,000 | | |
Other interest expense for the year ended December 31, 2013 was $300,000 compared
to $250,000 for the comparable period in the prior year. This increase of $50,000 was attributable to comparably
higher average levels of debt outstanding during the most recent year. The remaining amount of $2,000 is attributable to
rounding in this table. |
| | | |
|
$ | 2,053,000 | | |
|
Provision for Income Taxes
There was no provision for income taxes
for the year ended December 31, 2013 as we were in a net loss position. Deferred tax assets resulting from such losses are fully
reserved since it is unlikely that such assets will be realized.
Results of Operations for the
year ended December 31, 2012 compared to the year ended December 31, 2011
Revenues
Revenues of $6,000 reported for the year
ended December 31, 2012 are attributable to the licensing of development and marketing rights to a novel medical applicator. There
were no similar revenue amounts for the comparable period in the prior year.
Research and Development Expense
Research and development expense for the
year ended December 31, 2012 was $151,000 compared to $182,000 for the comparable period in the prior year. This decrease of $31,000
was attributable to multiple aspects of research and development activity occurring during 2011 associated with the novel medical
applicator.
General and Administrative Expense
General and administrative expense for
the year ended December 31, 2012 was $933,000 compared to $1,657,000 for the comparable period in the prior year. This decrease
of $724,000 consisted primarily of: a) an overall decrease of $271,000 in professional fees; b) a decrease of $312,000 in stock
based compensation expense for management; and c) a decrease of $141,000 in stock based compensation expense for financial advisory
services. The first decrease was attributable to the absence of unusual and non-recurring activity in 2012 that was present in
2011 associated with the establishment of the business and the ownership of iSafe. Professional fees consist of management, legal,
financial advisory, audit, and other professional services. The remaining decreases were attributable to the general absence of
such compensatory arrangements during 2012. Stock-based compensation is a non-cash charge related to equity incentives for management
and financial advisors.
Charge for Shares Issued in Connection
With the Myself Acquisition
During the year ended December 31, 2012,
the Company issued 180,000 shares of common stock and 1,500,000 shares of Series B Convertible Preferred Stock pursuant to the
terms of the agreement dated concerning the acquisition of the Myself pelvic muscle trainer royalty stream in December 2010. Under
the terms of that agreement, the Company was obligated to issue these additional shares if the average closing stock price of the
Company's common stock during the month of July 2012 did not meet certain specified price thresholds. The fair value of these additional
shares were determined to be $855,000 and the Company recorded an expense in that amount at that time.
There was no similar charge during the
comparable period in 2011.
Interest Expense
Interest expense for the year ended December
2011 was $250,000 compared to $199,000 for the comparable period in the prior year. These amounts are attributable to the increase
in the aggregate balance of various notes payable outstanding during 2011.
Provision for Income Taxes
The was no provision for income taxes for
the year ended December 31, 2012 as we were in a net loss position. Deferred tax assets resulting from such losses are fully reserved
since it is unlikely that such assets will be realized.
Contractual Obligations
The following table summarizes our contractual
obligations as of December 31, 2013:
Notes payable | |
$ | 803,000 | |
Note payable due to related party | |
| 800,000 | |
| |
$ | 1,603,000 | |
Off Balance Sheet Arrangements
We have no off balance sheet arrangements.
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
As a smaller reporting company we are not
required to provide the information required by this Item.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
For a list of financial statements and supplementary data filed
as part of this Annual Report, see the Index to Financial Statements beginning at page F-1 of this Annual Report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are no items required to be reported
under this Item.
ITEM 9A - CONTROLS AND PROCEDURES
| a) | Disclosure Controls and Procedures |
We conducted an evaluation, with
the participation of our Chief Executive Officer (our Principal Executive Officer) and Chief Financial Officer (our Principal Financial Officer), of the
effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of December 31, 2013 to ensure
that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in the Securities Exchange Commission's rules
and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under
the Exchange Act is accumulated and communicated to our management, including our principal executive and principal
financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of
December 31, 2013, our disclosure controls and procedures were not effective at the reasonable assurance level as evidenced
by the inability of the Company to file its 10-K for the year ended December 31, 2013 in a timely manner. This deficiency
is attributable to a lack of qualified financial personnel within the Company, specifically at SRG, and cash flow
constraints that limited the Company in obtaining the services of external professionals necessary to fulfill its reporting
obligations in a timely manner.
| b) | Management Reporting on Internal Controls Over Financial
Reporting |
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules
13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under the supervision of,
our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles in the United States and includes those policies
and procedures that:
| i) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our
transactions and any disposition of our assets; |
| ii) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are
being made only in accordance with authorizations of our management and directors; and |
| iii) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of our assets that could have a material effect on the financial statements. |
A material weakness is a deficiency, or
a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a
material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Our management
assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment,
our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework. Based on this assessment, management has identified the following material weaknesses that have caused
management to conclude that, as of December 31, 2013, our internal control over financial reporting, were not effective at the
reasonable assurance level:
| i) | We do not have a sufficient number of qualified internal accounting personnel, specifically at
SRG, nor an adequate internal reporting structure necessary to meet the reporting requirements of a public company. |
| ii) | We do not have sufficient segregation of duties within accounting functions, which is a basic internal
control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically
feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions
should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our
assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a
material weakness. |
| iii) | We have not documented our internal controls. We have limited policies and monitoring procedures
that cover the recording and reporting of financial transactions and accounting provisions. As a result we may be delayed in our
ability to calculate certain accounting provisions. While we believe these provisions are accounted for correctly in the attached
unaudited financial statements, our lack of internal controls could lead to a delay in our reporting obligations and possibly the
delays we encountered with the SRG transaction. Reporting companies have been required to provide written documentation of key
internal controls over financial reporting beginning with fiscal years ended on or after December 31, 2009. Management evaluated
the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure
controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. |
To address these material weaknesses, management
performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all
material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe
that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition,
results of operations and cash flows for the periods presented.
| c) | Remediation of Material Weaknesses |
The material weaknesses listed below are
expected to be remediated when additional financial resources are made available to us through either additional fundraising and/or
cash flows from operations. Those weaknesses consist of:
| i) | The absence of a sufficient number of qualified internal
accounting personnel, specifically at SRG, and an adequate internal reporting structure necessary to meet the reporting requirements
of a public company; |
| ii) | The lack of segregation of duties; and |
| iii) | The absence of documented internal controls. |
The Company plans to hire qualified personnel,
improve the internal reporting structure, improve segregation of duties, and document internal controls during the balance of 2014
and in 2015 as financial resources permit.
| d) | Changes in Internal Control over Financial Reporting |
Effective January 23, 2013 and as discussed
in the previous pages, we acquired SRG, a foreign entity based in Canada through which we conduct most of our day-to-day business
activities. Consequently, as described above, the material weaknesses described above combined with the acquisition of SRG have
affected our internal control over financial reporting during the year ended December 31, 2013.
ITEM 9B – OTHER INFORMATION
There are no events required
to be disclosed by the Item.
PART III
ITEM 10 – DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following table sets forth the names
and ages of our directors, director nominees, and executive officers, the principal offices and positions with the Company held
by each person as of December 31, 2013 and the date such person became a director or executive officer of the Company. The executive
officers of the Company are elected annually by the Board of Directors. The directors serve one-year terms until their successors
are elected. The executive officers serve terms of one year or until their death, resignation, or removal by the Board of Directors.
Unless described below, there are no family relationships among any of the directors and officers.
Name |
|
Age |
|
Position(s) |
|
|
|
|
|
Claude Brun |
|
65 |
|
Director and Chief Executive Officer |
|
|
|
|
|
Frederick Larcombe |
|
58 |
|
Chief Financial Officer |
|
|
|
|
|
Danielle Beauchamp |
|
55 |
|
Director and Secretary |
|
|
|
|
|
James F. Groelinger |
|
70 |
|
Director |
|
|
|
|
|
Harry Pond |
|
64 |
|
Director |
|
|
|
|
|
Frederick A. Voight |
|
57 |
|
Vice President of Investments |
|
|
|
|
|
Claude Brun has served as our Chief
Executive Officer and a member of our Board of Directors since January 23, 2013. Mr. Brun also holds these positions with SRG International, Inc., our wholly-owned subsidiary. Since 2008, Mr. Brun has served as the Chief Executive Officer at the Ovarium Company where
he provides strategic guidance including evaluating potential investments. From 2004 to 2005, Mr. Brun was President of Nemo Vehicles
Inc, leader in the design and manufacturing of electric utility vehicles (pick-ups) destined to businesses and governmental departments.
As a start-up company, Mr. Brun provided investment and strategic advisory services to companies wanting to participate in the
domestic private power industry. Previously, Mr. Brun was employed for 7 years as a director and financial advisory of a financial
service center with Laurentian Financial Services. Mr. Brun has a Bachelor’s Degree (industrial technology) and a certificate
in personnel management and labor relations from UQAM, Montreal.
Frederick Larcombe has served as
our Chief Financial Officer since November 2010 and as our as our Secretary from November 2010 to January 2013. Since 2008, Mr.
Larcombe, a principal with Crimson Partners, a group of seasoned financial professionals, has served a number of clients primarily
in the life sciences. In this connection, Mr. Larcombe has served from 2009 to 2011 as the Chief Financial Officer for iBio, Inc.
(IBPM.OB), a biotechnology company focused on commercializing its proprietary manufacturing technology. From 2005 to 2007, he was
simultaneously the Chief Financial Officer of Xenomics Inc., and FermaVir Pharmaceuticals, Inc. From 2004 to 2005, he was a consultant
with Kroll Zolfo Cooper, a professional services firm providing interim management and turn-around services, and from 2000 to 2004,
he was Chief Financial Officer of MicroDose Therapeutics. Prior to 2000, Mr. Larcombe held various positions with ProTeam.com,
Cambrex, and PriceWaterhouseCoopers. Mr. Larcombe's received his BS in Accounting from Seton Hall University, was designated a
Certified Public Accountant in New Jersey, and is an alumnus of the Management Development Program at Harvard Business School.
James F. Groelinger has served as
a member of our Board of Directors since November 2010 and as our as our Chief Executive Officer from November 2010 to January
2013. Since 2007, Mr. Groelinger has been the Managing Director at Bellegrove Associates where he provides strategic guidance to
emerging clean energy entrepreneurs and companies. This guidance includes, but is not limited to, evaluating potential energy-related
investments, assisting inventors with energy-related patents and products, as well as developing strategies for creating joint
ventures between U.S. and foreign entities or governments. Since 2009, Mr. Groelinger has also been the Executive Director of Clean
Energy Alliance, Inc., which is a national association of clean energy incubators for the purpose of fund raising, policy development,
and strategy. From 2001 to 2006, Mr. Groelinger was the Chief Executive Officer and a Director, and was President from 2007 to
2008, of EPV Solar, Inc., which was a photovoltaic technology company that developed a technology for the production of thin-film
photovoltaic products. As CEO of EPV Solar, Mr. Groelinger led the company and oversaw sales as they increased from nil to more
than $20 million annually, developed products sales in the U.S., Germany, and Spain, oversaw joint ventures with foreign manufacturers,
and managed a complex $60 million debt-for-equity recapitalization, setting the stage for a $70 million third-party financing and
initial public offering. Mr. Groelinger received his BChE from the City College of New York, New York, and his MBA in Finance from
Temple University.
Harry Pond, the Manager of the Rockland
Group, LLC, the holder of 7% of our outstanding common stock, has served as a member of our Board of Directors since November 2010.
From 2005 to present, Mr. Pond has served as Managing Director of Rockland Group, LLC, which is a real estate development company
active in the Houston, Texas real estate market. From 2008 to present, Mr. Pond has served as a senior business executive for Rockland
Insurance Agency, Inc. In this position he is actively involved with the management of loss prevention, marketing, and recruiting
to ensure the company’s profitability and productivity. From 1979 to present, Mr. Pond has owned and operated The Harry Pond
Insurance Agency, a company that he is currently in the process of merging with Rockland Insurance Agency, Inc. Mr. Pond received
his BS in mathematics and education from Texas State University.
Frederick A. Voight has served as
a member of our Board of Directors since June 2013 and as the Managing Director of F.A. Voight & Associates LP since its inception
in 1994. Mr. Voight has more than twenty-five years of experience in managing both public and private company investments. He has
previous experience as the Chairman and CEO of a public company and has served as a director of several public and numerous private
companies. From June 1983 until August 1994, Mr. Voight owned and operated a chain of retail lumber and home centers in New Jersey
and Pennsylvania. From May 1992 until October 1994, he served as Chairman of the Board of Directors and Chief Executive Officer
of Skylands Park Management, Inc., a publically traded NASDAQ company and led the company through two public offerings. From December
2004 until March 2006, he served as a director for Cell Robotics International, Inc., a publicly traded company that was a developer
and manufacturer of bio-photonic technologies for clinical and medical research. He also served as a director for the DesChutes
Medical Products Co., an Oregon company specializing in the design, manufacture, and marketing of innovative products for the medical
self-help market, from September 2006 until January 2009 when the company was sold to Jarden Corporation (JAH:NYSE). Mr. Voight
served as a director of EPV Solar, Inc., a Robbinsville, NJ PV manufacturing company, from June 1999 through 2010 and as Chairman
of the Board from October 2006 until July 2009. Mr. Voight has a degree in business administration and majored in finance.
Danielle Beauchamp has served as
a member of our Board of Directors and Secretary since January 23, 2013. Previously, from 1998 to 2012, Mrs. Beauchamp was Division
Director for an investors’ group and acted as a financial security advisor. Mrs. Beauchamp served for nine years as a Managing
Director and a Deputy Director of consumer credit in the corporate and investment banking group. The basic industries group was
responsible for investment banking coverage for clients in the building products and services areas.
Historical Compensation of Directors
Other than as set forth herein no compensation
has been given to any of the directors, although they may be reimbursed for any pre-approved out-of-pocket expenses.
Compliance with Section 16(a) of
the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange
Act of 1934 requires the Company’s directors and executive officers and persons who own more than ten percent of a registered
class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership
of common stock and other equity securities of the Company. Officers, directors and greater than ten percent shareholders are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
During the most recent fiscal year, to
the Company’s knowledge, the following delinquencies occurred:
Name | |
No. of Late Reports | |
No. of Transactions Reported Late | |
No. of Failures to File |
Harry Pond | |
0 | |
0 | |
4 |
James F. Groelinger | |
0 | |
0 | |
2 |
Frederick Larcombe | |
0 | |
0 | |
2 |
Wayne LeBlanc | |
0 | |
0 | |
2 |
New Horizon, Inc. | |
0 | |
0 | |
2 |
Board Meetings and Committees
During 2012 and 2013, the Board of Directors
met as circumstances required and took written action on numerous other occasions. All the members of the Board attended the meetings
and all written actions were by unanimous consent.
Code of Ethics
We have not adopted a written code of ethics,
because we believe and understand that our officers and directors adhere to and follow ethical standards without the necessity
of a written policy.
Audit Committee
We do not currently have an audit committee.
Compensation Committee
We do not currently have a compensation
committee.
ITEM 11 - EXECUTIVE COMPENSATION
Executive Officers and Directors
The following tables set forth certain
information about compensation paid, earned or accrued for services by (i) the Company’s Chief Executive Officer and (ii)
all other executive officers who earned in excess of $100,000 in the years ended December 31, 2013, 2012 and 2011 (“Named
Executive Officers”):
Name and Principal Position | |
Year | |
Salary ($) | | |
Bonus ($) | | |
Stock Awards ($) | | |
Option
Awards ($) | | |
Non-Equity Incentive
Plan Compensation
($) | | |
Nonqualified Deferred
Compensation ($) | | |
All Other Compensation
($) | | |
Total ($) | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Claude Brun | |
2013 | |
$ | 132,913 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
$ | 132,913 | |
CEO | |
2012 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
2011 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Frederick Larcombe | |
2013 | |
| 62,500 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 64,273 | | |
| 126,773 | |
CFO | |
2012 | |
| 48,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 17,564 | | |
| 65,564 | |
| |
2011 | |
| 48,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
| 48,000 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
James F. Groelinger | |
2013 | |
| 40,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 75,351 | | |
| 115,351 | |
Director | |
2012 | |
| 48,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 24,437 | | |
| 72,437 | |
| |
2011 | |
| 48,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 48,000 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Danielle Beauchamp | |
2013 | |
| 58,113 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
| 58,113 | |
Secretary | |
2012 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
2011 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Frederick Voight | |
2013 | |
| 40,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 71,000 | | |
| 111,000 | |
Director | |
2012 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
2011 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Employment Contracts
We currently do not have written employment
agreements with our executive officers.
Director Compensation
The following table sets forth director compensation
for the year ended December 31, 2013:
Name | |
Fees
Earned or
Paid in
Cash ($) | | |
Stock
Awards ($) | | |
Option
Awards ($) | | |
Non-Equity
Incentive Plan
Compensation ($) | | |
Nonqualified
Deferred
Compensation
Earnings ($) | | |
All Other
Compensation ($) | | |
Total ($) | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Claude Brun | |
$ | 132,913 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 132,913 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
James F. Groelinger | |
| 40,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 75,351 | | |
| 115,351 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Danielle Beauchamp | |
| 58,113 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 58,113 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Frederick A. Voight | |
| 40,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 71,000 | | |
| 111,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Harry Pond | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Outstanding Equity Awards at Fiscal
Year-End
The following table sets forth certain
information concerning outstanding stock awards held by the Named Executive Officers on December 31, 2013:
|
|
Option
Awards * |
|
|
Stock
Awards |
|
Name |
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable |
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable |
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) |
|
|
Option
Exercise
Price
($) |
|
|
Option
Expiration
Date |
|
|
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#) |
|
|
Market
Value
of
Shares
or Units
of Stock
That
Have
Not
Vested
($) |
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#) |
|
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James F.
Groelinger |
|
|
8,333 |
|
|
|
- |
|
|
|
- |
|
|
$ |
12.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
8,333 |
|
|
|
- |
|
|
|
- |
|
|
|
12.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
8,334 |
|
|
|
- |
|
|
|
12.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
9,000 |
|
|
|
- |
|
|
|
- |
|
|
|
16.67 |
|
|
|
12/15/14 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
8,333 |
|
|
|
- |
|
|
|
- |
|
|
|
20.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
8,333 |
|
|
|
- |
|
|
|
- |
|
|
|
20.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
8,334 |
|
|
|
- |
|
|
|
20.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
8,333 |
|
|
|
- |
|
|
|
- |
|
|
|
30.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
8,333 |
|
|
|
- |
|
|
|
- |
|
|
|
30.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
8,334 |
|
|
|
- |
|
|
|
30.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frederick Larcombe |
|
|
6,111 |
|
|
|
- |
|
|
|
- |
|
|
|
12.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
6,111 |
|
|
|
- |
|
|
|
- |
|
|
|
12.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
6,111 |
|
|
|
- |
|
|
|
12.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
4,500 |
|
|
|
- |
|
|
|
- |
|
|
|
16.67 |
|
|
|
12/15/14 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
6,111 |
|
|
|
|
|
|
|
- |
|
|
|
20.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
6,111 |
|
|
|
|
|
|
|
- |
|
|
|
20.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
6,111 |
|
|
|
- |
|
|
|
20.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
6,111 |
|
|
|
|
|
|
|
- |
|
|
|
30.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
6,111 |
|
|
|
|
|
|
|
- |
|
|
|
30.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
6,112 |
|
|
|
- |
|
|
|
30.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frederick Voight |
|
|
4,444 |
|
|
|
- |
|
|
|
- |
|
|
|
12.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
4,444 |
|
|
|
- |
|
|
|
- |
|
|
|
12.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
4,444 |
|
|
|
- |
|
|
|
12.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
4,500 |
|
|
|
- |
|
|
|
- |
|
|
|
16.67 |
|
|
|
12/15/14 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
4,444 |
|
|
|
|
|
|
|
- |
|
|
|
20.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
4,444 |
|
|
|
|
|
|
|
- |
|
|
|
20.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
4,444 |
|
|
|
- |
|
|
|
20.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
4,444 |
|
|
|
|
|
|
|
- |
|
|
|
30.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
4,444 |
|
|
|
|
|
|
|
- |
|
|
|
30.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
4,444 |
|
|
|
- |
|
|
|
30.00 |
|
|
|
7/20/22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
* - Awards are in the form of warrants.
ITEM 12 - SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table
sets forth, as of October 31, 2014, certain information with respect to the Company’s equity securities owned of record or
beneficially by (i) each Officer and Director of the Company; (ii) each person who owns beneficially more than 5% of each class
of the Company’s outstanding equity securities; and (iii) all Directors and Executive Officers as a group.
Common Stock
Title of Class | |
Name and Address
of Beneficial Owner (2) | |
Nature of
Beneficial
Ownership | |
Amount | | |
Percent of
Total Voting
Control of
Company(10) | |
Common Stock | |
Claude Brun (3) | |
Chief Executive Officer and Director | |
| 4,718,580 | (4) | |
| 11.4 | % |
| |
| |
| |
| | | |
| | |
Common Stock | |
Danielle Beauchamp (3) | |
Secretary and Director | |
| 353,021. | | |
| 0.9 | % |
| |
| |
| |
| | | |
| | |
Common Stock | |
James F. Groelinger (3) | |
Director | |
| 884,000 | (5) | |
| 2.1 | % |
| |
| |
| |
| | | |
| | |
Common Stock | |
Frederick Larcombe (3) | |
Chief Financial Officer | |
| 682,000 | (6) | |
| 1.7 | % |
| |
| |
| |
| | | |
| | |
Common Stock | |
Frederick A. Voight (3) | |
Director | |
| 17,529,452 | (7) | |
| 42.5 | % |
| |
| |
| |
| | | |
| | |
Common Stock | |
Harry Pond (3) | |
Director | |
| 3,345,758 | (8) | |
| 8.1 | % |
| |
| |
| |
| | | |
| | |
Common Stock | |
New Horizon, Inc. | |
5% Shareholder | |
| 2,750,704 | (9) | |
| 6.8 | % |
| |
| |
| |
| | | |
| | |
Common Stock | |
All Directors and Officers | |
| |
| 24,512,811 | (10) | |
| 60.0 | % |
| |
As a Group (6 persons) | |
| |
| | | |
| | |
| (1) | Based on 40,649,465 shares outstanding as of November 10, 2014. Shares of common stock subject
to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing
the percentage of the person holding such options or warrants, but are not deemed outstanding for the purposes of computing
the percentage of any other person. |
| (2) | Unless indicated otherwise, the address of the shareholder is c/o InterCore, Inc., 1615 South Congress
Avenue, Suite 103, Delray Beach, FL 33445. |
| (3) | Indicates an officer and/or director of the Company. |
| (4) | Includes options to purchase Six Hundred Thousand (600,000) shares of our common stock at an exercise
of $1.00 per share. |
| (5) | Includes warrants to purchase Nine Thousand (9,000) shares of our common stock at an exercise of
$16.70 per share, warrants to purchase Seventy Five Thousand (75,000) shares of our common stock with one third having an exercise
price of $12.00, one third having an exercise price of $20.00, and one third having an exercise price of $30.00, and options to
purchase Eight Hundred Thousand (800,000) shares of our common stock at an exercise of $1.00 per share. |
| (6) | Includes warrants to purchase Four Thousand Five Hundred (4.500) shares of our common stock at
an exercise of $16.70 per share, warrants to purchase Fifty Five Thousand (55,000) shares of our common stock with one third having
an exercise price of $12.00, one third having an exercise price of $20.00, and one third having an exercise price of $30.00, warrants
to purchase Twenty Two Thousand Five Hundred (22,500) shares of our common stock with one third having an exercise price of $1.00,
and options to purchase Six Hundred Thousand (600,000) shares of our common stock at an exercise of $1.00 per share. |
| (7) | Includes 7,151,831 shares held in the name of F A Voight & Associates, Inc., 7,227,875shares
held in the name of Rivercoach Partners, LP, 1,787,958 shares held in the name of DayStar Funding, LP, 390,333 shares held in the
name of Fandeck Associates, Inc, 326,955 shares held in the name of RWIP, LLC, warrants to purchase Four Thousand Five Hundred
(4.500) shares of our common stock at an exercise of $16.70 per share, warrants to purchase Forty Thousand (40,000) shares of our
common stock with one third having an exercise price of $12.00, one third having an exercise price of $20.00, and one third having
an exercise price of $30.00, and options to purchase Six Hundred Thousand (600,000) shares of our common stock at an exercise of
$1.00 per share. |
| (8) | Includes 2,920,758 shares of our common stock held in the name of Rockland Group, LLC, an entity
controlled by Mr. Pond, warrants to purchase Twenty Five Thousand (25,000) shares of our common stock with one third having an
exercise price of $12.00, one third having an exercise price of $20.00, and one third having an exercise price of $30.00, and options
to purchase Four Hundred Thousand (400,000) shares of our common stock at an exercise of $1.00 per share. |
| (9) | M. Scott Stevens is the principal owner of New Horizon, Inc. |
| (10) | Includes shares outlined in footnotes #4 through #7 above. |
We are not aware of any person
who owns of record, or is known to own beneficially, five percent or more of the outstanding securities of any class of the issuer,
other than as set forth above. There are no classes of stock other than common stock and the Series D Preferred Stock issued or
outstanding.
On January 23, 2013,
we closed on a transaction with SRG International, Inc., a Quebec Province corporation, (“SRG”) and the shareholders
of SRG pursuant to which the holders of 100% of the outstanding common stock of SRG transferred to us all of the common
stock of SRG in exchange for the issuance of 5,000,000 shares of our newly created Series C Convertible Preferred Stock
for the purpose of acquiring SRG's in-process research and development. We accounted for this acquisition as the purchase
of a business. Immediately after a reverse split of our common stock, which occurred on December 31, 2013, all of the
then outstanding shares of Series C Convertible Preferred Stock automatically converted into 80% of the then outstanding shares
of our common stock. The holders of the Series C Convertible Preferred Stock did not originally perfect their interest
in such securities due to non-performance of certain provisions of the acquisition agreement. On October 28, 2013, we
waived such provisions.
On March 15, 2013, we received $50,000
in return for issuing a note payable to an investment group managed by our then Managing Director of Investments, Mr. Frederick
A. Voight, with the face value of $50,000 plus a warrant for the purchase of 200,000 shares of our common stock at $1.00 per share
for a period of five years. This note was due on April 15, 2013 along with a $25,000 service fee and accrued interest on the principal
at the rate of 18% per annum compounded daily. Any time after April 15, 2013, the holder could convert all amounts due in connection
with this note into our Series C Preferred Stock at the rate of $0.01 per share. On April 16, 2013 and as a result of non-payment
of the note upon its due date, the holder issued us a notice of default and a notice of conversion of all amounts due into Preferred
Series C Stock. On April 17, 2013, we and the holder reached an agreement whereby we would issued 100,000 shares of our Series
C Preferred Stock to the holder of the note and the due date was revised to April 23, 2013. On April 24, 2013 and as a result of
non-payment of a note upon its due date, the holder issued us a notice of default and a notice of conversion of $75,971 due in
connection with the note into 7,597,100 shares of our Series C Preferred Stock. This resulted in the holder of the note owning
61% of the total shares of Series C Preferred Stock. Upon conversion of the Series C Convertible Preferred Stock into 80% of the
Company's outstanding common stock immediately after a reverse stock split, the holder owned 49% of the Company's outstanding common
stock. In light of the holder's relationship with other common shareholders, this transaction resulted in a change in control
transaction.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
On March 15, 2013, we received $50,000
in return for issuing a note payable to an investment group managed by our then Managing Director of Investments, Mr. Frederick
A. Voight (Mr. Voight is now one of our Directors), with the face value of $50,000 plus a warrant for the purchase of 200,000 shares
of our common stock at $1.00 per share for a period of five years. This note was due on April 15, 2013 along with a $25,000 service
fee and accrued interest on the principal at the rate of 18% per annum compounded daily. Any time after April 15, 2013, the holder
could convert all amounts due in connection with this note into our Series C Preferred Stock at the rate of $0.01 per share. On
April 16, 2013 and as a result of non-payment of the note upon its due date, the holder issued us a notice of default and a notice
of conversion of all amounts due into Preferred Series C Stock. On April 17, 2013, we and the holder reached an agreement whereby
we would issue 100,000 shares of our Series C Preferred Stock to the holder of the note and the due date was revised to April 23,
2013. On April 24, 2013 and as a result of non-payment of a note upon its due date, the holder issued us a notice of default and
a notice of conversion of $75,971 due in connection with the note into 7,597,100 shares of our Series C Preferred Stock. This resulted
in the holder of the note owning 61% of the total shares of Series C Preferred Stock. Upon the effectiveness of our 1-for-100 reverse
stock split on December 31, 2013, we issued the investment group 17,879,578 shares of our common stock for the conversion of its
shares of Series C Preferred Stock.
On December 27, 2012, we issued a total
of 50,000 shares of our common stock, restricted in accordance with Rule 144, to Rockland Group, LLC, our largest shareholder and
an entity controlled by Harry Pond, one of our then-officers and directors, in exchange for a total of $25,000, or $0.50 per share.
On November 22, 2011, we sold the iSafe
Entities to a company controlled by our majority shareholder for a cash payment of $250,000 plus 117,000 shares of our common stock
(restricted under Rule 144) and warrants for the purchase of 4,500 shares of our common stock with an exercise price of $33.90
and realized a gain of approximately $163,000.
We determined that this transaction was
in the best interests of our shareholders as events occurring subsequent to our purchase of the iSafe Entities, including but not
limited to the resignation of iSafe’s Chief Executive Officer, would likely have resulted in an operating situation requiring
significantly more attention by us than the investment warranted. It is our opinion that our shareholders would be better served
by having our time, attention, and resources focused on maximizing numerous other opportunities at hand.
We do not have a written policy concerning
the review, approval, or ratification of transactions with related persons.
We do not have an audit, compensation,
or nominating committee, and none of our Directors are considered independent.
ITEM 14 – PRINCIPAL ACCOUNTING
FEES AND SERVICES
Audit
Marcum LLP earned fees for professional
services totaling $104,500 and $105,000, respectively, relating to the audit of our financial statements for December 31, 2013
and December 2012, review of the financial statements included in our form 10-Qs for the years then ended.
Tax Fees
During the years ended December 31, 2013
and 2012, Marcum LLP did not earn any fees for professional services for tax preparation.
All Other Fees
During the years ended December 31, 2013
and December 31, 2012, Marcum LLP did not provide any other services or invoice any additional fees.
All of the fees described above for the
years ended December 31, 2013 and 2012, were approved by the entire Board of Directors.
PART IV
ITEM 15 - EXHIBITS, FINANCIAL STATEMENT
SCHEDULES
| (a)(1) | Financial Statements |
For a list of financial statements and supplementary data filed
as part of this Annual Report, see the Index to Financial Statements beginning at page F-1 of this Annual Report.
| (a)(2) | Financial Statement Schedules |
We do not have any financial statement
schedules required to be supplied under this Item.
Refer to (b) below.
2.1 (1) |
|
Plan of Reorganization of AP Corporate Services, Inc. |
|
|
|
3.1 (1) |
|
Articles of Incorporation of I-Web Media, Inc. filed April 29, 2010 |
|
|
|
3.2 (5) |
|
Amended Articles of Incorporation of I-Web Media, Inc., filed December 8, 2010 (effective December 29, 2010) |
|
|
|
3.3 (5) |
|
Restated Articles of Incorporation of InterCore Energy, Inc., filed December 8, 2010 (effective December 29, 2010) |
|
|
|
3.4 (13) |
|
Amendment to Articles of Incorporation of Heartland Bridge Capital, Inc. filed November 26, 2012 (effective May 16, 2012) |
|
|
|
3.5 (1) |
|
Bylaws of I-Web Media, Inc. |
|
|
|
3.5 (5) |
|
Restated Bylaws of InterCore Energy, Inc. |
|
|
|
3.7 (14) |
|
Certificate of Designation for Series C Convertible Preferred Stock |
|
|
|
10.1 (1) |
|
Form of “A” Warrant |
|
|
|
10.2 (1) |
|
Form of “B” Warrant |
|
|
|
10.3 (1) |
|
Form of “C” Warrant |
10.4 (1) |
|
Form of “D” Warrant |
|
|
|
10.5 (1) |
|
Form of “E” Warrant |
|
|
|
10.6 (2) |
|
Agreement to Purchase Common Stock by and between Kenneth S. Barton, Rockland Group, LLC, and I-Web Media, Inc., dated November 3, 2010 |
|
|
|
10.7 (2) |
|
Securities Purchase Agreement by and between I-Web Media, Inc. and Rockland Group, LLC, dated November 4, 2010 |
|
|
|
10.8 (3) |
|
Asset Purchase Agreement with New Horizon, Inc. dated December 9, 2010 |
|
|
|
10.9 (6) |
|
Amendment No. 1 to Asset Purchase Agreement with New Horizon, Inc. |
|
|
|
10.10 (3) |
|
Convertible Promissory Note Held by New Horizon, Inc. dated December 9, 2010 |
|
|
|
10.11 (3) |
|
Assignment of Rights Agreement with New Horizon, Inc. dated December 9, 2010 |
|
|
|
10.12 (3) |
|
Asset Purchase Agreement with RWIP, LLC dated December 10, 2010 |
|
|
|
10.13 (3) |
|
Convertible Promissory Note Held by RWIP, LLC dated December 10, 2010 |
|
|
|
10.14 (3) |
|
Warrant Agreement with RWIP, LLC dated December 10, 2010 |
|
|
|
10.15 (3) |
|
Consulting Agreement with RWIP, LLC dated December 13, 2010 |
|
|
|
10.16 (4) |
|
Development Services Agreement with NorthStar Partners Consulting, LLC, dated December 22, 2010 |
|
|
|
10.17 (4) |
|
Warrant Agreement with NorthStar Partners Consulting, LLC, dated December 22, 2010 |
|
|
|
10.18 (5) |
|
Promissory Note Held by Rockland Group, LLC, dated December 16, 2010 |
|
|
|
10.19 (5) |
|
Promissory Note Held by Rockland Group, LLC, dated December 27, 2010 |
|
|
|
10.20 (5) |
|
Form of Warrant Issued to Officers, Directors and Consultants on December 29, 2010 |
10.21 (7) |
|
Common Stock Purchase Warrant issued to Wexford Partners, L.P. dated March 21, 2011 |
|
|
|
10.22 (7) |
|
Reorganization and Stock Purchase Agreement with the iSafe Entities and iSafe Holders dated March 21, 2011 |
|
|
|
10.23 (7) |
|
Employment Agreement with Joseph W. Tischner dated March 22, 2011 |
|
|
|
10.24 (8) |
|
Promissory Note Held by Rockland Group dated December 29, 2010 |
|
|
|
10.25 (9) |
|
Series A Preferred Stock Purchase Agreement by and between InterCore Energy, Inc. and HepatoChem, Inc. dated September 15, 2011 |
|
|
|
10.26 (9) |
|
Purchase Agreement by and between InterCore Energy, Inc. and Digisort, LLC dated November 18, 2011 |
|
|
|
10.27 (10) |
|
Letter of Intent with Legends & Heroes, Inc. dated December 1, 2011 |
|
|
|
10.28 (11) |
|
Form of Warrant Repricing Agreement |
|
|
|
10.29 (11) |
|
Form of Repriced Warrant |
|
|
|
10.30 (14) |
|
Amended and Restated Share Exchange Agreement by and between InterCore Energy, Inc., SRG International, Inc. and the shareholders of SRG dated January 15, 2013 |
|
|
|
10.31 (14) |
|
Assignment and Assumption Agreement by and between InterCore Energy, Inc. and HLBC Distribution Company, Inc. dated January 15, 2013 |
|
|
|
10.32 (14) |
|
Asset Purchase Agreement by and between InterCore Energy, Inc. and Rockland Group, LLC dated January 15, 2013 |
|
|
|
10.33 (15) |
|
Promissory Note issued to Fandeck Associates, Inc., a Texas corporation, dated March 15, 2013 |
|
|
|
10.34 (15)
|
|
Letter Agreement with Fandeck Associates, Inc. dated April 17, 2013
|
|
|
|
31.1* |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
|
|
|
31.2* |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
32.1* |
|
Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.2* |
|
Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
101.INS** |
|
XBRL Instance Document |
|
|
|
101.SCH** |
|
XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL** |
|
XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF** |
|
XBRL Extension Definition Linkbase Document |
|
|
|
101.LAB** |
|
XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE** |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
| ** | 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 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability. |
| (1) | Incorporated by reference from our Registration Statement
on Form 10-12G/A filed with the Commission on August 12, 2010. |
| (2) | Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on November 8, 2010. |
| (3) | Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on December 15, 2010. |
| (4) | Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on December 23, 2010. |
| (5) | Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on December 30, 2010. |
| (6) | Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on January 14, 2011. |
| (7) | Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on March 24, 2011. |
| (8) | Incorporated by reference from our Annual Report on Form
10-K filed with the Commission on April 15, 2011. |
| (9) | Incorporated by reference from our Quarterly Report on
Form 10-Q filed with the Commission on November 21, 2011. |
| (10) | Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on December 8, 2011 |
| (11) | Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on May 29, 2012 |
| (12) | Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on May 29, 2012 |
| (13) | Incorporated by reference from our Quarterly Report on
Form 10-Q filed with the Commission on November 26, 2012 |
| (14) | Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on January 29, 2013 |
| (15) | Incorporated by reference from our Current Report on Form 8-K filed with the Commission on June 25, 2013
|
SIGNATURES
In accordance with Section 13 or 15(d)
of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
InterCore, Inc. |
|
|
|
Dated: November 12, 2014 |
|
/s/ James F. Groelinger |
|
By: |
James F. Groelinger |
|
|
Chief Executive Officer |
|
|
and a Director |
|
|
|
Dated: November 12, 2014 |
|
/s/ Frederick Larcombe |
|
By: |
Frederick Larcombe |
|
|
Chief Financial Officer and Secretary |
In accordance with the Exchange Act, this
report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Dated: November 12, 2014 |
|
/s/ Danielle Beauchamp |
|
By: |
Danielle Beauchamp |
|
|
Director |
|
|
|
Dated: November 12, 2014 |
|
/s/ Claude Brun |
|
By: |
Claude Brun |
|
|
Director |
|
|
|
Dated: November 12, 2014 |
|
/s/ James F. Groelinger |
|
By: |
James F. Groelinger |
|
|
Director and Chief Executive Officer |
|
|
|
Dated: November 12, 2014 |
|
/s/ Harry Pond |
|
By: |
Harry Pond |
|
|
Director |
|
|
|
Dated: November 12, 2014 |
|
/s/ Frederick A. Voight |
|
By: |
Frederick A. Voight |
|
|
Director |
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
Report of Independent Registered Public
Accounting Firm
To the Board of Directors and Stockholders
of
InterCore, Inc.
We have audited the accompanying
consolidated balance sheets of InterCore, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of
operations and comprehensive loss, stockholders' deficiency and cash flow for the years then ended. These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required, nor have we been engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentations. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of InterCore, Inc. as of December 31, 2013 and
2012, and its results of operations and cash flows for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has regularly incurred net losses and negative cash flows from operating activities since inception.
These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s
plans regarding these matters are also described in Note 2. The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Marcum LLP
New York, NY
November 12, 2014
InterCore, Inc. and Subsidiary
Consolidated Balance Sheets
| |
As of December 31, | |
| |
2013 | | |
2012 | |
| |
| | |
| |
Assets | |
| | | |
| | |
| |
| | | |
| | |
Current assets: | |
| | | |
| | |
| |
| | | |
| | |
Cash | |
$ | 23,225 | | |
$ | 53,744 | |
Accounts receivable | |
| 49,714 | | |
| - | |
Prepaid expenses and other current assets | |
| 288,828 | | |
| 12,676 | |
| |
| | | |
| | |
Total current assets | |
| 361,767 | | |
| 66,420 | |
| |
| | | |
| | |
Investments | |
| - | | |
| 910,000 | |
| |
| | | |
| | |
Total assets | |
$ | 361,767 | | |
$ | 976,420 | |
| |
| | | |
| | |
Liabilities and Stockholders' Deficiency | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
| |
| | | |
| | |
Accounts payable | |
$ | 253,970 | | |
$ | 481,022 | |
Accounts payable due to related parties | |
| - | | |
| 108,880 | |
Accrued compensation | |
| 58,500 | | |
| 386,500 | |
Accrued expenses | |
| 152,663 | | |
| 302,694 | |
Notes payable | |
| 803,343 | | |
| 8,497 | |
Note payable due to related party | |
| 800,000 | | |
| 714,938 | |
Convertible notes payable | |
| - | | |
| 1,666,667 | |
Deferred revenue | |
| - | | |
| 4,328 | |
| |
| | | |
| | |
Total liabilities | |
| 2,068,476 | | |
| 3,673,526 | |
| |
| | | |
| | |
Commitments and contingencies | |
| - | | |
| - | |
| |
| | | |
| | |
Stockholders' deficiency: | |
| | | |
| | |
| |
| | | |
| | |
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; 142,000 and 6,500,000 shares issued
and outstanding as of December 31, 2013 and 2012 as follows:
| |
| | | |
| | |
| |
| | | |
| | |
Series A - Zero and 2,000,000 shares issued and outstanding with a liquidation preference of zero and
$100,000 as of December 31, 2013 and 2012, respectively
| |
| - | | |
| 200 | |
| |
| | | |
| | |
Series B - Zero and 4,500,000 shares issued and outstanding with a liquidation preference of zero and
$750,000 as of December 31, 2013 and 2012, respectively
| |
| - | | |
| 450 | |
| |
| | | |
| | |
Series C - Zero shares issued and outstanding as of December 31, 2013 and 2012, respectively
| |
| - | | |
| - | |
| |
| | | |
| | |
Series D - 142,000 and zero shares issued and outstanding with a liquidation preference of $1,420,000
and zero as of December 31, 2013 and 2012, respectively
| |
| 14 | | |
| - | |
| |
| | | |
| | |
Common stock, $0.0001 par value, 275,000,000 shares authorized, 40,595,031 and 2,192,090 shares issued and outstanding as of December 31, 2013 and 2012, respectively | |
| 4,059 | | |
| 219 | |
| |
| | | |
| | |
Additional paid-in capital | |
| 12,428,791 | | |
| 5,194,040 | |
| |
| | | |
| | |
Accumulated deficit | |
| (14,108,050 | ) | |
| (7,892,015 | ) |
| |
| | | |
| | |
Accumulated other comprehensive gains | |
| (31,523 | ) | |
| - | |
| |
| | | |
| | |
Total stockholders' deficiency | |
| (1,706,709 | ) | |
| (2,697,106 | ) |
| |
| | | |
| | |
Total liabilities and stockholders' deficiency | |
$ | 361,767 | | |
$ | 976,420 | |
The accompanying notes are an integral part of these
consolidated financial statements.
InterCore, Inc. and Subsidiary
Consolidated Statements of Operations
and Comprehensive Loss
| |
For the years ended December 31, | |
| |
2013 | | |
2012 | |
| |
| | |
| |
Revenues | |
$ | 411,035 | | |
$ | 5,672 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
| |
| | | |
| | |
Research and development | |
| 2,693,525 | | |
| 151,450 | |
Charge for acquired in-process research and development | |
| 1,467,505 | | |
| - | |
General and administrative | |
| 412,830 | | |
| 932,989 | |
Charge for shares issued in connection with | |
| | | |
| | |
Myself acquisition agreement (Note 6(g)) | |
| - | | |
| 855,000 | |
| |
| | | |
| | |
Total operating expenses | |
| 4,573,860 | | |
| 1,939,439 | |
| |
| | | |
| | |
Operating loss | |
| (4,162,825 | ) | |
| (1,933,767 | ) |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
| |
| | | |
| | |
Settlement with Epec | |
| (187,500 | ) | |
| - | |
Charge to expense for: | |
| | | |
| | |
Loss on settlement of related party note payable | |
| (883,628 | ) | |
| - | |
Loss on settlement with vendors | |
| (170,650 | ) | |
| - | |
Loss on distribution of assets to HLBCDC (related party) | |
| (327,000 | ) | |
| - | |
Interest expense - Note payable to Fandeck (related party) | |
| (182,490 | ) | |
| - | |
Interest expense - Other | |
| (301,942 | ) | |
| (249,618 | ) |
| |
| | | |
| | |
Other income (expense) | |
| (2,053,210 | ) | |
| (249,618 | ) |
| |
| | | |
| | |
Loss before income taxes | |
| (6,216,035 | ) | |
| (2,183,385 | ) |
| |
| | | |
| | |
Income tax expense | |
| - | | |
| - | |
| |
| | | |
| | |
Net loss | |
| (6,216,035 | ) | |
| (2,183,385 | ) |
| |
| | | |
| | |
Other comprehensive gain - Foreign currency transalation | |
| (31,523 | ) | |
| - | |
| |
| | | |
| | |
Comprehensive loss | |
$ | (6,247,558 | ) | |
| (2,183,385 | ) |
| |
| | | |
| | |
Net loss per common share - Basic and diluted | |
$ | (0.86 | ) | |
$ | (1.22 | ) |
| |
| | | |
| | |
Weighted average common shares outstanding - Basic and diluted | |
| 7,228,602 | | |
| 1,790,507 | |
The accompanying notes are an integral
part of these consolidated financial statements.
InterCore, Inc. and Subsidiary
Consolidated Statement of Stockholders'
Deficiency
For the Years Ended December 31, 2012
and 2013
| |
Preferred Stock Series A | | |
Preferred Stock Series B | | |
Preferred Stock Series C | | |
Preferred Stock Series D | | |
Common Stock | | |
Additional | | |
Accumulated | | |
Accumulated | | |
Total | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Paid-In Capital | | |
Deficit | | |
Other | | |
Deficiency | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Comprehensive | | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Income | | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance, December 31, 2011 | |
| 2,000,000 | | |
$ | 200 | | |
| 3,000,000 | | |
$ | 300 | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 1,484,642 | | |
$ | 148 | | |
$ | 3,433,962 | | |
$ | (5,708,630 | ) | |
| | | |
$ | (2,274,020 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common stock for cash in connection
with exercise of warrants (Note 8(g)) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 35,159 | | |
| 4 | | |
| 390,656 | | |
| - | | |
| | | |
| 390,660 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of shares in connection with the cashless
exercise of warrants (Notes 8(h) and 10(d)) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 180,322 | | |
| 18 | | |
| (18 | ) | |
| - | | |
| | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of shares in connection with investment
in Epec Biofuels Holdings, Inc. (Notes 4(c) and 8(i)) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 100,000 | | |
| 10 | | |
| 99,990 | | |
| - | | |
| | | |
| 100,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common stock for cash (Notes 8(j),
8(k), and 8(m)) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 202,100 | | |
| 20 | | |
| 80,480 | | |
| - | | |
| | | |
| 80,500 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of contingent shares in connection with
Myself acquisition agreement (Notes 8(l) and 9) | |
| - | | |
| - | | |
| 1,500,000 | | |
| 150 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 180,000 | | |
| 18 | | |
| 854,832 | | |
| - | | |
| | | |
| 855,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued for services (Note 8(n)) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 9,867 | | |
| 1 | | |
| 257,772 | | |
| - | | |
| | | |
| 257,773 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Share-based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
| | | |
| 76,366 | | |
| - | | |
| | | |
| 76,366 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
| | | |
| | | |
| (2,183,385 | ) | |
| | | |
| (2,183,385 | ) |
Balance, December 31, 2012 | |
| 2,000,000 | | |
$ | 200 | | |
| 4,500,000 | | |
$ | 450 | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 2,192,090 | | |
$ | 219 | | |
$ | 5,194,040 | | |
$ | (7,892,015 | ) | |
| | | |
$ | (2,697,106 | ) |
InterCore, Inc. and Subsidiary
Consolidated Statement of Stockholders'
Deficiency
For the Years Ended December 31, 2012
and 2013
| |
Preferred Stock
Series A | | |
Preferred Stock
Series B | | |
Preferred Stock
Series C | | |
Preferred Stock
Series D | | |
Common Stock | | |
Additional | | |
Accumulated | | |
Accumulated | | |
Total | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Paid-In Capital | | |
Deficit | | |
Other | | |
Deficiency | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Comprehensive | | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Income | | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance, December 31, 2012 | |
| 2,000,000 | | |
$ | 200 | | |
| 4,500,000 | | |
$ | 450 | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 2,192,090 | | |
$ | 219 | | |
$ | 5,194,040 | | |
$ | (7,892,015 | ) | |
$ | - | | |
$ | (2,697,106 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Conversion on January 23, 2013 of Series A Convertible
Preferred Stock into common shares - Notes 9(a) and 10(b) | |
| (2,000,000 | ) | |
| (200 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 180,000 | | |
| 18 | | |
| 182 | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Conversion on January 23, 2013 of Series B Convertible
Preferred Stock into common shares - Notes 9(b) and 10(c) | |
| - | | |
| - | | |
| (4,500,000 | ) | |
| (450 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,025,000 | | |
| 203 | | |
| 247 | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance on January 23, 2013 of Series C Convertible
Preferred Stock - Notes 4 and 9(c) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,000,000 | | |
| 500 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 125,471 | | |
| - | | |
| - | | |
| 125,971 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance on January 10, 2013 of common stock
with a fair value of $0.0055 per share in connection with modification of investment agreement with Epec Biofuels Holdings,
Inc. - Notes 7(c) and 10(a) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 250,000 | | |
| 25 | | |
| 137,475 | | |
| - | | |
| - | | |
| 137,500 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance on January 23, 2013 of common stock
at $0.1667 per share in connection with the settlement of a note payable due to New Horizon - Notes 8(a) and 10(d) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 90,562 | | |
| 9 | | |
| 1,509,352 | | |
| - | | |
| - | | |
| 1,509,361 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance on January 23, 2013 of common stock
at $0.0032 per share with a fair value of $0.0080 in connection with the settlement of a note payable due to the Rockland
Group - Notes 8(b)(i) and 10(e) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,829,457 | | |
| 183 | | |
| 1,463,383 | | |
| - | | |
| - | | |
| 1,463,566 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance on January 23, 2013 of common stock
at $0.0160 per share with a fair value of $0.0080 in connection with the settlement of an amount due to a vendor - Note 10(f) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 148,000 | | |
| 15 | | |
| 229,985 | | |
| - | | |
| - | | |
| 230,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance on January 23, 2013 of common stock
at $0.0032 per share with a fair value of $0.0080 in connection with the settlement of amounts due to vendors - Note 10(g) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 353,312 | | |
| 35 | | |
| 282,614 | | |
| - | | |
| - | | |
| 282,649 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance on January 23, 2013 of common stock
at $0.0032 per share with a fair value of $0.0080 in connection with the distribution/assumption of certain assets and liabilities
to HLBC Distribution Company, Inc. - Notes 5 and 10(h) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 402,038 | | |
| 40 | | |
| 321,590 | | |
| - | | |
| - | | |
| 321,630 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of warrants on January 23, 2013 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
in connection with the | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
distribution/assumption of certain assets | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
and liabilities to HLBC Distribution | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Company, Inc. - Notes 5 and 11(a) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 295,000 | | |
| - | | |
| - | | |
| 295,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of warrants on March 15, 2013 in connection
with the issuance of a contertible promissory note - Notes 8(g) and 11(c) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 154,000 | | |
| - | | |
| - | | |
| 154,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance on April 17, 2013 of 100,000 shares
of Series C Convertible Preferred Stock at $0.025 per share - Notes 8(g) and 9(c) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 100,000 | | |
| 10 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,509 | | |
| - | | |
| - | | |
| 2,519 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance on April 24, 2013 of 7,597,100 shares
of Series C Convertible Preferred Stock at $0.01 per share - Notes 8(g) and 9(c) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 7,597,100 | | |
| 760 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 75,211 | | |
| - | | |
| - | | |
| 75,971 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance on various dates between August 8, 2013
and December 20, 2013 of 142,000 shares of Series D Preferred Stock at $10 per share net of commissions - Note 9(d) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 142,000 | | |
| 14 | | |
| - | | |
| - | | |
| 1,338,986 | | |
| - | | |
| - | | |
| 1,339,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance on various date between May 7, 2013
and August 14, 2013 of warrants in connection with the issuance of notes payable - Notes 8(j) and 11(d) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 50,351 | | |
| - | | |
| - | | |
| 50,351 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Conversion on December 31, 2013 of 12,697,100
shares of Series C Convertible Preferred Stock into 29,882,435 shares of Common Stock - Notes 9(c) and 10(q) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (12,697,100 | ) | |
| (1,270 | ) | |
| - | | |
| - | | |
| 29,882,413 | | |
| 2,988 | | |
| (1,718 | ) | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Conversion on December 31, 2013 of notes payable
and accrued interest aggregating $1,188,534 into 3,242,159 shares of Common Stock - Note 8(k) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,242,159 | | |
| 324 | | |
| 1,188,210 | | |
| - | | |
| - | | |
| 1,188,534 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Share based compensation - Warrants issued to
management - Notes 10(b) and 10(d) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 61,903 | | |
| - | | |
| - | | |
| 61,903 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (6,216,035 | ) | |
| - | | |
| (6,216,035 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Unrealized gain on foreign
currency transalation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (31,523 | ) | |
| (31,523 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2013 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 142,000 | | |
$ | 14 | | |
| 40,595,031 | | |
$ | 4,059 | | |
$ | 12,428,791 | | |
$ | (14,108,050 | ) | |
$ | (31,523 | ) | |
$ | (1,706,709 | ) |
The accompanying notes are an integral part
of these consoidated financial statements.
InterCore, Inc. and Subsidiary
Consolidated Statements of Cash Flows
| |
Years Ended December 31, | |
| |
2013 | | |
2012 | |
| |
| | |
| |
Cash flows used in operating activities: | |
| | | |
| | |
| |
| | | |
| | |
Net loss | |
$ | (6,216,035 | ) | |
$ | (2,183,385 | ) |
| |
| | | |
| | |
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: | |
| | | |
| | |
Charge for acquired in-process research and development | |
| 1,467,505 | | |
| - | |
Stock-based compensation expense: | |
| | | |
| | |
Common shares issued for services | |
| - | | |
| 257,773 | |
Options issued for services | |
| - | | |
| - | |
Warrants issued for services | |
| 61,903 | | |
| 76,366 | |
Charge for shares issued in connection with Myself acquisition agreement | |
| - | | |
| 855,000 | |
Charges related to Fandeck note recorded as interest expense: | |
| | | |
| | |
Debt issuance charges | |
| 181,870 | | |
| - | |
Amortization of debt discount | |
| 50,000 | | |
| - | |
Charges related to Fandeck note recorded as interest expense: | |
| | | |
| | |
Charges for issuance of common shares in connection with: | |
| | | |
| | |
Settlement with Epec | |
| 137,500 | | |
| - | |
Settlement of note due to Rockland | |
| 883,628 | | |
| - | |
Settlement of trade accounts payable | |
| 170,649 | | |
| - | |
Loss on distribution of assets and liabilities and issuance of common shares and warrants to HLBCDC | |
| 330,684 | | |
| - | |
| |
| | | |
| | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Increase in accounts receivable | |
| (49,714 | ) | |
| - | |
(Increase) decrease in prepaid expenses and other current assets | |
| (261,447 | ) | |
| 20,428 | |
Increase in accounts payable | |
| 151,496 | | |
| 107,663 | |
Increase (decrease) in accounts payable due to related parties | |
| (108,880 | ) | |
| 108,880 | |
Increase in accrued compensation | |
| 58,500 | | |
| 248,500 | |
Increase in accrued expenses | |
| 217,465 | | |
| 245,981 | |
Increase (decraese) in deferred revenue | |
| (4,328 | ) | |
| 4,328 | |
| |
| | | |
| | |
Net cash used in operations | |
| (2,929,204 | ) | |
| (258,466 | ) |
| |
| | | |
| | |
Cash flows provided by (used in) investing activities: | |
| | | |
| | |
| |
| | | |
| | |
Investment in HepatoChem | |
| - | | |
| (110,000 | ) |
Investment in Legends and Heros | |
| - | | |
| (75,000 | ) |
Investment in Epec | |
| - | | |
| (275,000 | ) |
| |
| | | |
| | |
Net cash provided by (used in) investing activities | |
| - | | |
| (460,000 | ) |
| |
| | | |
| | |
Cash flows provided by (used in) financing activities: | |
| | | |
| | |
| |
| | | |
| | |
Proceeds from sale of preferred stock | |
| 1,339,000 | | |
| - | |
Proceeds from sale of common stock | |
| - | | |
| 80,500 | |
Proceeds from exercise of warrants | |
| - | | |
| 390,660 | |
Proceeds from issuance of notes payable | |
| 787,152 | | |
| - | |
Proceeds from issuance of notes payable to related party | |
| - | | |
| 250,150 | |
Proceeds from issuance of convertible notes payable | |
| 1,100,000 | | |
| - | |
Proceeds from issuance of convertible notes payable to related party | |
| 105,000 | | |
| - | |
Proceeds from issuance of notes payable - Other | |
| 28,174 | | |
| - | |
Repayment of notes payable | |
| (429,120 | ) | |
| (1,522 | ) |
| |
| | | |
| | |
Net cash flows provided by financing activities | |
| 2,930,206 | | |
| 719,788 | |
| |
| | | |
| | |
Net increase in cash | |
| 1,002 | | |
| 1,322 | |
| |
| | | |
| | |
Effect of foreign exchange rate changes on cash | |
| (31,521 | ) | |
| - | |
| |
| | | |
| | |
Cash - Beginning of year | |
| 53,744 | | |
| 52,422 | |
| |
| | | |
| | |
Cash - End of year | |
$ | 23,225 | | |
$ | 53,744 | |
InterCore, Inc. and Subsidiary
Consolidated Statements of Cash Flows
| |
Years Ended December 31, | |
| |
2013 | | |
2012 | |
| |
| | |
| |
Supplemental disclosures of cash flow information: | |
| | | |
| | |
| |
| | | |
| | |
Cash paid for: | |
| | | |
| | |
Interest | |
$ | 115 | | |
$ | 1,625 | |
Income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Supplemental disclosures of non-cash operating, investing, and financing activities: | |
| | | |
| | |
| |
| | | |
| | |
Issuance of Common and Preferred Stock: | |
| | | |
| | |
Conversion of note payable into Series C Convertible Preferred Stock | |
$ | 75,971 | | |
$ | - | |
Settlement of note payable to New Horizon, Inc. | |
$ | 1,509,361 | | |
$ | - | |
Settlement of note payable to the Rockland Group, Inc. | |
$ | 1,463,566 | | |
$ | - | |
Settlement of accounts payable | |
$ | 513,053 | | |
$ | - | |
Distribution/assumption of assets and liabilities to HLBC Distribution Company, Inc. | |
$ | 321,630 | | |
$ | - | |
Investment in Epec Biofuels Holdings, Inc. | |
$ | - | | |
$ | 100,000 | |
| |
| | | |
| | |
Issuance of warrants - Transfer of assets and liabilities to HLBC Distribution Company, Inc. | |
$ | 295,000 | | |
$ | - | |
| |
| | | |
| | |
Acquisition of SRG International, Inc.: | |
| | | |
| | |
Acquisition of assets other than cash | |
$ | 1,722,941 | | |
$ | - | |
Assumption of liabilities | |
$ | 1,596,970 | | |
$ | - | |
Issuance of Series C Convertible Preferred Stock -
Purchase Price | |
$ | 125,971 | | |
$ | - | |
The accompanying notes are an integral part
of these consolidated financial statements.
InterCore Energy, Inc. and Subsidiary
Notes to the Consolidated Financial Statements
December 31, 2013
InterCore, Inc. (the "Company") was incorporated under the laws of the State of Delaware on
April 29, 2010 as I-Web Media, Inc. On December 29, 2010, the Company changed its name to Heartland Bridge Capital, Inc. Through
March 31, 2012, the Company operated as Heartland Bridge Capital, Inc. and focused primarily upon investments and acquisition opportunities
primarily in products and companies involved in the market segments of clean and renewable energy, medical technology, nanotechnology,
and environmentally-friendly (green) waste management. On March 31, 2012,
the Company decided to intensify its focus in the energy sector and the related opportunities within and, to that end, the Board
of Directors elected to change the name of the Company to InterCore Energy, Inc.
On January 23, 2013 and as more fully described
in Notes 4 and 5, the Company:
| a) | Transferred investments to a related party in exchange for the assumption of certain obligations
of the Company and then converted the majority of the remaining accounts payable, notes payable, and other commitments into shares
of common stock; and |
| b) | Closed on a transaction with SRG International, Inc. ("SRG") and its shareholders
whereby the Company acquired 100% of the outstanding common stock of SRG in exchange for ICOR's issuance of 5,000,000 shares
of a newly created Series C Convertible Preferred Stock. Immediately after a reverse split of the Company's common stock,
which occurred on December 31, 2013, all of the then outstanding shares of Series C Convertible Preferred Stock
automatically converted into 80% of the then outstanding shares of
the Company's common stock and the acquisition was accounted for as a purchase of a business. The holders of the Series C
Convertible Preferred Stock did not originally perfect their
interest in such securities due to non-performance of certain
provisions of the
acquisition agreement. On October 28, 2013, the Company waived such provisions. |
| | During 2013 the operations of SRG consisted primarily of researching, developing, and testing the
Driver Alertness Detection System ("DADS™"). DADS™ is designed around proprietary alertness detection technologies,
which enables individuals to modulate their work activity based on real time assessment of their actual state of alertness. The
DADS™ methodology employs a unique approach for assessing sleepiness and low alertness levels via the observed behavior of
individuals in real work conditions. |
On December 31, 2013, the name of the
Company was changed to InterCore, Inc.
| 2) | Basis of Presentation and Going Concern |
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. The Company incurred significant losses and negative
cash flows from operations since its inception in April 2010 and has an accumulated deficit of $14,108,050 as of December 31, 2013.
Cash used in operating activities during the year ended December 31, 2013 totaled $2,929,204 and the Company has a working capital
deficiency of $1,706,709 as of December 31, 2013. These conditions raise substantial doubt about the Company's ability to continue
as a going concern. The Company has historically financed its activities through the private placement of equity securities. Since
inception, it has dedicated most of its financial resources to general and administrative expenses in the pursuit of the business
plan described in the preceding paragraphs and, effective January 23, 2013, research, development, testing and commercialization
of the DADS™ technology.
The Company’s ability to continue
those activities is dependent upon its ability to raise additional equity, secure debt financing, and/or generate revenue.
The Company can give no assurance that
such financing will be available on acceptable terms or at all, or that it can generate revenue. Should the Company not be successful
in obtaining the necessary financing or generating revenue to fund its operations, the Company would need to curtail or cease its
operational activities. The accompanying financial statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.
| 3) | Significant Accounting Policies and Recent Accounting
Pronouncements |
| a) | Significant Accounting Policies |
Principles of Consolidation
- The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All other significant
inter-company balances and transactions have been eliminated in consolidation.
Use of Estimates - The preparation
of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses for the reporting period. Management bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those
estimates.
Revenue Recognition - The
Company recognizes revenue when persuasive evidence that an arrangement exists with a customer or client, the price to the purchaser
is fixed or determinable, the product has been shipped or the service has been performed, the Company has no significant remaining
obligation, and collectability is reasonably assured.
Research and Development - The
Company expenses research and development costs as incurred. The Company incurred research and development expense of $2,693,525
and $151,450 during the year ended December 31, 2013 and 2012, respectively. Additionally, the Company recorded a charge for acquired
research and development of $1,467,505 during the year ended December 31, 2013.
Stock-Based Compensation - The
Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity
instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized
as expense over the period during which the recipient is required to provide services in exchange for that award. Options and warrants
granted to consultants and other non-employees are recorded at fair value as of the grant date and subsequently adjusted to fair
value at the end of each reporting period until such options and warrants vest, and the fair value of such instruments, as adjusted,
is expensed over the related vesting period.
Stock-based compensation expense aggregated
$61,903 and $334,139 for the year ended December 31, 2013 and 2012, respectively, and was classified in general and administrative
expense.
Income Taxes - The Company
accounts for income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change
is effective. Income tax benefits are recognized when it is probable that the deduction will be sustained. A valuation allowance
is established when it is more likely than not that all or a portion of a deferred tax asset will either expire before the Company
is able to realize the benefit, or that future deductibility is uncertain.
Earnings (Loss) Per Share
- The Company calculates basic and diluted net loss per common share by dividing net loss by the weighted-average number of common
shares outstanding for the period. Basic and diluted net loss per common share were the same since the inclusion of common shares
issuable pursuant to the exercise of warrants and the conversion of preferred stock in the calculation of diluted net loss per
common share would have been anti-dilutive.
The following table summarizes the number
of common shares and common share equivalents excluded from the calculation of diluted net loss per common share for the years ended December, 2013 and 2012:
| |
2013 | | |
2012 | |
| |
| | |
| |
Warrants | |
| 1,293,304 | | |
| 404,804 | |
Series A Convertible Preferred Stock | |
| - | | |
| 180,000 | |
Series B Convertible Preferred Stock | |
| - | | |
| 2,025,000 | |
Convertible notes | |
| - | | |
| 240,687 | |
| |
| | | |
| | |
Total | |
| 1,293,304 | | |
| 2,850,491 | |
Investments - The Company
accounts for investments in other entities under the cost method of accounting when the Company does not hold a significant interest
in nor has any management control over those entities. The Company has not recorded any impairment for these investments.
Intangible Assets - The Company
accounts for intangible assets at their historical cost and records amortization utilizing the straight-line method over periods
ranging from five years to ten years based upon their estimated useful lives. The Company reviews them for impairment whenever
events or changes in business circumstances indicate that the carrying amount of such assets may not be fully recoverable. An impairment
loss would be recognized when the estimated undiscounted future cash flow expected to be derived from the use of those assets is
less than their carrying values. No impairment loss was recorded during the years ended December 31, 2013 and 2012.
Fair Value - The Company
determines the estimated fair value of amounts presented in these financial statements using available market information and appropriate
methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. The
estimates presented in the financial statements are not necessarily indicative of the amounts that could be realized in a current
exchange between buyer and seller. The use of different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts. These fair value estimates were based upon pertinent information available as of December
31, 2013 and, as of that date, the carrying value of all amounts approximates fair value.
The Company has categorized its assets
and liabilities at fair value based upon the following fair value hierarchy:
| a) | Level 1 inputs which utilize quoted prices (unadjusted) in active markets for identical assets
or liabilities. |
| b) | Level 2 inputs which utilize other-than-quoted prices that are observable, either directly or indirectly.
Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and
other information that are observable at commonly quoted intervals. |
| c) | Level 3 inputs which are unobservable and are typically based on assumptions, including situations
where there is little, if any, market activity. |
In certain cases, the inputs used to measure
fair value may fall into different levels of the fair value hierarchy. In such cases, the related asset or liability was categorized
based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance
of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset
or liability.
Both observable and unobservable inputs
may be used to determine the fair value of positions that are classified within the Level 3 category. As a result, the unrealized
gains and losses for assets within the Level 3 category presented in the tables below may include changes in fair value that were
attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in historical company
data) inputs.
The following are the major categories
of assets were measured at fair value as of December 31, 2013 and 2012 using quoted prices in active markets for identical assets
(Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):
| |
Level 1: | | |
Level 2: | | |
Level 3: | | |
Total | |
| |
Quoted Prices | | |
Significant | | |
Significant | | |
Assets | |
| |
In Active | | |
Other | | |
Unobservable | | |
As Of | |
| |
Markets For | | |
Observable | | |
Inputs | | |
The Year | |
| |
Identical | | |
Inputs | | |
| | |
Ended | |
| |
Assets | | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| |
December 31, 2012: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Investments | |
$ | - | | |
$ | - | | |
$ | 910,000 | | |
$ | 910,000 | |
Intangible asset | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
December 31, 2013: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Investments | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Intangible asset | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Based on its assessments, the Company recorded
an asset impairment charge of $2,950,000 related to the intangible asset during the year ended December 31, 2011 as further described
in Note 6. Aside from the disposition of the investments and the intangible assets described in Notes 5, 6, and 7, there were no
changes in fair value, including net transfers in and/or out of the Level 3 type asset/liability category, of all financial asset
and liabilities measured at fair value on a recurring basis using significant unobservable inputs as of December 31, 2013.
Impairment of Long-Lived Assets
- The Company reviews long-lived assets, including intangible assets other than goodwill, for impairment whenever changes in circumstances
indicate that the carrying value of the asset may not be recoverable. In connection with this review, the Company also reevaluates
the periods of depreciation and amortization for these assets. The Company assesses recoverability by determining whether the net
book value of the related asset will be recovered through the projected undiscounted future cash flows of the asset. If the Company
determined that the carrying value of the asset may not be recoverable, it measures any impairment based on the projected future
discounted cash flows as compared to the asset’s carrying value. Based on its assessments, the Company recorded an immediate impairment charge for acquired research and development of $1,467,505 in connection
with the acquisition of the SRG business. During the year ended December 31, 2012, the Company did not incur any impairment charges.
Financial Instruments - The
Company records financial instruments consisting of cash, accounts receivable, and accounts payable at historical cost and notes
payable at face value less principal repayments and considers such amounts to approximate fair value due to their short term nature
of those instruments.
Contingent Liabilities - The
Company records liabilities when it is probable a liability has been incurred and the amount can be reasonably estimated or determined.
As of December 31, 2013 and 2012, there were no accruals for contingent liabilities.
Foreign Operations - The Company
operates in the United States and Canada. Revenues and other financial statistics are attributed to the country in which each legal
entity is domiciled. The financial information by geographic area is as follows:
| |
United | | |
| | |
| |
| |
States | | |
Canada | | |
Total | |
| |
| | |
| | |
| |
Twelve months ended December 31, 2013: | |
| | | |
| | | |
| | |
Revenues by geographic area | |
$ | 644 | | |
$ | 410,391 | | |
$ | 411,035 | |
Operating loss by geographic area | |
| 1,680,398 | | |
| 2,482,427 | | |
| 4,162,825 | |
Net loss by geographic area | |
| 3,733,608 | | |
| 2,482,427 | | |
| 6,216,035 | |
| |
| | | |
| | | |
| | |
Twelve months ended December 31, 2012: | |
| | | |
| | | |
| | |
Revenues by geographic area | |
$ | 5,672 | | |
| - | | |
$ | 5,672 | |
Operating loss by geographic area | |
| 1,933,767 | | |
| - | | |
| 1,933,767 | |
Net loss by geographic area | |
| 2,183,385 | | |
| - | | |
| 2,183,385 | |
| |
| | | |
| | | |
| | |
As of December 31, 2013: | |
| | | |
| | | |
| | |
Identifiable assets by geographic area | |
$ | 32,370 | | |
$ | 329,397 | | |
$ | 361,767 | |
Long lived assets by geographic area | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | |
As of December 31, 2012: | |
| | | |
| | | |
| | |
Identifiable assets by geographic area | |
$ | 976,420 | | |
| - | | |
$ | 976,420 | |
Long lived assets by geographic area | |
| - | | |
| - | | |
| - | |
Leases
- The Company's policy is to amortize leasehold improvements over the lesser of the useful life of the asset or the initial
term of the related lease. During the years ended December 31, 2013 and 2012, the Company leased its office space on a month-to-month
basis. Rental expense under those operating leases for the years ended December 31, 2013 and 2012 totaled $46,399 and $2,419, respectively.
Credit Risk and Concentrations
- Financial instruments that subject the Company to credit risk consist principally of cash and accounts receivable.
The Company maintains cash deposits with
financial institutions, which, from time to time, may exceed federally insured limits. Cash is also maintained at a foreign financial
institution for its 100%-owned subsidiary. The Company has not experienced any losses and believes it is not exposed to any significant
credit risk from cash.
The Company does not require collateral
for financial instruments subject to credit risk such as accounts receivable. The Company believes that credit risk is limited
because the Company is familiar with the nature of operations of its customers. However, if appropriate and based upon the credit
risk of its customers, the Company's policy is to establish an allowance for uncollectible accounts and periodically reassess the
need for such allowances.
During the year ended December 31,
2013, the Company earned 99.8% of its revenues of $411,035 from one customer. As of December 31, 2013, that customer
represented 100% of the Company's accounts receivable balance of $49,714. During the year ended December 31, 2012, the
Company earned 100% of its revenues of $5,672 from another customer. As of December 31, 2012, the Company had no outstanding
accounts receivable.
| b) | Recent Accounting Pronouncements |
In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2013-11, Income
Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss,
or a Tax Credit Carryforward Exists. Under this new guidance, companies must present this unrecognized tax benefit in the
financial statements as a reduction to deferred tax assets created by net operating losses or other tax credits from prior
periods that occur in the same taxing jurisdiction. If the unrecognized tax benefit exceeds such credits it should be presented
in the financial statements as a liability. This update is effective for annual and interim reporting periods for fiscal years
beginning after December 15, 2013. The adoption of this standard is not expected to have a material impact on the Company's
financial position, results of operations or cash flows.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with
Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition
and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 and should be applied
retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying
the ASU recognized at the date of initial application. The adoption of this standard is not expected to have a material impact
on the Company's financial position, results of operations or cash flows.
In June 2014, the FASB issued ASU 2014-10, Development Stage Entities
(Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities
Guidance in Topic 810, Consolidation. This ASU removes the definition of a development stage entity from the Accounting Standards
Codification, thereby removing the financial reporting distinction between development stage entities and other reporting
entities from generally accepted accounting principles. In addition, the ASU eliminates the requirements for development stage
entities to (1) present inception-to-date information in the statements of operations, cash flows, and stockholders' equity,
(2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage
activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development
stage entity that in prior years it had been in the development stage. This ASU is effective for annual reporting periods
beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The Company elected to adopt
this ASU effective during the fiscal year ended December 31, 2013 and such adoption resulted in the removal of previously
required development stage disclosures.
In June 2014, the FASB issued ASU 2014-12, Compensation
- Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance
Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting,
and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance
target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation
cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should
represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The
amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December
15, 2015. Earlier adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company's
financial position, results of operations or cash flows.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements -
Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern. This
ASU requires management to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern
for each annual and interim reporting period. I f substantial doubt exists, additional disclosure is required. This new standard
will be effective for the Company for annual and interim periods beginning after December 15, 2016. Early adoption is permitted.
The Company expects to adopt this new standard for the fiscal year ending December 31, 2014 and the Company will continue
to assess the impact on its consolidated financial statements.
Other recent accounting pronouncements issued by the FASB and
the SEC did not have, or are not believed by management to have, a material impact on the Company's present or future consolidated
financial statements.
| 4) | Acquisition of SRG International, Inc. |
On January 23, 2013, the Company
closed on a transaction contemplated by an Amended and Restated Share Exchange Agreement (the “Agreement”) with
SRG International, Inc., a Quebec Province corporation, (“SRG”) and the shareholders of SRG pursuant to which the
holder of 100% of the outstanding common stock of SRG transferred to the Company all of the common stock of SRG in exchange
for the issuance of 5,000,000 shares of the Company's newly created Series C Convertible Preferred Stock for the purpose of
acquiring SRG's in-process research and development. Immediately after a reverse split of the Company's common stock, which
occurred on December 31, 2013, all of the then outstanding shares of Series C Convertible Preferred Stock automatically
converted into 80% of the then outstanding shares of the Company's common stock. The holders of the Series C Convertible
Preferred Stock did not originally perfect their interest in such securities due to non-performance of certain provisions of
the acquisition agreement. On October 28, 2013, the Company waived such provisions.
The 5,000,000 shares of Series C Convertible
Preferred Stock issued on January 23, 2013 in connection with this transaction were valued at $125,971, or $0.025 per share.
The acquisition of SRG was accounted for
by the Company as a purchase of a business whereby assets acquired and liabilities were recorded at their estimated
fair values as of the date of the acquisition and the results of operations of SRG have been consolidated with those of the Company
from the date of the acquisition.
The purchase price was allocated as follows:
Assets: | |
| | |
Acquired in-process research and development | |
$ | 1,467,505 | |
Other current assets | |
| 14,705 | |
| |
| 1,482,210 | |
| |
| | |
Liabilities: | |
| | |
Accounts payable | |
| 112,896 | |
Accrued expenses | |
| 34,703 | |
Notes payable | |
| 1,208,640 | |
| |
| 1,356,239 | |
| |
| | |
Purchase price (Fair value of Preferred Stock - $0.025 per share) | |
$ | 125,971 | |
The Company performed a valuation to estimate
the fair value of its Series C Convertible Preferred as of the date of acquisition. To determine the value of the equity instrument
the Company considered the following three possible valuation methods: (1) the income approach, (2) the market approach and (3)
the cost approach to estimate the enterprise value.
The income approach focuses on the income-producing
capability of a business by estimating value based on the expectation of future cash flows that a company will generate - such
as cash earnings, cost savings, tax deductions, and the proceeds from disposition. These cash flows are discounted to the present
using a rate of return that incorporates the risk-free rate for the use of funds, the expected rate of inflation, and risks associated
with the particular investment. The selected discount rate is generally based on rates of return available from alternative investments
of similar type, quality and risk.
The market approach valuation method measures
the value of an asset or business through an analysis of recent sales or offerings of comparable investments or assets. When applied
to the valuation of equity interests, consideration is given to the financial condition and operating performance of the entity
being appraised relative to those of publicly traded entities operating in the same or similar lines of business, potentially subject
to corresponding economic, environmental and political factors and considered to be reasonable investment alternatives.
The Company selected a Market Approach
to estimate the fair value of the Series C Convertible Preferred Stock as the Company sold a convertible note during the year ended
December 31, 2013 that was convertible into the same Series C Convertible Preferred Stock in the acquisition of SRG (see Note 9(c)).
Based on the Company’s evaluation of the convertible debt payable of $75,971 the debt was convertible into 7,597,100 shares
of Series C Convertible Preferred Stock.
Upon consummation of the acquisition, all
of the excess purchase price was allocated to in-process research and development. SRG's in-process research and development consisted
of the DADS™ technology, a system designed around proprietary alertness detection technologies which helps operators (such
a drivers of motor vehicles) in modulating their work activity based on real time knowledge of their actual state of alertness.
As of the date of the acquisition, SRG
had only produced a beta model and has not taken the DADS™ System to market. The Company was unable to determine the commercial
viability of such technology and, accordingly, recorded an impairment charge of $1,467,505 to the statement of operations for acquired
in-process research and development.
The following unaudited pro forma financial
information presents the consolidated results of operations of the Company and SRG for the years ended December 31, 2013 and 2012
as if the acquisition had occurred on January 1, 2012 instead of January 23, 2013. The following pro forma information does not
necessarily reflect the results of operations that would have occurred had the entities been a single company during those periods.
|
|
Results |
|
|
Pro |
|
|
Pro |
|
|
|
As |
|
|
Forma |
|
|
Forma |
|
|
|
Reported |
|
|
Adjustment |
|
|
Results |
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2013: | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Revenues | |
$ | 411,035 | | |
$ | - | | |
$ | 411,035 | |
Net loss | |
$ | (6,216,035 | ) | |
$ | 1,461,406 | | |
$ | (4,754,629 | ) |
Weighted average number of common shares outstanding | |
| 7,288,602 | | |
| - | | |
| 37,352,873 | |
Loss per common share - Basic and fully diluted | |
$ | (0.86 | ) | |
$ | - | | |
$ | (0.13 | ) |
| |
| | | |
| | | |
| | |
The pro forma adjustment consists of: | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Elimination of charge to expense for acquired in-process research and development | |
| | | |
$ | 1,467,505 | | |
| | |
Interest expense | |
| | | |
| (6,099 | ) | |
| | |
| |
| | | |
$ | 1,461,406 | | |
| | |
| |
| | | |
| | | |
| | |
For the year ended December 31, 2012: | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Revenues | |
$ | 5,672 | | |
$ | - | | |
$ | 5,672 | |
Net loss | |
$ | (2,183,385 | ) | |
$ | (1,563,524 | ) | |
$ | (3,746,909 | ) |
Weighted average number of common shares outstanding | |
| 1,790,507 | | |
| - | | |
| 37,352,873 | |
Loss per common share - Basic and fully diluted | |
$ | (1.22 | ) | |
$ | - | | |
$ | (0.10 | ) |
| |
| | | |
| | | |
| | |
The pro forma adjustment consists of: | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Charge to expense for acquired in-process research and development | |
| | | |
$ | (1,467,505 | ) | |
| | |
Interest expense | |
| | | |
| (96,019 | ) | |
| | |
| |
| | | |
$ | (1,563,524 | ) | |
| | |
The pro forma adjustments above for 2013
and 2012 assume that all Series C Convertible Preferred Stock issued in connection with the acquisition and financing of SRG occurred
on January 1, 2012 converted into shares of the Company's common stock on that date. There were no other pro forma adjustments
for 2012 as SRG did not have operations during that period.
| 5) | Distribution of Assets and Assumption of Liabilities |
On January 23, 2013 and simultaneously
with the closing of the Share Exchange Agreement described above, the Company closed on a transaction contemplated by an Assignment
and Assumption Agreement with HLBC Distribution Company, Inc., an entity ("HLBCDC") controlled by the president of New
Horizons, Inc, the Company's majority shareholder. Pursuant to that agreement, certain assets of the Company were distributed to
HLBCDC in exchange for HLBCDC assuming certain liabilities of the Company. It is intended that New Horizon, Inc. and certain member
of ICOR's Board of Directors and management team will collectively receive 78% of the future economic benefit, if any, derived
from the ownership of those assets by HLBCDC after the satisfaction of the assumed liabilities.
As more fully described in the footnotes
on the following pages, the assets distributed to HLBCDC had an aggregate value of $1,316,630 and consisted of:
| a) | The shares the Company owned in Legends & Heroes, Inc. and Epec Biofuels Holdings, Inc. as
well as the intangible rights associated with the Myself™ pelvic muscle trainer and a novel medical applicator referred to
as the “Soft and Smooth Assets” with a collective carrying value of $700,000 as described in Notes 6, 7(b), and 7(c); |
| b) | 402,038 shares of the Company's common stock with a negotiated value of $127,446, or $0.32 per
share, and a fair value of $321,630, or $0.80 per share as described in Note 10(p); and |
| c) | A warrant to purchase 500,000 shares of the Company's common stock at the exercise price of $0.55
per share, the fair market value of such shares on the date of the closing, which was valued at $295,000 through the use of the
Black-Scholes valuation formula as described in Note 11(d);. |
As more fully described in the footnotes
on the following pages, in exchange for the items listed above, HLBCDC assumed $985,946 of the Company's liabilities consisting
of:
| a) | The remaining balance due to New Horizons, Inc. of $450,000 in connection with the convertible
note payable as described in Note 8(a)(ii); |
| b) | Accrued liabilities of $386,500 due to management for services rendered; and |
| c) | Trade payables totaling $149,446; |
In connection with the distribution of
assets and the assumption of liabilities described above, the Company recorded a charge to expense for the loss associated with
that distribution in the amount of $330,684 during the year ended December 31, 2013.
During the year ended December 31,
2011, the Company recorded an impairment charge of $2,950,000 which represented the full carrying value of the Myself pelvic
muscle trainer intangible asset as the entity developing and marketing this product had not provided sufficient information
to enable the Company to continue to carry this asset at its previous value.
As of December 31, 2012, the company
continued to own this asset and its carrying value was zero.
On January 23, 2013, this asset was distributed
in connection with a transaction more fully described in Note 5.
As of December 31, 2013, the company
did not own any intangible assets.
Investments as of December 31, 2013 and
2012 consisted of the following:
| |
2013 | | |
2012 | |
| |
| | |
| |
HepatoChem, Inc. | |
$ | - | | |
$ | 210,000 | |
| |
| | | |
| | |
Legends and Heroes, Inc | |
| - | | |
| 325,000 | |
| |
| | | |
| | |
Epec Biofuels Holdings, Inc. | |
| - | | |
| 375,000 | |
| |
| | | |
| | |
Total | |
$ | - | | |
$ | 910,000 | |
The Company owned 12% or less of the common
stock of each entity on a fully diluted basis, and has no control or significant influence over management. All such investments
were accounted for utilizing the cost method of accounting
HepatoChem is a privately held
company that offers pharmaceutical and biotech companies a reliable and efficient means of accessing small molecule metabolites
in quantities needed in the drug development process. The investment consisted of 21,000 shares of Series A Convertible Preferred
Stock as of December 31, 2012 which represented approximately 8% of the total shares outstanding on a fully diluted basis as of
that date. Such securities had liquidation preference over the company’s common stock, are convertible into the company’s
common stock, have voting rights, and have certain protective voting provisions to help maintain their preferential position.
On January 23, 2013, this asset
was distributed in connection with a transaction more fully described in Note 8(b)(i).
Legends & Heroes is a privately
held company that develops and markets garments that constantly deliver cosmetic and other ingredients to the wearer's skin. The
investment consisted of approximately 82,723 shares of common stock as of December 31, 2012 which represented approximately 3%
of the total shares outstanding as of that date.
On January 23, 2013, this asset
was distributed in connection with a transaction as more fully described in Note 5.
| c) | Epec Biofuels Holdings, Inc. |
Epec Biofuels ("Epec")
is a privately held company that is pursuing the development of ethanol production facilities which utilize sweet sorghum as a
feedstock rather than corn or sugarcane. The investment consisted of 8,000,000 shares of common stock as of December 31, 2012 which
represented approximately 10% of the total shares outstanding on a fully diluted basis as of that date.
Under the terms of the Epec investment
agreement dated May 21, 2012:
| i) | The Company agreed to purchase 20,000,000 shares of common stock of Epec for the following consideration: |
| b) | 22,500 shares of the Company's common stock; and |
| c) | A commitment to pay an additional $600,000 in cash on or
before August 15, 2012; |
| ii) | 8,000,000 of the 20,000,000 shares of Epec were issued to the Company and the balance of 12,000,000
shares will be issued upon the full payment of the $600,000 described above; and |
| iii) | The Company had the right through May 2015 to elect one seat on Epec's Board of Directors and a
second seat upon payment of the $600,000 described above. |
The terms of this investment
agreement were modified on August 23, 2012 and the Company made payments aggregating $50,000 through that date. The new terms provided
for the remaining $550,000 to be paid in weekly installments of $25,000 from September 2012 through February 2013. In connection
with the modification of the terms of this agreement, the Company agreed to issue an additional 77,500 shares of the Company's
common stock which was valued at fair market value and recorded as an additional cost of the investment in Epec. The Company made
five of the installment payments described above through December 31, 2012 and was not in compliance with the investment agreement
as of that date. However, Epec did not issue the Company a formal notice of default.
| | The Company accounted for this investment at cost through December 31, 2012 as follows: |
Cash | |
$ | 275,000 | |
Issuance of 10,000,000 shares of ICOR common stock at fair value | |
| 100,000 | |
Total | |
$ | 375,000 | |
On January 10, 2013, Epec and
the Company modified the agreement whereby:
| i) | The number of Epec shares to be issued to the Company was reduced to 12,500,000 and all such shares
were released to the Company; |
| ii) | The Company's remaining payment obligation to Epec of $475,000 was reduced to $100,000; |
| iii) | The Company made a $50,000 payment; and |
| iv) | Epec could convert the Company's remaining obligation of $50,000 into the Company's common stock
at $0.20 per share. |
The Company accounted for the
$50,000 payment as a cost of modifying the Epec investment agreement and, therefore, recorded a charge to expense in that amount
during the year ended December 31, 2013.
On January 16, 2013 and as described
in Note 10(i), Epec converted the remaining payment obligation of $50,000 into 250,000 shares of the Company's common stock. The
Company considered the fair value of those shares to be $137,500, or $0.55 per share, based upon the closing market price that
day and accounted for that issuance as a cost of modifying the Epec investment agreement and recorded a charge to expense in that
amount during the year ended December 31, 2013.
On January 23, 2013, this asset
was distributed in connection with a transaction more fully described in Note 5.
Notes payable as of December 31, 2013 and
2012 consisted of the following:
| |
2013 | | |
2012 | |
| |
| | |
| |
Convertible note payable - New Horizon | |
| - | | |
$ | 1,666,667 | |
| |
| | | |
| | |
Note payable due to related party - Rockland | |
| - | | |
| 714,938 | |
| |
| | | |
| | |
Note payable - Huppe | |
$ | 800,000 | | |
| - | |
| |
| | | |
| | |
Series of Notes Payable due May 1, 2014, net of unamortized discount of $19,230 | |
| 644,770 | | |
| - | |
| |
| | | |
| | |
Epec | |
| 150,000 | | |
| - | |
| |
| | | |
| | |
Other | |
| 8,573 | | |
| 8,497 | |
| |
| | | |
| | |
Total | |
$ | 1,603,343 | | |
$ | 2,390,102 | |
The notes payable listed above were classified
as current liabilities as of December 31, 2013 and 2012. Additionally, the Company entered into and repaid a number of notes payable
as described in the following paragraphs.
| a) | Convertible note payable - New Horizon |
On December 8, 2010, the Company
issued to New Horizon a convertible note payable in the amount of $2,000,000 in connection with the acquisition of rights to a
royalty stream related to the sales of the Myself pelvic muscle trainer. This note accrues interest at the rate of 10% per annum
and matured on June 30, 2012. Principal and accrued interest was convertible into common stock at the rate of $16.70 per share
at any time at the option of the holder. The Company had the option at any time to pay principal and accrued interest with common
stock in lieu of cash at the rate of $11.10 per common share.
On March 31, 2011, the Company
elected to pay principal of $333,333 and accrued interest of $60,821 through the issuance of 35,474 shares of common stock at the
rate of $11.10 per share as permitted under the terms of the note.
As of December 31, 2012, the
Company was not in compliance with the terms of this note due to non-payment of principal and interest. However, the note holder
did not issue the Company a formal notice of default.
On January 23, 2013, the total
amount due to New Horizon of $1,959,361 was satisfied through:
| i) | The conversion by New Horizon of principal and accrued interest in the amounts of $1,216,667 and
$292,694, respectively, into 90,562 shares of the Company's common stock at the rate of $16.67 per share pursuant to the terms
of the note dated December 8, 2010. The Company accounted for this transaction as a decrease to notes payable and accrued expenses
with a corresponding increase of $1,509,361 to stockholders' equity as described in Note 10(l). |
| ii) | The assumption of the remaining principal in the amount of $450,000 by HLBCDC as described in Note
5. |
| b) | Note payable due to related party - Rockland |
On various dates from December
16, 2010 through December 31, 2012, the Company entered into a series of short term notes with the Rockland Group, the Company's
majority shareholder and an entity controlled by one of the Company's Directors in the aggregate principal amount of $581,447.
During that period, principal and interest due for all these notes were consolidated into one note as of December 31, 2012 in the
principal amount of $714,938 which accrued interest at the rate of 15% per annum and matured on March 31, 2013.
During January, 2013, the Rockland
Group advanced and additional $75,000 to the Company.
On January 23, 2013, the total
amount due to the Rockland Group of $789,938 was satisfied as follows:
| i) | $210,000 in connection with the distribution of the Company's investment in HepatoChem, Inc. to
the Rockland Group as also described in Note 7(a). As the Company's carrying value of this investment was $210,000, there was no
gain or loss recorded in connection with this transaction. |
| ii) | $579,938 in connection with the issuance of 1,829,457 shares of the Company's common stock at the
rate of $0.32 per share. The Company determined the fair value of those shares to be $1,463,566, or $0.80 per share based upon
the closing market price that day and accounted for this issuance as a settlement of notes payable of $579,938 and a charge to
expense of $883,628 during the year ended December 31, 2013 as also described in Note 10(m). |
On September 14, 2012, SRG,
a wholly owned subsidiary of the Company, issued a note payable to Mr. Huppe, an individual, in the amount of $1,200,000 in
connection with SRG's acquisition of all rights and interests in the DADS™ technology. This note accrued interest at
the rate of 8% per annum and matured on March 15, 2013. During the year ended December 31, 2013, the principal amount
outstanding has been reduced by $400,000.
As of December 31, 2013, the
Company is not in compliance with the terms of this note due to non-payment of principle and interest. However, the note holder
has not issued the Company a formal notice of default.
| d) | Note payable - Despres #1 |
On February 15, 2013, SRG, a
wholly owned subsidiary of the Company, issued a note payable to Le Groupe Despres, Inc. in the amount of $80,000 Canadian dollars
($76,000 in US dollars as of September 30, 2013). This note accrued interest at the rate of 25% per annum compounded daily basis
and was payable on demand.
On October 17, 2013 this note
and accrued interest was paid in full.
| e) | Note payable - Despres #2 |
On March 15, 2013, SRG, a wholly
owned subsidiary of the Company, issued a note payable to Le Groupe Despres, Inc. in the amount of $130,000 Canadian dollars ($123,500
in US dollars as of September 30, 2013). This note accrued interest at the rate of 25% per annum compounded daily basis and was
payable on demand.
On October 17, 2013 this note
and accrued interest was paid in full.
On March 15, 2013, SRG, a wholly
owned subsidiary of the Company, issued a note payable to Yves Doucet, an individual, in the amount of $100,000 Canadian dollars
($95,000 in US dollars as of September 30, 2013). This note accrued interest at the rate of 25% per annum compounded daily basis
and was payable on demand.
On October 17, 2013 this note
and accrued interest was paid in full.
| g) | Convertible note payable with face value of $75,000 due
to related party - Fandeck |
On March 15, 2013,
the Company issued a note payable to Fandeck Associates, Inc. ("Fandeck") in the amount of $50,000 plus a warrant
for the purchase of 200,000 shares of the Company's common stock at $1.00 per share for a period of five years, and received
proceeds of $50,000. These warrants were 100% vested upon issuance. This note was due on April 15, 2013 along with a
$25,000 service fee and accrued interest on the principal at the rate of 18% per annum compounded daily. Anytime after April
15, 2013, the holder could convert all amounts due in connection with this note into the Company's Preferred Series C Stock
at the rate of $0.01 per share. Fandeck is an investment group managed by the Company's Vice President of Investments.
The warrant was valued at $154,000.
The interest expense associated
with this note for the year ended December 31, 2013 consisted of the following:
Amount recorded as interest expense related to the warrant | |
$ | 104,000 | |
Accrued interest of the face amount of the note | |
| 971 | |
Amortization of debt discount | |
| 50,000 | |
Accrual of service fee | |
| 25,000 | |
Issuance | |
| 2,519 | |
| |
$ | 182,490 | |
On April 15, 2013, this note
matured and on April 16, 2013 and as a result of non-payment of the note upon its due date, the holder issued the Company a notice
of default and a notice of conversion of all amounts due into Preferred Series C Stock.
On April 17, 2013, the Company
and the holder reached an agreement whereby the Company issued 100,000 shares of its Preferred Series C Stock to the holder of
the note and the due date was revised to April 23, 2013. Consistent with the accounting for the acquisition of SRG described in Note 4, those shares were valued
at $0.025 per share and, therefore, $2,519 was classified as interest expense.
On April 24, 2013 and as a result
of non-payment of the note upon its due date, the holder issued the Company a notice of default and a notice of conversion of $75,971
due in connection with the note into 7,597,100 shares of Preferred Series C Stock as further described in Note 9(c).
| h) | Note payable - Seliztrine #1 |
On April 3, 2013, SRG, a wholly
owned subsidiary of the Company, issued a note payable to Gestion Seliztrine, an individual, in the amount of $150,000 Canadian
dollars ($142,500 in US dollars as of September 30, 2013). This note accrued interest at the rate of 25% per annum compounded daily
basis and was payable on demand.
On October 17, 2013 and as also
described in Note 15(b)(ii), this note and accrued interest was paid in full.
| i) | Note payable - Seliztrine #2 |
On May 1, 2013, SRG, a wholly
owned subsidiary of the Company, issued a note payable to Gestion Seliztrine, an individual, in the amount of $225,000 Canadian
dollars. This note accrued interest at the rate of 25% per annum compounded daily basis and was payable on demand.
On October 17, 2013 this note
and accrued interest was paid in full.
| j) | Series of Notes Payable due May 1, 2014 |
On various dates
between May 7, 2013 and August 14, 2013, the Company issued a series of notes payable in the aggregate amount of $664,000
plus warrants for the purchase of 16,600,000 shares of the Company's common stock at $0.02 per share until May 1, 2017. These
warrants were 100% vested upon issuance. These notes mature on May 1, 2014 and accrue interest at the rate of 12% per annum
for the first six months they are outstanding and then 18% per annum thereafter. The warrants were valued at $54,925.
The interest expense associated
with this note for the year ended December 31, 2013 consisted of the following:
Accrued interest of the face amount of the note | |
$ | 46,738 | |
Amortization of debt discount | |
| 31,121 | |
| |
$ | 77,859 | |
| k) | Series of Convertible Notes Payable due April 1, 2014 |
On various date between August
19, 2013 and October 18, 2013, the Company issued a series of convertible notes payable in the aggregate amount of $1,155,000.
These notes matured on April 1, 2014, accrued interest at the rate of 12% per annum compounded daily, and were collectively convertible
at the option of the holders into 7.74% of the Company's then outstanding number of common shares after the conversion of the
Preferred Series C Stock. On December 31, 2013 these notes and accrued interest totaling $1,188,534 were converted into 3,242,159
shares of the Company's common stock.
| a) | Series A Convertible Preferred Stock |
Series A Convertible Preferred
Stock has the following rights and preferences: (i) Dividend rights equal to the dividend rights of the Company's common stock;
(ii) A $100,000 liquidation preference over the Company's common stock; (iii) Each share of Series A Convertible Preferred Stock
is convertible into 0.09 shares of the Company's common stock; (iv) No redemption rights; (v) No call rights by the Company; (vi)
Each share of Series A Convertible Preferred stock has 2.25 votes on all matters validly brought to the common stockholders for
approval; (vii) Mandatory approval by a majority of the Series A Convertible Preferred stockholders for certain change of control
transactions by the Company; and (viii) Other rights and preferences to be determined by the Company's Board of Directors.
On January 23, 2013, the holder
of the 2,000,000 shares outstanding of Series A Convertible Preferred Stock elected to convert them into shares of the Company's
common stock as permitted under the rights and preferences described above and the Company issued 180,000 shares of common stock
as described in Note 10(j).
| b) | Series B Convertible Preferred Stock |
Series B Convertible Preferred
Stock has the following rights and preferences: (i) Dividend rights equal to the dividend rights of the Company's common stock;
(ii) A $750,000 liquidation preference over common stock and equal in nature to that of the Company's Series A Convertible Preferred
Stock; (iii) Each share of Series B Convertible Preferred Stock is convertible into 0.05 shares of the Company's common stock;
(iv) No redemption rights; (v) No call rights by the Company; (vi) Each share of Series B Convertible Preferred Stock has 0.01
vote on all matters validly brought to the common stockholders; and (vii) Other rights and preferences to be determined by the
Company's Board of Directors.
On January 23, 2013, New Horizon,
Inc., the holder of the 4,500,000 shares outstanding of Series B Convertible Preferred Stock and one of the largest shareholders
of the Company's common stock, elected to convert those preferred shares into shares of the Company's common stock as permitted
under the rights and preferences described above and the Company issued 2,025,000 shares of common stock as described in Note 10(k).
| c) | Series C Preferred Stock and Change of Control |
Series C Convertible Preferred
Stock has the following rights and preferences: (i) All shares will automatically convert into a number of common shares equal
to four times the number of outstanding common shares immediately upon the effectiveness of a 100 to 1 reverse split of those outstanding
common shares which occurred on December 31 2013. The resulting effect was that the collective holders of the Series C Convertible
Preferred Stock then owned 80% of the outstanding common shares of the Company immediately after such conversion; (ii) dividend
rights equal to the dividend rights of the Company's common stock; (ii) a liquidation preference over common stock and equal to
that of the original issue price of the Series C Convertible Preferred Stock; (iv) no redemption rights; (v) no call rights by
the Company; (vi) each share of Series C Convertible Preferred Stock is entitled to vote on an "as converted" basis on
all matters validly brought to the common stockholders; and (vii) other rights and preferences to be determined by the Company's
Board of Directors.
On January 23, 2013, the Company
issued 5,000,000 shares of this newly created Series C Convertible Preferred Stock in connection with the transaction with SRG
as more fully described in Note 4.
On April 17, 2013 and as also
described in Note 8(g), the Company issued 100,000 shares of Preferred Series C Stock to Fandeck in connection with the extension
of the due date of a note payable. Those shares were valued at $2,519 and that amount was classified as interest expense.
On April 24, 2013 and as a
result of non-payment of a note due to Fandeck upon its due date as described in Note 8(g), the holder of such note issued
the Company a notice of default and a notice of conversion of $75,971 due into 7,597,100 shares of Preferred Series C Stock
at $0.01 per share. This resulted in Fandeck, an investment group managed by the Company's Vice President of Investments, owning
61% of the total shares of Preferred Series C Stock.
On December 31, 2013 and immediately
after the reverse stock split of common stock and upon the conversion of Preferred Series C Stock, the Company issued 29,882,413
shares of common stock representing 80% of the Company's then outstanding shares of common stock. Fandeck then owned 49% of the
Company's outstanding common stock. In light of the holder's relationship with other common shareholders, this transaction resulted
in a change in control transaction.
| d) | Series D Preferred Stock |
Series D Preferred Stock has
the following rights and preferences: (i) For each $200,000 invested in 20,000 shares of Series D Preferred Stock at $10 per share,
the holder of such shares is entitled to royalty payments equal to: a) one percent of the Company's gross revenue until $1,000,000
has been paid to such holder; and b) one half of one percent of the Company's gross revenue until an additional $1,000,000 has
been paid to such holder. Such payments are due on a quarterly basis and once payments totaling $2,000,000 have been made to such
holder, those shares will cease earning royalty payments and be returned to the Company for no additional consideration; (ii) no
dividend rights; (iii) no liquidation rights other than what is owed in connection with the terms described in "(i)"
above; (iv) no conversion rights; (v) no redemption rights; (v) no call rights by the Company; and (vi) no voting rights.
On various dates from August
8, 2013 to December 31, 2013, the Company raised $1,420,000 through the sale of 142,000 shares of Series D Preferred Stock and
received net proceeds of $1,339,000.
On May 15, 2012, the Company effected a
nine-for-one forward stock split of its Common Stock and increased the total number of authorized shares of Common Stock to 750,000,000.
On December 31, 2013, the Company effected a one hundred-for-one reverse stock split of its Common Stock and decreased the total
number of authorized shares of Common Stock to 275,000,000. Consequently, all earnings per share and other share related amounts
and disclosures have been retroactively adjusted for those actions.
| a) | On May 16, 2012, the Company issued 35,159 shares of common stock at $11.11 per share to private
investors in connection with the exercise of warrants and received proceeds of $390,308. |
| b) | On May 16, 2012, the Company issued 180,322 shares of common stock pursuant to the exercise of
warrants by the holders for the purchase 270,000 shares of common stock utilizing the cashless exercise provision of those instruments.
This transaction was accounted for as an increase to common stock of $1,803, representing the par value of the shares issued, with
a corresponding decrease to additional paid-in capital. |
| c) | On May 21, 2012 and August 23, 2012, the Company issued an aggregate of 100,000 shares of common
stock in connection with an investment in Epec Biofuels Holdings, Inc. as more fully described in Note 4(c). |
| d) | On various dates from July 18, 2012 through November 29, 2012, the Company issued 15,710,000 shares
of common stock at $0.332 to$0.050 per share to private investors and received proceeds of $65,500. |
| e) | On July 25, 2012, the Company issued 5,000,000 shares of common stock at $0.005 per share to the
Rockland Group, the Company's majority shareholder and an entity controlled by one of the Company's Directors, and received proceeds
of $25,000. |
| f) | On August 31, 2012 and as more fully described in Note 9, the Company issued 18,000,000 shares
of Common Stock pursuant to the terms of an agreement dated December 9, 2010 for the acquisition of a royalty stream related to
the Myself pelvic muscle trainer and recorded a charge to expense during the year ended December 31, 2012. |
| g) | On October 1, 2012, the Company issued 4,500,000 shares of common stock at $0.0033 per share to
New Horizon, Inc., one of our largest shareholders, and received proceeds of $15,000. |
| h) | On various dates during the years ended December 31, 2012, the Company issued 9,867 shares of common
stock under the terms of a service agreement. Such shares were valued at an average of $26 per share based upon the most recent
closing price of the Company's shares on the date they were earned. During the year ended December 31, 2012, the Company recorded
expense in this connection of $257,773 and classified that amount in general and administrative expense |
| i) | On January 16, 2013 and as more fully described in Note 7(c), the Company issued 250,000
shares of common stock in connection with the modification of an investment agreement with Epec. The Company determined the
fair value of those shares to be $137,500, or $0.55 per share, based upon the closing market price of the Company's stock on
that day, and accounted for that issuance as a cost of modifying the Epec investment agreement and, therefore, recorded an
expense in that amount during the year ended December 31, 2013. |
| j) | On January 23, 2013 and as more fully described in Note 9(a), the Company issued 180,000 shares
of common stock in connection with the conversion of Series A Convertible Preferred Stock. |
| k) | On January 23, 2013 and as more fully described in Note 9(b), the Company issued 2,025,000 shares
of common stock in connection with the conversion of Series B Convertible Preferred Stock. |
| l) | On January 23, 2013 and as more fully described in Note 8(a)(i), the Company issued 90,562 shares
of common stock at $16.67 per share in connection with the conversion of principal and accrued interest totaling $1,509,361 due
to New Horizon pursuant to the terms of a note dated December 8, 2010. The Company accounted for this transaction as a settlement
of notes payable and accrued expenses with a corresponding increase to stockholders' equity. |
| m) | On January 23, 2013 and as more fully described in Note 8(b)(ii), the Company issued 1,829,457
shares of common stock at $0.32 per share in connection with the conversion of principal and accrued interest totaling $579,938
due to the Rockland Group. The Company accounted for this transaction as an increase of $1,463,566 to stockholders equity, a settlement
of notes payable and accrued expenses of $579,938 and a charge to expense of $883,628 during the year ended December 31, 2013. |
| n) | On January 23, 2013, the Company issued 148,000 shares of common stock at $1.60 per share in connection
to a vendor in satisfaction of a payable in the amount of $230,000. The Company accounted for this transaction as a settlement
of accounts payable with a corresponding increase in the same amount to stockholders' equity. |
| o) | On January 23, 2013 the Company issued 353,312 shares of common stock at $0.32 per share to two
vendors in satisfaction of payables in the amount of $112,000. The Company considered the fair value of those shares to be $282,649,
or $0.80 per share, based upon the closing market price of the Company's stock on that day. The Company accounted for this transaction
as a settlement of accounts payable of $112,000, an increase to equity of $282,649, and a charge to expense of $170,650 during
the year ended December 31, 2013. |
| p) | On January 23, 2013 and as more fully described in Note 5, the Company issued 402,038 shares
of common stock in connection with the distribution/settlement of certain assets and liabilities to HLBC Distribution
Company. The Company determined the fair value of those shares to be $321,630, or $0.80 per share, based upon the closing
market price of the Company's stock on that day and accounted for this transaction as an increase to equity in the same
amount. |
| q) | On December 31, 2013 and as more fully described in Note 9(c), the Company issued 29,882,413 shares
of common stock in connection with the conversion of Series C Convertible Preferred Stock. |
| r) | On December 31, 2013 and as more fully described in Note 8(k), the Company issued 3,242,159 shares
of common stock at $0.367 per share in connection with the conversion of notes payable with principal and accrued interest totaling
$1,188,534. The Company accounted for this transaction as a settlement of notes payable and accrued expenses with a corresponding
increase to stockholders' equity. |
The Company utilized the Black-Scholes
option pricing model to estimate the fair value of such instruments. The stock price on the date of issuance was based upon the
most recent price per share realized in the private placement of common shares as there is no established public market for the
Company's common stock. The risk-free interest rate assumption was based upon the observed interest rates appropriate for the expected
term of the equity instruments. The expected volatility assumption was based upon the historical volatility of the common stock
of comparable companies. The expected dividend yield was assumed to be zero as the Company has not paid any dividends since its
inception and does not anticipate paying dividends in the foreseeable future.
Assumptions made in calculating the fair
value of warrants during the years ended December 31, 2013 and 2012 were as follows:
Risk free interest rate |
|
0.8 to 2.7% |
|
0.3% to 1.7% |
Dividend yield |
|
Zero |
|
Zero |
Volatility |
|
100% |
|
100% |
Expected term |
|
3.0 to 9.3 years |
|
1.6 to 10.0 |
Activity during the years ended December 31, 2012 and 2013 was
as follows:
| a) | On April 13, 2012 and May 14, 2012, the Company entered into warrant repricing agreements wherein
the exercise price for Series C, D, and E Warrants of $56.00, $44.00, and $33.00 per share, respectively, were collectively revised
to $5.60 per share. The Company recorded no expense during the year ended December 31, 2012 in connection with such repricing as
the incremental value was determined to be de minimus. |
| b) | On May 15, 2012, as previously described in Note 10(b), warrants for the purchase 270,000 shares
of common stock were exercised by the holders utilizing the cashless exercise provision of those instruments. |
| c) | On July 20, 2012, the Company granted warrants to officers and members of management for the purchase
of 235,000 shares of common stock at prices ranging from $12.00 to $30.00 per share. Such warrants vest in equal amounts on February
1, 2013, August 1, 2013, and February 1, 2014. During the years ended December 31, 2013 and 2012, the Company recorded stock-based
compensation of $61,903 and $76,366 in this connection. |
| d) | On January 23, 2013 and in connection with the transaction described in Note 5, the Company issued
a warrant for the purchase of 500,000 shares of the Company's common stock at the exercise price of $0.55 per share through January
23, 2018. The fair market value of such shares on that date was $0.80. The warrant was valued at $295,000 and that amount was included
in the computation of the loss of $330,684 in connection with that transaction recorded by the Company during the year ended December
31, 2013. |
| e) | Effective February 1, 2013, the Company entered into a service agreement with Frederick Larcombe
to fulfill the role of its Chief Financial Officer for a period of three months. This agreement, as amended, consisted of compensation
of $22,500 in cash and a warrant for the purchase of 22,500 shares of the Company's common stock at $1.00 per share for a period
of five years. This warrant vested immediately upon issuance, contained provisions for a cashless exercise, was valued at $9,000,
and was recorded as stock-based compensation expense during the year ended December 31, 2013. |
| f) | On March 15, 2013 and in connection with the transaction described in Note 8(g) regarding the issuance
of a convertible promissory note, the Company issued a warrant for the purchase of 200,000 shares of the Company's common stock
at the exercise price of $1.00 per share through April 25, 2018. The warrant was valued at $154,000 and that amount was included
in accounting for the convertible promissory note referred to above. This warrant was 100% vested upon issuance. |
| g) | On various date between May 7, 2013 and August 14, 2013 and in connection with the issuance
of notes payable as described in Note 8(j), the Company issued a series of warrants for the purchase of 166,000 shares of the
Company's common stock at $2.00 per share through May 1, 2017. These warrants were valued at $50,351 and that amount was
included in accounting for the notes payable referred to above. These warrants were 100% vested upon issuance. |
A summary of the changes in warrants outstanding
during the years ended December 31, 2013 and 2012 is as follows:
| |
| | |
Weighted | | |
Weighted | | |
| |
| |
| | |
Average | | |
Average | | |
| |
| |
| | |
Exercise | | |
Remaining | | |
Aggregate | |
| |
Number of | | |
Price | | |
Contractual | | |
Intrinsic | |
| |
Shares | | |
Per Share | | |
Term (Years) | | |
Value | |
| |
| | |
| | |
| | |
| |
Outstanding at December 31, 2011 | |
| 474,963 | | |
$ | 33.33 | | |
| 1.1 | | |
| - | |
Granted | |
| 235,000 | | |
$ | 21.00 | | |
| | | |
| | |
Exercised - Cash | |
| (35,159 | ) | |
$ | 6.00 | | |
| | | |
| | |
Exercised - Cashless exercise | |
| (270,000 | ) | |
$ | 6.00 | | |
| | | |
| | |
Forfeited | |
| - | | |
| | | |
| | | |
| | |
Outstanding at December 31, 2012 | |
| 404,804 | | |
$ | 14.00 | | |
| 5.1 | | |
| - | |
Granted | |
| 888,500 | | |
$ | 0.90 | | |
| | | |
| | |
Exercised | |
| - | | |
| | | |
| | | |
| | |
Forfeited | |
| - | | |
| | | |
| | | |
| | |
Outstanding at December 31, 2013 | |
| 1,293,304 | | |
$ | 6.80 | | |
| 4.2 | | |
$ | 405,625 | |
| |
| | | |
| | | |
| | | |
| | |
Warrants exercisable at December, 2013 | |
| 1,293,304 | | |
$ | 5.80 | | |
| 3.9 | | |
$ | 405,625 | |
| 12) | Charge for Shares Issued in Connection with Myself Acquisition Agreement |
On August 31, 2012 and under the terms
of an agreement dated December 8, 2010, the Company issued an additional 1,500,000 and 180,000 shares of Series B Convertible Preferred
and Common Stock, respectively. That agreement was the vehicle through which the Company acquired the rights to a royalty stream
related to the sales of the Myself pelvic muscle trainer. The additional shares were required to be issued as the average closing
price of the Company's Common Stock did not reach a price threshold during July 2012 as specified in that agreement.
Those shares of Series B Preferred and
Common Stock were valued at $0.45 and $1.00 per share, respectively, based upon the closing price of the Company's common shares
on August 31, 2012 for total amounts of $675,000 and $180,000, respectively. During the year ended December 31, 2011, the Company
had recorded an impairment charge which represented the full carrying value of the Myself pelvic muscle trainer intangible asset.
Therefore, the $855,000 aggregate value of the Series B Preferred and Common Stock shares issued on August 31, 2012 was recorded
as a charge to expense during the year ended December 31, 2012.
| 13) | Licensing/Sale Agreement |
On June 7, 2012, the Company entered into
an agreement with Biopack Environmental, Inc. ("Biopack") granting it in exchange for the payment of a licensing fee
of $10,000 the exclusive right to develop and market for a one year period beginning with the date of the agreement a novel medical
applicator owned by the Company that is capable of delivering medicants and internal devices into the human body in an atraumatic
fashion.
Terms of this agreement permit Biopack
to acquire ownership of this product during the one year period beginning with the date of this agreement by assuming certain liabilities
incurred by the Company related to the development of this product. Additionally, under certain terms and conditions during that
period, the Company has the right to require Biopack to acquire ownership of this product.
The licensing fee is being amortized to
income ratably over the term of the agreement. During the year ended December 31, 2013, the Company recognized revenue of $5,672
in connection with this agreement.
Biopack is a related party as it is controlled
by the Rockland Group, the Company's majority shareholder and an entity controlled by one of the Company's Directors.
On January 23, 2013, this asset was distributed
in connection with a transaction as more fully described in Note 5.
United States and international components
of loss before income taxes for the years ended December 31, 2013 and 2012 were as follows:
| |
2013 | | |
2012 | |
| |
| | |
| |
Domestic | |
$ | 3,733,600 | | |
$ | 2,183,400 | |
Foreign | |
| 2,482,400 | | |
| - | |
Loss before income taxes | |
$ | 6,216,000 | | |
$ | 2,183,400 | |
The income tax provision (benefit) for
the years ended December 31, 2013 and 2012 consists of the following:
| |
2013 | | |
2012 | |
Federal: | |
| | | |
| | |
Current | |
$ | - | | |
$ | - | |
Deferred | |
| 120,300 | | |
| (358,800 | ) |
State and Local: | |
| | | |
| | |
Current | |
| - | | |
| - | |
Deferred | |
| 21,200 | | |
| (63,300 | ) |
Foreign: | |
| | | |
| | |
Current | |
| - | | |
| - | |
Deferred | |
| (657,800 | ) | |
| - | |
Change in valuation allowance | |
| 516,300 | | |
| 422,100 | |
Income tax provision (benefit) | |
$ | - | | |
$ | - | |
The provision (benefit) for income taxes
using the United States statutory federal tax rate as compared to the Company’s effective tax rate for the years ended December
31, 2013 and 2012 is summarized as follows:
| |
2013 | | |
2012 | |
| |
| | |
| |
Federal statutory rate | |
| (34.0 | )% | |
| (34.0 | )% |
State tax rates, net of Federal benefit | |
| (6.0 | )% | |
| (6.0 | )% |
Non-deductible stock-based compensation | |
| 9.8 | % | |
| 21.0 | % |
Write-off of intangible asset | |
| 16.5 | % | |
| 0.0 | % |
Rate differential | |
| 5.4 | % | |
| 0.0 | % |
Change in valuation allowance | |
| 8.3 | % | |
| 19.0 | % |
Effective Rate | |
| - | % | |
| - | % |
As of December 31, 2013 and 2012 the deferred
tax asset consisted of the following:
| |
2013 | | |
2012 | |
| |
| | |
| |
Net operating loss | |
$ | 2,409,400 | | |
$ | 895,100 | |
Stock-based compensation and warrants | |
| 55,300 | | |
| 30,500 | |
Intangible Asset Amortization | |
| 0 | | |
| 1,022,700 | |
Accrued Compensation | |
| 154,600 | | |
| 154,600 | |
Total Deferred Tax Assets | |
| 2,619,300 | | |
| 2,102,900 | |
Valuation Allowance | |
| (2,619,300 | ) | |
| (2,102,900 | ) |
Deferred tax asset, net of valuation allowance | |
$ | - | | |
$ | - | |
As of December 31, 2013 and 2012, the Company
had approximately $4,379,000 and $2,238,000, respectively, of federal and state net operating loss (“NOLs”) carryovers
available to offset future taxable income, which expire beginning in 2030. In accordance with Section 382 of the Internal Revenue
Code, the Company’s net operating loss carryovers are subject to an annual limitation in the event of a change of control.
The Company had significant change of control events in 2010 and 2013. A majority of the losses generated through the dates of
the changes in control will be limited. The Company is in the process of preparing and filing its 2010 through 2013 domestic and
foreign federal and state/local tax returns. Therefore, the Company’s net operating loss carryovers will not be available
to offset future taxable income, if any, until the returns are filed.
As of December 31, 2013, the foreign subsidiary
incurred losses. In future periods, if the foreign earnings were repatriated to the U.S., an additional tax provision would be
required.
In assessing the realization of deferred
tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After
consideration of all of the information available, Management believes that significant uncertainty exists with respect to future
realization of the deferred tax assets and has therefore established a full valuation allowance. For the year ended December 31,
2013 and 2012, the change in the valuation allowance was $516,000 and $422,000, respectively.
The Company evaluated accounting principles
generally accepted in the United States related to the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements. Those principles prescribe a comprehensive model for how a company should recognize, present, and disclose
uncertain positions that the company has taken or expects to take in its tax return. For those benefits to be recognized, a tax
position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions
taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred
to as ‘unrecognized benefits.” A liability is recognized (or amount of net operating loss carry forward or amount of
tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation
to the taxing authority for a tax position that was not recognized as a result of applying those principles.
If applicable, interest costs related to
unrecognized tax benefits are required to be calculated and would be classified as “Other Expenses - Interest” in the
statements of operation. Penalties would be recognized as a component of “General and Administrative” expenses.
No interest or penalties were recorded
during the years ended December 31, 2013 and 2012. As of December 31, 2013 and 2012, no liability for unrecognized tax benefits
was required to be reported. The Company does not expect this to change significantly over the next twelve months.
The Company is obligated to file tax returns
in domestic and Canadian federal and state/local tax jurisdictions and is subject to examination by tax authorities beginning
with the year ended December 31, 2010. The Company is in the process of preparing and filing its 2010 through 2013 domestic and
foreign federal and state/local tax returns and may be subject to late filing penalties and interest.
| 15) | Commitments and Contingencies |
| a) | On March 12, 2013, the Company entered into a Distribution Agreement (the “Distribution Agreement”)
with MeliaLife International, Inc. (“MeliaLife”), pursuant to which the Company was awarded the rights to distribute
and sell various natural supplement products produced by MeliaLife. Under the terms of the Distribution Agreement the Company would
be the exclusive distributor to sell certain products as described therein (the “Products”). The duration of the Distribution
Agreement is the lesser of five (5) years, or when the Company purchases Products in an amount by which the MeliaLife has received
$30 million, representing 50% of the total product value of the Products purchased by us, whichever happens first. At the end of
this contract, MeliaLife would assign its rights in all the Products to the Company for 4% of future net profits (total product
value minus direct costs related to the Products), calculated and paid monthly, generated by the sale by us of those Products worldwide. |
| | The Company's relationship with MeliaLife as been inactive since the date of the Distribution Agreement
and the Company expects it to expire with the passage of time of its own accord. |
| b) | On December 29, 2013, the Company entered into a lease
agreement for 3,250 for offices in Montreal which expires at the end of December 2016. Effective July 1 and October 1, 2014, the
company entered into two additional lease agreements for 12,036 and 5,486 square feet for additional office space in Montreal
which expires at the end of November 2018 and December 2016, respectively. Total annual minimum commitments under these three
lease agreements are as follows: |
2014 | |
$ | 219,615 | |
2015 | |
| 386,724 | |
2016 | |
| 396,228 | |
2017 | |
| 291,108 | |
2018 | |
| 279,379 | |
| |
$ | 1,573,054 | |
| c) | The Company is subject to litigation in the ordinary course of business. |
| | Certain
conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to
the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such
contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related
to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company
evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of
relief sought or expected to be sought therein. |
| | If the assessment
of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated,
then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment
indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot
be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and
material, would be disclosed. |
| | Loss contingencies
considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed.
There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position,
and results of operations or cash flows. As of December 31, 2013 and 2012 the Company has not accrued for any loss contingencies. |
| 16) | Related Party Transactions |
| a) | On January 23, 2013 and as more fully described in Notes 5 through 9, the Company closed on a transaction
contemplated by an Assignment and Assumption Agreement with HLBCDC which is controlled by the president of New Horizons, Inc, the
Company's majority shareholder. Pursuant to that agreement, certain assets of the Company were transferred to HLBCDC in exchange
for HLBCDC assuming certain liabilities of the Company. It is intended that New Horizon, Inc. and certain member of ICOR's Board
of Directors and management team will collectively receive 78% of the future economic benefit, if any, derived from the ownership
of those assets by HLBCDC after the satisfaction of the assumed liabilities. |
| b) | On March 15, 2013 and as more fully described in Note 8(g), the Company issued a note payable to
Fandeck, a related party, in the amount of $50,000 plus a warrant for the purchase of 200,000 shares of the Company's common stock
at $1.00 per share, and received proceeds of $50,000. On April 24, 2013 and as more fully described in Notes 8(g) and 9(c), upon
non-payment of this note on its due date, the holder converted amounts due into Series C Convertible Preferred Stock which resulted
in a change in control transaction. |
| c) | Accounts payable due to related parties as of December 31, 2013 and 2012 consisted of the following: |
| i) | $51,000 as of December 31, 2013 due FAV Associates, an investment group managed by the Company's
Vice President of Investments for services rendered; and |
| ii) | $108,880 as of December 31, 2012 due primarily to the Rockland Group, LLC, our majority shareholder
through January 23, 2013 and an entity controlled by one of our Directors in connection with a series of short-term, interest free
advances made to the Company on various dates from November 1, 2012 through December 28, 2012. There were no comparable amounts
outstanding as of December 31, 2013. |
| a) | Adoption of Stock Option Plan and Issuance of Options |
| | On February 3, 2014, the Company's Board of Directors approved the adoption of the InterCore, Inc.
2014 Non-Qualified Stock Option Plan (the “Plan”). The Plan is intended to aid the Company in maintaining and developing
a management team, attracting qualified officers and employees capable of assisting in the future success of the Company, and rewarding
those individuals who have contributed to the success of the Company. On that same date, the Board approved the issuance of options
to the Company's management team for the purchase of up to 4,600,000 shares of the Company's common stock at $1.00 per share for
a period of five years. |
| b) | Issuance of Series D Preferred Stock |
| | On various dates from January 1, 2014 through November 5, 2014, the Company raised
$1,965,000 through the sale of 196,500 shares of Series D Preferred Stock (the terms of which are described in Note #9(d))
and received net proceeds of $1,866,750. |
| c) | Issuance of Convertible Note Payable to Rhine |
| | On May 5, 2014, the Company entered into a Loan and Security Agreement and Secured Promissory Note
(collectively the "Note") with Rhine Partners, LP ("Rhine") under which the Company borrowed various amounts
between that date and September 29, 2014 totaling $4,000,000 and received net proceeds of $3,417,450. The Note bears interest at
18% per annum, is secured by a first lien on all the Company's assets, and matures on November 15, 2015. The Company is obligated
to commence repayment of the principal when it becomes cash flow positive and may do so without penalty. Outstanding principal
may be converted at the election of the Rhine at any time into the Company's Series D Preferred Shares at the price of $10.00 per
share or into restricted common stock at a price of a 60% discount to market based on the average closing price of the five days
preceding such election. Rhine has the right to make such a conversion election up to five days after the Company has tendered
repayment of the principal. Additionally on that same day and under the terms of the Note, the Company issued a warrant for Rhine
to purchase up to 2,000,000 shares of the Company\'s common stock at an exercise price of $1.00 per share for a period of four years.
The warrant was 100% vested upon issuance. |
| d) | Issuance of Convertible Note Payable to Topside |
| | On October 15, 2014, the Company entered into a Loan and Security Agreement and Secured Promissory
Note (collectively the "Note") with Topside Partners, LP ("Topside") under which the Company borrowed various
amounts between that date and October 22, 2014 totaling $1,000,000 and received net proceeds of $974,900. The Note bears interest
at 18% per annum, is secured by a first lien on all the Company's assets, and matures on April 30, 2015. The Company is obligated
to commence repayment of the principal when it becomes cash flow positive and may do so without penalty. Outstanding principal
may be converted at the election of the Topside at any time into the Company's Series D Preferred Shares at the price of $10.00 per
share or into restricted common stock at a price of a 60% discount to market based on the average closing price of the five days
preceding such election except that through April 15, 2015, Topside may convert the outstand principal into common stock at a price
equal to the lesser of: a) $2.00 per share; or b) a 60% discount to market based upon the average closing price five days preceding
such election. Topside has the right to make such a conversion election up to five days after the Company has tendered repayment
of the principal. Additionally on that same day and under the terms of the Note, the Company issued a warrant for Topside to purchase
up to 2,000,000 shares of the Company's common stock at an exercise price of $1.00 per share for a period of four years. The warrant
was 100% vested upon issuance. |
| e) | Issuance of Convertible Note Payable to Topside |
| | On October 29, 2014, the Company entered into a Loan and Security Agreement and Secured Promissory
Note (collectively the "Note") with Topside Partners, LP ("Topside") under which the Company borrowed various
amounts between that date and November 5, 2014 totaling $1,000,000 and received net proceeds of $895,000. The Note bears interest
at 18% per annum, is secured by a first lien on all the Company's assets, and matures on may 31, 2015. The Company is obligated
to commence repayment of the principal when it becomes cash flow positive and may do so without penalty. Outstanding principal
may be converted at the election of Topside at any time into the Company's Series D Preferred Shares at the price of $10.00 per
share or into restricted common stock at a price of a 60% discount to market based on the average closing price of the five days
preceding such election except that through April 29, 2015, Topside may convert the outstand principal into common stock at a price
equal to the lesser of: a) $2.00 per share; or b) a 60% discount to market based upon the average closing price five days preceding
such election. Topside has the right to make such a conversion election up to five days after the Company has tendered repayment
of the principal. Additionally on that same day and under the terms of the Note, the Company issued a warrant for Topside to purchase
up to 2,000,000 shares of the Company's common stock at an exercise price of $1.00 per share for a period of four years. The warrant
was 100% vested upon issuance. |
| f) | On July 1 and October 1, 2014, the Company entered into
lease agreements as further described in Note 15(b). |
* * * * *
EXHIBIT
31.1
Rule 13a-14(a)/15d-14(a)
Certification of Chief Executive Officer
I, James F. Groelinger, certify that:
I have reviewed this Annual Report
on Form 10-K of InterCore, Inc.;
Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s
other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and |
The registrant’s
other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
| (a) | All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant‘s internal control over financial reporting. |
Dated: November 12, 2014 |
|
|
|
|
/s/ James F. Groelinger |
|
By: |
James F. Groelinger |
|
|
Chief Executive Officer |
EXHIBIT
31.2
Rule 13a-14(a)/15d-14(a)
Certification of Chief Financial Officer
I, Frederick Larcombe, certify that:
I have reviewed this Annual Report
on Form 10-K of InterCore, Inc.;
Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s
other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and |
The registrant’s
other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant‘s internal control over financial reporting. |
Dated: November 12, 2014 |
|
|
|
|
/s/ Frederick Larcombe |
|
By: |
Frederick Larcombe |
|
|
Chief Financial Officer |
EXHIBIT
32.1
CERTIFICATION PURSUANT TO 18 USC, SECTION
1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of
InterCore, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2013, as filed with the Securities and
Exchange Commission on or about the date hereof (the “Report”), I, James F. Groelinger, Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| (2) | Information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company. |
Dated: November 12, 2014 |
/s/ James F. Groelinger |
|
By: James F. Groelinger |
|
Its: Chief Executive Officer |
A signed original of this written statement
required by Section 906 has been provided to InterCore, Inc. and will be retained by InterCore, Inc. and furnished to the Securities
and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 USC, SECTION
1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY
ACT OF 2002
In connection with the Annual Report of
InterCore, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2013, as filed with the Securities and
Exchange Commission on or about the date hereof (the “Report”), I, Frederick Larcombe, Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| (2) | Information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company. |
Dated: November 12, 2014 |
/s/ Frederick Larcombe |
|
By: Frederick Larcombe |
|
Its: Chief Financial Officer |
A signed original of this written statement
required by Section 906 has been provided to InterCore, Inc. and will be retained by InterCore, Inc. and furnished to the Securities
and Exchange Commission or its staff upon request.