Quarterly Report (10-q)

Date : 10/10/2018 @ 11:04AM
Source : Edgar (US Regulatory)
Stock : INTREorg Systems, Inc. (IORG)
Quote : 0.4  0.0 (0.00%) @ 1:00AM

Quarterly Report (10-q)


U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2018

 

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

 

For the transition period from __________ to __________

 

Commission File Number

 

INTREorg Systems, Inc.

(Exact name of registrant as specified in its charter)

 

Texas

 

45-0526215

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification No.)

 

2600 E. Southlake Blvd, Suite 120-366

Southlake, TX 76092

 

713-316-0061

(Issuer's telephone number)

 

(Former address)

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [   ] No [X]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [   ] No [X]

 

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 Ruble 12b-2 of the Exchange Act.

 

Large accelerated filer

[   ]

Accelerated filer

[   ]

Non-accelerated filer

[   ] (Do not check if a smaller reporting company)

Smaller reporting company

[X]

 

 

Emerging Growth Company

[X]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [   ] No [X]

 

The number of shares of Common Stock, no par value, issued and outstanding as of September 28, 2018 was 18,678,978.


1



TABLE OF CONTENTS

 

Part I -

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

10

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

12

Item 4.

Controls and Procedures

12

 

 

 

Part II -

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

13

Item 1A.

Risk Factors

13

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

13

Item 3.

Defaults Upon Senior Securities

13

Item 4.

Mine Safety Disclosures

13

Item 5.

Other Information

13

Item6.

Exhibits

14

SIGNATURES

15


2



INTRODUCTORY NOTE

 

Unless specifically set forth to the contrary, when used in this report the terms “INTREorg,” "we"", "our", the “Company" and similar terms refer to INTREorg Systems, Inc., a Texas corporation.

 

Special Note Regarding Forward-Looking Statements

 

This report contains forward-looking statements and information that are based on the beliefs of our management as well as assumptions made by and information currently available to us. Such statements should not be unduly relied upon. When used in this report, forward-looking statements include, but are not limited to, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions, as well as statements regarding new and existing products, technologies and opportunities, statements regarding market and industry segment growth and demand and acceptance of new and existing products, any projections of sales, earnings, revenue, margins or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements regarding future economic conditions or performance, uncertainties related to conducting business, any statements of belief or intention, and any statements or assumptions underlying any of the foregoing. These statements reflect our current view concerning future events and are subject to risks, uncertainties and assumptions. There are important factors that could cause actual results to vary materially from those described in this report as anticipated, estimated or expected, including, but not limited to: competition in the industry in which we operate and the impact of such competition on pricing, revenues and margins, volatility in the securities market due to the general economic downturn; Securities and Exchange Commission (the “SEC”) regulations which affect trading in the securities of “penny stocks,” and other risks and uncertainties. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward- looking statements, even if new information becomes available in the future. Depending on the market for our stock and other conditional tests, a specific safe harbor under the Private Securities Litigation Reform Act of 1995 may be available. Notwithstanding the above, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) expressly state that the safe harbor for forward-looking statements does not apply to companies that issue penny stock. Because we may from time to time be considered to be an issuer of penny stock, the safe harbor for forward-looking statements may not apply to us at certain times.


3



ITEM 1. FINANCIAL STATEMENTS. 

 

Contents

 

Unaudited Balance Sheets at June 30, 2018 and December31, 2017

 

5

 

 

 

Unaudited Statements of Operations for the three and six months ended June 30, 2018 and 2017

 

6

 

 

 

Unaudited Statements of Cash Flows for the six months ended June 30, 2018 and 2017

 

7

 

 

 

Unaudited Notes to Financial Statements

 

8


4



INTREorg Systems, Inc.

Balance Sheets

(Unaudited)

 

 

June 30,

 

December 31,

 

 

2018

 

2017

ASSETS

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

Cash

$

34,877

$

100

Investment in common stock

 

-

 

-

TOTAL ASSETS

$

34,877

$

100

 

 

 

 

 

LIABILITIES & STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

$

537,359

$

544,608

Accounts payable - related parties

 

562,962

 

535,839

Accrued interest and other liabilities

 

862,236

 

800,656

Accrued contingencies

 

453,290

 

453,290

Notes Payable

 

521,000

 

521,000

Revolving line of credit - related party

 

315,796

 

325,796

Total Current Liabilities

 

3,252,643

 

3,181,189

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

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

 

 

 

 

issued & outstanding

 

-

 

-

Common Stock, no par value; 100,000,000 shares authorized

 

 

 

 

17,171,507 and 16,624,260 shares issued & outstanding at June 30, 2018

 

 

 

 

& December 31, 2017, respectively

 

3,124,702

 

2,970,455

Additional paid in capital

 

462,579

 

430,353

Accumulated deficit

 

(6,805,047)

 

(6,581,897)

Total stockholders' deficit

 

(3,217,766)

 

(3,181,089)

 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

$

34,877

$

100

 

 

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


5



INTREorg Systems, Inc.

Statements of Operations

(Unaudited)

 

 

 

Three months ended

June 30,

 

Six months ended

June 30,

 

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

Services revenues

$

-

$

-

$

-

$

-

Services revenues- related parties

 

-

 

-

 

-

 

 

Total revenues

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

107,110

 

51,628

 

190,033

 

81,027

 

 

 

 

 

 

 

 

 

Operating Loss

 

(107,110)

 

(51,628)

 

(190,033)

 

(81,027)

 

 

 

 

 

 

 

 

 

Other expense

 

 

 

 

 

 

 

 

Interest expense

 

10,555

 

10,555

 

20,994

 

20,994

Interest expense- related party

 

5,913

 

6,278

 

12,123

 

12,489

Total other expenses

 

16,468

 

16,833

 

33,117

 

33,483

 

 

 

 

 

 

 

 

 

Net loss

$

(123,578)

$

(68,461)

$

(223,150)

$

(114,510)

 

 

 

 

 

 

 

 

 

Net loss per share of common stock

$

(0.01)

$

(0.00)

$

(0.01)

$

(0.01)

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

16,735,027

 

16,174,260

 

16,655,319

 

16,144,426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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


6



INTREorg Systems, Inc.

Statements of Cash Flows

(Unaudited)

 

 

For the Six Months Ended

June 30,

 

 

2018

 

2017

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

Net Loss

$

(223,150)

$

(114,510)

 

 

 

 

 

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

 

 

 

 

Common stock and options issued for services

 

29,247

 

44,003

Stock compensation-options

 

32,226

 

31,465

Changes in operating assets and liabilities:

 

 

 

 

Increase in accounts receivable

 

-

 

-

Increase (decrease) in accounts payable

 

(7,249)

 

1,557

Increase in accounts payable related parties

 

32,123

 

12,489

Increase in accrued liabilities and other

 

121,580

 

17,015

Net Cash Flows Used by Operating Activities

 

(15,223)

 

(7,981)

 

 

 

 

 

Net Cash Flows Provided (Used) by Investing Activities

 

-

 

-

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

Payments on related party revolving line of credit

 

(10,000)

 

7,983

Proceeds from issuance of common stock

 

60,000

 

-

Net Cash Flows Provided by Financing Activities

 

50,000

 

7,983

 

 

 

 

 

Net Change in Cash

 

34,777

 

2

 

 

 

 

 

Cash at Beginning of Period

 

100

 

-

 

 

 

 

 

Cash at End of Period

$

34,877

$

2

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

-

 

-

Cash paid for taxes

 

-

 

-

Stock issued for accounts payable and accrued liabilities

$

65,000

$

-

 

 

 

 

 

 

 

 

 

 

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


7



INTREORG SYSTEMS, INC.

Notes to the Financial Statements June 30, 2018

(Unaudited)

 

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

 

Organization

 

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

 

Reclassifications

 

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

 

Going Concern

 

The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company's current liabilities exceed the current assets by $3,217,766 at June 30, 2018. During the three-month period ended June 30, 2018, the Company generated no revenues. At June 30, 2018 the Company had an accumulated deficit of $6,805,047.

 

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

 

Basis of Presentation

 

Interim Accounting

 

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended December 31, 2017 as filed with the SEC on September 28, 2018. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2017 as reported in Form 10-K have been omitted.

 

Recent Accounting Pronouncements

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718) ("ASU 2017-09"). ASU 2017-09 provides guidance on when changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity should account for the effects of a modification unless all of the following are met:

 

The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified 

The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified 

The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. 

 

The amendments in ASU 2017-09 are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The amendments should be applied prospectively to an award modified on or after the adoption date. ASU 2017-09 is not expected to have a material impact on the Company's consolidated financial statements


8



INTREORG SYSTEMS, INC.

Notes to the Financial Statements June 30, 2018

(Unaudited)

 

NOTE 2. CAPITAL STOCK.

 

During the six-month period ended June 30, 2018, the Company authorized the issuance of 20,000 shares per month to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them. The grants are valued at the closing price of the Company’s common stock as of the grant date. During the three- and six-month period ended June 30, 2018 the Company recorded an expense of $12,352 and $22,247, respectively for the share grants.

 

On March 13, 2018, Mr. Robert Flynn was appointed to the Board as Director, Secretary and Treasurer. Mr. Flynn was issued 50,000 shares of common stock upon appointment to the Board.  On April 3, 2018, Mr Flynn converted $5,000 in consulting fees into 43,650 shares of common stock.

 

On April 3, 2018, Thomas Lindholm converted $60,000 of accrued CEO compensation into 333,597 shares of common stock.

 

On June 27, 2018, the Company named Mr. Richard M. Nummi, Director and Chairman of the Executive Compensation Committee.

Subject to vesting requirements, the Company granted 50,000 shares of common stock valued at $18,500 to Mr. Nummi on the date of this agreement which has been included in accrued interest and other liabilities in the June 30, 2018 balance sheet.  The shares were issued on July 13, 2018.

 

During the quarter ended June 30, 2018, the Company received, under a private placement, $60,000 for subscription to 300,000 shares of common stock at $.20 per share. The shares were issued in September 2018.

 

2010 Stock Option and Award Incentive Plan

 

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

 

During the six months ended June 30, 2018, no stock options were granted.

 

Stock option expense of $16,113and $32,226 was recorded during the three and six-month period ended June 30, 2018.

 

NOTE 3. SUBSEQUENT EVENTS

 

Directors and Management

 

In July 2018, Mr. Lindholm was issued 142,581 shares for previously accrued compensation and Mr Flynn was issued 79,890 shares for previously accrued consulting fees.

 

Public Stock Issuer Analytics, Inc. (“PISA”):

 

On November 11, 2017, the PISA Intellectual Property License Agreement was extended ten years from September 30, 2017 through September 30, 2027. Pursuant to the terms of the intellectual property license, the Company issued 60,000 shares through September 30, 2018 to Public Issuer Stock Analytics.

 

J.H. Brech Revolving 8% Credit Note:

 

The balance on the line of credit as of September 30, 2018 was $215,796.

 

Other:

 

During September 2018, the Company issued 1,235,000 shares of common stock for $247,000.  $60,000 of this amount was received in August 2018 and is shown in common stock in the accompanying balance sheet.


9



ITEM 2. DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our unaudited financial statements for the three and six months ended June 30, 2018 and 2017 and notes thereto contained elsewhere in this Report, and our annual report on Form 10-K for the year ended December 31, 2017 including the financial statements and notes thereto. The following discussion and analysis contain forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. See “Cautionary Note Concerning Forward-Looking Statements.”

 

Going Concern

 

We have incurred accumulated losses of $6,805,047 as of June 30, 2018. The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2017 contained an explanatory paragraph regarding our ability to continue as a going concern based upon our operating losses and need to raise additional capital. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to increase our revenues and report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.

 

As of June 30, 2018, and December 31, 2017, the Company owed JH Brech, LLC (“Brech”), a related party, $315,796 and $325,796, respectively for amounts advanced to the Company for working capital expenses. The maturity date on the Line of Credit was June 19. 2014. The balance is past due and is classified as a current liability as of June 30, 2018 and December 31, 2017. As of the date of this Report, Brech has not declared a default on the Line of Credit and has continued to advance us money under the line of credit from time to me. The Company’s notes payable totaling $521,000 are past due and in default and we do not have sufficient funds to repay these obligations. As a result of the default, the note holders could enforce their rights under these notes at any time.

 

Results of Operations

 

During the three and six months ended June 30, 2018, we recognized no revenues from operational activities.

 

During the fiscal quarter ended June 30, 2018, we recognized software licensing fees-related party of $12,352 as compared to $13,120 during the same quarter in 2017. The decrease of $768 or 6% was attributable to the decrease in fair value of our stock issuances to PISA for software licensing fees. PISA receives 20,000 shares per month under the terms of our agreement. Other general and administrative expenses were $94,785 compared to $38,508 during the same quarter in 2017. The increase of $56,277 or 146% was primarily the result of an increase in CEO compensation, legal and director fees.

 

Interest expenses- related party decreased $365 due to lower borrowings under our line of credit with Brech.

 

During the three months ended June 30, 2018, we recognized a net loss of $123,578 compared to $68,461 for the same quarter in 2017. The increase of $55,117 was attributable to higher expenses described above.

 

During the six month period ended June 30, 2018, we recognized software licensing fees-related party of $22,247 as compared to $31,465 during the same period in 2017. The decrease of $9,218 or 30% was attributable to the decrease in fair value of our stock issuances to PISA for software licensing fees. PISA receives 20,000 shares per month under the terms of our agreement. Other general and administrative expenses were $167,786 compared to $49,562 during the same period in 2017. The increase of $118,224 or 238% was primarily the result of an increase in CEO compensation, director fees and options and legal.

 

Interest expense for the six months ended June 30, 2018 was consistent with the same period in 2017.

 

During the six months ended June 30, 2018, we recognized a net loss of $223,150 compared to $114,510 for the same period in 2017. The increase of $108,640 was attributable to higher expenses described above.

 

We expect that expenses will increase during 2018 as we begin to further implement our business plan, although we are unable at this time to quantify the actual amount of this anticipated increase as it will be based upon our varying level of operations.


10



Liquidity and Capital Resources

 

Six Months Ended June 30, 2018 and 2017

 

The following table sets forth a summary of our cash flows for the periods indicated:

 

 

 

For the Six Months Ended

June 30

 

 

2018

 

2017

Net cash used in operating activities

$

(15,223)

$

(7,981)

Net cash (used in) investing activities

 

-

 

-

Net cash provided by financing activities

$

50,000

$

7,983

 

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. At June 30, 2018, we had a working capital deficit of $3,217,766 as compared to a working capital deficit of $3,181,089 at December 31, 2017. Historically we have relied upon debt funding and advances and loans from related parties to fund our cash needs. Our current liabilities increased $71,454 at June 30, 2018 from December 31, 2017 primarily related to net increases in accounts payable, accounts payable- related parties, accrued interest and other liabilities and additional advances under our revolving line of credit. Expenses were paid in common stock or were included in accounts payable which decreased $7,249, accounts payable- related parties which increased $32,123 or accrued interest and other liabilities which increased $121,580. At June 30, 2018, we owe a total of $315,796 under the working capital line of credit.

 

Our balance sheet at June 30, 2018 and December 31, 2017, includes $453,290 of accrued contingencies. This amount represents an estimate of certain operating liabilities which may have been incurred by prior management that we are unable to confirm.

 

At June 30, 2018, we have $521,000 principal amount and $486,451 of accrued interest due under the terms of various promissory notes to third parties. These notes, which are unsecured, are all in default and we do not have sufficient funds to repay these obligations. As a result of the default, the note holders could enforce their rights under these notes at any time.

 

Net cash used in operating activities for the six-month period ending June 30, 2018 was $15,223 as compared to net cash used in operating activities of $7,981 for the six -month period ending June 30, 2017. We did not generate or use any cash from investing activities during the six months ended June 30, 2018 and 2017. Cash flows provided by financing activities during the six months ended June 30, 2018 included an increase in cash of $60,000 from sales of common stock and a decrease from a $10,000 paydown on the line of credit to a related party During the six months ended June 30, 2017, the Company had an increase of cash from proceeds from the line of credit with a related party of $7,983

 

We have not generated any cash flows from revenues and we are dependent upon advances from a related party to fund our ongoing general and administrative expenses and satisfy our obligations. We need to initially raise $500,000 to fund the initial launch of our business plan, in addition to funds necessary to satisfy our current obligations. In March 2011, we raised $100,000 in a private placement of our securities and we continue to seek the additional necessary capital. We do not, however, have any agreements or understanding with any third party to provide this financing. Until we can raise the necessary funds, we will be unable to further implement our business plan. Given the development stage nature of our company and the thinly traded nature of the public market for our common stock, there are no assurances we will be able to raise the necessary capital. If we are unable to raise capital as necessary, our ability to continue as a going concern is in jeopardy and investors could lose their entire investment in our company.

 

Critical Accounting Policies

 

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

 

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


11



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

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

 

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

 

We carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Report. Based upon that evaluation, management concluded that our disclosure controls and procedures were not effective as of June 30, 2018, to cause the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by SEC, and that such information is accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There have not been any changes in our internal control over financial reporting during the three month period ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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


12



PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. We are currently not aware of any legal proceedings or claims that would require disclosure under Item 103 of Regulation S-K. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

ITEM 1A. RISK FACTORS

 

Not applicable.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Information on any and all equity securities we have sold during the period covered by this Report that were not registered under the Securities Act of 1933, as amended is set forth below:

 

During the six months ended June 30, 2018, the Company authorized the issuance of 120,000 shares valued at $22,247 to Public Issuer Stock Analytics pursuant to the terms of the intellectual property license and consulting agreement the Company maintains with them.

 

During the quarter ended June 30, 2018, the Company received, under a private placement, $60,000 for subscription to 300,000 shares of common stock at $.20 per share. The shares were issued in September 2018.

 

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

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None


13



ITEM 6. EXHIBITS

 

The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.

 

3.1

 

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

 

 

 

3.2

 

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

 

 

 

3.3

 

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

 

 

 

10.1

 

Form of Agreement with Central Coast Technology Associates (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8K filed on June 18,2013)

 

 

 

10.2

 

Form of Option Agreement for Central Coast Technology (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8K filed on June 18,2013)

 

 

 

10.3

 

Consulting Agreement with Darren Dunckel (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8K filed on January 14,2014)

 

 

 

10.4

 

Form of First Letter of Addendum and First Amendment to $500,000 8% Revolving Credit Note by and between the Company and J.H. Brech, LLC (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8K filed on August 28,2014)

 

 

 

31.1

 

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)

 

 

 

31.2

 

Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)

 

 

 

32.1

 

Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith)

 

 

 

32.2

 

Certification of the Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith)

 

 

 

101

 

Interactive Data Files (Filed herewith)

101.INS

 

XBRL INSTANCE DOCUMENT

101.SCH

 

XBRL TAXONOMY EXTENSION SCHEMA

101.CAL

 

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE

101.DEF

 

XBRL TAXONOMY EXTENSION DEFINITION LINKBASE

101.LAB

 

XBRL TAXONOMY EXTENSION LABEL LINKBASE

101.PRE

 

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE


14



SIGNATURES

 

 

Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

INTREorg Systems, Inc.

 

Dated: October 9, 2018

 

By: /s/Thomas E. Lindholm

Thomas E. Lindholm

President and CEO


15

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