UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
INTREORG SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Texas 45-0526215
- ---------------------------------- ------------------------
State or other jurisdiction of IRS Identification No.
incorporation or organization
2000 Wadsworth Blvd, PMB 179
Lakewood, CO, 80214
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(Address of principal executive offices) (Zip Code)
(303)988-3543
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Issuer's telephone number
Securities to be registered
under Section 12(b) of the Act:
Title of each class to be so Name of each exchange
registered on which each class is
to be registered
- ---------------------------------- ------------------------
Not Applicable Not Applicable
Securities to be registered under
Section 12(g) of the Act:
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Common Stock; no par value
(Title of class)
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_]
(Do not check if a
smaller reporting company)
TABLE OF CONTENTS
TITLE PAGE NUMBER
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Item 1 BUSINESS 2
Item 1A RISK FACTORS 9
Item 2 FINANCIAL INFORMATION 13
Item 3 PROPERTIES 18
Item 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 19
Item 5 DIRECTORS AND EXECUTIVE OFFICERS 20
Item 6 EXECUTIVE COMPENSATION 24
Item 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 27
Item 8 LEGAL PROCEEDINGS 28
Item 9 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND 28
RELATED STOCKHOLDER MATTERS
Item 10 RECENT SALES OF UNREGISTERED SECURITIES 29
Item 11 DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED 33
Item 12 INDEMNIFICATION OF DIRECTORS AND OFFICERS 34
Item 13 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 35
Item 14 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 56
FINANCIAL DISCLOSURE
Item 15 FINANCIAL STATEMENTS AND EXHIBITS 56
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ITEM 1. BUSINESS
GENERAL
The following is a summary of some of the information contained in this
document. Unless the context requires otherwise, references in this document to
"INTREorg" or the "Company" are to INTREorg Systems, Inc.
ABOUT INTREORG SYSTEMS, INC.
INTREorg Systems, Inc. was formed as a Texas corporation on November 3, 2003.
The Company is filing Form 10 on a voluntary basis in order to become a 12(g)
registered company under the Securities Exchange Act of 1934.
BUSINESS PLAN
INTREorg Systems Inc. ("INTREorg" or "The Company") has developed a business
plan to become an integrated provider of outsourced information technology
("IT") services, Software as a Service (SaaS) applications, enterprise support,
and business process outsourcing services. INTREorg's target market is
publicly-traded, emerging growth companies in need of rapidly expanded IT
services. Primarily the Company intends to focus on publicly traded companies to
allow it to evaluate the financial position and business situation of
prospective clients due to the inherent transparency required with publicly
traded firms.
The primary focus of the Company is to provide outsourced, day-to-day IT
operations to emerging companies in need of state-of-the-art IT services, tools
and processes. INTREorg focuses on providing IT services and systems to
emerging, technologically sophisticated companies that have grown beyond their
ability to manage their network. Additionally, the Company intends to provide
infrastructure services and products to meet the specific demands of INTREorg
customers. All of the Company's services will be offered individually or bundled
as a comprehensive solution.
IT OUTSOURCING SYSTEMS
INTREorg Systems plans to provide Information Technology solutions to assist the
Company's clients in assessing their business needs and identifying the IT
solutions to meet these needs. INTREorg intends to deliver services that include
the selection and implementation of packaged software and the design,
construction, testing, and integration of new systems.
The primary focus of INTREorg's IT Outsourcing Services will be to assume all of
the responsibility of a client's IT organization. In most cases, INTREorg would
evaluate the client's current personnel and augment that expertise with the
Company's extensive IT experience as well as its industry partners. This
approach is designed to allow INTREorg to help the Company's customers minimize
the costs associated with acquiring and training an IT staff--allowing them to
focus their time and resources on their core business.
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INTREorg's IT Outsourcing Services segment will provide help desk and
infrastructure support around-the-clock (24x7x365) for its clients, its
end-users and other constituencies. The Company intends to maintain and support
a full range of its clients' IT and business process infrastructures from
network environments to computing systems, and from shrink-wrapped applications
to advanced proprietary and acquired application systems.
END USER SERVICES
INTREorg intends to manage each of the client's assets to ensure that each of
their end user's PC and other devices run consistently and at maximum
efficiency. INTREorg provides the staffing, management and processes needed to
manage the whole enterprise, meeting desired service levels while leveraging
clients' existing infrastructure investments. INTREorg intends to help companies
increase end user productivity while decreasing their downtime. End user
services include:
o Help Desk--call management, problem solving and problem resolution
o Desktop Services--installations, upgrades and software problems
o Procurement and Product Services--streamlined, controlled and managed
procurement process and certified product reseller
COMPUTING SERVICES
INTREorg intends to help its customers manage all of their computing resources
helping them manage their network resources more effectively. Computing Services
include:
o IT Backup and Recovery Services
o Data Center Outsourcing
o Database Management
o Facility Management
NETWORK MANAGEMENT SERVICES
INTREorg intends to manage its clients' entire Wide Area Network (WAN) for
maximum performance and reliability. The Company will use its internal expertise
in conjunction with its clients' personnel to manage disparate carriers and
providers to provide maximum up time and higher efficiencies. Network Management
Services will include:
o Managed Communication Services--enhancing the performance and
reliability of critical networks and connectivity
o Remote Access Services--Support secure and cost-effective remote
access using the latest in wireless and wired technology
o On site Network Management--maximizing network uptime and device
functionality
3
SECURITY SERVICES
The Company provides custom security solutions for its clients, regardless of
the size or complexity of their system. INTREorg works with its clients to
identify key threats and risks and create customized security policies, and then
install, implement and manage the security solution. Security services include:
o Network Security--intrusion detection, secure VPN access
o Application Security--monitor and protect email and web content
o Security Monitoring--effective monitoring and management of the
client's network
APPLICATIONS SERVICES
Applications Services include services such as application development and
maintenance, including the development and maintenance of custom and packaged
application software for customers and application systems migration and
testing, which includes the migration of applications from legacy environments
to current technologies, as well as, performing quality assurance functions on
custom applications. INTREorg also intends to provide other applications
services such as application assessment and evaluation, hardware and
architecture consulting, systems integration, and INTREorg-based services.
SOFTWARE AS A SERVICE (SAAS)
INTREorg Systems, Inc. is currently developing a SaaS software delivery as part
of its overall business plan. The Company believes that this model offers
significant advantages over conventional software deployment, as well as,
traditional web-based ASP models. Traditionally, software has been thought of as
a stand-alone product that is purchased separately and installed on individual
computers.
The Company believes that customized software offers no specific advantage to
their business and that it is their delivery processes that are unique. By
offering standard, off-the-shelf software via the web using multi-tenant
architecture, INTREorg intends to offer a variety of applications to its clients
at a fraction of the cost of client purchased software. SaaS software is
network-based and centrally deployed and managed. These applications are
accessed via the web and are available anytime and anywhere there is an Internet
connection. Software updates and patches are handled in one central location
Software delivered via SaaS:
o Customer Relations Management
o Video Conferencing
o Human Resources
o Accounting and Email
o Enterprise Resource Planning
o Document Management
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The Company is focusing on marketing the IT outsourcing portion of the business
to drive the SaaS model.
INTREORG'S LINES OF BUSINESS
INTREorg Systems, Inc. offers services under two primary lines of business:
Industry Solutions and Consulting and Applications Solutions. The Company
considers these lines of business to be reportable segments and include
financial information and disclosures about these reportable segments in its
financial statements. Based on a quantitative and qualitative analysis of
varying factors, the Company may increase or decrease the amount of ongoing
investment in each of these business areas, make acquisitions that strengthen
its market position, divest, exit, or downsize aspects of a business area.
INFRASTRUCTURE SOLUTIONS
INTREorg's Infrastructure Solutions group will be responsible for defining the
technology strategies for the Company's Industry Solutions customers and
INTREorg while actively enforcing Capability Maturity Model Integration (CMMI)
methodologies. This group identifies new technology offerings and innovations
that deliver value to the Company's customers. It manages, updates and maintains
the technology infrastructure for the Company's customers and us, including
networks, data centers, help desks, mainframes, servers, storage, and workspace
computing. It also provides senior technology consultants to assist the
Company's customers with more complex technology transformations. It manages,
resolves and documents problems in the Company's customers' computing
environments. The group will also provide comprehensive monitoring, planning,
and safeguarding of information technology systems against intrusion by
monitoring system and network status, collecting and analyzing data regarding
system and network performance, and applying appropriate corrective actions. All
of these activities are designed to either be performed at customer facilities
or delivered through centralized data processing centers that the Company
intends to maintain.
CONSULTING AND APPLICATIONS SOLUTIONS
The Consulting and Applications Services Group intends to provide global
consulting and integration services, applications development and management
services, and applications outsourcing services to the Company's client base.
These services are designed to be delivered on-site and offshore, providing
innovative industry focused solutions. Leading through domain expertise to
provide performance improvement, business and technology architecture and
transformation these services will include: enterprise applications
implementation and integration; the development and maintenance of custom and
packaged applications; application systems migration; testing; migration of
applications from legacy environments to current technologies; and performing
quality assurance functions on custom applications.
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INTREORG SYSTEMS, INC. PERSONNEL
The markets for IT personnel and business integration professionals are
intensely competitive. A key part of the Company's business strategy is the
hiring, training, and retaining of highly motivated personnel with strong
character and leadership traits. INTREorg believes that employing associates
with such traits is -- and will continue to be -- an integral factor in
differentiating us from the Company's competitors in the IT industry. In seeking
such associates, INTREorg will screen candidates for employment through a
rigorous interview process. In addition to competitive salaries, INTREorg
intends to distribute cash bonuses that are paid promptly to reward excellent
performance, and the Company intends to adopt an annual incentive plan based on
the Company's performance in relation to the Company's business and financial
targets.
COMPETITIVE FEATURES
INTREorg Systems, Inc. intends to offer a unique blend of premium IT services
designed to assist the Company's clients in improving financial and operational
performance across their enterprise. INTREorg intends to develop business
strategies and technology solutions that address their specific needs while
providing them with increased competitive advantage. INTREorg intends that five
core values may differentiate INTREorg from the competition:
1. DELIVERY PERFORMANCE
INTREorg's delivery performance is based on a carefully designed business plan,
highly-skilled consultants, technical expertise, and well designed
implementation and support methodologies. INTREorg will emphasize strong quality
assurance and project management to achieve rapid and successful deployment of
the Company's solutions.
2. FLEXIBLE APPLICATION DELIVERY
INTREorg believes it can provide the Company's customers sophisticated business
software at a fraction of the cost of traditional client-based software
delivery. By leveraging the inherent flexibility and cost savings of the SaaS
software delivery model, this is an ideal solution for rapidly growing customers
that must have scalable solutions for their rapidly changing business
environment.
3. VERTICAL EXPERTISE
INTREorg intends to combine vertical-industry knowledge with a proven core of
key strategic technologies to offer to serve customers' needs and offer tailored
and innovative strategies and solutions.
4. TECHNOLOGY EXCELLENCE
INTREorg intends to deliver its services by blending proven software and
business practices to build scalable custom solutions. The Company believes its
team of professionals has the technology expertise to offer comprehensive
strategies and solutions.
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5. OPERATIONAL METRICS
INTREorg's intent is to maintain operational excellence, tracking key
performance indicators and well-defined operating metrics to manage the
Company's consulting resources, Company utilization and gross margin.
6. INFORMATION BASED SALES AND MARKETING EFFORTS
INTREorg has developed a set of metrics by which each client's needs and that
client's potential profitability can be assessed. As a result, INTREorg's intent
is to focus its sales and marketing efforts on growing public companies where
publicly reported information is available to assess the potential needs,
revenue and profitability of a client. This approach allows the Company to be
focused in its sales and marketing efforts, to bring solutions to the
accounting, and internal controls and procedures issues inherent in public
financial reporting.
BUSINESS STRATEGY
The Company's business strategy is to position INTREorg's Company as the leading
provider of premium IT services for both the middle market and divisions of
Global 2000 companies. INTREorg believes it can attain this strategic objective
by delivering a range of business and technology offerings. This approach
enables the Company to attain its business strategy objective. INTREorg intends
to maximize the Company's ability to deliver the following capabilities:
o Envision and realize strategic business solutions to serve the
Company's clients by delivering industry-based process re-engineering
services coupled with strategic technology management services.
o Implement Corporate Performance Management solutions to improve
financial performance and operating metrics across a client's
enterprise.
o Optimize business processes to improve the delivery of products and
services.
o Provide program and project management.
o Offer a complete range of managed IT services that enable the
Company's middle-market clients to concentrate on their core business,
while being assured their technical infrastructure will support them
as they grow.
o Leverage the Company's blend of industry and technology expertise
across all of the Company's service offerings.
COMPETITION
The Company intends to offer a full spectrum of IT consulting and Software
services and expertise to ensure the success of IT projects to small and middle
market companies. Competitors include IT solutions providers, in-house technical
staff, software product companies with extended service organizations,
international outsourcers of IT development, application and Web hosting firms
and specialized providers of CPM/BAM/BI. There is significant competition in the
management and IT consulting services space. Mergers or consolidations in this
market will create more larger or better-capitalized competitors with enhanced
abilities to attract and retain professionals. INTREorg also believes that the
principle criteria considered by prospective clients when selecting a consulting
firm include skills and capabilities of consultants, cost to value ratios, scope
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of services, service model approach, global presence, industry and technical
expertise, reputation and quality of past work, perceived value and a results
orientation.
The following is a representative list of competitors in the IT and management
consulting services space:
o Technical Consulting/Systems integrators: Accenture, Collaborative
Consulting, CMGI, EDS, IBM Global Services, Inforte, Keane Consulting,
LogicaCMG, Perficient, and Sapient;
o Business SaaS providers;
o Email outsourcing firms;
o Management/Business Consulting firms: Bain & Company, Booz-Allen &
Hamilton, Boston Consulting Group, Diamond Management and Technology
Consultants, Inc., and McKinsey & Company;
o Corporate Performance Management (CPM) / Business Activity Monitoring
(BAM) / Business Intelligence (BI) providers: AnswerThink, Hitachi
Consulting Corporation, Informatica Corporation, ISA, Hewlett-Packard,
Longview Solutions, Oracle, Palladium Consulting; and
o Computer hardware, software and service vendors: Dell,
Hewlett-Packard, IBM, Oracle and SAP.
EMPLOYEES
As of May 27, 2008, INTREorg had no full time employees. The officers and
directors currently provide certain services dedicated to current corporate and
business development activities on an as needed part-time basis. Officers
currently serve up to 20 hours per week.
CAPITAL STRUCTURE
INTREorg currently has 100,000,000 shares of common stock, no par value per
share, authorized by the Company's articles of incorporation as amended. As of
May 27, 2008, the Company had 9,696,016 shares of INTREorg common stock issued
and outstanding
The Company has 10,000,000 shares of preferred stock, no par value per share,
authorized by the Company's articles of incorporation. As of May 27, 2008, the
Company had no shares of INTREorg preferred stock issued and outstanding as a
result of the conversion of preferred shares to common
There is no public trading market for INTREorg stock at the present time.
8
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
All of the Company's revenues are presently designed to be derived from
customers within the United States. All of the Company's assets are currently
located in the United States.
ADMINISTRATIVE OFFICES
The Company's principal mailing address is 2000 Wadsworth Blvd., PMB 179,
Lakewood, Colorado 80214, and the telephone number is (303)988-3543; and the
facsimile number is (303)237-1661. The Company does not currently pay monthly
rent for the use of this mailing address. The Company will office out of the
homes of its executive officers until additional capital is raised.
ITEM 1A. RISK FACTORS
FORWARD LOOKING STATEMENTS
This registration statement includes forward-looking statements, including,
without limitation, statements relating to INTREorg plans, strategies,
objectives, expectations, intentions and adequacy of resources. These
forward-looking statements involve known and unknown risks, uncertainties, and
other factors that may cause INTREorg's actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. These
factors include, among others, the following: ability of INTREorg to implement
its business strategy; ability to obtain additional financing; INTREorg's
limited operating history; unknown liabilities associated with future
acquisitions; ability to manage growth; significant competition; ability to
attract and retain talented employees; and future government regulations; and
other factors described in this registration statement or in other of INTREorg
filings with the Securities and Exchange Commission. INTREorg is under no
obligation, to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
RISK FACTORS
GENERAL BUSINESS RISK FACTORS
DEVELOPMENT STAGE BUSINESS
INTREorg Systems, Inc. commenced operations in November 2003 and is organized as
a corporation under the laws of the State of Texas. Accordingly, INTREorg has
only a limited history upon which an evaluation of its prospects and future
performance can be made. INTREorg's proposed operations are subject to all
business risks associated with new enterprises. The likelihood of INTREorg's
success must be considered in light of the problems, expenses, difficulties,
complications, and delays frequently encountered in connection with the
expansion of a business, operation in a competitive industry, and the continued
development of advertising, promotions and a corresponding customer base. There
is a possibility that INTREorg could sustain losses in the future. There can be
no assurances that INTREorg will even operate profitably.
9
DEPENDENCE ON MANAGEMENT
In the early stages of development INTREorg's business will be significantly
dependent on INTREorg's management team. INTREorg's success will be particularly
dependent upon President and CEO Denis L. Iler. Mr. Iler will rely on the active
support of his leadership team: Austin Andres, the Company's COO, and Jeff
Huitt, the Company's CFO. The loss of any one of these individuals could have a
material adverse effect on INTREorg. Management is not working full time for the
Company and each devotes about twenty hours per week to the operations of the
Company.
DEPENDENCE UPON OUTSIDE CONTRACTORS OR ADVISORS
To supplement the business experience of its officers and directors, INTREorg
may be required to employ contractors, accountants, technical experts,
appraisers, attorneys, or other consultants or advisors. INTREorg's Management,
without any input from shareholders, will make the selection of any such
advisors. Furthermore, it is anticipated that such persons may be engaged on an
"as needed" basis without a continuing fiduciary or other obligation to
INTREorg. In the event INTREorg considers it necessary to hire outside
contractors or advisors, they may elect to hire persons who are affiliates, if
they are able to provide the required services.
RISKS OF BORROWING
If INTREorg incurs indebtedness, a portion of its cash flow will have to be
dedicated to the payment of principal and interest on such indebtedness. Typical
loan agreements also might contain restrictive covenants, which may impair
INTREorg's operating flexibility. Such loan agreements would also provide for
default under certain circumstances, such as failure to meet certain financial
covenants. A default under a loan agreement could result in the loan becoming
immediately due and payable and, if unpaid, a judgment in favor of such lender
which would be senior to the rights of shareholders of INTREorg. A judgment
creditor would have the right to foreclose on any of INTREorg's assets resulting
in a material adverse effect on INTREorg's business, operating results or
financial condition.
RISK OF NEW VENTURE
INTREorg is a development stage business. The Company has a limited history of
operation and no history of earnings. As a new development it will be subject to
all of the difficulties associated with establishing a new business enterprise,
including the following: hiring and retaining skilled employees or contractors;
licensing, permitting, and operating problems; competing with established
operators; and implementing the business infrastructure and support systems to
effectively carryout the business plan.
GENERAL ECONOMIC CONDITIONS
The financial success of INTREorg may be sensitive to adverse changes in general
economic conditions in the United States such as recession, inflation,
unemployment, and interest rates. Such changing conditions could reduce demand
in the marketplace for the IT Outsourcing services which is INTREorg's business.
Management believes that the services developed by INTREorg will maintain value
long term. Nevertheless, INTREorg has no control over these changes.
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NEED FOR ADDITIONAL FINANCING
INTREorg has very limited funds and such funds will not be adequate to carry out
the business plan without borrowing significant funds. The ultimate success of
INTREorg may depend upon its ability to raise additional capital. INTREorg has
not investigated the availability, source, or terms that might govern the
acquisition of additional capital and will not do so until it determines a need
for additional financing. If additional capital is needed, there is no assurance
that funds will be available from any source or, if available, that they can be
obtained on terms acceptable to INTREorg. If not available, INTREorg's
operations will be limited to those that can be financed with its modest
capital.
LACK OF REVENUE HISTORY
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 other companies. The Company has not earned
significant revenues from limited principal operations. The Company is not
profitable and the business effort is considered to be in an early development
stage. INTREorg Systems, Inc. must be regarded as a new or development venture
with all of the unforeseen costs, expenses, problems, risks and difficulties to
which such ventures are subject.
NO ASSURANCE OF SUCCESS OR PROFITABILITY.
There is no assurance that INTREorg will ever operate profitably. There is no
assurance that it will generate revenues or profits, or that the value of
INTREorg's shares will be increased thereby.
RISK FACTORS RELATING TO THE COMMON STOCK
HIGHLY SPECULATIVE NATURE OF INVESTMENT
Due to the highly speculative nature of INTREorg's business, Investors should
not invest unless they can financially bear the loss of their entire investment.
Investment should, therefore, be limited to that portion of discretionary funds
not needed for normal living purposes or for reserves for disability and
retirement.
REGULATION OF PENNY STOCKS
The Company's securities are subject to a Securities and Exchange Commission
rule that imposes special sales practice requirements upon broker-dealers who
sell such securities to persons other than established customers or accredited
investors. For purposes of the rule, the phrase "accredited investors" means, in
general terms, institutions with assets in excess of $5,000,000, or individuals
having a net worth in excess of $1,000,000 or having an annual income that
exceeds $200,000 (or that, when combined with a spouse's income, exceeds
$300,000). For transactions covered by the rule, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
11
written agreement to the transaction prior to the sale. Consequently, the rule
may affect the ability of broker-dealers to sell the Company's securities and
also may affect the ability of purchasers in this offering to sell their
securities in any market that might develop therefore.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act
of 1934, as amended. Because the securities of the Company may constitute "penny
stocks" within the meaning of the rules, the rules would apply to the Company
and to its securities. The rules may further affect the ability of owners of
Shares to sell the securities of the Company in any market that might develop
for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.
BLUE SKY CONSIDERATIONS
Because the securities registered hereunder have not been registered for resale
under the blue sky laws of all states, the holders of such shares and persons
who desire to purchase them in any trading market, should be aware that there
may be significant state blue-sky law restrictions upon the ability of investors
to sell the securities and of purchasers to purchase the securities in any
particular state. Some jurisdictions may not under any circumstances allow the
trading or resale of blind-pool or "blank-check" securities. Accordingly,
investors should consider the secondary market for the Company's securities to
be a limited one.
NO FORESEEABLE DIVIDENDS
The Company has not paid dividends on its Common Stock and does not anticipate
paying such dividends in the foreseeable future.
NO ASSURANCE OF SUCCESS OR PROFITABILITY
There is no-assurance that the Company will acquire a favorable business
opportunity. Even if the Company should become involved in a business
opportunity, there is no assurance that it will generate revenues or profits, or
that the market price of the Company's common stock will be increased thereby.
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LACK OF DIVERSIFICATION
Because of the limited financial-resources that the Company has, it is unlikely
that the Company will be able to diversify its acquisitions or operations. The
Company's probable inability to diversify its activities into more than one area
will subject the Company to economic fluctuations within a particular business
or industry and therefore increase the risks associated with the Company's
operations.
ITEM 2. FINANCIAL INFORMATION
The following discussion is intended to provide an analysis of the Company's
financial condition and should be read in conjunction with INTREorg's financial
statements and the notes thereto set forth herein. The matters discussed in
these sections that are not historical or current facts deal with potential
future circumstances and developments. INTREorg's actual results could differ
materially from the results discussed in the forward-looking statements. Factors
that could cause or contribute to such differences include those discussed
below.
OVERVIEW
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 other companies. The Company's fiscal year end is
December 31.
BASIS OF PRESENTATION - DEVELOPMENT STAGE COMPANY
To date the Company has not earned significant revenues from limited principal
operations. Accordingly, the Company's activities have been accounted for as
those of a "Development Stage Enterprise" as set forth in Financial Accounting
Standards Board Statement No. 7 ("SFAS 7"). Among the disclosures required by
SFAS & are that the Company's financial statements be identified as those of a
development stage company, and that the statements of operations, stockholders'
equity (deficit) and cash flows disclose activity since the date of the
Company's inception.
CRITICAL ACCOUNTING POLICIES
INTREorg has identified the policies below as critical to INTREorg business
operations and the understanding of INTREorg results from operations. The impact
and any associated risks related to these policies on the Company's business
operations is discussed throughout this Financial Information section where such
policies affect INTREorg's reported and expected financial results. For a
detailed discussion on the application of these and other accounting policies,
see Note 1 in the Notes to the Financial Statements beginning on page 42 of this
document. Note that the Company's preparation of this document requires INTREorg
to make estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
INTREorg's financial statements, and the reported amounts of revenue and
expenses during the reporting period. There can be no assurance that actual
results will not differ from those estimates.
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PLAN OF OPERATIONS WITH TWELVE MONTH BUDGET AND QUARTERLY GOALS
INTREorg intends to raise $250,000 in a private placement of common stock in the
last half of 2008. The Company's operating budget for the $250,000 in capital it
intends to raise is:
IT Implementation Consultant and Contract Officers $36,000
Conference and Travel 16,000
Web Site and Internet 15,000
Legal and Accounting 35,000
Miscellaneous Fees 5,000
Debt Maturity 35,000
Bridge Note Interest 17,000
Working Capital and Operations 91,000
------------
TOTAL $250,000
During the second quarter of 2008, the Company will use existing resources to
complete the marketing materials and identify key potential clients. Efforts
during the second quarter have resulted in the Company signing two service
agreements in May 2008. These basic service agreements are with -
o Sun River Energy, Inc.; and
o Legacy Technology Holdings, Inc.
These signed basic service agreements allow the Company to begin specific
evaluations of each client's needs and associated implementation plans and
pricing. The Company can't predict specific revenue, if any as a result of these
agreements as the development of implementation plans and pricing will drive the
revenue opportunity.
The operational focus and goal of the second quarter 2008 is to sign 5
additional clients to basic services agreement which will be used to develop
specific implementation plans for the IT products and services sold to each
client. As discussed above, the Company has signed three basic service
agreements. Work evaluating the clients needs and the preparation of
implementation plans is underway and the Company will begin to implement the
plans for each client towards the end of this quarter.
During the third quarter of 2008, the Company is planning on completing the
installation and implementation work for its new clients. The Company will
continue and slightly accelerate marketing efforts during this time frame as
well.
During the fourth quarter of 2008, the Company will be focusing on product and
service delivery for clients identified during the marketing process and
continued marketing efforts to maintain a pipeline consistent with the 2008
operating budget.
It is likely that the Company will need additional funds to fully implement the
projects for its clients, depending on the number of clients and the complexity
of each project. The Company may raise additional funds via debt and/or equity
as needed. No representation is made that any funds will be available when
needed or on terms that are acceptable to the Company. In the event funds cannot
be raised when needed, the Company may not be able to carry out its business
14
plan, may never achieve sales or income, and could fail in business as a result
of these uncertainties.
RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 2007 AND 2006
Revenues for the year ended December 31, 2007 were zero, representing no change
from the period ended December 31, 2006. The Company is a development stage
company and therefore has not recognized revenues from its activities.
General and administrative expenses for the year ended December 31, 2007 were
$326,019 as compared to the year ending December 31, 2006 which were $416,450, a
decrease of $90,431. The decrease in general and administrative expenses was
primarily related to the scaling back of operations to match available resources
and to allow management to focus its efforts on the business plan and within
budgeted levels of expenditures.
During the year ending December 31, 2007, the net operating loss of $326,019
consisted of consulting and professional Fees of $154,850, legal and accounting
fees of $77,528, director's fees of $18,120, office support and supplies of
$35,854, conference and travel expenses of $19,268. During the year ended
December 31, 2007, we issued 800,000 shares to cover $24,120 of the above
expenses.
We recorded a net loss of $383,975 during the year ended December 31, 2007
versus net loss of $313,398 for the year ended December 31, 2006. The $70,577
increase in net losses was due to the decrease of $90,431 offset by the $25,614
increase in interest expense and the decrease of $135,750 in debt forgiveness.
The Company's basic loss per share was $0.04 during the year ended December 31,
2007 versus a basic loss per share of $0.09 during the year ended December 31,
2006.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2007, the Company had total current assets of $20,655,
consisting of $9,577 in accounts receivable and $11,078 in advances receivable.
At December 31, 2007, the Company did not have any cash on hand. At December 31,
2007, the Company had total liabilities of $1,460,709, all current, consisting
of $462,225 in accounts payable, $493,640 in accrued expenses and liabilities
and $504,386 in notes payable.
During the year ended December 31, 2007, the Company used $262,134 in operating
activities compared to $279,213 during the year ended December 31, 2006. During
the years ended December 31, 2007 and 2006, the Company had net losses of
$383,975 and $313,398, respectively, that were not reconciled for any non-cash
items.
During the year ended December 31, 2007, the Company did not receive or use any
funds in its investing activities. During the year ended December 31, 2006, the
Company used $1,000 to acquire investments.
During the year ended December 31, 2007, the Company raised $223,500 in bridge
loans for a total of $504,386 in notes payable. The loans have interest rates
ranging from 6% to 10% per annum and have due dates between 90 and 180 days. In
15
connection with these notes, the Company has issued 2,947,000 shares of its
restricted common stock as payment of interest of $26,900 on these notes.
During the year ended December 31, 2007, the Company issued 812,000 shares of
its restricted common stock with a value of $8,120. Of the 800,000 shares,
512,000 shares were issued to directors of the Company.
The only sources of liquidity for the Company is from the sale of its capital
stock or from loans. Its sole capital resources are its common and preferred
stock.
INTREorg has very limited funds and such funds will not be adequate to carry out
the business plan without borrowing significant funds. The ultimate success of
INTREorg may depend upon its ability to raise additional capital. The Company
plans to commence a $250,000 private placement in the last half of 2008. There
is no assurance that funds will be available from any source or, if available,
that they can be obtained on terms acceptable to INTREorg. If not available,
INTREorg's operations will be limited to those that can be financed with its
modest capital.
The Company has funded its operations primarily from the following sources:
o Equity proceeds through private placements of INTREorg securities;
o Loans and lines of credit; and
o Sales of equity investments.
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2008 COMPARED
TO THE THREE MONTH PERIOD ENDED MARCH 31, 2007
During the three months ended March 31, 2008 and 2007, the Company did not
recognize any revenues from its business activities. The Company is a
development stage company and is pre-revenue.
General and administrative expenses for the three months ended March 31, 2008
were $60,967 as compared to the three months ended March 31, 2007, which were
$87,296, a decrease of $26,329. The decrease in general and administrative
expenses was primarily related to the scaling back of operations to match
available resources and to stay focused on the business plan and within budgeted
levels of expenditures. During the three months ended March 31, 2007, general
and administrative expenses consisted of consulting and professional fees of
$46,450, legal and accounting fees of $9,244, office support and supplies of
$4,105.
The Company recognized a net loss of $70,503 during the March 31, 2008 versus
net loss of $93,469 during the three months ended March 31, 2007. The decrease
of $22,966 is a result of the $26,329 decrease in general and administrative
expenses off set by the $3,078 increase in interest expense. The Company's basic
loss per share was less than $0.01 for the three months ended March 31, 2008
versus a basic loss per share of $0.02 for the three months ended March 31,
2007.
16
LIQUIDITY AND CASH FLOWS
At March 31, 2008, the Company had total current assets of $21,315, consisting
of $9,577 in accounts receivable and $11,738 in advances receivable. At March
31, 2008, the Company did not have any cash on hand. At March 31, 2008, the
Company had total liabilities of $1,526,597, all current, consisting of $521,339
in accounts payable, $502,651 in accrued expenses and liabilities and $499,386
in notes payable. At of March 31, 2008, the Company had a working capital
deficit of approximately $1,505,282.
Cash used in the Company's operating activities totaled $3,038 during the three
months ended March 31, 2008. Cash used in operating activities during the three
months ended March 31, 2007 was $90,543. During the three months ended March 31,
2008 and 2007, the Company recognized net losses of $70,503 and $93,469,
respectively, which were not adjusted for any non-cash items.
The Company did not receive or use any funds in investing activities during the
three months ended March 31, 2008 and 2007.
At December 31, 2007, the Company had outstanding notes payable of $504,386.
This represents bridge loans made by the Company. The bridge loans have interest
rates ranging from 6% to 10% per annum and have due dates between 90 and 180
days. During the three months ended March 31, 2008, the Company issued 207,500
shares of its common stock with a value of $2,075 as payment on interest on
these loans. During the three months ended March 31, 2008, the Company made a
payment totaling $5,000 on these loans. At March 31, 2008, the loans had an
outstanding balance of $499,386.
During the three months ended March 31, 2008, the Company issued 587,000 shares
of its restricted common stock as payment for services rendered totaling
$58,700. Of the 587,000 shares, 475,000 shares were issued to officers and
directors of the Company, in lieu of salaries.
The only sources of liquidity for the Company is from the sale of its capital
stock or from loans. Its sole capital resources are its common and preferred
stock.
INTREorg has very limited funds and such funds will not be adequate to carry out
the business plan without borrowing significant funds. The ultimate success of
INTREorg may depend upon its ability to raise additional capital. The Company
plans to commence a $250,000 private placement in the last half of 2008. There
is no assurance that funds will be available from any source or, if available,
that they can be obtained on terms acceptable to INTREorg. If not available,
INTREorg's operations will be limited to those that can be financed with its
modest capital.
The Company has funded its operations primarily from the following sources:
o Equity proceeds through private placements of INTREorg securities;
o Loans and lines of credit; and
o Sales of equity investments.
17
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty
in Income Taxes - An Interpretation of FASB Statement No. 109, (FIN 48). FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return that results in a
tax benefit. Additionally, FIN 48 provides guidance on de-recognition, income
statement classification of interest and penalties, accounting in interim
periods, disclosure, and transition. This interpretation is effective for the
Company for its fiscal year ending June 30, 2008. The Company has not yet
evaluated the effect that the application of FIN 48 may have, if any, on its
future results of operations and financial condition.
In September 2006 the FASB issued SFAS No. 157, "Fair Value Measurements". SFAS
No. 157 defines fair value, establishes a framework for measuring fair value in
accordance with generally accepted accounting principles and expands fair value
disclosure requirements. SFAS No. 157 applies whenever another accounting
standard requires (or permits) assets or liabilities to be measured at fair
value, but does not expand the use of fair value to new circumstances. SFAS No.
157 is effective beginning in 2008. The Company has not yet determined the
effect SFAS No. 157 will have on its financial statements.
In September 2006 the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Post Retirement Plans". SFAS No. 158 requires
the Company to recognize the funded status of its post retirement plans on the
balance sheet and recognize as a component of accumulated other comprehensive
income the gains and losses, prior service costs or credits that occur during
the financial year but are not recognized as components of the Company's pension
costs This Statement is effective as of the beginning of its first fiscal year
that begins after December 15, 2008. The Company does not expect application of
SFAS No. 156 to have a material affect on its financial statements.
In February 2007 the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115". SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. The amendment to
SFAS No. 115 applies to all entities with investments in available-for-sale or
trading securities. The statement is effective for fiscal years beginning after
November 15, 2007. The Company has not yet determined the effect SFAS No. 159
will have on its financial statements.
ITEM 3. PROPERTIES
The Company's principal mailing address is 2000 Wadsworth Blvd., PMB 179,
Lakewood, Colorado 80214, and the telephone number is (303)988-3543; and the
facsimile number is (303)237-1661. The Company does not currently pay monthly
rent for the use of this mailing address. The Company will office out of the
homes of its executive officers until additional capital is raised.
18
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of INTREorg outstanding common stock by:
o each person who is known by INTREorg to be the beneficial owner of
five percent (5%) or more of INTREorg common stock;
o INTREorg's chief executive officer, its other executive officers, and
each director as identified in the "Management -- Executive
Compensation" section; and
o all of the Company's directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock and options, warrants
and convertible securities that are currently exercisable or convertible within
60 days of the date of this document into shares of INTREorg common stock are
deemed to be outstanding and to be beneficially owned by the person holding the
options, warrants or convertible securities for the purpose of computing the
percentage ownership of the person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
The information below is based on the number of shares of INTREorg common stock
that INTREorg believes was beneficially owned by each person or entity as of May
27, 2008.
NUMBER OF SHARES OF
COMMON STOCK PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIALLY OWNED BENEFICIALLY OWNED
- --------------------------------------------------------- ------------------------ -----------------------
Russell K. Boyd, Chairman of the Board (2) 1,234,000 14.0%
Denis L. Iler, President, CEO, Director 125,000 1.4%
Austin Andres, Chief Operating Officer, Director 100,000 1.1%
Jeff Huitt, Chief Financial Officer, Director (3) 300,000 3.4%
Redgie Green, Director 25,000 <1%
Wesley F. Whiting, Director 25,000 <1%
------------------------ -----------------------
All directors and executive officers as a group (six 1,809,000 20.5%
persons)
- -----------------------------
(1) Except as noted above the business address for all listed individuals or
entities is c/o INTREorg Services, Inc., 2000 Wadsworth Blvd., PMB 179,
Lakewood, Colorado 80214.
(2) Mr. Boyd has Proxy Control of 900,000 shares previously held by Mr. Alton
Smith. Mr. Boyd has direct control of 334,000 common shares representing 3.4% of
the outstanding shares of common stock.
(3) Through Huitt Consulting, LLC. Mr. Huitt is the Managing Member.
19
Rule 13d-3 under the Securities Exchange Act of 1934 governs the determination
of beneficial ownership of securities. That rule provides that a beneficial
owner of a security includes any person who directly or indirectly has or shares
voting power and/or investment power with respect to such security. Rule 13d-3
also provides that a beneficial owner of a security includes any person who has
the right to acquire beneficial ownership of such security within sixty days,
including through the exercise of any option, warrant or conversion of a
security. Any securities not outstanding which are subject to such options,
warrants or conversion privileges are deemed to be outstanding for the purpose
of computing the percentage of outstanding securities of the class owned by such
person. Those securities are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person. Included in
this table are only those derivative securities with exercise prices that
INTREorg believes have a reasonable likelihood of being "in the money" within
the next sixty days.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as to persons who currently serve as
INTREorg's directors or executive officers, including their ages as of May 27,
2008.
NAME AGE POSITION
- ----------------------------- --- ------------------------------------
Denis L. Iler 44 President, CEO, Director
Austin Andres 56 Chief Operating Officer, Director
Jeff Huitt 46 Chief Financial Officer, Director
Redgie Green 53 Director
Wesley F. Whiting 73 Director
Russell K. Boyd 37 Director and Chairman of the Board
INTREorg officers are elected by the board of directors at the first meeting
after each annual meeting of INTREorg shareholders and hold office until their
successors are duly elected and qualified under INTREorg bylaws.
The directors named above will serve until the next annual meeting of the
Company's stockholders. Thereafter, directors will be elected for one-year terms
at the annual stockholders' meeting. Officers will hold their positions at the
pleasure of the board of directors absent any employment agreement. There is no
arrangement or understanding between the directors and officers of the Company
and any other person pursuant to which any director or officer was or is to be
selected as a director or officer.
The directors and officers of the Company will not devote full time to the
Company's affairs, but will devote sufficient time until the operations and
working capital of the Company require more time to be devoted.
20
BIOGRAPHICAL INFORMATION
Management not devote full time to the Company's affairs, but will devote
sufficient time until the operations and working capital of the Company require
more time to be devoted and any time spent will be devoted to screening and
assessing and, if warranted, negotiating to acquire business opportunities.
DENIS L. ILER, age 44, became Chief Executive Officer and a director of the
Company in January 2008. Mr. Iler is currently the CEO and a member of the board
of directors. He holds a Six Sigma Black Belt for Tandberg Data Corp. His
primary responsibilities include Quality reporting to a major computer hardware
supplier worldwide. He brings with him more than 20 years experience in the data
storage industry. Previously, he served as Vice President of Quality and
Customer support for Exabyte and Ecrix Corporations. While at Exabyte he also
formed and managed its industry award-winning International Technical Support
division. During this period he managed up to six Technical Support offices
located throughout Europe and the Far East. His diverse background also includes
Quality leadership and statistical analysis through the use of the Six Sigma
methodology.
AUSTIN ANDRES, age 56, became Chief Operating Officer and a director of the
Company in January 2008. Mr. Andres has served in numerous financial and
information systems positions during his 22 year career with Qwest
Communications. He has extensive experience in leading and managing teams
providing actionable information for operating decisions from diverse
information sources. His current position focuses on delivery of financial and
operational performance information to business units. Mr. Andres holds Master
Degrees in Accounting from the University of Colorado - Denver and a Bachelor's
Degree in Management Information Science from the University of Northern
Colorado. He holds an inactive CPA license in the State of Colorado.
JEFF HUITT, age 46, became Chief Financial Officer and a director in April 2007.
He also serves as Chief Financial Officer at XsunX, Inc. Located in the Golden,
Colorado research facility, his responsibilities include operations management
and coordination of resources. He has over 20 years experience in leadership
positions of both larger organizations and start ups, most recently as President
of Parking Stripes Advertising, a private start-up media company from October
2006 to August 2007. Prior to that, he was COO/CFO of a startup defense
contractor guiding the company through high growth and a recapitalization from
January 2004 to October 2006. His additional experience includes CFO of iSherpa
Capital, from October 2001 to January 2004 and Controller of Qwest Wireless from
1996 to 2000. Mr. Huitt is a CPA and holds two degrees from the University of
Denver: a Bachelor of Science in Accounting and a Master's in Business
Administration.
REDGIE GREEN, age 53, is Director of INTREorg Services, Inc. He has been
Secretary and Director of Sun River Energy, Inc. since 1998. Mr. Green has been
co-owner and operator of Green's B&R Enterprises, a wholesale donut baker since
1983. He has been an active investor in small capital and high-tech adventures
since 1987. Mr. Green was a director of Colorado Gold & Silver, Inc. in 2000. He
was a director for Houston Operating Company in late 2004 until December 2004.
He recently served as a director for Mountains West Exploration, Inc. in 2005.
21
He is a Director of Cavion Technologies, Inc. (2006) and Aspeon, Inc. (2006) and
has been appointed as an officer and director of Captech Financial, Inc. in May
2006. He served as a director of Baymark Technologies, Inc. 2005-2006.
WESLEY F. WHITING, Director, age 75. Mr. Whiting was President, director, and
Secretary of Berge Exploration, Inc. (1978-88) and President, Vice President,
and director of NELX, Inc. (1994-1998), and was Vice President and director of
Intermountain Methane Corporation (1988-1991), and President of Westwind
Production, Inc. (1997-1998). He was a director of Kimbell deCar Corporation
from 1998, until 2000 and he has been President and a director of Sun River
Energy, Inc. since 1998. He was a Director of Colorado Gold & Silver, Inc. from
1999 to 2000. He was President and director of Business Exchange Holding Corp.
from 2000 to 2002 and Acquisition Lending, Inc. (2000-2002). He was director and
Vice President of Utilitec, Inc, 1999 to 2002, and has been Vice President and
director of Agro Science, Inc. since 2001. He was President and director of
Premium Enterprises, Inc. from October 2002 to December 31, 2002. He is Vice
President and director of Evergreen Associates, Inc. and Resource Science, Inc.
He was appointed Director and Secretary of BSA SatelLINK, Inc. in 2002. He was
President and Director of Fayber Group, Inc. 2003, 2005 when he resigned. He has
also been Director of Life USA, Inc. since 2003. He has been appointed as an
officer and director of Captech Financial, Inc. in May 2006. He served as a
director of Baymark Technologies, Inc. 2005-2006. He is a director of Cavion
Technologies, Inc. (2006) and Aspeon, Inc. (2006).
RUSSELL K. BOYD, age 37, has served as Chairman of the Board of Directors for
the Company since November of 2004. He has extensive experience in the
electronic data processing and consulting industries leading and managing
project delivery teams. He currently is with Electronic Data Systems (EDS) for
the past seven years working on a variety of service delivery and consulting
projects. Prior to EDS, Mr. Boyd's career consists of progressively broader
roles and responsibilities with TIER Technologies, Inc. He holds a Bachelor of
Arts Degree in Computer Information Systems from Tarleton State University
COMMITTEES OF THE BOARD OF DIRECTORS
INTREorg is managed under the direction of its board of directors. INTREorg's
board of directors plans to establish an audit committee as soon as practicable.
EXECUTIVE COMMITTEE
Members of the INTREorg Executive Committee are as follows: Denis L. Iler,
Austin Andres and Jeff Huitt.
AUDIT COMMITTEE
INTREorg currently does not have an audit committee. When formed, the audit
committee will be comprised solely of directors who are independent and
financially literate, as required by the Securities Exchange Act of 1934, as
amended, which INTREorg refers to as the Securities Exchange Act. At least one
member of the committee will have accounting or related financial management
expertise.
22
CONFLICTS OF INTEREST
The officers and directors of the Company will not devote more than a portion of
their time to the affairs of the Company. There will be occasions when the time
requirements of the Company's business conflict with the demands of their other
business and investment activities. Such conflicts may require that the Company
attempt to employ additional personnel. There is no assurance that the services
of such persons will be available or that they can be obtained upon terms
favorable to the Company.
CONFLICTS OF INTEREST - GENERAL.
Certain of the officers and directors of the Company may be directors and/or
principal shareholders of other companies and, therefore, could face conflicts
of interest with respect to potential acquisitions. In addition, officers and
directors of the Company may in the future participate in business ventures,
which could be deemed to compete directly with the Company. Additional conflicts
of interest and non-arms length transactions may also arise in the future in the
event the Company's officers or directors are involved in the management of any
firm with which the Company transacts business. The Company's Board of Directors
has adopted a policy that the Company will not seek a merger with, or
acquisition of, any entity in which management serve as officers or directors,
or in which they or their family members own or hold a controlling ownership
interest. Although the Board of Directors could elect to change this policy, the
Board of Directors has no present intention to do so. In addition, if the
Company and other companies with which the Company's officers and directors are
affiliated both desire to take advantage of a potential business opportunity,
then the Board of Directors has agreed that said opportunity should be available
to each such company in the order in which such companies registered or became
current in the filing of annual reports under the Exchange Act subsequent to
January 1, 1997.
(Remainder of page left blank intentionally)
23
ITEM 6. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth this information by INTREorg, including salary,
bonus and certain other compensation to the Company's Chief Executive Officer
and named executive officers for the past three fiscal years.
Summary Executives' Compensation Table
- ------------------- ------- --------- -------- ------- -------- ------------- ----------- ------------ -------------
NON-EQUITY NON-QUALIFIED
INCENTIVE DEFERRED
STOCK OPTION PLAN COMPENS-ATIONALL OTHER
SALARY BONUS AWARDS AWARDS COMPENS-ATION EARNINGS COMPENS-ATION TOTAL
NAME & POSITION YEAR ($) ($) ($) ($) ($) ($) ($) ($)
- ------------------- ------- --------- -------- ------- -------- ------------- ----------- ------------ -------------
Denis L. Iler, 2007 0 0 0 0 0 0 0 0
President, CEO & 2006 0 0 0 0 0 0 0 0
Director 2005 0 0 0 0 0 0 0 0
- ------------------- ------- --------- -------- ------- -------- ------------- ----------- ------------ -------------
Austin Andres, 2007 0 0 0 0 0 0 0 0
COO & Director 2006 0 0 0 0 0 0 0 0
2005 0 0 0 0 0 0 0 0
- ------------------- ------- --------- -------- ------- -------- ------------- ----------- ------------ -------------
2007 $15,900 0 0 0 0 0 0 $15,900
Jeff Huitt, CFO & 2006 0 0 0 0 0 0 0 0
Director (1) 2005 0 0 0 0 0 0 0 0
- ------------------- ------- --------- -------- ------- -------- ------------- ----------- ------------ -------------
(1)The Company pays Huitt Consulting, LLC $50 per hour for work performed by
Jeff Huitt as the Company's contract CFO.
DIRECTOR COMPENSATION
The Company pays $500 for Directors fees for meeting attendance. Prior to the
appointment of additional board members in April 2008, the Company had a single
director. Board meetings were held monthly for routine matters. The sole
director, Russell K. Boyd, earned $18,500 his services in 2005, 2006 and 2007.
This amount was paid in the form of 212,000 shares of common stock issued
January 4, 2007. An Audit Committee has yet to be established therefore no
compensation has been paid for this function.
24
The following table sets forth certain information concerning compensation paid
to the Company's directors for services as directors, but not including
compensation for services as officers reported in the "Summary Executives'
Compensation Table" during the year ended December 31, 2007:
Non-qualified
Non-equity deferred
Fees incentive plan compensation All other
earned Stock Option compensation ($) earnings compensation ($) Total
Name or paid awards awards ($) (1) ($)
in cash ($) ($)
($)
- ------------- --------- ---------- ---------- ------------------ ----------------- ------------------ -------
Russell K. $ -0- $18,500 $ -0- $ -0- $ -0- $ -0- $18,500
Boyd
Denis L. $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Iler
Austin $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Andres
Jeff Huitt $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Redgie Green $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Wesley F. $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Whiting
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
There was no grant of stock options to the Chief Executive Officer and other
named executive officers during the fiscal year ended December 31, 2007 and
through March 31, 2008. The market value of the Company's common stock as of May
27, 2008 was none.
LONG TERM INCENTIVE PLANS/AWARDS IN LAST FISCAL YEAR
None were granted during the last fiscal year.
STOCK PURCHASE PLANS; PROFIT SHARING AND THRIFT PLANS
Presently the Company has no stock purchase plans, profit-sharing or thrift
plans.
OPTIONS, WARRANTS OR RIGHTS
Presently the Company has no options, warrants or rights authorized.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Not applicable.
25
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The INTREorg board of directors in its entirety acts as the compensation
committee for INTREorg. Mr. Denis L. Iler is the Chief Executive Officer and a
director of the Company.
STOCK OPTION PLAN
The Company intends to adopt an incentive stock option plan pursuant to which
the board of directors may grant options to purchase shares of the Company's
common stock to key employees, consultants and others. The plan will provide for
the grant of incentive stock options with an exercise price of not less than the
fair market value on the date of the grant as determined by the board of
directors and will expire no later than the tenth anniversary of the date of
grant.
AUDIT COMMITTEE
The Company does not have an Audit Committee. The members of the Board sit as
the Audit Committee. No qualified financial expert has been hired because the
Company is too small to afford such expense.
LIMITATION ON LIABILITY AND INDEMNIFICATION
INTREorg is a Texas corporation. The Texas Business Corporation Act (TBCA)
provides that the articles of incorporation of a Texas corporation may contain a
provision eliminating or limiting the personal liability of a director to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except that any such provision may not eliminate or limit
the liability of a director (i) for any breach of the director's duty of loyalty
to the corporation or its shareholders, (ii) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
acts specified in TBCA (concerning unlawful distributions), or (iv) any
transaction from which a director directly or indirectly derived an improper
personal benefit. INTREorg's articles of incorporation contain a provision
eliminating the personal liability of directors to INTREorg or INTREorg
shareholders for monetary damages to the fullest extent provided by the TBCA.
The TBCA provides that a Texas corporation must indemnify a person who was
wholly successful, on the merits or otherwise, in defense of any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal (a
"Proceeding"), in which he or she was a party because the person is or was a
director, against reasonable expenses incurred by him or her in connection with
the Proceeding, unless such indemnity is limited by the corporation's articles
of incorporation. INTREorg articles of incorporation do not contain any such
limitation.
The TBCA provides that a Texas corporation may indemnify a person made a party
to a Proceeding because the person is or was a director against any obligation
incurred with respect to a Proceeding to pay a judgment, settlement, penalty,
fine (including an excise tax assessed with respect to an employee benefit plan)
or reasonable expenses incurred in the Proceeding if the person conducted
26
himself or herself in good faith and the person reasonably believed, in the case
of conduct in an official capacity with the corporation, that the person's
conduct was in the corporation's best interests and, in all other cases, his or
her conduct was at least not opposed to the corporation's best interests and,
with respect to any criminal proceedings, the person had no reasonable cause to
believe that his or her conduct was unlawful. The Company's articles of
incorporation and bylaws allow for such indemnification. A corporation may not
indemnify a director in connection with any Proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation or, in
connection with any other Proceeding charging that the director derived an
improper personal benefit, whether or not involving actions in an official
capacity, in which Proceeding the director was judged liable on the basis that
he or she derived an improper personal benefit. Any indemnification permitted in
connection with a Proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with such Proceeding.
The TBCA, unless otherwise provided in the articles of incorporation, a Texas
corporation may indemnify an officer, employee, fiduciary, or agent of the
corporation to the same extent as a director and may indemnify such a person who
is not a director to a greater extent, if not inconsistent with public policy
and if provided for by its bylaws, general or specific action of its board of
directors or shareholders, or contract. INTREorg articles of incorporation
provide for indemnification of directors, officers, employees, fiduciaries and
agents of INTREorg to the full extent permitted by Texas law.
INTREorg articles of incorporation also provide that INTREorg may purchase and
maintain insurance on behalf of any person who is or was a director or officer
of INTREorg or who is or was serving at the request of INTREorg as a director,
officer or agent of another enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity or arising out of his
or her status as such, whether or not INTREorg would have the power to indemnify
him or her against such liability.
EQUITY COMPENSATION PLAN INFORMATION
The Company has not established an equity compensation plan or Incentive Stock
Option Plan at this time.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No officer or director of the Company has or proposes to have any direct or
indirect material interest in any asset proposed to be acquired by the Company
through security holdings, contracts, options, or otherwise.
The following table shows the issuances of stock, in lieu for services for
compensation to officers or directors or affiliates in last two years and five
months:
27
DATE OF NUMBER OF
NAME ISSUANCE SHARES POSITION
- ----------------- ----------- --------- ----------
Russell K. Boyd 01/04/2007 212,000 Director
Huitt Consulting,
LLC* 04/23/2007 300,000 *
Chief
Operating
Austin Andres 03/14/2008 100,000 Officer & Director
Russell K. Boyd 03/14/2008 200,000 Director
Redgie Green 03/14/2008 25,000 Director
Chief
Denis L. Iler 03/14/2008 125,000 Executive
Officer & Director
Wesley F. Whiting 03/14/2008 25,000 Director
-----------
Total 987,000
* Huitt Consulting, LLC is a company of which Mr. Jeff Huitt, the acting
Chief Financial Officer and Director of the Company, is a managing member.
ITEM 8. LEGAL PROCEEDINGS
INTREorg anticipates that it will from time to time become subject to claims and
legal proceedings arising in the ordinary course of business. It is not feasible
to predict the outcome of any such proceedings and INTREorg cannot assure you
that their ultimate disposition will not have a material adverse effect on
INTREorg business, financial condition, cash flows or results of operations.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
There is no current public trading market for the common stock and there is no
assurance that one will develop in the near future, if ever. INTREorg will seek
application to be listed on the over-the-counter bulletin board trading facility
("OTCBB") concurrent with filing this Form 10. The Company cannot assure that
its shares will trade at or above the Company's net asset value.
HOLDERS
There are approximately 141 holders of record of INTREorg's common stock as of
May 27, 2008.
ANNUAL MEETING
The annual meeting of INTREorg stockholders is expected to be held at a future
date in 2008. This will be an annual meeting of stockholders for the election of
directors. The annual meeting will be held at the Company's principal office or
at such other place as permitted by the laws of the State of Texas and on such
date as may be fixed from time to time by resolution of INTREorg's board of
directors.
28
DIVIDEND POLICY
Holders of INTREorg common stock are not entitled to receive dividends. INTREorg
has not declared or paid any dividends on INTREorg common shares and it does not
plan on declaring any dividends in the near future. INTREorg currently intends
to use all available funds to finance the operation and expansion of its
business.
SHARES ELIGIBLE FOR FUTURE SALE
INTREorg currently has 9,696,016 shares of common stock outstanding at May 27,
2008. A current shareholder who is an "affiliate" of INTREorg, defined in Rule
144 as a person who directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with INTREorg will be
required to comply with the resale limitations of Rule 144. As of date hereof a
total of 8,313,516 shares have been held for 1 year or more and are eligible for
resale under Rule 144. Sales by affiliates will be subject to the volume and
other limitations of Rule 144, including certain restrictions regarding the
manner of sale, notice requirements, and the availability of current public
information about INTREorg. The volume limitations generally permit an affiliate
to sell, within any three month period, a number of shares that does not exceed
the greater of one percent of the outstanding shares of common stock or the
average weekly trading volume during the four calendar weeks preceding his sale.
A person who ceases to be an affiliate at least three months before the sale of
restricted securities beneficially owned for at least one year may sell the
restricted securities under Rule 144 without regard to any of the Rule 144
limitations, or in the case of a reporting company which has been reporting at
least 90 days, a non-affiliate shareholder may sell without restriction after
holding for six months.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
- ----------------------------------- --------------- ------------------ --------------------
NAME DATE NUMBER OF SHARES PRICE/SHARE
($)
- ----------------------------------- --------------- ------------------ --------------------
Schrunk, M 01/17/2006 25,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Bradford, N 02/03/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Chambers, J 02/03/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Childers, C 02/03/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Schrunk, M 02/07/2006 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Barnett, M 02/10/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
McAdams, C 02/13/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Sterk, D 02/13/2006 5,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Wood, M 02/13/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Mayfield, C 02/14/2006 5,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Walsh, B 02/14/2006 5,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Walsh, T 02/14/2006 5,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
29
- ----------------------------------- --------------- ------------------ --------------------
NAME DATE NUMBER OF SHARES PRICE/SHARE
($)
- ----------------------------------- --------------- ------------------ --------------------
Browne, D 02/15/2006 15,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Cheshire, L 02/15/2006 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Savant, T 02/15/2006 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Taylor, R 02/15/2006 20,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Miller, D 02/16/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Hill, J 03/03/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Renard, P 03/07/2006 20,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Cawthon, M 03/14/2006 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Dameron, T 03/14/2006 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Running of the Bulls 03/18/2006 250,000 0.50
- ----------------------------------- --------------- ------------------ --------------------
Arndt, G 03/23/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Callahan, C 03/23/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Fitzgerald, S 03/24/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Newberry, D 03/24/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Fodor, R 04/17/2006 230,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Fry, G 04/19/2006 130,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Baughman, B 05/11/2006 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Schrunk, M 07/21/2006 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Miller, D 08/01/2006 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Bradford, N 08/02/2006 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Chambers, J 08/02/2006 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Childers, C 08/02/2006 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Schrunk, M 08/06/2006 25,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Barnett, M 08/09/2006 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
McAdams, C 08/12/2006 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Sterk, D 08/12/2006 1,250 0.01
- ----------------------------------- --------------- ------------------ --------------------
Wood, M 08/12/2006 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Mayfield, C 08/13/2006 1,250 0.01
- ----------------------------------- --------------- ------------------ --------------------
Walsh, B 08/13/2006 1,250 0.01
- ----------------------------------- --------------- ------------------ --------------------
Walsh, T 08/13/2006 1,250 0.01
- ----------------------------------- --------------- ------------------ --------------------
Browne, D 08/14/2006 3,750 0.01
- ----------------------------------- --------------- ------------------ --------------------
Cheshire, L 08/14/2006 25,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Savant, T 08/14/2006 40,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
30
- ----------------------------------- --------------- ------------------ --------------------
NAME DATE NUMBER OF SHARES PRICE/SHARE
($)
- ----------------------------------- --------------- ------------------ --------------------
Taylor, R 08/14/2006 5,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Hill, J 08/30/2006 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Renard, P 09/03/2006 5,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Cawthon, M 09/10/2006 25,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Dameron, T 09/10/2006 25,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Arndt, G 09/19/2006 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Callahan, C 09/19/2006 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Fitzgerald, S 09/20/2006 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Newberry, D 09/20/2006 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Cawthon, M 10/02/2006 12,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Dameron, T 10/02/2006 12,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Fodor, R 10/17/2006 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Fry, G 10/19/2006 70,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Baughman, B 11/07/2006 25,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Brewbaker, L 11/29/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Beck, T 11/30/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Childers, C 11/30/2006 20,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Miller, D 11/30/2006 5,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Newberry, D 11/30/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Fitzgerald, S 12/04/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Hendrix, A 12/05/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
JDT Inv Grp 12/05/2006 25,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Hendrix, C 12/06/2006 5,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Hendrix, T 12/06/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Papa, R 12/08/2006 20,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Greer, S 12/11/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Bradford, N 12/13/2006 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Keenan, J 12/13/2006 5,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Webster, T 12/13/2006 20,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Dameron, T 12/20/2006 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Tindle, K 12/20/2006 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Savant, T 12/31/2006 12,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
J H Brech LLC 01/01/2007 300,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
31
- ----------------------------------- --------------- ------------------ --------------------
NAME DATE NUMBER OF SHARES PRICE/SHARE
($)
- ----------------------------------- --------------- ------------------ --------------------
Macko, J 01/02/2007 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Boyd, K 01/04/2007 212,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Bleicken, K 01/08/2007 15,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Parra, D 01/08/2007 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Armstrong, M 01/09/2007 25,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Bader, W 01/11/2007 75,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Callahan, C 01/11/2007 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Kozachenko, S 01/11/2007 30,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Vandeman, J 01/11/2007 20,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Vandeman, R 01/11/2007 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Fry, G 01/12/2007 (70,000) 0.01
- ----------------------------------- --------------- ------------------ --------------------
Running of the Bulls 01/12/2007 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Haas, R 01/16/2007 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Napolitano, T 01/16/2007 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Phifer, R 01/16/2007 200,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Burns, T 01/18/2007 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Grifka, A 01/18/2007 30,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Minyard, T 01/18/2007 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Bennett, D 01/26/2007 15,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Harrison, J 01/31/2007 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Margolis, M 02/02/2007 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Cawthon, M 02/05/2007 12,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Simpson, J 02/07/2007 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Colina, J 02/20/2007 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Degarmo, K 02/20/2007 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Huddleston, M 02/20/2007 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Tindle, K 02/20/2007 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Uttamchandani, R 02/23/2007 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Cheshire, L 03/02/2007 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Shuey, E 03/06/2007 110,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
G & E Grp 03/07/2007 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Greggains, N 03/22/2007 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Parra, E 03/23/2007 40,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
32
- ----------------------------------- --------------- ------------------ --------------------
NAME DATE NUMBER OF SHARES PRICE/SHARE
($)
- ----------------------------------- --------------- ------------------ --------------------
Altman, M 03/29/2007 10,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Daragan, D 03/29/2007 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Garnett, A 03/29/2007 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
JKJB 04/05/2007 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Szczech, K 04/09/2007 80,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Bus Fin Sys 04/23/2007 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Fry, G 04/23/2007 32,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Huitt Consulting LLC 04/23/2007 300,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Goldman, M 10/02/2007 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Cooper Bus Solns 10/10/2007 90,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Peppe, R 10/15/2007 250,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
D'Alessandro, D 11/06/2007 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Dameron, T 12/05/2007 20,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Andres, A 03/14/2008 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Armstrong, M 03/14/2008 50,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Barnett, M 03/14/2008 2,500 0.01
- ----------------------------------- --------------- ------------------ --------------------
Boyd, K 03/14/2008 200,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Green, R 03/14/2008 25,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Iler, D 03/14/2008 100,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Iler, D 03/14/2008 25,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Whiting, W 03/14/2008 25,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Fry, G 04/21/2008 150,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Papa, R 04/21/2008 20,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
Furfaro, M 05/02/2008 175,000 0.01
- ----------------------------------- --------------- ------------------ --------------------
TOTAL 6,400,750
- ----------------------------------- --------------- ------------------ --------------------
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
AUTHORIZED CAPITAL STOCK
COMMON STOCK
The Company's authorized capital stock consists of 100,000,000 shares of common
stock, no par value per share. As of May 27, 2008, 9,351,016 shares of
INTREorg's common stock were issued and outstanding.
33
The holders of INTREorg common stock have no preemptive rights. The rights,
preferences and privileges of holders of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
preferred stock which INTREorg may designate and issue in the future.
All Shares are equal to each other with respect to voting, liquidation, and
dividend rights. Special Shareholders' meetings may be called by the officers or
director, or upon the request of holders of at least one-tenth (1/10th) of the
outstanding Shares. Holders of Shares are entitled to one vote at any
Shareholders' meeting for each Share they own as of the record date fixed by the
board of directors. There is no quorum requirement for Shareholders' meetings.
Therefore, a vote of the majority of the Shares represented at a meeting will
govern even if this is substantially less than a majority of the Shares
outstanding. Holders of Shares are entitled to receive such dividends as may be
declared by the board of directors out of funds legally available therefore, and
upon liquidation are entitled to participate pro rata in a distribution of
assets available for such a distribution to Shareholders. There are no
conversion, pre-emptive or other subscription rights or privileges with respect
to any Shares. Reference is made to our Articles of Incorporation and our
By-Laws as well as to the applicable statutes of the State of Texas for a more
complete description of the rights and liabilities of holders of Shares. It
should be noted that the board of directors without notice to the Shareholders
may amend the By-Laws. Our Shares do not have cumulative voting rights, which
means that the holders of more than fifty percent (50%) of the Shares voting for
election of directors may elect all the directors if they choose to do so. In
such event, the holders of the remaining Shares aggregating less than fifty
percent (50%) of the Shares voting for election of directors may not be able to
elect any director.
PREFERRED STOCK
The Company's Articles of Incorporation authorize INTREorg to issue ten million
(10,000,000) Shares of Preferred Stock, no par value per share. As of May 27,
2008, INTREorg had no shares of Preferred Stock issued and outstanding. The
Board of Directors of the Company is authorized to issue the preferred stock
from time to time in classes and series and is further authorized to establish
such classes and series, to fix and determine the variations in the relative
rights and preferences as between series, to fix voting rights, if any, for each
class or series, and to allow for the conversion of preferred stock into common
stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for INTREorg's common stock is Computershare
Trust Company, of Golden, Colorado.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Company's Articles of Incorporation and By-Laws, the Company may
indemnify an officer or director who is made a party to any proceeding,
including a lawsuit, because of his position, if he acted in good faith and in a
manner he reasonably believed to be in the Company's best interest. No officer
or director may be may be indemnified, however, where the officer or director
acted committed intentional misconduct, fraud, or an intentional violation of
the law.
34
The Company may advance expenses incurred in defending a proceeding. To the
extent that the officer or director is successful on the merits in a proceeding
as to which he is to be indemnified, the Company must indemnify him against all
expenses incurred, including attorney's fees. With respect to a derivative
action, indemnity may be made only for expenses actually and reasonably incurred
in defending the proceeding, and if the officer or director is judged liable,
only by a court order. The indemnification is intended to be to the fullest
extent permitted by the laws of the State of Texas.
Regarding the indemnification for liabilities arising under the Securities Act
of 1933, which may be permitted to officers and directors under Texas law, the
Company is informed that, in the opinion of the Securities and Exchange
Commission, indemnification is against public policy, as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities is asserted by the Company's officer(s), director(s),
or controlling person(s) in connection with the securities being registered, we
will, unless in the opinion of the Company's legal counsel the matter has been
settled by controlling precedent, submit the question of whether such
indemnification is against public policy to a court of appropriate jurisdiction.
The Company will then be governed by the court's decision.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements of INTREorg Systems, Inc. for the years ended
December 31, 2007 and 2006 appear as pages 36 through 46. The unaudited interim
financial statements for the three months ended March 31, 2008 appear as pages
47 through 55.
35
INTREorg Systems, Inc.
(A Development Stage Company)
December 31, 2007 and 2006
Audited
(With Report of Independent Registered Public Accounting Firm)
36
Larry O'Donnell, CPA, P.C.
Telephone (303) 745-4545 2228 South Fraser Street
Fax (303) 369-9384 Unit I
Email larryodonnellcpa@msn.com Aurora, Colorado 80014
www.larryodonnellcpa.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
INTREorg Systems, Inc.
I have audited the accompanying balance sheets of INTREorg Systems, Inc., as of
December 31, 2007 and 2006, and the related statements of loss, changes in
stockholders' equity, and cash flows for the years then ended and the period
from inception, November 3, 2003 to December 31, 2007. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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 presentation. I believe that my audits provide a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of INTREorg Systems, Inc. as of
December 31, 2007 and 2006, and the results of its operations and cash flows for
the years then ended and the period from inception, November 3, 2003 to December
31, 2007 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 4 to the
financial statements, the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern. Managements
plans regarding these matters are described in the notes to the financial
statements. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/Larry O'Donnell, CPA, P.C.
- -----------------------------
Larry O'Donnell, CPA, P.C.
May 14, 2008
37
INTREorg Systems, Inc.
(A Development Stage Company)
Balance Sheets
December 31,
2007 2006
-------------------- --------------------
ASSETS:
Current Assets:
Cash $ - $ 3,706
Accounts Receivable 9,577 9,577
Advances Receivable 11,078 500
-------------------- --------------------
Total Current Assets
20,655 13,783
Furniture and fixtures - net 10,207 10,207
Deposits 6,900 6,900
Investment - Fusion Equity 1,000 1,000
TOTAL ASSETS $ 38,762 $ 31,890
==================== ====================
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Cash Deficit $ 458 $ -
Accounts payable 462,225 316,993
Accrued expenses and liabilities 493,640 506,453
Notes Payable 504,386 280,886
-------------------- --------------------
Total Current Liabilities
1,460,709 1,104,332
Stockholders' Equity
Common Stock, no par value; 10,000,000 shares authorized
8,567,416 and 5,120,416 shares issued and outstanding 294,780 260,310
at December 31, 2007 and December 31, 2006 respectively
Preferred Stock, no par value; 2,000,000 shares authorized
none and 169,100 shares issued and outstanding 247,100 247,100
at December 31, 2007 and December 31, 2006 respectively
Deficit accumulated during the development stage (1,963,827) (1,579,852)
-------------------- --------------------
Total Stockholders' equity (1,421,947) (1,072,442)
-------------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 38,762 $ 31,890
==================== ====================
The accompanying notes are an integral part of these financial statements
38
INTREorg Systems, Inc.
(A Development Stage Company)
Statements of Operations
Year Ended November 3, 2003
December 31, December 31, (Inception) to
2007 2006 December 31,
2007
---------------- ---------------- -------------------
Revenue $ - $ - $ -
Depreciation - - 6,175
General and administrative 326,019 416,450 1,979,750
---------------- ---------------- -------------------
Total Expenses 326,019 416,450 1,985,925
---------------- ---------------- -------------------
Net Operating Loss (326,019) (416,450) (1,985,925)
---------------- ---------------- -------------------
Other Revenue / (Expense)
Forgiveness of debt - 135,750 135,750
Interest Income 356 356
Interest Expense (58,312) (32,698) (114,008)
---------------- ---------------- -------------------
Net Loss $ (383,975) $ (313,398) $ (1,963,827)
================ ================ ===================
Net Income/Loss per share of common
stock $ (0.04) $ (0.09)
================ ================
Weighted average number of common
shares outstanding 8,009,612 4,470,112
================ ================
The accompanying notes are an integral part of these financial statements
39
INTREorg Systems, Inc.
(A Development Stage Company)
Stockholders' Equity
Deficit
Accum. During
Common Stock Preferred A Stock the Development
# of Shares Amount # of Shares Amount Stage Totals
------------- ----------- ------------ ----------- ------------------ -------------
Balance - November 3, 2003 - $ - $ - $ - $ -
Stock issued for cash 1,000,000 5,000 5,000
Net Loss for period - (3,325) (3,325)
------------- ----------- ------------ ----------- ------------------ -------------
Balance - December 31, 2003 1,000,000 5,000 - - (3,325) 1,675
------------- ----------- ------------ ----------- ------------------ -------------
Stock issued for cash 33,000 16,500 169,100 169,100 185,600
Stock issued for services 145,833 729 729
Stock issued for compensation 448,333 13,518 13,518
Net Loss for period (605,823) (605,823)
------------- ----------- ------------ ----------- ------------------ -------------
Balances - December 321, 2004 169,100
1,627,166 35,747 169,100 (609,148) (404,301)
Stock issued for cash 64,000 32,000 76,000 76,000 108,000
Stock issued for services 297,000 8,850 8,850
Stock issued for compensation 61,000 30,500 30,500
Stock issued for interest 990,000 9,900 2,000 2,000 11,900
Net Loss for period (657,305) (657,305)
------------- ----------- ------------ ----------- ------------------ -------------
Balances - December 31, 2005 3,039,166 116,997 247,100 247,100 (1,266,453) (902,356)
Stock issued for services 250,000 125,000 125,000
Stock issued for interest 1,831,250 18,313 18,313
Net Loss for period (313,399) (313,399)
------------- ----------- ------------ ----------- ------------------ -------------
Balances - December 31, 2006 5,120,416 260,310 247,100 247,100 (1,579,852) (1,072,442)
Stock issued for services 812,000 8,120 8,120
Stock issued for interest 2,635,000 26,350 26,350
Net Loss for period (383,975) (383,975)
------------- ----------- ------------ ----------- ------------------ -------------
Balances - December 31, 2007 8,567,416 $ 294,780 247,100 $ 247,100 $ (1,963,827) $ (1,421,947)
============= =========== ============ =========== ================== =============
The accompanying notes are an integral part of these financial statements
40
INTREorg Systems, Inc.
(A Development Stage Company)
Statements of Cash Flows
(Indirect Method)
November 3, 2003
Year Ended (Inception) to
December 31, December 31,
2007 2006 2007
--------------- --------------- --------------------
Cash Flows from Operating Activities
Net Profit (Loss) $ (383,975) $ (313,398) $ (1,963,826)
Depreciation - - 6,165
Adjustments to reconcile net loss to net cash used
by operating activities
Changes in operating assets and liabilities
Increase in Accounts Receivable and Advances (10,578) (500) (20,655)
Increase in Accounts Payable and accrued liabilities 132,419 34,585 955,864
Increase (Decrease) in Deposits - 100 (6,900)
--------------- --------------- --------------------
Net Cash Flows Used by Operating Activities (262,134) (279,213) (1,029,352)
--------------- --------------- --------------------
Cash Flows from Investing Activities
Acquisition of Fixed Assets - - (16,372)
Acquisition of Investments - (1,000) (1,000)
--------------- --------------- --------------------
Net Cash Flows Provided (Used) by Investing Activities - (1,000) (17,372)
--------------- --------------- --------------------
Cash Flows from Financing Activities
Increase in loans payable 223,500 132,000 504,386
Issuance of Preferred A Stock - - 247,100
Issuance of Common Stock 34,470 143,313 294,780
--------------- --------------- --------------------
Net Cash Flows Provided by Financing Activities 257,970 275,313 1,046,266
--------------- --------------- --------------------
Net Increase (Decrease) in Cash (4,164) (4,900) (458)
--------------- --------------- --------------------
Cash at Beginning of Period 3,706 (1,394) -
--------------- --------------- --------------------
Cash at End of Period $ (458) $ (6,294) $ (458)
=============== =============== ====================
Supplemental Disclosure of Cash Flow Information
Cash paid for interest $ - $ - $ -
=============== =============== ====================
Cash paid for taxes $ - $ - $ -
=============== =============== ====================
The accompanying notes are an integral part of these financial statements
41
INTREorg Systems, Inc.
Notes to Financial Statements
December 31, 2007
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization:
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 other companies. Also to pursue any other lawful
business opportunity as decided upon by the board of directors. The Company's
fiscal year end is December 31.
Basis of Presentation - Development Stage Company
The Company has not earned significant revenues from limited principal
operations. Accordingly, the Company's activities have been accounted for as
those of a "Development Stage Enterprise" as set forth in Financial Accounting
Standards Board Statement No. 7 ("SFAS 7"). Among the disclosures required by
SFAS & are that the Company's financial statements be identified as those of a
development stage company, and that the statements of operations, stockholders'
equity (deficit) and cash flows disclose activity since the date of the
Company's inception.
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States.
Cash and Cash Equivalents
The Company considers all highly-liquid debt instruments, with an original
maturity of three months, to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
42
INTREorg Systems, Inc.
Notes to Financial Statements
December 31, 2007
Net Loss Per Share
Net loss per share is based on the weighted average number of common shares
outstanding during the period. This number has not been adjusted for outstanding
options since the average would be antidilutive.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided for using the straight-line method over the useful life
of the assets.
Other Comprehensive Income
INTREorg Systems, Inc. has no material components of other comprehensive income
(loss), and accordingly, net loss is equal to comprehensive loss in all periods.
Note 2 - FEDERAL INCOME TAX
The Company has made no provision for income taxes because there have been no
operations to date causing income for financial statement or tax purposes.
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards Number 109 ("SFAS 109"), "Accounting for Income
Taxes", which requires a change from the deferred method to the asset and
liability method of accounting for income taxes. Under the asset and liability
method, deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax basis of existing assets and liabilities.
2007
Deferred tax assets:
Net operating loss carryforwards $ 1,960,515
Valuation allowance (1,960,515)
------------
Net deferred tax assets $ 0
At December 31, 2007, the Company had net operating loss carry forwards of
approximately $1,960,515 for federal income tax purposes. These carryforwards if
not utilized to offset taxable income will begin to expire in 2018.
43
INTREorg Systems, Inc.
Notes to Financial Statements
December 31, 2007
Note 3 - CAPITAL STOCK TRANSACTIONS
The authorized capital stock of the Company is 10,000,000 shares of common stock
at no par value. The Company issued no shares of stock for cash. The Company
issued 500,000 shares for services rendered valued at $50,000. The Company also
issued 2,947,000 shares for interest to providers of bridge loans valued at
$26,900.
The Company has authorized 2,000,000 shares of preferred stock at no par value.
During 2006 the Company issued no shares of preferred stock. These preferred
shares are convertible into one share of common stock for each share of
preferred stock on a one for one basis at the discretion of the Company or the
stockholder. The Company does not pay dividends and there are no dividend
preferences included with these shares.
Note 4 - 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 $1,439,312. The Company generated no
revenue for the period indicated against expenses of $383,975 resulting in a net
loss of $383,975.
The Company is in the development stage and has earned minimal revenues from
operations. The Company's ability to continue as a going concern is dependent
upon its ability to develop additional sources of capital or locate a merger
candidate 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. Management believes that
actions presently being taken to revise the Company's operating and financial
requirements 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. Management is seeking
new capital to carry forward the purposes of the Company.
Note 5 - INTERIM FINANCING
During the past year the Company has raised approximately $223,500 in bridge
loans in addition to the $280,886 raised previously to be able to continue
operations. These loans carry interest rates from 6% to 10% per annum and have
due dates between 90 and 180 days. The providers of these loans were also given
shares of common stock in the amount of 1 share of common stock for each dollar
of loan. At renewal time the providers were given an equal amount of stock while
the interest was accrued.
44
INTREorg Systems, Inc.
Notes to Financial Statements
December 31, 2007
Note 6 - BUSINESS SEGMENT INFORMATION
INTREorg Systems, Inc. is structured to operate primarily in a single operating
segment, namely the providing of internet consulting and "back office" services
to other companies. This consists in offering internet consulting, accounting,
payroll, accounts receivable and accounts payable management. There already
exist a number of larger better established companies in this segment and the
Company will most likely experience some difficulty in attracting clients.
Note 7 - FINANCIAL ACCOUNTING DEVELOPMENTS
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty
in Income Taxes - An Interpretation of FASB Statement No. 109, (FIN 48). FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return that results in a
tax benefit. Additionally, FIN 48 provides guidance on de-recognition, income
statement classification of interest and penalties, accounting in interim
periods, disclosure, and transition. This interpretation is effective for the
Company for its fiscal year ending June 30, 2008. The Company has not yet
evaluated the effect that the application of FIN 48 may have, if any, on its
future results of operations and financial condition.
In September 2006 the FASB issued SFAS No. 157, "Fair Value Measurements". SFAS
No. 157 defines fair value, establishes a framework for measuring fair value in
accordance with generally accepted accounting principles and expands fair value
disclosure requirements. SFAS No. 157 applies whenever another accounting
standard requires (or permits) assets or liabilities to be measured at fair
value, but does not expand the use of fair value to new circumstances. SFAS No.
157 is effective beginning in 2008. The Company has not yet determined the
effect SFAS No. 157 will have on its financial statements.
In September 2006 the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Post Retirement Plans". SFAS No. 158 requires
the Company to recognize the funded status of its post retirement plans on the
balance sheet and recognize as a component of accumulated other comprehensive
income the gains and losses, prior service costs or credits that occur during
the financial year but are not recognized as components of the Company's pension
costs This Statement is effective as of the beginning of its first fiscal year
that begins after December 15, 2008. The Company does not expect application of
SFAS No. 156 to have a material effect on its financial statements.
45
INTREorg Systems, Inc.
Notes to Financial Statements
December 31, 2007
Note 7 - FINANCIAL ACCOUNTING DEVELOPMENTS - CONTINUED
In February 2007 the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115". SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. The amendment to
SFAS No. 115 applies to all entities with investments in available-for-sale or
trading securities. The statement is effective for fiscal years beginning after
November 15, 2007. The Company has not yet determined the effect SFAS No. 159
will have on its financial statements.
46
INTREORG SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
Unaudited Financial Statements for the
Three Months Ended March 31, 2008
(Unaudited)
47
INTREorg Systems, Inc.
(A Development Stage Company)
Balance Sheets
March 31, December 31,
2008 2007
(Unaudited) (Audited)
------------------- -------------------
ASSETS:
Current Assets:
Cash $ - $ -
Accounts Receivable 9,577 9,577
Advances Receivable 11,738 11,078
------------------- -------------------
Total Current Assets
21,315 20,655
Furniture and fixtures - net 10,207 10,207
Deposits 6,900 6,900
Investment - Fusion Equity 1,000 1,000
TOTAL ASSETS $ 39,422 $ 38,762
=================== ===================
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Cash Deficit $ 3,221 $ 458
Accounts payable 521,339 462,225
Accrued expenses and liabilities 502,651 493,640
Notes Payable 499,386 504,386
------------------- -------------------
Total Current Liabilities
1,526,597 1,460,709
Stockholders' Equity
Common Stock, no par value; 10,000,000 shares authorized
5,120,416 and 8,310,416 shares issued and outstanding 300,055 294,780
at December 31, 2007 and December 31, 2006 respectively
Preferred Stock, no par value; 2,000,000 shares authorized
none and 169,100 shares issued and outstanding 247,100 247,100
at December 31, 2007 and December 31, 2006 respectively
Deficit accumulated during the development stage (2,034,330) (1,963,827)
------------------- -------------------
Total Stockholders' equity (1,487,175) (1,421,947)
------------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 39,422 $ 38,762
=================== ===================
The accompanying notes are an integral part of these financial statements
48
INTREorg Systems, Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)
For the Three Months Ended November 3, 2003
March 31, (Inception) to
2008 2007 March 31,
2008
---------------- ---------------- -------------------
Revenue $ - $ - $ -
Depreciation - - 6,175
General and administrative 60,967 87,296 2,040,717
---------------- ---------------- -------------------
Total Expenses 60,967 87,296 2,046,892
---------------- ---------------- -------------------
Net Operating Loss (60,967) (87,296) (2,046,892)
---------------- ---------------- -------------------
Other Revenue / (Expense)
Forgiveness of debt - - 135,750
Interest Income - 285 356
Interest Expense (9,536) (6,458) (123,544)
---------------- ---------------- -------------------
Net Loss $ (70,503) $ (93,469) $ (2,034,330)
================ ================ ===================
Net Income/Loss per share of common stock * $ (0.02)
================ ================
Weighted average number of common
shares outstanding 8,003,228 4,470,112
================ ================
The accompanying notes are an integral part of these financial statements
49
INTREorg Systems, Inc.
(A Development Stage Company)
Stockholders' Equity
March 31, 2008
(Unaudited)
Deficit
Accum. During
Common Stock Preferred A Stock the Development
# of Shares Amount # of Shares Amount Stage Totals
------------- ----------- ------------ ----------- ------------------ --------------
Balance - November 3, 2003 - $ - $ - $ - $ -
Stock issued for cash 1,000,000 5,000 5,000
Net Loss for period - (3,325) (3,325)
------------- ----------- ------------ ----------- ------------------ --------------
Balance - December 31, 2003 1,000,000 5,000 - - (3,325) 1,675
------------- ----------- ------------ ----------- ------------------ --------------
Stock issued for cash 33,000 16,500 169,100 169,100 185,600
Stock issued for services 145,833 729 729
Stock issued for compensation 448,333 13,518 13,518
Net Loss for period (605,823) (605,823)
------------- ----------- ------------ ----------- ------------------ --------------
Balances - December 321, 2004 1,627,166 35,747 169,100 169,100 (609,148) (404,301)
Stock issued for cash 64,000 32,000 76,000 76,000 108,000
Stock issued for services 297,000 8,850 8,850
Stock issued for compensation 61,000 30,500 30,500
Stock issued for interest 990,000 9,900 2,000 2,000 11,900
Net Loss for period (657,305) (657,305)
------------- ----------- ------------ ----------- ------------------ --------------
Balances - December 31, 2005 3,039,166 116,997 247,100 247,100 (1,266,453) (902,356)
Stock issued for services 250,000 125,000 125,000
Stock issued for interest 1,831,250 18,313 18,313
Net Loss for period (313,399) (313,399)
------------- ----------- ------------ ----------- ------------------ --------------
Balances - December 31, 2006 5,120,416 260,310 247,100 247,100 (1,579,852) (1,072,442)
Stock issued for services 500,000 5,000 5,000
Stock issued for interest 2,690,000 26,900 26,900
Net Loss for period (380,663) (380,663)
------------- ----------- ------------ ----------- ------------------ --------------
Balances - December 31, 2007 8,310,416 $ 292,210 247,100 $247,100 $ (1,960,515) $ (1,421,205)
Stock issued for services 587,000 5,870 5,870
Stock issued for interest 207,500 2,075 2,075
Adjust in dollar amount for common (100) (100)
Rounding difference (1) (1)
Net Loss for period (73,814) (73,814)
------------- ----------- ------------ ----------- ------------------ --------------
Balances - March 31, 2008 9,104,916 $ 300,055 247,100 $ 247,100 $ (2,034,330) $ (1,487,175)
============= =========== ============ =========== ================== ==============
50
The accompanying notes are an integral part of these financial statements
INTREorg Systems, Inc.
(A Development Stage Company)
Statements of Cash Flows
(Indirect Method)
(Unaudited)
November 3, 2003
Three Months Ended (Inception) to
March 31, March 31,
2008 2007 2008
---------------- ---------------- -------------------
Cash Flows from Operating Activities
Net Profit (Loss) $ (70,503) $ (93,469) $ (2,034,329)
Depreciation - - 6,165
Adjustments to reconcile net loss to net cash used
by operating activities
Changes in operating assets and liabilities
Increase in Accounts Receivable and Advances (660) 500 (21,315)
Increase in notes receivable and accrued interest (18,284)
Increase in Accounts Payable and accrued liabilities 68,125 20,800 1,023,989
Increase (Decrease) in Deposits - - (6,900)
---------------- ---------------- -------------------
Net Cash Flows Used by Operating Activities (3,038) (90,453) (1,032,390)
---------------- ---------------- -------------------
Cash Flows from Investing Activities
Acquisition of Fixed Assets - - (16,372)
Acquisition of Investments - - (1,000)
---------------- ---------------- -------------------
Net Cash Flows Provided (Used) by Investing Activities - - (17,372)
---------------- ---------------- -------------------
Cash Flows from Financing Activities
Increase (decrease) in loans payable (5,000) 174,500 499,386
Issuance of Preferred A Stock - - 247,100
Issuance of Common Stock 5,275 - 300,055
---------------- ---------------- -------------------
Net Cash Flows Provided by Financing Activities 275 174,500 1,046,541
---------------- ---------------- -------------------
Net Increase (Decrease) in Cash (2,763) 84,047 (3,221)
---------------- ---------------- -------------------
Cash at Beginning of Period (458) (6,294) -
---------------- ---------------- -------------------
Cash at End of Period $ (3,221) $ 77,753 $ (3,221)
================ ================ ===================
Supplemental Disclosure of Cash Flow Information
Cash paid for interest $ - $ - $ -
================ ================ ===================
Cash paid for taxes $ - $ - $ -
================ ================ ===================
The accompanying notes are an integral part of these financial statements
51
INTREorg Systems, Inc.
Notes to Financial Statements
March 31, 2008
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization:
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 other companies. Also to pursue any other lawful
business opportunity as decided upon by the board of directors. The Company's
fiscal year end is December 31.
Basis of Presentation - Development Stage Company
The Company has not earned significant revenues from limited principal
operations. Accordingly, the Company's activities have been accounted for as
those of a "Development Stage Enterprise" as set forth in Financial Accounting
Standards Board Statement No. 7 ("SFAS 7"). Among the disclosures required by
SFAS & are that the Company's financial statements be identified as those of a
development stage company, and that the statements of operations, stockholders'
equity (deficit) and cash flows disclose activity since the date of the
Company's inception.
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States.
Cash and Cash Equivalents
The Company considers all highly-liquid debt instruments, with an original
maturity of three months, to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
52
INTREorg Systems, Inc.
Notes to Financial Statements
March 31, 2008
(Unaudited)
Net Loss Per Share
Net loss per share is based on the weighted average number of common shares
outstanding during the period. This number has not been adjusted for outstanding
options since the average would be antidilutive.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided for using the straight-line method over the useful life
of the assets.
Other Comprehensive Income
INTREorg Systems, Inc. has no material components of other comprehensive income
(loss), and accordingly, net loss is equal to comprehensive loss in all periods.
Note 2 - FEDERAL INCOME TAX
The Company has made no provision for income taxes because there have been no
operations to date causing income for financial statement or tax purposes.
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards Number 109 ("SFAS 109"), "Accounting for Income
Taxes", which requires a change from the deferred method to the asset and
liability method of accounting for income taxes. Under the asset and liability
method, deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax basis of existing assets and liabilities.
2008
Deferred tax assets:
Net operating loss carryforwards $2,034,330
Valuation allowance (2,034,330)
------------
Net deferred tax assets $ 0
At March 31, 2008, the Company had net operating loss carry forwards of
approximately $2,034,330 for federal income tax purposes. These carryforwards if
not utilized to offset taxable income will begin to expire in 2018
53
INTREorg Systems, Inc.
Notes to Financial Statements
March 31, 2008
(Unaudited)
Note 3 - CAPITAL STOCK TRANSACTIONS
During the quarter ended the Company, pursuant to a vote of the stockholders
approved an increase in the authorized shares from 10,000,000 to 100,000,000. At
the same time the conversion of the preferred stock from preferred to common was
approved.
The authorized capital stock of the Company is 100,000,000 shares of common
stock at no par value. The Company issued no shares of stock for cash. The
Company issued 587,000 shares for services rendered valued at $58,700. The
Company also issued 207,500 shares for interest to providers of bridge loans
valued at $2,075.
The Company has authorized 2,000,000 shares of preferred stock at no par value.
During 2006 the Company issued no shares of preferred stock. These preferred
shares are convertible into one share of common stock for each share of
preferred stock on a one for one basis at the discretion of the Company or the
stockholder. The Company does not pay dividends and there are no dividend
preferences included with these shares.
Note 4 - 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 $1,505,282. The Company generated no
revenue for the period indicated against expenses of $70,500 resulting in a net
loss of $70,500.
The Company is in the development stage and has earned minimal revenues from
operations. The Company's ability to continue as a going concern is dependent
upon its ability to develop additional sources of capital or locate a merger
candidate 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. Management believes that
actions presently being taken to revise the Company's operating and financial
requirements 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. Management is seeking
new capital to carry forward the purposes of the Company.
54
INTREorg Systems, Inc.
Notes to Financial Statements
March 31, 2008
(Unaudited)
Note 5 - INTERIM FINANCING
During the past quarter the Company has paid approximately $5,000 in bridge
loans in addition to the $504,386 raised previously to be able to continue
operations. These loans carry interest rates from 6% to 10% per annum and have
due dates between 90 and 180 days. The providers of these loans were also given
"equity kickers" of stock in the amount of 1 share of common stock for each one
cent of loan amount. At renewal time the providers were given an equal amount of
stock while the interest was accrued.
Note 6 - BUSINESS SEGMENT INFORMATION
INTREorg Systems, Inc. is structured to operate primarily in a single operating
segment, namely the providing of internet consulting and "back office" services
to other companies. This consists in offering internet consulting, accounting,
payroll, accounts receivable and accounts payable management. There already
exists a number of larger better established companies in this segment and the
Company will most likely experience some difficulty in attracting clients.
55
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited financial statements for years ended December 31, 2007 and 2006
Unaudited financial statements for the three months ended March 31, 2008
(b) EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 Articles of Incorporation
3.2 Articles of Amendment
3.3 Bylaws
21.1 List of Subsidiaries of INTREorg Systems, Inc.
23.1 Consent of Independent Registered Public Accounting Firm
56
SIGNATURES:
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 29, 2008
INTREorg Systems, Inc.
/s/Denis L. Iler
------------------------------------------------
Denis L. Iler, President, CEO and Director
/s/Austin Andres
------------------------------------------------
Austin Andres, COO and Director
/s/Jeff Huitt
------------------------------------------------
Jeff Huitt, CFO and Director
/s/Redgie Green
------------------------------------------------
Redgie Green, Director
/s/Wesley F. Whiting
------------------------------------------------
Wesley F. Whiting, Director
/s/Russell K. Boyd
------------------------------------------------
Russell K. Boyd, Director, Chairman of the Board
57