LEGACY CARE PARTNERS INC. - Annual Report: 2016 (Form 10-K)

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:  $11,390,974 as of June 30, 2016.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:  28,427,288 shares as of March 31, 2017.

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We will need to seek additional funding for our operations and ongoing general and administrative expenses. Our current plan is to identify and evaluate industries and business opportunities in order to identify a suitable acquisition target for the Company. We cannot give any assurance that we will be successful in this effort or that if a suitable acquisition target is obtained, it will result in profitable operations nor can we give any assurances that we will obtain adequate funding to stay in business until a suitable acquisition target is identified.

 

 

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KLJ & Associates, LLP

Edina, MN

April 17, 2017

 

 

    

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

 

 

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

 

 

 

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

 

 

 

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

 

    

Note 1.  Nature of Business and Significant Accounting Policies

Nature of Business

Trailblazer Resources, Inc., (the “Company”), is a public shell company that is seeking a business opportunity. We currently have no on-going business operations.

The Company formerly engaged in the manufacture, sale, installation and service of fiberglass tank and piping products through ECC Corrosion, Inc. (“ECC-C”), a former wholly owned subsidiary of the Company. On September 2, 2011, the Board of Directors of the Company, acting on the recommendation of its disinterested directors, approved the sale of all of the stock of ECC-C to Jamie and Jennifer Mancl and their affiliated entities who were the majority shareholders of the Company (the “Mancls”) in exchange for substantially all of the Mancls’ shares of the Company’s common stock pursuant to the terms of a Stock Purchase Agreement dated August 12, 2011 (the “ECC-C Sale”). On October 21, 2011, the Company completed the ECC-C Sale.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Accordingly, actual results could differ from those estimates.

Concentrations of Risk

The Company maintains its cash in high-quality financial institutions.  The balances, at times, may exceed the federally insured limits.

Cash and Cash Equivalents

For purposes of balance sheet presentation, the Company considers all unrestricted demand deposits, money market funds, savings funds and investments with an original maturity of three months or less to be cash and cash equivalents.

Income Taxes

Income taxes are provided for using the asset and liability method of accounting. A deferred tax asset or liability is recorded for all differences between the reported amounts of assets and liabilities and their respective tax basis, and for tax credit carryforwards.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.

The Company accounts for income taxes pursuant to Financial Accounting Standards Board (“FASB”) guidance.  This guidance prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.  For those benefits to be recognized, a tax position must be more-likely-than not to be sustained upon examination by taxing authorities. The Company believes its income tax filing positions and deductions will be sustained upon examination and, accordingly, no reserves, or related accruals for interest and penalties has been recorded at December 31, 2016 and 2015.  In accordance with the guidance, the Company has adopted a policy under which, if required to be recognized in the future, interest related to the underpayment of income taxes will be classified as a component of interest expense and any related penalties will be classified in operating expenses in the statements of operations.  The Company’s remaining open tax years subject to examination include the years ended December 31, 2010 through 2016.

 

TRAILBLAZER RESOURCES, INC.

NOTES TO FINANCIAL STATEMENTS

Advertising Expense

The Company expenses advertising costs as incurred.  The Company had no advertising expense during the years ended December 31, 2016 and 2015, respectively.

Fair Value of Financial Instruments

The Company’s financial instruments included on the balance sheet include cash, accounts payable, and debt. Fair values of accounts payable and cash were assumed to approximate cost or carrying values.

At December 31, 2016 and 2015, it is deemed impracticable to estimate the fair value of the Company’s debt, as (a) quoted market prices are not available, and (b) the debt involves a related party. A valuation model necessary to estimate the fair value has not been developed, and the cost of obtaining an independent valuation is deemed excessive in relation to the value of the debt held by the Company.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss) and items defined as other comprehensive income (loss).  Items defined as other comprehensive income (loss) include items such as foreign currency translation adjustments and unrealized gains and losses on certain marketable securities.  For the years ended December 31, 2016 and 2015, there were no adjustments to net loss to arrive at comprehensive loss.

Reclassifications

Certain items previously reported were reclassified for consistency with the current presentation.

Recent Accounting Pronouncements

The Company has no operations during the periods presented. Therefore, no new accounting standards issued or effective during the year ended December 31, 2016 had or are expected to have a material impact on the Company’s results of operations, financial condition, or cash flows.

Note 2.   Going Concern Uncertainty

 

The accompanying financial statements have been prepared in conformity with GAAP, assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At December 31, 2016, the Company had a working capital deficiency of $1,570,364 and an accumulated deficit of $25,071,691, and reported a net loss for the year then ended of $96,438.

The Company has limited financial resources, has been unprofitable since its inception and currently has no source of revenue generating activities.   These factors raise substantial doubt about its ability to continue as a going concern. Management plans to rely on advances from certain shareholders to fund its ongoing obligations; however, there is no guarantee that the Company will be able to obtain an adequate amount of funding. If the Company is unable to obtain the necessary funding, the Company may need to liquidate. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Note 3.  Convertible Notes Payable

In August 2008, the Company began a private placement offering of Units, each Unit consisting of (i) a 3-year, 6% convertible debenture with a conversion price of $2.50 (the “Conversion Price”) per share (subject to adjustment for stock splits and stock dividends) (the “Debentures”), and (ii) a number of warrants equal to the number of shares issuable upon conversion of the principal amount of the Convertible Debenture (the “Warrants”).  

 

TRAILBLAZER RESOURCES, INC.

NOTES TO FINANCIAL STATEMENTS

    

The private placement was closed on December 14, 2008.  Debentures in the aggregate principal amount of $6,370,000 were sold which included the issuance of 2,548,000 Warrants (expired).  The Debentures are considered to be conventional convertible debt.

All outstanding Debentures, totaling $400,000 and $550,000 at both December 31, 2016 and 2015, respectively, are past their maturity dates and are currently due on demand. The effective annual interest rate for both of the years ended December 31, 2016 and 2015 was 6%.

In December 2016, certain debenture holders converted $150,000 in outstanding principal and $24,453 in accrued interest payable to 69,782 shares of common stock. The shares were issued in January 2017 and consequently recorded as common stock payable as of December 31, 2016. Accrued interest payable as of December 31, 2016 and 2015 amounted to $133,217 and $124,939, respectively.

Note 4.  Note Payable

On April 15, 2015, the Company established a promissory note in the amount of $250,000 with Global CashSpot Corp (GCS). Under the terms of the promissory note, GCS has agreed to advance the Company funds up to $250,000 to fund accounting, legal and other operating costs. The unsecured promissory note is non-interest bearing, and repayment is due within 60 days following notice of demand by GCS. In the event the Company enters into a business combination with GCS, the promissory note shall be deemed paid in full. In September 2015, the Company and GCS agreed to amend the promissory note, increasing its amount to $350,000. The borrowing amount was further increased to $515,000 and $523,500 in February and August 2016, respectively. During the years ended December 31, 2016 and 2015, GCS advanced $46,000 and $477,500 under the promissory note, respectively.

Note 5.  Advances From Shareholders

On February 21, 2013, the Company established a revolving convertible line of credit arrangement in the amount of $250,000 with DEP as described in Note 7, Revolving Convertible Note, Shareholder.

During 2015, the Company repaid $50,000 of shareholder advances, funded entirely by the proceeds of the note payable from GCS, discussed in Note 4. Note Payable.

During 2016 and 2015, $4,376 and $4,375, of interest expense was incurred on advances from shareholders, all of which was outstanding and included in accrued expenses at December 31, 2016.  All advances are unsecured, non-interest bearing, and due on demand.

In July 2013, the Company entered into a revised consulting agreement with the Company's contract controller, JIMMAR Consulting, Inc. ("JIMMAR"), providing for consulting fees.  The Company’s debt to JIMMAR, amounted to $26,668 and $15,263 at December 31, 2016 and 2015, respectively. The debt agreement required payment of the entire outstanding balance on or before December 31, 2013, with interest accruing at a rate of 15% per annum. Interest was to be paid in cash, or could, at the Company's option, be paid in common shares of the Company's stock, based on a conversion price of $0.37 per share. During the years ended December 31, 2016 and 2015, the Company made payments aggregating $25,213 and $106,500, respectively. Accrued interest on the note payable to shareholder was $36,026 and $29,183 at December 31, 2016 and 2015, respectively, and is included in accrued expenses.

 

TRAILBLAZER RESOURCES, INC.

NOTES TO FINANCIAL STATEMENTS

Note 7.  Revolving Convertible Note, Shareholder

On February 21, 2013, the Company established an unsecured revolving convertible note in the amount of $250,000 with DEP.  Under the terms of the note, DEP agreed to make loans to the Company during the three-year term of the revolving credit commitment period.  Interest accrued on the unpaid principal balance at a rate of eight percent per annum and required quarterly payments beginning May 31, 2013; however, none of the interest has been paid as of December 31, 2016. DEP waived its right to call payment on the loan if all accrued interest was paid prior to February 21, 2016.

During 2015, the entire $250,000 principal balance of the revolving note was repaid, funded entirely by the proceeds of the note payable from GCS, discussed in Note 4. Note Payable. Accrued expenses include $49,260 of interest due to shareholders relating to this revolving convertible note as of December 31, 2016 and 2015, respectively. Interest expense on the revolving convertible note, shareholder was $0 and $14,268 for the years ended December 31, 2016 and 2015, respectively, and is included in accrued expenses.

Note 8.  Stockholders’ Equity

 

Stock Issuances and Warrants

 

There were no common stock or warrant issuances during the years ended December 31, 2016 and 2015.

Converted Debt ~ Common Stock Payable

 

There were no shares issued for conversions of debt to equity during the years ended December 31, 2016 and 2015.

However, in December 2016, certain convertible debenture holders converted $150,000 in outstanding principal and $24,453 in accrued interest payable to 69,782 shares of common stock. The shares were issued in January 2017 and consequently recorded as common stock payable of $136,194 as of December 31, 2016. The Company recognized $38,259 of gain on extinguishment of debt during the years ended December 31, 2016.

Note 9.  Income Taxes 

The income tax provision (benefit) consisted of the following for the years ended December 31, 2016 and 2015:

 

At December 31, 2016 and 2015, the Company reviewed all available evidence pertaining to the realization of the Company’s recorded deferred tax assets. The negative evidence available to the Company at December 31, 2016 and 2015 included the Company’s continued significant operating losses recorded through December 31, 2016 and 2015 and the divestiture of the Company’s only operating business on October 31, 2011.  Based on the weighting of the evidence, the Company concluded that a full valuation allowance was needed as of December 31, 2016 and 2015.

TRAILBLAZER RESOURCES, INC.

NOTES TO FINANCIAL STATEMENTS

As of December 31, 2016, the Company had federal net operating loss carryforwards of approximately $5,742,000 expiring in various years from 2028 through 2035. Due to the significant ownership change that occurred with the divestiture of ECC-C on October 21, 2011, these federal operating loss carryforwards will likely be severely limited after a U.S. Internal Revenue Code Section 382 study is performed if the Company becomes profitable in the future.

The reconciliation of the tax provision (benefit) compared at the statutory rate to the effective tax rate is as follows for the years ended December 31:

 

Note 10.  Related Party Transactions

 

During the year ended December 31, 2015, the Company reimbursed its Chief Financial Officer for $16,300 of miscellaneous expenses incurred on behalf of the Company.

During 2015, the entire $250,000 principal balance of the revolving note was repaid, funded entirely by the proceeds of the note payable from GCS, discussed in Note 4. Note Payable. Accrued expenses include $49,260 of interest due to shareholders relating to this revolving convertible note as of December 31, 2016 and 2015, respectively.

Note 11.  Commitments and Contingencies

Legal Proceedings

The Company may be subject to legal proceedings and claims arising in the ordinary course of business.  As of the date hereof, we are not currently involved in any pending or threatened legal proceedings.

TRAILBLAZER RESOURCES, INC.

NOTES TO FINANCIAL STATEMENTS

Note 12.  Loss Per Share

The Company computes earnings (loss) per share using two different methods, basic and diluted, and presents per share data for all periods in which statements of operations are presented. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common stock and common stock equivalents outstanding, so long as such equivalents are not anti-dilutive.

The following tables provide a reconciliation of the numerators and denominators used in calculating basic and diluted earnings (loss) per share for the years ended December 31, 2016 and 2015:

The following common stock equivalents have been excluded from the diluted per share calculations because they are anti-dilutive:

(1).          At December 31, 2016 and 2015, there were outstanding convertible debentures equivalent to 160,000 and 220,000 common shares, respectively.

 

(2).          At December 31, 2016 and 2015, there were no outstanding warrant equivalents.

 

(3).          At December 31, 2016 and 2015, there were no outstanding option equivalents.

 

(4).          At December 31, 2016 and 2015, there were no outstanding revolving convertible note equivalents.

 

(5).          At December 31, 2016, there were 69,782 common shares payable to convertible debtholders.

 

Note 13.  Subsequent Events

On December 8, 2016, the Company entered into a mutually binding letter of intent to acquire Global CashSpot Corp (“GCS”). Under the letter of intent, the Company will issue 37,809,039 newly issued shares of the Company in exchange for all outstanding shares of GCS. Both parties intended that the transaction would close within 60 days, unless extended by mutual agreement of both parties. On February 8, 2017, the parties agreed to extend the date by which closing would occur to March 31, 2017. As a condition precedent to closing, the Company will obtain all necessary shareholder authorizations to change its name to Global CashSpot Corp, and bring its SEC reporting obligations current. GCS is a financial technology company deploying a proprietary cross-border payment network that enables un-banked or self- banked consumers around the world to transfer money, via computer or mobile device from anywhere in the world using a branded prepaid debit card.

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2016 to the date of these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described above.

 

 

Item 9.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures and Changes in Internal Controls

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Interim Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance the objectives of the control system are met.

As of December 31, 2016, our management carried out an evaluation of the effectiveness of our disclosure controls and procedures as such term is defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act. Based on this evaluation, the Interim Chief Executive Officer and Interim Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2016, because of the identification of the material weakness in internal control over financial reporting described below. Notwithstanding the material weakness that existed as of December 31, 2016, our Interim Chief Executive Officer and Interim Chief Financial Officer have concluded that the financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, the financial position, results of operations and cash flows of the Company and its subsidiaries in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a company’s principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

 

·

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;

·

Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

·

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 

 

Under the supervision and with the participation of our management, including our Interim Chief Executive Officer and Interim Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based on criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992, as of December 31, 2016.

 

 

As a result of our material weakness described below, management has concluded that, as of December 31, 2016, our internal control over financial reporting was not effective based on the criteria in “Internal Control-Integrated Framework” issued by COSO.

Material Weakness in Internal Control over Financial Reporting

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility, that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In connection with its assessment, management identified the following material weaknesses at December 31, 2016: 

·

With the Company operating as a shell company, there is a lack of segregation of duties within the accounting and financial reporting process.

·

Since we use external consultants to prepare our financial statements and provide sufficient documentation of such preparation and review procedures, our officers must rely on such documentation.

 

Due to our limited resources as a public shell company, we expect these weaknesses in internal control to continue while we search for an acquisition target.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

During the period covered by this annual report, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.

Other Information.

None.

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

Our directors and officers, and their ages as of the date of this report, are as follows:

The term of office of each officer ends at the next annual meeting of our board of directors, expected to take place immediately after the next annual meeting of stockholders, or when such officer’s successor is elected and qualified.  The Board of Directors expects that it will elect the current officers (including those also currently serving as directors) to return to their positions as officers of our Company until the next annual meeting of stockholders.

Mark Huelskamp has been a director since October 2011 and the interim chief executive officer since September 2016.  From February 2001 to June 2015, he was the President of the Spokane Division of Core-Mark International, Inc., which is wholesale distributor of packaged consumer products to the convenience retail industry in North America.

 

 

Bob A. Varma was elected to serve as Interim Chief Financial Officer, Secretary and a director in September 2016.  He has provided accounting and tax consulting services through his own firm since 1992 in Longwood, Florida.  In addition, since June 2006 he has served as the chief financial officer of AW Solutions Inc. and AW Solutions Puerto Rico LLC, both telecommunications infrastructure companies and wholly-owned subsidiaries of Intercloud Systems, Inc., a publicly-held company.  Mr. Varma has been a certified public accountant in Florida since 1994 and has been qualified as a chartered accountant in London since 1974.

We are not aware of any material proceedings to which any of the non-director executive officers, or any associate of any such officer, is a party adverse to us or has a material interest adverse to us or to any of our subsidiaries.  There are no family relationships between any of our non-director executive officers.  During the last five years, none of the non-director officers has (i) had any bankruptcy petition filed by or against any business of which such person was an officer; (ii) had any conviction in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (iii) been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or (iv) been found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.

No directorships are held by any director in any company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or any company registered as an investment company, under the Investment Company Act of 1940.

Nominees to the Board of Directors

Since our last proxy statement, we have not made any material changes to the procedures by which stockholders may recommend nominees to our board of directors.

Committees

Our entire board of directors, rather than committees, acts on various items.  The board of directors has determined that it does not have an audit committee financial expert.

Code of Ethics

Our Board has adopted a Code of Ethics that applies to all of our employees, including our principal executive officer and principal financial officer and persons performing similar functions. The Code of Ethics addresses such topics as protection and proper use of our assets, compliance with applicable laws and regulations, accuracy and preservation of records, accounting and financial reporting, and conflicts of interest. The Code of Ethics is available in print, free of charge to any stockholder who sends a request for a paper copy to Trailblazer Resources, Inc., 2520 St. Rose Parkway, Suite 319, Henderson, Nevada 89074.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors, and persons who beneficially own more than 10% of our common stock to file reports of securities ownership and changes in such ownership with the Securities and Exchange Commission (“SEC”).  Officers, directors and greater than 10% beneficial owners are also required by rules promulgated by the SEC to furnish us with copies of all Section 16(a) forms they file.

Based solely upon a review of the copies of such forms furnished to us, or written representations that no Form 5 filings were required, we believe that during the fiscal year ended December 31, 2016, there was compliance with all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners.

 

 

Item 11.

Executive Compensation.

The following table sets forth information regarding the remuneration of our principal executive officer and any executive officers that earned in excess of $100,000 per annum during any part of the last two completed fiscal years:

Summary Compensation Table

Outstanding Equity Awards at 2016 Year End

There were no outstanding equity awards at December 31, 2016.

Director Compensation

During the fiscal year ended December 31, 2016, we did not pay any compensation to our directors.

Stock Plans

Our stockholders adopted the 2008 Stock Incentive Plan on August 29, 2008, in order to attract, retain and motivate the employees, officers, directors and consultants of our Company and our affiliates and to provide incentives and rewards for superior performance.

Shares Subject to the Stock Incentive Plan.  We may issue Awards equal to no more than 10% of our issued and outstanding common stock under the Stock Incentive Plan, which are outstanding as of the last completed fiscal year.  As of our last fiscal year end, we had 28,344,290 issued and outstanding shares of common stock.  Thus, we are currently authorized to issue Awards representing 2,834,429 shares of common stock.  The number of shares available for Awards, as well as the terms of outstanding Awards, is subject to adjustment as provided in the Stock Incentive Plan for stock splits, stock dividends, recapitalizations and other similar events.

Shares that are subject to any Award that expires, or is forfeited, cancelled or becomes un-exercisable will again be available for subsequent Awards, except as prohibited by law.  In addition, shares that we refrain from delivering pursuant to an Award as payment of either the exercise price of an Award or applicable withholding and employment taxes will be available for subsequent Awards.

Administration.  Either the Board of Directors or a committee appointed by the Board is authorized to administer the Stock Incentive Plan.  The Board and any committee exercising discretion under the Stock Incentive Plan from time to time are referred to as the “Committee.”  To the extent permitted by law, the Committee may authorize one or more persons who are reporting persons for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or other officers, to make Awards to directors, officers or employees who are not reporting persons for purposes of Rule 16b-3 under the Exchange Act, or other officers whom we have specifically authorized to make Awards.  With respect to decisions involving an award intended to satisfy the requirements of Section 162(m) of the Code, the Committee is to consist of two or more directors who are “outside directors” for purposes of that Code section.

 

 

Subject to the terms of the Stock Incentive Plan, the Committee has express authority to determine the directors, employees and consultants who will receive Awards, the number of Shares, units or share appreciation rights to be covered by each award, and the terms and conditions of Awards.  The Committee has broad discretion to prescribe, amend and rescind rules relating to the Stock Incentive Plan and its administration, and to interpret and construe the Stock Incentive Plan and the terms of all award agreements.  Within the limits of the Stock Incentive Plan, the Committee may accelerate the vesting of any award, allow the exercise of unvested Awards, and may modify, replace, cancel or renew them.  In addition, the Committee may under certain circumstances buy out options or SARs or, subject to stockholder approval, reduce the exercise price for outstanding options or SARs.

The Stock Incentive Plan provides that we will indemnify members of the Committee and their delegates against any claims, liabilities or costs arising from the good faith performance of their duties under the Stock Incentive Plan.  The Stock Incentive Plan releases these individuals from liability for good faith actions associated with the Stock Incentive Plan’s administration.

Eligibility.  The Committee may grant options that are intended to qualify as incentive stock options, or ISOs, only to employees, and may grant all other Awards to directors, employees and consultants.  The Stock Incentive Plan and the discussion below use the term “participant” to refer to a director, employee or consultants who has received an Award.  The Stock Incentive Plan provides that no more than 1,000,000 Shares may be issued during any calendar year to any participant pursuant to options and SARs Awards under the Stock Incentive Plan.

Options.  Options granted under the Stock Incentive Plan provide participants with the right to purchase Shares at a predetermined exercise price.  The Committee may grant options that are intended to qualify as ISOs or options that are not intended to so qualify, or Non-ISOs.  The Stock Incentive Plan also provides that ISO treatment may not be available for options that become first exercisable in any calendar year to the extent the value of the underlying shares that are the subject of the option exceeds $100,000 (based upon the fair market value of the common stock on the option grant date).

Share Appreciation Rights (SARs).  A SAR generally permits a participant who receives it to receive, upon exercise, cash and/or Shares equal in value to the excess of (i) the fair market value, on the date of exercise, of the common stock with respect to which the SAR is being exercised, over the exercise price of the SAR for such shares multiplied by (ii) the number of shares with respect to which the SAR is being exercised.  The Committee may grant SARs in tandem with options or independently of them.  SARs that are independent of options may limit the value payable on its exercise to a percentage, not exceeding 100%, of the excess value.

Exercise Price for Options and SARs.  The exercise price of ISOs, Non-ISOs, and SARs may not be less than 100% of the fair market value on the grant date of the common stock subject to the award.  The exercise price of ISOs for participants who own more than 10% of our common stock on the grant date may not be less than 110% of the fair market value on the grant date of the underlying Shares subject to the Award.  Neither the Company nor the Committee shall, without shareholder approval, allow for a repricing within the meaning of the federal securities laws applicable to proxy statement disclosures.

Exercise of Options and SARs.  To the extent exercisable in accordance with the agreement granting them, an option or SAR may be exercised in whole or in part, and from time to time during its term; subject to earlier termination relating to a holder’s termination of employment or service.  With respect to options, the Committee has the discretion to accept payment of the exercise price in any of the following forms, or combination of them: cash or check in U.S.  dollars, certain shares of our common stock, and cashless exercise under a plan the Committee approves.

The term over which participants may exercise options and SARs may not exceed ten years from the date of grant (five years in the case of ISOs granted to employees who, at the time of grant, own more than 10% of our common stock).

 

 

Restricted Shares, Restricted Share Units, Unrestricted Shares and Deferred Share Units.  Under the Stock Incentive Plan, the Committee may grant restricted shares that are forfeitable until certain vesting requirements are met, may grant restricted share units which represent the right to receive Shares after certain vesting requirements are met, and may grant unrestricted shares as to which the participant’s interest is immediately vested.  For restricted Awards, the Stock Incentive Plan provides the Committee with discretion to determine the terms and conditions under which a participant’s interests in such Awards become vested.  The Stock Incentive Plan provides for deferred share units in order to permit certain directors, consultants or select members of management to defer their receipt of compensation payable in cash or Shares (including Shares that would otherwise be issued upon the vesting of restricted shares and restricted share units).  Deferred share units represent a future right to receive Shares.

Whenever Shares are released pursuant to these Awards, the participant will be entitled to receive additional Shares that reflect any stock dividends that stockholders received between the date of the award and issuance or release of the Shares.  Likewise, a participant will be entitled to receive a cash payment reflecting cash dividends paid to our stockholders during the same period.  Such cash dividends will accrue interest, at 5% per annum, from their payment date to our stockholders until paid in cash when the Shares to which they relate are either released from restrictions in the case of restricted shares or issued in the case of restricted share units.

Performance Awards.  The Stock Incentive Plan authorizes the Committee to grant performance-based Awards in the form of performance units that the Committee may or may not designate as “performance compensation awards” that are intended to be exempt from Code section 162(m) limitations.  In either case, performance awards vest and become payable based upon the achievement, within the specified period of time, of performance objectives applicable to the individual, our Company or any affiliate.  Performance awards are payable in Shares, cash or some combination of the two, subject to an individual participant limit of 1,000,000 Shares and $1,000,000 in cash.  The Committee decides the length of performance periods, but the periods may not be less than one fiscal year.

With respect to performance compensation awards, the Stock Incentive Plan requires that the Committee specify in writing the performance period to which the Award relates, and an objective formula by which to measure whether and the extent to which the Award is earned on the basis of the level of performance achieved with respect to one or more performance measures.  Once established for a performance period, the performance measures and performance formula applicable to the Award may not be amended or modified in a manner that would cause the compensation payable under the Award to fail to constitute performance-based compensation under Code Section 162(m).

Under the Stock Incentive Plan, the possible performance measures for performance compensation awards include basic, diluted or adjusted earnings per share; sales or revenue; earnings before interest, taxes and other adjustments (in total or on a per share basis); basic or adjusted net income; returns on equity, assets, capital, revenue or similar measure; economic value added; working capital; total stockholder return; and product development, product market share, research, licensing, litigation, human resources, information services, mergers, acquisitions and sales of assets of affiliates or business units.  Each measure will be, to the extent applicable, determined in accordance with generally accepted accounting principles as consistently applied by us (or such other standard applied by the Committee) and, if so determined by the Committee, and in the case of a performance compensation award, to the extent permitted under Code section 162(m), adjusted to omit the effects of extraordinary items, gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions and cumulative effects of changes in accounting principles.  Performance measures may vary from performance period to performance period and from participant to participant, and may be established on a stand-alone basis, in tandem or in the alternative.

Income Tax Withholding.  As a condition for the issuance of Shares pursuant to Awards, the Stock Incentive Plan requires satisfaction of any applicable federal, state, local or foreign withholding tax obligations that may arise in connection with the Awards or the issuance of Shares.

Transferability.  Awards may not be sold, pledged, assigned, hypothecated, transferred or disposed of other than by will or the laws of descent and distribution, except to the extent the Committee permits lifetime transfers to charitable institutions, certain family members or related trusts or as otherwise approved by the Committee.

 

 

Certain Corporate Transactions.  The Committee shall equitably adjust the number of Shares covered by each outstanding Award, and the number of Shares that have been authorized for issuance under the Stock Incentive Plan but as to which no Awards have yet been granted or that have been returned to the Stock Incentive Plan upon cancellation, forfeiture or expiration of an Award, as well as the price per share covered by each such outstanding Award, to reflect any increase or decrease in the number of issued and outstanding common stock resulting from a stock split, reverse stock split, stock dividend, combination, recapitalization or reclassification of the common stock, or any other increase or decrease in the number of issued and outstanding common stock effected without receipt of consideration by us.  In the event of any such transaction or event, the Committee may provide in substitution for any or all outstanding Awards under the Stock Incentive Plan such alternative consideration (including securities of any surviving entity) as it may in good faith determine to be equitable under the circumstances and may require in connection therewith the surrender of all Awards so replaced.  In any case, such substitution of securities will not require the consent of any person who is granted Awards pursuant to the Stock Incentive Plan.

In addition, in the event or in anticipation of a Change in Control, the Committee may at any time in its sole and absolute discretion and authority, without obtaining the approval or consent of our stockholders or any participant with respect to his or her outstanding Awards (except to the extent an Award provides otherwise), take one or more of the following actions: (a) arrange for or otherwise provide that each outstanding Award will be assumed or substituted with a substantially equivalent Award by a successor corporation or a parent or subsidiary of such successor corporation; (b) accelerate the vesting of Awards for any period (and may provide for termination of unexercised options and SARs at the end of that period) so that Awards shall vest (and, to the extent applicable, become exercisable) as to the Shares that otherwise would have been unvested; (c) arrange or otherwise provide for payment of cash or other consideration to participants in exchange for the satisfaction and cancellation of outstanding Awards; or (d) terminate outstanding Awards upon the consummation of the transaction, provided that the Committee may in its sole discretion provide for vesting of all or some outstanding Awards in full as of a date immediately prior to consummation of the Change of Control.  To the extent that an Award is not exercised prior to consummation of a transaction in which the Award is not being assumed or substituted, such Award shall terminate upon such consummation.

Term of Stock Incentive Plan; Amendments and Termination.  The term of the Stock Incentive Plan expires on July 31, 2018.  The Board of Directors may from time to time, amend, alter, suspend, discontinue or terminate the Stock Incentive Plan; provided that no amendment, suspension or termination of the Stock Incentive Plan shall materially and adversely affect Awards already granted unless it relates to an adjustment pursuant to certain transactions that change our capitalization or it is otherwise mutually agreed between the participant and the Committee.  In addition, the Committee may not cancel an outstanding option that is underwater for the purpose of reissuing the option to the participant at a lower exercise price or granting a replacement Award of a different type.  Notwithstanding the foregoing, the Committee may amend the Stock Incentive Plan to eliminate provisions which are no longer necessary as a result of changes in tax or securities laws or regulations, or in the interpretation thereof.

Termination, Rescission and Recapture.  Each Award under the Stock Incentive Plan is intended to align the participant’s long-term interest with our interests.  If the participant engages in certain activities (such as disclosure of confidential or proprietary information without appropriate authorization, breaches certain agreements relating to the protection of our intellectual property, solicits our employees to leave our Company or renders services to an organization or business which is, or working to become, competitive to us), either during employment or after the participant has terminated his employment or other relationship with us for any reason, the participant is deemed to be acting contrary to our long-term interests.  In such cases, except as otherwise expressly provided in the Award Agreement, we may terminate any outstanding, unexercised, unexpired, unpaid or deferred Awards, rescind any exercise, payment or delivery pursuant to the Award, or recapture any Shares (whether restricted or unrestricted) or proceeds from the participant’s sale of Shares issued pursuant to the Award.

As of December 31, 2016, there were no outstanding options or other awards under the Stock Incentive Plan.

 

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth certain information regarding beneficial ownership of our common stock on March 31, 2017 by each person who is known by us to own beneficially more than 5% of the outstanding shares of common stock and our current directors and executive officers.  Shares of common stock subject to  warrants currently exercisable or exercisable within 60 days of March 31, 2017 are deemed outstanding for purposes of computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.

*          Less than 0.1%

______________

(1)	To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws, it is anticipated that each person named in the table will have sole voting and investment power with respect to the shares set forth opposite such person’s name.

(2)	Based on 28,427,288 shares of common stock outstanding as of March 31, 2017.

Changes in Control

On December 7, 2016, we entered into a binding letter of intent to acquire Global CashSpot Corp by issuing the shareholders of that company 37,809,039 shares of our common stock.  Upon the completion of that transaction, the former shareholders of Global CashSpot collectively would own a majority of the outstanding shares of our company.

Equity Compensation Plan Information

The following table provides information as of December 31, 2016, with respect to shares of our common stock that may be issued under our existing equity compensation plans:

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

Our officers and directors are now and may in the future become stockholders, officers or directors of other companies that may be engaged in business activities similar to those conducted by us.  Accordingly, direct conflicts of interest may arise in the future with respect to such individuals acting on our behalf or other entities.  Moreover, additional conflicts of interest may arise with respect to opportunities which come to the attention of such individuals in the performance of their duties or otherwise.  Although we do not currently have a right of first refusal pertaining to opportunities that come to management’s attention insofar as such opportunities may relate to our business operations, we have established a conflict of interest policy intended to ensure timely disclosure and avoidance of activities and relationships that conflict with the interests of the Company.

Our officers and directors are subject to the restriction that all opportunities contemplated by our business plan which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available to our Company.  A breach of this requirement will be a breach of the fiduciary duties of the officer or director.

All future affiliated transactions will be made or entered into on terms that are no less favorable to us than those that can be obtained from any unaffiliated third party.  To the extent possible, a majority of the independent, disinterested members of our board of directors will approve future affiliated transactions.

 

 

Diversified Equity Partners, LLC. On February 21, 2013, the Company established an unsecured revolving convertible note in the amount of $250,000 with DEP.  Under the terms of the note, DEP agreed to make loans to the Company during the three-year term of the revolving credit commitment period.  Interest accrued on the unpaid principal balance at a rate of eight percent per annum and required quarterly payments beginning May 31, 2013; however, none of the interest has been paid as of December 31, 2016. DEP waived its right to call payment on the loan if all accrued interest was paid prior to February 21, 2016. During 2015, the entire $250,000 principal balance of the revolving note was repaid, funded entirely by the proceeds of the note payable from GCS.

JIMMAR Consulting, Inc. Consulting Agreement. In July 2013, the Company entered into a revised consulting agreement with the Company's contract controller, JIMMAR Consulting, Inc. ("JIMMAR"), providing for consulting fees on an hourly basis, plus the Company agreed to issue shares of the Company's common stock as follows: 5,000 shares on August 31, 2013, 5,000 shares on November 30, 2013, and 10,000 shares on March 15, 2014. The 20,000 shares were issued to JIMMAR in April 2014. Based on the share price of the stock at the date of the revised consulting agreement, the stock to be issued was valued at $0.35 per share, for an aggregate value of $7,000. This amount has been expensed over the service period, resulting in additional expense of $0 and $2,187 during the years ended December 31, 2014 and 2013, respectively. The Company also formally acknowledged its existing debt to JIMMAR, which amounted to $26,688 and $15,263 at December 31, 2016 and 2015, respectively. The debt agreement required payment of the entire outstanding balance on or before December 31, 2013, with interest accruing at a rate of 15% per annum. Interest is to be paid in cash, or may, at the Company's option, be paid in common shares of the Company's stock, based on a conversion price of $0.37 per share. During the years ended December 31, 2016 and 2015, the Company made payments aggregating $25,213 and $106,500, respectively. Accrued interest on the note payable to shareholder was $36,026 and $29,183 at December 31, 2016 and 2015, respectively, and is included in accrued expenses on the accompanying balance sheet.

Director Independence

The Board of Directors has determined that it does not have any independent directors as that term is defined by NASDAQ Marketplace Rule 5605(a)(2).  In assessing the independence of the directors, the Board considers any transactions, relationships and arrangements between our Company and our independent directors or their affiliated companies.  This review is based primarily on responses of the directors to questions in a director and officer questionnaire regarding employment, business, familial, compensation and other relationships with our Company or our management.

Item 14.

Principal Accountant Fees and Services.

Fees paid to our principal accountants, KLJ & Associates, LLP (“KLJ”), for the fiscal years ended December 31, 2016 and 2015, respectively, were as follows:

(1)	The amount billed or to be billed to us for professional services related to the audit of our annual financial statements for the years ended December 31, 2016 and 2015 and included reviews of our quarterly reports on Form 10-Q.

 

 

The Board of Directors has considered whether the provision of the non-audit services described above by an external auditor is compatible with maintaining the auditor’s independence, and determined that these non-audit services are compatible with the required independence.  The Board of Directors pre-approves all services to be provided to our Company by the independent auditors.  This includes the pre-approval of (i) all audit services, and (ii) any significant (i.e., not de minimis) non-audit services.  Before granting any approval, the Board of Directors gives due consideration to whether approval of the proposed service will have a detrimental impact on the auditor’s independence.  All services provided by and fees paid to our independent auditors for 2016 and 2015 were pre-approved by the Board of Directors.

PART IV

Item 15.

Exhibits, Financial Statement Schedules.

          

(1)

Filed as an exhibit to the Current Report on Form 8-K dated October 14, 2008, filed October 17, 2008.

(2)

Filed as an exhibit to the Current Report on Form 8-K dated October 21, 2011, filed October 27, 2011.

(3)

Filed as an exhibit to the Current Report on Form 8-K dated December 15, 2008, filed December 19, 2008.

(4)

Filed as an exhibit to the Current Report on Form 8-K dated August 12, 2011, filed August 19, 2011.

(5)

Filed as an exhibit to the Current Report on Form 8-K dated February 21, 2013, filed February 27, 2013.

(6)

Filed as an exhibit to the Current Report on Form 8-K dated February 13, 2015, filed February 17, 2015

*In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

 

 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.