MCX Technologies Corp - FORM 10-K/A - December 17, 2014

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EX-31.1 - SARBANES-OXLEY 302 CERTIFICATION - MCX Technologies Corpexh31-1.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A-1

[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013
 
OR
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:   000-54918

TOUCHPOINT METRICS, INC.
(Exact name of registrant as specified in its charter)

California
(State or other jurisdiction of incorporation or organization)

201 Spear Street, Suite 1100
San Francisco, CA   94105
(Address of principal executive offices, including zip code)

(415) 526-2655
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to section 12(g) of the Act:
NONE
COMMON STOCK

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   YES [   ]   NO [X]

Indicate by check mark if the registrant is required to file reports pursuant to Section 13 or Section 15(d) of the Act:    YES [X]   NO [   ]

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer
[   ]
Accelerated Filer
[   ]
Non-accelerated Filer (Do not check if a smaller reporting company)
[   ]
Smaller Reporting Company
[X]

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

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 sold, or the average bid and asked price of such common equity, as of June 30, 2013: $0.61.

At March 26, 2014, 16,081,158 shares of the registrant's common stock were outstanding.
 
 

 

REASON FOR AMENDMENT

The sole purpose of this Amendment to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 is to respond to a comment from the SEC relating to the auditor's opinion. No other changes have been made to this Form 10-K and this Amendment has not been updated to reflect events occurring subsequent to the filing of this Form 10-K.



TABLE OF CONTENTS

 
Page
   
   
     
Financial Statements and Supplementary Data.
4
     
   
     
Exhibits and Financial Statement Schedules.
20
     
22
   
23
 

 
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ITEM 8.                          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

TOUCHPOINT METRICS, INC.

INDEX TO THE FINANCIALS

 
Index
   
F-1
   
FINANCIAL STATEMENTS
  
 
F-2
 
F-3
 
F-4
 
F-5
   
F-6












-3-
 




To the Board of Directors and Stockholders
Touchpoint Metrics, Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT

We have audited the accompanying balance sheets of Touchpoint Metrics, Inc. ("the Company") as of December 31, 2013 and 2012 and the related statements of income, changes in stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company, at December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.


David Lee Hillary, Jr., CPA, CITP
Noblesville, Indiana
March 5, 2014


5797 East 169th Street, Suite 100 Noblesville, IN 46062
317-222-1416
www.HillaryCPAgroup.com






F-1
-4-
 


Touchpoint Metrics, Inc.
Balance Sheets


   
December 31,
  
   
2013
    
2012
  
Assets
        
Current assets:
        
Cash and cash equivalents
  
$
653,990
    
$
106,999
  
Accounts receivable
    
74,978
      
110,720
  
Accounts receivable-related party
    
-
      
1,527
  
Total current assets
    
728,968
      
219,246
  
Long term assets:
                
Property and equipment, net
    
91,108
      
152,724
  
Capitalized software development costs, net
    
164,480
      
188,371
  
Intangible assets, net
    
43,489
      
59,151
  
Other assets
    
5,953
      
11,622
  
Total assets
  
$
1,033,998
    
$
631,114
  
                 
Liabilities and Shareholders' Equity
                
Current liabilities:
                
Accounts payable
  
$
110,116
    
$
50,866
  
Accrued liabilities
    
-
      
1,452
  
Deferred revenue
    
3,249
      
-
  
Other current liabilities, accrued interest
    
13,773
      
-
  
Notes payable
    
50,000
      
-
  
Notes payable-related party
    
100,000
      
-
  
Total current liabilities
    
277,138
      
52,318
  
Other noncurrent liabilities, accrued interest
    
-
      
7,500
  
Notes payable
    
-
      
50,000
  
Notes payable-related party
    
-
      
100,000
  
Total liabilities
    
277,138
      
209,818
  
Commitments and contingencies
                
Shareholders' equity:
                
Common stock, $0 par value, 30,000,000 shares authorized,
16,081,158 and 13,132,302 shares issued and outstanding at
December 31, 2013 and 2012, respectively
    
-
      
-
  
Accumulated deficit
    
(1,861,414
)
    
(1,145,758
)
Additional paid-in capital
    
2,618,274
      
1,567,054
  
Total shareholders' equity
    
756,860
      
421,296
  
Total liabilities and shareholders' equity
  
$
1,033,998
    
$
631,114
  








The accompanying notes are an integral part of these statements.

F-2
-5-
 


Touchpoint Metrics, Inc.
Statements of Operations


   
December 31,
  
   
2013
    
2012
  
Revenue
        
Consulting services
  
$
902,530
    
$
833,609
  
Products and other
    
37,785
      
66,523
  
Total revenue
    
940,315
      
900,132
  
Cost of goods sold
                
Labor
    
199,444
      
129,534
  
Services
    
42,754
      
14,552
  
Products and other
    
102,780
      
59,827
  
Total cost of goods sold
    
344,978
      
203,913
  
Gross profit
    
595,337
      
696,219
  
Expenses
                
Salaries and wages
    
703,176
      
523,452
  
Contract services
    
117,257
      
162,206
  
Other general and administrative
    
397,885
      
314,202
  
Total expenses
    
1,218,318
      
999,860
  
Net operating income
    
(622,981
)
    
(303,641
)
Interest expense
    
(12,156
)
    
(10,982
)
Other income (expense)
    
(80,519
)
    
7,675
  
Loss before income taxes
    
(715,656
)
    
(306,948
)
Income tax provision
    
-
      
-
  
Net loss
  
$
(715,656
)
  
$
(306,948
)
                 
Net loss per share-basic and diluted
  
$
(0.05
)
  
$
(0.02
)
                 
Weighted average common shares outstanding-basic
and diluted
    
14,606,730
      
13,132,302
  

















The accompanying notes are an integral part of these statements.

F-3
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Touchpoint Metrics, Inc.
  
Statements of Common Shareholders' Equity
  
 
 
   
Common Stock
    
Additional
Paid in
    
Retained
Earnings
(Accumulated
      
   
Shares
    
Amount
    
Capital
    
Deficit)
    
Total
  
                     
Balance, December 31, 2011
    
9,312,302
    
$
-
    
$
957,207
    
$
(837,310
)
  
$
119,897
  
Stock based compensation-stock options
    
-
              
13,347
      
-
      
13,347
  
Common stock issued
    
3,820,000
      
-
      
596,500
      
(1,500
)
    
595,000
  
Net loss
    
-
      
-
      
-
      
(306,948
)
    
(306,948
)
Balance, December 31, 2012
    
13,132,302
    
$
-
    
$
1,567,054
    
$
(1,145,758
)
  
$
421,296
  
Stock based compensation-stock options
    
-
      
-
      
19,120
      
-
      
19,120
  
Common stock issued
    
2,948,856
      
-
      
1,032,100
      
-
      
1,032,100
  
Net loss
    
-
      
-
      
-
      
(715,656
)
    
(715,656
)
Balance, December 31, 2013
    
16,081,158
    
$
-
    
$
2,618,274
    
$
(1,861,414
)
  
$
756,860
  

































The accompanying notes are an integral part of these statements.

F-4
-7-
 


Touchpoint Metrics, Inc.
Statements of Cash Flows


   
December 31,
  
   
2013
    
2012
  
Cash flows from operating activities:
        
Net loss
  
$
(715,656
)
  
$
(306,948
)
Adjustments to reconcile net income to net cash provided
by operations:
                
Depreciation and amortization
    
59,072
      
7,730
  
Stock compensation expense
    
19,120
      
13,347
  
Loss on disposal of assets
    
62,982
      
-
  
Impairment of intangible asset
    
17,537
      
-
  
Changes in operating assets and liabilities:
                
Accounts receivable
    
35,742
      
(49,502
)
Accounts receivable, related party
    
1,527
      
(1,527
)
Other assets
    
5,669
      
3,848
  
Accounts payable
    
59,250
      
(19,387
)
Accrued liabilities
    
2,069
      
(5,300
)
Accrued interest
    
6,000
      
6,000
  
Net cash used in operating activities
    
(446,688
)
    
(351,739
)
                 
INVESTING ACTIVITIES
                
Purchase of intangible assets
    
(2,500
)
    
-
  
Equipment purchases
    
(4,984
)
    
-
  
Capitalized software development costs
    
(30,937
)
    
(188,371
)
Net cash used in investing activities
    
(38,421
)
    
(188,371
)
                 
FINANCING ACTIVITIES
                
Proceeds from the issuance of common stock
    
1,032,100
      
596,500
  
Retained earnings
    
-
      
(1,500
)
Net cash provided by financing activities
    
1,032,100
      
595,000
  
                 
Increase in cash and cash equivalents
    
546,991
      
54,890
  
Cash and cash equivalents, beginning of period
    
106,999
      
52,109
  
Cash and cash equivalents, end of period
  
$
653,990
    
$
106,999
  












The accompanying notes are an integral part of these statements.

F-5
-8-
 

TOUCHPOINT METRICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2013


Note 1: Organization and Basis of Presentation

Touchpoint Metrics, Inc. (the "Company") is a for profit corporation established under the corporation laws in the State of California, United States of America on December 14, 2001. The corporation operated as The Innes Group, Inc., dba MCorp Consulting until filing a Certificate of Amendment to the Articles of Incorporation renaming the company Touchpoint Metrics, Inc., effective October 18, 2011.

The Company develops and delivers technology-enabled products and services that improve customer experience management capabilities for corporations. Their focus assists companies who wish to improve business performance by measuring and transforming the ways they interact with customers.

The Company services a wide variety of industries and customer size.


Note 2: Summary of Significant Accounting Policies

The financial statements of the Company are presented on the accrual basis. The significant accounting policies followed are described below to enhance the usefulness of the financial statements to the reader.

The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America. This requires management to make estimates and assumptions that affect the reported amounts and disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents are comprised of highly liquid investments with original maturity dates of less than three months that are not reported as investments. While the Company may maintain cash and cash equivalents in bank deposit accounts, which at times exceed Federal Deposit Insurance Corporation insured limits, they have not experienced any losses in such accounts.

Portions of the bank deposit accounts are held in Canadian banks on a Canadian and US Dollar basis. The balances in these accounts at times exceed Canada Deposit Insurance Corporation insured limits. They have not experienced any losses in these accounts.

Management believes it is not exposed to any significant credit risk on cash and cash equivalents.

Fair Value of Financial Instruments

Effective July 1, 2009, the Company adopted Accounting Standards Codification Topic 820, Fair Value Measurements (ASC 820). ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair market hierarchy, which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The standard describes three levels based on the reliability of the inputs to determine the fair value:
F-6
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Level 1, defined as inputs such as unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company's financial instruments consist of cash, accounts receivable, accounts payable and notes payable. The carrying amount of cash, accounts receivable and accounts payable approximates fair value because of the short-term nature of these items. The fair value of the Company's note payable approximates book value as of December 31, 2012 and December 31, 2011.

We measure property, plant and equipment, at fair value on a nonrecurring basis.

Property, Improvements, and Depreciation

Property and equipment are stated at cost or estimated historical cost through appraisal. Betterments, renewals, and extraordinary repairs over $1,000 that extend the life of the assets are capitalized; other repairs and maintenance are expensed.

The cost and accumulated depreciation applicable to assets retired are removed from the accounts, and the gain or loss on disposition is recognized as other income or expense. Depreciation and amortization is computed on the straight line method over the applicable estimated depreciable life as follows:

Depreciable Asset Class
Depreciable Life
Real Property Improvements
15-Years
Computer Equipment
5-Years
Furniture and Fixtures
7-Years
Leasehold Improvements
15-Years
Machinery and Equipment
7-Years

Software Development Costs

Costs for the development and delivery of the SaaS technology are capitalized once planning is completed and technological feasibility is established.  Costs incurred during the operating stage of the software application relating to upgrades and enhancements are capitalized to the extent that they result in the extended life of the product.  All other costs are expensed as incurred.  Capitalized costs include only direct external costs of materials and services as well as compensation and benefits for employees directly associated with the software project.  Such amounts are included in the accompanying balance sheets under the caption "capitalized software development costs."

Intangibles

Intangible assets include an online media asset, title and interest in a LinkedIn group, and fully amortized organization costs.  The online media asset is periodically reviewed for impairment indicators and tested for recoverability whenever events or changes in circumstances indicate the carrying amount may not be recoverable. An impairment loss, if any, would be measured as the excess of the carrying value over the fair value determined by discounted future cash flows.




F-7
-10-
 


Revenue Recognition

Products

The company has added SaaS (Software as a Service) technology to its offerings. SaaS is a subscription based offering that includes nonrefundable setup fees, subscription fees, professional services, and consulting fees related to implementation, customization, configuration, training, and other value added services. The company accounts for multiple-element arrangements by following ASC 605-25, Revenue Recognition: Multiple-Element Arrangements, as amended by Accounting Standards Update (ASU) 2009-13, Multiple-Deliverable Revenue Arrangements. At the inception of the arrangement, and again as each element is delivered, the company evaluates all deliverables in the offering to determine whether they represent separate units of accounting based on the following criteria: 1) the items have value to the customer on a standalone basis and 2) if the arrangement includes a general right of return relative to the delivered item, delivery or perfor­mance of the undelivered item or items is considered probable and substantially in the control of the company.

The company determines the relative selling price for a deliverable based on vendor-specific objective evidence of selling price ("VSOE"), if available, third-party evidence ("TPE"), if VSOE is not available; and best estimate of selling price ("BESP"), if neither VSOE nor TPE is available.

VSOE. The company determines VSOE based on historical pricing and discounting practices for the specific solution when sold separately. In determining VSOE, it is required that a substantial majority of the selling prices for these services fall within a reasonably narrow pricing range. Due to the introduction of new services, the non-refundable set-up fee and the SaaS subscription have not been not historically priced. As a result, VSOE has been used to allocate the selling price of deliverables in limited circumstances.

TPE. When VSOE cannot be established for deliverables in multiple element arrangements, the company applies judgment with respect to whether it can establish selling price based on TPE. TPE is determined based on competitor prices for similar deliverables when sold separately. It has been determined that TPE is not a practical alternative due to differences in service offerings compared to other parties and the availability of relevant third-party pricing information.

BESP. When the company is unable to establish selling price using VSOE or TPE, BESP is used to determine selling price of significant deliverables. The objective of BESP is to determine the price at which the company would transact a sale if the service were sold on a stand-alone basis.  The process for determining BESP for deliverables without VSOE or TPE involves management's judgment. BESP is determined by considering overall pricing objectives and market conditions. Significant pricing practices taken into consideration include the company's discounting practices, the size and volume of transactions, the customer demographic, and market strategy.  If the facts and circumstances underlying the factors considered change or should future facts and circumstances lead the company to consider additional factors, BESPs could change in future periods.

The guidance of SEC Codification of Staff Accounting Bulletins Topic 13(A)(3)(f) is followed in accounting for nonrefundable setup fees.  Each of the revenue areas relating to the SaaS offering may or may not be sold as part of a sale to a customer, with the exception of the nonrefundable set-up fee and SaaS technology subscription. Each of the items, except for the set-up fee and SaaS technology subscription, can and often are sold separately and will have value to a customer on a standalone basis. The nonrefundable set-up fee and the SaaS subscription are the only two revenue streams that do not exist without each other. The subscription and services provided are essential to the customer receiving the expected benefit of the set-up fee.  Therefore, the set-up fee is earned and recognized as the related services are delivered and performed over the term of the subscription.

SaaS subscriptions are sold with three payment options. The subscription can be paid annually, quarterly, or monthly and are all payable prior to services being provided. The company determines fair value for the individual elements in these arrangements as the estimated relative selling price charged for each individual element when sold on a standalone basis.
F-8
-11-
 


As payments are received, the revenue is reported as unearned revenue on the balance sheet and recognized at the end of each monthly period as service is provided.  The company measures and allocates the arrangement consideration to the individual elements based on the relative estimated selling price of each item as sold on a standalone basis.

The non-refundable setup fees are recognized over the term of the initial subscription period. The professional services and consulting fees included in the offering follow the same revenue recognition process as the consultation and research services.

Subscription agreements provide service-level commitments of 99.5% uptime per period, excluding scheduled maintenance and any unavailability caused by defined circumstances beyond reasonable control. Failure to meet this availability commitment requires a credit to qualifying customers equal to the value of the time unavailable, up to a maximum of one month of subscription fees. Reserves equal to the maximum potential credits are recorded on the balance sheet and are treated as a reduction in revenue. Revenue is recorded net of applicable sales, use, and excise taxes.

Professional Services

Revenues are primarily derived from professional and software-enabled consulting services. Engagements normally span a period of 45 to 120 days in duration and may be fixed price or, less commonly, time and materials engagements.

The company typically enters into engagements with one of two contracted payment arrangements. The contracts call for a deposit to be made at the time of contract signing and payment as project milestones are achieved, or no deposit is made and payment as project milestones are achieved.

For engagements where a deposit is received, the company reports the deposit amount as unearned revenue on the balance sheet. Revenue is recognized and reported as project milestones are achieved and accepted by the customer for fixed price contracts. The revenue for production and product sales are recognized as incurred.

Time and material engagements are not common for the company, but when such an engagement is entered into, contractual terms are arranged that provide for the company to submit periodic invoices to the customer as per the contract terms for the time and materials used during the period for the customer's benefit. The contracts will generally specify the rate for specific types of functions to be performed.

Reimbursed Expenses

We classify reimbursed expenses in both other revenues and cost of goods sold in our consolidated statements of income.  Other revenue is earned from reimbursable expense revenues that are incidental to the consultation and research efforts. The project related expenses consist of costs incurred by the Company on behalf of the customer. This will generally consist of travel costs or products and services purchased as a convenience for the customer.

Income Taxes

Income taxes are accounted for using the asset and liability method as prescribed by ASC 740 "Income Taxes." Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance would be provided for those deferred tax assets for which if it is more likely than not that the related benefit will not be realized.

F-9
-12-
 


A full valuation allowance has been established against all net deferred tax assets as of December 31, 2013 based on estimates of recoverability. While the Company has optimistic plans for its business strategy, we determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to our ability to generate sufficient profits from our business model.


Note 3: Recent Accounting Pronouncements

In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, ("ASU 2011-11"). ASU 2011-11 requires an entity to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Retrospective disclosure is required for all comparative periods presented. The adoption of ASU 2011-11 did not have a material impact on the Company's financial statements.

In October 2012, the FASB issued ASU No. 2012-04, Technical Corrections and Improvements, ("ASU 2012-04"). This update includes source literature amendments, guidance clarification, reference corrections and relocated guidance affecting a variety of topics in the Codification. The update also includes conforming amendments to the Codification to reflect ASC 820's fair value measurement and disclosure requirements. The amendments in this update that will not have transition guidance are effective upon issuance. The amendments in this update that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 did not have a material impact on the Company's financial statements.

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities ("ASU 2013-01").  This update clarifies that ordinary trade receivables and receivables are not in the scope of ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities ("ASU 2011-11"). Specifically, ASU 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement. The Company is required to apply the amendments in ASU 2013-01 beginning January 1, 2013. The adoption of ASU 2013-01 by the Company did not have a material impact on the consolidated financial statements.

In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update, or ASU, 2013-02, Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This update requires companies to provide information regarding the amounts reclassified out of accumulated other comprehensive income by component. In addition, companies are required to present, either on the face of the statement where net income is presented or in the accompanying notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income.  ASU 2013-02 is effective for annual reporting periods beginning on or after December 15, 2012, and interim periods within those annual periods. ASU 2013-02 was adopted January 1, 2013 and did not have a significant impact on our financial statements.

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740) ("ASU 2013-11"), which requires the financial statement presentation of an unrecognized tax benefit in a particular jurisdiction, or a portion thereof, as a reduction to a deferred tax asset for a net operating loss ("NOL") carryforward, a similar tax loss, or a tax credit carryforward, unless the uncertain tax position is not available to reduce, or would not be used to reduce, the NOL or carryforward under the tax law in the same jurisdiction; otherwise, the unrecognized tax benefit should be presented as a gross liability and should not be combined with a deferred tax asset. ASU 2013-11 is effective for interim and annual periods beginning after December 15, 2013. We are currently evaluating the impact of this guidance on our consolidated financial position, results of operations, and cash flows.

F-10
-13-
 


Note 4: Property and Equipment

Property and equipment consist of:

   
December 31,
    
December 31,
  
   
2013
    
2012
  
Computers and hardware
  
$
48,014
    
$
43,029
  
Software
    
38,646
      
38,646
  
Equipment
    
2,359
      
2,359
  
Furniture
    
31,731
      
31,731
  
Leasehold improvements
    
-
      
95,608
  
Land
    
85,000
      
85,000
  
Land improvements
    
4,000
      
4,000
  
     
209,750
      
300,373
  
Less: accumulated depreciation
    
(118,642
)
    
(147,649
)
   
$
91,108
    
$
152,724
  

Depreciation expense incurred during the twelve months ended December 31, 2013 and 2012 was $3,620 and $7,730, respectively.  During the twelve months ended December 31, 2013, the company disposed of leasehold improvements with a net book value of approximately $62,900, which was written off as the lease term of the subject property had been terminated.


Note 5: Stock-Based Compensation

The Company's stock-based compensation program was established in 2008. Plan Shares cannot exceed 30% of any outstanding issue or 2,500,000 shares, whichever is the lower amount.

All stock option grants have an exercise price equal to the fair market value of our common stock on the date of grant and have a 10-year term.

In order to calculate the fair value of stock options at the date of grant, we use the Black-Scholes option pricing model. The volatility used was based on historical volatility of similar sized companies due to lack of historical data of the Company's stock price.  The expected term was determined based on the simplified method outlined in Staff Accounting Bulletin No. 110.  The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The company currently has three active option commitments. The first option commitment was granted February 7, 2011 with an option for 300,000 shares at an exercise price of $0.35. The options have a graded vesting schedule and a ten-year term.

The second grant date was on September 3, 2013 with an option for 300,000 shares at an exercise price of $0.40.  These options have a graded vesting schedule and a ten-year term.

The third option commitment was granted November 25, 2013 with an option for 80,000 shares at an exercise price of $0.50. The options have a graded vesting schedule and a ten-year term.

At December 31, 2013, 240,000 stock options were exercisable and $43,523 of total compensation cost related to vested share-based compensation grants had been recognized.  Unrecognized compensation expense from stock options was $93,277 at December 31, 2013, which is expected to be recognized over a weighted-average vesting period of 1.56 years beginning January 1, 2014.

F-11
-14-
 


The following table summarizes our stock option activity for the twelve months ended December 31, 2013:

   
Number of
Shares
    
Weighted
Avg EP per
Share
    
Weighted Avg
Remaining
Contractual
Term (Yrs)
    
Aggregate
Intrinsic
Value
  
Outstanding at December 31, 2012
    
320,000
    
$
0.34
          
Granted
    
380,000
    
$
0.38
          
Exercised
    
—
      
—
          
Forfeited or expired
    
(20,000
)
  
$
0.25
          
Outstanding at December 31, 2013
    
680,000
    
$
0.39
      
8.57
    
$
75,000
  
Fully vested and expected to vest at
December 31, 2013
    
240,000
    
$
0.35
      
7.11
    
$
36,000
  
Non-exercisable at December 31, 2013
    
440,000
    
$
0.41
      
9.37
    
$
39,000
  

The following assumptions were used to calculate weighted average fair values of the options granted in the twelve months ended December 31, 2013 and 2012:

   
For the Twelve Months Ended
December 31,
  
   
2013
    
2012
  
   
Option
Grant 1
    
Option
Grant 2
      
Expected life (in years)
    
6.00
      
6.00
      
-
  
Risk-free interest rate
    
2.00
%
    
1.73
%
    
-
  
Volatility
    
65.99
%
    
65.13
%
    
-
  
Dividend yield
    
-
      
-
      
-
  
Weighted average grant date fair value per option granted
  
$
0.24
    
$
0.30
      
-
  


Note 6: Concentrations

The Company sells services to a broad range of clients under various terms. The mix of clients ranges from start-ups to Fortune 500 companies across multiple industries.

Sales are concentrated among a few large clients. For the twelve months ended December 31, 2013 and 2012, the percentage of sales and the concentrations are as follows:

   
2013
    
2012
  
Largest client
    
46.82
%
    
20.59
%
Second largest client
    
15.82
%
    
17.19
%
Third largest client
    
13.27
%
    
15.58
%
Next three largest clients
    
20.33
%
    
25.63
%
All other clients
    
3.76
%
    
21.01
%
     
100.0
%
    
100.0
%

During 2012, the Company entered a consulting services agreement with mfifty, which is a related party. The President of the Company is also an owner of mfifty. During the twelve months ended December 31, 2013 and 2012, the company earned consulting revenues of approximately $0 and $51,632, respectively, from this related party.

Sales are made without collateral and the credit-related losses have been insignificant or non-existent. Accordingly, there is no provision made to include an allowance for doubtful accounts.
F-12
-15-
 


Note 7: Capitalized Software Development Costs

Costs incurred to develop Software as a Service (SaaS) technology consist of external direct costs of materials and services and payroll and payroll-related costs for employees who directly devote time to the project. Research and development costs incurred during the preliminary project stage were expensed as incurred. Capitalization begins when technological feasibility is established. Costs incurred during the operating stage of the software application relating to upgrades and enhancements are capitalized to the extent that they result in the extended life of the product. All other costs are expensed as incurred.

Amortization of software development costs commences when the product is available for general release to customers. The capitalized costs are amortized on a straight line basis over the three year expected useful life of the software. Capitalized software development costs, net of amortization, were $164,480 and $188,371 as of December 31, 2013 and 2012, respectively. Amortization expense incurred during the twelve months ended December 31, 2013 and 2012 was $54,827 and $0, respectively.


Note 8: Intangible Assets

Intangibles as of December 31, 2013, consist of the following:

    
Gross
    
Accumulated
Amortization
    
Impairment
    
Net Book Value
  
PetroPortfolio
  
$
131,151
     $      
$
(89,537
)
  
$
41,614
  
LinkedIn group
    
2,500
      
(625
)
    
-
      
1,875
  
Organization costs
    
1,377
      
(1,377
)
    
-
      
-
  
Total intangibles
  
$
135,028
    
$
(2,002
)
  
$
(89,537
)
  
$
43,489
  

Amortization of identifiable intangible assets was $625 and $0 for the twelve months ended December 31, 2013 and 2012, respectively.

At year end, management identified impairment indicators and performed tests for recoverability resulting in values less than the PetroPortfolio asset's carrying amount.  A resulting charge for impairment of $17,537 was based on management's review of these analyses, and the balance at December 31, 2013 accurately represents management's opinion of current value.  There was no impairment of intangible assets during the year ended December 31, 2012.


Note 9: Commitments and Contingencies

Leases

The Company leases one facility in northern California under an operating lease that expires in 2016.  Rent expense under operating leases was $22,896 and $21,716 for the twelve months ended December 31, 2013 and 2012.

As of December 31, 2013, the estimated future payments under this operating lease (including rent escalation clauses) for each of the next five years is as follows:

2014
  
$
24,732
  
2015
    
24,737
  
2016
    
17,170
  
2017
    
-
  
2018
    
-
  
Total minimum lease payments
  
$
66,639
  
F-13
-16-
 


Purchase Obligations

The Company has entered into non-cancelable service contracts related to SaaS licenses and access to marketing research services which expire in the year ended December 31, 2014. As of December 31, 2013, future payments under these contractual obligations were as follows:

2014
  
$
38,856
  
2015
    
-
  
2016
    
-
  
2017
    
-
  
2018
    
-
  
Total purchase obligations
  
$
38,856
  

Legal Matters

The Company has no known legal issues pending.


Note 10: Debt

On September 16, 2011, a $100,000 CDN note was executed with Brad Holland, a 2.67% shareholder.  The note is structured to incur a balloon payment of the principal and 4% APR non-compounding accrued interest on its maturity date of September 16, 2014.  As of December 31, 2013, principal and accrued interest was $100,000 and $9,000, respectively.

On September 7, 2011, a $50,000 USD note was executed with McLellan Investment Corporation, an unrelated party.  The note is structured to incur a balloon payment of the principal and 4% APR non-compounding accrued interest on its maturity date of September 7, 2014.  As of December 31, 2013, principal and accrued interest was $50,000 and $4,500, respectively.


Note 11: Shareholders' Equity

On July 2, 2013 the Company completed a private placement of 2,948,856 restricted shares of common stock for a purchase price of $0.35 per share.  The Company received aggregate gross proceeds of $1,032,100 from the private placement.


Note 12: Interest Expense

Interest expense consists of interest on the Company's debt, short-term promissory note, and credit card balances.  Interest expense was $12,156 and $10,982 for the twelve months ended December 31, 2013 and 2012, respectively.


Note 13: Advertising Expenses

Advertising is expensed as incurred. Advertising expense incurred during the twelve months ended December 31, 2013 and 2012, was $14,024 and $16,130 respectively.




F-14
-17-
 


Note 14: Income Taxes

Income taxes are summarized as follows for the year ended December 31, 2013:

   
December 31, 2013
  
Current benefit
  
$
(715,656
)
Deferred benefit
    
715,656
  
Net income tax (benefit) expense
  
$
-
  

A full valuation allowance has been established for deferred tax assets based on a "more likely than not" threshold. The ability to realize deferred tax assets depends on our ability to generate sufficient taxable income within the carry forward periods provided in the tax law. While the Company's statutory tax rate is 35%, its effective tax rate is 0% due to the effects of the valuation allowance described above. The Company does not have any material uncertainties with respect to its provisions for income taxes.


Note 15: Net Loss per Share

Net loss per share was computed by dividing the net loss by the weighted average number of common shares outstanding during the period.  The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding.  For the twelve months ended December 31, 2013 and 2012, the assumed exercise of share options are anti-dilutive due to the Company's net loss and are excluded from the determination of net loss per share – basic and diluted.  Accordingly, net loss per share basic and diluted are equal in all periods presented.

The computations for basic and diluted net loss per share are as follows:

   
Year Ended December 31,
  
   
2013
    
2012
  
Net loss
  
$
(715,656
)
  
$
(306,948
)
Basic and diluted weighted average common shares outstanding
    
14,606,730
      
13,132,302
  
Net loss per share
                
Basic and diluted
  
$
(0.05
)
  
$
(0.02
)


Note 16: Related Party Transactions

The Company has a related party transaction involving a significant shareholder. The nature and details of the transaction are described in Note 10. The Company also has two related party transactions with its President, the nature, description and details of the transaction are described in Note 6 and this note.

IREMCO, a controlling shareholder, provides the company with office space on a month-to-month basis at no charge under a verbal agreement. The office space was vacant and not in use by IREMCO. This space provides the company with office space in Canada and will be eliminated if IREMCO has a need for the space.

On January 31, 2013, the Company entered into an agreement with Michael Hinshaw, President, to loan $25,000 to the Company. The loan was a non-convertible Promissory Note with an interest rate of 3.25%.  The note was structured to incur a balloon payment of the principal and non-compounding accrued interest. Interest began accruing on the unpaid balance thirty (30) days from the date of the note. The note was paid in full in August, 2013.



F-15
-18-
 


Note 17: Going Concern

The accompanying financial statements and notes have been prepared assuming that the Company will continue as a going concern.

For the year ended December 31, 2013, the Company had a net loss of $715,656.  In addition, the Company had a net loss of $306,948 for the year ended December 31, 2012. These circumstances result in substantial doubt as to the Company's ability to continue as a going concern.  The Company's ability to continue as a going concern is dependent upon the Company's ability to generate sufficient revenues to operate profitably or raise additional capital through debt financing and/or through sales of common stock.

The failure to achieve the necessary levels of profitability or obtain the additional funding would be detrimental to the Company.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
 















F-16

-19-
 

PART IV

ITEM 15.                      EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

 
 
Incorporated by reference
Filed
Exhibit
Document Description
Form
Date
Number
herewith
3.1
Articles of Incorporation (12/14/2001).
S-1
4/25/12
3.1
  
 
 
        
3.2
Amended Articles of Incorporation (4/08/2006).
S-1
4/25/12
3.2
  
 
 
        
3.3
Amended Articles of Incorporation (10/17/2011).
S-1
4/25/12
3.3
  
 
 
        
3.4
Amended and Restated Bylaws.
S-1
4/25/12
3.4
  
 
 
        
4.1
Specimen Stock Certificate.
S-1
4/25/12
4.1
  
 
 
        
10.1
Lease Agreement for San Anselmo office.
S-1
4/25/12
10.1
  
 
 
        
10.2
Lease Agreement for North Carolina office.
S-1
4/25/12
10.2
  
 
 
        
10.3
Lease Agreement for San Francisco office.
S-1
4/25/12
10.3
  
 
 
        
10.4
Deed covering Lake County Real Property.
S-1
4/25/12
10.4
  
 
 
        
10.5
Stock Option Plan.
S-1
4/25/12
10.5
  
 
 
        
10.6
Promissory Note – McLellan Investment Corporation.
S-1/A-2
7/24/12
10.6
  
 
 
        
10.7
Promissory Note – Brad Holland.
S-1/A-2
7/24/12
10.7
  
 
 
        
10.8
Employment Agreement – Lynn Davison.
S-1/A-3
9/12/12
10.8
  
 
 
        
10.9
Services Agreement with mfifty dated March 2, 2012.
S-1/A-3
9/12/12
10.9
  
 
 
        
10.10
Share Option Plan with Lynn Davison dated September 3, 2013.
10-Q
11/14/13
10.38
  
           
10.11
Lease Extension Agreement with Annette Kaufman Survivor Trust
dated February 26, 2013.
10-K
3/31/14
10.39
  
 
 
        
10.12
Independent Contractor Agreement with Ashley Garnot dated
August 1, 2013.
10-K
3/31/14
10.40
  
 
 
        
10.13
Non-Disclosure Agreement with Ashley Garnot dated August 1,
2013.
10-K
3/31/14
10.41
  
 
 
        
10.14
Statement of Work with Ashley Garnot dated August 1, 2013.
10-K
3/31/14
10.42
  
 
 
        
10.15
Master Services Agreement with Progress Software Corporation
dated December 6, 2013.
10-K
3/31/14
10.43
  
 
 
        
10.16
Statement of Work (Schedule A) with Progress Software dated
December 6, 2013.
10-K
3/31/14
10.44
  
           
10.17
Statement of Work 2 with Ashley Garnot dated February 2, 2014.
10-K
3/31/14
10.48
  

-20-
 

10.18
Endorsement and Market Agreement with Western Independent
Bankers' Service Corporation, dated March 17, 2014.
10-Q
08/01/14
10.49
  
 
 
        
10.19
Lease with Four Keys dated June 5, 2014.
10-Q
08/01/14
10.50
  
 
 
        
10.20
Statement of Work with lululemon athletica Canada inc. dated
June 12, 2014.
10-Q
11/05/14
10.1
  
 
 
        
10.21
Statement of Work with Microsoft Corporation dated August 28,
2014.
10-Q
11/05/14
10.2
  
 
 
        
10.22
Statement of Work with NuVision Federal Credit Union dated
August 15, 2014.
10-Q
11/05/14
10.3
  
 
 
        
14.1
Code of Ethics.
10-K
3/27/13
14.1
  
 
 
        
31.1
Certification of Principal Executive and Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
      
X
 
 
        
32.1
Certification of Chief Executive and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
      
X
 
 
        
99.7
Letter to the Shareholders.
8-K
4/04/14
99.7
  
 
 
        
101.INS
XBRL Instance Document.
10-Q
11/05/14
101.INS
  
 
 
        
101.SCH
XBRL Taxonomy Extension – Schema.
10-Q
11/05/14
101.SCH
  
 
 
        
101.CAL
XBRL Taxonomy Extension – Calculations.
10-Q
11/05/14
101.CAL
  
 
 
        
101.DEF
XBRL Taxonomy Extension – Definitions.
10-Q
11/05/14
101.DEF
  
 
 
        
101.LAB
XBRL Taxonomy Extension – Labels.
10-Q
11/05/14
101.LAB
  
 
 
        
101.PRE
XBRL Taxonomy Extension – Presentation.
10-Q
11/05/14
101.PRE
  
-21-
 



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this amended report has been signed on its behalf by the undersigned, thereunto duly authorized on this 16th day of December, 2014.

 
TOUCHPOINT METRICS, INC.
 
(the "Registrant")
     
 
BY:
MICHAEL HINSHAW
   
Michael Hinshaw
   
Principal Executive Officer, Principal Accounting Officer, Principal Financial Officer, Treasurer and a member of the Board of Directors

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

Signature
Title
Date
     
MICHAEL HINSHAW
President, Principal Executive Officer,
December 16, 2014
Michael Hinshaw
Treasurer, Principal Financial Officer, Principal Accounting Officer and a Director
  
     
ASHLEY GARNOT
Director
December 16, 2014
Ashley Garnot
    








-22-
 


EXHIBIT INDEX

 
 
Incorporated by reference
Filed
Exhibit
Document Description
Form
Date
Number
herewith
3.1
Articles of Incorporation (12/14/2001).
S-1
4/25/12
3.1
  
 
 
        
3.2
Amended Articles of Incorporation (4/08/2006).
S-1
4/25/12
3.2
  
 
 
        
3.3
Amended Articles of Incorporation (10/17/2011).
S-1
4/25/12
3.3
  
 
 
        
3.4
Amended and Restated Bylaws.
S-1
4/25/12
3.4
  
 
 
        
4.1
Specimen Stock Certificate.
S-1
4/25/12
4.1
  
 
 
        
10.1
Lease Agreement for San Anselmo office.
S-1
4/25/12
10.1
  
 
 
        
10.2
Lease Agreement for North Carolina office.
S-1
4/25/12
10.2
  
 
 
        
10.3
Lease Agreement for San Francisco office.
S-1
4/25/12
10.3
  
 
 
        
10.4
Deed covering Lake County Real Property.
S-1
4/25/12
10.4
  
 
 
        
10.5
Stock Option Plan.
S-1
4/25/12
10.5
  
 
 
        
10.6
Promissory Note – McLellan Investment Corporation.
S-1/A-2
7/24/12
10.6
  
 
 
        
10.7
Promissory Note – Brad Holland.
S-1/A-2
7/24/12
10.7
  
 
 
        
10.8
Employment Agreement – Lynn Davison.
S-1/A-3
9/12/12
10.8
  
 
 
        
10.9
Services Agreement with mfifty dated March 2, 2012.
S-1/A-3
9/12/12
10.9
  
 
 
        
10.10
Share Option Plan with Lynn Davison dated September 3, 2013.
10-Q
11/14/13
10.38
  
 
 
        
10.11
Lease Extension Agreement with Annette Kaufman Survivor Trust
dated February 26, 2013.
10-K
3/31/14
10.39
  
 
 
        
10.12
Independent Contractor Agreement with Ashley Garnot dated
August 1, 2013.
10-K
3/31/14
10.40
  
 
 
        
10.13
Non-Disclosure Agreement with Ashley Garnot dated August 1,
2013.
10-K
3/31/14
10.41
  
 
 
        
10.14
Statement of Work with Ashley Garnot dated August 1, 2013.
10-K
3/31/14
10.42
  
 
 
        
10.15
Master Services Agreement with Progress Software Corporation
dated December 6, 2013.
10-K
3/31/14
10.43
  
 
 
        
10.16
Statement of Work (Schedule A) with Progress Software dated
December 6, 2013.
10-K
3/31/14
10.44
  
 
 
        
10.17
Statement of Work 2 with Ashley Garnot dated February 2, 2014.
10-K
3/31/14
10.48
  
-23-
 



10.18
Endorsement and Market Agreement with Western Independent
Bankers' Service Corporation, dated March 17, 2014.
10-Q
08/01/14
10.49
  
 
 
        
10.19
Lease with Four Keys dated June 5, 2014.
10-Q
08/01/14
10.50
  
 
 
        
10.20
Statement of Work with lululemon athletica Canada inc. dated
June 12, 2014.
10-Q
11/05/14
10.1
  
 
 
        
10.21
Statement of Work with Microsoft Corporation dated August 28,
2014.
10-Q
11/05/14
10.2
  
 
 
        
10.22
Statement of Work with NuVision Federal Credit Union dated
August 15, 2014.
10-Q
11/05/14
10.3
  
 
 
        
14.1
Code of Ethics.
10-K
3/27/13
14.1
  
 
 
        
31.1
Certification of Principal Executive and Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
      
X
 
 
        
32.1
Certification of Chief Executive and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
      
X
 
 
        
99.7
Letter to the Shareholders.
8-K
4/04/14
99.7
  
 
 
        
101.INS
XBRL Instance Document.
10-Q
11/05/14
101.INS
  
 
 
        
101.SCH
XBRL Taxonomy Extension – Schema.
10-Q
11/05/14
101.SCH
  
 
 
        
101.CAL
XBRL Taxonomy Extension – Calculations.
10-Q
11/05/14
101.CAL
  
 
 
        
101.DEF
XBRL Taxonomy Extension – Definitions.
10-Q
11/05/14
101.DEF
  
 
 
        
101.LAB
XBRL Taxonomy Extension – Labels.
10-Q
11/05/14
101.LAB
  
 
 
        
101.PRE
XBRL Taxonomy Extension – Presentation.
10-Q
11/05/14
101.PRE
  





 
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MCX Technologies Corp Reports