Attached files
| file | filename |
|---|---|
| EX-32 - CERTIFICATION - IRONCLAD ENCRYPTION Corp | ex322.htm |
| EX-32 - CERTIFICATION - IRONCLAD ENCRYPTION Corp | ex321.htm |
| EX-31 - CERTIFICATION - IRONCLAD ENCRYPTION Corp | ex312.htm |
| EX-31 - CERTIFICATION - IRONCLAD ENCRYPTION Corp | ex311.htm |
| EX-21 - SUBSIDIARY - IRONCLAD ENCRYPTION Corp | ex21.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
OR
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-53662
IRONCLAD ENCRYPTION CORPORATION
(Exact name of registrant as specified in its charter)
(Formerly known as Butte Highlands Mining Company)
NEVADA |
| 81-0409475 |
(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
777 S. Post Oak Lane, Suite 1700, Houston, TX |
| 77056 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant's telephone number, including area code: (888) 362-7972
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Class A Common Stock, $0.01 par value per share
(Titles of Classes)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. ¨ ¨ Yes x x No
Indicate by check mark if the registrant is not 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 and (2) has been subject to such filing requirements for the past 90 days.
x Yes ¨ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
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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. x Yes ¨ No
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to 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 was approximately $227,829. For purposes of this disclosure, shares of stock held by persons who hold more than 5% of the outstanding shares of common stock, and shares held by officers and directors of the Registrant have been excluded, because such persons may be deemed to be affiliates.
On March 27, 2017, the number of outstanding shares of the Registrant’s $0.001 par value Class A Common Stock was 66,741,579; and the number of outstanding shares of the Registrant’s $0.001 par value Class B Common Stock was 1,538,872.
1
IRONCLAD ENCRYPTION CORPORATION
FORM 10K
December 31, 2016
Table of Contents
Item 1. Description of Business
Item 1B. Unresolved Staff Comments
Item 4. Mine Safety Disclosures
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 13. Certain Relationships and Related Transactions
Item 14. Principal Accountant Fees and Services
2
PART I
Item 1. Description of Business
Forward-looking statements
This Form 10-K contains forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions that are not statements of historical facts. This document and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. The words “believe,” “expect,” “anticipate,” “intends,” “estimates,” “forecast,” “project” and similar expressions identify forward-looking statements.
The forward-looking statements in this document are based upon various assumptions, many of which are based on management’s discussion and analysis or plan of operations and elsewhere in this report. Although we believe that these assumptions were reasonable when made, these statements are not guarantees of future performance and are subject to certain risks and uncertainties, some of which are beyond our control, and are difficult to predict. Actual results could differ materially from those expressed in forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements, which reflect management’s view only as of the date of this report.
History
Ironclad Encryption Corporation, an encryption technology company, as of February 22, 2017 incorporated in the State of Nevada, is formerly known as Butte Highlands Mining Company (hereinafter “Butte” or “the Company”) incorporated in May 1929 under the laws of the State of Delaware for the purpose of exploring and mining the Butte Highland’s (Only Chance) Mine, south of Butte, Montana. Butte ceased significant operations in 1942.
In 2009 Butte registered its shares under the Securities Exchange Act of 1934 (the “Exchange Act”) for the purpose of becoming a reporting company. The Company’s shares then became listed on the OTCQB.
On January 6, 2017, Butte entered into a Share Exchange Agreement with owners of InterLok Key Management, Inc., a Texas corporation wherein it agreed to issue 56,655,891 restricted shares of our common stock in exchange for 100% of the outstanding shares of InterLok Key Management, Inc. common stock. InterLok Key Management, Inc. is engaged in the business of developing and licensing its patented key based encryption methods. On January 6, 2017, Butte completed its Share Exchange Agreement with the owners of InterLok, and issued 56,655,891 restricted shares of our common stock to 29 persons and/or entities in exchange for all of the outstanding shares of InterLok Key Management, Inc. common stock. Immediately following completion of the share exchange agreement, the new Board changed the Company name to Ironclad Encryption Corporation, moved the Company from Delaware to Nevada, and changed the stock symbol to IRNC from BTHI.
Employees
At December 31, 2016 Butte had no employees and utilized the services of outside consultants and contractors to provide additional services to the Company. The Company’s President served without compensation.
Upon execution of the share exchange agreement on January 6, 2017 with InterLok Key Management, Inc. the Board appointed a President, Chief Technology Officer, Vice President of Operations, Vice President of Planning, Vice President of Sales and Vice President of Legal. These are full-time and part-time positions. The company continues to utilize the services of outside consultants and contractors to provide additional services.
Regulation
Environmental Matters
Because the Company was historically engaged in the mineral exploration industry, the possibility exists that the Company may have environmental liabilities. Management has no knowledge of any actions of the Company that might give rise to such potential liabilities, but there can be no assurance that the Company may not, at some future date, be deemed to have environmental liabilities, although the likelihood of such is deemed remote, and the amount and nature of any liabilities is impossible to estimate
3
Item 1A. Risk Factors
Not applicable, as the Company is a smaller reporting company, and is not required to provide the information required by this item.
Item 1B. Unresolved Staff Comments
Not applicable, as the Company is a smaller reporting company, and is not required to provide the information required by this item, however there were no unresolved staff comments during the year ended December 31, 2016.
Item 2. Properties
The Company does not hold an interest in any properties.
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Market for Common Equity and Related Stockholder Matters
a) Market Information . Our Class A Common Stock is quoted in the over-the-counter market on OTCQB with the symbol IRNC, previously BTHI. The following table sets forth the range of high and low bid prices for the years ended December 31, 2016 and 2015. These bid prices reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.
| 2016 | 2015 | ||
| High | Low | High | Low |
First Quarter | $0.31 | $0.31 | $0.51 | $0.51 |
Second Quarter | 1.00 | 0.31 | 0.51 | 0.51 |
Third Quarter | 0.52 | 0.38 | 0.51 | 0.40 |
Fourth Quarter | 0.52 | 0.51 | 0.40 | 0.31 |
b) Holders of Record . As of March 27, 2017, there were approximately 170 holders of record of the Company’s Class A Common Stock, and 727 holders of record of the Company’s Class B Common Stock.
c) Dividends . The Company has paid no dividends and has no plans to pay dividends in the foreseeable future, even if funds are available, as to which there is no assurance. There are no restrictions on the Company's ability to pay dividends.
Item 6. Selected Financial Data
Not applicable
4
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Year ended December 31, 2016 compared to year ended December 31, 2015.
Result of Operations
During 2016, the Company had net loss of $39,733 compared to a net loss of $32,750 during 2015. This loss, which represents increase loss of $6,983over the year ended December 31, 2015 is primarily due to increase in professional fees in the amount of $768 and general and administrative expenses in the amount of $6,224.
Total operating expenses decreased to $39,733 in 2016 from $32,741 in 2015. The difference is due to increases in professional fees and general and administrative expenses.
For 2016, the Company had net other income of $0 from interest expense compared to net other (loss) of ($9) from interest income during 2015.
Liquidity and Capital Resources
The Company’s working capital at December 31, 2016 was $58,870 compared to working capital of $98,603 at December 31, 2015. Working capital decreased primarily because the Company only had no income in 2016 to offset its operating expenses.
Net cash used in operating activities was $42,694 in 2016 compared with $28,534 in 2015.
Cash flow from investing activities was zero in 2016, remaining unchanged from 2015.
Cash flow from financing activities was zero in 2016, remaining unchanged from 2015.
As a result, cash decreased by $42,694 in 2016. The Company had cash of $60,125 as of December 31, 2016.
The Company estimates that the annual costs associated with being a reporting public company will be approximately $40,000. This amount is comprised of accounting fees of approximately $15,000 and legal fees of $25,000.
Critical Accounting Policies
In the notes to the audited financial statements for the year ended December 31, 2016 included in the Company’s Form 10-K, the Company discussed those accounting policies that are considered to be significant in determining the results of operations and our financial position. We believe that the accounting principles utilized by us conform to accounting principles generally accepted in the United States of America.
The preparation of financial statements requires management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these judgments are subject to an inherent degree of uncertainty. On an on-going basis, we evaluate our estimates, such as those related to bad debts, inventories, intangible assets, warranty obligations, product liability, revenue, and income taxes. We base our estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities. The actual results may differ from these estimates under different assumptions or conditions.
5
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
We lack an operating history, have never had more than nominal revenues, have no current prospects for significant future revenues, and have losses which we expect to continue into the future. As a result, we may have to suspend or cease operations.
We were incorporated on May 1929 for the purpose of mining. On January 6, 2017, we completed an exchange of restricted shares of our common stock for 100% of the capital stock of InterLok Key Management, Inc. a Texas corporation and changed our business focus from mining to patented encryption technology. We have no operating history upon which an evaluation of our future success or failure can be made. Losses are a result of the issuance of stock and, incorporation, legal and accounting. We have never had revenues and we do not have any current prospects for future revenues. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:
*
our ability sell encrypted software and hardware
*
our ability to generate revenues from the sale of encrypted software and hardware
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our ability to reduce development costs.
Based upon current plans, we expect to incur operating losses in future periods. This will happen because there are expenses associated with the research and development of encryption applications. As a result, we may not generate revenues in the future. Failure to generate revenues could cause us to suspend or cease operations.
Because we are small and do not have much capital, we may have to limit our development activity which may result in a loss of your investment.
Because we are small and do not have much capital, we must limit our development activity. As such we may not be able to complete a software and hardware program that is as thorough as we would like. Therefore, we have not considered and will not consider any activity beyond our current patented technology.
Because our Chief Technology Officer has other outside business activities he will only be devoting 30% of his time or approximately twelve hours per week to our operations.
Risks associated with the Company:
Because our officers and directors will own more than 50% of the outstanding shares they will control the company and will be able to decide who will be directors. As a result you may not be able to elect any directors.
Total shares following the merger: 59,637,780
Need for substantial additional capital.
We are in need of additional capital, without which our ability to continue as a going concern will be jeopardized. In order to fund our ongoing, day-to-day operations, we will continue to require significant amounts of additional capital, and the failure to obtain such additional capital will materially adversely affect our operations. In order to fully implement our plan of operation, it will be necessary to raise at least an additional $750,000. There is no assurance that we will be successful in raising additional capital. If we raise additional capital through the sale of common stock, you could experience dilution. If we are unsuccessful in raising such additional capital, you could lose your entire investment.
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.
The Financial Industry Regulation Authority (FINRA) has adopted rules that apply to broker/dealers in recommending an investment to a customer. The broker/dealers must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker/dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker/dealers to recommend our common stock to their customers, which may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers charge higher transactional fees for penny stock transactions. As a result, fewer broker/dealers may be willing to make a market in our common stock, reducing our stockholder’s ability to resell shares of our common stock.
6
Our future sales of our common shares could cause our stock price to decline.
There is no restriction on our ability to issue additional shares. We cannot predict the effect, if any, that market sales of our common shares or the availability of shares for sale will have on the market price prevailing from time to time. Sales by us of our common shares in the public market, or the perception that our sales may occur, could cause the trading price of our stock to decrease or to be lower than it might be in the absence of those sales or perceptions.
The market price of our common stock may be volatile.
The trading price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various factors. Some of the factors that may cause the market price of our common stock to fluctuate include:
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fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;
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changes in estimates of our financial results or recommendations by securities analysts;
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failure of any of our products to achieve or maintain market acceptance;
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changes in market valuations of similar companies;
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significant products, contracts, acquisitions or strategic alliances of our competitors;
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Success of competing products or services;
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changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;
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regulatory developments;
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litigation involving our company, our general industry or both;
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additions or departures of key personnel;
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investors’ general perception of us; and
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changes in general economic, industry and market conditions.
7
Item 8. Financial Statements
![[ironclad10kmar3117v4001.jpg]](ironclad10kmar3117v4001.jpg)
802 N. Washington St.
Spokane, WA 99201
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Ironclad Encryption Corporation
(f/k/a Butte Highlands Mining Co.)
We have audited the accompanying balance sheet of Ironclad Encryption Corporation as of December 31, 2016 and 2015 and the related statements of operations, stockholder’s equity, and cash flows for each of the years in the two-year period ended December 31, 2016. Ironclad Encryption Corporation’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required 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 financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ironclad Encryption Corporation as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and would be dependent upon outside funding, which raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
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Fruci & Associates II, PLLC Spokane, WA | |
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March 31, 2017 |
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![[ironclad10kmar3117v4003.gif]](ironclad10kmar3117v4003.gif)
8
The accompanying notes are an integral part of these financial statements.
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IRONCLAD ENCRYPTION CORPORATION (fka BUTTE HIGHLANDS MINING COMPANY) STATEMENTS OF OPERATIONS | ||||||
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| Year Ended | ||
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| December 31 | ||
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| 2016 |
| 2015 |
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REVENUES | $ | - | $ | - | ||
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OPERATING EXPENSES |
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| Professional fees |
| 27,813 |
| 27,045 | |
| Depreciation |
| - |
| - | |
| Officers & directors fees |
| - |
| - | |
| General and administrative |
| 11,920 |
| 5,696 | |
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| TOTAL OPERATING EXPENSES |
| 39,733 |
| 32,741 |
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LOSS FROM OPERATIONS |
| (39,733) |
| (32,741) | ||
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OTHER INCOME (EXPENSES) |
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| Interest income |
| - |
| 1 | |
| Interest expense |
| - |
| (10) | |
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| TOTAL OTHER INCOME (EXPENSES) |
| - |
| (9) |
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LOSS BEFORE TAXES |
| (39,733) |
| (32,750) | ||
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INCOME TAXES |
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| Income tax benefit |
| - |
| - | |
| Tax expense |
| - |
| - | |
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| - |
| - |
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NET LOSS | $ | (39,733) | $ | (32,750) | ||
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| NET LOSS PER COMMON SHARE, |
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| BASIC AND DILUTED | $ | (0.01) | $ | (0.01) |
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| WEIGHTED AVERAGE NUMBER OF |
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| COMMON STOCK SHARES |
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| OUTSTANDING, BASIC AND DILUTED |
| 2,981,889 |
| 2,981,889 |
The accompanying notes are an integral part of these financial statements.
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IRONCLAD ENCRYPTION CORPORATION (fka BUTTE HIGHLANDS MINING COMPANY) STATEMENT OF STOCKHOLDERS' EQUITY (Audited) | ||||||||||||||||
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| Additional |
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| Other |
| Total | ||||||
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| Class B |
| Paid-in |
| Accumulated |
| Comprehensive |
| Stockholders' | ||||
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| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Income |
| Equity |
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Balance, December 31, 2013 |
| 1,327,698 | $ | 1,328 |
| 1,654,191 | $ | 1,654 | $ | 269,469 | $ | (101,098) | $ | - | $ | 171,353 |
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Net income for period ending December 31, 2014 |
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| - |
| - |
| (40,000) |
| - |
| (40,000) |
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Balance, December 31, 2014 |
| 1,327,698 | $ | 1,328 |
| 1,654,191 | $ | 1,654 | $ | 269,469 | $ | (141,098) | $ | - | $ | 131,353 |
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Shares converted from Class B |
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to Class A |
| 115,319 |
| 115 |
| (115,319) |
| (115) |
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| - |
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Net income for period ending December 31, 2015 |
| - |
| - |
| - |
| - |
| - |
| (32,750) |
| - |
| (32,750) |
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Balance, December 31, 2015 |
| 1,443017 | $ | 1,443 |
| 1,538,872 | $ | 1,539 | $ | 269,469 | $ | (173,848) | $ | - | $ | 98,603 |
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Net income for period ending December 31, 2016 |
| - |
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| - |
| - |
| (39,733) |
| - |
| (39,733) |
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Balance, December 31, 2016 |
| 1,443,017 | $ | 1,443 |
| 1,538,872 | $ | 1,539 | $ | 269,469 | $ | (213,581) | $ | - | $ | 58,870 |
The accompanying notes are an integral part of these financial statements.
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IRONCLAD ENCRYPTION CORPORATION (fka BUTTE HIGHLANDS MINING COMPANY) STATEMENTS OF CASH FLOWS | ||||||||
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| Year Ended | |||
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| December 31 | |||
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| 2016 |
| 2015 | ||
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net loss | $ | (39,733) |
| $ | (32,750) | ||
| Adjustments to reconcile net income (loss) to net cash |
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| Changes in assets and liabilities: |
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| Decrease (increase) in prepaid expense |
| 63 |
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| (173) | |
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| Increase (decrease) in accounts payable |
| (3,024) |
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| 4,389 | |
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| Increase (decrease) in income tax payable |
| - |
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| Net cash used by operating activities |
| (42,694) |
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| (28,534) | |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS |
| (42,694) |
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| (28,534) | |||
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Cash, beginning of period |
| 102,819 |
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| 131,353 | |||
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Cash, end of period | $ | 60,125 |
| $ | 102,819 | |||
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SUPPLEMENTAL CASH FLOW INFORMATION: |
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Interest paid | $ | - |
| $ | - | |||
Income taxes paid | $ | - |
| $ | - | |||
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The accompanying notes are an integral part of these financial statements.
12
IRONCLAD ENCRYPTION CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2016
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Ironclad Encryption Corporation, formerly Butte Highlands Mining Company (hereinafter “Butte” or “the Company”) was incorporated in May 1929 under the laws of the State of Delaware for the purpose of exploring and mining the Butte Highland’s (Only Chance) Mine, south of Butte, Montana. The Company was reorganized in October 1996 for the purpose of acquiring and developing mineral properties. As of the date of reorganization, stockholders representing approximately 76% of the outstanding capital stock could not be located. In order to obtain the quorum necessary for the special meetings, the Company obtained an order from the Superior Court of Spokane County, Washington appointing a trustee for the benefit of those stockholders which could not be located.
As of May 17, 2007 the Company had disposed of all of its historical mineral properties or claims, and reentered the development stage. On January 6, 2017, we changed the focus of our business when we acquired all of the ownership interests of InterLok Key Management, Inc., a Texas corporation engaged in the business of developing and licensing its patented key based encryption methods.
Attempts to safeguard information from unauthorized use have met with limited success. The increasing number of data thefts and security breaches, as well as new and pending legislation is driving many businesses to shift their focus and make data security a top priority.
Stronger encryption is a key component to the overall solution to this problem. InterLok was formed to develop and license a new approach that enhances the strength of today’s key-based encryption methods. Through its patented Dynamic Synchronous Key Management technology, InterLok brings innovation to data encryption security. Its solutions increase the effectiveness of current encryption products. InterLok’s unique design also prevents hacker attacks by providing perpetual authentication for communication sessions. As the next generation data security leader, InterLok technology addresses current market perception of encryption: cost, implementation and human interaction. As of March 28, 2017 InterLok is a wholly owned subsidiary of Ironclad Encryption Corporation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Butte Highlands Mining Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied in the preparation of the financial statements.
Accounting Method
The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.
Earnings (Losses) Per Share
Basic net income/loss per share was computed by dividing the net income/loss by the weighted average number of shares outstanding during the year. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time they were outstanding. The Company presents EPS on a combined basis because Class B common stock has all of the rights and privileges of Class A common stock, except for voting rights. See Note 1 and 3. Additionally, if the two class method were used the EPS would be identical.
Cash Equivalents
The Company considers cash, certificates of deposit, and debt instruments with a maturity of three months or less when purchased to be cash equivalents.
Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of the Company’s financial position and results of operations.
13
IRONCLAD ENCRYPTION CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2016
Fair Value of Financial Instruments
The Company's financial instruments as defined by ASC 825-10-50, include cash, receivables, accounts payable and accrued expenses. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at December 31, 2016.
The standards under ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FASB ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little of no market data, which require the reporting entity to develop its own assumptions.
The Company did not have any assets measured at fair value at December 31, 2016.
Going Concern
As shown in the accompanying financial statements, the Company has incurred operating losses since inception. As of December 31, 2016, the Company has no financial resources with which to achieve its objectives and obtain profitability and positive cash flows. As shown in the accompanying balance sheets and statements of operations, the Company has an accumulated deficit of $213,581 and the Company's working capital is $58,870. Achievement of the Company's objectives will be dependent upon the ability to obtain additional financing, and generate revenue from current and planned business operations, and control costs. The Company is in the development stage and has generated no operating income.
The Company plans to fund its future operations by joint venturing or obtaining additional financing from investors and/or lenders. However there is no assurance that the Company will be able to achieve these objectives, therefore substantial doubt about its ability to continue as a going concern exists. The financial statements do not include adjustments relating to the recoverability of recorded assets nor the implication of associated bankruptcy costs should the Company be unable to continue as a going concern.
Provision for Taxes
Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition . Under the approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by ASC 740-10-25-5 to allow recognition of such an asset. See Note 5.
New Accounting Pronouncements
The Company has evaluated the authoritative guidance issued during the year ended December 31, 2016 and does not expect the adoption of these standards to have a material effect on its financial position or results of operations.
Reclassification
Certain amounts in prior period financial statements have been reclassified to conform to the presentation in the current period financial statements. The reclassification had no effect on reported net losses, total assets or total equity.
NOTE 3 – COMMON STOCK
Upon formation in 1929, the Company issued 1,500,000 shares of its common stock in exchange for mineral claims. During 1937, the Company’s total authorized common stock was increased to 2,500,000 under a reorganization plan.
During 1996, due to a long period of inactivity, stockholders representing approximately 76% of the outstanding common stock of the Company could not be located. The Company obtained an order from the Superior Court of Spokane County, Washington appointing a “trustee for the benefit of those stockholders who cannot be located”. After obtaining this order, the Company adopted a plan of reorganization. Under this plan of reorganization, the Company increased authorized common stock to 25,000,000 shares of which 23,292,907 were designated as Class A voting common stock and 1,707,093 were designated as Class B nonvoting common stock. All of the Company’s locatable stockholders received share-for-share Class A voting common stock. All of the Company’s unlocated stockholders received share-for-share Class B nonvoting common stock, which is held in trust for missing shareholders pending knowledge of their location.
14
IRONCLAD ENCRYPTION CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2016
If a previously unlocated recorded owner or beneficiary of a record owner is subsequently located, they must present satisfactory evidence and presentation of a share certificate or an “Affidavit of Loss” with an agreement to indemnify the Company for any future damage as a result of the certificate having been sold or transferred but not lost. Upon satisfaction of these requirements, Class A voting common stock will be issued share-for-share in exchange for the Class B nonvoting common stock. The relevant shares of Class B nonvoting common stock will then be cancelled.
During the year ended December 31, 2007, the Company issued 500,000 shares of Class A common stock to two directors for $35,000 in cash, according to the Company’s stock option plan.
During the years ended December 31, 2008 through December 31, 2011, the Company did not issue any shares of common stock.
During the year ended December 31, 2012, the Company increased its authorized capital to 521,707,093 shares and changed its par value to $0.001 per share, of which 500,000,000 shares are designated as Class A Common Stock, 1,707,093 shares are designated as Class B Common Stock and 20,000,000 designated as Preferred Stock. All amounts in the foregoing financials reflect this change.
During the period ending March 31, 2016 the Company identified 115,319 Class B shares that had previously been cancelled and re-issued as Class A shares. The shares have been reclassified and all affected periods have been updated to reflect this change.
NOTE 4 – RELATED PARTY TRANSACTIONS
The Company utilized office facilities provided by its president. The value of the office facilities provided by the Company’s president is nominal and immaterial to the financial statements, additionally the value of the services provided by the Company’s president are nominal and immaterial to the financial statements.
NOTE 5 – INCOME TAXES
Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by ASC 740-10-25-5.
Topic 740 in the Accounting Standards Codification (ASC 740) prescribes recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, 2016, the Company had taken no tax positions that would require disclosure under ASC 740.
The Company files income tax returns in the U.S. federal jurisdiction. The federal jurisdiction has a statute of limitations of three years. Federal income tax returns prior to year ending December 31, 2011 are closed.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes.
Significant components of the deferred tax assets at an anticipated tax rate of 35% for the periods ended December 31, 2016 and December 31, 2015 are as follows:
| December 31, 2016 |
| December 31, 2015 |
Net operating loss carryforwards | 215,479 |
| 175,750 |
Deferred tax asset | 75,418 |
| 61,500 |
Valuation allowance for deferred asset | (75,418) |
| (61,500) |
Net deferred tax asset | - |
| - |
At December 31, 2016, the Company has net operating loss carryforwards of approximately $215,480 which will begin to expire in the year 2032. The change in the allowance account from December 31, 2015 to December 31, 2016 was $13,920.
15
IRONCLAD ENCRYPTION CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2016
NOTE 6 – SUBSEQUENT EVENTS
On January 6, 2017, we entered into a Share Exchange Agreement with owners of InterLok Key Management, Inc., a Texas corporation wherein we agreed to issue 56,655,891 restricted shares of our common stock in exchange for 100% of the outstanding shares of InterLok Key Management, Inc. common stock. InterLok Key Management, Inc. is engaged in the business of developing and licensing its patented key based encryption methods. On January 6, 2017, we completed our Share Exchange Agreement with the owners of InterLok, and issued 56,655,891 restricted shares of our common stock to 29 persons and/or entities in exchange for all of the outstanding shares of InterLok Key Management, Inc. common stock. Immediately following completion of the share exchange agreement, the new Board changed the Company name to Ironclad Encryption Corporation, moved the Company from Delaware to Nevada, and changed the stock symbol to IRNC from BTHI.
On January 16, 2017, the Delaney Equity Group, LLC received 75,000 shares of restricted Class A Common Stock at a base value of $0.15 per share, and options to purchase 75,000 shares of Class A Common Stock at $0.75 per share over a three year period, as part of a compensation package for brokerage services.
On January 20, 2017 as previously reported on Form 3A these Ironclad Officers received the following Class A Common stock options at a purchase price of $0.15 per share that vest on January 6, 2018:
•
JD McGraw, President: 1,000,000 shares per year over four years, for a total of 4,000,000 shares. And, a performance based option to purchase 10,000,000 shares at $0.15 per share if the stock price reaches $15 per share.
•
Daniel Lerner, Chief Technology: 1,000,000 per year over three year, for a total of 3,000,000 shares.
•
Jeff Barrett, Vice President of Planning: 250,000 per year over four years, for a total of 1,000,000 shares.
•
Len Walker, General Council: 250,000 shares per year over four years, for a total of 1,000,000 shares.
On January 31, 2017, Ironclad issued a Private Placement Memorandum (PPM) to accredited investors to sell up to 9,333,334 shares of the Company’s $0.001 par value restricted Class A Common Stock at a price of $0.15 per share and raise up to $1,400,000. As of March 27, 2017, 8,317,671 the shares have been sold to 31 investors. The PPM is expected to close on March 31, 2017.
On January 31, 2017, per the terms of the Share Exchange Agreement on January 6, 2017, Paul Hatfield received 250,000 shares of restricted Class A Common Stock at a base value of $0.03 per share, options to purchase 350,000 shares of Class A Common Stock at $0.15 per share over a two year period, and $25,000 in cash.
On February 1, 2017, Halliburton Investor Relations received options to purchase 100,000 shares of Class A Common Stock at $0.15 per share over a three year period, as part of a compensation package for investor relations services.
On March 13, 2017, Lisa Morgan, an Ironclad Encryption writing consultant, received options to purchase 100,000 shares of Class A Common Stock at $0.15 per share over a four year period at 25,000 shares per year, with an option period of twenty-four months.
On March 15, 2017, two convertible notes, each in the amount of $30,000 were converted to 200,000 shares of restricted Class A Common Stock at $0.15 per share. The total 400,000 shares are accounted for in the above mentioned PPM offering. As well, the two owners of the convertible notes were each granted options to purchase 250,000 shares of Class A Common Stock at a purchase price of $0.15 until August 9, 2018.
On March 21, 2017, Mendy Ouzillou, an Ironclad marketing consultant received options to purchase 20,000 shares of Class A Common Stock at $0.15 per share over a three year period.
All related financial information for the year ended December 31, 2016 for the private company, InterLok Key Management, Inc. is contained in a corresponding amended 8K dated March 29, 2017.
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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
In connection with the preparation of this annual report on Form 10-K, an evaluation was carried out by the Company’s management, with the participation of the Chief Executive Officer/ Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of December 31, 2016. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Company’s management concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Securities and Exchange Commission’s rules and forms.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process, under the supervision of the Principal Executive Officer/ Financial Officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP). Internal control over financial reporting includes those policies and procedures that:
·
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets;
·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s 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. 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.
The Company’s management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment, management identified a material weakness in internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
17
The material weakness identified is described below.
Lack of Appropriate Independent Oversight. The board of directors has not provided an appropriate level of independent oversight of the Company’s consolidated financial reporting and procedures for internal control over financial reporting. The independent directors do not provide oversight of the adequacy of financial reporting and internal control procedures. In addition, due to insufficient staffing and the lack of full-time personnel, it was not possible to ensure appropriate segregation of duties between incompatible functions, and formalized monitoring procedures have not been established or implemented.
As a result of the material weakness in internal control over financial reporting described above, the Company’s management has concluded that, as of December 31, 2016, the Company’s internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework issued by COSO.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended December 31, 2016, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
None
PART III
Item 10. Directors, Executive Officers and Corporate Governance
(a) Identification of Directors and Executive Officers:
As of December 31, 2016 are as follows:
Business Experience of Directors and Executive Officers
Paul A. Hatfield has been a Director of the Company since 1986. From 1986 to 1991 Mr. Hatfield served as the Company’s Vice President and has served as the President of the Company since 1991. From 1989 to 2003 Mr. Hatfield served as the Vice-President of Mining for N. A. Degerstrom, Inc. From April 2003 until May, 2005 Mr. Hatfield was employed as a project manager for Old Castle Corporation. From May 2005 until February 2015 Mr. Hatfield was employed by Spokane Rock Products, Inc as the Asphalt Manager. From February 2015 until the present Mr. Hatfield has been employed as a Senior Project Manager by the Granite Consgtruction Company is Carlsbad, California. Mr. Hatfield is a graduate of Montana Tech of the University of Montana with a Bachelor of Science degree. Mr. Hatfield also serves as the Company’s principal financial officer.
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Susan Ann Robinson-Trudell has been a Director and Vice-President of the Company since 1991. Since 2004, Ms. Robinson –Trudell has been the Director of the Nevada Cancer Institute From 1997 to 2004 she served as the Executive Director of the American Cancer Society. Ms. Robinson –Trudell is graduated from the University of California at Santa Barbara with a Bachelor of Arts Degree. She received her M.B.A. from the University of Nevada and is currently enrolled in post-graduate study at Duke University. Ms. Robinson-Trudell is the sister of Paul Hatfield, the President of the Company.
Doris Marie Prater has been a Director of the Company since 1984. For the past twenty-five years Ms. Prater has been employed as a secretary by Opportunities, Inc. a privately held company in Great Falls, Montana.
As of March 10, 2017 are as follows:
In connection with the Share Exchange, our current directors agreed to resign and be replaced by nominees of Interlok. Doris Marie Prater resigned and Jeff B. Barrett was appointed to fill that vacancy. Thereafter, Susan Ann Robinson-Trudell resigned and James D. McGraw was appointed to fill that vacancy. Paul Hatfield resigned and Gregory B. Lipsker was appointed to fill the final vacancy on the Board of Directors. The resignations of Doris Marie Prater, Susan Ann Robinson-Trudell and Paul Hatfield as directors and the subsequent appoint of a new board of directors became effective on January 16, 2017 upon the conclusion of the 10-day period that followed the date on which an Information Statement on Schedule 14f-1 was filed with the Securities and Exchange Commission (“SEC”) and transmitted to our Class A Common Stock stockholders of record on the effective date of the Share Exchange Agreement, January 6, 2017.
Name and Address | Age | Affiliation with Registrant | Expiration of Term |
Jeff Barrett | 59 | Vice President of Planning and Director | Annual Meeting |
Greg Lipsker | 66 | Director | Annual Meeting |
J. D. McGraw | 58 | CEO/President and Director | Annual Meeting |
Daniel Lerner | 62 | Chief Technology Officer | Annual Meeting |
Miguel Yanez | 44 | Vice President of Sales, Latin America | Annual Meeting |
Dan Dinhoble | 51 | Vice President of Operations | Annual Meeting |
Len Walker | 46 | Vice President of Legal | Annual Meeting |
Business Experience of Directors and Executive Officers
Jeff B. Barrett has an entrepreneurial background including a twenty-year track record founding and operating a high-end custom electronics sales and installation company. He gained extensive experience in sales, marketing, management, research, analyzing, and budgeting as the owner and operator of a successful business. During the previous five years Mr. Barrett has been engaged in management consulting for commercial and residential security.
J.D. McGraw is the co-founder of Nova Biosource Fuels, Inc. and served as its President and as a Board Member. Mr. McGraw addressed venture capital and investment funding needs for Nova and provided knowledge and experience with the intricacies of taking companies public. Mr. McGraw has administered services to over 150 companies including Adtec Digital, American Rice, Blockbuster Video, Chuck E. Cheese, Dryper, DataVan, International Recovery, Republic Industries and Swift Energy. Over his twenty-five-year career, he has held posts as founder, CEO and President in a wide range of business sectors and development, including oil and gas and computer technology, and has experience in large-scale roll-ups. Mr. McGraw holds a Secret security clearance.
Greg Lipsker is a graduate of the Georgetown University Law Center. For 35 years Mr. Lipsker practiced law specializing in corporate transactions and securities law, focusing on junior mineral exploration companies. For more than the past five years Mr. Lipsker’s principal occupation has been as the owner/winemaker of Barrister Winery in Spokane, Washington. During that period Mr. Lipsker’s legal practice has been limited to serving as legal counsel to Butte Highlands Mining Company.
19
Daniel Lerner serves as Chief Technology Officer for Teledrill Inc., and is responsible for all aspects of technology, including design, engineering, production and field testing. Mr. Lerner has t experience as a developer of technological products, electronics, computer software, and network security services and is an experienced leader of multi-disciplinary teams in the technology industry. He has architected data acquisition and signal processing systems and patented, designed and implemented ultra-high security data encryption. Mr. Lerner’s previous experience as Senior Applications Engineer for Teradyne, primarily servicing Texas Instruments, included electronic design, system program administration and sales assistance for a $1.5 billion semiconductor production test equipment manufacturer. He received a BSEE and MSEE from La Salle University.
Dan Dinhoble currently serves as chief operating officer for Wisegate, a private professional advisory and IT security network. Mr. Dinhoble brings over twenty years of experience in product execution, managing teams and marketing products. He directed a company start-up, adding over 150 customers in the first year and successfully driving development of platform extensions. His career includes managing virtualization alliances with Microsoft, VMware, and Citrix for Oracle Corporation and leading a 40 million dollar acquisition and integration of an enterprise role management vendor for Sun Microsystems. Mr. Dinhoble earned a BS from Texas A&M University and an MBA from The University of Texas.
Miguel Yanez brings a background of executive leadership with inveterate experience in the fields of national security operations and international diplomacy, global relationship building, personnel management, and military/police training. As a prior Naval Commando and lead bilingual undercover officer with the Houston Police Department, he is experienced in counterterrorism operations, from asymmetrical warfare to developing operating procedures for American allies, and has held high level security posts such as protecting the presidents of Iraq and newly elected prime ministers. Mr. Yanez has industry experience in cybersecurity and has conducted operations in various troubled spots worldwide. He attended Texas Tech University and the University of Houston.
Len Walker is the president and founder of Legacy Rock Corporation, a construction and services company focused on government opportunities. Mr. Walker specializes in drafting government contracts and coordinating financial and legal agreements. A former Marine Corps officer and helicopter pilot, he flew 3,000 hours and served five combat tours in Afghanistan and Iraq. He was awarded the Meritorious Service Medal and Air Medal with 10 Strike Flights. He completed his 20 year career as the Executive Officer and Chief-of-Staff of a Marine Corps squadron, second in command of a 200-person organization with nine aircraft and $100 million in equipment. As the Security Manager, he was responsible for maintaining and safeguarding all classified material and equipment, as well as initiating and revoking security clearances. Mr. Walker earned a BBA from Baylor University, a JD from South Texas College of Law, and holds a Top Secret security clearance.
Board Committees
The Board of Directors has no standing audit, nominating or compensation committees, as the entire board performs the function of each of these committees. The Company adopted a Code of Ethics in 2010 for its President and Senior Financial Officers.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company pursuant to Section 240.16a-3 during the most recent fiscal year, and Form 5 and amendments thereto furnished to the Registrant with respect to the most recent fiscal year, no person who at any time during the fiscal year was a director, officer, or beneficial owner or more than ten percent of any class of equity securities of the Company failed to file on a timely basis, as disclosed in the above Forms, reports required by Section 16(a) of the Exchange Act.
Item 11. Executive Compensation
No directors’ fees were paid during the years ended December 31, 2016 and December 31, 2015. No officers were compensated by the Company for the years ended December 31, 2016 and December 31, 2015. As of December 31, 2016 the Company provided no stock options, warrants, or stock appreciation rights, and there were no employment contracts, incentive pay agreements or outstanding options with any officer or director.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
(a) Security ownership of certain beneficial owners, and (b) Security Ownership of Management:
At December 31, 2016 one person of record owned more than 5% of the Company's Class A Common Stock as follows:
Title of Class | Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class (1) |
Class A Common | Paul A. Hatfield | 875,566 direct | 65.95 |
(1) Based upon 1,327,698 total Class A Common Shares outstanding at April 8, 2015 | |||
(b) Security Ownership of Management:
At March 10, 2017 these Directors and Officers owned the Company's Class A Common Stock as follows:
Name of |
| Number of | Percentage of |
Beneficial Owner (1) | Position | Shares | Ownership(1) |
|
|
|
|
Jeff Barrett | Vice President of Planning | 15,900,000 | 26.66% |
|
|
|
|
Greg Lipsker | Director | 250,000 | .42% |
|
|
|
|
J. D. McGraw | CEO/President | 23,531,081(2) | 39.46% |
|
|
|
|
Daniel Lerner | Chief Technology Officer | 5,000,000 | 8.38% |
|
|
|
|
Miguel Yanez | Vice President of Latin America | 550,000 | 0.92% |
|
|
|
|
Dan Dinhoble | Vice President of Operations | 50,000 | .08% |
|
|
|
|
Len Walker | Vice President of Legal | 150,000 | .25% |
|
|
|
|
All officers and directors as a group |
|
|
|
(7 individuals) |
| 45,431,081 | 76.17% |
(1) Based upon 59,637,780 Class A and Class B Common Shares outstanding after Share Exchange
(2) Includes options to acquire up to 500,000 shares from Paul Hatfield, a former Director and President of the Registrant
(c) No arrangements are in place for a change in control of the Company.
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Item 13. Certain Relationships and Related Transactions
In a related agreement, on June 20, 2016 Paul Hatfield entered into a Stock Purchase Agreement with JD McGraw, of Houston, Texas. Mr. McGraw was instrumental in negotiating the LOI. Pursuant to the terms of the Stock Purchase Agreement, Mr. McGraw, or his assigns, have been granted the right to purchase from Mr. Hatfield a maximum of Five-Hundred Thousand (500,000) Shares at a price of $0.15 per share. The Stock Purchase Agreement is effective for a period of twenty-four (24) months commencing upon the closing of the transaction contemplated by the LOI.
Neither JD McGraw nor Jeff Barrett are independent directors. Greg Lipsker is the only independent member of the Board of Directors.
Item 14. Principal Accountant Fees and Services
Audit Fees
The aggregate fees billed for professional services rendered by the Company’s principal accountant and the predecessor for the audit and the reviews of the Company’s financial statements in 2016 and 2015 were $19,000 and $16,000 respectively.
Audit Related Fees
The Company incurred no fees during the last two fiscal years for assurance and related services by the Company’s principal accountant that were reasonably related to the performance of the audit or review of the Company’s financial statements, and not reported under “Audit Fees” above.
Tax Fees
During the last two fiscal years, the Company incurred $1135 in 2016 and $950 in 2015 for professional services rendered by the Company’s principal accountant for tax compliance, tax advice or tax planning.
All Other Fees
The Company incurred no other fees during the last two fiscal years for products and services rendered by the Company’s principal accountant.
Our pre-approval policies and procedures for the board, acting in lieu of a separately designated, independent audit committee, described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.
The percentage of hours expended on the principal accountant’s engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full time, permanent employees was 0%.
22
PART IV
Item 15. Exhibits
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
IRONCLAD ENCRYPTION CORPORATION
(Registrant)
/s/ James D. McGraw
By :
James D. McGraw
President (Principal Executive Officer) and Principal Financial Officer
Date: March 31, 2017
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ James D. McGraw
By :
James D. McGraw
Director and President (Principal Executive Officer) and Principal Financial Officer
Date: March 31, 2017
/s/ Jeff B. Barrett
By :
Jeff B. Barrett
Director
Date: March 31, 2017
/s/ Greg Lipsker
By:
Greg Lipsker
Director
Date: March 31, 2017
24