ITEM 1. BUSINESS
Nature of Business
TetriDyn Solutions, Inc. (“TetriDyn”), specializes in providing business information technology (IT) solutions to our customers. We optimize business and IT processes by utilizing systems engineering methodologies, strategic planning, and system integration to add efficiency and value to our customers’ business processes and to help our customers identify critical success factors in their business.
We provide business IT solutions primarily to the healthcare industry. We are expanding our service offerings into select other professional industries as we are able to commercialize product ideas for developing markets.
Organization
TetriDyn Solutions, Inc. (“TetriDyn-Idaho”), was organized under the laws of the state of Idaho on October 3, 2000. On March 22, 2006, TetriDyn-Idaho and its shareholders completed a stock exchange agreement with Creative Vending Corp., a Florida corporation. Under the terms of the agreement, the TetriDyn-Idaho shareholders exchanged all of the outstanding TetriDyn-Idaho common stock for 17,170,563 shares of Creative common stock. Creative also issued 829,437 shares to a consultant for services primarily rendered to TetriDyn-Idaho under a July 2005 agreement. Creative had 2,009,350 shares of common stock outstanding prior to the reorganization that remained outstanding after the transaction. The members of the board of directors of TetriDyn-Idaho and its management became the board of directors and management of Creative. TetriDyn-Idaho continues as TetriDyn’s subsidiary through which operations are conducted.
Due to the TetriDyn-Idaho shareholders controlling TetriDyn-Idaho before and after the completion of the agreement, TetriDyn-Idaho was considered the accounting acquirer. The transaction was therefore recognized as a 1-to-2.07 stock split of the common stock of TetriDyn-Idaho and the reverse acquisition of Creative by TetriDyn-Idaho. Creative did not meet the definition of a business under Emerging Issues Task Force Issue 98-3, Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business; accordingly, the acquisition of Creative was recognized as a nonmonetary exchange whereby the 2,009,350 shares of common stock constructively issued to the Creative shareholders were recorded at $4,500, which was the value of the liabilities assumed.
On June 1, 2006, Creative changed its domicile to the state of Nevada through a merger with and into a newly formed subsidiary, TetriDyn Solutions, Inc., a Nevada corporation. The reorganization of Creative into the Nevada surviving corporation was accomplished by a 1-for-1 share exchange by the shareholders. Under Nevada law, our authorized capital consists of 5,000,000 shares of preferred stock, $0.001 par value, and 100,000,000 shares of common stock, $0.001 par value.
IT Solutions
We provide IT solutions to the healthcare industry, but we are expanding our business IT solutions to select other industries. We believe the IT solutions needed by the healthcare industry are similar to IT solutions needed by other industries. All modern companies require a reliable network and computing infrastructure; however, many small-to-midsize businesses cannot afford to employ a full IT department with advanced engineering and related management capabilities to effectively use and manage such resources. We provide a cost-effective conduit to an array of IT skills from management to engineering to basic technical assistance.
Our IT solutions range from full-service IT management to the sale of software and hardware products. We have categorized our solutions into four interrelated and complimentary areas, each of which is discussed in more detail below:
1. Healthcare Solutions
2. IT Services
3. ChargeCatcher Revenue Recovery Services
4. Radio Frequency Identification (RFID) Solutions
Healthcare Solutions
We are a value-added reseller (VAR) for McKesson Corporation healthcare software and service packages and have recently upgraded to becoming a One McKesson VAR, which provides us with additional priority and services from McKesson. We sell, install, implement, support, and train on the following McKesson products: Medisoft Clinical, Lytec MD, and Total Practice Partner. McKesson Corporation, currently ranked 18th on the FORTUNE 500, is one of the largest healthcare companies in the world.
We also provide custom software development for specialized electronic medical record, or EMR, charts, customized reports, and interfaces for other software systems.
We had developed and marketed our proprietary AeroMD EMR product nationwide through direct marketing and a group of VARs throughout the country. Our AeroMD EMR product offered medical offices the wireless ability to perform all office tasks from scheduling and examinations to prescription and billing processes. However, we have recently moved our AeroMD EMR product into the maintenance phase of product development, in which we will continue to support our existing AeroMD EMR customers for the next two years but we will no longer pursue new customers for the product. This decision was based on business analysis in the light of the recent changes in the healthcare industry that would have required extensive and expensive changes to the product to meet the definition of “meaningful use” to qualify for the American Recovery and Reinvestment Act of 2009 stimulus funding. We have been working with our AeroMD EMR customers to transition them to McKesson EMR products in the future.
IT Services
For customers whose technical needs have surpassed their technical capabilities, we provide either the management or the outsourcing of their internal IT department. When managing the customer’s IT department, we emphasize the development of well-rounded skills relevant to the contemporary IT industry within the department. Senior team members work with the organization’s administration and leadership teams to align the business processes and IT investments with the vision of the organization’s chief officers and board members.
We provide a hybrid approach using proven methodologies born from systems engineering, software engineering, engineering management, and project management. The overall value proposition to our customers is based on our ability to leverage our business process analysis, service and delivery infrastructure, leadership position in IT innovation, and technology expertise. Our commitment to excellence is demonstrated in the success of our customers’ visions.
IT services that we provide to our customers include, but are not limited to, the following:
·
IT Infrastructure Assessment
·
IT Strategic Planning
·
Network Optimization
·
Engineering & Software Services
·
Systems Lifecycle Engineering
·
Technology Contract Review
We provide customers the ability to purchase computer and networking equipment, installation services, and follow-on support necessary for successful operation. We forge strategic relationships with reliable IT vendors to offer clients the best quality at a price that meets their budgetary demands. We have a team of experts that designs systems with high reliability and installs them according to all manufacturers’ specifications. Finally, after the system is designed and installed, we provide the support to keep it running efficiently.
ChargeCatcher Revenue Recovery Services
In 2011, we introduced a new proprietary product and associated services called ChargeCatcher. ChargeCatcher specifically targets revenue recovery in hospital environments. ChargeCatcher augments a hospital staff’s ability to capture lost revenue due to data-entry errors, missing charge sheets, or other process errors. We perform advanced data mining and statistical correlation methodologies on a hospital’s chargeable items, while also employing artificial intelligence algorithms, to identify services and materials that were expended but never billed. By reviewing the identified missed charges, hospitals can correct their processes going forward.
ChargeCatcher fees are set on a contingency basis in which we are paid a percentage of the recovered revenue. This revenue model protects our customers if they have little lost revenue, while it benefits us for high-quality data analysis that results in identifying increased lost revenue.
RFID Solutions
Starting in 2009, we expanded our previous radio-frequency identification, or RFID, research and development to address problem areas in the healthcare segment, including issues surrounding patient care, optimized business processes for the healthcare providers, and improved reporting of incidents. Our team has a unique combination of radio frequency, electrical, firmware, software, database, and systems engineering expertise. This blend of expertise allows us to create a complete, integrated system that includes: hardware devices worn by individuals; communications equipment; complex databases; and software systems that provide advanced reporting and analysis tools.
In 2011, we established our first two beta-test sites for our healthcare RFID solutions that include automatic fall detection, motion detection, identification of location within a facility, and proximity of facility employee to facility resident. Beta testing was initialized in the first quarter of 2011.
Previous Livestock Segment Activities
Until the fourth quarter of 2009, we also were engaged in providing business IT solutions to the livestock segment through a variable interest subsidiary, Southfork Solutions, Inc., which is developing electronic livestock tracking systems, in which we had an approximately 40% and 39% interest at December 31, 2010 and 2009, respectively. Effective October 2009, we are no longer in management or financial control of this entity, although we continue to hold our approximately 40% minority interest. Effective September 30, 2009, we changed from the variable interest consolidation method of accounting for this entity to the cost method of accounting for this entity. See Note 8, Investments, of the Notes to Consolidated Financial Statements.
Research and Development
We incurred costs of $162,245 and $194,003 for research and development for our continuing operations during the years ended December 31, 2010 and 2009, respectively. In addition, we routinely complete customer-required engineering and related developmental activities in connection with the delivery of various customized products that indirectly support our research and development effort.
Intellectual Property
We believe our intellectual properties are critical to our business and growth. We rely on trade secret protection; confidentiality agreements with employees, consultants, customers, and others with whom we interact; and patent laws to protect our proprietary rights. We do not believe that our business IT solutions segment is dependent upon or obtains a competitive advantage from our patents or that the expiration of any patent would materially affect our business.
We frequently review our research and development efforts and product identification needs to consider whether we should seek additional patent or trademark protection for new developments or product offerings.
We do not believe that any of our products or other proprietary rights infringe upon the rights of third parties. However, we cannot assure that others may not assert infringement claims against us in the future and recognize that any such assertion may require us to incur legal and other defense costs, enter into compromise royalty arrangements, or terminate the use of some technologies. Further, we may be required to incur legal and other costs to protect our proprietary rights against infringement by third parties.
Employees
As of April 12, 2011, we had nine employees, including eight full-time employees, consisting of two executive officers, who are also directors and perform technical and managerial functions, six other technical and sales employees, and one part-time administrative staff.
Government Regulation; Environmental Compliance
Our activities are not subject to present or expected probable material governmental regulation, including environmental laws.
Competition
The market for IT services and products is intensely competitive and highly fragmented, with minimal barriers to entry. We expect competition to increase in the future, and there can be no assurance that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not have a material adverse effect on our business, financial condition, and operating results.
Potential competitors may have substantially greater research and product development capabilities and financial, technical, marketing, and human resources than we have. As a result, these competitors may:
·
succeed in developing products that are equal to or superior to our products or that achieve greater market acceptance than our products;
·
devote greater resources to developing, marketing, or selling their products;
·
respond more quickly to new or emerging technologies or technical advances and changes in customer requirements, which could render our technologies or products obsolete;
·
introduce products that make the continued development of our current and future products uneconomical;
·
obtain patents that block or otherwise inhibit our ability to develop and commercialize our products;
·
withstand price competition more successfully than we can;
·
establish cooperative relationships among themselves or with third parties that enhance their ability to address the needs of our prospective customers; and
·
take advantage of acquisition or other opportunities more readily than we can.
In our business IT solutions segment, we believe competition is based principally on providing resourceful creative solutions at competitive prices with quick, responsive service. We cannot assure that our efforts to meet these competitive factors will be successful.
ITEM 1A.
ITEM 1A. RISK FACTORS
In addition to the negative implications of all information and financial data included in or referred to directly in this periodic report, you should consider the following risk factors. This periodic report contains forward-looking statements and information concerning us, our plans, and other future events. Those statements should be read together with the discussion of risk factors set forth below, because those risk factors could cause actual results to differ materially from such forward-looking statements.
We cannot predict the impact on our activities of the current economic crises.
The current economic crises may adversely affect our ability to expand or generate new sales from our healthcare industry customers, which are likely to continue to face reduced patient and procedure revenues and patient and third-party payments. We may be unable to expand sales in a constricted or further constricting healthcare industry economy.
The auditors’ report for our most recent fiscal year contains an explanatory paragraph about our ability to continue as a going concern.
The report of our auditors on our consolidated financial statements for the years ended December 31, 2010 and 2009, contains an explanatory paragraph about our ability to continue as a going concern.
We will require substantial amounts of additional capital from external sources.
We will require substantial additional funds to implement our marketing plan and pursue expansion of our business IT segment. The extent of our future capital requirements will depend on many factors, including competing technological and market developments; effective commercialization activities; establishment of strategic alliances, joint ventures, or other collaborative arrangements; and other factors not within our control. We anticipate that we will seek required funds from external sources.
We may seek required funds through the sale of equity or other securities. Our ability to complete an offering on acceptable terms will depend on many factors, including the condition of the securities markets generally and for companies such as us at the time of such offering; the business, financial condition, and prospects at the time of the proposed offering; our ability to identify and reach a satisfactory arrangement with prospective underwriters; and various other factors, many of which are outside our control. There can be no assurance that we will be able to complete an offering on terms favorable to us or at all. The issuance of additional equity securities may dilute the interest of our existing shareholders or may subordinate their rights to the superior rights of new investors.
We may also seek additional capital through strategic alliances, joint ventures, or other collaborative arrangements. Any such relationships may dilute our interest in any specific project and decrease the amount of revenue that we may receive from such project. There can be no assurance that we will be able to negotiate any strategic investment or obtain required additional funds on acceptable terms, if at all. In addition, our cash requirements may vary materially from those now planned because of the results of future research and development; results of product testing; potential relationships with our strategic or collaborative partners; changes in the focus and direction of our research and development programs; competition and technological advances; issues related to patent or other protection for proprietary technologies; and other factors.
If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate our planned marketing efforts; to obtain funds through arrangements with strategic or collaborative partners that may require us to relinquish rights to certain of our technologies, product candidates, or products that we would otherwise seek to develop or commercialize ourselves; or to license our rights to such products on terms that are less favorable to us than might otherwise be available.
Product development still comprises a substantial part of our operations, and we face significant technological uncertainties.
Our prospects must be considered in light of the risks, expenses, delays, problems, and difficulties that we may encounter in entering new markets with our business IT solutions, including:
·
our ability to maintain and expand a sales network to expose our product to potential customers and to complete sales;
·
our ability to manage our limited working capital;
·
our ability to scale systems and fulfillment capabilities to accommodate any growth of our business;
·
our ability to meet competition;
·
our ability to access and obtain additional capital when required;
·
our ability to develop and maintain strategic relationships; and
·
our dependence upon key personnel.
We cannot be certain that our business strategy will be successful or that it will successfully address these risks.
Recently adopted national healthcare legislation may adversely affect our business.
The recently adopted national healthcare legislation will implement a number of changes in the way healthcare is delivered and paid for in the United States, which may result in market disruptions and other currently unforeseen circumstances that may limit or reduce the demand for our services or the ability of our current and future customers to pay for them. We cannot predict the potential negative impact of these legislative reforms on our business.
If we are unable to protect our intellectual property, we may lose a valuable asset or incur costly litigation to protect our rights.
Our success will depend, in part, upon our intellectual property rights. Litigation to enforce intellectual property rights or to protect trade secrets could result in substantial costs and may not be successful. Any inability to protect intellectual property rights could seriously harm our business, operating results, and financial condition. In addition, the laws of certain foreign countries may not protect intellectual property rights to the same extent as do the laws of the United States. Our means of protecting our intellectual property rights in the United States or abroad may not be adequate to fully protect those intellectual property rights.
Claims that we infringe upon the intellectual property rights of others could be costly to defend or settle.
Litigation regarding intellectual property rights is common in the software industry. We expect that software technologies and services may be increasingly subject to third-party infringement claims as the number of competitors in our industry segment grows and the functionality of products and services in different industry segments overlaps. We may from time to time encounter disputes over rights and obligations concerning intellectual property. Although we believe that our intellectual property rights will be sufficient to allow us to market products and services without incurring third-party liability, third parties may bring claims of infringement against us. These claims may or may not have merit. Any litigation to defend against claims of infringement or invalidity could result in substantial costs and diversion of resources. Furthermore, a party making a claim could secure a judgment that requires us to pay substantial damages. A judgment could also include an injunction or other court order that could prevent us from selling products or services. Our business, operating results, and financial condition could be harmed if any of these events occurred.
We are heavily dependent on our executive officers and technical personnel.
We are dependent upon the continued participation and assistance of our key management and technical personnel, including David Hempstead, Chief Executive Officer, Chief Financial Officer, and President, and Antoinette Knapp, Deputy Chief Executive Officer and Vice President. We do not have and generally do not intend to acquire keyman life insurance on any of our executives. We will require the recruitment and retention of additional personnel, including technical advisors and management, and the development of additional expertise by existing management. The inability to acquire such services or to develop such expertise could have a material adverse effect on our operations.
We will need to hire and retain a number of key employees who may be difficult to find.
Growth may require us to hire additional personnel, including software engineers, systems engineers, customer support personnel, marketing personnel, and operational personnel. Competition for these individuals is intense, and we may not be able to attract or retain additional highly qualified personnel in the future. The failure to attract, motivate, and retain such additional employees could seriously harm our business.
Any substantial increase in sales will require skilled management of growth.
As our operations expand, our success will depend on our ability to manage continued growth, including integration of our executive officers, directors, and consultants into an effective management and technical team; to formulate strategic alliances, joint ventures, or other collaborative arrangements with third parties; to commercialize and market our proposed products and services; and to monitor and manage these relationships on a long-term basis. If our management is unable to integrate these resources and manage growth effectively, the quality of our products and services, our ability to retain key personnel, and the results of our operations would be materially and adversely affected.
If we provide software products that are unreliable, we could lose customers and revenues.
Software products may contain unknown and undetected errors or performance problems. Many serious defects in software products are frequently found during the period immediately following introduction of new or enhancements to existing products. Although we will attempt to resolve all errors we believe our customers would consider serious, no technology is error-free. Undetected errors or performance problems may be discovered after customers begin using our products. This could result in lost revenues or delays in customer acceptance and could be detrimental to our reputation, which could harm our business, operating results, and financial condition.
We will be exposed to the risk of product liability.
The implementation of our business plan entails risks of product liability. We will seek to obtain product liability insurance, but there can be no assurance that we will be able to obtain such insurance or, if we are able to do so, that we will be able to do so at rates that will make it cost-effective. Any successful product liability claim made against us could substantially reduce or eliminate any economic return to us or our shareholders and could have a significant adverse impact on our future.
If we become subject to service-related liability claims, they could be time-consuming and costly to defend.
Because our customers will use our products and services for mission-critical applications in the medical and other fields, any errors, defects, or other performance problems could result in liability or financial or other damages to our customers. They could seek damages for losses from us that, if successful, could have a material adverse effect on our business, operating results, or financial condition. Although we intend for our agreements with customers to contain provisions designed to limit exposure to service-related liability claims, existing or future laws or unfavorable judicial decisions could negate these limitations of liability provisions. A service-related liability claim brought against us, even if unsuccessful, could be time-consuming, costly to defend, and harm our reputation.
We are authorized to issue substantial additional shares of stock, which would dilute the ownership of our stockholders.
We have authorized 100,000,000 shares of common stock and 5,000,000 shares of preferred stock. Of these, 21,881,863 shares of common stock and 1,200,000 shares of preferred stock are issued and outstanding as of the date of this report. Our board of directors also has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued shares. Any such issuance will dilute the percentage ownership of shareholders and may further dilute the book value of the shares of common stock.
Penny stock regulations will impose certain restrictions on resales of our securities, which may cause an investor to lose some or all of its investment.
The Securities and Exchange Commission has adopted regulations that generally define a “penny stock” to be any equity security that has a market price (as defined) of less than $5.00 per share that is not traded on a national securities exchange or that has an exercise price of less than $5.00 per share, subject to certain exceptions. As a result, our common stock is subject to rules that impose additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Further, if the price of the stock is below $5.00 per share and the issuer does not have $2.0 million or more net tangible assets or is not listed on a registered national securities exchange, sales of such stock in the secondary trading market are subject to certain additional rules promulgated by the Securities and Exchange Commission. These rules generally require, among other things, that brokers engaged in secondary trading of penny stocks provide customers with written disclosure documents, monthly statements of the market value of penny stocks, disclosure of the bid and asked prices, and disclosure of the compensation to the broker-dealer and the salesperson working for the broker-dealer in connection with the transaction. These rules and regulations may affect the ability of broker-dealers to sell our common stock, thereby effectively limiting the liquidity of our common stock. These rules may also adversely affect the ability of persons that acquire our common stock to resell their securities in any trading market that may exist at the time of such intended sale.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
This item is not applicable to our company.
ITEM 2.
ITEM 2. PROPERTIES
Our principal executive offices are located at 1651 Alvin Ricken Drive, Pocatello Idaho, where we lease approximately 5,500 square feet of office space from an unrelated party at $1,700 per month on a month-to-month basis.
ITEM 3.
Item 3.
Articles of Incorporation and Bylaws
3.01
Articles of Incorporation of TetriDyn Solutions, Inc. dated May 15, 2006
Incorporated by reference from the current report on Form 8-K filed June 7, 2006.
3.02
Bylaws of TetriDyn Solutions, Inc. adopted May 26, 2006
Incorporated by reference from the current report on Form 8-K filed June 7, 2006.
3.03
Designation of Rights, Privileges, and Preferences of Series A Preferred Stock
Incorporated by reference from the annual report on Form 10-K for the year ended December 31, 2009, filed March 31, 2010.
Item 4.
Item 4.
Instruments Defining the Rights of Security Holders, Including Debentures
4.01
Specimen stock certificate
Incorporated by reference from the current report on Form 8-K filed June 7, 2006.
Item 10.
Material Contracts
10.01
Technology License Agreement, effective October 16, 2001, by Bechtel B WXT Idaho, LLC, and TetriDyn Solutions, Inc.
Incorporated by reference from the current report on Form 8-K filed March 28, 2006.
10.02
Lease Document between Idaho State University and TetriDyn Solutions, Inc. dated September 1, 2004
Incorporated by reference from the current report on Form 8-K filed March 28, 2006.
10.03
Employment Agreement between TetriDyn Solutions, Inc. and David W. Hempstead dated January 21, 2006**
Incorporated by reference from the current report on Form 8-K filed March 28, 2006.
10.04
Employment Agreement between TetriDyn Solutions, Inc. and Antoinette R. Knapp dated January 21, 2006**
Incorporated by reference from the current report on Form 8-K filed March 28, 2006.
10.06
Amendment dated October 9, 2009, to Consulting Agreement dated July 17, 2007, with Southfork Solutions, Inc., also included
Incorporated by reference from the quarterly report on Form 10-Q for the quarter ended September 30, 2009, filed November 10, 2009.
10.07
Loan Agreement between TetriDyn Solutions, Inc., and Southeast Idaho Council of Governments, Inc., together with related promissory notes, dated December 23, 2009
Incorporated by reference from the annual report on Form 10-K for the year ended December 31, 2009, filed March 31, 2010.
Exhibit
Number*
Title of Document
Location
10.08
Promissory Note dated June 1, 2010
Incorporated by reference from the current report on Form 8-K filed June 2, 2010.
10.09
Promissory Note dated August 12, 2010
Incorporated by reference from the quarterly report on Form 10-Q for the quarter ended June 30, 2010, filed August 16, 2010.
10.10
Promissory Note dated December 22, 2010
Incorporated by reference from the current report on Form 8-K filed December 27, 2010.
10.11
Promissory Note dated February 19, 2011
Incorporated by reference from the current report on Form 8-K filed February 25, 2011.
Item 14.
Code of Ethics
14.01
TetriDyn Solutions, Inc., Code of Ethics
Incorporated by reference from the annual report on Form 10-KSB for the year ended December 31, 2006, filed April 2, 2007.
Item 16.
Letter on Change of Certifying Accountant
16.01
Letter from Hansen, Barnett & Maxwell to Securities and Exchange Commission
Incorporated by reference from the current report on Form 8-K filed January 22, 2007.
Item 21.
Subsidiaries of the Small Business Issuer
21.01
Schedule of subsidiaries
This filing.
Item 31.
Rule 13a-14(a)/15d-14(a) Certifications
31.01
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14
This filing.
Item 32.
Section 1350 Certifications
32.01
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
This filing.
__________
*
The number preceding the decimal indicates the applicable SEC reference number in Item 601, and the number following the decimal indicating the sequence of the particular document. Omitted numbers in the sequence refer to documents previously filed with the SEC as exhibits to previous filings, but no longer required.
**
Identifies each management contract or compensatory plan or arrangement required to be filed as an exhibit, as required by Item 15(a)(3) of Form 10-K.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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 date indicated.
Dated: April 13, 2011
/s/ David W. Hempstead
David W. Hempstead, Director
Principal Executive Officer
Principal Financial and Accounting Officer
/s/ Antoinette R. Knapp
Antoinette R. Knapp, Director
/s/ Orville J. Hendrickson
Orville J. Hendrickson, Director
/s/ Larry J. Ybarrondo
Larry J. Ybarrondo, Director
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
We will furnish to the Securities and Exchange Commission, at the same time that it is sent to stockholders, any proxy or information statement that we send to our stockholders in connection with our 2011 annual stockholders’ meeting.
TETRIDYN SOLUTIONS, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AND
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 and 2009
TETRIDYN SOLUTIONS, INC.
Page
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2010 and December 31, 2009
Consolidated Statements of Operations for the Years Ended December 31, 2010 and 2009
Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2010 and 2009
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010 and 2009
Notes to Consolidated Financial Statements for the Years Ended December 31, 2010 and 2009
Webb & Company, P.A.
Certified Public Accountants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of:
TetriDyn Solutions, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of TetriDyn Solutions, Inc. and Subsidiary (the “Company”) as of December 31, 2010 and December 31, 2009 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the two years then ended. These financial statements are the responsibility of the Company’s management. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly in all material respects, the financial position of TetriDyn Solutions, Inc. and Subsidiary (the “Company”) as of December 31, 2010 and December 31, 2009 and the results of its operations and its cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company had a net loss from continuing operations of $400,227 and used $165,001 of cash in operating activities for the year ended December 31, 2010. The Company had a working capital deficiency of $346,135 and a stockholders’ deficiency of $746,619 as of December 31, 2010. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Webb & Company, P.A.
WEBB & COMPANY, P.A.
Certified Public Accountants
Boynton Beach, Florida
April 13, 2011
1501 Corporate Drive, Suite 150 Ÿ Boynton Beach, FL 33426
Telephone: (561) 752-1721 Ÿ Fax: (561) 734-8562
www.cpawebb.com
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 1 - Organization and Summary of Significant Accounting Policies
Nature of Business - TetriDyn Solutions, Inc. (the “Company”), specializes in providing business information technology (IT) solutions to its customers. The Company optimizes business and IT processes by utilizing systems engineering methodologies, strategic planning, and system integration to add efficiency and value to its customers’ business processes and to help its customers identify critical success factors in their business.
Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, an Idaho corporation also named TetriDyn Solutions, Inc. (“TetriDyn-Idaho”), and results of discontinued operations of its partially owned variable interest entity, Southfork Solutions, Inc., from January 1, 2009, through September 30, 2009. Intercompany accounts and transactions have been eliminated in consolidation.
Business Segments - The Company has only one segment for 2010. For 2009, the Company’s services can be broadly classified into two principal segments: the business IT solutions segment and the livestock segment. The business IT solutions segment provides business IT solutions within the healthcare industry, although the segment is in the process of expanding the solutions to other select industries. The livestock segment was focused on providing business IT solutions specifically within the livestock industry. The Company’s involvement in the livestock segment ended in the fourth quarter of 2009 (see Note 8).
Use of Estimates - In preparing financial statements in conformity with generally accepted accounting principles (GAAP), management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from these estimates.
Cash and Cash Equivalents - For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
Revenue Recognition - Revenue from software licenses, related installation, and support services is recognized when earned and realizable. Revenue is earned and realizable when persuasive evidence of an arrangement exists; services, if requested by the customers, have been rendered and are determinable; and collectability is reasonably assured. Amounts received from customers prior to these criteria being met are deferred. Revenue from the sale of software is recognized when delivered to the customer or upon installation of the software if an installation contract exists. Revenue from post-contract support service contracts is recognized as the services are provided, determined on an hourly basis. The Company recognizes the revenue received for unused support hours under support service contracts that have had no support activity after two years. Revenue applicable to multiple-element fee arrangements is divided among the software, the installation, and post-contract support service contracts using vendor-specific objective evidence of fair value, as evidenced by the prices charged when the software and the services are sold as separate products or arrangements.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
The Company’s AeroMD EMR, electronic medical records software, is provided as turnkey software that has been customized for specific medical specializations. The Company installs the software at the customer’s location for a fee and charges the customer a monthly license fee, based on the number of operating workstations, under a one- or two-year usage agreement. The customer is entitled to all systems upgrades during the term of the agreement. At the end of their contracts, customers may continue using AeroMD by entering into a new license with the Company. The Company also sells installation and post-contract support service contracts on an hourly basis. The Company does not provide any rights of return or warranties on its AeroMD EMR software or on its support service contracts.
Long-Lived Assets - The Company accounts for long-lived assets under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 350, “Accounting for Goodwill and Other Intangible Assets,” and FASB ASC Topic 360, “Accounting for Impairment or Disposal of Long-Lived Assets.” In accordance with FASB ASC Topic 350 and FASB ASC Topic 360, long-lived assets, goodwill, and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, goodwill, and intangible assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets.
Going Concern- The accompanying consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern. As reflected in accompanying consolidated financial statements, the Company had a net loss of $400,227 and used $165,001 of cash in operating activities for the year ended December 31, 2010. The Company had a working capital deficiency of $346,135 and a stockholders’ deficiency of $746,619 as of December 31, 2010. The ability of the Company to continue as a going concern is dependent on the Company’s ability to increase its sales and obtain external funding for its product development. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.
Income Taxes - The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and on the amount of operating loss carryforwards, and are measured using the enacted tax rates and laws that will be in effect when the temporary differences and carryforwards are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.
Fair Value of Financial Instruments - The carrying amounts of the Company’s current portion of accounts receivable, prepaid expenses, accounts payable, accrued liabilities, unearned revenue, notes payable, and related-party convertible note payable approximate fair value due to the relatively short period to maturity for these instruments.
Property and Equipment - Property and equipment are recorded at cost. Maintenance, repairs, and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful life of the asset, which is set at five years for computing equipment and vehicles and seven years for office equipment. Gains or losses on dispositions of property and equipment are included in the results of operations when realized.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Inventory - Inventory is recorded at cost and the Company utilizes the First-In, First-Out (FIFO) cost flow method. Gains or losses on dispositions of inventory are included in the results of operations when realized.
Stock-Based Compensation - On May 15, 2006, at a special shareholders’ meeting, the Company’s shareholders approved the 2006 Long-Term Incentive Plan under which up to 4,000,000 shares of common stock may be issued. The 2006 plan is to be administered either by the board of directors or by the appropriate committee to be appointed from time to time by such board of directors. Awards granted under the 2006 plan may be incentive stock options (“ISOs”) (as defined in the Internal Revenue Code), appreciation rights, options that do not qualify as ISOs, or stock bonus awards that are awarded to employees, officers, and directors that, in the opinion of the board or the committee, have contributed or are expected to contribute materially to the Company’s success. In addition, at the discretion of the board of directors or the committee, options or bonus stock may be granted to individuals that are not employees, officers, or directors, but contribute to the Company’s success.
On June 17, 2009, at the Company’s annual shareholders’ meeting, the Company’s shareholders approved the 2009 Long-Term Incentive Plan under which up to 4,000,000 shares of common stock may be issued. The 2009 plan is to be administered either by the board of directors or by the appropriate committee to be appointed from time to time by such board of directors. Awards granted under the 2009 plan may be incentive stock options (“ISOs”) (as defined in the Internal Revenue Code), appreciation rights, options that do not qualify as ISOs, or stock bonus awards that are awarded to employees, officers, and directors that, in the opinion of the board or the committee, have contributed or are expected to contribute materially to the Company’s success. In addition, at the discretion of the board of directors or the committee, options or bonus stock may be granted to individuals that are not employees, officers, or directors, but contribute to the Company’s success.
Equity instruments issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB ASC 505, “Share-Based Payment.” Emerging Issues Task Force, or EITF, Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a: (a) performance commitment, as defined, is reached; or (b) the earlier of: (i) the non-employee performance is complete; or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the EITF.
Effective January 1, 2006, the Company adopted the provisions of FASB ASC 505 for its stock-based compensation plan. Under FASB ASC 505, all employee stock-based compensation is measured at the grant date, based on the fair value of the option or award, and is recognized as an expense over the requisite service, which is typically through the date the options or awards vest. The Company adopted FASB ASC 505 using the modified prospective method. Under this method, for all stock-based options and awards granted prior to January 1, 2006, that remain outstanding as of that date, compensation cost is recognized for the unvested portion over the remaining requisite service period, using the grant-date fair value measured under the original provisions of FASB ASC 505 for pro forma and disclosure purposes. Furthermore, compensation costs will also be recognized for any awards issued, modified, repurchased, or cancelled after January 1, 2006.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
As the result of adoption of FASB ASC 505, the Company recognized no compensation during the years ended December 31, 2010, and December 31, 2009 (see Note 6).
Net Profit (Loss) Per Common Share - Basic and diluted net profit (loss) per common share is computed based upon the weighted-average stock outstanding as defined by FASB ASC 260, “Earnings Per Share.” As of December 31, 2010 and 2009, 3,465,000 and 3,497,000, respectively, of common share equivalents for granted stock options were antidilutive and not used in the calculation of diluted net loss per share. Additionally, as of December 31, 2010 and 2009, 5,000,000 and 0, respectively, of common share equivalents for convertible note payables were antidilutive and not used in the calculation of diluted net loss per share.
Reclassifications - Certain amounts in the 2009 information have been reclassified to conform to the 2010 presentation. These reclassifications had no impact on the Company’s net loss or cash flows.
Restatement - On October 5, 2010, the Company determined that it had not properly presented the disposal of its variable interest entity on the Consolidated Statements of Cash Flows under ASC 230-10-45-4, which requires the Company to classify the cash held by the variable interest entity upon deconsolidation as cash used in investment activities. As a result of this adjustment, the Company amended its Form 10-K for the year ended December 31, 2009. The adjustment did not have any effect on the Consolidated Statement of Operations or on the net income (loss) per share for the year ended December 31, 2009.
Note 2 - Property and Equipment
Property and equipment consist of the following as of December 31, 2010 and 2009:
Depreciation expense during the years ended December 31, 2010 and 2009, was $15,351 and $13,636, respectively.
Note 3 - Inventory
The Company’s inventory is comprised of regular inventory and direct materials to be used in the manufacture of new products. The Company had inventory as of December 31, 2009, that consisted of one piece of equipment valued at $739. During the year ended December 31, 2010, the Company received computer chips in exchange for reduction of a former variable interest subsidiary’s debt to the Company by $63,432.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 4 - Notes Payable and Revolving Credit Agreements
In February 2010, the Company paid the balance of $19,035 in full for its note payable to a bank that was due April 2010.
Effective in June 2010, one economic development lender agreed to suspend all loan payments toward principal and interest for six months on two separate loans. The balances of the two loans were $27,045 and $145,132 as of December 31, 2010.
Effective in July 2010, a separate economic development lender agreed to suspend all loan payments toward principal and interest for six months. The balance of the loan was $104,829 as of December 31, 2010.
Notes payable are summarized as follows:
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Annual maturities of notes payable as of December 31, 2010, were as follows:
Note 5 - Convertible Notes Payable to Related Party
In June 2010, the Company borrowed $50,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $5,000 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2013.
In August 2010, the Company borrowed an additional $50,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $5,000 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2013.
In December 2010, the Company borrowed an additional $50,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $5,000 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2013.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 6 - Stockholders’ Equity
Common Stock - As of January 1, 2009, the Company had 21,381,863 common shares issued and outstanding.
On June 17, 2009, at the Company’s annual shareholders’ meeting, the Company’s shareholders approved the 2009 Long-Term Incentive Plan under which up to 4,000,000 shares of common stock may be issued. The 2009 plan is to be administered either by the board of directors or by the appropriate committee to be appointed from time to time by such board of directors. Awards granted under the 2009 plan may be incentive stock options (“ISOs”) (as defined in the Internal Revenue Code), appreciation rights, options that do not qualify as ISOs, or stock bonus awards that are awarded to employees, officers, and directors that, in the opinion of the board or the committee, have contributed or are expected to contribute materially to the Company’s success. In addition, at the discretion of the board of directors or the committee, options or bonus stock may be granted to individuals that are not employees, officers, or directors, but contribute to the Company’s success.
On December 28, 2009, the Company granted 150,000 shares of common stock to each of its outside directors (300,000 total shares) for their services valued at the fair value on the date of grant of $16,800. The Company also granted 200,000 shares of common stock to its employees valued at the fair value on the date of grant of $11,200.
No options were granted in 2009 or 2010.
A summary of the status of the Company’s stock options as of December 31, 2010, and the changes during the period ended are presented below:
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
A summary of the status of the Company’s stock options as of December 31, 2009, and the changes during the period ended are presented below:
Preferred Stock - On November 12, 2009, the Company’s Executive Compensation Committee, consisting of two independent directors, authorized the issuance of 600,000 shares Series A Preferred Stock to each of the Company’s executives (1,200,000 total shares) at a total value of $53,455. Each share of Series A Preferred Stock is entitled to 100 votes, voting with the common stock as a single class, except when voting as a separate class is required by law, and to 1/20 of the dividends on common stock and in distributions on dissolution and liquidation.
Note 7 - Concentrations
Sales - The Company had two customers that represented 17% and 13% of sales for the year ended December 31, 2010. The two customers were both regional critical access hospitals that purchased services, hardware, and software from the Company. The Company had one customer that represented 52% of sales for the year ended December 31, 2009. This customer was a regional hospital that contracted with the Company for IT consulting and management services. The agreement with the customer expired in 2009 and was not renewed.
Accounts Receivable - The Company had four customers that represented 10%, 14%, 20%, and 36% of the accounts receivable for the year ended December 31, 2010. The 10% and 14% accounts receivables were for services and hardware and have both been paid in full in January 2011. The 20% and 36% accounts receivables are accounts that are on payment plans and are current on their payments. The Company had one customer that represented 93% of the accounts receivable for the year ended December 31, 2009. This accounts receivable was for engineering services provided to Southfork Solutions, Inc. The Company and Southfork reached a settlement agreement in which the accounts receivable were paid with a combination of cash, equipment, and inventory. (See Note 8.)
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 8 - Investments
Until the fourth quarter of 2009, the Company was engaged in providing business IT solutions to the livestock segment through a variable interest subsidiary, Southfork Solutions, Inc., which was developing electronic livestock tracking systems, in which the Company had an approximately 39% interest at December 31, 2009. Effective October 2009, the Company is no longer in management or financial control of this entity, although as of December 31, 2010, it holds an approximately 40% minority interest. Effective September 30, 2009, the Company changed from the variable interest consolidation method of accounting for this entity to the cost method of accounting for this entity.
Note 9 - Income Taxes
As of December 31, 2010, the Company has net operating loss carry-forwards of approximately $2,530,423 that expire, if not used, from 2022 through 2030. The valuation allowance at December 31, 2010, was $974,396. The net change in the valuation allowance for the year ended December 31, 2010, was a decrease of $349,024. The Company paid no income taxes during the years ended December 31, 2010 and 2009. Deferred tax assets and related valuation allowance were as follows at December 31, 2010 and 2009:
The following is a reconciliation of the tax benefit of pretax loss at the U.S. federal statutory rate with the benefit from income taxes:
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 10 - Commitments and Contingencies
In November 2009, the Executive Compensation Committee extended the annual salaries for the Chief Executive Officer and the Deputy Chief Executive Officer at $108,000 and $96,000, respectively, through calendar year 2010. However, Mr. Hempstead and Ms. Knapp voluntarily forfeited a portion of their 2009 and 2010 salaries to reduce the outgoing cash flow of the Company.
In March 2011, the Executive Compensation Committee extended the annual salaries for the Chief Executive Officer and the Deputy Chief Executive Officer at $108,000 and $96,000, respectively, through calendar year 2011 and for subsequent calendar years until otherwise modified in subsequent Executive Compensation Committee resolution.
Note 11 - Subsequent Event
In February 2011, the Company borrowed $25,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $2,500 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2014.
Item 10.
Material Contracts
10.01
Technology License Agreement, effective October 16, 2001, by Bechtel B WXT Idaho, LLC, and TetriDyn Solutions, Inc.
Incorporated by reference from the current report on Form 8-K filed March 28, 2006.
10.02
Lease Document between Idaho State University and TetriDyn Solutions, Inc. dated September 1, 2004
Incorporated by reference from the current report on Form 8-K filed March 28, 2006.
10.03
Employment Agreement between TetriDyn Solutions, Inc. and David W. Hempstead dated January 21, 2006**
Incorporated by reference from the current report on Form 8-K filed March 28, 2006.
10.04
Employment Agreement between TetriDyn Solutions, Inc. and Antoinette R. Knapp dated January 21, 2006**
Incorporated by reference from the current report on Form 8-K filed March 28, 2006.
10.06
Amendment dated October 9, 2009, to Consulting Agreement dated July 17, 2007, with Southfork Solutions, Inc., also included
Incorporated by reference from the quarterly report on Form 10-Q for the quarter ended September 30, 2009, filed November 10, 2009.
10.07
Loan Agreement between TetriDyn Solutions, Inc., and Southeast Idaho Council of Governments, Inc., together with related promissory notes, dated December 23, 2009
Incorporated by reference from the annual report on Form 10-K for the year ended December 31, 2009, filed March 31, 2010.
Exhibit
Number*
Title of Document
Location
10.08
Promissory Note dated June 1, 2010
Incorporated by reference from the current report on Form 8-K filed June 2, 2010.
10.09
Promissory Note dated August 12, 2010
Incorporated by reference from the quarterly report on Form 10-Q for the quarter ended June 30, 2010, filed August 16, 2010.
10.10
Promissory Note dated December 22, 2010
Incorporated by reference from the current report on Form 8-K filed December 27, 2010.
10.11
Promissory Note dated February 19, 2011
Incorporated by reference from the current report on Form 8-K filed February 25, 2011.
Item 14.
Code of Ethics
14.01
TetriDyn Solutions, Inc., Code of Ethics
Incorporated by reference from the annual report on Form 10-KSB for the year ended December 31, 2006, filed April 2, 2007.
Item 16.
Letter on Change of Certifying Accountant
16.01
Letter from Hansen, Barnett & Maxwell to Securities and Exchange Commission
Incorporated by reference from the current report on Form 8-K filed January 22, 2007.
Item 21.
Subsidiaries of the Small Business Issuer
21.01
Schedule of subsidiaries
This filing.
Item 31.
Rule 13a-14(a)/15d-14(a) Certifications
31.01
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14
This filing.
Item 32.
Section 1350 Certifications
32.01
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
This filing.
__________
*
The number preceding the decimal indicates the applicable SEC reference number in Item 601, and the number following the decimal indicating the sequence of the particular document. Omitted numbers in the sequence refer to documents previously filed with the SEC as exhibits to previous filings, but no longer required.
**
Identifies each management contract or compensatory plan or arrangement required to be filed as an exhibit, as required by Item 15(a)(3) of Form 10-K.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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 date indicated.
Dated: April 13, 2011
/s/ David W. Hempstead
David W. Hempstead, Director
Principal Executive Officer
Principal Financial and Accounting Officer
/s/ Antoinette R. Knapp
Antoinette R. Knapp, Director
/s/ Orville J. Hendrickson
Orville J. Hendrickson, Director
/s/ Larry J. Ybarrondo
Larry J. Ybarrondo, Director
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
We will furnish to the Securities and Exchange Commission, at the same time that it is sent to stockholders, any proxy or information statement that we send to our stockholders in connection with our 2011 annual stockholders’ meeting.
TETRIDYN SOLUTIONS, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AND
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 and 2009
TETRIDYN SOLUTIONS, INC.
Page
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2010 and December 31, 2009
Consolidated Statements of Operations for the Years Ended December 31, 2010 and 2009
Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2010 and 2009
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010 and 2009
Notes to Consolidated Financial Statements for the Years Ended December 31, 2010 and 2009
Webb & Company, P.A.
Certified Public Accountants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of:
TetriDyn Solutions, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of TetriDyn Solutions, Inc. and Subsidiary (the “Company”) as of December 31, 2010 and December 31, 2009 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the two years then ended. These financial statements are the responsibility of the Company’s management. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly in all material respects, the financial position of TetriDyn Solutions, Inc. and Subsidiary (the “Company”) as of December 31, 2010 and December 31, 2009 and the results of its operations and its cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company had a net loss from continuing operations of $400,227 and used $165,001 of cash in operating activities for the year ended December 31, 2010. The Company had a working capital deficiency of $346,135 and a stockholders’ deficiency of $746,619 as of December 31, 2010. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Webb & Company, P.A.
WEBB & COMPANY, P.A.
Certified Public Accountants
Boynton Beach, Florida
April 13, 2011
1501 Corporate Drive, Suite 150 Ÿ Boynton Beach, FL 33426
Telephone: (561) 752-1721 Ÿ Fax: (561) 734-8562
www.cpawebb.com
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 1 - Organization and Summary of Significant Accounting Policies
Nature of Business - TetriDyn Solutions, Inc. (the “Company”), specializes in providing business information technology (IT) solutions to its customers. The Company optimizes business and IT processes by utilizing systems engineering methodologies, strategic planning, and system integration to add efficiency and value to its customers’ business processes and to help its customers identify critical success factors in their business.
Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, an Idaho corporation also named TetriDyn Solutions, Inc. (“TetriDyn-Idaho”), and results of discontinued operations of its partially owned variable interest entity, Southfork Solutions, Inc., from January 1, 2009, through September 30, 2009. Intercompany accounts and transactions have been eliminated in consolidation.
Business Segments - The Company has only one segment for 2010. For 2009, the Company’s services can be broadly classified into two principal segments: the business IT solutions segment and the livestock segment. The business IT solutions segment provides business IT solutions within the healthcare industry, although the segment is in the process of expanding the solutions to other select industries. The livestock segment was focused on providing business IT solutions specifically within the livestock industry. The Company’s involvement in the livestock segment ended in the fourth quarter of 2009 (see Note 8).
Use of Estimates - In preparing financial statements in conformity with generally accepted accounting principles (GAAP), management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from these estimates.
Cash and Cash Equivalents - For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
Revenue Recognition - Revenue from software licenses, related installation, and support services is recognized when earned and realizable. Revenue is earned and realizable when persuasive evidence of an arrangement exists; services, if requested by the customers, have been rendered and are determinable; and collectability is reasonably assured. Amounts received from customers prior to these criteria being met are deferred. Revenue from the sale of software is recognized when delivered to the customer or upon installation of the software if an installation contract exists. Revenue from post-contract support service contracts is recognized as the services are provided, determined on an hourly basis. The Company recognizes the revenue received for unused support hours under support service contracts that have had no support activity after two years. Revenue applicable to multiple-element fee arrangements is divided among the software, the installation, and post-contract support service contracts using vendor-specific objective evidence of fair value, as evidenced by the prices charged when the software and the services are sold as separate products or arrangements.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
The Company’s AeroMD EMR, electronic medical records software, is provided as turnkey software that has been customized for specific medical specializations. The Company installs the software at the customer’s location for a fee and charges the customer a monthly license fee, based on the number of operating workstations, under a one- or two-year usage agreement. The customer is entitled to all systems upgrades during the term of the agreement. At the end of their contracts, customers may continue using AeroMD by entering into a new license with the Company. The Company also sells installation and post-contract support service contracts on an hourly basis. The Company does not provide any rights of return or warranties on its AeroMD EMR software or on its support service contracts.
Long-Lived Assets - The Company accounts for long-lived assets under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 350, “Accounting for Goodwill and Other Intangible Assets,” and FASB ASC Topic 360, “Accounting for Impairment or Disposal of Long-Lived Assets.” In accordance with FASB ASC Topic 350 and FASB ASC Topic 360, long-lived assets, goodwill, and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, goodwill, and intangible assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets.
Going Concern- The accompanying consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern. As reflected in accompanying consolidated financial statements, the Company had a net loss of $400,227 and used $165,001 of cash in operating activities for the year ended December 31, 2010. The Company had a working capital deficiency of $346,135 and a stockholders’ deficiency of $746,619 as of December 31, 2010. The ability of the Company to continue as a going concern is dependent on the Company’s ability to increase its sales and obtain external funding for its product development. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.
Income Taxes - The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and on the amount of operating loss carryforwards, and are measured using the enacted tax rates and laws that will be in effect when the temporary differences and carryforwards are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.
Fair Value of Financial Instruments - The carrying amounts of the Company’s current portion of accounts receivable, prepaid expenses, accounts payable, accrued liabilities, unearned revenue, notes payable, and related-party convertible note payable approximate fair value due to the relatively short period to maturity for these instruments.
Property and Equipment - Property and equipment are recorded at cost. Maintenance, repairs, and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful life of the asset, which is set at five years for computing equipment and vehicles and seven years for office equipment. Gains or losses on dispositions of property and equipment are included in the results of operations when realized.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Inventory - Inventory is recorded at cost and the Company utilizes the First-In, First-Out (FIFO) cost flow method. Gains or losses on dispositions of inventory are included in the results of operations when realized.
Stock-Based Compensation - On May 15, 2006, at a special shareholders’ meeting, the Company’s shareholders approved the 2006 Long-Term Incentive Plan under which up to 4,000,000 shares of common stock may be issued. The 2006 plan is to be administered either by the board of directors or by the appropriate committee to be appointed from time to time by such board of directors. Awards granted under the 2006 plan may be incentive stock options (“ISOs”) (as defined in the Internal Revenue Code), appreciation rights, options that do not qualify as ISOs, or stock bonus awards that are awarded to employees, officers, and directors that, in the opinion of the board or the committee, have contributed or are expected to contribute materially to the Company’s success. In addition, at the discretion of the board of directors or the committee, options or bonus stock may be granted to individuals that are not employees, officers, or directors, but contribute to the Company’s success.
On June 17, 2009, at the Company’s annual shareholders’ meeting, the Company’s shareholders approved the 2009 Long-Term Incentive Plan under which up to 4,000,000 shares of common stock may be issued. The 2009 plan is to be administered either by the board of directors or by the appropriate committee to be appointed from time to time by such board of directors. Awards granted under the 2009 plan may be incentive stock options (“ISOs”) (as defined in the Internal Revenue Code), appreciation rights, options that do not qualify as ISOs, or stock bonus awards that are awarded to employees, officers, and directors that, in the opinion of the board or the committee, have contributed or are expected to contribute materially to the Company’s success. In addition, at the discretion of the board of directors or the committee, options or bonus stock may be granted to individuals that are not employees, officers, or directors, but contribute to the Company’s success.
Equity instruments issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB ASC 505, “Share-Based Payment.” Emerging Issues Task Force, or EITF, Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a: (a) performance commitment, as defined, is reached; or (b) the earlier of: (i) the non-employee performance is complete; or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the EITF.
Effective January 1, 2006, the Company adopted the provisions of FASB ASC 505 for its stock-based compensation plan. Under FASB ASC 505, all employee stock-based compensation is measured at the grant date, based on the fair value of the option or award, and is recognized as an expense over the requisite service, which is typically through the date the options or awards vest. The Company adopted FASB ASC 505 using the modified prospective method. Under this method, for all stock-based options and awards granted prior to January 1, 2006, that remain outstanding as of that date, compensation cost is recognized for the unvested portion over the remaining requisite service period, using the grant-date fair value measured under the original provisions of FASB ASC 505 for pro forma and disclosure purposes. Furthermore, compensation costs will also be recognized for any awards issued, modified, repurchased, or cancelled after January 1, 2006.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
As the result of adoption of FASB ASC 505, the Company recognized no compensation during the years ended December 31, 2010, and December 31, 2009 (see Note 6).
Net Profit (Loss) Per Common Share - Basic and diluted net profit (loss) per common share is computed based upon the weighted-average stock outstanding as defined by FASB ASC 260, “Earnings Per Share.” As of December 31, 2010 and 2009, 3,465,000 and 3,497,000, respectively, of common share equivalents for granted stock options were antidilutive and not used in the calculation of diluted net loss per share. Additionally, as of December 31, 2010 and 2009, 5,000,000 and 0, respectively, of common share equivalents for convertible note payables were antidilutive and not used in the calculation of diluted net loss per share.
Reclassifications - Certain amounts in the 2009 information have been reclassified to conform to the 2010 presentation. These reclassifications had no impact on the Company’s net loss or cash flows.
Restatement - On October 5, 2010, the Company determined that it had not properly presented the disposal of its variable interest entity on the Consolidated Statements of Cash Flows under ASC 230-10-45-4, which requires the Company to classify the cash held by the variable interest entity upon deconsolidation as cash used in investment activities. As a result of this adjustment, the Company amended its Form 10-K for the year ended December 31, 2009. The adjustment did not have any effect on the Consolidated Statement of Operations or on the net income (loss) per share for the year ended December 31, 2009.
Note 2 - Property and Equipment
Property and equipment consist of the following as of December 31, 2010 and 2009:
Depreciation expense during the years ended December 31, 2010 and 2009, was $15,351 and $13,636, respectively.
Note 3 - Inventory
The Company’s inventory is comprised of regular inventory and direct materials to be used in the manufacture of new products. The Company had inventory as of December 31, 2009, that consisted of one piece of equipment valued at $739. During the year ended December 31, 2010, the Company received computer chips in exchange for reduction of a former variable interest subsidiary’s debt to the Company by $63,432.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 4 - Notes Payable and Revolving Credit Agreements
In February 2010, the Company paid the balance of $19,035 in full for its note payable to a bank that was due April 2010.
Effective in June 2010, one economic development lender agreed to suspend all loan payments toward principal and interest for six months on two separate loans. The balances of the two loans were $27,045 and $145,132 as of December 31, 2010.
Effective in July 2010, a separate economic development lender agreed to suspend all loan payments toward principal and interest for six months. The balance of the loan was $104,829 as of December 31, 2010.
Notes payable are summarized as follows:
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Annual maturities of notes payable as of December 31, 2010, were as follows:
Note 5 - Convertible Notes Payable to Related Party
In June 2010, the Company borrowed $50,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $5,000 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2013.
In August 2010, the Company borrowed an additional $50,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $5,000 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2013.
In December 2010, the Company borrowed an additional $50,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $5,000 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2013.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 6 - Stockholders’ Equity
Common Stock - As of January 1, 2009, the Company had 21,381,863 common shares issued and outstanding.
On June 17, 2009, at the Company’s annual shareholders’ meeting, the Company’s shareholders approved the 2009 Long-Term Incentive Plan under which up to 4,000,000 shares of common stock may be issued. The 2009 plan is to be administered either by the board of directors or by the appropriate committee to be appointed from time to time by such board of directors. Awards granted under the 2009 plan may be incentive stock options (“ISOs”) (as defined in the Internal Revenue Code), appreciation rights, options that do not qualify as ISOs, or stock bonus awards that are awarded to employees, officers, and directors that, in the opinion of the board or the committee, have contributed or are expected to contribute materially to the Company’s success. In addition, at the discretion of the board of directors or the committee, options or bonus stock may be granted to individuals that are not employees, officers, or directors, but contribute to the Company’s success.
On December 28, 2009, the Company granted 150,000 shares of common stock to each of its outside directors (300,000 total shares) for their services valued at the fair value on the date of grant of $16,800. The Company also granted 200,000 shares of common stock to its employees valued at the fair value on the date of grant of $11,200.
No options were granted in 2009 or 2010.
A summary of the status of the Company’s stock options as of December 31, 2010, and the changes during the period ended are presented below:
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
A summary of the status of the Company’s stock options as of December 31, 2009, and the changes during the period ended are presented below:
Preferred Stock - On November 12, 2009, the Company’s Executive Compensation Committee, consisting of two independent directors, authorized the issuance of 600,000 shares Series A Preferred Stock to each of the Company’s executives (1,200,000 total shares) at a total value of $53,455. Each share of Series A Preferred Stock is entitled to 100 votes, voting with the common stock as a single class, except when voting as a separate class is required by law, and to 1/20 of the dividends on common stock and in distributions on dissolution and liquidation.
Note 7 - Concentrations
Sales - The Company had two customers that represented 17% and 13% of sales for the year ended December 31, 2010. The two customers were both regional critical access hospitals that purchased services, hardware, and software from the Company. The Company had one customer that represented 52% of sales for the year ended December 31, 2009. This customer was a regional hospital that contracted with the Company for IT consulting and management services. The agreement with the customer expired in 2009 and was not renewed.
Accounts Receivable - The Company had four customers that represented 10%, 14%, 20%, and 36% of the accounts receivable for the year ended December 31, 2010. The 10% and 14% accounts receivables were for services and hardware and have both been paid in full in January 2011. The 20% and 36% accounts receivables are accounts that are on payment plans and are current on their payments. The Company had one customer that represented 93% of the accounts receivable for the year ended December 31, 2009. This accounts receivable was for engineering services provided to Southfork Solutions, Inc. The Company and Southfork reached a settlement agreement in which the accounts receivable were paid with a combination of cash, equipment, and inventory. (See Note 8.)
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 8 - Investments
Until the fourth quarter of 2009, the Company was engaged in providing business IT solutions to the livestock segment through a variable interest subsidiary, Southfork Solutions, Inc., which was developing electronic livestock tracking systems, in which the Company had an approximately 39% interest at December 31, 2009. Effective October 2009, the Company is no longer in management or financial control of this entity, although as of December 31, 2010, it holds an approximately 40% minority interest. Effective September 30, 2009, the Company changed from the variable interest consolidation method of accounting for this entity to the cost method of accounting for this entity.
Note 9 - Income Taxes
As of December 31, 2010, the Company has net operating loss carry-forwards of approximately $2,530,423 that expire, if not used, from 2022 through 2030. The valuation allowance at December 31, 2010, was $974,396. The net change in the valuation allowance for the year ended December 31, 2010, was a decrease of $349,024. The Company paid no income taxes during the years ended December 31, 2010 and 2009. Deferred tax assets and related valuation allowance were as follows at December 31, 2010 and 2009:
The following is a reconciliation of the tax benefit of pretax loss at the U.S. federal statutory rate with the benefit from income taxes:
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 10 - Commitments and Contingencies
In November 2009, the Executive Compensation Committee extended the annual salaries for the Chief Executive Officer and the Deputy Chief Executive Officer at $108,000 and $96,000, respectively, through calendar year 2010. However, Mr. Hempstead and Ms. Knapp voluntarily forfeited a portion of their 2009 and 2010 salaries to reduce the outgoing cash flow of the Company.
In March 2011, the Executive Compensation Committee extended the annual salaries for the Chief Executive Officer and the Deputy Chief Executive Officer at $108,000 and $96,000, respectively, through calendar year 2011 and for subsequent calendar years until otherwise modified in subsequent Executive Compensation Committee resolution.
Note 11 - Subsequent Event
In February 2011, the Company borrowed $25,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $2,500 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2014.
Item 14.
Code of Ethics
14.01
TetriDyn Solutions, Inc., Code of Ethics
Incorporated by reference from the annual report on Form 10-KSB for the year ended December 31, 2006, filed April 2, 2007.
Item 16.
Letter on Change of Certifying Accountant
16.01
Letter from Hansen, Barnett & Maxwell to Securities and Exchange Commission
Incorporated by reference from the current report on Form 8-K filed January 22, 2007.
Item 21.
Subsidiaries of the Small Business Issuer
21.01
Schedule of subsidiaries
This filing.
Item 31.
Rule 13a-14(a)/15d-14(a) Certifications
31.01
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14
This filing.
Item 32.
Section 1350 Certifications
32.01
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
This filing.
__________
*
The number preceding the decimal indicates the applicable SEC reference number in Item 601, and the number following the decimal indicating the sequence of the particular document. Omitted numbers in the sequence refer to documents previously filed with the SEC as exhibits to previous filings, but no longer required.
**
Identifies each management contract or compensatory plan or arrangement required to be filed as an exhibit, as required by Item 15(a)(3) of Form 10-K.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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 date indicated.
Dated: April 13, 2011
/s/ David W. Hempstead
David W. Hempstead, Director
Principal Executive Officer
Principal Financial and Accounting Officer
/s/ Antoinette R. Knapp
Antoinette R. Knapp, Director
/s/ Orville J. Hendrickson
Orville J. Hendrickson, Director
/s/ Larry J. Ybarrondo
Larry J. Ybarrondo, Director
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
We will furnish to the Securities and Exchange Commission, at the same time that it is sent to stockholders, any proxy or information statement that we send to our stockholders in connection with our 2011 annual stockholders’ meeting.
TETRIDYN SOLUTIONS, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AND
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 and 2009
TETRIDYN SOLUTIONS, INC.
Page
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2010 and December 31, 2009
Consolidated Statements of Operations for the Years Ended December 31, 2010 and 2009
Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2010 and 2009
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010 and 2009
Notes to Consolidated Financial Statements for the Years Ended December 31, 2010 and 2009
Webb & Company, P.A.
Certified Public Accountants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of:
TetriDyn Solutions, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of TetriDyn Solutions, Inc. and Subsidiary (the “Company”) as of December 31, 2010 and December 31, 2009 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the two years then ended. These financial statements are the responsibility of the Company’s management. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly in all material respects, the financial position of TetriDyn Solutions, Inc. and Subsidiary (the “Company”) as of December 31, 2010 and December 31, 2009 and the results of its operations and its cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company had a net loss from continuing operations of $400,227 and used $165,001 of cash in operating activities for the year ended December 31, 2010. The Company had a working capital deficiency of $346,135 and a stockholders’ deficiency of $746,619 as of December 31, 2010. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Webb & Company, P.A.
WEBB & COMPANY, P.A.
Certified Public Accountants
Boynton Beach, Florida
April 13, 2011
1501 Corporate Drive, Suite 150 Ÿ Boynton Beach, FL 33426
Telephone: (561) 752-1721 Ÿ Fax: (561) 734-8562
www.cpawebb.com
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 1 - Organization and Summary of Significant Accounting Policies
Nature of Business - TetriDyn Solutions, Inc. (the “Company”), specializes in providing business information technology (IT) solutions to its customers. The Company optimizes business and IT processes by utilizing systems engineering methodologies, strategic planning, and system integration to add efficiency and value to its customers’ business processes and to help its customers identify critical success factors in their business.
Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, an Idaho corporation also named TetriDyn Solutions, Inc. (“TetriDyn-Idaho”), and results of discontinued operations of its partially owned variable interest entity, Southfork Solutions, Inc., from January 1, 2009, through September 30, 2009. Intercompany accounts and transactions have been eliminated in consolidation.
Business Segments - The Company has only one segment for 2010. For 2009, the Company’s services can be broadly classified into two principal segments: the business IT solutions segment and the livestock segment. The business IT solutions segment provides business IT solutions within the healthcare industry, although the segment is in the process of expanding the solutions to other select industries. The livestock segment was focused on providing business IT solutions specifically within the livestock industry. The Company’s involvement in the livestock segment ended in the fourth quarter of 2009 (see Note 8).
Use of Estimates - In preparing financial statements in conformity with generally accepted accounting principles (GAAP), management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from these estimates.
Cash and Cash Equivalents - For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
Revenue Recognition - Revenue from software licenses, related installation, and support services is recognized when earned and realizable. Revenue is earned and realizable when persuasive evidence of an arrangement exists; services, if requested by the customers, have been rendered and are determinable; and collectability is reasonably assured. Amounts received from customers prior to these criteria being met are deferred. Revenue from the sale of software is recognized when delivered to the customer or upon installation of the software if an installation contract exists. Revenue from post-contract support service contracts is recognized as the services are provided, determined on an hourly basis. The Company recognizes the revenue received for unused support hours under support service contracts that have had no support activity after two years. Revenue applicable to multiple-element fee arrangements is divided among the software, the installation, and post-contract support service contracts using vendor-specific objective evidence of fair value, as evidenced by the prices charged when the software and the services are sold as separate products or arrangements.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
The Company’s AeroMD EMR, electronic medical records software, is provided as turnkey software that has been customized for specific medical specializations. The Company installs the software at the customer’s location for a fee and charges the customer a monthly license fee, based on the number of operating workstations, under a one- or two-year usage agreement. The customer is entitled to all systems upgrades during the term of the agreement. At the end of their contracts, customers may continue using AeroMD by entering into a new license with the Company. The Company also sells installation and post-contract support service contracts on an hourly basis. The Company does not provide any rights of return or warranties on its AeroMD EMR software or on its support service contracts.
Long-Lived Assets - The Company accounts for long-lived assets under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 350, “Accounting for Goodwill and Other Intangible Assets,” and FASB ASC Topic 360, “Accounting for Impairment or Disposal of Long-Lived Assets.” In accordance with FASB ASC Topic 350 and FASB ASC Topic 360, long-lived assets, goodwill, and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, goodwill, and intangible assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets.
Going Concern- The accompanying consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern. As reflected in accompanying consolidated financial statements, the Company had a net loss of $400,227 and used $165,001 of cash in operating activities for the year ended December 31, 2010. The Company had a working capital deficiency of $346,135 and a stockholders’ deficiency of $746,619 as of December 31, 2010. The ability of the Company to continue as a going concern is dependent on the Company’s ability to increase its sales and obtain external funding for its product development. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.
Income Taxes - The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and on the amount of operating loss carryforwards, and are measured using the enacted tax rates and laws that will be in effect when the temporary differences and carryforwards are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.
Fair Value of Financial Instruments - The carrying amounts of the Company’s current portion of accounts receivable, prepaid expenses, accounts payable, accrued liabilities, unearned revenue, notes payable, and related-party convertible note payable approximate fair value due to the relatively short period to maturity for these instruments.
Property and Equipment - Property and equipment are recorded at cost. Maintenance, repairs, and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful life of the asset, which is set at five years for computing equipment and vehicles and seven years for office equipment. Gains or losses on dispositions of property and equipment are included in the results of operations when realized.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Inventory - Inventory is recorded at cost and the Company utilizes the First-In, First-Out (FIFO) cost flow method. Gains or losses on dispositions of inventory are included in the results of operations when realized.
Stock-Based Compensation - On May 15, 2006, at a special shareholders’ meeting, the Company’s shareholders approved the 2006 Long-Term Incentive Plan under which up to 4,000,000 shares of common stock may be issued. The 2006 plan is to be administered either by the board of directors or by the appropriate committee to be appointed from time to time by such board of directors. Awards granted under the 2006 plan may be incentive stock options (“ISOs”) (as defined in the Internal Revenue Code), appreciation rights, options that do not qualify as ISOs, or stock bonus awards that are awarded to employees, officers, and directors that, in the opinion of the board or the committee, have contributed or are expected to contribute materially to the Company’s success. In addition, at the discretion of the board of directors or the committee, options or bonus stock may be granted to individuals that are not employees, officers, or directors, but contribute to the Company’s success.
On June 17, 2009, at the Company’s annual shareholders’ meeting, the Company’s shareholders approved the 2009 Long-Term Incentive Plan under which up to 4,000,000 shares of common stock may be issued. The 2009 plan is to be administered either by the board of directors or by the appropriate committee to be appointed from time to time by such board of directors. Awards granted under the 2009 plan may be incentive stock options (“ISOs”) (as defined in the Internal Revenue Code), appreciation rights, options that do not qualify as ISOs, or stock bonus awards that are awarded to employees, officers, and directors that, in the opinion of the board or the committee, have contributed or are expected to contribute materially to the Company’s success. In addition, at the discretion of the board of directors or the committee, options or bonus stock may be granted to individuals that are not employees, officers, or directors, but contribute to the Company’s success.
Equity instruments issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB ASC 505, “Share-Based Payment.” Emerging Issues Task Force, or EITF, Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a: (a) performance commitment, as defined, is reached; or (b) the earlier of: (i) the non-employee performance is complete; or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the EITF.
Effective January 1, 2006, the Company adopted the provisions of FASB ASC 505 for its stock-based compensation plan. Under FASB ASC 505, all employee stock-based compensation is measured at the grant date, based on the fair value of the option or award, and is recognized as an expense over the requisite service, which is typically through the date the options or awards vest. The Company adopted FASB ASC 505 using the modified prospective method. Under this method, for all stock-based options and awards granted prior to January 1, 2006, that remain outstanding as of that date, compensation cost is recognized for the unvested portion over the remaining requisite service period, using the grant-date fair value measured under the original provisions of FASB ASC 505 for pro forma and disclosure purposes. Furthermore, compensation costs will also be recognized for any awards issued, modified, repurchased, or cancelled after January 1, 2006.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
As the result of adoption of FASB ASC 505, the Company recognized no compensation during the years ended December 31, 2010, and December 31, 2009 (see Note 6).
Net Profit (Loss) Per Common Share - Basic and diluted net profit (loss) per common share is computed based upon the weighted-average stock outstanding as defined by FASB ASC 260, “Earnings Per Share.” As of December 31, 2010 and 2009, 3,465,000 and 3,497,000, respectively, of common share equivalents for granted stock options were antidilutive and not used in the calculation of diluted net loss per share. Additionally, as of December 31, 2010 and 2009, 5,000,000 and 0, respectively, of common share equivalents for convertible note payables were antidilutive and not used in the calculation of diluted net loss per share.
Reclassifications - Certain amounts in the 2009 information have been reclassified to conform to the 2010 presentation. These reclassifications had no impact on the Company’s net loss or cash flows.
Restatement - On October 5, 2010, the Company determined that it had not properly presented the disposal of its variable interest entity on the Consolidated Statements of Cash Flows under ASC 230-10-45-4, which requires the Company to classify the cash held by the variable interest entity upon deconsolidation as cash used in investment activities. As a result of this adjustment, the Company amended its Form 10-K for the year ended December 31, 2009. The adjustment did not have any effect on the Consolidated Statement of Operations or on the net income (loss) per share for the year ended December 31, 2009.
Note 2 - Property and Equipment
Property and equipment consist of the following as of December 31, 2010 and 2009:
Depreciation expense during the years ended December 31, 2010 and 2009, was $15,351 and $13,636, respectively.
Note 3 - Inventory
The Company’s inventory is comprised of regular inventory and direct materials to be used in the manufacture of new products. The Company had inventory as of December 31, 2009, that consisted of one piece of equipment valued at $739. During the year ended December 31, 2010, the Company received computer chips in exchange for reduction of a former variable interest subsidiary’s debt to the Company by $63,432.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 4 - Notes Payable and Revolving Credit Agreements
In February 2010, the Company paid the balance of $19,035 in full for its note payable to a bank that was due April 2010.
Effective in June 2010, one economic development lender agreed to suspend all loan payments toward principal and interest for six months on two separate loans. The balances of the two loans were $27,045 and $145,132 as of December 31, 2010.
Effective in July 2010, a separate economic development lender agreed to suspend all loan payments toward principal and interest for six months. The balance of the loan was $104,829 as of December 31, 2010.
Notes payable are summarized as follows:
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Annual maturities of notes payable as of December 31, 2010, were as follows:
Note 5 - Convertible Notes Payable to Related Party
In June 2010, the Company borrowed $50,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $5,000 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2013.
In August 2010, the Company borrowed an additional $50,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $5,000 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2013.
In December 2010, the Company borrowed an additional $50,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $5,000 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2013.
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 6 - Stockholders’ Equity
Common Stock - As of January 1, 2009, the Company had 21,381,863 common shares issued and outstanding.
On June 17, 2009, at the Company’s annual shareholders’ meeting, the Company’s shareholders approved the 2009 Long-Term Incentive Plan under which up to 4,000,000 shares of common stock may be issued. The 2009 plan is to be administered either by the board of directors or by the appropriate committee to be appointed from time to time by such board of directors. Awards granted under the 2009 plan may be incentive stock options (“ISOs”) (as defined in the Internal Revenue Code), appreciation rights, options that do not qualify as ISOs, or stock bonus awards that are awarded to employees, officers, and directors that, in the opinion of the board or the committee, have contributed or are expected to contribute materially to the Company’s success. In addition, at the discretion of the board of directors or the committee, options or bonus stock may be granted to individuals that are not employees, officers, or directors, but contribute to the Company’s success.
On December 28, 2009, the Company granted 150,000 shares of common stock to each of its outside directors (300,000 total shares) for their services valued at the fair value on the date of grant of $16,800. The Company also granted 200,000 shares of common stock to its employees valued at the fair value on the date of grant of $11,200.
No options were granted in 2009 or 2010.
A summary of the status of the Company’s stock options as of December 31, 2010, and the changes during the period ended are presented below:
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
A summary of the status of the Company’s stock options as of December 31, 2009, and the changes during the period ended are presented below:
Preferred Stock - On November 12, 2009, the Company’s Executive Compensation Committee, consisting of two independent directors, authorized the issuance of 600,000 shares Series A Preferred Stock to each of the Company’s executives (1,200,000 total shares) at a total value of $53,455. Each share of Series A Preferred Stock is entitled to 100 votes, voting with the common stock as a single class, except when voting as a separate class is required by law, and to 1/20 of the dividends on common stock and in distributions on dissolution and liquidation.
Note 7 - Concentrations
Sales - The Company had two customers that represented 17% and 13% of sales for the year ended December 31, 2010. The two customers were both regional critical access hospitals that purchased services, hardware, and software from the Company. The Company had one customer that represented 52% of sales for the year ended December 31, 2009. This customer was a regional hospital that contracted with the Company for IT consulting and management services. The agreement with the customer expired in 2009 and was not renewed.
Accounts Receivable - The Company had four customers that represented 10%, 14%, 20%, and 36% of the accounts receivable for the year ended December 31, 2010. The 10% and 14% accounts receivables were for services and hardware and have both been paid in full in January 2011. The 20% and 36% accounts receivables are accounts that are on payment plans and are current on their payments. The Company had one customer that represented 93% of the accounts receivable for the year ended December 31, 2009. This accounts receivable was for engineering services provided to Southfork Solutions, Inc. The Company and Southfork reached a settlement agreement in which the accounts receivable were paid with a combination of cash, equipment, and inventory. (See Note 8.)
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 8 - Investments
Until the fourth quarter of 2009, the Company was engaged in providing business IT solutions to the livestock segment through a variable interest subsidiary, Southfork Solutions, Inc., which was developing electronic livestock tracking systems, in which the Company had an approximately 39% interest at December 31, 2009. Effective October 2009, the Company is no longer in management or financial control of this entity, although as of December 31, 2010, it holds an approximately 40% minority interest. Effective September 30, 2009, the Company changed from the variable interest consolidation method of accounting for this entity to the cost method of accounting for this entity.
Note 9 - Income Taxes
As of December 31, 2010, the Company has net operating loss carry-forwards of approximately $2,530,423 that expire, if not used, from 2022 through 2030. The valuation allowance at December 31, 2010, was $974,396. The net change in the valuation allowance for the year ended December 31, 2010, was a decrease of $349,024. The Company paid no income taxes during the years ended December 31, 2010 and 2009. Deferred tax assets and related valuation allowance were as follows at December 31, 2010 and 2009:
The following is a reconciliation of the tax benefit of pretax loss at the U.S. federal statutory rate with the benefit from income taxes:
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010 AND 2009
Note 10 - Commitments and Contingencies
In November 2009, the Executive Compensation Committee extended the annual salaries for the Chief Executive Officer and the Deputy Chief Executive Officer at $108,000 and $96,000, respectively, through calendar year 2010. However, Mr. Hempstead and Ms. Knapp voluntarily forfeited a portion of their 2009 and 2010 salaries to reduce the outgoing cash flow of the Company.
In March 2011, the Executive Compensation Committee extended the annual salaries for the Chief Executive Officer and the Deputy Chief Executive Officer at $108,000 and $96,000, respectively, through calendar year 2011 and for subsequent calendar years until otherwise modified in subsequent Executive Compensation Committee resolution.
Note 11 - Subsequent Event
In February 2011, the Company borrowed $25,000 from two of its officers and directors, repayable pursuant to a convertible promissory note. The terms of the note are as follows: (a) no interest will accrue if the note is repaid within 60 days; (b) if the note is not repaid within 60 days, the Company is obligated to pay $2,500 for costs associated with securing the funds; (c) if the loan is repaid within one year, no annual interest rate will be charged; however, if the loan is not repaid within one year, the note will accrue interest at 6% per annum, beginning on the one-year anniversary date of the note; (d) the lenders are authorized to convert part or all of the note balance and accrued interest, if any, into the Company’s common stock at its fair value at any time while the note is outstanding; and (e) the loan’s due date for full repayment is December 31, 2014.