Item 1. Business
Overview
Inelco Corporation (the "Company", “Inelco”, “we”, “us” or “our”) is a holding company with two wholly-owned subsidiaries, NexPhase Lighting Inc., a Florida corporation, (“NexPhase”) and Cyber Centers Worldwide Corporation, a Florida corporation (“CCWC”).
NexPhase is in the business of designing, developing, manufacturing and marketing a high quality and high efficiency full line of LED intelligent lighting fixtures and control systems for commercial applications and projects involving both new construction and retrofits (the “LED Lighting Fixtures”), as well as licensing its technologies to territories outside of the United States.
Effective on April 30, 2012, the Board of Directors approved and authorized the execution of a licensing, manufacturing and distribution agreement (the “Agreement”) with Jarlyn S.A., an Uruguayan corporation (“Jarlyn”). In accordance with the terms and provisions of the Agreement, Jarlyn shall be designated the exclusive licensee, manufacturer, distributor and re-seller of certain licensed technologies within the Oriental Republic of Uruguay (the “Territory”).
On November 30, 2012, the Company and Jarlyn entered into a Cancellation Agreement, mutually cancelling the Licensing, Manufacturing and Distribution Agreement previously entered into on April 30, 2012.
In anticipation of the spin-off of NexPhase, the operations of the Company will change from the business of designing, developing, manufacturing and marketing a high quality and high efficiency full line of LED intelligent lighting fixtures and control systems for commercial applications and projects involving both new construction and retrofits.
The business operations of the Company will be conducted through its new wholly-owned subsidiary, CCWC, which involves interactive online gaming within the entertainment industry. Over the past years, the founders of CCIC have invested private capital, time and effort and innovative technology in its product development. CCWC today is capitalizing on the emerging trends in interactive gaming and social marketing with a vision to become the benchmark in the gaming industry with a reputation for customer safety, security and quality customer service, while also upholding the interests of shareholders.
Company History
Inelco Corporation was incorporated under the laws of the State of Nevada on December 31, 2007 as InfoSpi Inc. The Company was established as part of the implementation of the Chapter 11 plan of reorganization of Arrin Systems, Inc. ("Arrin"). Arrin filed for Chapter 11 Bankruptcy in April 2007 in the U.S. Bankruptcy Court for the Southern District of California. Arrin’s plan of reorganization was confirmed by the Court on December 12, 2007 and became effective on December 30, 2007. The plan of reorganization provided for the establishment of the Issuer and the sale to the Issuer of Arrin’s proprietary software (used in the employee background screening industry) in exchange for 0.284 shares of InfoSpi’s common stock which were distributed to Arrin’s general unsecured creditors.
At that time, management believed the Company lacked the resources to effectively market its services on its own and therefore engaged in a search for a merger or acquisition partner with the resources to either develop this business or enter another line of business which will bring value to the Issuer's shareholders.
The Company was founded to develop innovative, practical and cost-effective solutions to some of the most significant environmental challenges facing industries and governments around the world. Additionally, these solutions must show promise of generating profits for the company. Specifically the company has determined that one industry that meets both of the above-mentioned prongs of criteria is the Energy Saving Lighting Industry.
Effective on February 14, 2011, the Board of Directors of the Company approved and authorized the execution of a definitive agreement dated February 14, 2011 (the “Agreement”) among the Company, NexPhase Lighting, Inc., a privately held Florida corporation (“NexPhase”)., and the shareholders of NexPhase (the “NexPhase Shareholders”). In accordance with the terms and provisions of the Agreement: (i) the Company acquired from the NexPhase Shareholders an aggregate 55,622,000 shares of common stock of NexPhase representing the total issued and outstanding shares of NexPhase; (ii) in exchange thereof, the Company issued to the NexPhase Shareholders an aggregate 33.75 shares of its restricted common stock generally in proportion to the equity holdings of the NexPhase Shareholders; (iii) NexPhase transferred and assigned to the Company all existing material contracts including those related to distribution, licensing and marketing and those dealing with the grant of rights for the use of any and all intellectual property; (iv) the Company assumed all other assets of NexPhase, including licenses, royalty rights, equipment, product designs, marketing and sale materials, logos, trademarks, copyrights and website; and (v) the Company further assumed all liabilities of NexPhase, including all trade and debt obligations. Therefore, as of the February 14, 2011, NexPhase has become a wholly-owned subsidiary of the Company.
On March 29, 2011, we filed a Certificate of Amendment with the Nevada Secretary of State in order to change our name from “InfoSpi Inc.” to “Onteco Corporation” (the “Name Change”). The Name Change was effective with the Nevada Secretary of State on March 29, 2011 when the Certificate of Amendment was filed. The Name Change was approved by our Board of Directors pursuant to written consent resolutions dated March 15, 2011 and further approved by certain shareholders holding a majority of our total issued and outstanding shares of common stock pursuant to written consent resolutions dated March 16, 2011.
We filed the appropriate documentation with FINRA in order to effectuate the Name Change in the OTC Markets. The Name Change was effected on the OTC Markets April 11, 2011.
On April 1, 2013, we filed a Certificate of Amendment with the Nevada Secretary of State in order to change our name from “Onteco Corporation” to “Inelco Corporation” (the “Name Change”). The Name Change was effective with the Nevada Secretary of State on April 1, 2013 when the Certificate of Amendment was filed. The Name Change was approved by our Board of Directors pursuant to written consent resolutions dated January 14, 2013 and further approved by certain shareholders holding a majority of our total issued and outstanding shares of common stock pursuant to written consent resolutions dated January 14, 2013. Management deemed it appropriate to change our name to Inelco Corporation in furtherance of and to better reflect the nature of our new business operations.
We filed the appropriate documentation with FINRA in order to effectuate the Name Change in the OTC Markets. The Name Change was effected on the OTC Markets April 11, 2011. We have not yet received our new CUSIP number or trading symbol.
The Company’s Board of Directors has unanimously adopted a resolution, and has received shareholder approval, to authorize the Board to effectuate a Spin-Off of NexPhase upon receipt of all necessary regulatory approvals and the passage of all necessary waiting periods. The Board of Directors had determined that it would be in the Company’s best interest to effect the Spin-Off and has received the consent of holders of over 100% of the voting rights and power of the Company’s securities to authorize the Board of Directors to effect the Spin-Off. The Company will issue shares of NexPhase to the existing shareholders of the Company on a pro-rated basis on or about June 30, 2013.
Effective October 25, 2012, the Company’s Board of Directors approved and authorized the execution of a share exchange agreement (the “Share Exchange Agreement”) with Cyber Centers Worldwide Corporation, a private Florida corporation (“CCWC”), and the shareholders of CCWC (the "CCWC Shareholders"). In accordance with the terms and provisions of the Share Exchange Agreement, the Company will acquire approximately 150,000,000 shares of common stock of CCWC and 1,000,000 shares of Series B preferred stock of CCWC, which represents 100% of the total issued and outstanding shares held of record by the CCWC Shareholders. In exchange for the acquisition of the capital shares of CCWC, the Company shall issue to the CCWC Shareholders on a pro rata basis 75,000 restricted shares of common stock of the Company and 1,000,000 shares of Series B preferred stock of the Company. This resulted in CCWC becoming the wholly-owned subsidiary of the Company. Prior to this share exchange, CCWC changed its name from Cyber Centers International Corporation ("CCIC").
In accordance with the Share Exchange Agreement and anticipated consummation of the spin-off of the Company's wholly-owned subsidiary, NexPhase Lighting Inc., the operations of the Company will change from the business of designing, developing, manufacturing and marketing a high quality and high efficiency full line of LED intelligent lighting fixtures and control systems for commercial applications and projects involving both new construction and retrofits. The business operations of the Company will be conducted through its new wholly-owned subsidiary, CCWC, which involves interactive online gaming within the entertainment industry. Over the past years, the founders of CCIC have invested private capital, time and effort and innovative technology in its product development. CCWC today is capitalizing on the emerging trends in interactive gaming and social marketing with a vision to become the benchmark in the gaming industry with a reputation for customer safety, security and quality customer service, while also upholding the interests of shareholders.
Our Strategy
Management believes that the past years success of new social media platforms have changed the ways consumers approach media, circumventing traditional marketing channels such as television and print media in favor of social media sites that provide easy access to information, advice and recommendations. People go online to socialize and be entertained. During that process, these connected customers are actively building and refining their own trusted personal networks. People trust friends. Management believes that the opportunity is very clear. CCWC integrates social media deeply into its concept and will focus on succeeding in motivating its members to share with their networks, and thereby create a powerful channel for increasing the CCWC brand’s influence in the marketplace. Social media is all about the ability for the members to create personalized signals that they can plug into. When members find a new product or a great deal, they love to share it with others to obtain social status. CCWC has integrated basic social media sharing functions into its services and will also use third party specialists to fully capitalize on the useful aspects of the fast developing trends within the social marketing space. CCWC’s marketing will focus on a solution that allows creating social media campaigns that can be tracked measured and optimized to maximize reach and ROI. Understanding the hierarchy of social motivators that makes social marketing successful is also imperative to CCWC.
Employees
As of December 31, 2012, the Company has one employee.
Patents and Trademarks
None.
Available Information
All reports of the Company filed with the SEC are available free of charge through the SEC’s Web site at www.sec.gov. In addition, the public may read and copy materials filed by the Company at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain additional information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.
Item 1A.
Item 1A. Risk Factors
An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in evaluating us and our business before purchasing shares of our common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. The risks described below are all of the material risks that we are currently aware of that we are facing. Additional risks not presently known to us may also impair our business operations. You could lose all or part of your investment due to any of these risks.
RISKS RELATED TO OUR BUSINESS
We have a limited amount of revenues and a history of losses and may be unable to continue operations unless we can generate sufficient operating income from the sale of our products.
We have sustained operating losses since our inception. We have generated no revenue since inception. As of December 31, 2012 and 2011, we had accumulated deficits of $5,061,170 and $2,590,932, respectively. As evidenced by these financial results, we may not be able to achieve or maintain profitability on a consistent basis. Continuing losses may exhaust our capital resources and force us to discontinue our operations.
We have yet to achieve positive cash flow, and our ability to generate positive cash flow is uncertain. If we are unable to obtain sufficient capital when needed, our business and future prospects will be adversely affected and we could be forced to suspend or discontinue operations.
Our operations have not generated positive cash flow for any reporting period since our inception, and we have funded our operations primarily through the issuance of common and preferred stock and short-term debt. Our limited operating history makes an evaluation of our future prospects difficult. The actual amount of funds that we will need to meet our operating needs will be determined by a number of factors, many of which are beyond our control. These factors include the timing and volume of sales transactions, the success of our marketing strategy, market acceptance of our products, the success of our manufacturing and research and development efforts (including any unanticipated delays), the costs associated with obtaining and enforcing our intellectual property rights, regulatory changes, competition, technological developments in the market, evolving industry standards and the amount of working capital investments we are required to make. Our ability to continue to operate until our cash flow from operations turns positive will depend on our ability to continue to raise funds through public or private sales of shares of our capital stock or through debt.
During this economic downturn, we may experience limited access to the capital and credit markets, and it remains uncertain whether we will be able to obtain outside capital when we need it or on terms that would be acceptable to us. We may primarily need to rely on financing or guaranties from our affiliates. There are no assurances that such related parties will provide financing on terms that are acceptable to us or at all. If we raise funds by selling additional shares of our common stock or securities convertible or exercisable into our common stock, the ownership interest of our existing stockholders will be diluted. If we are unable to obtain sufficient outside capital when needed, our business and future prospects will be adversely affected and we could be forced to suspend or discontinue operations.
If we are unable to manage any future growth effectively, our profitability and liquidity could be adversely affected.
Our growth is expected to place significant strain on our limited research and development, sales and marketing, operational and administrative resources. To manage any future growth, we must continue to improve our operational and financial systems and expand, train and manage our employee base. We also need to improve our supply chain management and quality control operations and hire and train new employees, including sales and customer service representatives and operations managers. If we are unable to manage our growth effectively, our profitability and liquidity could be adversely affected.
If our developed technology or technology under development does not achieve market acceptance, prospects for our growth and profitability would be limited.
Our future success depends on market acceptance of our social media platform technology and the technology currently under development. Although adoption of social media has grown in recent years, adoption of new platforms is still limited and faces significant challenges.
Our financial results may vary significantly from period-to-period due to unpredictable sales cycles in certain of the markets into which we sell our products, and changes in the mix of products we sell during a period, which may lead to volatility in our stock price.
The size and timing of our potential revenue from sales to our customers is difficult to predict and is market dependent. Our sales efforts will often require us to educate our customers about the use and benefits of our products, including their technical and performance characteristics. We intend to spend substantial amounts of time and money on our sales efforts and there is no assurance that these investments will produce any sales within expected time frames or at all. Because most of our operating and capital expenses will be incurred based on the estimated number of purchases and their timing, they are difficult to adjust in the short term. As a result, if our revenue falls below our expectations or is delayed in any period, we may not be able to proportionately reduce our operating expenses for that period.
Our business may be impaired by claims that we, or our customers, infringe intellectual property rights of others.
Our industry is characterized by vigorous protection and pursuit of intellectual property rights. These traits have resulted in significant and often protracted and expensive litigation. In addition, we may inadvertently infringe on patents or rights owned by others and licenses might not be available to us on reasonable or acceptable terms or at all. Litigation to determine the validity of patents or claims by third parties of infringement of patents or other intellectual property rights could result in significant legal expense and divert the efforts of our technical personnel and management, even if the litigation results in a determination favorable to us. Third parties have and may in the future attempt to assert infringement claims against us, or our customers, with respect to our products. In the event of an adverse result in such litigation, we could be required to pay substantial damages; stop the manufacture, use and sale of products found to be infringing; incur asset impairment charges; discontinue the use of processes found to be infringing; expend significant resources to develop non-infringing products or processes; or obtain a license to use third party technology and whether or not the result is adverse to us, we may have to indemnify our customers if they were brought into the litigation.
Failure to achieve and maintain effective internal controls could have a material adverse effect on our operations and our stock price.
We are subject to Section 404 of the Sarbanes-Oxley Act of 2002, which requires an annual management assessment of the effectiveness of our internal control over financial reporting. Effective internal controls are necessary for us to produce reliable financial reports, and failure to achieve and maintain effective internal controls over financial reporting could cause investors to lose confidence in our operating results, and could have a material adverse effect on our business and on the price of our common stock. Because of our status as a smaller reporting company registrant as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the independent registered public accounting firm auditing our financial statements has not been required to attest to, and report on, the effectiveness of our internal control over financial reporting.
During the evaluation of disclosure controls and procedures for the years ended December 31, 2010, 2009 and 2008, we concluded that our disclosure controls and procedures were not effective in reaching a reasonable level of assurance of achieving management’s desired controls and procedures objectives in our internal control over financial reporting. We believe that many of the observed material weaknesses result from our transition from a small company with immature processes and inadequate staffing in our financial accounting and reporting functions to one that is growing rapidly and must now enhance our reporting and control standards to accommodate this growth. Although we have not yet remediated all of the identified weaknesses, we have taken certain remedial actions. See “Item 9A. Internal Controls and Procedures”.
Additional measures will be necessary to complete the remediation of our internal controls. We plan to continue to assess our internal controls and procedures and intend to take further action as necessary or appropriate to address any other matters we identify. The process of designing and implementing effective internal controls and procedures is a continuous effort, however, that requires us to anticipate and react to changes in our business and economic and regulatory environments. Additionally, we or our independent registered public accounting firm may identify additional weaknesses. The steps we have taken, or may subsequently take, may not have been or be sufficient to fully remediate the material weakness identified or ensure that our internal controls are effective. Complying with these requirements may place a strain on our personnel, information technology systems and resources and divert management’s attention from other business concerns. We may need to hire, at a material expense to us, additional accounting and financial staff with appropriate public company experience and technical accounting knowledge as part of the remediation of our material weakness or otherwise.
We rely upon key members of our management team and other key personnel and a loss of key personnel could prevent or significantly delay the achievement of our goals.
Our success will depend to a large extent on the abilities and continued services of key members of our management team. The loss of these key members of our management team or other key personnel could prevent or significantly delay the implementation of our business plan, research and development and marketing efforts. If we continue to grow, we will need to add additional management and other personnel. Our success will depend on our ability to attract and retain highly skilled personnel and our efforts to obtain or retain such personnel may not be successful.
Nevada Law and Our Articles of Incorporation May Protect our Directors From Certain Types of Lawsuits.
Nevada law provides that our officers and directors will not be liable to us or our stockholders for monetary damages for all, but certain types of conduct as officers and directors. Our Bylaws permit us broad indemnification powers to all persons against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our officers and directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our officers and directors against claims, including claims arising out of their negligence, poor judgment, or other circumstances.
RISKS RELATED TO OUR COMMON STOCK
Sales of a Substantial Number of Shares of Our Common Stock Into the Public Market by Certain Stockholders May Result in Significant Downward Pressure on the Price of Our Common Stock and Could Affect Your Ability to Realize the Current Trading Price of Our Common Stock.
Sales of a substantial number of shares of our common stock in the public market by certain stockholders could cause a reduction in the market price of our common stock. As of the date of this Annual Report, we have 808,160 post-Reverse Stock Split shares of common stock issued and outstanding. As of the date of this Annual Report, there are 125,132 outstanding shares of our common stock that are restricted securities as that term is defined in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). Although the Securities Act and Rule 144 place certain prohibitions on the sale of restricted securities, restricted securities may be sold into the public market under certain conditions.
Any significant downward pressure on the price of our common stock as the selling stockholders sell their shares of our common stock could encourage short sales by selling stockholders or others. Any such short sales could place further downward pressure on the price of our common stock.
The Trading Price of Our Common Stock on the OTC Bulletin Board Will Fluctuate Significantly and Stockholders May Have Difficulty Reselling Their Shares.
As of the date of this Annual Report, our common stock trades on the Over-the-Counter Bulletin Board. There is a volatility associated with Bulletin Board securities in general and the value of your investment could decline due to the impact of any of the following factors upon the market price of our common stock: (i) disappointing results from our exploration or development efforts; (ii) failure to meet our revenue or profit goals or operating budget; (iii) decline in demand for our common stock; (iv) downward revisions in securities analysts' estimates or changes in general market conditions; (v) technological innovations by competitors or in competing technologies; (vi) lack of funding generated for operations; (vii) investor perception of our industry or our prospects; (viii) general economic trends; and ix) Commodity price fluctuation
In addition, stock markets have experienced price and volume fluctuations and the market prices of securities have been highly volatile. These fluctuations are often unrelated to operating performance and may adversely affect the market price of our common stock. As a result, investors may be unable to sell their shares at a fair price and you may lose all or part of your investment.
Additional Issuance of Equity Securities May Result in Dilution to Our Existing Stockholders.
Our Articles of Incorporation, as amended, authorize the issuance of 5,000,000,000 shares of common stock and 10,000,000 shares of preferred stock. The Board of Directors has the authority to issue additional shares of our capital stock to provide additional financing in the future and the issuance of any such shares may result in a reduction of the book value or market price of the then outstanding shares of our common stock. If we do issue any such additional shares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders. As a result of such dilution, your proportionate ownership interest and voting power will be decreased accordingly. Further, any such issuance could result in a change of control.
Our Common Stock is Classified as a “Penny Stock” Under SEC Rules Which Limits the Market for Our Common Stock.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in "penny stocks." Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and sales person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for stock that becomes subject to those penny stock rules. If a trading market for our common stock develops, our common stock will probably become subject to the penny stock rules, and shareholders may have difficulty in selling their shares.
Securities analysts may not provide coverage of our common stock or may issue negative reports, which may have a negative impact on the market price of our common stock.
Securities analysts have not historically provided research coverage of our common stock and may elect not to do so in the future. If securities analysts do not cover our common stock, the lack of research coverage may cause the market price of our common stock to decline. The trading market for our common stock may be affected in part by the research and reports that industry or financial analysts publish about our business. If one or more of the analysts who elects to cover us downgrades our stock, our stock price would likely decline substantially. If one or more of these analysts ceases coverage of us, we could lose visibility in the market, which in turn could cause our stock price to decline. In addition, rules mandated by the Sarbanes-Oxley Act of 2002 and a global settlement reached in 2003 between the SEC, other regulatory agencies and a number of investment banks have led to a number of fundamental changes in how analysts are reviewed and compensated. In particular, many investment banking firms are required to contract with independent financial analysts for their stock research. It may be difficult for companies such as ours, with smaller market capitalizations, to attract independent financial analysts that will cover our common stock. This could have a negative effect on the market price of our stock.
We do not intend to pay cash dividends and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We have never declared or paid cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. We have a history of losses and currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business. In addition, the terms of the Wells Fargo Facility restrict our ability to pay dividends and any future credit facilities and loan agreements may further restrict our ability to pay dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of potential gain for the foreseeable future.
Item 1B.
Item 1B. Unresolved Staff Comments
None.
Item 2.
Item 2. Properties
Our principal office space is located at 2450 Hollywood Blvd, Suite 708, Hollywood, Florida 33020. We entered into a one-year lease term for this office space on November 8, 2012 (the “Lease”). The terms and provisions of the Lease include: (i) monthly rent commencing November 15, 2012 in the amount of $475 including sales tax and (ii) triple-net provisions.
Item. 3. Legal Proceedings
Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Annual Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.
Item. 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Shares of our common stock commenced trading on the OTC Bulletin Board approximately July 2008. As of the date of this Annual Report, our common stock trades under the symbol “ONTC:QB”. The market for our common stock is limited, and can be volatile. The following table sets forth the high and low bid prices relating to our common stock on a quarterly basis for the periods indicated as quoted by the NASDAQ OTC:BB stock market. These quotations reflect inter-dealer prices without retail mark-up, mark-down, or commissions, and may not reflect actual transactions.
As of March 31, 2013, we had 124 shareholders of record, which does not include shareholders whose shares are held in street or nominee names.
Dividend Distributions
We have not historically and do not intend to distribute dividends to stockholders in the foreseeable future.
Securities authorized for issuance under equity compensation plans
We do not have any equity compensation plans.
Penny Stock
Our common stock is considered to be a "penny stock" under the rules the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market System, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the Commission, that:
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contains a description of the nature and level of risks in the market for penny stocks in both public offerings and secondary trading;
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contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities' laws; contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;
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contains a toll-free telephone number for inquiries on disciplinary actions;
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defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and
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contains such other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with:
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bid and offer quotations for the penny stock;
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the compensation of the broker-dealer and its salesperson in the transaction;
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the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the marker for such stock; and
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monthly account statements showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules that require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.
Related Stockholder Matters
None.
Purchase of Equity Securities
None.
Item 6.
Item 6. Selected Financial Data.
As the Company is a “smaller reporting company,” this item is inapplicable.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
You should read the following discussion of our results of operations and financial condition with the audited financial statements and related notes included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs, and that involve numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this report. Actual results may differ materially from those contained in any forward-looking statements. See “Cautionary Statement Concerning Forward-Looking Statements.” Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
We are a development stage company and have not generated any revenue to date. We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
RESULTS OF OPERATION
Fiscal Year Ended December 31, 2012 Compared to Fiscal Year Ended December 31, 2011.
Our net loss for fiscal year ended December 31, 2012 was ($2,470,830) compared to a net loss of ($1,813,191) for fiscal year ended December 31, 2011 (an increase of $657,047). During fiscal years ended December 31, 2012 and 2011, we did not generate any revenue from operations.
During fiscal year ended December 31, 2012, we incurred operating expenses of $319,575 compared to operating expenses of $794,987 incurred during fiscal year ended December 31, 2011 (a decrease of $475,412). The operating expenses incurred during fiscal year ended December 31, 2012 consisted of: (i) general and administrative of $74,050 (2011: $139,176); (ii) investor relations of $-0- (2011: $124,072); (iii) occupancy - headquarters of $40,201 (2011: $45,568); (iv) officer compensation of $42,600 (2011: $180,000); (v) professional fees of $106,356 (2011: $95,140); (vi) staff compensation of $29,993 (2011: $94,581); (vii) stock-based compensation of $25,000 (2011: $115,150: and (viii) depreciation of $1,375 (2010: $1,300). Our operating expenses decreased primarily based on the decreased scope and scale of our business operations relating to the discontinuing of operations of NexPhase as our wholly-owned subsidiary and reduced marketing and sale of our NexPhase lighting products. Thus, operating expenses decreased resulting substantially from a decrease of $64,588 in staff compensation, $124,072 in investor relations, $5,367 in occupancy-headquarters, $65,126 in general and administrative expenses, $137,400 in officer compensation and $90,150 in stock-based compensation. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing, and consulting costs.
Therefore, our operating loss incurred during fiscal year ended December 31, 2012 was $319,575 as compared to an operating loss incurred during fiscal year ended December 31, 2011 of $794,987.
Other expenses incurred during fiscal year ended December 31, 2012 included: (i) interest expense of $1,132,553 (2011: $451,580); (ii) write-off of project development costs of $-0- (2011: $27,600); (iii) loss on the settlement of debt of $711,702 (2011: $-0-); and (iv) net loss from discontinued operations of NexPhase of $306,408 (2011: $539,024). Therefore, our net loss and loss per share during fiscal year ended December 31, 2012 was $2,470,830 or ($12.37) per post-Reverse Stock Split share compared to a net loss and loss per share of ($1,813,191) or ($11,376.49) per post-Reverse Stock Split share during fiscal year ended December 31, 2011. The weighted average number of shares outstanding was 199,644 for fiscal year ended December 31, 2012 compared to 159 for fiscal year ended December 31, 2011.
LIQUIDITY AND CAPITAL RESOURCES
Fiscal Year Ended December 31, 2011
As of December 31, 2012, our current assets excluding discontinued operations were $1,004,861 and our current liabilities excluding discontinued operations were $1,244,303, which resulted in a working capital deficit of $239,442. As of December 31, 2012, our current assets were comprised of: (i) $14 in cash; (ii) $991,687 in amounts due from NexPhase; (iii) $8.960 in a loan to officer; and (iv) $4,200 in other current assets. As of December 31, 2012, current liabilities were comprised of: (i) $36,575 in accounts payable; (ii) $85,706 in accrued interest; (iii) $23,990 in advances from non-affiliated related parties; (iv) $2,781 in advances from third parties; (v) $662,818 in notes payable, non-affiliated related parties; and (vi) $432,433 in notes payable - third parties.
As of December 31, 2012, our total assets of $4,691,978 were comprised of: (i) $1,004,861 in current assets excluding discontinued operations; (ii) $6,522 in fixed assets of net property and equipment; (iii) $8,439 in security deposits; (iv) $71,531 in valuation of intellectual property; (v) $451,792 in goodwill; and (vi) $3,148,833 of assets attributable to discontinued operations. As of December 31, 2012, our total liabilities of $2,538,568 were comprised of current liabilities and $1,294,265 of liabilities attributable to discontinued operations.
Stockholders’ equity (deficit) increased from $1,702,504 for fiscal year ended December 31, 2011 to $2,153,410 for fiscal year ended December 31, 2012.
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. For fiscal year ended December 31, 2012, net cash flows used by operations was ($361,138). Net cash flows used in operating activities for fiscal year ended December 31, 2012 consisted of a net loss of $2,470,238 adjusted by: (i) $1,375 in depreciation; (ii) $25,000 in stock-based compensation; (iii) $711,702 in loss on settlement of debt; (iv) $62,176 in interest accrued on notes payable, non-affiliate related parties; (v) $29,339 in interest accrued on notes payable, third parties; (vi) $1,018,354 in accretion of beneficial conversion feature as interest expense; and (vii) $553,896 in changes in assets and liabilities of discontinued operations, offset by changes in operating assets and liabilities of $297,833.
Cash Flows from Investing Activities
For fiscal year ended December 31, 2011, net cash flows used in investing activities was $12,292 consisting of $12,852 in net cash received from acquisition, which was offset by $560 in purchase of property and equipment.
Cash Flows from Financing Activities
We have financed our operations primarily from debt or the issuance of equity instruments. For fiscal year ended December 31, 2012, net cash flows provided from financing activities was $353,275 consisting of $73,650 in proceeds from note payable - non-affiliated related parties, $345,000 in proceeds from issuance of notes payable third parties and $22,890 in advances from non-affiliated related parties, which was offset by $34,000 in payments on notes payable - non-affiliated related parties, $52,315 in payments on notes payable - third parties and $1,950 from net payments on advances from third parties.
PLAN OF OPERATION AND FUNDING
As noted above, we have acquired CCWC as our wholly-owned subsidiary. In connection with our future business plan, management anticipates additional increases in operating expenses and capital expenditures relating to our business operations. We would finance these expenses with further issuances of securities and debt issuances. We expect we would need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities would result in dilution to our current shareholders. Further, such securities may have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
GOING CONCERN
The independent auditors' report accompanying our December 31, 2012 and December 31, 2011 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our principal accounting policies are described in Note 2 of the audited financial statements included elsewhere in this report. The preparation of the financial statements in accordance with Generally Accepted Accounting Principles (“U.S. GAAP”) requires management to make significant judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. Our financial position and results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information. The preparation of interim financial statements involves the use of certain estimates that are consistent with those used in the preparation of our annual financial statements. Significant accounting policies, including areas of critical management judgments and estimates, include the following:
Impairment or Disposal of Long-Lived Assets
The Company accounts for the impairment or disposal of long-lived assets according to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.
Stock Based Compensation
The Company accounts for Stock-Based Compensation under ASC 718 “Compensation - Stock Compensation”, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 is a revision to SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.
The Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Any stock options or warrants issued to non-employees are recorded in expense and additional paid-in capital in shareholders' equity/(deficit) over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options or warrants at the end of each period.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As the Company is a “smaller reporting company,” this item is inapplicable.
Item 8.
Item 8. Financial Statements and Supplementary Data.
2451 N. McMullen Booth Road
Suite.308
Clearwater, FL 33759
855.334.0934 Toll free
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Inelco Corporation
Formerly Onteco Corporation.
We have audited the accompanying consolidated balance sheet of Inelco, formerly known as Onteco Corporation (a development stage company) as of December 31, 2012 and 2011, and the related statement of operations, stockholders’ equity(deficit), and cash flows for the years then ended and the period from Inception (December 31, 2007) through December 31, 2012. 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 audit
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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Inelco Corporation as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended and for the period from Inception (December 31, 2007) through December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has significant net losses and cash flow deficiencies. Those conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters are described in Note B. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ DKM Certified Public Accountants
DKM Certified Public Accountants
f/k/a/ Drake &Klein CPAs
Clearwater, Florida
April 15, 2013
INELCO CORPORATION AND SUBSIDIARIES
f/k/a Onetco Corporation
(A Development Stage Company)
Consolidated Balance Sheets
See accompanying notes to consolidated financial statements.
INELCO CORPORATION AND SUBSIDIARIES
f/k/a Onetco Corporation
(A Development Stage Company)
Consolidated Statements of Operations
See accompanying notes to consolidated financial statements.
INELCO CORPORATION AND SUBSIDIARIES
f/k/a Onetco Corporation
(A Development Stage Company)
Consolidated Statements of Cash Flows
Continued
See accompanying notes to consolidated financial statements.
INELCO CORPORATION AND SUBSIDIARIES
f/k/a Onetco Corporation
(A Development Stage Company)
Statements of Cash Flows (Continued)
See accompanying notes to consolidated financial statements.
Continued
See accompanying notes to consolidated financial statements.
Continued
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 1 - Nature of Business, Presentation, and Going Concern
Organization
Organization
Inelco Corporation ("the Company") was organized under the laws of the State of Nevada on December 31, 2007 as InfoSpi Inc. The Company was established as part of the implementation of the Chapter 11 plan of reorganization of Arrin Systems, Inc. ("Arrin"). Arrin filed for Chapter 11 Bankruptcy in April 2007 in the U.S. Bankruptcy Court for the Southern District of California. Arrin’s plan of reorganization was confirmed by the Court on December 12, 2007 and became effective on December 30, 2007. The plan of reorganization provided for the establishment of the Issuer and the sale to the Issuer of Arrin’s proprietary software (used in the employee background screening industry) in exchange for 0.284 shares of InfoSpi’s common stock which were distributed to Arrin’s general unsecured creditors.
At that time, management believed the Company lacked the resources to effectively market its services on its own and therefore engaged in a search for a merger or acquisition partner with the resources to either develop this business or enter another line of business which will bring value to the Issuer's shareholders.
The Company was founded to develop innovative, practical and cost-effective solutions to some of the most significant environmental challenges facing industries and governments around the world. Additionally, these solutions must show promise of generating profits for the company. Specifically the company has determined that one industry that meets both of the above-mentioned prongs of criteria is the Energy Saving Lighting Industry.
Effective on February 14, 2011, the Board of Directors of the Company approved and authorized the execution of a definitive agreement dated February 14, 2011 (the “Agreement”) among the Company, NexPhase Lighting, Inc., a privately held Florida corporation (“NexPhase”)., and the shareholders of NexPhase (the “NexPhase Shareholders”). In accordance with the terms and provisions of the Agreement: (i) the Company acquired from the NexPhase Shareholders an aggregate 55,622,000 shares of common stock of NexPhase representing the total issued and outstanding shares of NexPhase; (ii) in exchange thereof, the Company issued to the NexPhase Shareholders an aggregate 33.75 shares of its restricted common stock generally in proportion to the equity holdings of the NexPhase Shareholders; (iii) NexPhase transferred and assigned to the Company all existing material contracts including those related to distribution, licensing and marketing and those dealing with the grant of rights for the use of any and all intellectual property; (iv) the Company assumed all other assets of NexPhase, including licenses, royalty rights, equipment, product designs, marketing and sale materials, logos, trademarks, copyrights and website; and (v) the Company further assumed all liabilities of NexPhase, including all trade and debt obligations. Therefore, as of the February 14, 2011, NexPhase has become a wholly-owned subsidiary of the Company.
NexPhase is in the business of designing, developing, manufacturing and marketing a high quality and high efficiency full line of LED intelligent lighting fixtures and control systems for commercial applications and projects involving both new construction and retrofits (the “LED Lighting Fixtures”), as well as licensing its technologies to territories outside of the United States.
On March 29, 2011, we filed a Certificate of Amendment with the Nevada Secretary of State in order to change our name from “InfoSpi Inc.” to “Onteco Corporation” (the “Name Change”). The Name Change was effective with the Nevada Secretary of State on March 29, 2011 when the Certificate of Amendment was filed. The Name Change was approved by our Board of Directors pursuant to written consent resolutions dated March 15, 2011 and further approved by certain shareholders holding a majority of our total issued and outstanding shares of common stock pursuant to written consent resolutions dated March 16, 2011.
On April 1, 2013, we filed a Certificate of Amendment with the Nevada Secretary of State in order to change our name from “Onteco Corporation” to “Inelco Corporation” (the “Name Change”). The Name Change was effective with the Nevada Secretary of State on April 1, 2013 when the Certificate of Amendment was filed. The Name Change was approved by our Board of Directors pursuant to written consent resolutions dated January 14, 2013 and further approved by certain shareholders holding a majority of our total issued and outstanding shares of common stock pursuant to written consent resolutions dated January 14, 2013.
We filed the appropriate documentation with FINRA in order to effectuate the Name Change in the OTC Markets. The Name Change was effected on the OTC Markets April 11, 2011.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 1 - Nature of Business, Presentation, and Going Concern (Continued)
Organization (Continued)
Therefore, as of April 11, 2011, our trading symbol is “ONTC”. Our management deemed it appropriate to change our name to Inelco Corporation in furtherance of and to better reflect the nature of our new business operations.
The Company’s Board of Directors has unanimously adopted a resolution, and has received shareholder approval, to authorize the Board to effectuate a Spin-Off of NexPhase upon receipt of all necessary regulatory approvals and the passage of all necessary waiting periods. The Board of Directors had determined that it would be in the Company’s best interest to effect the Spin-Off and has received the consent of holders of over 100% of the voting rights and power of the Company’s securities to authorize the Board of Directors to effect the Spin-Off. The Company will issue shares of NexPhase to the existing shareholders of the Company on a pro-rated basis on or about June 30, 2013. See Note 7 - Spin-Off of NexPhase Lighting.
Effective October 25, 2012, the Company’s Board of Directors approved and authorized the execution of a share exchange agreement (the “Share Exchange Agreement”) with Cyber Centers Worldwide Corporation, a private Florida corporation (“CCWC”), and the shareholders of CCWC (the "CCWC Shareholders"). In accordance with the terms and provisions of the Share Exchange Agreement, the Company will acquire approximately 150,000,000 shares of common stock of CCWC and 1,000,000 shares of Series B preferred stock of CCWC, which represents 100% of the total issued and outstanding shares held of record by the CCWC Shareholders. In exchange for the acquisition of the capital shares of CCWC, the Company shall issue to the CCWC Shareholders on a pro rata basis 75,000 restricted shares of common stock of the Company and 1,000,000 shares of Series B preferred stock of the Company. This resulted in CCWC becoming the wholly-owned subsidiary of the Company. Prior to this share exchange, CCWC changed its name from Cyber Centers International Corporation ("CCIC"). See Note 6 - Acquisition of Cyber Centers Worldwide Corporation.
In accordance with the Share Exchange Agreement and anticipated consummation of the spin-off of the Company's wholly-owned subsidiary, NexPhase Lighting Inc., the operations of the Company will change from the business of designing, developing, manufacturing and marketing a high quality and high efficiency full line of LED intelligent lighting fixtures and control systems for commercial applications and projects involving both new construction and retrofits. The business operations of the Company will be conducted through its new wholly-owned subsidiary, CCWC, which involves interactive online gaming within the entertainment industry. Over the past years, the founders of CCIC have invested private capital, time and effort and innovative technology in its product development. CCWC today is capitalizing on the emerging trends in interactive gaming and social marketing with a vision to become the benchmark in the gaming industry with a reputation for customer safety, security and quality customer service, while also upholding the interests of shareholders.
Stock Splits
On November 2, 2011, the Company's Board of Directors declared a one for one-thousand reverse stock split of all outstanding shares of common stock. The total number of authorized common shares and the par value thereof was not changed by the split.
On January 14, 2013, the Company's Board of Directors declared a one for two-thousand reverse stock split of all outstanding shares of common stock. All common share and per common share data in these consolidated financial statements and related notes hereto have been retroactively adjusted to account for the effect of the reverse stock splits for all periods presented prior to December 31, 2012. The total number of authorized common shares and the par value thereof was not changed by the split.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission (“SEC”).
Reclassifications
Certain items on the 2011 balance sheet, statement of operations and statement of cash flows have been reclassified to conform to current period presentation.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 1 - Nature of Business, Presentation, and Going Concern (Continued)
Development Stage Enterprise
Since its formation on December 31, 2007, the Company became a “development stage company” as defined in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) ASC Topic 915 “Development Stage Entities”. To date, the Company's planned principal operations have not fully commenced.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net losses of $2,470,238 and $1,813,191 for the years ended December 31, 2012 and 2011, respectively, and has incurred cumulative losses since inception of $5,061,170. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate revenues, its ability to continue to raise investment capital, and implement its business plan. No assurance can be given that the Company will be successful in these efforts.
These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.
Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas of estimate include the estimates and assumptions related to its deferred income tax asset valuation and the inputs used in calculating stock compensation and transactions.
The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Principles of Consolidation
The consolidated financial statements include the accounts of Inelco Corporation and its wholly-owned subsidiaries, NexPhase and CCWC. All significant inter-company balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2012 and 2011, respectively, the Company had no cash equivalents.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 2 - Summary of Significant Accounting Policies (Continued)
Property and Equipment
Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful lives ranging from 5 years to 7 years. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations. Leasehold improvements are amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.
Depreciation expense was $1,375 and $1,300 for the years ended December 31, 2012 and 2011, respectively.
Impairment or Disposal of Long-Lived Assets
The Company accounts for the impairment or disposal of long-lived assets according to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, other current assets, accounts payable and notes payable. The carrying amount of cash, other current assets, payables and notes payable approximates fair value because of the short-term nature of these items.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist principally of cash. Cash was deposited with a high quality credit institution.
Beneficial Conversion Feature of Convertible Notes Payable
The Company accounts for convertible notes payable in accordance with the guidelines established by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 470-20, “Debt with Conversion and Other Options”, Emerging Issues Task Force ("EITF") 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios and EITF 00-27, Application of Issue No 98-5 To Certain Convertible Instruments. The Beneficial Conversion Feature ("BCF") of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible note when issued and also records the estimated fair value of any warrants issued with those convertible notes.
The BCF of a convertible note is measured by allocating a portion of the note's proceeds to the warrants, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The Company calculates the fair value of warrants issued with the convertible note using the Black Scholes valuation model and uses the same assumptions for valuing employee options in accordance with ASC Topic 718 “Compensation - Stock Compensation”. The only difference is that the contractual life of the warrants is used.
The value of the proceeds received from a convertible note is then allocated between the conversion features and warrants on a relative fair value basis. The allocated fair value is recorded in the financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 2 - Summary of Significant Accounting Policies (Continued)
Income Taxes
Income taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized or the liability settled. The effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period that the change occurs. Future income tax assets are recognized to the extent that they are considered more likely than not to be realized.
The FASB has issued ASC 740 “Income Taxes”. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.
As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by ASC 740 and concluded that the tax position of the Company has not met the more-likely-than-not threshold as of December 31, 2012.
Stock Based Compensation
The Company accounts for Stock-Based Compensation under ASC 718 “Compensation - Stock Compensation”, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.
The Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Any stock options or warrants issued to non-employees are recorded in expense and additional paid-in capital in shareholders' equity/(deficit) over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options or warrants at the end of each period.
The Company issues stock to consultants for various services. The costs for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete. The Company recognized consulting expense and a corresponding increase to additional paid-in-capital related to stock issued for services.
During the year ended December 31, 2012 and 2011, the Company granted no stock options to the Company's employees, directors and consultants.
Basic and Diluted Loss Per Share
The Company computes income (loss) per share in accordance with ASC 260, "Earnings per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing income (loss) available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. There were no potentially dilutive shares as of December 31, 2012 and 2011.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 2 - Summary of Significant Accounting Policies (Continued)
Accounting for Obligations and Instruments Potentially to be settled in the Company’s Own Stock
We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with ASC 815 “Accounting for Derivative Financial Instruments”. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock.
Fair Value Accounting
On October 1, 2010, we adopted ASC 820, “Fair Value Measurements.” which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. ASC 820 does not require any new fair value measurements, and has been partially deferred for non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The partial adoption of ASC 820 for financial assets and liabilities did not have a material impact on our financial position, results of operations or cash flow.
Revenue and Expense Recognition
Revenue is recognized when earned rather than when received. Sales are recognized when a product is delivered or shipped to the customer and all material conditions relating to the sale have been substantially performed. Expenses are charged to operations as incurred.
Accounting Standards Codification
The FASB’s Accounting Standards Codification (“ASC”) became effective on September 15, 2009. At that date, the ASC became the FASB’s officially recognized source of authoritative generally accepted accounting principles (“GAAP”) applicable to all public and non-public non-governmental entities, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”) and related literature. All other accounting literature is considered non-authoritative. The switch to the ASC affects the way companies refer to U.S. GAAP in financial statements and accounting policies. Citing particular content in the ASC involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure.
Effect of Recent Accounting Pronouncements
The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these financial statements as presented and does not anticipate the need for any future restatement of these financial statements because of the retro-active application of any accounting pronouncements issued subsequent to December 31, 2012 through the date these financial statements were issued.
Note 3 - Project Development Costs
On January 15, 2010 the Company engaged an engineering firm to design, plan and supervise the development of proprietary “critical reactor” equipment to be used in environmentally friendly sewer and sludge conversion and used tire and plastic recovery. The initial cost of this project, in the amount of $27,600 was capitalized pending the results of the Company’s efforts to commercialize this technology. On June 30, 2011, Management determined that although the critical reactor project was commercially feasible, it was in the best interest of the company to commit all future funding to the NexPhase Lighting subsidiary. Therefore, on June 30, 2011, the project development cost in the amount of $27,600 was written off.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 4 - Notes Payable - Non-affiliated Related Parties
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 4 - Notes Payable - Non-affiliated Related Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 4 - Notes Payable - Non-affiliated Related Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 4 - Notes Payable - Non-affiliated Related Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 4 - Notes Payable - Non-affiliated Related Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 4 - Notes Payable - Non-affiliated Related Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 4 - Notes Payable - Non-affiliated Related Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 4 - Notes Payable - Non-affiliated Related Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 5 - Notes Payable - Third Parties
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 5 - Notes Payable - Third Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 5 - Notes Payable - Third Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 5 - Notes Payable - Third Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 5 - Notes Payable - Third Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 5 - Notes Payable - Third Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 5 - Notes Payable - Third Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 5 - Notes Payable - Third Parties (Continued)
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 6 - Acquisition of Cyber Centers Worldwide Corporation
Effective October 25, 2012, the Company’s Board of Directors approved and authorized the execution of a share exchange agreement (the “Share Exchange Agreement”) with Cyber Centers Worldwide Corporation, a private Florida corporation (“CCWC”), and the shareholders of CCWC (the "CCWC Shareholders"). In accordance with the terms and provisions of the Share Exchange Agreement, the Company will acquire approximately 150,000,000 shares of common stock of CCWC and 1,000,000 shares of Series B preferred stock of CCWC, which represents 100% of the total issued and outstanding shares held of record by the CCWC Shareholders. In exchange for the acquisition of the capital shares of CCWC, the Company shall issue to the CCWC Shareholders on a pro rata basis 75,000 restricted shares of common stock of the Company and 1,000,000 shares of Series B preferred stock of the Company. This resulted in CCWC becoming the wholly-owned subsidiary of the Company. Prior to this share exchange, CCWC changed its name from Cyber Centers International Corporation ("CCIC").
The following table summarizes the consideration given for CCWC and the fair values of the assets acquired and liabilities assumed recognized at the acquisition date.
The 75,000 shares of Inelco common stock were valued at the market price of $0.80 per share on the date of acquisition. The 1,000,000 shares of Inelco Series B Preferred Stock were valued at the common stock equivalent market price of $0.40 per preferred share on the date of acquisition as the preferred shares are convertible to .5 common shares.
Intangible assets consisting of software in development were valued by management based on the fair value of software development costs incurred to date. As the software remains in development, definite lives have not yet been determined and no amortization has been recognized as of December 31, 2012.
In accordance with the Share Exchange Agreement and anticipated consummation of the spin-off of the Company's wholly-owned subsidiary, NexPhase Lighting Inc., the operations of the Company will change from the business of designing, developing, manufacturing and marketing a high quality and high efficiency full line of LED intelligent lighting fixtures and control systems for commercial applications and projects involving both new construction and retrofits. The business operations of the Company will be conducted through its new wholly-owned subsidiary, CCWC, which involves interactive online gaming within the entertainment industry. Over the past years, the founders of CCIC have invested private capital, time and effort and innovative technology in its product development. CCWC today is capitalizing on the emerging trends in interactive gaming and social marketing with a vision to become the benchmark in the gaming industry with a reputation for customer safety, security and quality customer service, while also upholding the interests of shareholders.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 7 - Spin-Off of NexPhase Lighting
The Company’s Board of Directors has unanimously adopted a resolution, and has received shareholder approval, to authorize the Board to effectuate a Spin-Off of NexPhase upon receipt of all necessary regulatory approvals and the passage of all necessary waiting periods. The Board of Directors had determined that it would be in the Company’s best interest to effect the Spin-Off and has received the consent of holders of over 100% of the voting rights and power of the Company’s securities to authorize the Board of Directors to effect the Spin-Off. The Company will issue shares of NexPhase to the existing shareholders of the Company on a pro-rated basis on or about June 30, 2013.
Since the acquisition of NexPhase, the Company has provided working capital to NexPhase. Amounts due from NexPhase are $991,687 and $405,528 at December 31, 2012 and 2011, respectively.
Due to the transfer of the assets and liabilities of NexPhase to the shareholders, the accounting for NexPhase in this period and historically would be classified as a discontinued operation. Accordingly, the Company has excluded results for NexPhase from its continuing operations in the Consolidated Statement of Operations for all periods presented. The following table shows the results of NexPhase included in the loss from discontinued operations:
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 7 - Spin-Off of NexPhase Lighting
The major classes of assets and liabilities of discontinued operations on the balance sheet are as follows:
Note 8 - Licensing, Manufacturing and Distribution Agreement
Effective on April 30, 2012, the Board of Directors of Onteco Corporation, a Nevada corporation (the “Company”), approved and authorized the execution of a Licensing, Manufacturing and Distribution Agreement (the “Agreement”) with Jarlyn S.A., an Uruguayan corporation (“Jarlyn”). In accordance with the terms and provisions of the Agreement, Jarlyn shall be designated the exclusive licensee, manufacturer, distributor and re-seller of certain licensed technologies within the Oriental Republic of Uruguay (the “Territory”).
In accordance with the terms and provisions of the Agreement: (i) the Company shall grant to Jarlyn an exclusive license to the Licensed Technology Products, for the manufacturing and distribution of the Licensed Technologies, and for the use of the trademark in the Territory; (ii) the Company shall grant to Jarlyn exclusive distribution rights for the direct sale and resale to resellers or other channels of the Licensed Technology Products in the Territory; (iii) Jarlyn shall compensate the Company for the granting of the license and rights pertaining to the Licensed Technology Products by the transfer to the Company of 1,000,000 shares of common stock held of record by Jarlyn in a publicly traded company acceptable to the Company; (iv) Jarlyn shall further compensate the Company for the granting of the license and rights pertaining to the Licensed Technology Products by the payment of the sum of $200,000 U.S. Dollars as a one-time cash licensing fee; and (v) Jarlyn shall pay to the Company a royalty of ten percent (10%) of all gross revenues received by Jarlyn or its affiliates relating to sales, installation and services associated with the Licensed Technologies in the Territory. The agreement is for a period of seven (7) years.
On November 30, 2012, the Company and Jarlyn entered into a Cancellation Agreement, mutually cancelling the Licensing, Manufacturing and Distribution Agreement previously entered into on April 30, 2012. Accordingly, any and all amounts and transaction previously recorded in the Company’s financial statements have been reversed in their entirety.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 9 - Executive Compensation Agreement
On January 8, 2010, the Company entered an Executive Employment Agreement effective January 11, 2010 with its Chief Executive Officer. Terms of the agreement include an inception bonus of $150,000 and monthly payments of $15,000. The agreement expires on December 31, 2013.
On November 25, 2010, effective with the change in control, the chief executive officer resigned. The executive compensation agreement remains in effect through December 31, 2013.
During the years ended December 31, 2011 and 2010, the Company recorded executive compensation expenses to the Company's chief executive officer; $180,000 and $180,000 respectively, resulting in an accrued employee compensation liability of $488,000 at December 31, 2011.
Oh January 8, 2012, the Company and its former Chief Executive Officer entered into an agreement to terminate the executive compensation agreement and the Company issued a convertible promissory note for the accrued compensation and interest thereon totally $501,425. The note is due January 8, 2013, bears interest at 6.25% and is convertible at the lower of 1) a price of $2.00, or 2) a seventy-five percent discount to the previous day's closing bid price if the closing bid price is $3.00 per share or less.
Note 10 - Stockholders’ Equity (Deficit)
Authorized Capital
On June 15, 2010, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved an amendment to our Articles of Incorporation to increase the authorized capital (the “2010 Amendment”). The 2010 Amendment was filed with the Nevada Secretary of State on July 22, 2010 increasing our authorized capital from 75,000,000 shares of common stock to 350,000,000 shares of common stock, par value $0.001, and 10,000,000 shares of preferred stock, par value $0.001.
On January 18, 2011, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved a further amendment to our Articles of Incorporation to increase the authorized capital (the “January 2011 Amendment”). The January 2011 Amendment was filed with the Nevada Secretary of State on January 19, 2011 increasing our authorized capital from 350,000,000 shares of common stock to 750,000,000 shares of common stock, par value $0.001, and 10,000,000 shares of preferred stock, par value $0.001.
Effective January 19, 2011, the Board of Directors approved the designation of Series A Preferred Stock. The shares of Series A Preferred stock carry certain rights and preferences, including voting rights consisting of ten thousand votes for each one share of Series A Preferred stock. The shares of Series A preferred stock are convertible into shares of common stock on a one-to-one thousand share basis.
Effective June 18, 2012, the Board of Directors approved the designation of Series B Preferred Stock. The shares of Series B Preferred stock carry certain rights and preferences, including voting rights consisting of one hundred votes for each one share of Series B Preferred stock. The shares of Series B preferred stock are convertible into shares of common stock on a one-to-one thousand share basis.
On November 4, 2011, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved a further amendment to our Articles of Incorporation to increase the authorized capital (the “November 2011 Amendment”). The November 2011 Amendment was filed with the Nevada Secretary of State on November 14, 2011 increasing our authorized capital from 750,000,000 shares of common stock to 2,000,000,000 shares of common stock, par value $0.001. The authorized preferred stock of 100,000,000 shares remains unchanged.
On April 3, 2012, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved a further amendment to our Articles of Incorporation to increase the authorized capital (the “2012 Amendment”). The 2012 Amendment was filed with the Nevada Secretary of State on April 3, 2012 reducing our authorized capital from 2,000,000,000 shares of common stock to 300,000,000 shares of common stock, par value $0.001, and reducing the authorized capital of preferred stock from 100,000,000 to 10,000,000 shares, par value $0.001.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On August 22, 2012, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved a further amendment to our Articles of Incorporation to increase the authorized capital (the “2012 Amendment”). The 2012 Amendment was filed with the Nevada Secretary of State on August 22, 2012 increasing our authorized capital from 300,000,000 shares of common stock to 5,000,000,000 shares of common stock, par value $0.001. The authorized capital of preferred stock remained unchanged at 10,000,000 shares, par value $0.001.
Stock Splits
On November 2, 2011, the Company's Board of Directors declared a one for one-thousand reverse stock split of all outstanding shares of common stock. The total number of authorized common shares and the par value thereof was not changed by the split.
On January 14, 2013, the Company's Board of Directors declared a one for two-thousand reverse stock split of all outstanding shares of common stock. All common share and per common share data in these consolidated financial statements and related notes hereto have been retroactively adjusted to account for the effect of the reverse stock splits for all periods presented prior to December 31, 2012. The total number of authorized common shares and the par value thereof was not changed by the split.
Preferred Stock
Effective October 31, 2011, the Board of Directors authorized the issuance 150,000 shares of Series A Preferred Stock to Dror Svorai, the Company’s Chief Executive Officer, for the period November 24, 2010 through November 23, 2011 based upon recognition of the outstanding services, leadership and innovative business operational strategies provided by Svorai and his continuous dedication and loyalty to the Company. The preferred shares were valued at $150, or $0.001 per share.
Effective October 25, 2012, the Board of Directors authorized the issuance 1,000,000 shares of Series B Preferred Stock to the selling shareholders of CCWC in accordance with the terms of the Share Exchange Agreement between the selling shareholders and the Company. The preferred shares were valued at $400,000, or $0.40 per share.
Common Stock
The Company’s first and second stock issuances took place pursuant to the Plan of Reorganization confirmed by the Bankruptcy Court: On December 12, 2007, the Court ordered the distribution of shares in the Company to all general unsecured creditors of Arrin Systems, Inc. ("Arrin"), with these creditors to receive .0005 of a share in InfoSpi for each $2,940 of Arrin’s debt which they held. These creditors received an aggregate of .28 of a share in the Company on December 31, 2007.
The Court also ordered the distribution of shares and warrants in the Company to all administrative creditors of Arrin, with these creditors to receive one share and five warrants in InfoSpi for each $100 of Arrin's administrative debt which they held. On January 15, 2008, these creditors received an aggregate of 1common shares in the Company and 2.5 warrants.
On February 4, 2008 the Company issued a total of 2 shares of common stock to an Officer and Director in exchange for $4,000 in cash to be used as operating capital for the Company. The shares were issued at a price of $2,000 per share.
On October 28, 2009 and effective September 23, 2009, our Board of Directors pursuant to unanimous written consent authorized the issuance of an aggregate 18 shares of restricted common stock at $5,975 per share in exchange for prior services rendered including, but not limited to, introduction to potential funding arrangements and various strategic partners. Factors considered by the Board in determining the fair value of the 18 shares of common stock included:
1.
A lack of observable market price because of the minimal volume of shares that had been traded on any independent market since inception of the Company,
2.
The large number of shares being issued compared to the number of shares of common stock outstanding prior to the stock issuance,
3.
The Company’s issuance of 14 shares for 5,000 warrants converted to common stock effective September 22, 2009 at an issuance price of $2 per share,
4.
The unregistered status of the shares which limits the marketability of the shares,
5.
The fact that issuance of these shares does not change who is in control of the Company, and
6.
The estimated value of the services provided.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On November 13, 2009 and effective September 22, 2009, our Board of Directors pursuant to unanimous written consent acknowledged the warrants and authorized the exchange of 5,000 warrants and issuance of an aggregate 14 shares of our common stock at a per share price of $2 (par value).
On October 7, 2010, the Board of Directors approved the issuance of 7 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 19, 2010 in the amount of $15,400 including bonus interest. In accordance with the terms of the note, the shares were issued at $2,200 per share.
Effective on November 25, 2010, in accordance with the appointment of Dror Svorai as our sole executive officer, President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer, and our sole director, we issued an aggregate 6 shares of restricted common stock to Svorai at $10,416.67 per share. The Board of Directors evaluated certain factors regarding the issuance including, but not limited to, the following: (i) the 6 shares of common stock are restricted and cannot be resold except under the parameters of Rule 144; (ii) the opportunity for successful new business operations for us based upon the engagement of Svorai and the opportunities and business contacts provided to us through his engagement; and (iii) our inability to monetarily compensate Dror Svorai and recognition of his current and continuous dedication and long-term loyalty to us.
On December 1, 2010, we entered into an agreement (the “FIS Agreement”) with Financial Insights & Solutions Inc. (“FIS”). In accordance with the terms and provisions of the FIS Agreement: (i) FIS shall provide consulting services to us in the form of a senior administrator support for business transactions and coordination of outside legal and accounting services and other corporation matters and general business counsel relating to our overall business; (ii) we shall pay FIS an hourly rate of $175.00 for performance of such services; and (iii) issue to FIS 2 shares of our restricted common stock.
On December 10, 2010, we entered into a consulting agreement (the “CEC Consulting Agreement”) with Corporate Excellence Consulting LLC (“CEC”). In accordance with the terms and provisions of the CEC Consulting Agreement: (i) CEC shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to CEC 8 shares of our restricted common stock.
Effective February 22, 2011, we entered into a termination and settlement agreement (the “Termination Agreement”) with CEC. In accordance with the terms and provisions of the Termination Agreement: (i) CEC is to return share certificate no. 1332 evidencing the issuance of the 8 shares of common stock, which have been cancelled and returned to treasury; and (ii) we shall issue to CEC 1 share as settlement for services rendered by CEC to us.
Effective on February 14, 2011, the Board of Directors of the Company approved and authorized the execution of a definitive agreement dated February 14, 2011 (the “Agreement”) among the Company, NexPhase Lighting, Inc., a privately held Florida corporation (“NexPhase”)., and the shareholders of NexPhase (the “NexPhase Shareholders”). In accordance with the terms and provisions of the Agreement: (i) the Company acquired from the NexPhase Shareholders an aggregate 55,622,000 shares of common stock of NexPhase representing the total issued and outstanding shares of NexPhase; (ii) in exchange thereof, the Company issued to the NexPhase Shareholders an aggregate 34 shares of its restricted common stock generally in proportion to the equity holdings of the NexPhase Shareholders; (iii) NexPhase transferred and assigned to the Company all existing material contracts including those related to distribution, licensing and marketing and those dealing with the grant of rights for the use of any and all intellectual property; (iv) the Company assumed all other assets of NexPhase, including licenses, royalty rights, equipment, product designs, marketing and sale materials, logos, trademarks, copyrights and website; and (v) the Company further assumed all liabilities of NexPhase, including all trade and debt obligations.
The parties agreed to value the transaction as follows: value based on the patent appraisal and other corporate asset and on-going operations of $18,000,000; agreed discount to value based on the cost to “perfect” the patent and need for additional capital funding to maintain the on-going operations of the subsidiary $17,400,000; agreed value of the transaction: $600,000; agreed number of shares issued 34.
On February 25, 2011, the Board of Directors approved the issuance of 1 unregistered common share in accordance with the convertibility provisions contained in a promissory note dated February 10, 2010 in the amount of $1,316. In accordance with the terms of the note, the shares were issued at $1,316 per share.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On March 10, 2011, the Board of Directors approved the issuance of 2 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 21, 2010 in the amount of $4,000. In accordance with the terms of the note, the shares were issued at $2,000 per share.
On March 15, 2011, we entered into a consulting agreement with Kodiak Capital (“Kodiak”). In accordance with the terms and provisions of the agreement: (i) Kodiak shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Kodiak 1 shares of our restricted common stock.
On March 17, 2011, we entered into a consulting agreement with Tracy Clinton (“Clinton”). In accordance with the terms and provisions of the agreement: (i) Clinton shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Clinton 1 shares of our restricted common stock.
On March 23, 2011, we entered into a consulting agreement with Eric Weinberger (“Weinberger”). In accordance with the terms and provisions of the agreement: (i) Weinberger shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Weinberger 1 shares of our restricted common stock.
On March 31, 2011 the Company entered into a stock repurchase agreement with five NexPhase investors to repurchase .122 of a share of Common Stock acquired in the NexPhase acquisition. Terms include principal and premium interest of ten percent (10.0%), the note is due on June 30, 2012.
On April 5, 2011, we entered into a consulting agreement with Virmmac, LLC (“Virmmac”). In accordance with the terms and provisions of the agreement: (i) Virmmac shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Virmmac 1 share of our restricted common stock.
On April 7, 2011, the Board of Directors approved the issuance of 5 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 21, 2010 in the amount of $9,500. In accordance with the terms of the note, the shares were issued at $1,900 per share.
On April 7, 2011, the Board of Directors approved the issuance of 5 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2010 in the amount of $18,000. In accordance with the terms of the note, the shares were issued at $3,600 per share.
On April 13, 2011, the Board of Directors approved the issuance of 1 unregistered common share in accordance with the convertibility provisions contained in a promissory note dated March 21, 2011 in the amount of $7,500. In accordance with the terms of the note, the shares were issued at $7,500 per share.
On May 4, 2011, the Board of Directors approved the issuance of 3 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 21, 2010 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $1,667 per share.
On May 23 2011, we entered into a consulting agreement with Charles Neustein (“Neustein”). In accordance with the terms and provisions of the agreement: (i) Neustein shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Neustein 1 shares of our restricted common stock.
On May 23, 2011, the Board of Directors approved the issuance of 5 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 21, 2010 in the amount of $10,500. In accordance with the terms of the note, the shares were issued at $2,100 per share.
On May 26, 2011, the Board of Directors approved the issuance of 2 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 21, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $5,000 per share.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On June 7, 2011, we entered into a consulting agreement with Virmmac, LLC (“Virmmac”). In accordance with the terms and provisions of the agreement: (i) Virmmac shall perform such services in connection with business development and marketing and growth capital funding; and (ii) we shall issue to Virmmac 1 share of our restricted common stock.
On June 10, 2011, the Board of Directors approved the issuance of 6 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2010 in the amount of $11,000. In accordance with the terms of the note, the shares were issued at $1,833 per share.
On June 20, 2011, the Board of Directors approved the issuance of 6 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 21, 2010 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $2,000 per share.
On June 21, 2011, the Board of Directors approved the issuance of 2 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 21, 2011 in the amount of $20,000. In accordance with the terms of the note, the shares were issued at $10,000 per share.
On July 20, 2011, the Board of Directors approved the issuance of 5 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 23, 2010 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $2,000 per share.
On August 23, 2011, the Board of Directors approved the issuance of 5 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 21, 2010 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $2,000 per share.
On August 23, 2011, the Board of Directors approved the issuance of 5 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 23, 2010 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $2,000 per share.
On August 23, 2011, the Board of Directors approved the issuance of 2 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 23, 2010 in the amount of $4,000. In accordance with the terms of the note, the shares were issued at $2,000 per share.
On August 24, 2011, the Board of Directors approved the issuance of 5 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2010 in the amount of $9,000. In accordance with the terms of the note, the shares were issued at $1,800 per share.
On September 1, 2011, the Board of Directors approved the issuance of 8 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 23, 2010 in the amount of $15,000. In accordance with the terms of the note, the shares were issued at $1,875 per share.
On September 3, 2011, the Board of Directors approved the issuance of 6 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2010 in the amount of $11,000. In accordance with the terms of the note, the shares were issued at $1,833 per share.
On September 8, 2011, the Board of Directors approved the issuance of 7 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $26,500. In accordance with the terms of the note, the shares were issued at $3,786 per share.
On September 12, 2011, the Board of Directors approved the issuance of 8 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 23, 2010 in the amount of $16,500. In accordance with the terms of the note, the shares were issued at $2,063 per share.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On September 15, 2011, the Board of Directors approved the issuance of 3 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $4,000 per share.
On September 21, 2011, the Board of Directors approved the issuance of 2 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $5,000 per share.
On September 27, 2011, the Board of Directors approved the issuance of 5 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $2,400 per share.
On October 14, 2011, the Board of Directors approved the issuance of 6 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $1,667 per share.
On October 20, 2011, the Board of Directors approved the issuance of 5 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $8,000. In accordance with the terms of the note, the shares were issued at $1,600 per share.
On October 28, 2011, the Board of Directors approved the issuance of 5 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $7,500. In accordance with the terms of the note, the shares were issued at $1,500 per share.
On October 28, 2011, the Board of Directors approved the issuance of 6 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $8,124. In accordance with the terms of the note, the shares were issued at $1,354 per share.
On October 28, 2011, the Board of Directors approved the issuance of 8 unregistered common shares as compensation to FIS, a consultant to the Company. The shares were valued at $1,875 per share for a total of $15,000, based on the fair value of the services received.
On October 29, 2011, the Board of Directors approved the issuance of 15 unregistered common shares as recognition of business development accomplishment by NexPhase Lighting, Inc. to John Cooper, an employee of the Company. The shares were valued at $2,000.00 per share for a total of $30,000, based on the fair value of the services received.
Effective October 31, 2011, the Board of Directors of the Company authorized the issuance of 35 shares of restricted common stock to Dror Svorai, its President/Chief Executive Officer and a member of the Board of Directors (“Svorai”) for the period November 24, 2010 through November 23, 2011 based upon recognition of the outstanding services, leadership and innovative business operational strategies provided by Svorai and his continuous dedication and loyalty to the Company. The common shares were valued at $2,000 per share for a total of $70,000, based on the fair value of the services received.
On November 4, 2011, the Board of Directors approved the issuance of 2 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 1, 2011 in the amount of $2,900. In accordance with the terms of the note, the shares were issued at $1,450 per share.
On November 8, 2011, the Board of Directors approved the issuance of 9 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated November 4, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $1,111 per share.
On November 11, 2011, the Board of Directors approved the issuance of 10 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $1,000 per share.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On November 15, 2011, the Board of Directors approved the issuance of 9 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated November 4, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $1,111 per share.
On November 16, 2011, the Board of Directors approved the issuance of 14 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated November 10, 2011 in the amount of $12,500. In accordance with the terms of the note, the shares were issued at $893 per share.
On November 18, 2011, the Board of Directors approved the issuance of 10 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $9,000. In accordance with the terms of the note, the shares were issued at $900 per share.
On November 21, 2011, the Board of Directors approved the issuance of 9 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $8,000. In accordance with the terms of the note, the shares were issued at $889 per share.
On November 29, 2011, the Board of Directors approved the issuance of 9 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $5,500. In accordance with the terms of the note, the shares were issued at $611 per share.
On November 29, 2011, the Board of Directors approved the issuance of 10 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $2,000. In accordance with the terms of the note, the shares were issued at $200 per share.
On November 30, 2011, the Board of Directors approved the issuance of 18 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated November 10, 2011 in the amount of $12,500. In accordance with the terms of the note, the shares were issued at $694 per share.
On December 7, 2011, the Board of Directors approved the issuance of 8 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $4,000. In accordance with the terms of the note, the shares were issued at $500 per share.
On December 9, 2011, the Board of Directors approved the issuance of 8 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $4,000. In accordance with the terms of the note, the shares were issued at $500 per share.
On December 13, 2011, the Board of Directors approved the issuance of 17 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 5, 2011 in the amount of $6,800. In accordance with the terms of the note, the shares were issued at $400 per share.
On December 13, 2011, the Board of Directors approved the issuance of 10 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $3,000. In accordance with the terms of the note, the shares were issued at $300 per share.
On December 14, 2011, the Board of Directors approved the issuance of 8 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $3,500. In accordance with the terms of the note, the shares were issued at $438 per share.
On December 20, 2011, the Board of Directors approved the issuance of 8 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $3,500. In accordance with the terms of the note, the shares were issued at $438 per share.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On December 23, 2011, the Board of Directors approved the issuance of 8 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $3,500. In accordance with the terms of the note, the shares were issued at $438 per share.
On December 23, 2011, the Board of Directors approved the issuance of 20 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $6,000. In accordance with the terms of the note, the shares were issued at $300 per share.
On December 29, 2011, the Board of Directors approved the issuance of 9 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $3,500. In accordance with the terms of the note, the shares were issued at $389 per share.
On January 4, 2012, the Board of Directors approved the issuance of 10 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $3,500. In accordance with the terms of the note, the shares were issued at $35 per share.
On January 4, 2012, the Board of Directors approved the issuance of 20 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $6,000. In accordance with the terms of the note, the shares were issued at $300 per share.
On January 24, 2012, the Board of Directors authorized the issuance of an aggregate 25,000 shares of its restricted common stock at a per share price of $2.00. Of the 25,000 shares of restricted common stock issued, an aggregate 15,000 shares were issued to Dror Svorai, the President/Chief Executive Officer of the Company, in recognition of his outstanding services, loyalty and dedication to the Company during the period of November 23, 2011 through January 23, 2011. Of the 25,000 shares of restricted common stock issued, an aggregate 10,000 shares were issued to Jon Cooper, the President of NexPhase Lighting Inc., in recognition of his business accomplishments to the Company during fiscal year 2011.
On January 17, 2012, the Board of Directors approved the issuance of 23 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $1,350. In accordance with the terms of the note, the shares were issued at $60 per share.
On January 25, 2012, the Board of Directors approved the issuance of 1,1791 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 23, 2011 in the amount of $23,600. In accordance with the terms of the note, the shares were issued at $20 per share.
On January 25, 2012, the Board of Directors approved the issuance of 54 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 18, 2011 in the amount of $1,078. In accordance with the terms of the note, the shares were issued at $20 per share.
On January 25, 2012, the Board of Directors approved the issuance of 17 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 21, 2011 in the amount of $343. In accordance with the terms of the note, the shares were issued at $20 per share.
On January 27, 2012, the Board of Directors approved the issuance of 107 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $112 per share.
On January 30, 2012, the Board of Directors approved the issuance of 1,350 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 29, 2010 in the amount of $27,000. In accordance with the terms of the note, the shares were issued at $20 per share.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On January 30, 2012, the Board of Directors approved the issuance of 114 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated December 5, 2011 in the amount of $18,200. In accordance with the terms of the note, the shares were issued at $160 per share.
On February 1, 2012, the Board of Directors approved the issuance of 1,400 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated November 15, 2010 in the amount of $28,000. In accordance with the terms of the note, the shares were issued at $20 per share.
On February 2, 2012, the Board of Directors approved the issuance of 34 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $149 per share.
On February 15, 2012, the Board of Directors approved the issuance of 74 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $135 per share.
On February 15, 2012, the Board of Directors approved the issuance of 54 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 28, 2011 in the amount of $7,240. In accordance with the terms of the note, the shares were issued at $135 per share.
On February 17, 2012, the Board of Directors approved the issuance of 137 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $12,500. In accordance with the terms of the note, the shares were issued at $91 per share.
On February 21, 2012, the Board of Directors approved the issuance of 139 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $15,000. In accordance with the terms of the note, the shares were issued at $108 per share.
On February 21, 2012, the Board of Directors approved the issuance of 1,250 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 15, 2012 in the amount of $25,000. In accordance with the terms of the note, the shares were issued at $20 per share.
On February 27, 2012, the Board of Directors approved the issuance of 1,500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated May 24, 2011 in the amount of $30,000. In accordance with the terms of the note, the shares were issued at $20 per share.
On March 1, 2012, the Board of Directors approved the issuance of 1,700 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $3,400. In accordance with the terms of the note, the shares were issued at $2 per share.
On March 1, 2012, the Board of Directors approved the issuance of 1,800 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $3,600. In accordance with the terms of the note, the shares were issued at $2 per share.
On March 1, 2012, the Board of Directors approved the issuance of 1,900 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $3,800. In accordance with the terms of the note, the shares were issued at $2 per share.
On March 1, 2012, the Board of Directors approved the issuance of 2,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $4,000. In accordance with the terms of the note, the shares were issued at $2 per share.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On March 8, 2012, the Board of Directors approved the issuance of 217 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $55.20 per share.
On March 14, 2012, the Board of Directors approved the issuance of 217 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $46 per share.
On March 15, 2012, the Board of Directors approved the issuance of 500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated September 2, 2010 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $20 per share.
On March 20, 2012, the Board of Directors approved the issuance of 1,100 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 23, 2011 in the amount of $11,000. In accordance with the terms of the note, the shares were issued at $10 per share.
On March 20, 2012, the Board of Directors approved the issuance of 900 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $9,000. In accordance with the terms of the note, the shares were issued at $10 per share.
On March 22, 2012, the Board of Directors approved the issuance of 213 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $6,395. In accordance with the terms of the note, the shares were issued at $30 per share.
On March 27, 2012, the Board of Directors approved the issuance of 235 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $8,120. In accordance with the terms of the note, the shares were issued at $34.60 per share.
On March 29, 2012, the Board of Directors approved the issuance of 2,500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 9, 2010 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $2 per share.
On March 30, 2012, the Board of Directors approved the issuance of 679 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $10,180. In accordance with the terms of the note, the shares were issued at $149 per share.
On April 9, 2012, the Board of Directors approved the issuance of 1,350 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 31, 2011 in the amount of $5,600. In accordance with the terms of the note, the shares were issued at $4.20 per share.
On April 9, 2012, the Board of Directors approved the issuance of 2,250 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 4, 2011 in the amount of $9,000. In accordance with the terms of the note, the shares were issued at $4 per share.
On April 17, 2012, the Board of Directors approved the issuance of 1,079 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 24, 2011 in the amount of $10,000. In accordance with the terms of the note, the shares were issued at $9.20 per share.
On April 25, 2012, the Board of Directors approved the issuance of 2,500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated September 2, 2010 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $2 per share.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On April 25, 2012, the Board of Directors approved the issuance of 2,500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $2 per share.
On April 25, 2012, the Board of Directors approved the issuance of 2,250 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2011 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $2 per share.
On April 26, 2012, the Board of Directors approved the issuance of 3,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $6,000. In accordance with the terms of the note, the shares were issued at $2 per share.
On May 2, 2012, the Board of Directors approved the issuance of 799 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 24, 2011 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $9.20 per share.
On May 8, 2012, the Board of Directors approved the issuance of 2,750 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2011 in the amount of $5,500. In accordance with the terms of the note, the shares were issued at $2 per share.
On May 23, 2012, the Board of Directors approved the issuance of 2,500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated September 2, 2010 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $2 per share.
On May 29, 2012, the Board of Directors approved the issuance of 1,817 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 26, 2011 in the amount of $12,000. In accordance with the terms of the note, the shares were issued at $7.80 per share.
On May 29, 2012, the Board of Directors approved the issuance of 2,800 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $5,600. In accordance with the terms of the note, the shares were issued at $2 per share.
On May 29, 2012, the Board of Directors approved the issuance of 3,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 31, 2011 in the amount of $6,000. In accordance with the terms of the note, the shares were issued at $2 per share.
On July 1, 2012, the Board of Directors approved the issuance of 4,250 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 1, 2011 in the amount of $8,500. In accordance with the terms of the note, the shares were issued at $2 per share.
On July 2, 2012, the Board of Directors approved the issuance of 2,900 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 1, 2011 in the amount of $5,800. In accordance with the terms of the note, the shares were issued at $2 per share.
On July 9, 2012, the Board of Directors approved the issuance of 2,750 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated November 8, 2010 in the amount of $5,500. In accordance with the terms of the note, the shares were issued at $2 per share.
On July 12, 2012, the Board of Directors approved the issuance of 4,250 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated November 8, 2010 in the amount of $8,500. In accordance with the terms of the note, the shares were issued at $2 per share.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On July 13, 2012, the Board of Directors approved the issuance of 4,250 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 20, 2011 in the amount of $8,500. In accordance with the terms of the note, the shares were issued at $2 per share.
On July 16, 2012, the Board of Directors approved the issuance of 4,250 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 1, 2011 in the amount of $8,500. In accordance with the terms of the note, the shares were issued at $2 per share.
On July 26, 2012, the Board of Directors approved the issuance of 5,115 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated November 30, 2010 in the amount of $10,230. In accordance with the terms of the note, the shares were issued at $2 per share.
On July 31, 2012, the Board of Directors approved the issuance of 5,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 12, 2012 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $1 per share.
On August 13, 2012, the Board of Directors approved the issuance of 5,556 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 12, 2012 in the amount of $5,000. In accordance with the terms of the note, the shares were issued at $0.80 per share.
On August 21, 2012, the Board of Directors approved the issuance of 5,288 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2012 in the amount of $5,500. In accordance with the terms of the note, the shares were issued at $1.04 per share.
On August 22, 2012, the Board of Directors approved the issuance of 5,600 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 12, 2012 in the amount of $4,480. In accordance with the terms of the note, the shares were issued at $0.80 per share.
On August 31, 2012, the Board of Directors authorized the issuance of 25,000 shares of its restricted common stock at a per share price of $2 to Jorge Schcolnik as partial compensation in connection with his appointment as the President and a Director of the Company. The shares were valued at $1, the market value of the shares on the date of issuance, for a total of $25,000.
On September 4, 2012, the Board of Directors approved the issuance of 7,070 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 12, 2012 in the amount of $3,535. In accordance with the terms of the note, the shares were issued at $0.60 per share.
On September 11, 2012, the Board of Directors approved the issuance of 75,000 unregistered common shares to the shareholders of CCWC as an initial deposit relating to the acquisition of CCWC. The shares were valued at $1.40, the market value per share on the date of issuance, for a total of $105,000.
On September 13, 2012, the Board of Directors approved the issuance of 5,357 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2012 in the amount of $3,000. In accordance with the terms of the note, the shares were issued at $0.60 per share.
On September 13, 2012, the Board of Directors approved the issuance of 3,973 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated August 15, 2012 in the amount of $2,225. In accordance with the terms of the note, the shares were issued at $0.60 per share.
On September 13, 2012, the Board of Directors approved the issuance of 11,500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 12, 2012 in the amount of $6,900. In accordance with the terms of the note, the shares were issued at $0.60 per share.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On September 14, 2012, the Board of Directors approved the issuance of 11,500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 23, 2011 in the amount of $3,067. In accordance with the terms of the note, the shares were issued at $0.27 per share.
On September 17, 2012, the Board of Directors approved the issuance of 12,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 11, 2011 in the amount of $3,200. In accordance with the terms of the note, the shares were issued at $0.27 per share.
On September 18, 2012, the Board of Directors approved the issuance of 12,500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 02, 2011 in the amount of $3,542. In accordance with the terms of the note, the shares were issued at $0.28 per share.
On September 19, 2012, the Board of Directors approved the issuance of 12,500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated June 23, 2011 in the amount of $3,750. In accordance with the terms of the note, the shares were issued at $0.30 per share.
On September 20, 2012, the Board of Directors approved the issuance of 11,429 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2012 in the amount of $6,400. In accordance with the terms of the note, the shares were issued at $0.56 per share.
On September 27, 2012, the Board of Directors approved the issuance of 11,429 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2012 in the amount of $6,400. In accordance with the terms of the note, the shares were issued at $0.56 per share.
On October 3, 2012, the Board of Directors approved the issuance of 11,429 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2012 in the amount of $6,400. In accordance with the terms of the note, the shares were issued at $0.56 per share.
On October 3, 2012, the Board of Directors approved the issuance of 16,748 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated May 16, 2011 in the amount of $6,978. In accordance with the terms of the note, the shares were issued at $0.42 per share.
On October 3, 2012, the Board of Directors approved the issuance of 11,500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated July 12, 2012 in the amount of $6,900. In accordance with the terms of the note, the shares were issued at $0.60 per share.
On October 4, 2012, the Board of Directors approved the issuance of 17,500 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 2, 2012 in the amount of $7,292. In accordance with the terms of the note, the shares were issued at $0.42 per share.
On October 5, 2012, the Board of Directors approved the issuance of 18,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated January 20, 2012 in the amount of $12,900. In accordance with the terms of the note, the shares were issued at $0.72 per share.
On October 10, 2012, the Board of Directors approved the issuance of 19,250 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated January 10, 2011 in the amount of $13,796. In accordance with the terms of the note, the shares were issued at $0.72 per share.
On October 18, 2012, the Board of Directors approved the issuance of 10,893 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2012 in the amount of $6,100. In accordance with the terms of the note, the shares were issued at $0.56 per share.
On October 18, 2012, the Board of Directors approved the issuance of 21,937 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated May 16, 2011 in the amount of $5,850. In accordance with the terms of the note, the shares were issued at $0.27 per share.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 10 - Stockholders’ Equity (Deficit) (Continued)
On October 5, 2012, the Board of Directors approved the issuance of 18,000 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated January 20, 2012 in the amount of $12,900. In accordance with the terms of the note, the shares were issued at $0.72 per share.
On October 10, 2012, the Board of Directors approved the issuance of 19,250 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated January 10, 2011 in the amount of $13,796. In accordance with the terms of the note, the shares were issued at $0.72 per share.
On October 18, 2012, the Board of Directors approved the issuance of 10,893 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2012 in the amount of $6,100. In accordance with the terms of the note, the shares were issued at $0.56 per share.
On October 18, 2012, the Board of Directors approved the issuance of 21,937 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated May 16, 2011 in the amount of $5,850. In accordance with the terms of the note, the shares were issued at $0.27 per share.
On November 5, 2012, the Board of Directors approved the issuance of 23,750 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 18, 2012 in the amount of $3,563. In accordance with the terms of the note, the shares were issued at $0.15 per share.
On November 8, 2012, the Board of Directors approved the issuance of 11,471 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 3, 2012 in the amount of $3,900. In accordance with the terms of the note, the shares were issued at $0.34 per share.
On November 9, 2012, the Board of Directors approved the issuance of 27,375 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated May 16, 2011 in the amount of $3,650. In accordance with the terms of the note, the shares were issued at $0.13 per share.
On November 12 2012, the Board of Directors approved the issuance of 28,725 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 2, 2012 in the amount of $3,351. In accordance with the terms of the note, the shares were issued at $0.12 per share.
On November 14 2012, the Board of Directors approved the issuance of 30,125 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated March 2, 2011 in the amount of $3,013. In accordance with the terms of the note, the shares were issued at $0.10 per share.
On November 20, 2012, the Board of Directors approved the issuance of 31,625 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated January 10, 2011 in the amount of $2,109. In accordance with the terms of the note, the shares were issued at $0.07 per share.
On November 23 2012, the Board of Directors approved the issuance of 31,739 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 18, 2012 in the amount of $1,587. In accordance with the terms of the note, the shares were issued at $0.05 per share.
On December 3 2012, the Board of Directors approved the issuance of 30,125 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated April 2, 2012 in the amount of $1,506. In accordance with the terms of the note, the shares were issued at $0.05 per share.
On December 17, 2012, the Board of Directors approved the issuance of 33,319 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated October 18, 2012 in the amount of $1,666. In accordance with the terms of the note, the shares were issued at $0.05 per share.
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 11 - Related Party Transactions
The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts.
During the year ended December 31, 2012, the Company advanced $8,960 to its President and Director. The advance has no repayment date and does not bear interest.
See Note 4 - Notes Payable - Non-affiliated Related Parties and Note 10 - Stockholders’ Equity (Deficit) for additional related party disclosures.
Note 12 - Loss on Settlement of Debt
During the year ended December 31, 2012, the Company issued 17,265 shares of common stock to related parties in conversion of $68,730 of notes payable in accordance with the terms of the notes. The fair value of the common stock issued was $780,432 at the date of the conversions, resulting in a loss on the settlements of $711,702.
Note 13 - Income Taxes
No provision for income tax was made for the period from December 31, 2007 (Inception) to December 31, 2012 as the Company had cumulative operating losses. For the years ended December 31, 2012 and 2011, the Company incurred net losses for tax purposes of approximately $2,163,800 and $1,274,200, respectively.
The income tax expense (benefit) differs from the amount computed by applying the United States Statutory corporate income tax rate as follows:
The Company provides for income taxes using the liability method in accordance with FASB ASC Topic 740 “Income Taxes”. Deferred income taxes arise from the difference in the recognition of income and expenses for tax purposes. Deferred tax assets and liabilities are comprised of the following at December 31, 2012 and 2011:
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 13 - Income Taxes (Continued)
The amount taken into income as deferred income tax assets must reflect that portion of the income tax loss carry forwards that is more likely than not to be realized from future operations. The Company has established a full valuation allowance on its net deferred tax assets because of a lack of sufficient positive evidence to support its realization. The valuation allowance increased by $813,600 and $479,100 for the years ended December 30, 2012 and 2011, respectively.
No provision for income taxes has been provided in these financial statements due to the net loss for the years ended December 31, 2012 and 2011. At December 31, 2012, the Company has net operating loss carry forwards of approximately $4,215,700, which expire commencing 2027. The potential tax benefit of these losses may be limited due to certain change in ownership provisions under Section 382 of the Internal Revenue Code (“IRS”) and similar state provisions.
IRS Section 382 places limitations (the “Section 382 Limitation”) on the amount of taxable income which can be offset by net operating loss carry forwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct operating loss carry forwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the net operating loss and tax credit carry forwards may be subject to an annual limitation regarding their utilization against taxable income in future periods. The Company has not concluded its analysis of Section 382 through December 31, 2012, but believes the provisions will not limit the availability of losses to offset future income.
As of December 31, 2012, tax years 2011, 2010, 2009 and 2008 remain open for IRS audit.
Note 14 - Commitments and Contingencies
As of the date of this Report, we have entered into the following material commitments:
On November 8, 2012, we entered into a one year office building lease for our corporate headquarters located in Hollywood, Florida. The lease terms include: (i) monthly rent commencing on November 15, 2012 in the amount of $475 including sales tax; and (ii) triple-net provisions. Future annual lease payments over the term of the lease are as follows:
Note 15 - Subsequent Events
On January 22, 2013, the Company entered into a convertible promissory note with an investment firm in the amount of $9,000. Terms include simple interest at ten percent (10%), the note is due on January 22, 2014 and is convertible at the option of the holder at a price that is the lower of (i) $2.00 or (ii) a seventy-five percent (75%) to the previous day’s closing bid price if the closing market price is $3.00 per share or less.
On February 8, 2013, the Board of Directors approved the issuance of 69,971 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated February 7, 2012 in the amount of $1,746. In accordance with the terms of the note, the shares were issued at $0.025 per share.
On February 20, 2013, the Company entered into a convertible promissory note with an investment firm in the amount of $4,000. Terms include simple interest at ten percent (10%), the note is due on February 20, 2014 and is convertible at the option of the holder at a price that is the lower of (i) $2.00 or (ii) a seventy-five percent (75%) to the previous day’s closing bid price if the closing market price is $3.00 per share or less.
On March 6, 2013, the Company entered into a convertible promissory note with an investment firm in the amount of $6,500. Terms include simple interest at ten percent (10%), the note is due on March 6, 2014 and is convertible at the option of the holder at a price that is the lower of (i) $2.00 or (ii) a seventy-five percent (75%) to the previous day’s closing bid price if the closing market price is $3.00 per share or less.
On March 14, 2013, the Board of Directors approved the issuance of 38,484 unregistered common shares in accordance with the convertibility provisions contained in a promissory note dated May 16, 2011 in the amount of $1,828. In accordance with the terms of the note, the shares were issued at $0.0475 per share
INELCO CORPORATION
f/k/a Onteco Corporation
(An Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2012
Note 15 - Subsequent Events (Continued)
On March 19 2013, the Company entered into a convertible promissory note with an investment firm in the amount of $7,900. Terms include simple interest at ten percent (10%), the note is due on March 19, 2014 and is convertible at the option of the holder at a price that is the lower of (i) $2.00 or (ii) a seventy-five percent (75%) to the previous day’s closing bid price if the closing market price is $3.00 per share or less.
The Company has evaluated subsequent events through the date the financial statements were issued and filed with Securities and Exchange Commission. The Company has determined that there are no other events that warrant disclosure or recognition in the financial statements.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Our principal independent registered public accounting firm effective December 5, 2010 and to current date is Drake Klein Messineo CPAs PA.
On January 10, 2013, the audit firm of Drake & Klein CPAs changed its name to Drake Klein Messineo CPAs PA. The change was reported to the PCAOB as a change of name. This is not a change of auditors for the Company.
Item 9A.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to chief executive and chief financial officers to allow timely decisions regarding disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date.
Management’s Annual Report on Internal Control over Financial Reporting
The management of the Company is responsible for the preparation of the financial statements and related financial information appearing in this Annual Report on Form 10-K. The financial statements and notes have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The management of the Company is also responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A company's internal control over financial reporting is defined as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
·
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the Company; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
Management, including the Chief Executive Officer and Chief Financial Officer, does not expect that the Company's disclosure controls and internal controls will prevent all error and all fraud. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Further, over time, control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.
With the participation of the Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of the Company's internal control over financial reporting as of December 31, 2012 based upon the framework in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management has concluded that, as of December 31, 2012, our internal controls over financial reporting were not effective as the Company had material weaknesses in its internal control over financial reporting. Specifically, management identified the following material weaknesses at December 31, 2012:
1.
Lack of oversight by independent directors in the establishment and monitoring of required internal controls and procedures;
2.
Lack of functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
3.
Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;
4.
Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.
As a result of the material weaknesses described above, management has concluded that, as of December 31, 2012, we did not maintain effective internal control over financial reporting, involving the preparation and reporting of our financial statements presented in conformity with GAAP.
To remediate our internal control weaknesses, management intends to implement the following measures:
·
The Company will add sufficient number of independent directors to the board and appoint an audit committee.
·
The Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.
·
Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures.
The additional hiring is contingent upon The Company’s efforts to obtain additional funding through equity or debt for its continued exploration activities and corporate expenses. Management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.
We understand that remediation of material weaknesses and deficiencies in internal controls is a continuing work in progress due to the issuance of new standards and promulgations. However, remediation of any known deficiency is among our highest priorities. Our management will periodically assess the progress and sufficiency of our ongoing initiatives and make adjustments as and when necessary.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant rules of the SEC that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
Not applicable.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth information with respect to persons who are serving as directors and officers of the Company. Each director holds office until the next annual meeting of shareholders or until his successor has been elected and qualified.
(1) Appointed Director, President and Secretary on August 31, 2012. Appointed to additional positions of Treasurer and Chief Financial Officer on November 9, 2012.
(2) Appointed as Director on December 18, 2012.
(3) Resigned from all positions on November 9, 2012.
Biography of Directors and Officers
Mr. Jorge Schcolnik was appointed as Director, President and Secretary on August 31,2012 and as Treasurer and Chief Financial Officer of the Company on November 9, 2012. During the past five years, Mr. Schcolnik has been involved in several large international companies. Mr. Schcolnik was one of the founders of Integral Bioenergies Systems SL, a company located in Spain, where he was involved in its restructure and ultimate sale in 2008. Mr. Schcolnik was associated with E-Libro Corp. for which he deployed the digital publishing market in Argentina. He was also associated with the Federal and City of Buenos Aires Government for the company's academic platform. Since 2010, Mr. Schcolnik has been an officer in Advanced Envirotec Corp., Advanced Copisa Environmental Corp. and other environmental remediation companies.
Since 1995, Mr. Jorge Schcolnik has also been representing the State of Buenos Aires, Argentina, within the United States in a number of capacities Commencing 1999, Mr. Schcolnik acted as the chief advisor to the Small and Medium Sized Enterprises Secretariat of the Republic of Argentina based in the United States. Mr. Schcolnik held that position until 2001. During 2001, Mr. Schcolnik participated as a co-founder of Enterprise Buenos Aires Corp., which was later transformed into EBA PLC Corp., a company dedicated to the development of power-line communications. EBA PLC Corp. became a prominent company within the power line communications industry as after two years it was sold in a transaction involving several million US Dollars.
Mr. Yosef Baruch was appointed as Director on December 18, 2012. During the past fifteen years, Mr. Baruch has been involved in administrative, managerial and financial capacities within the business industry. Mr. Baruch has considerable knowledge in managing large work teams, organizational ability and development of varied contacts between business communities. He has the ability to plan short and long term within the global economy, problem analysis and conflict resolution. He also has superior communication and interpersonal skills and is proactive and focus oriented.
From approximately March 2009 through August 2011, Mr. Baruch was the general management consultant at the educational institution in Modi'in Illit-Kiryat Sefer. His duties included office management, supervising employees, negotiating with suppliers, monitoring book keeping and accounting procedures, working with the banking system, human resources management. event planning inventory management and problematic analysis.
Mr. Baruch was born in Israel and is fluent in English and Hebrew. Mr. Baruch is a graduate of the University Bar - Ilan with emphasis on trend logistics business and from the Graduate College of Management with an emphasis on trending business and marketing initiatives.
Mr. Dror Svorai was appointed Director, President, Chief Executive Officer, Secretary, treasurer and Chief Financial Officer on November 25, 2010. Mt Svorai resigned these positions on November 9, 2012. During the past ten years, Mr. Svorai has served in executive positions, including president and chief executive officer, and as a member of the board of directors of certain publicly traded companies. From 1995 to April 26, 2010, Mr. Svorai was the president and chief executive officer of Green LED Technologies, Inc., a Florida corporation, which he founded. On September 18, 2009, Green LED Technologies, Inc. was subsequently acquired by Hi Score Corporation. The acquisition resulted in the appointment of Mr. Svorai as the president/chief executive officer and a director of Hi Score Corporation. In April 2010, Mr. Svorai resigned from his executive positions and as a director with Hi Score Corporation. Prior to and during this period, Mr. Svorai also was involved in investment of real estate and as a business owner in the garment industry and the private jet industry. From 1997 until 2001, Mr. Svorai was the founder and chief executive officer of Ocean Drive of Orlando. From 1998 until 2003, Mr. Svorai was the founder and chief executive officer of Ocean Drive Fashion. From 2003 until 2006 Mr. Svorai was the founder and chief executive officer of the D & D Fashion Group Inc.
Our directors are elected at the annual meeting of the shareholders, with vacancies filled by the Board of Directors, and serve until their successors are elected and qualified, or their earlier resignation or removal. Officers are appointed by the board of directors and serve at the discretion of the board of directors or until their earlier resignation or removal. Any action required can be taken at any annual or special meeting of stockholders of the corporation which may be taken without a meeting, without prior notice and without a vote, if consent of consents in writing setting forth the action so taken, shall be signed by the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office, its principle place of business, or an officer or agent of the corporation having custody of the book in which the proceedings of meetings are recorded.
Indemnification of Directors and Officers
Nevada Corporation Law allows for the indemnification of officers, directors, and any corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities, including reimbursement for expenses, incurred arising under the 1933 Act. The Bylaws of the Company provide that the Company will indemnify its directors and officers to the fullest extent authorized or permitted by law and such right to indemnification will continue as to a person who has ceased to be a director or officer of the Company and will inure to the benefit of his or her heirs, executors and Consultants; provided, however, that, except for proceedings to enforce rights to indemnification, the Company will not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred will include the right to be paid by the Company the expenses (including attorney’s fees) incurred in defending any such proceeding in advance of its final disposition.
The Company may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Company similar to those conferred to directors and officers of the Company. The rights to indemnification and to the advancement of expenses are subject to the requirements of the 1940 Act to the extent applicable.
Furthermore, the Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another company against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the Nevada General Corporation Law.
Committees of the Board of Directors
None.
Auditors
Our principal independent accountant is Drake Klein Messineo CPAs PA..
Code of Ethics
We do not currently have a Code of Ethics because we have limited business operations and only three officers/directors on the Board. We believe a code of ethics would have limited utility at this stage. We intend to adopt such code of ethics that would cover our business as soon as possible.
Item 11.
Item 11. Executive Compensation.
Our directors do not receive any stated salary for their services as directors or members of committees of the board of directors, but by resolution of the board, a fixed fee may be allowed for attendance at each meeting. Directors may also serve the company in other capacities as an officer, agent or otherwise, and may receive compensation for their services in such other capacity. Directors of the Company who are also employees of the Company will not receive additional compensation for their services as directors. Reasonable travel expenses are reimbursed.
The following table sets forth all of the compensation awarded to, earned by or paid to (i) each individual serving as our principal executive officer and principal financial officer during our last completed fiscal year; and (ii) each other individual that served as an executive officer at the conclusion of the fiscal year ended December 31, 2012 (collectively, the Named Executives).
(1)
Mr. Jorge Schcolnik was appointed President, Secretary and Director on August 31, 2012. He was further appointed Treasurer and Chief Financial Officer on November 9, 2012.
(2)
Mr. Yosef Baruch was appointed as a Director on December 18, 2012.
(3)
Mr. Dror Svorai resigned from all positions on November 9, 2012.
(4)
This amount represent the basis of 25,000of common stock issued at $1.00 per share,
(5)
This amount represents the basis of the 35 shares of common stock issued at $2,000.00 per share and the 150,000 shares of Series A Preferred stock at $0.001 per share.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table summarizes certain information regarding the beneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of outstanding Common Stock as of March 22, 2013 by (i) each person known by us to be the beneficial owner of more than 5% of the outstanding Common Stock, (ii) each of our directors, (iii) each of our named executive officers (as defined in Item 403(a) of Regulation S-K under the Securities Act), and (iv) all executive officers and directors as a group. Except as indicated in the footnotes below, the security and stockholders listed below possess sole voting and investment power with respect to their shares.
(1)
The percentage of common stock is calculated based upon 808,160 shares issued and outstanding as of March 22, 2013.
(2)
Unless other wise indicated, the address of each person listed is c/o Inelco Corporation, 2450 Hollywood Blvd, Suite 708, Hollywood, FL 33020
(3)
Indicates Director
(4)
Indicates Officer
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
As of the date of this Annual Report, other than as disclosed below, none of our directors, officers or principal stockholders, nor any associate or affiliate of the foregoing, have any interest, direct or indirect, in any transaction or in any proposed transactions, which has materially affected or will materially affect us during fiscal year ended December 31, 2011.
Item 14.
Item 14. Principal Accounting Fees and Services.
Audit Fees
During fiscal year ended December 31, 2012, we incurred approximately $23,500 in fees to our principal independent accountant for professional services rendered in connection with the audit of our financial statements for fiscal year ended December 31, 2012 and for the review of our financial statements for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012.
During fiscal year ended December 31, 2011, we incurred approximately $26,500 in fees to our principal independent accountant for professional services rendered in connection with the audit of our financial statements for fiscal year ended December 31, 2011 and for the review of our financial statements for the quarters ended March 31, 2011, June 30, 2011 and September 30, 2011
Audit-Related Fees
For the years ended December 31, 2012 and 2011, our principal accountants did not render any audit-related services.
Tax Fees
For the years ended December 31, 2012 and 2011, our principal accountants did not render any tax services.
All Other Fees
For the years ended December 31, 2012 and 2011, our principal accountants did not render any other services.
Prior to engaging its accountants to perform a particular service, our board of directors obtains an estimate for the service to be performed. All of the services described above were approved by the board of directors in accordance with its procedures.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules
Financial Statements
See Item 8. Financial Statements and Supplementary Data
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
/s/ Jorge Schcolnik
April 15, 2013
Jorge Schcolnik, Principal Executive Officer
Date
/s/ Jorge Schcolnik
April 15, 2013
Jorge Schcolnik, Principal Financial Officer
Date
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Jorge Schcolnik
April 15, 2013
Jorge Schcolnik, Director
Date
/s/ Yosef Baruch
April 15, 2013
Yosef Baruch, Jr., Director
Date