UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012
 
OR
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:   000-54918

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

California
(State or other jurisdiction of incorporation or organization)

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

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

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

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

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

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

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

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

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

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

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of June 30, 2012: $0.00.

At March 5, 2013, 13,132,302 shares of the registrant’s common stock were outstanding.


 
 


TABLE OF CONTENTS

 
Page
   
   
     
Business.
3
Risk Factors.
9
Unresolved Staff Comments.
9
Properties.
9
Legal Proceedings.
9
Mine Safety Disclosure.
10
     
   
     
Market for Our Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
10
Selected Financial Data.
11
Management’s Discussion and Analysis of Financial Condition and Results of Operation.
11
Quantitative and Qualitative Disclosures About Market Risk.
21
Financial Statements and Supplementary Data.
21
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure.
36
Controls and Procedures.
36
Other Information.
38
     
   
     
Directors, Executive Officers and Corporate Governance.
38
Executive Compensation.
42
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
44
Certain Relationships and Related Transactions, and Director Independence.
45
Principal Accountant Fees and Services.
46
     
   
     
Exhibits and Financial Statement Schedules.
47
     
50
   
51



 
-2-


PART I

ITEM 1.         BUSINESS.

General

We were incorporated in the State of California on December 14, 2001. We are a customer experience management solutions company, focused on helping large, medium and small enterprises plan, measure and improve the experiences that they deliver to their customers. We currently offer professional and software-enabled services, and are developing on-demand software solutions designed to measure, optimize and improve customer experiences for businesses of all sizes.

We maintain our primary business address at 201 Spear Street, Suite 1100, San Francisco, CA 94105. Our telephone number is (415) 526-2655.  Our registered agent for service of process is National Registered Agents, Inc.

Industry Background

It is generally recognized by executive management in large, medium and small enterprises that business value is derived from its customers. Consequently, companies have been trying to improve customer relationships for years, investing heavily in technologies and services such as Customer Relationship Management (CRM), Marketing Management Consulting and Marketing Research industry sectors.

In our opinion, these three industry sectors exist for only one reason: to help corporations better understand and serve their customers by driving insights into customer actions, opinions and perceptions, and devising strategies to accomplish these things.

Yet investments in these areas are costly, time consuming and resource intensive, each requiring complex, industry- and company-specific customization.

Enter Customer Experience Management (CEM). CEM is a series of disciplines, methodologies and processes used to understand, measure and comprehensively manage a customer’s cross-channel interactions and transactions with a company.

While the CEM ecosystem is broad and complex, our solutions are focused on the needs of large, medium and small enterprises specifically interested in voice-of-the-customer insights, and a straightforward way to gather, measure, monitor and improve customer experience over time.

We believe that a series of three macro trends sets the stage for market acceptance of our solutions. These trends include:

§
Digitally-empowered consumers are changing the traditional company-customer dynamic: Until recently, corporations have been able to ‘control’ customer relationships in large part because they controlled customer data and access to information. With the now wide-spread adoption of smart phones and broadband wireless access, customers are able to quickly assess competitive alternatives. As a result, many businesses run the risk of becoming “perceptually commoditized” unless they can offer customers a differentiated customer experience.



§
Market interest in Customer Experience Management: In the face of this first trend, a large majority of corporate executives have said that customer experience strategies are an important part of their organization’s agenda, and that it is critical to their future success.  The reasons for this are generally recognized to be the ability of a firm to better compete in an otherwise commoditized business by offering superior customer experiences.

§
Widespread acceptance of cloud computing.   Cloud computing – including hosted data, on-demand software and services in the “cloud” – has gained widespread acceptance with corporate IT departments as well as consumers. As a result, the historical cost structure associated with designing, maintaining and upgrading software has changed dramatically, making it easier to and less expensive by historical standards to scale growth and control product development.

In our opinion, improving customer experience drives significant value for corporations, increasing loyalty, driving brand engagement and helping customers stay longer and buy more. As a result, we believe that in the coming years companies are likely to invest heavily to improve customer experience, shifting existing budgets from the areas of marketing management consulting, marketing research and customer relationship management to the emerging market of Customer Experience Management.

Our Strategy

In mid-2010, we made the decision to shift the strategic focus of our business from a primary focus on professional services with software in a secondary, supporting role to a primary focus on on-demand software solutions and software-enabled services. With this refocusing, professional services are migrating to a secondary role supporting our software deployment.

Our decision to re-focus our business on the development of on-demand, Internet cloud-based (SaaS) software and software-enabled professional and consulting services was based primarily on the scalability of these products and related services versus non- software-enabled professional and consulting services. By commercializing our Touchpoint Mapping® analytical and research methodologies as software, our firm has the potential to grow more rapidly and profitably because we plan to leverage technology to scale our business, versus the labor or capital investment requirements required to scale a typical service business. 

Once we made the decision to shift the strategic focus of our business, we made the further decision to do so utilizing the expertise of available staff and resources, rather than committing to the significant expense of bringing new, untested resources to bear. As a result, we narrowed our service offerings in a shift away from implementation-oriented projects towards strategy, focusing delivery efforts on more profitable customers, while re-tasking other resources to focus on “productizing” our service offerings in an on-demand software platform. Just as we shifted resources away from implementation-oriented projects towards product development, we anticipate that we will shift a portion of these resources away from product development and back towards service delivery, as immediate product development requirements are replaced by the need to engage in sales and resulting product support.

The market factors that make this strategy both possible and strategically relevant include the widespread acceptance of cloud computing, which means that the historical cost structure associated with designing, maintaining and upgrading software has changed dramatically, making it both easier to and less expensive by historical standards to scale growth and control product development. Additionally,


there has been increasing market interest in and global demand for Customer Experience Management solutions, which can be met more easily through a distributed, cloud-based technology solution delivered through a global partner and reseller distribution channel.

We plan to use our expertise as a customer experience strategy expert to create a leading customer experience management technology company. Our ability to accomplish these goals will stem from the commercialization of Touchpoint Mapping ® , our analytical and research methodologies delivered in the form of on-demand, Internet cloud-based (SaaS) software and software-enabled professional and consulting services, the business intelligence which we derive as a result, and the licensing of our proprietary systems as we continue to develop products and services that help companies better serve their customers by improving their ability to manage customer experience, thereby reducing or eliminating bad experiences for their customers.

Research-based approach to “outside in” customer insights:

Customer Relationship Management (CRM) -- which generally doesn’t take into account a customer’s view of the company, and usually doesn’t capture how these interactions make customers feel -- relies on an internally-generated “inside out” view of the customer. Touchpoint Mapping provides a Voice of the Customer (VoC) based, “outside-in” view of the customer. It is a fact-based approach that can help companies impact experience by measuring the customers’ perspective, as well as how well their wants and needs are being met.

Best-in-breed technology and integration:

Our product solution is designed to be highly scalable and cloud-based, and uses a combination of proprietary and commercially available software. With the continued growth and widespread acceptance of cloud computing, our firm can leverage multiple, separate purpose-built technologies through strategic commercial relationships on a subscription or other similar fee basis, allowing us to limit technology risk (including development costs), while focusing product development on those areas of proprietary technology and services creation that drive the greatest enterprise value for the firm.

Licensee and partner distribution channels

In addition to direct sales, we plan to establish a global partner and reseller distribution channel. We anticipate that these will primarily be small and medium-size companies such as general business management consulting firms, CRM consultants, ad agencies and social media marketing firms, industry-focused technology and consulting firms and others looking for new ways to drive revenue and provide insights to existing customers.

Our Services and Software Products

We currently offer professional and software-enabled services, and are engaged in the business of developing and subsequently selling on-demand software solutions designed to optimize customer experiences for businesses of all sizes. These professional and software-enabled services and our on-demand software together fall into the broader category of Customer Experience Management (CEM).



Our currently offered professional services fall into three primary categories; consulting services, creative and production services and research services. Consulting services include strategy development, planning, education, training and best practices consulting. Creative and production services are primarily related to the articulation and implementation of customer-centric strategies. Research services include the development and execution of customized research and analytical solutions, based on a client’s specific business application. Consulting, creative and research services have been offered primarily through our consulting services group, MCorp, which is a dba of the Company. Our currently offered software-enabled services leverage the analytical frameworks of Touchpoint Mapping and our currently offered research services, with a particular focus on analytical solutions in support of customer experience improvement initiatives.

Our primary on-demand software products include scalable, cloud-based software which will help large, medium and small enterprises gather and display customer experience insights and business intelligence in near real-time.

Our services and software products will help our client companies better understand both positive and negative customer perceptions of customer experience and the specific interactions that drive these perceptions. As a result, the data which is gathered by and displayed in our Touchpoint Mapping ® products is designed to help our clients increase their understanding of their customers, providing them the detailed insights they need to take action to improve customer experiences, driving increased customer value in these primary areas:

§
Increase retention, by keeping customers longer;
§
Get existing customers to spend more, more often;
§
Increase acquisition of new customers through positive word-of-mouth, and;
§
Reduce the cost of serving customers by improving or eliminating ineffective interactions.

Our business strategies, product development and sales and marketing efforts are focused around the commercialization of five primary revenue streams. These include a focus on the small and medium enterprises with Touchpoint Mapping® on-demand, which will be customized and pre-populated for targeted industry niches – e.g., banking, home building, hospitals and hospitality. Secondly, we plan to focus on needs of medium-sized enterprises across multiple industries with “semi-custom” Touchpoint Mapping on demand, which will populate our basic, pre-configured on-demand software with a combination of industry- and client-specific data. Third, we plan to focus on the needs of large enterprises, with fully-customized Touchpoint Mapping on-demand products and software-enabled services, leveraging the data gathering and analytical frameworks of all Touchpoint Mapping products and services, but would also include the potential to be modified dramatically based on the data gathering and reporting requirements of different organizations. Our fourth revenue stream is expected to generate revenue from large, medium and small enterprises, and will include consulting, education, research, creative and production services sold either with an initial software license, or on a fee-for-service basis, fully dependent on the needs of our clients’ organizations.  The fifth area includes aggregation and analysis of industry data, to be used for the development of related information products. We plan to license all products and services for distribution worldwide.

Touchpoint Mapping®

Currently, we offer one product for sale to our customers.  It is Touchpoint Mapping® on-demand. Pricing of Touchpoint Mapping® on-demand varies based on industry, size of company, number of employees, number of locations, number of customers and other variables.


We have customized it for small and medium enterprises in the banking industry, and began sales and marketing activities in August of 2012. However, no revenues have been generated from the sale thereof.  We have also customized it for small and medium enterprises in the home building industry, and began marketing activities in the 4 th Quarter of 2012.

“Semi-custom” Touchpoint Mapping® on-demand, customized software that is prepared for the particular needs of particular clients and focused on medium-sized enterprises across multiple industries, is also is available for sale to customers today.  Sales and marketing activities began in September of 2012, however, no revenues have been generated from the sale thereof.

In 2013, we anticipate further developing Touchpoint Mapping on-demand by customizing it for small and medium enterprises in the hospital and hospitality industries.

Product Launch

The product launch will include the active promotion of our first and second industry-specific products, including: Bank Touchpoint Mapping, to mid-size, regional and community banks and credit unions, and Builder Touchpoint Mapping to mid-size, regional residential real estate developers. We will distribute press releases to industry publications, conduct webinars showcasing product benefits, and engage in direct sales activities to potential customers throughout North America.

Both Bank Touchpoint Mapping and Builder Touchpoint Mapping have been fully developed, and have completed live beta testing and user feedback with prospective customers.

There are many potential unforeseen and significant market and competitive risks associated with launching any new product in any market. It is our expectation that numerous unforeseen challenges will be encountered as we enter banking, as well as subsequent markets.  These include the fact that we are early in market, which may extend the sales cycle. While Customer Experience Management is a concept that is becoming well recognized, some companies may be confused by the differences with Customer Relationship Management or be wedded to more traditional customer satisfaction approaches. Some existing Customer Relationship Management vendors are rebranding their Customer Relationship Management software as Customer Experience Management, which has the potential to create both unforeseen competitive barriers and market confusion.

There are a number of significant features of the product which can help companies impact experience by measuring the customers’ perspective, as well as how well their wants and needs are being met. These include the ability to pinpoint which specific interactions are meeting customer wants and needs and which are not, by measuring the gap between customer expectations and the actual customer experience they receive. In addition to customer insight, Touchpoint Mapping on-demand collects data on direct competitors’ customers to provide insight on competitive threats. Touchpoint Mapping on-demand also identifies where gaps in alignment exist in customer and employee perceptions of experience, to help companies’ target and focus efforts.

Competition

Multiple potential competitors exist in the overlapping areas of marketing research, CRM and marketing management consulting. These include both large and small management consulting firms and more often smaller Customer Experience Management (CEM) consulting firms. In addition, many CRM


software companies are beginning to include CEM-specific insights as adjunct capabilities to their existing platforms, and as a result these companies have the ability to compete directly with us as well. Given the growth of CEM, there are likely to be many other competitors we have not identified.

Petro Portfolio

On July 16, 2007, we acquired certain assets of International Resource Management Corp.  The assets were a media property comprised of a website and a registered domain name (petroportfolio.com), a newsletter, a database of opt-in email subscribers, and a library of related content.  The consideration for purchase of the assets was 262,302 restricted shares of our common stock.  We valued the shares at $0.50 per share.  The value of the assets was agreed upon by International Resource Management Corp. and us in an arm’s length transaction based upon International Resource Management Corp.’s total investments in developing the assets, as well as our belief that the assets had the potential to generate revenues for us. At the time of the acquisition, International Resource Management Corp. owned less that 10% of our outstanding shares of common stock and was not an affiliate.  Subsequent to the acquisition of the assets, International Resource Management Corp. acquired additional shares of our common stock and currently owns 1,962,302 shares of our common stock or 14.94% of our total outstanding shares of common stock.  The assets were used to operate a website and distribute a newsletter and were active from the time of purchase until mid-2008. However, our belief that there was an adverse business climate for media properties resulted in our decision to cease all Petro Portfolio-related activities in late 2008. While the assets have not been updated since this time we currently believe that the assets have potential to generate revenues, and we are unwilling at the present time to re-initiate operations of them.  Further, there is no assurance that we will re-initiate activities in the future.  We carried the assets on our financial statements at $131,151.00 which reflected the 262,302 restricted shares of common stock which were valued at $0.50 per share.  In the second quarter of 2012 we elected to impair the assets in the amount of $72,000 and now carry the assets on our financial statements at $59,151. The impairment was calculated following a review of the assets for indicators of impairment. Three separate tests for recoverability were conducted, including 1) analysis of undiscounted future cash flows, 2) the fair market cost of recreating the assets, and 3) an analysis of costs to return the assets to their relative market position at the time operations ceased, based on management’s opinion. The resulting charge for impairment was based on management’s review of these analyses, and accurately represents management’s opinion of current value.

Insurance

We maintain health insurance, workman’s compensation and general liability insurance.

Employees

We currently have five full-time employees and nine independent contractors.  We intend to hire more employees and independent contractors on an as-needed basis.

Offices

We have four business addresses. Our primary business address is located at 201 Spear Street, Suite 1100, San Francisco, CA 94105.



Our additional addresses include a business office in San Anselmo, California located at 251 Sir Francis Drake Boulevard, 94960.  We lease the aforementioned from the Annette Kaufman Survivor Trust, 2 Magnolia Avenue, San Anselmo, CA 94960 pursuant to a 36 month lease entered into on August 15, 2010.  Our monthly rental was $1,788 until July 18, 2012 and $1,840 thereafter.

Our office in Charlotte, North Carolina is located at 15720 John J. Delaney Dr., Suite 300, 28277. We lease the San Francisco and Charlotte spaces from Davinci Virtual LLC, 2150 South 1300 East, Suite 200, Salt Lake City UT 84106 pursuant to a commercial lease on a month to month basis.  Our monthly rental is $190.00 for our San Francisco location and $80.00 per month for our Charlotte, North Carolina location.  Our office in Vancouver, British Columbia is located at 2901-1050 Burrard Street, V6Z 2S3 (Canada), and is made available to us for no charge on a month-to-month basis under a verbal contract, by IREMCO. IREMCO is a controlling shareholder of Touchpoint Metrics.

Government Regulation

We are not currently subject to direct federal, state or local regulation other than regulations applicable to businesses.


ITEM 1A.
RISK FACTORS.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.


ITEM 1B.
UNRESOLVED STAFF COMMENTS.

None.


ITEM 2.
PROPERTIES.

Our corporate headquarters are in leased space located in San Francisco, California. The Company also leases office space in San Anselmo, California and Charlotte, North Carolina. We lease the San Anselmo office pursuant to a 36 month lease entered into on August 15, 2010. Our monthly rental under this lease is $1,840. We lease the San Francisco and Charlotte spaces pursuant to a commercial lease on a month to month basis. Our total monthly rental for the two locations is $270.00.  Our office in Vancouver, British Columbia is made available to us for no charge on a month-to-month basis under a verbal contract, by IREMCO. IREMCO is a controlling shareholder of Touchpoint Metrics.  In 2007, we obtained undeveloped, real property in the unincorporated area of Blue Lake County of Lake, California.

We believe that our existing facilities and offices are adequate to meet our current requirements. If we require additional space, we believe that we will be able to obtain such space on acceptable, commercially reasonable terms.


ITEM 3.
LEGAL PROCEEDINGS.

We are not presently a party to any litigation.



ITEM 4.         MINE SAFETY DISCLOSURES.

None.


PART II

ITEM 5.
MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our shares are traded on the Bulletin Board operated by the Financial Industry Regulatory Authority under the symbol “TPOI”.  FINRA cleared Pennaluna & Company for an unpriced quotation on February 13, 2013.  A summary of trading by quarter for 2012 and 2011 is as follows:

Fiscal Year – 2012
High Bid
Low Bid
     
 
Fourth Quarter 10-1-2012 to 12-31-12
$0.00
$0.00
 
Third Quarter 7-1-12 to 9-30-12
$0.00
$0.00
 
Second Quarter 4-1-12 to 6-30-12
$0.00
$0.00
 
First Quarter 1-1-12 to 3-31-12
$0.00
$0.00
 
 
   
Fiscal Year – 2011
High Bid
Low Bid
     
 
Fourth Quarter 10-1-11 to 12-31-11
$0.00
$0.00
 
Third Quarter 7-1-11 to 9-30-11
$0.00
$0.00
 
Second Quarter 4-1-11 to 6-30-11
$0.00
$0.00
 
First Quarter 1-1-11 to 3-31-11
$0.00
$0.00

Holders

There are 75 holders of record for our common stock.  There are a total of 13,132,302 shares of common stock outstanding.

Dividends

We have not declared any cash dividends, nor do we intend to do so. We are not subject to any legal restrictions respecting the payment of dividends, except that they may not be paid to render us insolvent. Dividend policy will be based on our cash resources and needs and it is anticipated that all available cash will be needed for our operations in the foreseeable future.

Section 15(g) of the Securities Exchange Act of 1934

Our shares are covered by section 15(g) of the Securities Exchange Act of 1934, as amended that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer must




make a special suitability determination for the purchase and have received the purchaser’s written agreement to the transaction prior to the sale. Consequently, the Rule may affect the ability of broker/dealers to sell our securities and also may affect your ability to sell your shares in the secondary market.

Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as bid and offer quotes, a dealers spread and broker/dealer compensation; the broker/dealer compensation, the broker/dealers’ duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers’ rights and remedies in cases of fraud in penny stock transactions; and, FINRA’s toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.

Securities Authorized for Issuance Under Equity Compensation Plans

     
Number of securities
 
Number of securities to
Weighted-average
remaining available for
 
be issued upon exercise
exercise price of
future issuance under
 
of outstanding options,
outstanding options,
equity compensation plans
 
warrants and rights
warrants and rights
(excluding securities
Plan category
(a)
(b)
in column (a)) (c)
Equity compensation plans
     
approved by security holders
320,000
$0.34375
2,180,000
       
Equity compensation plans
     
not approved by securities
     
holders
None
None
None
       
Total
320,000
$0.34375
2,180,000


ITEM 6.          SELECTED FINANCIAL DATA.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.


ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

This Management’s Discussion and Analysis includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: “believe,” “expect,” “estimate,” “anticipate,” “intend,” “project,” “will,” “should” and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Form 10-K. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.



Overview

We are engaged in the business of developing and delivering technology-enabled products and services that improve customer experience management capabilities for corporations.

Customer experience management is the collection of processes a company uses to track, oversee and organize interactions between a customer and the organization throughout the customer lifecycle. The goal of customer experience management is to optimize interactions from the customer’s perspective and, as a result, foster customer loyalty.‬

Until 2011, our professional services included consulting services, creative and production services and research services. In 2012, we narrowed our service offerings to consulting services in order to focus more resources on developing our software product, Touchpoint Mapping® On-Demand. All of our professional services are software-enabled, using technology to more efficiently deliver solutions supporting customer experience improvement initiatives.

Touchpoint Mapping On-Demand is a data gathering and analytical software that gathers and analyzes feedback on customer interactions from the customers’ and client employees’ perspectives, and delivers the results to clients over the Internet as a SaaS (software-as-a-service) based technology platform that helps companies automate and systematize customer experience feedback. Touchpoint Mapping On-Demand has been customized and pre-populated for small and medium enterprises in the banking industry, and as a “semi-custom” offering for medium enterprises across multiple industries.

Development is ongoing, as Touchpoint Mapping On-Demand is refined and improved based on customer feedback, and as it is customized for specific industry sectors. The services delivered with Touchpoint Mapping On-Demand may include consulting, creative and production and research services, in addition to planned services such as assessment, product implementation, and additional offline analysis of data gathered and reporting.

Although we began sales and marketing activities for Touchpoint Mapping On-Demand in 2012, we cannot predict the timing, nor probability, of generating sales revenue from the product as we currently do not have dedicated sales professionals on staff to identify and develop product sales opportunities.

Sources of Revenue

Our revenue consisted primarily of professional consulting services in 2012, while derived from professional consulting services, creative and production services, research services, and products in 2011. Consulting services include strategy, planning, education, training and best practices consulting. Creative and production services are primarily related to the articulation and implementation of customer-centric strategies. Research services include the development and execution of customized research and analytical solutions, based on a client’s specific business application. Product revenue is from productized and software-enabled service sales not elsewhere classified, while other revenue includes reimbursement of related travel costs and out-of-pocket expenses.





While our plan of operations is based on migrating the majority of our service revenue from these categories to recurring SaaS subscription fees, we anticipate that fees for professional consulting services will remain a significant revenue source in the near future.  As of December 31, 2012, we have not obtained a sales commitment for our software product, Touchpoint Mapping® On-Demand.  We have not engaged the necessary sales staff to develop and execute product sales opportunities and cannot predict when those positions will be filled.

Should we successfully launch Touchpoint Mapping On-Demand, we anticipate that subscription agreements and related professional services associated with delivering our software solutions will become a source of significant revenue. Subscriptions and associated professional services pricing will be based upon our gross margin objectives, growth strategies and the specific needs of our clients’ organizations, measured primarily by the following metrics: industry type, size of company, number of locations and number of seats. Additional fees will be assessed based on the number and type of customer, non-customer and employee records uploaded to our software portal, and subsequently surveyed by our customers.

We anticipate that subscription agreements for our software solutions will be offered as monthly term agreements which contain a minimum commitment period of at least 12 months, and which include related setup, upgrades, hosting and support. Professional services will include consulting fees related to implementation, customization, configuration, training and any other value added services.

Based on data gathered during setup of our beta client engagements, we believe the average time it will take our clients from placing an order to live deployment of our products is between 30 and 45 days. We plan to invoice clients upon inception of their subscription agreements for setup and total subscription fees contracted over the term of the agreements, with payment due within 30 days. Professional services related to the subscription agreements will be invoiced at the inception of the professional services agreement at one-third or fifty percent of total fees, with the balance of payments due over the duration of the contract as project milestones are met. Amounts invoiced will be recorded in accounts receivable and deferred revenue or revenue, depending on whether revenue recognition criteria have been met.

Cost of Revenue and Operating Expenses

Our costs of revenue and operating expenses are detailed at the sub-category level in our Income Statements. And while the financial results for these categories are further explained in the Results of Operations section below, a general description of these categories follows:

1)         Cost of Goods Sold. Cost of goods sold consists primarily of expenses directly related to providing professional and consulting services. Those expenses include contract labor, third-party services and subscriptions, materials and travel expenses related to providing professional services to our clients.

As Touchpoint Mapping® On-Demand is launched, costs of goods will include all product-related hosting and monitoring costs, licenses for products embedded in the application, related sales commissions, service support, account management and credit card fees.

Should our client base grow, we intend to continue to invest additional resources in our hosting, technical support and professional services, as well as our utilization of third-party licensed software. We expect our professional services costs to increase in absolute dollars as we increase our overall revenue, but expect that professional services as a percentage of total revenue will decrease as we continue to shift



our business towards sales of on-demand software solutions and software-enabled services. Because cost as a percentage of revenue is higher for professional services revenue than for software, hosting and support revenue, a decrease in professional services as a percentage of total revenue will likely increase gross profit as a percentage of total revenue.

2)         General and Administrative Expenses. General and administrative expenses consist primarily of salary and related expenses for management, finance and accounting, legal, information systems and human resources personnel. Expenses also include contract services, administrative costs, automobile expenses, computer and software expenses, insurance, marketing and promotion, professional fees, rent and a portion of travel expenses and other overhead.

Sales and marketing expenses are currently reflected in contract labor, salaries and wages, marketing and promotion and other related overhead expense categories. While we have not yet recognized commissionable sales for Touchpoint Mapping On-Demand, we plan to expense product sales commissions through cost of goods sold. Since we will be recognizing revenue over the terms of the subscriptions or professional services engagements, we expect to experience a delay between increases in selling and marketing expenses and the recognition of revenue. We expect significant increases in sales and marketing expenses in both absolute dollars and as a percentage of expenses as we hire sales and additional marketing personnel and increase the level of marketing activities.

In 2011, research and development expenses consisted of preliminary project stage activities and are reflected in contract labor, salaries and wages and other related overhead expense categories.  The majority of product development expenses during the last three quarters of 2012 related to application development stage expenses and were capitalized on our balance sheet, to be amortized over the estimated useful life.

We expect that total general and administrative expenses will increase as we continue to add personnel in connection with the growth of our business. In addition to increases in sales and marketing and research and development expenses, we anticipate we will also incur additional employee salaries and related expenses, professional service fees and insurance costs related to the growth of our business and operations to meet the requirements of a public company.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

We believe that the assumptions and estimates associated with revenue recognition, income taxes, stock-based compensation, research and development costs and the impairment of long-lived assets, have the greatest potential impact on our financial statements. Therefore, we consider these to be our critical accounting policies and estimates.




Revenue Recognition

We plan to enter into arrangements with multiple-deliverables that generally include nonrefundable setup fees, subscription fees, professional services and consulting fees. We account for multiple-element arrangements by following ASC 605-25, Revenue Recognition: Multiple-Element Arrangements, as amended by Accounting Standards Update (ASU) 2009-13, Multiple-Deliverable Revenue Arrangements.

Under the accounting guidance, in order to treat deliverables in a multiple-deliverable arrangement as separate units of accounting, the deliverables must have standalone value upon delivery. To date, we have concluded that subscription services and the associated nonrefundable setup fees do not have standalone value as such services are not sold separately, while professional services and consulting fees included in multiple-deliverable arrangements executed have standalone value as they are often sold separately and will have value to the customer on a standalone basis.

Under the accounting guidance, when multiple-deliverables included in an arrangement are separated into different units of accounting, the arrangement consideration is allocated to the identified separate units based on a relative selling price hierarchy. We determine the relative selling price for a deliverable based on its vendor-specific objective evidence of selling price (“VSOE”), if available, third-party evidence (“TPE”), if VSOE is not available; and our best estimate of selling price (“BESP”), if neither VSOE nor TPE is available. Due to the introduction of the new product, and its related services, and due to differences in our service offerings compared to other parties and the lack of availability of relevant third-party pricing information, we have determined that VSOE and TPE are not practical alternatives. Therefore, the company uses BESP to determine selling price of significant deliverables.

We determine BESP by considering our overall pricing objectives and market conditions. Significant pricing practices taken into consideration include our discounting practices, the size and volume of our transactions, the customer demographic and our market strategy. The determination of BESP is made through consultation with and approval by management, taking into consideration our market strategy. As our market strategy evolves, we may modify our pricing practices in the future, which could result in changes in relative selling prices, including BESP.

Revenue recognition requires judgment, including whether the arrangement includes multiple elements, and if so, whether VSOE or TPE of fair value exists for those elements. A portion of revenue may be recorded as unearned due to undelivered elements. Changes to the elements in a software arrangement, the ability to identify VSOE, TPE or BSEP for those elements, and the fair value of the respective elements could materially impact the amount of earned and unearned revenue. Judgment is also required to assess whether future releases of certain software represent new products or upgrades and enhancements to existing products. Variations in the actual outcome of these variables could materially impact our financial statements.

Income Taxes

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Accounting literature provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax



positions, and income tax disclosures. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our financial statements.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date using a Black-Scholes valuation model and is recognized as expense over the requisite service period. Determining the fair value of stock-based awards at the grant date requires judgment and assumptions, including expected volatility. In addition, judgment is also required in estimating the amount of stock-based awards that are expected to be forfeited. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be impacted.

Research and Development Costs

We capitalize the software development costs incurred during the application development stage of certain internally developed computer software to be sold as a service when application development begins, it is probable that the project will be completed, and the software will be used as intended. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred. Our policy provides for the capitalization of certain external direct costs of materials and services associated with developing or obtaining internal-use software and certain payroll and payroll-related costs for employees who are directly associated with the computer software development projects. The capitalized costs are included in other assets on our balance sheets. Straight-line amortization of these costs over the estimated useful life, which is typically three years, is included in cost of revenue over the estimated life of the products. Judgment is required in determining when the application development stage has begun as well as in allocating certain payroll and payroll-related costs for employees directly associated with the projects.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate an asset’s carrying value may not be recoverable. If such circumstances are present, we assess the recoverability of the long-lived assets by comparing the carrying value to the undiscounted future cash flows associated with the related assets. If the future net undiscounted cash flows are less than the carrying value of the assets, the assets are considered impaired and an expense, equal to the amount required to reduce the carrying value of the assets to the estimated fair value, is recorded in the statements of operations. Significant judgment is required to estimate the amount and timing of future cash flows and the relative risk of achieving those cash flows.

Assumptions and estimates about future values and remaining useful lives are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. Impairment charges could materially decrease our future net income and result in lower asset values on our balance sheet.




Results of Operations

Years Ended December 31, 2012 and 2011

           
Variance
   
2012
 
2011
 
Dollars
Percent
Revenue
$
900,132
$
611,374
$
288,758
47%
Cost of goods sold
 
203,913
 
241,874
 
(37,961)
-16%
Gross profit
 
696,219
 
369,500
 
326,719
88%
Operating expenses
             
Administrative costs
 
42,431
 
31,545
 
10,886
35%
Automobile expense
 
13,528
 
22,423
 
(8,895)
-40%
Computers and software
 
65,681
 
21,987
 
43,694
199%
Contract services
 
162,206
 
89,041
 
73,165
82%
Insurance
 
27,003
 
33,764
 
(6,761)
-20%
Marketing and promotion
 
43,046
 
32,324
 
10,722
33%
Professional fees
 
80,262
 
45,475
 
34,787
76%
Salaries and wages
 
523,452
 
439,601
 
83,851
19%
Travel expenses
 
12,049
 
25,892
 
(13,843)
-53%
Other operating expenses
 
41,184
 
41,237
 
(53)
0%
Total operating expenses
 
1,010,842
 
783,289
 
227,553
29%
Net operating income (loss)
 
(314,623)
 
(413,789)
 
99,166
-24%
Other income
 
7,675
 
516
 
7,159
1387%
Net loss
$
(306,948)
$
(413,273)
$
106,325
-26%

Revenue

Our revenues for year ended December 31, 2012 were $900,132 as compared to revenues of $611,374 for the year ended December 31, 2011.  Revenues increased by $288,758, or 47%.  Consulting revenues were $833,609 as compared to $290,221 in the previous year, an increase of $543,388 or 187%. Products & Other revenue increased by $18,652 or 39%, to $66,523, while revenues from Creative & Production Services and Research services decreased by 100%. These changes are due primarily to the acquisition of two significant consulting engagements in Q4 of 2012 and a shift away from implementation-oriented projects, such as Creative & Production and Research services, towards strategy services consulting and product development.

Cost of Goods Sold and Operating Expenses

Cost of Goods Sold. Cost of goods sold during the years ended December 31, 2012 and 2011 was $203,913 and $241,874, respectively, representing a decrease of $37,961 or 16%. Cost of sales as a percentage of revenues decreased by 17% from 2011. Cost of sales as a percentage of revenues decreased from historical results as we have narrowed our service offerings and focused our efforts on our more profitable professional services and consulting customers. We have also sourced more cost-effective vendors, thus lowering the total cost of direct labor and associated services related to our service offerings.

Operating Expenses . Operating expenses as a percentage of revenue was 112% and 128% for the years ended December 31, 2012 and 2011, respectively.



Administrative expenses increased by $10,886 to $42,431 over 2011 as a result of increases in interest expense, third party administrative costs associated with a significant consulting engagement entered into in Q4 of 2012 and filing fees related to our trademarks filed with the United States Patent and Trademark Office.

Automobile expenses decreased by $8,895 to $13,528 during the year ended December 31, 2012 over 2011.  This 40% decrease primarily resulted from refinancing an auto lease and decreases in gas, parking and tolls related to a strategic reduction in business development strategies requiring travel to prospect locations.

Computers and software expenses increased by $43,694 to $65,681 during 2012 as a result of investments in the third party software and technology required in the planning and preliminary project development stage of our SaaS product Touchpoint Mapping ® On-Demand.

Contract services expenses increased by $73,165, or 82%, during the year ended December 31, 2012 to $162,206 from $89,041 during the previous year. The increase primarily relates to significant expansion in research and development and business development activities, in accordance with our strategic plan.

During the year ended December 31, 2012, insurance expenses decreased by 20%, or $6,761 over the comparative period in 2011 to $27,003 primarily due to the capitalization of certain portions of benefits for employees directly associated with the development of our SaaS product Touchpoint Mapping On-Demand.

Marketing and promotion expenses increased by 33%, or $10,722 in 2012 to $43,046 primarily due to referral fees incurred, as well as advertising placed and marketing materials developed in support of our business development efforts.

Professional fees increased by $34,785, or 77%, during the year ended December 31, 2012 to $80,262 from $45,475 during the year ended December 31, 2011. This is a direct result of the increase in use of technology and market research services to aid in our efforts to initiate marketing our SaaS product, as well as the legal, accounting and advisory services related to our registration with the SEC.

Salaries and wages increased by $83,851, or 19%, during the year ended December 31, 2012 to $523,452 from $439,601 during the year ended December 31, 2011. The increase primarily relates to significant expansion in research and development and business development activities, as well as the addition of administrative and project management staff, in accordance with our strategic plan.

Travel expenses decreased by $13,843, or 54% during the year ended December 31, 2012 to $12,049 from $25,892 during 2011.  This decrease primarily relates to our strategic move towards an emphasis on internet-based business development strategies.

Liquidity and Capital Resources

We measure our liquidity in a variety of ways, including the following:

   
December 31, 2012
 
December 31, 2011
Cash and Cash Equivalents
$
106,999
$
52,109
Working Capital
$
166,928
$
36,322




In 2011, we financed our operations, working capital needs and product development through operating activities, debt financing, and private sales of common stock. Specifically, we received an aggregate of $40,000 in net proceeds from the issuance of stock in 2011 as well as $150,000 from non-convertible, long-term debt instruments. A $100,000 CDN note was executed with Brad Holland, an 8.09% shareholder on September 16, 2011. The note is structured to incur a balloon payment of the principal and 4% APR non-compounding accrued interest. The maturity date of the note is September 16, 2014. The principal and accrued interest payable at maturity will be $112,000. A $50,000 USD note was executed with McLellan Investment Corporation, an unrelated party, on September 7, 2011. The note is structured to incur a balloon payment of the principal and 4% APR non-compounding accrued interest. The maturity date of the note is September 7, 2014. The principal and accrued interest payable at maturity will be $56,000.

Through the year ended December 31, 2012 we were able to finance our operations, including capital expenditures for infrastructure, product development and marketing through operating activities, cash on hand, and additional private sales of common stock. In 2012, we received an aggregate of $595,000 in net proceeds from the issuance of common stock.

Subsequent to December 31, 2012, material revenues receivable from two significant services engagements exceeded their payment terms by over 45 days. This resulted in material fluctuations in our cash flow and necessitated a $25,000 short-term, non-convertible debt instrument to be executed with our President, Michael Hinshaw to finance operations.  The note is structured to incur a balloon payment of the principal and 3.25% APR non-compounding accrued interest. Interest is to begin accruing on the unpaid balance thirty (30) days from the date of the note. The maturity date of the note is April 1, 2013.  The principal and accrued interest payable at maturity will be $25,068.  We expect to collect these client receivables in Q1 of 2013.

Although we can provide no assurances, we believe that a significant reliance on unrealized future services revenue which we anticipate will be generated from ongoing operations, as well as with our available cash and cash equivalents and working capital balances, will allow us to generate sufficient cash to satisfy capital requirements and other planned expenditures for the next twelve months. If working capital and cash flows from operations are not sufficient to fund planned expenditures, management may elect to reduce the investment in these planned expenditures, and/or raise additional capital through debt financing and/or through sales of common stock.

Anticipated Uses of Cash

We prioritized our resources in 2012 to strengthen our infrastructure, market and sell our products and services, expand product development activities and maintain capital reserves. This prioritization of resources to allowed us to complete market-ready production development of our initial industry vertical product offerings, engage in and finalize both beta testing and formal soft-launch of our products into the designated verticals.

In 2013, to support our initiative to successfully launch our SaaS product, our primary areas of investment are expected to support sales and marketing activities, and will include sales and marketing staff, advertising services and media, marketing and sales automation software and other related services. A secondary area of investment is anticipated to include client support staff, to support deployment and delivery of the SaaS product offering, and the management of ongoing client relationships.




 
We currently plan to fund these expenditures with cash flows generated from ongoing operations during this period.

We do not intend to pay dividends in the foreseeable future.

Cash Flow

Years Ended December 31, 2012 and 2011

Operating Activities. During the year ended December 31, 2012, we reported negative cash flows from operations of $351,739. This consisted of our net loss of $306,948 adjusted by the increase in accounts receivable of $51,029 which was primarily due to an increase in total revenues in 2012 over 2011. This increase in revenues and corresponding increase in accounts receivable were a direct result of two consulting services engagements initiated in Q4 of 2012. The net loss was also adjusted by a decrease in accounts payable of $19,387. The decrease in accounts payable was partially offset by an increase in credit card expenses due to costs associated with development of our products.  Depreciation and amortization and stock compensation expense increases of $7,730 and $13,347, respectively also offset our net loss.

Days Sales Outstanding (DSO) during the year ended December 31, 2012 was approximately 46 days, up from approximately 37 days during the year ended December 31, 2011.  This was a direct result of entering into services agreements which had terms of 45 days.  Payment terms for clients have historically been less than 30 days.

We reported negative cash flows from operations during the year ended December 31, 2011. Our net cash used in operating activities of $302,831 consisted of a net loss of $413,273, adjusted primarily by a decrease in total accounts receivable of $41,014 and increases in accounts payable of $57,141. The accounts receivable decrease was primarily due to a decrease in revenues as a direct result of the strategic shift of our business from a primary focus on professional services to a primary focus on development of on-demand software solutions.  The increase in accounts payable was due to increased costs associated with development of our products.  Depreciation and amortization and stock compensation expense increases of $11,179 and $11,056, respectively also offset our net loss.

Investing Activities. Net cash used in investing activities for the years ended December 31, 2012 and 2011 amounted to $188,371 and $2,932, respectively. Net cash used in investing activities for the year ended December 31, 2012 related to capitalization of software costs for the development of the SaaS product offering.  While net cash used in investing activities for the year ended December 31, 2011 resulted from a net increase in equipment during the year.

Financing Activities. Net cash provided by financing activities for years ended December 31, 2012 and 2011 amounted to $595,000 and $190,000, respectively. For the year ended December 31, 2012, net cash provided by financing activities primarily resulted from net proceeds from the issuance of common stock of $595,000. Net cash provided by financing activities during the year ending December 31, 2011 was primarily due to entering two notes payable totaling $150,000 and from net proceeds from the issuance of common stock of $40,000.

Off Balance Sheet Arrangements

We did not have any off balance sheet arrangements as of December 31, 2012.



Contractual Obligations

We lease one facility in northern California from Annette Kaufman and Michael Mirsky, co-trustees Annette Kaufman Survivor Trust and Annette Kaufman trustee, Mozart Kaufman Exemption Trust under an operating lease that we expect to expire in 2013. We do not have any debt capital lease obligations. As of December 31, 2012, the following table summarizes our contractual obligation under the foregoing lease agreement and the effect such obligation is expected to have on our liquidity and cash flow in future periods:

 
Payments Due by Period
   
Total
 
Less Than
1 Year
 
1-3
Years
 
3-5
Years
 
More Than
5 Years
Operating lease obligations
$
14,720
$
14,720
$
-
$
-
$
-

The contractual commitment amount in the table above is associated with the foregoing lease obligation that is enforceable and legally binding. Obligations under contracts that we can cancel without a significant penalty are not included in the table above.


ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.


IT EM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

TOUCHPOINT METRICS, INC.

INDEX TO THE FINANCIALS

 
Index
   
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F-1
   
FINANCIAL STATEMENTS
 
 
F-2
 
F-3
 
F-4
 
F-5
   
F-6












INDEPENDENT AUDITOR’S REPORT

To the Board of Directors and Shareholders
Touchpoint Metrics, Inc.
San Francisco, California

We have audited the accompanying statements of financial position of Touchpoint Metrics, Inc. (a California corporation) as of December 31, 2012 and 2011 and the related statements of income, retained earnings, and cash flows for the years then ended. All information included in these financial statements is the representation of the management of Touchpoint Metrics, Inc. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Touchpoint Metrics, Inc. as of December 31, 2012 and 2011 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.





DAVID L. HILLARY, JR.

David L. Hillary, Jr., CPA, CITP
Indianapolis, Indiana
February 25, 2013




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

F-1



TOUCHPOINT METRICS, INC.
BALANCE SHEETS


   
December 31,
   
2012
   
2011
Assets
         
Current assets:
         
Cash and cash equivalents
$
106,999
 
$
52,109
Accounts receivable
 
110,720
   
61,218
Accounts receivable-related party
 
1,527
   
-
Total current assets
 
219,246
   
113,327
           
Long term assets:
         
Property and equipment, net
 
152,724
   
160,454
Capitalized software development costs
 
188,371
   
-
Intangible assets, net
 
59,151
   
59,151
Other assets
 
11,622
   
15,470
Total long term assets
$
411,868
 
$
235,075
           
Total assets
$
631,114
 
$
348,402
           
Liabilities and Shareholders’ Equity
         
Current liabilities:
         
Accounts payable
$
50,866
 
$
70,253
Accrued liabilities
 
1,452
   
6,752
Total current liabilities
 
52,318
   
77,005
           
Long-term liabilities:
         
Other noncurrent liabilities, accrued interest
 
7,500
   
1,500
Notes payable
 
50,000
   
50,000
Notes payable-related party
 
100,000
   
100,000
Total long-term liabilities
 
157,500
   
151,500
Commitments and contingencies
         
Total liabilities
 
209,818
   
228,505
           
Shareholders’ equity:
         
Common stock, $0 par value, 30,000,000 shares authorized,
13,312,302 and 9,312,302 shares issued and outstanding
at December 31, 2012 and 2011, respectively
 
1,542,651
   
946,151
Accumulated deficit
 
(1,145,758)
   
(837,310)
Additional paid-in capital
 
24,403
   
11,056
Total shareholders’ equity
 
421,296
   
119,897
           
Total liabilities and shareholders’ equity
$
631,114
 
$
348,402





The accompanying notes are an integral part of these statements.
F-2



TOUCHPOINT METRICS, INC.
STATEMENTS OF OPERATIONS


   
Year Ended December 31,
   
2012
   
2011
Revenue
         
Consulting services
$
833,609
 
$
290,221
Creative and production services
 
-
   
46,980
Research
 
-
   
226,303
Products & Other
 
66,523
   
47,870
Total revenue
 
900,132
   
611,374
           
Cost of goods sold
         
Labor
 
129,534
   
88,375
Services
 
14,552
   
90,349
Products and other
 
59,827
   
63,150
Total cost of goods sold
 
203,913
   
241,874
           
Gross profit
 
696,219
   
369,500
           
Expenses
         
Salaries and wages
 
523,452
   
439,601
Contract services
 
162,206
   
89,041
Other general and administrative
 
325,184
   
254,647
Total expenses
 
1,010,842
   
783,289
           
Net operating income
 
(314,623)
   
(413,789)
Other income
 
7,675
   
516
           
Loss before income taxes
 
(306,948)
   
(413,273)
Income tax provision
 
-
   
-
           
Net loss
$
(306,948)
 
$
(413,273)
           
Net loss per share-basic and diluted
$
(0.02)
 
$
(0.08)
           
Weighted average common shares outstanding-basic and diluted
 
13,132,302
   
5,343,585












The accompanying notes are an integral part of these statements.
F-3



TOUCHPOINT METRICS, INC.
STATEMENTS OF COMMON SHAREHOLDERS’ EQUITY


         
Retained Earnings
   
 
Common Stock
 
Additional
 
(Accumulated
   
 
Shares
 
Amount
 
Paid in Capital
 
Deficit)
 
Total
 
                 
Balance, December 31, 2010
5,312,302
$
906,151
$
-
$
(424,037)
$
482,114
 
                 
Stock based compensation-stock options
       
11,056
     
11,056
 
                 
Common stock issued
4,000,000
 
40,000
         
40,000
 
                 
Net income
           
(413,273)
 
(413,273)
 
                 
Balance, December 31, 2011
9,312,302
$
946,151
$
11,056
$
(837,310)
$
119,897
 
                 
Stock based compensation-stock options
       
13,347
     
13,347
 
                 
Common stock issued
3,820,000
 
596,500
     
(1,500)
 
595,000
 
                 
Net income
           
(306,948)
 
(306,948)
 
                 
Balance, December 31, 2012
13,132,302
$
1,542,651
$
24,403
$
(1,145,758)
$
421,296





























The accompanying notes are an integral part of these statements.
F-4



TOUCHPOINT METRICS, INC.
STATEMENTS OF CASH FLOWS


   
Year Ended December 31,
   
2012
   
2011
Cash flows from operating activities:
         
Net income
$
(306,948)
 
$
(413,273)
Adjustments to reconcile net income to net cash provided by operations:
         
Depreciation and amortization
 
7,730
   
11,179
Stock compensation expense
 
13,347
   
11,056
Changes in operating assets and liabilities:
         
Accounts receivable
 
(49,502)
   
41,014
Accounts receivable-related party
 
(1,527)
   
-
Other assets
 
3,848
   
(4,132)
Accounts payable
 
(19,387)
   
57,141
Accrued liabilities
 
(5,300)
   
(7,316)
Accrued interest
 
6,000
   
1,500
Net cash used in operating activities
 
(351,739)
   
(302,831)
           
INVESTING ACTIVITIES
         
Equipment purchases
 
-
   
(2,932)
Capitalized software development costs
 
(188,371)
   
-
Net cash used in investing activities
 
(188,371)
   
(2,932)
           
FINANCING ACTIVITIES
         
Proceeds from notes payable
 
-
   
50,000
Proceeds from notes payable-related party
 
-
   
100,000
Common stock
 
596,500
   
40,000
Retained earnings
 
(1,500)
   
-
Net cash provided by financing activities
 
595,000
   
190,000
           
Increase (decrease) in cash and cash equivalents
 
54,890
   
(115,763)
Cash and cash equivalents, beginning of period
 
52,109
   
167,872
Cash and cash equivalents, end of period
$
106,999
 
$
52,109















The accompanying notes are an integral part of these statements.
F-5



TOUCHPOINT METRICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2012

Note 1:  Organization and Basis of Presentation

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

The Company maps and improves the touchpoints between organizations and their customers. Their focus assists companies who wish to improve business performance by measuring and transforming the ways they interact with customers.

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

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Note 2:  Summary of Significant Accounting Policies

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

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

Cash and Cash Equivalents

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

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

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

Investments

The Company reports marketable investments at published market or fair value with gains and losses reported in the income statements.

For investments without a readily available market, valuation is recorded at historical cost and tested for impairment as of each reporting period.


F-6



Fair Value of Financial Instruments

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

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair market hierarchy, which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The standard describes three levels based on the reliability of the inputs to determine the fair value:

Level 1, defined as inputs such as unadjusted quoted prices in active markets for identical assets or liabilities;

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

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

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

We measure property, plant and equipment, at fair value on a nonrecurring basis. No impairments on property, plant and equipment were taken during the period.

Property, Improvements, and Depreciation

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

The cost and accumulated depreciation applicable to assets retired are removed from the accounts, and the gain or loss on disposition is recognized as other income or expense. Depreciation and amortization is computed on various methods as follows:

Depreciable Asset Class
Method
Depreciable Life
Software Design & Development
Straight Line
3-Years
Organization Costs
Straight Line
3-Years
Real Property Improvements
150 DB HY
15-Years
Computer Equipment
200 DB HY
5-Years
Furniture and Fixtures
200 DB HY
7-Years
Leasehold Improvements
Straight Line
15-Years
Machinery and Equipment
200 DB HY
7-Years

Software Development Costs

Costs for the development and delivery of the SaaS technology are capitalized once planning is completed and development begins.  Capitalized costs include only direct external costs of materials and services as well as compensation and benefits for employees directly associated with the software project.  Such amounts are included in the accompanying balance sheets under the caption “capitalized software development costs.”
F-7



Intangibles

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

Other Assets

Other assets are comprised of security deposits and prepaid expenses.

Revenue Recognition

Consultation and research engagements

Revenues are traditionally derived from consultation and research engagements. Consultation and research engagements normally span a period of 45 to 120 days in duration and may be fixed price, or time and materials engagements.

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

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

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

Products

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

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

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

F-8



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

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

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

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

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

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

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

Reimbursed Expenses

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


F-9



Income Taxes

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

A full valuation allowance has been established against all net deferred tax assets as of December 31, 2012 based on estimates of recoverability. While the Company has optimistic plans for its business strategy, we determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to our ability to generate sufficient profits from our business model.

Note 3:  Recent Accounting Pronouncements

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

In August 2012, the FASB issued ASU No. 2012-03, Technical Amendments and Corrections to SEC Sections Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (“ASU 2012-03”). This update was issued in order to codify various amendments and corrections included in SEC Staff Accounting Bulletin No. 114, SEC Release 33-9250, and ASU 2010-22, Accounting for Various Topics: Technical Corrections to SEC Paragraphs. The amendments and corrections included in this update are effective upon issuance. The adoption of ASU 2012-03 did not have an impact on the Company’s consolidated financial statements.
 
In October 2012, the FASB issued ASU No. 2012-04, Technical Corrections and Improvements, (“ASU 2012-04”).  This update includes source literature amendments, guidance clarification, reference corrections and relocated guidance affecting a variety of topics in the Codification. The update also includes conforming amendments to the Codification to reflect ASC 820’s fair value measurement and disclosure requirements. The amendments in this update that will not have transition guidance are effective upon issuance. The amendments in this update that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on the Company’s consolidated financial statements.

Note 4: Property and Equipment

Property and improvements consist of:

   
2012
   
2011
Computers and hardware
$
43,029
 
$
43,029
Software
 
38,646
   
38,646
Equipment
 
2,359
   
2,359
Furniture
 
31,731
   
31,731
Leasehold improvements
 
95,608
   
95,608
Land
 
85,000
   
85,000
Land improvements
 
4,000
   
4,000
   
300,373
   
300,373
Less: accumulated depreciation
 
(147,649)
   
(139,919)
 
$
152,724
 
$
160,454

F-10



Depreciation expense for the years ended December 31, 2012 and 2011 were $7,730 and $11,179, respectively.

Note 5: Stock-Based Compensation

The Touchpoint Metrics, Inc. stock-based compensation program is designed to attract and retain high quality employees while aligning employees’ interests with the interests of the shareholders.

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

The company entered into two option commitments during 2011. The first grant date was on February 7, 2011 with an option for 300,000 shares at an exercise price of $0.35. The options carry a vesting schedule with 20% vesting on February 7, 2012 and an additional 20% vesting every six months thereafter. The optioned shares will fully vest after 36 months on February 7, 2014. The options will remain open for 10 years, expiring on February 7, 2021.

The second grant date is on December 15, 2011 with an option for 20,000 shares at an exercise price of $0.25. The options carry a vesting schedule with one-third of the total optioned shares becoming vested every 12 months. The optioned shares will fully vest after 36 months on December 15, 2014. The options will remain open for 5 years, expiring on December 15, 2016.

Stock options are valued under the fair value method of accounting using a Black-Scholes valuation model to measure stock option expense at the date of grant. All stock option grants have an exercise price equal to the fair market value of our common stock on the date of grant and have a 10-year term.

The Black-Sholes Values for the two options granted are $0.120 and $0.101and are amortized to expense over the vesting period of three years.

The weighted-average Black-Scholes fair value assumptions are as follows:

 
Option Grant #1
Option Grant #2
 
   
Expected life
10 Years
5 Years
Risk free interest rate
3.68%
3.68%
Expected volatility
40.00%
40.00%
Current Stock Price
$0.25
$0.25
Exercise Price
$0.35
$0.25
 
   
Black-Sholes Value
$0.120
$0.101

The expected life is the period over which our employees are expected to hold their options. The risk free interest rate is based on the U.S. Treasury T-Bond rate at the grant date. Volatility reflects movements in the stock price over the most recent historical period equivalent to the expected life.

The option grant #1 shares will incur a compensation expense of $36,000 to be realized over 36 months beginning with the option vesting date of February 7, 2012. Option grant #2 shares will incur a compensation expense of $2,020 over 36 months beginning with the first vesting date of December 15, 2012.

At December 31, 2012, there was $24,403 of total recognized compensation cost related to vested share-based compensation grants.

126,667 stock options were exercisable at December 31, 2012.


F-11



Note 6: Concentrations

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

Sales are concentrated among a few large clients. For the twelve months ended December 31, 2012 and December 31, 2011, the percentage of sales and the concentration is as follows:

 
12/31/12
12/31/11
Largest client
20.59%
35.82%
Second largest client
17.19%
18.33%
Third largest client
15.58%
12.15%
Next three largest clients
25.63%
25.00%
All other clients
21.01%
8.70%
 
100.00%
100.00%
 
 
During 2012, the Company entered a consulting services agreement with mfifty, which is a related party.  The President of the Company is also the owner of mfifty.  During the twelve months ended December 31, 2012, the company earned revenues of approximately $51,632 from this related party.

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

Note 7: Capitalized Software Development Costs

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

The capitalized costs are amortized on a straight line basis over the three year expected useful life of the software. $188,371 was capitalized as project development costs during the twelve months ended December 30, 2012. Amortization of software development costs will commence at the end of the project development process or when the first sales commitment is obtained.

Note 8: Intangible Assets

Intangible assets include an online media asset, Petro Portfolio, and fully amortized organization costs.  Petro Portfolio is an online media asset with a website and registered domain name (petroportfolio.com), newsletter, and a database of approximately 80,000 registered subscribers. The asset was purchased on July 16, 2007 in a stock trade with a related party. The asset had a valuation of $131,151 on the trade date. 262,032 restricted common shares valued at $0.50 per share were issued to complete the purchase.

The website and newsletter remained highly active until mid-2008. Macroeconomic events during this period created an adverse business climate, resulting in management’s decision to cease Petro Portfolio-related operations in late 2008, eliminating associated costs. Petro Portfolio remains an inactive asset at this time, and in management’s opinion, carrying costs are negligible.

The Petro Portfolio assets are periodically reviewed for indicators of impairment. Should an impairment indicator be present, a test for recoverability is conducted including 1) analysis of undiscounted future cash flows, 2) the fair market cost of recreating the assets, and 3) an analysis of costs to return the assets to their relative market position at the time operations ceased, based on management’s opinion. In the event that the recoverability tests result in values less than the asset’s carrying amount, management determines the fair value of the asset and recognizes an impairment loss as the difference between the carrying amount and its fair value.
F-12



Note 9:  Other Assets

Other assets are comprised of security deposits and prepaid expenses.

Note 10: Accounts Payable

Accounts payable consists of trade accounts payable and credit card debt.

Note 11: Long-Term Debt

The company entered into two long-term, non-convertible debt instruments during 2011.

A $100,000 CDN note was executed with Brad Holland, an 8.09% shareholder on September 16, 2011. The note is structured to incur a balloon payment of the principal and 4% APR non-compounding accrued interest. The maturity date of the note is September 16, 2014. The principal and accrued interest payable at maturity will be $112,000.

A $50,000 USD note was executed with McLellan Investment Corporation, an unrelated party, on September 7, 2011. The note is structured to incur a balloon payment of the principal and 4% APR non-compounding accrued interest. The maturity date of the note is September 7, 2014. The principal and accrued interest payable at maturity will be $56,000.

Note 12: Income Taxes

Income taxes are summarized as follows for year ended December 31, 2012:

   
2012
Current benefit
$
(306,948)
Deferred benefit
 
306,948
Net income tax (benefit) expense
$
-

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

Note 13: Net Loss per Share

Basic net income per common share is net income available to common shareholders divided by the weighted average of common shares outstanding during the period.

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

   
Year Ended December 31,
   
2012
   
2011
Net loss
$
(306,948)
 
$
(413,273)
Basic and diluted weighted average
common shares outstanding
 
13,132,302
   
5,343,585
Net loss per share
         
Basic and diluted
$
(0.02)
 
$
(0.08)

Options to purchase 320,000 shares were not included in the calculation of diluted earnings per common share because these options were out-of-the-money. Out-of-the-money options have an exercise price of $0.35.

F-13



Note 14: Stock

The Company was capitalized through the sale of 5,312,302 shares of stock totaling $907,651. There are 30,000,000 shares authorized. 4,000,000 additional restricted shares were issued for $40,000 during 2011 and 3,820,000 additional restricted shares were issued for an additional $595,000 during the first two quarters of 2012, resulting in 13,132,302 shares issued and outstanding as of December 31, 2012.

Note 15: Legal Proceedings

The Company has no known legal issues pending.

Note 16: Related Party Transactions

The Company has a related party transaction involving a significant shareholder. The nature and details of the transaction are described in Note 11. The Company also has two related party transactions with its President, the nature, description and details of the transaction are described in Note 6 and Note 17.

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

These related party transactions do not present any evidence of preferential treatment for either shareholder or the Company.

Note 17: Subsequent Events

On January 31, 2013, the Company entered into an agreement with Michael Hinshaw, President, to loan $25,000 to the Company. The loan is secured with a non-convertible Promissory Note with an interest rate set at 3.25%. The rate is what would be expected in an arm’s length transaction.

The note is structured to incur a balloon payment of the principal and non-compounding accrued interest. Interest is to begin accruing on the unpaid balance thirty (30) days from the date of the note. The maturity date of the note is April 1, 2013.  The principal and accrued interest payable at maturity will be $25,068.

Note 18: Going Concern

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















F-14
 


ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE .

There have been no disagreements on accounting and financial disclosures from January 1, 2010 through December 31, 2012 and through the date of this report. Our financial statements for the periods from January 1, 2011 through December 31, 2012, included in this report have been audited by Hillary CPA Group, Independent Registered Public Accounting Firm, 9465 Counselors Row, Suite 200, Indianapolis, Indiana 46240, telephone (317) 222-1416, as set forth in its report included in this annual report.


ITEM 9A.       CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were effective as of the end of the period covered by this report.

Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



CEO and CFO Certifications

Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently
reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2012. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework . Based on our assessment, as of December 31, 2012, our internal control over financial reporting was effective.

Changes in Internal Controls

  There were no changes in our internal control over financial reporting during the quarter ended December 31, 2012 that have affected, or are reasonably likely to affect, our internal control over financial reporting.




ITEM 9B.       OTHER INFORMATION.

None.


PART III

ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Officers and Directors

Our directors will serve until their successor is elected and qualified. Our officers are elected by the board of directors to a term of one (1) year and serve until their successor is duly elected and qualified, or until he is removed from office. The board of directors has no nominating or compensation committees.

The names, addresses, ages and positions of our officers and directors are set forth below:

Name and Address
Age
Position(s)
Michael Hinshaw
51
President, Principal Executive Officer, Treasurer,
201 Spear Street, Suite 1100
 
Principal Financial Officer, Principal Accounting
San Francisco, CA 94105
 
Officer and a member of the Board of Directors
     
Lynn Davison
49
Vice-President, Secretary
201 Spear Street, Suite 1100
   
San Francisco, CA 94105
   
     
Ashley Garnot
27
Director
201 Spear Street, Suite 1100
   
San Francisco, CA 94105
   

The people named above are expected to hold their offices/positions until the next annual meeting of our stockholders.

Background of Officers and Directors

Michael Hinshaw – President, Principal Executive Officer, Treasurer, Principal Financial Officer, Principal Accounting Officer and a director.

Since March 31, 2006, Mr. Hinshaw has been our President, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and a director. Mr. Hinshaw has served as Treasurer and Principal Accounting Officer since December 7, 2011.  Mr. Hinshaw founded The Innes Group, Inc. (now Touchpoint Metrics, Inc.) in 2001.  From 1999 until 2002, Mr. Hinshaw served as President and Chief Executive Officer of Verida Internet Corp.  Prior to its sale in 1999, Mr. Hinshaw served as President of Triad Inc.  Mr. Hinshaw holds a MFA in Design and Communication and a BFA in Graphic Design from the Academy of Art University in San Francisco.



Lynn Davison – Vice-President, Secretary

Since February 7, 2011, Ms. Davison has been our Vice-President.  Ms. Davison has served as our Secretary since February 3, 2012.  From April 2004 to February 2011, Ms. Davison worked as an independent management consultant to a range of start-up, mid-sized and Fortune 500 clients providing strategic business consulting services to improve business performance and overall growth.  From 1994 through April, 2004, Ms. Davison co-founded and served as Marketing Director of C-Change, Inc., a boutique consulting firm focused on innovative performance improvement programs for Fortune 500 companies.  Ms. Davison has a BA in economics from Whitman College in Walla Walla, Washington and is a certified Project Management Professional (PMP) by the Project Management Institute.

Ashley Garnot – Director

Since December 7, 2011, Ashley Garnot has been a member of the board of directors. Since October 2011, Ms. Garnot has been employed as a management consultant for Coronado Resources Ltd. (TSX-V: CRD), and is a member of the board of directors. Since January 2012, Ms. Garnot has been employed as a management consultant for Pacific Reach Management located in Vancouver, BC.  Pacific Research Management is private equity Investment Company.  Since December 2011, Ms. Garnot has been the sole owner of ALG Investments, a private equity Investment Company investing in private and public companies.  From September 2006 to August 2008 Ms. Garnot was employed as a management and marketing consultant for DLJ Management, located in Vancouver BC. From September 2008 through July 2009, Ms. Garnot was a property manager for Coldwell Banker Horizon Realty in Kelowna, BC. From September 2005 to June 2008, Ms. Garnot served as managing partner of Asluxe Designs Inc.  In addition to her experience as a director of public and private companies, Ms. Garnot has completed the Canadian Securities Institute’s Canadian Securities Course.  She also has a degree in fashion design and marketing from the Art Institute of Vancouver, and a Real Estate Course and Property Management diploma from Sauder School of Business.

Involvement in Certain Legal Proceedings

During the past ten years, Mr. Hinshaw, Ms. Davison and Ms. Garnot have not been the subject of the following events:

1.  
A petition under the Federal bankruptcy laws or any state insolvency law filed by or against, or a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he/she was a general partner at or within two years before the time of such filing, or any corporation or business association of which he/she was an executive officer at or within two years before the time of such filing;

2.  
Convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

3.  
The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him/her from, or otherwise limiting, the following activities;


 
 
i)
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator,  floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; or

 
ii)
Engaging in any type of business practice; or

 
iii)
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws.

 
4.
The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity;

 
5.
Found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

 
6.
Found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

 
7.
The subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

 
i)
Any Federal or State securities or commodities law or regulation; or

 
ii)
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or

 
iii)
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 
8.
Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934, as amended, (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Conflicts of Interest

There are no conflicts of interest with respect to our officers, directors and key employees.


Audit Committee Financial Expert

We do not have an audit committee financial expert. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Further, because we are only beginning our commercial operations, at the present time, we believe the services of a financial expert are not warranted.

Audit Committee and Charter

We have a separately-designated audit committee of the board.  Audit committee functions are performed by our board of directors. None of our directors are deemed independent. One of our directors also holds several officer positions. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee. A copy of the audit committee charter is filed as Exhibit 99.1 with this Form 10-K.

Code of Ethics

We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. A copy of the code of ethics is filed as Exhibit 14.1 with this Form 10-K.

Disclosure Committee and Charter

We have a disclosure committee and disclosure committee charter. Our disclosure committee is comprised of all of our officers and directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us and the accuracy, completeness and timeliness of our financial reports.  A copy of the disclosure committee charter is filed as Exhibit 99.2 with this Form 10-K.

Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 (“Exchange Act”) requires our executive officers and directors, and persons who beneficially own more than 10% of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based upon a review of information available to us and a review of the information filed with the SEC, all officers, directors and owners of 10% or more of our shares of common stock have filed all reports required by Section 16(a) of the Securities Exchange Act of 1934, as amended.



ITEM 11.        EXECUTIVE COMPENSATION.

On February 1, 2011, we entered into an employment agreement with Lynn Davison, pursuant to which she agreed to serve as our Vice President. Ms. Davison’s agreement provides for an annual base salary of $132,000. In addition, Ms. Davison is eligible for bonus compensation as established by us from time to time. On February 7, 2011, we granted Ms. Davison 10-year options, with an exercise price of $0.35 per share, to purchase 300,000 share of our common stock.  The options vest as follows:  one fifth 12 months after the grant date, and one fifth every six months thereafter until all options are fully vested.  The options remain open for ten years, expiring on February 7, 2021.

Michael Hinshaw does not have an employment agreement with the company.

The following table sets forth information with respect to compensation paid by us to our officers for the last two years.

Executive Officer Compensation Table
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
             
Change in
   
             
Pension
   
             
Value &
   
           
Non-Equity
Nonqualified
   
           
Incentive
Deferred
All
 
Name and
     
Stock
Option
Plan
Compensation
Other
 
Principal
 
Salary
Bonus
Awards
Awards [1]
Compensation
Earnings
Compensation
Totals
Position
Year
($)
($)
($)
($)
($)
($)
($)
($)
 
                 
Michael Hinshaw
2012
300,000
0
0
0
0
0
0
300,000
President
2011
300,000
0
0
0
0
0
1,500
301,500
                   
Lynn Davison
2012
132,000
20,000
0
13,347
0
0
0
165,347
Vice President
2011
121,000
0
0
26,964
0
0
0
147,964

[1]
The amounts shown reflect the aggregate grant date fair value of the option awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718™, Compensation-Stock Compensation (ASC 718). In valuing such options, the Company made certain assumptions. For a discussion of those assumptions, please see Note 5 to our Financial Statements for the Fiscal Years ended December 31, 2012 and 2011.

The following table sets forth information with respect to compensation paid by us to our directors during the last completed fiscal year ending December 31, 2012.

Director Compensation Table
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
         
Change in
   
         
Pension Value and
   
 
Fees
   
Non-Equity
Nonqualified
   
 
Earned or
   
Incentive
Deferred
All
 
 
Paid in
Stock
Option
Plan
Compensation
Other
 
 
Cash
Awards
Awards
Compensation
Earnings
Compensation
Total
Name
($)
($)
($)
($)
($)
($)
($)
 
             
Michael Hinshaw
0
0
0
0
0
0
0
Ashley Garnot
0
0
0
0
0
0
0

 
 
All compensation received by our officers and directors has been disclosed.

There are no retirement, pension, or profit sharing plans for the benefit of our officers and directors other than our stock option plan.  The stock option plan reserves 2,500,000 shares of common stock that may be issued at the discretion of the board of directors.

The following table sets forth information with respect to outstanding equity awards at December 31, 2012.

Outstanding Equity Awards at December 31, 2012
     
Equity Incentive
     
Equity Incentive
 
Number of
Number of
Plan Awards:
   
Number of
Plan Awards:
 
Securities
Securities
Securities
   
Shares
Number of
 
Underlying
Underlying
Underlying
   
Or Units of
Unearned
 
Unexercised
Unexercised
Unexercised
Option
Option
Stock
Shares,
 
Options
Options
Unearned
Exercise
Expiration
that have not
Units that
Name
Exercisable
Unexercisable
Options
Price
Date
Vested
have not vested
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
 
             
Lynn Davison
120,000
180,000
0
$0.35 [1]
2/7/2021
180,000
0

[1]
The option exercise price is set at $0.35 per share with a provision to reset if subsequent common stock offerings are made at a lower stock price.  There was a subsequent private placement at $0.01 per share, lowering the option exercise price from $0.35 to $0.01.

The following table sets forth the information with respect to option exercises and stock vested for the year ended December 31, 2011.

Option Exercises and Stock Vested for the year ended December 31, 2012
 
Number of
 
Number of
Value
 
Shares Acquired
Value Realized
Shares Acquired
Realized on
 
On Exercise
On Exercise
On Vesting
Vesting
Name
(#)
($)
(#)
($)
(a)
(b)
(c)
(d)
(e)
 
       
Lynn Davison
0
0
0
0

In addition, in 2012, we granted Kris Clark an option to acquire up to 20,000 shares of common stock at an exercise price of $0.25 per share with one-third of the shares vesting December 15 of each year commencing 2012.

Indemnification

Under our Articles of Incorporation and Bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his or her position, if he or she acted in good faith and in a manner he or she reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he or she is to be indemnified, we must indemnify him or her against all expenses incurred, including attorney’s fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of California.


Regarding indemnification for liabilities arising under the Securities Act of 1933, as amended, which may be permitted to directors or officers under California law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against policy, as expressed in the Act and is, therefore, unenforceable.


ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth, as of the date of this offering, the total number of shares owned beneficially by each of our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares.  Shares of common stock subject to options and warrants exercisable within 60 days from the date of this table are deemed to be outstanding and beneficially owned for purposes of computing the percentage ownership of such person but are not treated as outstanding for purposes of computing the percentage ownership of others.

The information in this table reflects “beneficial ownership” as defined in Rule 13d-3 of the Exchange Act. To our knowledge, and unless otherwise indicated, the stockholders listed below have direct ownership of their shares and possess sole voting and dispositive power with respect to the shares, subject to community property laws where applicable.

 
Shares of Common Stock
 
Beneficially Owned
Name and Address of Beneficial Owner
Number
%
Michael Hinshaw
6,000,000
45.69%
201 Spear Street, Suite 1100
   
San Francisco, CA 94105
   
 
   
Lynn Davison
120,000 [1]
0.91%
201 Spear Street, Suite 1100
   
San Francisco, CA 94105
   
 
   
Ashley Garnot
850,000 [2]
6.47%
201 Spear Street, Suite 1100
   
San Francisco, CA 94105
   
 
   
All officers and directors as a group
6,970,000
53.08%
(3 individuals)
   
 
   
International Resource Management Corp.
1,962,302
14.94%
2901-1050 Burrard Street
   
Vancouver, British Columbia V6Z 2S3
   

[1]
Comprised of shares of common stock issuable upon the exercise of currently exercisable options.

[2]
Comprised of 500,000 shares of common stock held in the name of ALG Investments Ltd., which is owned and controlled by Ms. Garnot; 250,000 shares owned by Ms. Garnot and her husband, Wade Garnot; and, 100,000 shares held in Ms. Garnot’s maiden name, Ashley Guidi.


Securities Authorized for Issuance Under Equity Compensation Plans

     
Number of securities
 
Number of securities to
Weighted-average
remaining available for
 
be issued upon exercise
exercise price of
Future issuance under
 
of outstanding options,
outstanding options,
equity compensation plans
 
warrants and rights
warrants and rights
(excluding securities
Plan category
(a)
(b)
in column (a)) (c)
Equity compensation plans
     
approved by security holders
320,000
$0.34375
2,180,000
 
     
Equity compensation plans
     
not approved by securities
     
holders
None
None
None
 
     
Total
320,000
$0.34375
2,180,000


ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

On April 14, 2006, we issued 3,000,000 restricted shares of common stock to Michael Hinshaw, our president, in consideration of services valued at $1,500.00.  On December 6, 2011, we issued 3,000,000 restricted shares of common stock to Mr. Hinshaw, in consideration of $30,000.00. The shares were issued pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended.  Mr. Hinshaw was furnished with all of the information that is contained in a registration statement and is a sophisticated investor.  No commission was paid to anyone in connection with the sale of shares to Mr. Hinshaw.

On July 16, 2007, we issued 262,302 restricted shares of common stock to  International Resource Management Corp. in consideration of certain assets (a media property including the domain name petroportfolio.com) owned by International Resource Management Corp.  We valued the assets at $131,151.00. The shares of common stock were issued pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended, in that the transactions took place outside the United States of America with non-US persons.

On July 30, 2007, the company effected a transfer of 100,000 restricted shares of common stock from an existing shareholder to Ashley Guidi, now known as Ashley Garnot, in consideration of $50,000.00 to the existing shareholder.  The shares of common stock were issued pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended, in that the transactions took place outside the United States of America with non-US persons.

On September 16, 2011, we executed a $100,000 CDN non-convertible note with Brad Holland, an 8.09% shareholder.  The note is structured to incur a balloon payment of the principal and 4% APR non-compounding accrued interest. The maturity date of the note is September 16, 2014. The principal and accrued interest payable at maturity will be $112,000.



 
On December 6, 2011, we issued 500,000 restricted shares of common stock to ALG Investments Ltd., a corporation owned and controlled by Ashley Garnot, in consideration of $5,000.00.  The shares of common stock were issued pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended, in that the transactions took place outside the United States of America with non-US persons.

On January 4, 2012, we issued 250,000 restricted shares of common stock to Ashley Garnot and her husband Wade, in consideration of $62,500.00.  The shares of common stock were issued pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended, in that the transactions took place outside the United States of America with non-US persons.

On March 2, 2012 we entered into an agreement with mfifty, a company owned and controlled by Michael Hinshaw, our president, wherein we agreed to supply certain services to mfifty in consideration of the payment of fees for our services.  The nature of services we expect to supply include consulting, creative, project management and production services.  The nature and amounts of services as well as the terms on which any such services would be provided will be negotiated and finalized through a signed services agreement and statement of work.  We have provided the following services to date under the agreement: project management, creative and consulting services.  The total approximate dollar amount of these services provided to mfifty is $37,840.

On January 31, 2013, we executed a $25,000 non-convertible note with Michael Hinshaw, President.  The note is structured to incur a balloon payment of the principal and 3.25% APR non-compounding accrued interest. Interest is to begin accruing on the unpaid balance thirty (30) days from the date of the note. The maturity date of the note is April 1, 2013.  The principal and accrued interest payable at maturity will be $25,068.

Our office in Vancouver, British Columbia is located at 2901-1050 Burrard Street, V6Z 2S3 (Canada), and is made available to us for no charge on a month-to-month basis under a verbal contract with IREMCO. IREMCO is a controlling shareholder of Touchpoint Metrics.


ITEM 14.        PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(1)        Audit Fees

The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for our audit of annual financial statements and review of financial statements included in our Form 10-Qs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:

2012
$
14,090
Hillary CPA Group
2011
$
8,700
Hillary CPA Group

(2)        Audit-Related Fees

The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:


 
2012
$
0
Hillary CPA Group
2011
$
0
Hillary CPA Group

(3)        Tax Fees

The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:

2012
$
750
Hillary CPA Group
2011
$
750
Hillary CPA Group

(4)        All Other Fees

The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:

2012
$
0
Hillary CPA Group
2011
$
1,629
Hillary CPA Group

(5)         Our audit committee’s pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.

(6)         The percentage of hours expended on the principal accountant’s engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full time, permanent employees was 50%.


PART IV

ITEM 15.        EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

   
Incorporated by reference
Filed
Exhibit
Document Description
Form
Date
Number
herewith
 
         
3.1
Articles of Incorporation (12/14/2001).
S-1
4/25/12
3.1
 
 
         
3.2
Amended Articles of Incorporation (4/08/2006).
S-1
4/25/12
3.2
 
 
         
3.3
Amended Articles of Incorporation (10/17/2011).
S-1
4/25/12
3.3
 
 
         
3.4
Amended and Restated Bylaws.
S-1
4/25/12
3.4
 
 
         
4.1
Specimen Stock Certificate.
S-1
4/25/12
4.1
 
 
         
10.1
Lease Agreement for San Anselmo office.
S-1
4/25/12
10.1
 


 

10.2
Lease Agreement for North Carolina office.
S-1
4/25/12
10.2
 
 
         
10.3
Lease Agreement for San Francisco office.
S-1
4/25/12
10.3
 
 
         
10.4
Deed covering Lake County Real Property.
S-1
4/25/12
10.4
 
 
         
10.5
Stock Option Plan.
S-1
4/25/12
10.5
 
 
         
10.6
Promissory Note – McLellan Investment Corporation.
S-1/A-2
7/24/12
10.6
 
 
         
10.7
Promissory Note – Brad Holland.
S-1/A-2
7/24/12
10.7
 
 
         
10.8
Employment Agreement – Lynn Davison.
S-1/A-3
9/12/12
10.8
 
 
         
10.9
Services Agreement with mfifty dated March 2, 2012.
S-1/A-3
9/12/12
10.9
 
           
10.10
Letter of Agreement with TAG Oil, Ltd. dated February 1, 2010.
S-1/A-4
10/16/12
10.1
 
 
         
10.11
Letter of Agreement TAG Oil, Ltd. with dated September 1, 2010.
S-1/A-4
10/16/12
10.2
 
 
         
10.12
Letter of Agreement with Infinitee dated May 26, 2011.
S-1/A-4
10/16/12
10.3
 
 
         
10.13
Letter of Agreement with Dolce Vita Homes LP dated May 31, 2011.
S-1/A-4
10/16/12
10.4
 
 
         
10.14
Letter of Agreement with Labrador Technology, Inc. dated June 3, 2011.
S-1/A-4
10/16/12
10.5
 
           
10.15
Letter of Agreement with Infinitee dated July 15, 2011.
S-1/A-4
10/16/12
10.6
 
 
         
10.16
Letter of Agreement with Brinson Patrick Securities dated October 27, 2011.
S-1/A-4
10/16/12
10.7
 
 
         
10.17
Letter of Agreement with Labrador Technology, Inc. dated November 22, 2011.
S-1/A-4
10/16/12
10.8
 
 
         
10.18
Letter of Agreement with Brinson Patrick Securities dated February 1, 2012.
S-1/A-4
10/16/12
10.9
 
 
         
10.19
Statement of Work for mfifty dated March 2, 2012.
S-1/A-4
10/16/12
10.10
 
 
         
10.20
Letter of Agreement with Danone Trading B.V. dated April 17, 2012.
S-1/A-5
11/05/12
10.11
 
 
         
           



10.21
Letter of Agreement and Addendum to Proposal with Danone Trading B.V. dated April 25, 2012.
S-1/A-4
10/16/12
10.12
 
 
         
10.22
Consulting Agreement with California Physicians’ Service d/b/a Blue Shield of California dated August 30, 2012.
     
X
 
         
10.23
Statement of Work for MBO Partners, Inc. dated October 29, 2012.
     
X
 
         
14.1
Code of Ethics.
     
X
 
         
31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
X
 
         
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
X
 
         
99.1
Audit Committee Charter.
     
X
 
         
99.2
Disclosure Committee Charter.
     
X
 
         
101.INS
XBRL Instance Document.
     
X
 
         
101.SCH
XBRL Taxonomy Extension – Schema.
     
X
 
         
101.CAL
XBRL Taxonomy Extension – Calculations.
     
X
 
         
101.DEF
XBRL Taxonomy Extension – Definitions.
     
X
 
         
101.LAB
XBRL Taxonomy Extension – Labels.
     
X
 
         
101.PRE
XBRL Taxonomy Extension – Presentation.
     
X










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 has been signed on its behalf by the undersigned, thereunto duly authorized on this 27 th day of March, 2013.

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

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

Signature
Title
Date
     
MICHAEL HINSHAW
President, Principal Executive Officer,
March 27, 2013
Michael Hinshaw
Treasurer, Principal Financial Officer, Principal Accounting Officer and a Director
 
     
ASHLEY GARNOT
Director
March 27, 2013
Ashley Garnot
   


















 

EXHIBIT INDEX

   
Incorporated by reference
Filed
Exhibit
Document Description
Form
Date
Number
herewith
 
         
3.1
Articles of Incorporation (12/14/2001).
S-1
4/25/12
3.1
 
 
         
3.2
Amended Articles of Incorporation (4/08/2006).
S-1
4/25/12
3.2
 
 
         
3.3
Amended Articles of Incorporation (10/17/2011).
S-1
4/25/12
3.3
 
 
         
3.4
Amended and Restated Bylaws.
S-1
4/25/12
3.4
 
 
         
4.1
Specimen Stock Certificate.
S-1
4/25/12
4.1
 
 
         
10.1
Lease Agreement for San Anselmo office.
S-1
4/25/12
10.1
 
 
         
10.2
Lease Agreement for North Carolina office.
S-1
4/25/12
10.2
 
 
         
10.3
Lease Agreement for San Francisco office.
S-1
4/25/12
10.3
 
 
         
10.4
Deed covering Lake County Real Property.
S-1
4/25/12
10.4
 
 
         
10.5
Stock Option Plan.
S-1
4/25/12
10.5
 
 
         
10.6
Promissory Note – McLellan Investment Corporation.
S-1/A-2
7/24/12
10.6
 
 
         
10.7
Promissory Note – Brad Holland.
S-1/A-2
7/24/12
10.7
 
 
         
10.8
Employment Agreement – Lynn Davison.
S-1/A-3
9/12/12
10.8
 
 
         
10.9
Services Agreement with mfifty dated March 2, 2012.
S-1/A-3
9/12/12
10.9
 
 
         
10.10
Letter of Agreement with TAG Oil, Ltd. dated February 1, 2010.
S-1/A-4
10/16/12
10.1
 
 
         
10.11
Letter of Agreement TAG Oil, Ltd. with dated September 1, 2010.
S-1/A-4
10/16/12
10.2
 
 
         
10.12
Letter of Agreement with Infinitee dated May 26, 2011.
S-1/A-4
10/16/12
10.3
 
 
         
10.13
Letter of Agreement with Dolce Vita Homes LP dated May 31, 2011.
S-1/A-4
10/16/12
10.4
 
 
         
10.14
Letter of Agreement with Labrador Technology, Inc. dated June 3, 2011.
S-1/A-4
10/16/12
10.5
 
 
         
10.15
Letter of Agreement with Infinitee dated July 15, 2011.
S-1/A-4
10/16/12
10.6
 


 
         
10.16
Letter of Agreement with Brinson Patrick Securities dated October 27, 2011.
S-1/A-4
10/16/12
10.7
 
 
         
10.17
Letter of Agreement with Labrador Technology, Inc. dated November 22, 2011.
S-1/A-4
10/16/12
10.8
 
 
         
10.18
Letter of Agreement with Brinson Patrick Securities dated February 1, 2012.
S-1/A-4
10/16/12
10.9
 
 
         
10.19
Statement of Work for mfifty dated March 2, 2012.
S-1/A-4
10/16/12
10.10
 
 
         
10.20
Letter of Agreement with Danone Trading B.V. dated April 17, 2012.
S-1/A-5
11/05/12
10.11
 
 
         
10.21
Letter of Agreement and Addendum to Proposal with Danone Trading B.V. dated April 25, 2012.
S-1/A-4
10/16/12
10.12
 
 
         
10.22
Consulting Agreement with California Physicians’ Service d/b/a Blue Shield of California dated August 30, 2012.
     
X
 
         
10.23
Statement of Work for MBO Partners, Inc. dated October 29, 2012.
     
X
 
         
14.1
Code of Ethics.
     
X
 
         
31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
X
 
         
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
X
 
         
99.1
Audit Committee Charter.
     
X
 
         
99.2
Disclosure Committee Charter.
     
X
 
         
101.INS
XBRL Instance Document.
     
X
 
         
101.SCH
XBRL Taxonomy Extension – Schema.
     
X
 
         
101.CAL
XBRL Taxonomy Extension – Calculations.
     
X
 
         
101.DEF
XBRL Taxonomy Extension – Definitions.
     
X
 
         
101.LAB
XBRL Taxonomy Extension – Labels.
     
X
 
         
101.PRE
XBRL Taxonomy Extension – Presentation.
     
X

 



 
-52-
 


 
MCorp Consulting                                                                         Blue Shield of California
Contract No.  C123041
 

Exhibit 10.22
 
CONSULTING AGREEMENT
 

THIS CONSULTING AGREEMENT (the “Agreement”) is made, entered into and effective as of August 30, 2012 (the “Effective Date”) by and between Touchpoint Metrics, Inc d/b/a MCorp Consulting , located at 251 Sir Francis Drake Blvd, San Anselmo, CA 94960 (“Consultant”) and California Physicians’ Service d/b/a Blue Shield of California , a California not for profit mutual benefit corporation, located at 50 Beale Street, San Francisco, California  94105 (“BSC”).  BSC may be obtaining the services described in this Agreement on behalf of its affiliates and subsidiaries, including without limitation, Blue Shield of California Life & Health Insurance Company (“BSL”).  BSC is a health care service plan licensed under the Knox-Keene Act and regulated by the California Department of Managed Health Care.  BSL is licensed as a life and disability insurance company pursuant to the California Insurance Code and is regulated by the California Department of Insurance. References to specific laws or regulatory agencies in this Agreement may be applicable only to BSC, or only to its affiliates or subsidiaries.

WHEREAS , BSC does not have the expertise to do the specific services it needs and therefore desires to have Consultant provide BSC with the consulting services set forth below (the “Services”); and

WHEREAS , the Consultant has the knowledge, experience, expertise and ability to provide the Services and has provided such services to other clients over a lengthy period of time; and
 
WHEREAS , the parties desire to enter into an agreement concerning the provision of the Services.
 
NOW, THEREFORE , in consideration of the promises and the mutual covenants contained herein and for other good and valuable consideration, the parties hereto agree as follows:
 

1.           Services
 
The Consultant will provide to BSC the Services, which includes any related Deliverables, as is more fully set forth in the Statement of Work attached hereto as Exhibit A (the “SOW”).  From time to time BSC may desire to obtain, and Consultant may desire to perform, additional Services, including related Deliverables, pursuant to a new SOW.  In such event the initial SOW shall be designated Exhibit A-1 and each new additional SOW shall be consecutively numbered (e.g., Exhibit A-2, A-3, A-4, etc.).  All additional SOWs shall at a minimum set forth a description of the Services to be provided and the fees to be paid in consideration of such Services, and shall only become effective upon execution by Consultant and an authorized representative of BSC.  Upon mutual execution, such new SOW shall be deemed attached to this Agreement and incorporated herein by reference.

2.           Compensation, Billing Terms, and Procedures
 
The Consultant will be paid as set forth on Exhibit A .
 
3.           Taxpayer Identification Number
 
Prior to commencing the Services, Consultant shall provide BSC with a duly executed IRS Form W-9 as set forth on Exhibit B and provide Consultant’s Employer Identification Number (“EIN”) or Social Security Number (“SSN”) to BSC.
 
4.           Term and Termination
 
This Agreement shall be effective as of the Effective Date and shall terminate, unless terminated as hereinafter provided, upon completion of the Services by Consultant.  BSC may, at any time, without cause, terminate this Agreement or any SOW by giving the Consultant five (5) business days’ prior written notice.  Consultant shall stop performing Services on the date specified in the termination notice and deliver to BSC all Deliverables completed or in progress up to the date of termination.  In the event BSC  terminates this Agreement or any SOW without cause BSC will only be obligated to pay Consultant for the Services actually performed, and allowed reimbursable expenses incurred, through the date of termination.  In the event of a breach by either party, the other party shall give written notice to the breaching party of its intent to terminate this Agreement.  The breaching party shall then have ten (10) days after receipt of the notice to cure the breach.  If the breaching party does not cure the breach within said ten (10) day period, this Agreement may be terminated by the non-breaching party.  If BSC terminates the Agreement for a breach, Consultant understands and agrees BSC will pay no further compensation to the Consultant for any work performed by Consultant after Consultant’s receipt of the termination notice.
 
Notwithstanding the foregoing, if Consultant breaches the provisions of Sections 6 or 7 hereof, then in order to protect its confidential and proprietary information, including its trade secrets, BSC shall be entitled to immediately obtain injunctive relief, Consultant will be responsible for any damages BSC suffers as a result of the breach and the Agreement may be immediately terminated by BSC.
 
Upon notice of termination of this Agreement or any SOW, Consultant shall cooperate with BSC to develop as promptly as reasonable a comprehensive plan for transferring the Services back to BSC or to any new consultant designated by BSC.  Consultant shall assist BSC in transferring the Services in an expeditious manner in order to minimize the possibility of discontinuity or disruption to BSC. As part of the transfer of the Services, Consultant shall provide adequate information on the Services environment to allow BSC or any new consultant to duplicate such environment and the Services.
 
5.           Licenses and Permits
 
Consultant represents and warrants that Consultant has and will maintain any and all licenses and permits required to perform the Services while Consultant serves as an independent contractor to BSC.
 


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MCorp Consulting                                                                                                       Blue Shield of California
Contract No. C123041
 


 
6.           Ownership of Materials
 
Any and all information and material provided to Consultant by BSC, or anyone acting for or on behalf of BSC, will remain the sole property of BSC and any such information and material is provided to Consultant solely for the purpose set forth in this Agreement.  Such information shall be considered BSC’s Confidential Information as provided for in Section 7 of this Agreement.
 
Consultant agrees all work product and the Deliverables shall be owned by and be the property of BSC and BSC shall have the exclusive ownership of all such Deliverables and work and shall exclusively own all United States and international copyrights, patents, trade secrets, trade marks and all other intellectual property rights in the Deliverables and work.  Consultant assigns, and upon creation of each element of each piece of work or Deliverable automatically assigns to BSC, its successors and assigns, all right, title and interest in and to the work and Deliverable and ownership of all United States and international copyrights, patents, trade secrets, trade marks and all other intellectual property rights in each element of each piece of the Deliverable or work.  From time to time, upon BSC’s request, Consultant and/or Consultant’s personnel shall confirm such assignments by execution and delivery of such assignments, confirmations of assignments, or other written instruments as BSC may request.  BSC and its successors and assigns shall have the right to obtain and hold in its own name all copyright registrations, patents, trade secrets, trade marks and other evidence of rights that may be available for the Deliverables or work and any portion(s) thereof.  All of the Deliverables and work, whether completed or not, will be promptly given to BSC upon the termination or expiration of this Agreement or upon BSC’s request and Consultant shall not use or retain any copies of the Deliverables and work.
 
7.           Confidential Information
 
Consultant and Consultant’s agents and representatives agree to be bound by Exhibit C to this Agreement, which is attached hereto and incorporated by reference herein.  Consultant shall not remove any BSC Confidential Information or other BSC materials from BSC’s premises without the written consent of BSC.  Upon receiving such consent, the Consultant shall provide to BSC a written list specifically setting forth what BSC Confidential Information or materials Consultant is removing from the BSC premises.  All such Confidential Information and materials shall be returned to BSC, upon BSC’s request or as is provided for in Exhibit C .  Consultant agrees that information provided by BSC, whether Confidential Information or not, shall not be transmitted or stored outside the United States of America without BSC’s prior written consent.  Consultant further agrees that the terms and conditions of the Agreement are considered Confidential Information and are governed by the provisions set forth in this Section 7.
 
8.           Examination of Records
 
BSC and any governmental officials entitled to such access by law may at any time during the term of this Agreement and for one (1) year after the termination of this Agreement, upon reasonable notice, examine the Consultant’s records pertaining to the Services.
 
9.           Indemnification
 
Consultant will be solely and entirely responsible for Consultant’s actions and the actions of Consultant’s agents, employees, representatives and subcontractors.  Consultant agrees to fully indemnify, defend and hold harmless (collectively “Indemnify”) BSC (including for purposes of this Section 9 BSC’s directors, officers, employees, representatives and agents) from and against any losses, actions, liabilities, damages, claims, demands, obligations, costs or expenses (including reasonable attorneys’ fees and costs) (collectively, “Losses”) arising from the (i) acts or omissions of Consultant or any of Consultant’s agents, employees, representatives or subcontractors; or (ii) claims made by the Consultant’s agents, employees, representatives or subcontractors.  Consultant represents and warrants (i) that all Deliverables and work developed for or made available to BSC (other than materials owned by BSC) is original to Consultant or has been provided to Consultant under licenses or approvals from the owners or licensees of such Deliverable or work; (ii) that all royalties and costs arising from patents, trademarks, service-marks, licenses and copyrights in any way involved in the Services or Deliverables or work (other than materials owned by BSC) have been paid by Consultant and whenever Consultant is required or desires to use any such design, device, material or process, Consultant shall have obtained all rights to use it as well as the right for BSC to use it; and (iii) that neither the Deliverables or work nor any of their elements, nor the use thereof, does or will violate or infringe upon any patent, copyright, trade secret, or other property right of any person.  Consultant will Indemnify BSC from and against any and all Losses arising from or in connection with any claim that any Deliverable or work developed by Consultant hereunder infringes, or is alleged to infringe, a patent, a copyright or a trade secret, or other property rights of any person.  If any such Deliverable or work is, or in Consultant’s opinion is likely to be, held to constitute an infringing product, Consultant shall at Consultant’s expense and option immediately either: (i) procure the right for BSC to continue using it, (ii) replace it with a non-infringing equivalent, or (iii) modify it to make it non-infringing.  During the pendency of any claim against Consultant or BSC with respect to an infringement claim, BSC may withhold compensation associated with the claim.  BSC shall have the right to select the counsel who will provide the indemnification defense, subject to Consultant’s approval, which shall not be unreasonably withheld.  Should Consultant fail to furnish a defense or the defense is clearly inadequate or insufficient, as determined by BSC, BSC may assume its own defense and Consultant shall reimburse, on a monthly basis, BSC for this defense.
 
10.         Independent Contractor
 
The Consultant is an independent contractor and nothing herein shall be construed to the contrary.  Consultant shall not assume or create any obligations or responsibilities express or implied, on behalf of or in the name of BSC, or bind BSC in any manner or thing whatsoever without BSC’s written consent.  The Consultant will use Consultant’s own tools and instruments in providing the Services.  Consultant will supply all necessary labor to render Services under this Agreement and may use subcontractors in doing so.  Consultant’s execution of any subcontracts, including subcontracts approved by BSC, will not relieve, waive or diminish any obligation Consultant may have to BSC under this Agreement
 


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MCorp Consulting                                                                                                          Blue Shield of California
Contract No. C123041
 


 
and  Consultant shall be responsible and liable for all acts of its subcontractors, their employees or agents.   Consultant shall be solely responsible for the direction and control of Consultant’s agents, employees, representatives and subcontractors, including decisions regarding hiring, firing, supervision, assignment and the setting of wages and working conditions.  BSC shall neither have nor exercise disciplinary control or authority over Consultant or Consultant’s agents, employees, representatives or subcontractors.  No agent, employee, representative or subcontractor of Consultant shall be or be deemed to be the employee, agent, representative or subcontractor of BSC.  None of the employer-paid benefits provided by BSC to its own employees, including but not limited to workers’ compensation insurance and unemployment insurance, are available from BSC to Consultant or to Consultant’s employees, agents, representatives or subcontractors.  Consultant agrees to provide workers’ compensation insurance for any person utilized by Consultant to perform services under this Agreement and to pay all applicable social security taxes, unemployment compensation taxes, income taxes and other employer taxes and contributions required by any federal, state or local law with respect to Consultant or to persons utilized by Consultant to perform services under this Agreement.
 
11.         Tax Reporting and Filing
 
For all purposes, including but not limited to the Federal Insurance Contributions Act, the Social Security Act, the Federal Unemployment Tax Act, Federal income tax withholding requirements, California Personal Income Tax Withholding, California Unemployment taxes, California Disability Insurance, and all other federal, state and local laws, rules and regulations, Consultant (and Consultant’s respective employees, agents, representatives and subcontractors, if any) shall be treated as an independent contractor consultant and not as a BSC employee.
 
Consultant acknowledges and agrees that Consultant shall be responsible for filing all tax returns, tax declarations, and tax schedules, and for the payment of all taxes required, when due, with respect to any and all compensation earned by Consultant under this Agreement.  BSC will not withhold any employment taxes from compensation it pays Consultant.  Rather, BSC will report the amount it pays Consultant on IRS Forms 1099, to the extent required to do so under applicable Internal Revenue Code provisions and state or local law.
 
12.         Performing Services for Others
 
BSC agrees that Consultant may perform services for others, so long as the performance of those services does not interfere with the performance or completion of any Services. It is expressly understood and agreed that this Agreement does not grant to Consultant any exclusive rights to do business with BSC and that BSC may contract with other suppliers for the procurement of comparable services.  BSC makes no guarantee or commitment for any minimum or maximum amount of Services to be purchased under this Agreement.
 
13.         Insurance
 
Consultant shall maintain the following insurance coverage, and is also responsible for its Subcontractors maintaining sufficient limits of the same insurance coverage.
 
A.     Workers’ Compensation and Employers’ Liability:
 
Workers’ Compensation insurance or self-insurance indicating compliance with any applicable labor codes, acts, laws or statutes, state or federal, where Consultant performs Work.
 
Employers’ Liability insurance shall not be less than $1,000,000 for injury or death each accident.
 
B.     Commercial General Liability:
 
Coverage shall be at least as broad as the Insurance Services Office (ISO) Commercial General Liability Coverage “occurrence” form, with no coverage deletions.
 
The limit shall not be less than $1,000,000 each occurrence and $2,000,000 aggregate (if any) for bodily injury, property damage and personal injury.
 
Coverage shall:
 
 
i)
By “Additional Insured” endorsement add as insureds BSC, its affiliates, subsidiaries, and parent company, and BSC’s officers, managers, directors, agents and employees with respect to liability arising out of or connected with the Work performed by or for the Consultant.  (ISO Form CG2010 or equivalent is preferred.)  In the event the Commercial General Liability policy includes a “blanket endorsement by contract,” the following language added to the certificate of insurance will satisfy BSC’s additional insured requirement:  “BSC, its affiliates, subsidiaries, and parent company, and BSC’s officers, managers, directors, agents and employees with respect to liability arising out of Work performed by or for the Consultant are additional insureds under a blanket endorsement.”
 
 
ii)
Be endorsed to specify that the Consultant’s insurance is primary and that any insurance or self-insurance maintained by BSC shall not contribute with it.
 
C.    Business Auto:
 
Coverage shall be at least as broad as the ISO Business Auto Coverage form covering Automobile Liability, code 1 “any auto”.
 
The limit shall not be less than $1,000,000 each accident for bodily injury and property damage.
 
D.    Additional Insurance Provisions:
 
Before commencing performance of Work, Consultant shall furnish BSC with certificates of insurance and endorsements of all required insurance for Consultant.  The documentation must be signed by a person authorized by that insurer to bind coverage on its behalf.  Consultant shall provide immediate notice to BSC if any of the above described policies receive notice of cancellation or nonrenewal from its insurer.  All documentation shall be submitted to:
 
Blue Shield of California
Procurement
50 Beale Street
San Francisco, CA 94105



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MCorp Consulting                                                                                                 Blue Shield of California
Contract No. C123041
 


14.         Force Majeure
 
Neither party shall be liable, and its performance shall be excused, for any delays resulting from circumstances or causes beyond its reasonable control, including without limitation, fire or other casualty, act of God, strike or labor dispute, war, sabotage, terrorism, acts of aggression or other violence provided such party shall have used its commercially reasonable efforts to mitigate its effects and has given prompt written notice to the other party. The time for the performance shall be extended for the period of delay or inability to perform due to such occurrences up to a period of five days at which time the party unaffected by the Force Majeure event may immediately terminate this Agreement.
 
15.         Compliance with Laws and BSC’s Policies and Procedures
 
Consultant will comply with all applicable laws, rules and regulations while providing the Services and will comply with the applicable policies and procedures of BSC.
 
16.         Representations and Warranties
 
A.  Consultant represents and warrants (i) that it has full power and authority to provide the Services and Deliverables to BSC and to grant BSC the rights granted herein and (ii) that all Services, including creation of all Deliverables, will be performed within the United States of America.
 
B.  Consultant represents and warrants that:
 
(i) It will perform the Services on a professional best efforts basis and that the findings, recommendations and Deliverables provided or set forth in the Services, as well as any other materials provided to BSC, will reflect Consultant’s best professional judgment based on the information available to Consultant.
 
(ii) Its personnel assigned to perform Services under this Agreement and any SOW have the necessary qualifications, competence, and experience required to provide the Services and the Deliverables.  If BSC, at its sole discretion, is not satisfied with the performance of any Consultant personnel, BSC shall notify Consultant and Consultant shall promptly furnish replacement personnel.
 
(iii) All materials, software and equipment supplied to BSC, if any, and any associated workmanship, will be free from errors, faults, and defects and in conformance with the requirements of this Agreement and any SOW for a period of twelve (12) months following completion of the Services.  If any longer warranty is specified for any materials, software, equipment or workmanship under any SOW, the longer warranty period will govern.  Consultant will ensure that all materials, software and equipment that carry a manufacturer’s warranty are registered with the manufacturer in BSC’s name.
 
(iv) Upon notice from BSC, Consultant will promptly remedy any non-conformance with the warranties set forth in this Section 16.B. within a thirty (30) day cure period.  In the event such breach is not remedied within the applicable cure period, Consultant will, upon BSC’s request and without limiting any other remedies BSC may have, refund all amounts paid by BSC related to the non-conforming Services and/or Deliverables and reimburse BSC for additional costs BSC incurs related to the provision of replacement services and/or deliverables.  Consultant will be allowed only one cure period for the same or similar breach.
 
17.         Change Control and Escalation.
 
Any changes to the Services, Deliverables or fees under an SOW must be submitted in writing by the party requesting such change to the other party (a “Change Request”).  For Change Requests submitted by BSC, Consultant shall notify BSC in writing of any cost, functionality and schedule impacts within two (2) business days.  If Consultant and BSC agree to approve a Change Request, the parties shall enter into a mutually executed amendment to the respective SOW, which identifies all changes to the terms set forth in such SOW.  The terms set forth in the respective SOW shall remain in place until such time as an amendment reflecting the proposed change has been signed by an authorized representative of each party.
 
If the parties are unable to agree on any change, or if the parties otherwise have a dispute under this Agreement or any SOW, either party may escalate the matter in accordance with the levels of escalation described below.  At each escalation level the parties will use good faith efforts, for a period of up to five (5) business days, to resolve the dispute.
 
 
For BSC
For Consultant
Level 1:
Lee Backston
Lynn Davison
Level 2:
Kathy Swenson
Michael Hinshaw

18.         Miscellaneous
 
A.     Assignment
 
This Agreement may not be voluntarily or by operation of law assigned or transferred in whole or part, or in any other manner transferred by the Consultant without the prior written consent of BSC. Any attempt to assign or transfer this Agreement other than in conformance with this Section shall be of no effect and considered null and void.
 
B.     Amendments
 
No change, amendment or modification of this Agreement, including any SOWs attached hereto, shall be valid unless the same is in writing and signed by the Consultant and an authorized representative of BSC.
 
C.     Waiver
 
It is understood and agreed that no failure or delay by either party in exercising any right, power or privilege hereunder in any one or more instances or to insist on strict compliance with the performance of this Agreement or to take advantage of any respective rights shall operate as a waiver thereof or the relinquishment of such rights in other instances but the same shall continue and remain in full force and effect nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder.
 
D.     Severability
 
If any provision of this Agreement is deemed to be invalid or unenforceable by a court of competent jurisdiction, the same shall be deemed severable from the remainder of this Agreement and the parties agree to renegotiate such provision in good faith, in order to maintain the economic
 


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MCorp Consulting                                                                                                 Blue Shield of California
Contract No. C123041
 


 
position enjoyed by each party as close as possible to that under the provision rendered unenforceable.  In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.
 
E.     Notice
 
Any notice shall be deemed given by U.S. mail, certified, return receipt requested, personal delivery,  or by courier to the below addresses, or to such other addresses as may be provided by one party to the other. Notice by mail shall be deemed delivered five (5) days after the date it was mailed. Personal delivery shall be deemed to occur upon delivery to the receiving party or his/her/its office. Notice by courier shall be deemed delivered upon delivery by the courier.
 
If to BSC:
Blue Shield of California
50 Beale Street
San Francisco, CA 94105
Attn:  Director of Marketing

with a copy to:
Blue Shield of California
50 Beale Street
San Francisco, CA 94105
Attn:  Law Department

If to Consultant:
MCorp Consulting
201 Spear Street, Suite 1100
San Francisco, CA 94105
Attn:  Lynn Davison
Phone Number:   415-526-2653

F.     Governing Laws
 
This Agreement shall be construed and governed in accordance with the laws of the State of California without regard to its conflict of laws principles.  It is agreed by the parties that any action arising out of, in connection with, or in any way involving this Agreement or the parties hereto, shall be brought only in California (or federal, as applicable) courts with proper venue and jurisdiction and proper venue shall lie only in a court of competent jurisdiction located in San Francisco County.  Each party shall comply with all applicable federal, state and local statutes, laws, ordinances, regulations, rules, orders and codes in the performance of its obligations hereunder.
 
G.     Use of Names/Publicity
 
Consultant shall not use BSC’s name, logo, service marks, domain names, symbols or any other BSC name or mark without BSC’s written consent, other than in providing the Services to BSC under this Agreement.  Consultant may not use BSC as a reference or this Agreement as an endorsement of Consultant’s work without BSC’s written consent. The parties will cooperate to create any and all appropriate public, promotional announcements or press releases relating to the relationship set forth in this Agreement.  Neither party shall make any public announcement regarding the existence or content of this Agreement without the other party’s prior written approval and consent.
 
H.     Successors and Assigns
 
This Agreement and all of the terms and conditions hereof shall be binding upon and inure to the benefit of BSC and Consultant and their respective successors, transferees, permitted assignees or legal representatives.  Any terms of this Agreement containing a reference to Consultant or BSC shall apply with equal effect to any such successor, permitted assignee, transferee or legal representative of the party in question.
 
I.      Counterparts
 
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one document.
 
J.     Titles and Subtitles
 
The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
 
K.    Interpretation
 
In the event any dispute arises in regard to the interpretation of any term or condition of this Agreement, the parties agree that the drafting of this Agreement shall not be deemed that of one party or their agent and that any rules of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be applicable.
 
L.     Remedies
 
The rights and remedies herein provided shall be cumulative and no one of them shall be exclusive of any other and shall be in addition to any other remedies available at law or in equity.
 
M.    Order of Precedence
 
In the event of any conflict between or among the provisions contained in the Agreement, the following order of precedence will govern:  (i) this Agreement, exclusive of its Exhibits; (ii) Exhibits to this Agreement.
 
N.    Survival
 
Sections 6, 7, 8, 9, 16 and this Section 18 shall survive any termination or expiration of this Agreement.
 
O.    Association Disclosure
 
Consultant hereby expressly acknowledges its understanding that this Agreement constitutes a contract between Consultant and BSC, that BSC is an independent corporation operating under a license from the Blue Cross and Blue Shield Association, an association of independent Blue Cross and Blue Shield Plans (the “Association”) permitting BSC to use the Blue Shield Service Mark in the State of California, and that BSC is not contracting as the agent of the Association.  Consultant further acknowledges and agrees that it has not entered into this Agreement
 


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MCorp Consulting                                                                                                 Blue Shield of California
Contract No. C123041
 


 
based upon representations by any person other than BSC and that no person, entity, or organization other than BSC shall be held accountable or liable to Consultant for any of BSC’s obligations to Consultant under this Agreement.  This paragraph shall not create any additional obligations whatsoever on the part of BSC other than those obligations under other provisions of this Agreement.
 
P.      Entire Agreement
 
This Agreement constitutes the entire understanding between the parties.  All previous representations or undertakings, whether oral or in writing, are superseded by this Agreement.
 


 

 

 
IN WITNESS WHEREOF , the parties have executed this Agreement effective on the date and year first set forth above.
 

 

 

 
TOUCHPOINT METRICS, INC d/b/a MCORP CONSULTING   (“CONSULTANT”)
CALIFORNIA PHYSICIANS’ SERVICE d/b/a BLUE SHIELD OF CALIFORNIA  (“BSC”)
 
 
By:                 ____________________________________
 
 
By:                 ____________________________________
 
Name:             ____________________________________
 
Name:             ____________________________________
 
Title:              ____________________________________
 
Title:               ____________________________________
 
Date:              ____________________________________
 
Date:               ____________________________________








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MCorp Consulting                                                                                              Blue Shield of California
Contract No. C123041, Exhibit A-1
 

Exhibit A
Statement of Work

THIS STATEMENT OF WORK (the “SOW”), is made, entered into and effective August 30 2012 (the “Effective Date”), by and between Touchpoint Metrics, Inc d/b/a MCorp Consulting (“Consultant”) and California Physicians’ Service d/b/a Blue Shield of California (“BSC”).   This SOW shall be governed by the terms and conditions of the Consulting Agreement by and between Consultant and BSC dated August 30, 2012 (the “Agreement”).
 
1.  
Services
 
 
1.1
Overview . BSC is requesting the services of Consultant to assist with BSC’s Customer Journey Mapping initiative.  The goal is to inventory all instances where BSC interacts with our members (each a “Touchpoint”), such as when we process a claim or provide customer service, measure the level of importance and effectiveness of these Touchpoints from members and employees, and at a high level, understanding the processes, technology, systems and needed data to support each of the Touchpoints. The purpose of gaining this insight is to develop a roadmap to improve BSC customer journey and where to invest time and resources in improving internal operations in support of our customer’s experience.

 
1.2
Services .  Consultant shall provide the following services to BSC (the “Services”):
 
a.           Phase I - Immersion and Planning
i.       
Facilitate engagement and planning meeting with BSC project team
ii.      
Develop data gathering plan which shall provide a timeline and identify individuals to be interviewed
iii.     
Perform one-on-one interviews with up to fifteen (15) key stakeholders as identified by BSC
iv.     
Develop sampling strategy and provide a research plan addressing the qualitative and quantitative components as detailed in Phase II and III below

b.           Phase II – Qualitative Internal and External Research
i.       
Facilitate Touchpoint mapping workshop with BSC key stakeholders to identify existing Touchpoints
ii.      
Develop questionnaire and focus group guides for online customer research for BSC review and approval
iii.     
Conduct online customer focus group research
iv.     
Develop inventory of customer Touchpoints

c.           Phase III – Quantitative External Research
i.       
Develop draft questionnaire for cross segment online survey for BSC review
ii.      
Incorporate BSC feedback and deliver final questionnaire
iii.     
Conduct cross segment online survey
iv.     
Conduct comprehensive data analysis to identify current and desired states
v.      
Develop research summary report to include findings on customer attributes, drivers and Touchpoints

d.           Phase IV – Findings and Recommendations
i.       
Summarize key findings including prioritization of disconnect, customer persona and gaps in customer journey
ii.      
Develop and provide recommended customer journey maps
iii.     
Present findings and recommendations to the BSC project team and  BSC key stakeholders as BSC deems appropriate
iv.     
Facilitate onsite strategy session with BSC senior leadership team, including providing meeting handouts on findings and recommendations moving forward

 
1.3
Term .  Consultant shall begin providing the Services under this SOW on August 30, 2012 and Consultant will complete all Services and provide all Deliverables no later than February 28, 2013. Unless otherwise terminated earlier pursuant to the terms of the Agreement, this SOW will terminate on completion of all Services, including final acceptance of all Deliverables.
 

 
2.  
Deliverables
 
 
2.1
Deliverables .   In connection with the Services, Consultant shall provide the deliverables no later than the Due Date set forth in the table below (the “Deliverables”):
 
Item
Deliverables
Due Date
1
From Phase I - Immersion and Planning
• Detailed project plan in Microsoft Office format
• Final research plan in Microsoft Office format
October 8, 2012


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MCorp Consulting                                                                                                 Blue Shield of California
Contract No. C123041, Exhibit A-1
 


2
From Phase II - Qualitative Internal and External Research
• Interview and focus group guides in Microsoft Office format
November 2, 2012
3
From Phase II - Qualitative Internal and External Research
• Inventory of customer Touchpoints in Microsoft Office format
November 19, 2012
4
From Phase III - Quantitative External Research
• Draft online survey questionnaire in Microsoft Office format
 
November 19, 2012
 
5
From Phase III - Quantitative External Research
·   Final online survey questionnaire in Microsoft Office format
 
November 21, 2012
 
6
From Phase III - Quantitative External Research
• Research summary report in   Microsoft Office format
 
January 14, 2013
 
7
From Phase IV - Findings and Recommendations
• Summary of key findings in Microsoft Office format
• Recommendations on customer journey maps in Microsoft Office format
• BSC senior leadership presentation material in PPT
February 8, 2013

 
2.2       
Acceptance of Deliverables .
 
Upon completion of any Deliverables, Consultant shall submit such Deliverable to BSC for acceptance testing.  Final acceptance of all Deliverables shall be determined in the sole but reasonable discretion of BSC within thirty (30) days of receipt of such Deliverables.  In the event that any Deliverable fails acceptance testing, BSC shall promptly notify Consultant and shall provide a reasonably detailed description of the reason for such failure.  Consultant shall then promptly modify such Deliverable to remedy the identified failures, at no additional cost to BSC, and shall re-submit such Deliverable to BSC for acceptance testing within five (5) days of such notification or as otherwise agreed to in writing by BSC and Consultant.
 
 
 
 
3.  
Points of Contact
 
 
3.1
The BSC point of contact for this SOW is:
 
Name:                                           Lee Backston
Phone:                                           916-350-8753
E-mail Address:                            lee.backston@blueshieldca.com
 
 
 
3.2
The Consultant point of contact for this SOW is:
 
Name:                                           Lynn Davison
Phone                                           415- 526-2653
E-mail Address:                            ldavison@mcorpconsulting.com


4.  
Fees
 
In consideration of the Services and Deliverables, Consultant will be paid a fixed fee of One Hundred Fifty-Two Thousand Four Hundred Seventy-Five and 00/100 Dollars ($152,475.00) which will be the total payment for all labor, materials, taxes, and  equipment costs (the “Fixed Fee”).  The Fixed Fee may be invoiced by Consultant according to the following schedule:
 
§  
Upon full execution of Agreement:                                                                                                 $50,825.00
 
§  
Upon acceptance of Deliverable #1, #2, #3 and #4:                                                                        $50,825.00
 
§  
Upon acceptance of all Deliverable:                                                                                                $50,825.00
 

 
5.  
Reimbursable Expenses
 
The total of all Reimbursable Expenses authorized under this Agreement shall not exceed Sixteen Thousand Five Hundred Twenty-Five and 00/100 Dollars ($16,525.00).
 
BSC shall reimburse Consultant for expenses which have been approved by BSC in writing, in advance.  All reimbursable expenses directly incurred by Consultant in the performance of its Services under this SOW shall be reasonable, ordinary and necessary, shall be billed at cost and shall be in conformance with the requirements attached hereto as Schedule 1.
 


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MCorp Consulting                                                                                                       Blue Shield of California
Contract No. C123041, Exhibit A-1
 


6.  
Total SOW  Maximum
 
The dollar amount payable to Consultant by BSC for Services and Deliverables under this SOW shall not exceed One Hundred Sixty-Nine Thousand and 00/100 Dollars ($169,000.00) (the “Total SOW Maximum”), without prior written authorization by BSC in the form of a written Amendment signed by both parties.
 

 
7.  
Invoice Payment
 
 
Costs for Fee(s) and Reimbursable Expense(s) shall be invoiced separately.
 
 
a.
Fees
 
For the first payment of Fees, Consultant will furnish BSC with invoice(s) in accordance with Section 4 which, if valid and undisputed by BSC, will be paid within fifteen (15) days of receipt of such invoice.
 
For subsequent payment of Fees, Consultant will furnish BSC with invoice(s) in accordance with Section 4 which, if valid and undisputed by BSC, will be paid within forty-five (45) days of receipt of such invoice.  In the event that BSC issues payment for an invoice within ten (10) days of receipt of such invoice, Consultant agrees that BSC shall be entitled to deduct two percent (2%) of the aggregate amount of such invoice as a prompt-payment discount.
 
 
Each invoice shall provide a description of the Service(s) being invoiced.
 
 
b.
Reimbursable Expenses
 
 
For payment of Reimbursable Expenses, Consultant will furnish BSC with invoice(s) in accordance with Section 5 which, if valid and undisputed by BSC, will be paid within forty-five (45) days of receipt of such invoice.
 
 
Each invoice shall provide a description of the expense(s) being invoiced
 
 
All invoices must contain the following information: 

·  
Agreement or SOW Number associated to the invoice;
·  
Project name/phase;
·  
Milestone or Deliverable associated with invoiced Fee;
·  
Name of the BSC cost center owner; and
·  
Project information - Purchase Order number, cost center, project number & account number;

 
 
c.
Consultant shall send invoices containing the BSC point of contact name (specified in Section 3.1 above), and the BSC Purchase Order Number for each payment when due to:
 
Via U.S. Mail:
Blue Shield/Concur Invoice Capture
10700 Prairie Lakes Drive
Eden Prairie, MN  55344

OR

Via Email:
Email the invoice (in Adobe PDF format) for payment to the address specified below.  Consultant must state “BSC” and the “BSC point of contact” name in the email subject line.

Email address:   BSCInvoiceCapture@concur.com

 

 

 

 


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MCorp Consulting                                                                                                                  Blue Shield of California
Contract No. C123041, Exhibit A-1, Schedule 1
 

Schedule 1
Reimbursable Expenses for Travel


1.  
Air Travel .  Costs within or outside of the United States will be reimbursed only on a coach, non-refundable, lowest cost fare basis.  The following expenses will not be reimbursed:  Air fare upgrades, change fees (without prior approval from BSC), and checked baggage for more than one (1) checked bag.
 
2.  
Meals .  Only meals incurred while traveling away from home, overnight, on BSC’s business will be eligible for reimbursement, up to a maximum of $60 per day.  A daily per diem will not be paid.
 
3.  
Lodging.    All BSC required lodging expenses will be reimbursed at the lowest rate available from:
 
A.       
BSC’s contracted hotels at BSC’s pre-negotiated rates, as listed on BSC’s Intranet travel site.
 
B.       
Alternative hotels, if rates are at or below BSC’s contracted hotel rates.
 
C.       
Tips will be limited to a maximum $8 on any day (Bellman - $5, Housekeeping - $3.00).
 
D.       
Consultant shall cancel guaranteed lodging reservations, as needed, to ensure BSC does not incur unnecessary charges.
 
E.       
BSC will not reimburse for the following expenses:   Laundry/dry cleaning, Internet connectivity fees, telephone charges, room upgrades, fitness center fees, movie rental fees, theft, loss of, or damage to personal items, and toiletries.
 
4.  
Rental Cars .
 
A.       
Consultant must book a compact to mid-size rental car when traveling on BSC business.  For example, a compact class car should be used when traveling alone, whereas a mid-size class car might be needed when the vehicle will be transporting more than one (1) person.
 
Rental cars and associated expenses for Consultant personnel working in BSC’s San Francisco office (except for travel to BSC locations outside of the greater Bay Area), are not reimbursable.
 
Costs to refuel a rental car are reimbursable.   Consultant personnel are encouraged to refuel a rental car prior to returning it to the rental car company.
 
B.       
BSC will not reimburse for the following expenses:  Limousine service, parking tickets, moving violations, or additional automobile insurance.
 
5.
Mileage .  May be a reimbursable expense at the then current IRS rate for Consultant personnel who use their personal car to perform services for BSC at locations other than their BSC assigned office.  Consultant personnel may submit expenses for the miles in excess of such Consultant’s personnel’s regular commute between his/her home and their assigned BSC office.
 
   Mileage must be documented with the date, starting point and ending point, and mileage amount recorded.
 
6.
Miscellaneous Expenses .  Costs, such as telephone communications, copying, electronic mail, facsimile transmissions, computer time and use of Consultant’s in-house technical software are considered to be part of Consultant’s overhead costs and are not eligible for reimbursement.
 
7.  
Other Requirements:
 
A.       
Consultant personnel working at BSC’s San Francisco locations are expected to use the least costly mode of transportation when commuting to and from BSC locations outside of the greater Bay Area (e.g., Southern California, Sacramento area).
 
B.       
Receipts .  For each expense item $25 or higher, supporting data and documentation, such as copies of receipts shall be provided with the invoice with each item clearly identified as to its purpose.  Copies of detailed expense reports to support such reimbursement request shall be attached to the invoice.
 
C.       
Invoices .  Each invoice shall be assembled with supporting documentation attached in the order listed in the invoice, and each item of expense chargeable to BSC shall be highlighted or clearly delineated.
 

 

 

 


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MCorp Consulting                                                                                                   Blue Shield of California
Contract No. C123041, Exhibit B
 


 
Exhibit B
 

 

 
Attach completed IRS Form W-9 here.
 
http://ftp.fedworld.gov/pub/irs-pdf/fw9.pdf
 

 

 

 

 

 

 

 
 

 

















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MCorp Consulting                                                                                                   Blue Shield of California
Contract No. C123041, Exhibit C
 

Exhibit C
 
CONFIDENTIALITY AND NON-DISCLOSURE OF BSC INFORMATION
 
1.           As a condition of being furnished information (whether in written, oral or any other form) concerning BSC, the Consultant agrees to treat any information concerning BSC, its subsidiaries, affiliates, members, customer, vendors, including but not limited to its subscribers, customers, business plans, products, proposed new products and concepts, market research, trade secrets, employees, proprietary systems, information technology systems and software, financial data and operating procedures, and any third party confidential and proprietary information (e.g., computer software and related information which is furnished to Consultant by or on behalf of BSC or which is observed, ascertained, learned or obtained by the Consultant in observing BSC’s operations or while providing services to BSC (such information along with all analyses, compilations, data, studies, notes, memoranda, documents, electronic files, records, drawings, work papers or other work prepared by the Consultant or Consultant’s agents or representatives which is based in whole or in part on such BSC information or relates to the business of BSC is herein collectively referred to as the “Confidential Information”) in accordance with the provisions of this Agreement.  The term “Confidential Information” shall not include information which the Consultant can demonstrate by contemporaneous documentation; (i) is already in the Consultant’s possession, provided that such information is not known by the Consultant to be subject to another confidentiality agreement with or other obligation of secrecy to BSC or another party, or (ii) is or becomes generally available to the public by BSC, or (iii) is or becomes available to the Consultant on a non-confidential basis from a source other than BSC, provided that such source is not bound by a confidentiality agreement with or other obligation of secrecy to BSC or another party.
 
2.           Consultant agrees that the Confidential Information made available to Consultant shall be kept confidential by Consultant; provided, however, that such information may be disclosed to those Consultant representatives who need to know such information for the purpose of assisting Consultant (it being understood that prior to the receipt of any Confidential Information by representatives of Consultant such representatives shall be informed of the confidential nature of such information and directed by Consultant to treat such information as confidential and such representatives shall agree to comply with and be bound by the confidentiality terms and conditions of this Agreement).  In addition, without the prior written consent of BSC, Consultant shall not, and shall direct its representatives not to: (i) copy or otherwise reproduce for, or distribute to, third parties any Confidential Information, (ii) disclose to any person, other than the foregoing representatives, by any means any Confidential Information that has been made available to it, or the substance of the Confidential Information, except as may be required by law or regulation as is addressed in Paragraph 3. below: (iii) use any of the Confidential Information for any purpose other than to provide the Services set forth in the Agreement and, (iv) when the Confidential Information includes member, subscriber or patient specific information and/or individually identifiable medical information, not use the Confidential Information for any purpose other than to provide billing, claims, management, medical data processing or other administrative services to BSC as directed by BSC, and the Consultant shall only use this information in accordance with all Applicable state and federal law, including but not limited to California Civil Code Section 56, et seq . and the federal Health Insurance Portability & Accountability Act (HIPAA) requirements, and finally, shall not use the Confidential Information in any other manner not specifically authorized in writing by BSC.  Consultant agrees to be responsible for any breach of this Agreement by its representatives.
 
3.           In the event Consultant or any of its representatives is requested or required (by oral questions, interrogatories, requests for information or documents, subpoenas, civil investigative demands or similar processes) to disclose any Confidential Information, it is agreed that Consultant shall provide BSC with prompt written notice of such request(s) and the documents or information requested so that BSC may seek an appropriate protective order and/or waive Consultant’s compliance with the provisions of this Agreement.  It is further agreed that if, in the absence of a protective order or the receipt of a written waiver from BSC, Consultant is, nonetheless, in the written opinion of its legal counsel, compelled to disclose any of the Confidential Information to any person or else stand liable for contempt or suffer other censure or penalty, Consultant agrees to disclose to such tribunal only such Confidential Information as is legally required, which disclosure shall be without liability hereunder; provided, however, that Consultant shall give BSC written notice of the Confidential Information to be so disclosed as far in advance of its disclosure as is practicable and shall use its reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed.
 
4.           Upon BSC’s request, as may be indicated in a writing (a “Request”) delivered by BSC to Consultant, Consultant shall promptly collect from Consultant’s representatives all Confidential Information and any other information, including documents, memoranda and notes containing or reflecting or based upon any information in the Confidential Information, whether prepared by Consultant, its representatives or otherwise, as well as any Confidential Information and any other material containing or reflecting or based upon the Confidential Information Consultant has (said material collectively hereinafter referred to as the “Material”) and upon BSC’s direction either (1) deliver to BSC the  Material, or (2) destroy such Material, without retaining any copies, extracts or other reproductions in whole or in part, and further, upon the written request of BSC, shall direct that written certification by an authorized officer of Consultant of the delivery or destruction of Material be delivered to BSC no later than ten (10) business days following delivery of the Request by BSC.
 
5.           Confidential Information disclosed hereunder shall at all times remain, as between the parties, the property of BSC.  No rights, expressed or implied, by license or otherwise, to any Confidential Information, trade secrets, copyrights, patents or other rights is granted by this Agreement or any disclosure of Confidential Information hereunder, except as provided for in the above Section 2.
 

 

 



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Exhibit 10.23

DealPoint ID #
820913



 
Statement of Work
 
(“SOW”)
 
Addresses and contacts for notices
 

“Microsoft”
“Vendor” MBO Partners
“Vendor Personnel”
Company Name: Microsoft
Company Name: MBO Partners, Inc.
Company Name: Touchpoint Metrics, Inc. DBA MCorp Consulting
Primary Contact:
Primary Contact: Rachana Suri
 
Vendor Personnel Name(s):
Michael Hinshaw
Lynn Davison
Kris Clark
Address:
Address: 13454 Sunrise Valley
Dr #300 Herndon, VA 20194
Address: 201 Spear Street,
Suite 1100, San Francisco,
CA 94105
Phone number:
Phone number: (703) 793-6000
Phone number: 415-526-2290
Fax number:
Fax number:
Fax number: 415-526-2650
Email (if applicable):
 
Email (if applicable):
Email (if applicable):
admin@mcorpconsulting.com
Secondary Contact:
Secondary Contact:
Secondary Contact: Lisa
Hamilton (Accounting)
 
Microsoft Vendor Number:
2188117
 
 

SOW Effective Date:
10/29/12
SOW Expiration Date:
3/22/13
 

 

 

 

 



IC SOW                                                                                                                                                                                 Confidential
Page 1 of 6
October 2011

 
 
 


 
Agreed and accepted
 

Microsoft
Supplier
Microsoft  Signature:
 
Supplier  Signature:
 
Microsoft  Name:
Tony Scott
Supplier  Name:
Rachana Suri
Microsoft  Title:
CIO
Supplier  Title:
Business Manager
Microsoft  Date:
 
Supplier  Date:
 


This SOW, executed in accordance with the terms of that certain Microsoft Master Vendor Agreement (MMVA) (the “Agreement”) dated October 10, 2012 between Microsoft   and Vendor, is entered into by the parties and effective as of the SOW Effective Date above.

1.
Description of S ervices

 
Pursuant to and in conformance with any standards and/or specifications which may be provided by Microsoft to Vendor from time to time, Vendor Personnel shall deliver to and/or perform for Microsoft the following goods, services and/or other items or materials as a work made for hire (collectively, the “Services”).
 
MCorp will assist the Microsoft Information Technology organization (MSIT) and the Connected Customer Experience team (CCE) to embed an “outside-in” customer perspective into the organization through the development a robust customer experience design, improvement and management competency. MCorp will apply its proven approach across a multitude of projects within Microsoft Learning (MSL) to transfer its knowledge and capabilities to the CCE team. Specifically, MCorp will assist MSIT to:
§
Develop ways to define, understand and improve customer experience (CX)
§
Leverage IT to change how customers navigate the Microsoft hierarchy to be easier, more enjoyable and useful to them
§
Improve how customers interact with the company as a whole
§
Build a repeatable CX management capability that may be scaled and consistently applied across the entire IT organization.
 
MCorp will engage in a “co-creation” approach with MSIT, working side-by-side with MSIT as a team to accomplish the engagement objectives. MCorp will do so by first modeling behaviors and work activities, followed by mentoring and then guiding MSIT/CCE team members in the same work.
 
Our approach will guide the joint identification, strategic framework development and experience design of end-to-end customer journeys through a Microsoft certification for three high-profile MSL personas, including:
§
MS Certified Professional (external)
§
MS Certified Trainer (external)


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§
MS Manager – someone who is managing the certification of their product (internal)
 
This “macro” focused engagement will both inform and be informed by the multiple initiatives recently completed, in flight or getting underway across MSL.
 
These end-to-end lifecycle views will uncover all major issues and needs, touching multiple business processes, systems and functions while standardizing CCE strategy and design – informing, guiding and supporting the experience improvement roadmap across MSIT over the next several years.
 
Through each phase of work the CCE team will shadow the MCorp team, focusing on a series of “secondary” personas (selected in Phase 1 of the engagement). The MCorp team will mentor and guide the CCE team to “learn by doing”, while simultaneously codifying CX methodologies, processes, artifacts and systems.
 
The key activities for each phase of work are as follows:
 
Project Kickoff
 
§
Schedule development
 
§
Role definition
 
Phase 1
 
§
Internal stakeholder interviews conducted
 
§
Research Plan finalized and agreed upon
 
§
Knowledge transfer approach defined, including mentoring and guiding MSIT in identifying, developing or making available the supporting components (e.g., collaborative platform, frameworks and formats, etc.)
 
Phase 2
 
§
Touchpoint mapping workshop completed
 
§
Online focus group completed
 
§
Quantitative research completed
 
§
Data analysis and research summary findings completed
 
§
Three personas created
 
§
Knowledge transfer completed to conduct qualitative and quantitative customer experience research. Includes mentoring and guiding MSIT in sourcing reference materials and developing methodology, outputs and roles and responsibilities.
 
Phase 3
 
§
Current state customer journey maps completed for three targeted personas
 
§
Customer experience strategy articulated
 
§
Knowledge transfer completed to create current state customer journey maps and define the customer experience strategy. Includes mentoring and guiding MSIT in sourcing reference materials and developing methodology, outputs and roles and responsibilities.
 
Phase 4
 
§
Ideal state customer journey maps completed
 
§
Recommendations, implementation roadmap and supporting high-level business case completed


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§
Stakeholder presentation completed
 
§
Knowledge transfer completed to create ideal state customer journey maps. Includes mentoring and guiding MSIT in sourcing reference materials and developing methodology, outputs and roles and responsibilities.
 


All Services shall be treated as Microsoft Confidential Information unless otherwise designated by Microsoft.

2.
Deliverables/Delivery Schedule

Vendor Personnel shall complete and deliver all Services to Microsoft on or before March 22, 2013.   The milestone delivery schedule for the Services, if applicable, shall be as follows:

Milestone
#
Brief Description of Services to be completed by
Vendor Personnel and delivered to Microsoft
Due on or
Before
1
Project kick-off, including schedule development and
role definition
11/5
2
Phase 1 deliverables including the completion of the
Research Plan and defined knowledge transfer
approach.
11/30
3
Phase 2 deliverables including the completion of the
qualitative research consisting of a touchpoint
mapping workshop and three (3) online focus groups
and knowledge transfer through mentoring and
guiding MSIT to source reference materials and
develop related methodology, outputs and roles and
responsibilities.
12/21
4
Phase 2 deliverables including the completion of the
quantitative web-based research and three (3)
personas and knowledge transfer through mentoring
and guiding MSIT to source reference materials and
develop related methodology, outputs and roles and
responsibilities.
1/25
5
Phases 3 and 4 deliverables including the completion
of the customer experience strategy definition
current, ideal state customer journeys, business case,
implementation roadmap and knowledge transfer
through mentoring and guiding MSIT to source
reference materials and develop related methodology,
outputs and roles and responsibilities.
3/22

3.
Payment

3.1
Services Fees

As complete and final payment for Services which has been completed and delivered by Vendor Personnel to Microsoft and which has been accepted by Microsoft, Microsoft shall pay Vendor:


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o   flat fee of ________________ U.S. Dollars ( $                                                                                _________   USD ).
 
or
 
x   total fee not to exceed three hundred thousand U.S. Dollars ( $ 300,000.00 USD ) in accordance with the following milestone payment schedule:

Milestone  #
Not to Exceed
Payment Amount
Delivery/Payment Date
IO
1
$  76,000.00
10/29/12
BPA – 1429434
2
$  56,000.00
11/30/12
Athena – 1436467
3
$  56,000.00
12/21/12
Athena – 1436467
4
$  56,000.00
1/25/13
BPA – 1429434
5
$  56,000.00
3/22/13
BPA – 1429434
Sub-Total
$300,000.00
   
Expenses (if any –
see Section 3.2, below)
$  15,000.00
As incurred
BPA - 1429434
Total
$315,000.00
   

 
or
 
o   total fee not to exceed ________ U.S. Dollars ($________ USD ) in accordance with the weekly rate of ________ U.S. Dollars ($________ USD ) .
 

 


3.2
Expenses :   (choose one of the below)

 
x
As reflected in Section 3.1, above, Microsoft shall reimburse Vendor up to fifteen thousand US Dollars ( $15,000.00 USD) for pre-approved, reasonable and actual travel and travel-related expenses incurred by Vendor Personnel in connection with the performance of the Services.  All travel expenses hereunder are subject to Microsoft’s review and the Microsoft Travel Policy and Vendor or Vendor Personnel must submit appropriate documentation evidencing expenses to be reimbursed.
OR

  o 
Vendor shall bear sole responsibility for all expenses incurred in connection with the performance of the Services, unless otherwise agreed to in writing by Microsoft.

4.
Relationship of the Parties
 
(a)  
No employment. The Agreement or this SOW does not create an employment relationship between Microsoft and Vendor or Vendor Personnel. Vendor’s employees, independent contractors, personnel and/or subcontractors (collectively referred to as “Vendor Personnel”) are not Microsoft employees.
 
(b)  
Vendor is responsible for and will pay all wages, fringe benefits, payroll taxes, insurance, work schedules, and work conditions with respect to the Vendor Personnel, and for all other costs incurred by it in connection with its business, including but not limited to travel, rent, and the cost of supplies and materials, except as may have been approved by Microsoft in accordance


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with section this SOW.   Upon Microsoft’s request, Vendor will provide Microsoft with satisfactory proof of employment status of the assigned Resources.
 
(c)  
Vendor will be responsible for and pay all costs of conducting its business, including, but not limited to, the expense and responsibility for any applicable insurance or city, county, state or federal licenses, permits, taxes or assessments of any kind. Vendor will be responsible for payment of any taxes imposed on Vendor including, but not limited to, income taxes, Social Security and Medicare taxes, and worker’s compensation premiums.   Vendor will indemnify Microsoft and hold it harmless from paying such business costs or taxes.
 
(d)  
Vendor will defend, indemnify and hold harmless Microsoft and any of its parent, subsidiary or related companies, officers, managers, directors, employees and agents, for any claims, damages, judgments, settlement, costs or expenses incurred by Microsoft as a result of any action instituted by Vendor Personnel against Microsoft, including but not limited to any claims for wages, fringe benefits, or other compensation under federal or state law, any claims related to Vendor’s employment of or contract with Vendor Personnel, and any claims challenging the Vendor’s right to dismiss or sever contractual ties with its Vendor Personnel.  Similarly, Vendor will defend, indemnify and hold Microsoft harmless for any other third-party claims, judgments, settlements, costs, fines or penalties related to the employment status of the Vendor Personnel.



5.
Other

 
Estimated expenses in clause 3.2 Expenses above include any reasonable and necessary out-of-pocket expenses such as workshop materials, courier transcription fees and focus group platform fees.  All expenses will be billed as incurred, with no additional mark up or margin added by MCorp Consulting.
 

Reporting, technical requirements, attendance, Microsoft materials provided, or acceptance criteria, if any, in addition to the terms included in the Agreement/Purchase Order, are described below:




 
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Exhibit 14.1

Touchpoint Metrics, Inc.

CODE OF ETHICS

TOPICS

1.   Statement of Policy
2.   Implementation and Enforcement
3.   Relations with Competitors and Other Third Parties
4.   Insider Trading, Securities Compliance and Public Statements
5.   Financial Reporting
6.   Human Resources
7.   Environmental, Health and Safety
8.   Conflicts of Interest
9.   International Trade
10.   Government Relations
11.   Contractors, Consultants, and Temporary Workers
12.   Conclusion

1.
STATEMENT OF POLICY

The Company has adopted ten corporate principles (“Principles”) to provide a framework for all employees in conducting ourselves in our jobs. These policies are not intended to substitute for those Principles, but will serve as guidelines in helping you to conduct the Company’s business in accordance with our Principles. Compliance requires meeting the spirit, as well as the literal meaning, of the law, the policies and the Principles. It is expected that you will use common sense, good judgment, high ethical standards and integrity in all your business dealings.

If you encounter a situation you are not able to resolve by reference to these policies, ask for help.  Contact Michael Hinshaw, Chief Executive Officer, who has been identified as responsible for overseeing compliance with these policies.

Violations of the law or the Company’s policies will subject employees to disciplinary action, up to and including termination of employment. In addition, individuals involved may subject themselves and the Company to severe penalties including fines and possible imprisonment. Compliance with the law and high ethical standards in the conduct of Company business should be a top priority for each employee, officer and director.

2.
IMPLEMENTATION AND ENFORCEMENT

Michael Hinshaw, our Chief Executive Officer, has been appointed as Compliance Officer of the Company, responsible for overseeing compliance with, and enforcement of, all Company policies.

 
1
 

Employees are expected to be familiar with these policies as they apply to their duties. They should consult with their managers if they need assistance in understanding or interpreting these policies. Each employee is required to follow these policies and to comply with their terms. A refusal by any employee to agree to be bound by these policies shall be grounds for discipline up to and including dismissal.

Any employee who, in good faith, has reason to believe a Company operation or activity is in violation of the law or of these policies must call the matter to the attention of Michael Hinshaw, our Chief Executive Officer.  All reports will be reviewed and investigated as necessary under the circumstances, and the reporting employee should provide sufficient information to enable a complete investigation to be undertaken.

Any employee who makes an allegation in good faith reasonably believing that a person has violated these policies or the law, will be protected against retaliation.

3.  
RELATIONS WITH COMPETITORS AND OTHER THIRD PARTIES

The Company’s policy is to comply fully with competition and antitrust laws throughout the world. These laws generally prohibit companies from using illegal means to maintain, obtain or attempt to obtain a monopoly in a market. They also prohibit companies from engaging in unfair trade practices. “Unfair trade practices” include fixing prices, dividing markets, agreeing with competitors not to compete, or agreeing to boycott certain customers.  It is advised that you consult with our Chief Executive Officer, Michael Hinshaw before attending a meeting with a party who may be viewed as a competitor.

4.  
INSIDER TRADING, SECURITIES COMPLIANCE AND PUBLIC STATEMENTS

Securities laws prohibit anyone who is in possession of material, non-public information (“Insider Information”) about a company from purchasing or selling stock of that company, or communicating the information to others. Information is considered “material” if a reasonable investor would consider it to be important in making a decision to buy or sell that stock. Some examples include financial results and projections, new products, acquisitions, major new contracts or alliances prior to the time that they are publicly announced. Employees who become aware of such Insider Information about the Company must refrain from trading in the shares of the Company until the Insider Information is publicly announced.

Employees must also refrain from disclosing that information to persons who do not have a Company need to know, whether they are inside the Company or outside, such as spouses, relatives or friends.

The Company makes regular formal disclosures of its financial performance and results of operations to the investment community. We also regularly issue press releases. Other than those public statements, which go through official Company channels, employees are prohibited from communicating outside the Company about the Company’s business, financial performance or future prospects. Such communications include questions from securities analysts, reporters or other news media, but also include seemingly innocent discussions with family, friends, neighbors or acquaintances.

 
2
 

5.  
FINANCIAL REPORTING

The Company is required to maintain a variety of records for purposes of reporting to the government. The Company requires all employees to maintain full compliance with applicable laws and regulations requiring that its books of account and records be accurately maintained. Specifics of these requirements are available from Michael Hinshaw, Chief Executive Officer.

6.  
HUMAN RESOURCES

The Company is committed to providing a work environment that is free from unlawful harassment and discrimination, and respects the dignity of its employees. The Company has policies covering various aspects of its relationship with its employees, as well as employees’ relationships with each other. For more detailed information, you should consult Michael Hinshaw, Chief Executive Officer.  Each employee is expected to be familiar with these policies and to abide by them.

7.  
ENVIRONMENTAL, HEALTH AND SAFETY

The Company is committed to protecting the health and safety of our employees, as well as the environment in general. The Company expects employees to obey all laws and regulations designed to protect the environment, and the health and safety of our employees, and to obtain and fully observe all permits necessary to do business.

At the very least, all employees should be familiar with and comply with safety regulations applicable to their work areas. The Company will make, to the extent possible, reasonable accommodations for the known physical or mental limitations of our employees. Employees who require an accommodation should contact Michael Hinshaw.  The Company will then engage in an interactive process to determine what reasonable accommodations may exist.

8.  
CONFLICTS OF INTEREST

Each employee is expected to avoid any activity, investment or association that interferes with the independent exercise of his or her judgment in the Company’s best interests (“Conflicts of Interest”). Conflicts of Interest can arise in many situations. They occur most often in cases where the employee or the employee’s family obtains some personal benefit at the expense of the Company’s best interests.

No employee, or any member of employee’s immediate family, shall accept money, gifts of other than nominal value, unusual entertainment, loans, or any other preferential treatment from any customer or supplier of the Company where any obligation may be incurred or implied on the giver or the receiver or where the intent is to prejudice the recipient in favor of the provider. Likewise, no employee shall give money, gifts of other than nominal value, unusual entertainment or preferential treatment to any customer or supplier of the Company, or any employee or family members thereof, where any obligation might be incurred or implied, or where the intent is to prejudice the recipient in favor of the Company. No such persons shall solicit or accept kickbacks, whether in the form of money, goods, services or otherwise, as a means of influencing or rewarding any decision or action taken by a foreign or domestic vendor, customer, business partner, government employee or other person whose position may affect the Company’s business.

 
3
 

No employee shall use Company property, services, equipment or business for personal gain or benefit.

Employees may not: (1) act on behalf of, or own a substantial interest in, any company or firm that does business, or competes, with the Company; (2) conduct business on behalf of the Company with any company or firm in which the employee or a family member has a substantial interest or affiliation. Exceptions require advance written approval from the Legal Department.

Employees should not create the appearance that they are personally benefitting in any outside endeavor as a result of their employment by the Company, or that the Company is benefitting by reason of their outside interests. Any employee who is not sure whether a proposed action would present a conflict of interest or appear unethical should consult with Michael Hinshaw, Chief Executive Officer.

9.  
INTERNATIONAL TRADE

The Company must comply with a variety of laws around the world regarding its activities.  In some cases, the law prohibits the disclosure of information, whether the disclosure occurs within the U.S. or elsewhere, and whether or not the disclosure is in writing.

Payments or gifts to non-U.S. government officials are prohibited by law and by Company policy. The Foreign Corrupt Practices Act precludes payments to non-U.S. government officials for the purpose of obtaining or retaining business, even if the payment is customary in that country. This law applies anywhere in the world to U.S. citizens, nationals, residents, businesses or employees of U.S. businesses. Because Touchpoint Metrics, Inc. is a U.S. company, this law applies to the Company and all of its subsidiaries. Any questions on this policy should be directed to Michael Hinshaw, Chief Executive Officer.

10.  
GOVERNMENT RELATIONS

The Company is prohibited by law from making any contributions or expenditures in connection with any U.S. national election. This includes virtually any activity that furnishes something of value to an election campaign for a federal office. Use of the Company’s name in supporting any political position or ballot measure, or in seeking the assistance of any elected representative, requires the specific approval of the Chairman and Chief Executive Officer of the Company. Political contributions or expenditures are not to be made out of Company funds in any foreign country, even if permitted by local law, without the consent of the Company’s Chairman and Chief Executive Officer.

U.S. law also prohibits giving, offering, or promising anything of value to any public official in the U.S. or any foreign country to influence any official act, or to cause an official to commit or omit any act in violation of his or her lawful duty. Company employees are expected to comply with these laws.

11.  
VENDORS, CONTRACTORS, CONSULTANTS AND TEMPORARY WORKERS

Vendors, contractors, consultants or temporary workers who are acting on the Company’s behalf, or on Company property, are expected to follow the law, Company policies and honor Company Principles. Violations will subject the person or firm to sanctions up to and including loss of the contract, contracting or consulting agreement, or discharge from temporary assignment.

 
4
 

12.  
CONCLUSION

This Code of Ethics is not intended to cover every possible situation in which you may find yourself. It is meant to give you the boundaries within which the Company expects you to conduct yourself while representing Touchpoint Metrics, Inc.  You may find yourself in a situation where there is no clear guidance given by this Code of Ethics.  If that occurs, return to the foundations stated earlier: common sense, good judgment, high ethical standards and integrity. And refer to the Company’s Principles. In addition, there are many resources upon which you may rely: your management chain, Human Resources, Legal or other Touchpoint Metrics, Inc. departments, and the CEO. Together we can continue to make Touchpoint Metrics, Inc. a company that sets a standard for customer experience management solutions.


 
______________________________________
 
Employee




 
 
 
 
 

 



 
5
 


TOUCHPOINT METRICS, INC.

Ten Corporate Principles


1. Do great work.
Do fabulous work and be known nationwide for our innovativeness.

2. It’s OK to be a little “off.”
Attract and work with exciting people, more than a few of whom are a little offbeat.

3. There is always a better way.
Question the way things are and move forward with a plan, building a foundation that helps us learn along the way.

4. Learning new things should be fun!
Make sure that those who move on (clients, consultants and staff), will say that they learned a lot, made friends and had a special experience.

5. Friends don’t throw friends under the bus.
Have an honest, collegial, supportive environment where it’s ok to ask questions and check assumptions, and politics are as absent as possible.

6. Be straight up.
Based on clarity of communication and strength of character, ensure that no question or innuendo ever has any cause to arise regarding our ethics or integrity.

7. Details matter... a lot.
Excellence is where we begin. This means dotting the i’s, crossing the t’s, writing intelligently, checking our grammar, rigorously following our own standards and recognizing that god is in the details.

8. We’re all in this together.
Work with exciting clients and other partners who will stretch us, teach us and who we enjoy associating with. Nurture those clients and partners that don’t live up to the challenge, but don’t be afraid to let them go.

9. Sometimes it IS about the money.
Bring in substantially more money than we spend, and ensure that what we spend includes higher-than average levels of compensation and investment in our future.

10. Grow smart.
While growing through the strategic use of data, delivery of creative, high quality services, and the acquisition of terrific clients, we do not wish to grow simply for the sake of growth. We’ll also take the time to learn from what we do and allow for mistakes along the



 
6
 


Reportable Violations


·   Accounting Error
·   Accounting Omissions
·   Accounting Misrepresentations
·   Auditing Matters
·   Compliance/Regulation Violations
·   Corporate Scandal
·   Domestic Violence
·   Discrimination
·   Embezzlement
·   Environmental Damage
·   Ethics Violation
·   Fraud
·   Harassment
·   Industrial Accidents
·   Misconduct
·   Mistreatment
·   Poor Customer Service
·   Poor Housekeeping
·   Sabotage
·   Securities Violation
·   Sexual Harassment
·   Substance Abuse
·   Theft
·   Threat of Violence
·   Unfair Labor Practice
·   Unsafe Working Conditions
·   Vandalism
·   Waste
·   Waste of Time and Resources
·   Workplace Violence







 
7
 


Exhibit 31.1

SARBANES-OXLEY SECTION 302(a) CERTIFICATION

I, Michael Hinshaw , certify that:

1.
I have reviewed this Form 10-K for the year ended December 31, 2012 of Touchpoint Metrics, Inc. ;
 
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
 
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
   
 
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
 
   
 
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
   
 
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
   
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
 
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
   
 
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
March 27, 2013
MICHAEL HINSHAW
   
Michael Hinshaw
   
Principal Executive Officer and Principal Financial Officer


 
 
 


Exhibit 32.1





CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of Touchpoint Metrics, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2012 , as filed with the Securities and Exchange Commission on the date hereof (the “report”), I, Michael Hinshaw , Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
 
(2)
The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated this 27 th day of March, 2013.


 
MICHAEL HINSHAW
 
Michael Hinshaw
 
Chief Executive Officer and Chief Financial Officer









 
 
 


Exhibit 99.1
 
Touchpoint Metrics, Inc.
 
CHARTER - AUDIT COMMITTEE
 
Committee Role
 
The committee’s role is to act on behalf of the board of directors and oversee all material aspects of the company’s reporting, control, and audit functions, except those specifically related to the responsibilities of another standing committee of the board. The audit committee’s role includes a particular focus on the qualitative aspects of financial reporting to shareholders and on company processes for the management of business/financial risk and for compliance with significant applicable legal, ethical, and regulatory requirements.
 
In addition, the committee  responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) establishing internal financial controls; (5) engaging outside advisors; and, (6) funding for the outside auditor and any outside advisors engagement by the audit committee.
 
The role also includes coordination with other board committees and maintenance of strong, positive working relationships with management, external and internal auditors, counsel, and other committee advisors.
 
Committee Membership
 
The committee shall consist of two (2) or more directors.  The committee shall have access to its own counsel and other advisors at the committee’s sole discretion.
 
Committee Operating Principles
 
The committee shall fulfill its responsibilities within the context of the following overriding principles:
 
(1)
Communications - The chairperson and others on the committee shall, to the extent appropriate, have contact throughout the year with senior management, other committee chairpersons, and other key committee advisors, external and internal auditors, etc., as applicable, to strengthen the committee’s knowledge of relevant current and prospective business issues.
 

 

 
1
 


 
(2)
Committee Education/Orientation - The committee, with management, shall develop and participate in a process for review of important financial and operating topics that present potential significant risk to the company. Additionally, individual committee members are encouraged to participate in relevant and appropriate self-study education to assure understanding of the business and environment in which the company operates.
 
(3)
Annual Plan - The committee, with input from management and other key committee advisors, shall develop an annual plan responsive to the “primary committee responsibilities” detailed herein. The annual plan shall be reviewed and approved by the full board.
 
(4)
Meeting Agenda - Committee meeting agendas shall be the responsibility of the committee chairperson, with input from committee members. It is expected that the chairperson would also ask for management and key committee advisors, and perhaps others, to participate in this process.
 
(5)
Committee Expectations and Information Needs - The committee shall communicate committee expectations and the nature, timing, and extent of committee information needs to management, internal audit, and external parties, including external auditors. Written materials, including key performance indicators and measures related to key business and financial risks, shall be received from management, auditors, and others at least one week in advance of meeting dates. Meeting conduct will assume board members have reviewed written materials in sufficient depth to participate in committee/board dialogue.
 
(6)
External Resources -The committee shall be authorized to access internal and external resources, as the committee requires, to carry out its responsibilities.
 
(7)
Committee Meeting Attendees - The committee shall request members of management, counsel, internal audit, and external auditors, as applicable, to participate in committee meetings, as necessary, to carry out the committee responsibilities. Periodically and at least annually, the committee shall meet in private session with only the committee members. It shall be understood that either internal or external auditors, or counsel, may, at any time, request a meeting with the audit committee or committee chairperson with or without management attendance. In any case, the committee shall meet in executive session separately with internal and external auditors, at least annually.
 
(8)
Reporting to the Board of Directors - The committee, through the committee chairperson, shall report periodically, as deemed necessary, but at least semi-annually, to the full board. In addition, summarized minutes from committee meetings, separately identifying monitoring activities from approvals, shall be available to each board member at least one week prior to the subsequent board of directors meeting.
 

 
2
 

(9)
Committee Self Assessment - The committee shall review, discuss, and assess its own performance as well as the committee role and responsibilities, seeking input from senior management, the full board, and others. Changes in role and/or responsibilities, if any, shall be recommended to the full board for approval.
 
Meeting Frequency
 
The committee shall meet at least three times quarterly.  Additional meetings shall be scheduled as considered necessary by the committee or chairperson,
 
Reporting to Shareholders
 
The committee shall make available to shareholders a summary report on the scope of its activities. This may be identical to the report that appears in the company’s annual report.
 
Committee’s Relationship with External and Internal Auditors
 
(1)
The external auditors, in their capacity as independent public accountants, shall be responsible to the board of directors and the audit committee as representatives of the shareholders.
 
(2)
As the external auditors review financial reports, they will be reporting to the audit committee. They shall report all relevant issues to the committee responsive to agreed-on committee expectations. In executing its oversight role, the board or committee should review the work of external auditors.
 
(3)
The committee shall annually review the performance (effectiveness, objectivity, and independence) of the external and internal auditors. The committee shall ensure receipt of a formal written statement from the external auditors consistent with standards set by the Independent Standards Board and the Securities and Exchange Commission. Additionally, the committee shall discuss with the auditor relationships or services that may affect auditor objectivity or independence. If the committee is not satisfied with the auditors’ assurances of independence, it shall take or recommend to the full board appropriate action to ensure the independence of the external auditor.
 
(4)
The internal audit function shall be responsible to the board of directors through the committee.
 
(5)
If either the internal or the external auditors identify significant issues relative to the overall board responsibility that have been communicated to management but, in their judgment, have not been adequately addressed, they should communicate these issues to the committee chairperson.
 
(6)
Changes in the directors of internal audit or corporate compliance shall be subject to committee approval.
 

 
3
 


 
Primary Committee Responsibilities
 

 
Monitor Financial Reporting and Risk Control Related Matters
 

 
The committee should review and assess:
 
(1)
Risk Management - The company’s business risk management process, including the adequacy of the company’s overall control environment and controls in selected areas representing significant financial and business risk.
 
(2)
Annual Reports and Other Major Regulatory Filings - All major financial reports in advance of filings or distribution.
 
(3)
Internal Controls and Regulatory Compliance - The company’s system of internal controls for detecting accounting and reporting financial errors, fraud and defalcations, legal violations, and noncompliance with the corporate code of conduct.
 
(4)
Internal Audit Responsibilities - The annual audit plan and the process used to develop the plan. Status of activities, significant findings, recommendations, and management’s response.
 
(5)
Regulatory Examinations - SEC inquiries and the results of examinations by other regulatory authorities in terms of important findings, recommendations, and management’s response.
 
(6)
External Audit Responsibilities - Auditor independence and the overall scope and focus of the annual/interim audit, including the scope and level of involvement with unaudited quarterly or other interim-period information.
 
(7)
Financial Reporting and Controls - Key financial statement issues and risks, their impact or potential effect on reported financial information, the processes used by management to address such matters, related auditor views, and the basis for audit conclusions. Important conclusions on interim and/or year-end audit work in advance of the public release of financials.
 
(8)
Auditor Recommendations - Important internal and external auditor recommendations on financial reporting, controls, other matters, and management’s response. The views of management and auditors on the overall quality of annual and interim financial reporting.
 

 
4
 


 
The committee should review, assess, and approve:
 
(1)
The code of ethical conduct.
 
(2)
Changes in important accounting principles and the application thereof in both interim in and annual financial reports.
 
(3)
Significant conflicts of interest and related-party transactions.
 
(4)
External auditor performance and changes in external audit firm (subject to ratification by the full board).
 
(5)
Internal auditor performance and changes in internal audit leadership and/or key financial management.
 
(6)
Procedures for whistle blowers.
 
(7)
Pre-approve allowable services to be provided by the auditor.
 
(8)
Retention of complaints.
 

 


 
5
 


Exhibit 99.2
 
Touchpoint Metrics, Inc.
 
CHARTER - DISCLOSURE COMMITTEE
 

 
Disclosure Policy
 
All financial disclosures made by the Company to its security holders or the investment community should (i) be accurate, complete and timely, (ii) fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows, and (iii) meet any other legal, regulatory or stock exchange requirements.
 
Committee Purpose
 
The Company’s Disclosure Committee (the “Committee”) shall assist the Company’s officers and directors (collectively, the “Senior Officers”) fulfilling the Company’s and their responsibilities regarding (i) the identification and disclosure of material information about the Company and (ii) the accuracy, completeness and timeliness of the Company’s financial reports.
 
Responsibilities
 
Subject to the supervision and oversight of Senior Officers, the Committee shall be responsible for the following tasks:
 
-
Review and, as necessary, help revise the Company’s controls and other procedures (“Disclosure Controls and Procedures”) to ensure that (i) information required by the Company to be disclosed to the Securities and Exchange Commission (the “SEC”), and other written information that the Company will disclose to the public is recorded, processed, summarized and reported accurately and on a timely basis, and (ii) such information is accumulated and communicated to management, including the Senior Officers, as appropriate to allow timely decisions regarding required disclosure.
 
-
Assist in documenting, and monitoring the integrity and evaluating the effectiveness of, the Disclosure Controls and Procedures.
 
-
Review the Company’s (i) Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, proxy statement, material registration statements, and any other information filed with the SEC (collectively, the “Reports”), (ii) press releases containing financial information, earnings guidance, forward-looking statements, information about material transactions, or other information material to the Company’s security holders, (iii) correspondence broadly disseminated to shareholders, and (iv) other relevant communications or presentations (collectively, the “Disclosure Statements”).

 
 
 


 

 
 
-
Discuss information relative to the Committee’s responsibilities and proceedings, including (i) the preparation of the Disclosure Statements and (ii) the evaluation of the effectiveness of the Disclosure Controls and Procedures.

 
Other Responsibilities
 
The Committee shall have such other responsibilities, consistent with the Committee’s purpose, as any Senior Officer may assign to it from time to time.
 
Disclosure Control Considerations
 
The Committee shall base the review and revision of the Disclosure Controls and Procedures on the following factors:
 
 
-
Control Environment: The directives of the Board and Audit Committee; the integrity and ethical values of the Company’s officers and employees, including the “tone at the top”; the Company’s Code of Conduct; and the philosophy and operating style of management, including how employees are organized and how authority is delegated.
 
-
Risk Assessment: The identification and analysis of relevant risks to achieving the goal of accurate and timely disclosure, forming a basis for determining how the risks should be managed.
 
-
Control Activities: The procedures to ensure that necessary actions are taken to address and handle risks to achievement of objectives.
 
-
Information and Communication: The accumulation, delivery and communication of financial information throughout (i.e., up, down and across) the organization.
 
-
Monitoring: The assessment of the quality of the financial reporting systems over time through ongoing monitoring and separate evaluations, including through regular management supervision and reporting of deficiencies upstream.

 
Organization
 
The members of the Committee will be comprised of the Company’s officers and directors.
 
The Committee may designate two or more individuals, at least one of whom shall be knowledgeable about financial reporting and another about law, who can, acting together, review Disclosure Statements when time does not permit full Committee review.
 

 
 
 


 
The Senior Officers at their option may, at any time and from time to time, assume any or all of the responsibilities of the Disclosure Committee identified in this Charter, including, for example, approving Disclosure Statements when time does not permit the full Committee (or the designated individuals) to meet or act.
 
Chair
 
The Chief Financial Officer of the Company shall act as the Chair of the Committee (unless and until another member of the Committee shall be so appointed by any Senior Officer).
 
Meetings and Procedures
 
The Committee shall meet or act as frequently and as formally or informally as circumstances dictate to (i) ensure the accuracy, completeness and timeliness of the Disclosure Statements and (ii) evaluate the Disclosure Controls and Procedures and determine whether any changes to the Disclosure Controls and Procedures are necessary or advisable in connection with the preparation of the Reports or other Disclosure Statements, taking into account developments since the most recent evaluation, including material changes in the Company’s organization and business lines and any material change in economic or industry conditions.
 
The Committee shall adopt, whether formally or informally, such procedures as it deems necessary to facilitate the fulfillment of its responsibilities.
 
Full Access
 
The Committee shall have full access to all of Company’s books, records, assets, facilities and personnel, including the internal auditors, in connection with fulfilling its responsibilities.
 
Charter Review
 
The Committee shall review and assess this Charter annually, and recommend any proposed changes to the Senior Officers for approval.
 
Interpretation
 
Any questions of interpretation regarding this Charter, or the Committee’s responsibilities or procedures, shall be determined initially by the Chair and, to the extent necessary, ultimately by the Senior Officers.