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

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015

Commission File Number 033-19411-C

TETRIDYN SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
   
Nevada
20-5081381
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
800 South Queen Street
 
Lancaster, PA
17603
(Address of principal executive offices)
(Zip Code)
 
717-715-0238
(Registrant’s telephone number, including area code)
   
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
n/a
n/a
 
Securities registered pursuant to Section 12(g) of the Act:
n/a
(Title of Class)

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 not required to file reports pursuant to Section 13 or 15(d) of the Act. x

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). 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. x

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  o
Accelerated filer  o
Non-accelerated filer  o
Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨   No  x

State the aggregate market value of the voting and nonvoting common equity held by nonaffiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. As of June 30, 2015, the aggregate market value of the voting and nonvoting common equity held by nonaffiliates of the registrant was $1,201,593.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of March 30, 2016, issuer had 53,404,140 shares of issued and outstanding common stock, par value $0.001.

DOCUMENTS INCORPORATED BY REFERENCE:  None.
 
 
 

TABLE OF CONTENTS


Item
Description
Page
     
 
Special Note About Forward-Looking Information
3
     
 
Part I
 
Item 1
Business
4
Item 1A
Risk Factors
8
Item 1B
Unresolved Staff Comments
11
Item 2
Properties
12
Item 3
Legal Proceedings
12
Item 4
Mine Safety Disclosures
12
     
 
Part II
 
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters
 
 
and Issuer Purchases of Equity Securities
12
Item 6
Selected Financial Data
13
Item 7
Management’s Discussion and Analysis of Financial Condition
 
 
and Results of Operations
13
Item 7A
Quantitative and Qualitative Disclosures about Market Risk
17
Item 8
Financial Statements and Supplementary Data
18
Item 9
Changes in and Disagreements with Accountants on
 
 
Accounting and Financial Disclosure
18
Item 9A
Controls and Procedures
18
Item 9B
Other Information
20
     
 
Part III
 
Item 10
Directors, Executive Officers and Corporate Governance
20
Item 11
Executive Compensation
21
Item 12
Security Ownership of Certain Beneficial Owners and Management
 
 
and Related Stockholder Matters
22
Item 13
Certain Relationships and Related Transactions,
 
 
and Director Independence
23
Item 14
Principal Accounting Fees and Services
23
     
 
Part IV
 
Item 15
Exhibits, Financial Statement Schedules
25
 
Signatures
27

2
 
 
 


SPECIAL NOTE ABOUT FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K are forward-looking statements contains statements about the future, sometimes referred to as “forward-looking” statements. Forward-looking statements are typically identified by the use of the words “believe,” “may,” “could,” “should,” “expect,” “anticipate,” “estimate,” “project,” “propose,” “plan,” “intend,” and similar words and expressions. Statements that describe our future strategic plans, goals, and objectives are also forward-looking statements.

Readers of this report are cautioned that any forward-looking statements, including those regarding us and our management’s current beliefs, expectations, anticipations, estimations, projections, strategies, proposals, plans, and intentions, are not guarantees of future performance or results of events and involve risks and uncertainties, such as:

●
whether we will be able to obtain additional amounts of capital from external sources in order to expand our product offerings and introduce newly developed products into new markets;

●
whether the substantial amounts we need to spend for product development will enable us to penetrate new markets and expand sales;

●
whether we will be able to develop or acquire additional technologies that will allow us to expand our product offerings;

●
whether we will be able to overcome our low stock price to obtain equity capital on favorable terms;

●
whether we will be able to overcome the general downturn in the economy to expand our markets and increase revenues;

●
whether recently adopted national healthcare legislative reform will adversely affect the particular segments of the industry in which we are engaged;

●
whether our efforts to protect our intellectual properties will be successful;

●
whether our intellectual properties interfere with the intellectual properties of others; and

●
whether we will be able to engage and retain qualified technical and executive personnel.

The forward-looking information is based on present circumstances and on our predictions respecting events that have not occurred, that may not occur, or that may occur with different consequences from those now assumed or anticipated. Actual events and results may differ materially from those discussed in the forward-looking statements. The forward-looking statements included in this report are made only as of the date of this report.
 
3
 
 
 


PART I

ITEM 1. BUSINESS

Nature of Business

We specialize in providing business information technology (IT) solutions to our customers. We optimize business and IT processes by using systems engineering methodologies, strategic planning, and system integration to add efficiency and value to our customers’ business processes and to help our customers identify critical success factors in their business.

We provide business IT solutions primarily to the healthcare industry. We are expanding our service offerings into select other professional industries as we are able to commercialize product ideas for developing markets. We are attempting to expand marketing of our previous radio-frequency identification, or RFID, research and development to: address location tracking issues in the healthcare industry, including issues surrounding patient care; optimize business processes for healthcare providers; improve reporting of incidents; and increase revenues for provided services.

While we advance commercialization of our products, particularly Silver Key Solution as discussed below, we may also opportunistically investigate other technologies and operations that might diversify our business and provide an opportunity to enhance our value by leveraging our entrepreneurial skills, funding capabilities, and business contacts. We have not identified any such opportunity at this time.

Product Lines

In previous years, our research and development team, using a unique combination of radio-frequency, electrical, firmware, software, database, and systems engineering expertise, created complete, integrated business IT solutions, including hardware devices worn by individuals, communications equipment, complex databases, and software systems that provide advanced reporting and analysis tools. These solutions fall into four major categories:

(1)       Silver Key Solution
(2)       ChargeCatcher Revenue Recovery Services
(3)      Healthcare Software Solutions
(4)      Consulting Services

We are currently focusing our efforts on our Silver Key Solution and ChargeCatcher products, as well as working to develop or acquire new complementary technologies.

Silver Key Solution

Silver Key Solution is our leading healthcare RFID solution that includes automatic patient fall detection, motion detection, identification of location within a facility, and proximity of facility employee to facility resident. Over time, we have continued to enhance the product offering to address the concerns of various transitional care, assisted living, and nursing care facilities.

ChargeCatcher Revenue Recovery Services

ChargeCatcher specifically targets revenue recovery in hospital environments. ChargeCatcher augments a hospital staff’s ability to capture lost revenue due to data-entry errors, missing charge sheets, or other process errors. We perform advanced data mining and statistical correlation methodologies on a hospital’s chargeable items, while also employing artificial intelligence algorithms, to identify services and materials that were expended but never billed. By reviewing the identified missed charges, hospitals can correct their processes going forward.
 
4
 
 
 
ChargeCatcher fees are set on a contingency basis in which we are paid a percentage of the recovered additional revenue. This revenue model protects our customers if they have little lost revenue, while it benefits us for high-quality data analysis that results in identifying increased lost revenue.

Healthcare Solutions

Until late 2013, we were a value-added reseller for McKesson Corporation healthcare software and service packages. We sell, install, implement, support, and train on the following McKesson products: Medisoft Clinical, Lytec MD, and Total Practice Partner.

Consulting Services

Until late 2013, we provided consulting services to customers needing assistance with various aspects of their IT services. We also offered enterprise IT assessments, policy and procedure review and creation, IT strategic planning, and project management and planning.

2015 Activities

On October 27, 2015, we entered into a letter of intent with The Ameriglobal Senior Living Group, Inc. (ASLG). Under the terms of the letter of intent, ASLG is currently carrying out a beta trial of our Silver Key Solution product line, which will include peer review, at two senior healthcare facilities in Allentown, Pennsylvania. The trial is intended to determine the viability of the Silver Key Solution product line for the medical industry as a professional medical management and tracking solution that addresses problem areas in the healthcare segment, including issues surrounding patient care, optimized business processes to the healthcare providers, improved reporting of incidents, and increased revenues for provided services.

If the results of the beta trial justify further commercialization of the Silver Key Solution product line, the parties have agreed to negotiate in good faith a technology transfer agreement that provides for ASLG to market and sell Silver Key Solution products throughout the United States (but not internationally) in consideration of a cash payment and royalty on all sales during the ensuing 10 years.

2015 Investment Agreement

On March 23, 2015, we entered into an Investment Agreement dated March 12, 2015, with JPF Venture Group, Inc. (“JPF”). Before entering into this agreement, there was no material relationship between us and our affiliates and JPF and its affiliates.

Under the terms of the Investment Agreement, JPF purchased for $100,000 in cash 29,372,277 shares of our common stock at $0.003405 per share (the “JPF Stock”) and a warrant to purchase up to 1,033,585 shares of our common stock at an exercise price of $0.003 per share. JPF is an investment entity that is majority-owned by Jeremy P. Feakins (“Feakins”). The JPF Stock represents a 55% ownership interest by JPF in us, without giving effect to the issuance of additional shares of our common stock on the conversion of outstanding convertible notes.

JPF’s investment was used principally to initiate and pursue an updated technical and commercialization review of our intellectual properties with a view toward possible broadened marketing introduction and, in general, advance our business activities and bring our regulatory filings current.
 
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Concurrently with the execution of the Investment Agreement, Antoinette Knapp Hempstead and the estate of her late husband, David W. Hempstead (together, the “Hempsteads”), JPF, and Feakins entered into an agreement whereby, among other things: (i) JPF agreed to execute supplemental guarantees for the Hempsteads in connection with certain debt obligations to economic development entities owed by us and guaranteed by the Hempsteads; (ii) the Hempsteads transferred to JPF the consolidated convertible note payable by us to the Hempsteads with an outstanding principal balance of $394,380 as of December 31, 2014, together with accrued and unpaid payroll of $213,436, for a total of $607,816; and (iii) the Hempsteads returned to us for cancellation 1,200,000 shares of Series A Preferred Stock, which were cancelled. We have filed a Certificate of Withdrawal of Certificate of Designation for the preferred stock with the Nevada Secretary of State.

As required by the Investment Agreement, two designees of JPF, Feakins and Peter Wolfson, were appointed as our directors to replace incumbent directors Orville J. Hendrickson and Larry J. Ybarrondo, who resigned. See Change in Directors and Management below.

2015 Agreement and Plan of Merger

Also on March 23, 2015, we entered into an Agreement and Plan of Merger with Ocean Thermal Energy Corporation (“OTE”), under which we would have acquired OTE in exchange for what would have constituted 95% of our outstanding stock, after giving effect to the transaction. Before entering into this agreement, there were no material relationships between us and our affiliates and OTE and its affiliates.

The completion of our acquisition of OTE was subject to a number of conditions, including approval of the transaction to the OTE shareholders by the California Corporations Commission, No action was taken on that application after nine months of consideration, so the parties agreed to terminate the proposed acquisition, with each party paying its own costs.

Research and Development

We incurred costs of $0 and $341 for research and development for our operations during the years ended December 31, 2015 and 2014, respectively.

Intellectual Property

We believe our intellectual properties are critical to our business and growth. We rely on trade secret protection; confidentiality agreements with employees, consultants, customers, and others with whom we interact; and patent laws to protect our proprietary rights. We do not believe that our business IT solutions segment is dependent upon, or obtains a competitive advantage from, our patents or that the expiration of any patent would materially affect our business.

We frequently review our research and development efforts and product identification needs to consider whether we should seek additional patent or trademark protection for new developments or product offerings. Our 2013 patent application covering components of the Silver Key Solution processes is now considered abandoned due to lack of funds to continue the application process. We may seek patent protection for any novel enhancements we may invent.

We do not believe that any of our products or other proprietary rights infringe upon the rights of third parties. However, we cannot assure that others may not assert infringement claims against us in the future and recognize that any such assertion may require us to incur legal and other defense costs, enter into compromise royalty arrangements, or terminate the use of some technologies. Further, we may be required to incur legal and other costs to protect our proprietary rights against infringement by third parties.
 
6
 
 
 


Employees

As of December 31, 2015, we had one employee, Jeremy P. Feakins, who is employed as our chief executive officer and chief financial officer.

Government Regulation; Environmental Compliance

Our activities are not subject to present or expected probable material governmental regulation, including environmental laws.

Competition

The market for IT services and products is intensely competitive and highly fragmented, with minimal barriers to entry. We expect competition to increase in the future, and we cannot assure that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not have a material adverse effect on our business, financial condition, and operating results.

Potential competitors may have substantially greater research and product development capabilities and financial, technical, marketing, and human resources than we have. As a result, these competitors may:
 
●
succeed in developing products that are equal to or superior to our products or that achieve greater market acceptance than our products;
 
●
devote greater resources to developing, marketing, or selling their products;
 
●
respond more quickly to new or emerging technologies and technical advances and changes in customer requirements, which could render our technologies and products obsolete;
 
●
introduce products that make the continued development of our current and future products uneconomical;
 
●
obtain patents that block or otherwise inhibit our ability to develop and commercialize our products;
 
●
withstand price competition more successfully than we can;
 
●
establish cooperative relationships among themselves or with third parties that enhance their ability to address the needs of our prospective customers; and
 
●
take advantage of acquisition and other opportunities more readily than we can.

In our business IT solutions segment, we believe competition is based principally on providing resourceful creative solutions at competitive prices with quick, responsive service. We cannot assure that our efforts to meet these competitive factors will be successful.

Other Opportunities

To diversify risk and provide additional potential sources of revenue while we continue efforts to commercialize our products, principally Silver Key Solution at this time, we may seek to identify other opportunities for possible expansion or acquisition. We believe that we may be able to increase the commercial value of other products, technologies, and operations that we may seek through the application of the entrepreneurial, fundraising, management, marketing, and other skills of our management and executives we may recruit. We have not identified any such target products, technologies, or operations at this time.

If we do identify other products, technologies, or operations, we may seek a commercial arrangement through a joint venture or strategic relationship, acquisition, or other arrangement. We may issue common stock and other securities to acquire and fund any such transaction, which may dilute the interests of current stockholders. We cannot assure that our efforts to identify, acquire, and operate any acquired products, technologies, or operations will be successful.
 
7
 
 
 


ITEM 1A. RISK FACTORS

In addition to the negative implications of all information and financial data included in or referred to directly in this periodic report, you should consider the following risk factors. This periodic report contains forward-looking statements and information concerning us, our plans, and other future events. Those statements should be read together with the discussion of risk factors set forth below, because those risk factors could cause actual results to differ materially from such forward-looking statements.

The auditors’ report for the fiscal year ended December 31, 2015, contains an explanatory paragraph about our ability to continue as a going concern.

The report of our auditors on our consolidated financial statements for the years ended December 31, 2015 and 2014, as well as for prior years, contains an explanatory paragraph raising substantial doubt about our ability to continue as a going concern.

We will need to reorganize and expand our management.

Since the April 2013 unexpected death of David Hempstead, we have sought to expand our management to obtain critical technological, management, and fundraising skills that we believe will be important to our business. We continue that effort in order to advance the scaled commercialization of our principal products, but cannot predict when or whether we will be able to recruit and maintain additional personnel with required marketing and technology support skills.

We will require substantial amounts of additional capital from external sources.

We will require substantial additional funds to complete development and marketing of our Silver Key Solution products and to expand marketing of our ChargeCatcher product. The extent of our future capital requirements will depend on many factors, including competing technological and market developments; effective commercialization activities; establishment of strategic alliances, joint ventures, or other collaborative arrangements; and other factors not within our control. We anticipate that we will seek required funds from external sources.

We may seek required funds through the sale of equity or other securities. Our ability to complete an offering on acceptable terms will depend on many factors, including the condition of the securities markets generally and for companies such as our company at the time of an offering; the business, financial condition, and prospects at the time of the proposed offering; our ability to identify and reach a satisfactory arrangement with prospective underwriters; and various other factors, many of which are outside our control. Our efforts to raise equity capital will be adversely affected by the low trading price of our common stock. We cannot assure that we will be able to complete an offering on terms favorable to us or at all. The issuance of additional equity securities may dilute the interest of our existing stockholders or may subordinate their rights to the superior rights of new investors.

We may also seek additional capital through strategic alliances, joint ventures, or other collaborative arrangements. Any such relationships may dilute our interest in any specific project and decrease the amount of revenue that we may receive from the project. We cannot assure that we will be able to negotiate any strategic investment or obtain required additional funds on acceptable terms, if at all. In addition, our cash requirements may vary materially from those now planned because of the results of future research and development; results of product testing; potential relationships with our strategic or collaborative partners; changes in the focus and direction of our research and development programs; competition and technological advances; issues related to patent or other protection for proprietary technologies; and other factors.
 
8
 
 
 


If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate our planned marketing efforts; to obtain funds through arrangements with strategic or collaborative partners that may require us to relinquish rights to certain of our technologies, product candidates, or products that we would otherwise seek to develop or commercialize ourselves; or to license our rights to such products on terms that are less favorable to us than might otherwise be available.

Product development still comprises a substantial part of our operations, and we face significant technological uncertainties.

Our prospects must be considered in light of the risks, expenses, delays, problems, and difficulties that we may encounter in entering new markets with our business IT solutions, including:
 
●
our ability to maintain and expand a sales network to expose our product to potential customers and to complete sales;
 
●
our ability to manage our limited working capital;
 
●
our ability to scale systems and fulfillment capabilities to accommodate any growth of our business;
 
●
our ability to meet competition;
 
●
our ability to access and obtain additional capital when required;
 
●
our ability to develop and maintain strategic relationships; and
 
●
our dependence upon key personnel.

We cannot be certain that our business strategy will be successful or that it will successfully address these risks.

Implementation and any new amendment of national healthcare legislation may adversely affect our business.

The recently adopted national healthcare legislation is implementing a number of changes in the way healthcare is delivered and paid for in the United States, which may result in market disruptions and other currently unforeseen circumstances that may limit or reduce the demand for our services or the ability of our current and future customers to pay for them. That legislation has been subject to persistent opposition in the United States Congress, and there is significant risk that it may be amended, repealed, or replaced with legislation that would implement different changes. We cannot predict the possible impact of these existing and potential legislative reforms on our business.

If we are unable to protect our intellectual property, we may lose a valuable asset or incur costly litigation to protect our rights.

Our success will depend, in part, upon our intellectual property rights. Litigation to enforce intellectual property rights or to protect trade secrets could result in substantial costs and may not be successful. Any inability to protect intellectual property rights could seriously harm our business, operating results, and financial condition. In addition, the laws of certain foreign countries may not protect intellectual property rights to the same extent as do the laws of the United States. Our means of protecting our intellectual property rights in the United States or abroad may not be adequate to fully protect those intellectual property rights.
 
9
 
 
 


Claims that we infringe upon the intellectual property rights of others could be costly to defend or settle.

Litigation regarding intellectual property rights is common in the software industry. We expect that software technologies and services may be increasingly subject to third-party infringement claims as the number of competitors in our industry segment grows and the functionality of products and services in different industry segments overlaps. We may, from time to time, encounter disputes over rights and obligations concerning intellectual property. Although we believe that our intellectual property rights will be sufficient to allow us to market products and services without incurring third-party liability, third parties may bring claims of infringement against us. These claims may or may not have merit. Any litigation to defend against claims of infringement or invalidity could result in substantial costs and diversion of resources. Furthermore, a party making a claim could secure a judgment that requires us to pay substantial damages. A judgment could also include an injunction or other court order that could prevent us from selling products or services. Our business, operating results, and financial condition could be harmed if any of these events occurred.

We will need to hire and retain a number of key employees who may be difficult to find.

Roll-out of our products may require us to hire additional personnel, including software engineers, systems engineers, customer support personnel, marketing personnel, and operational personnel. Competition for these individuals is intense, and we may not be able to attract or retain additional highly qualified personnel in the future. The failure to attract, motivate, and retain these additional employees could seriously harm our business.

Any substantial increase in sales will require skilled management of growth.

As our operations expand, our success will depend on our ability: to manage continued growth, including integration of our executive officers, directors, and consultants into an effective management and technical team; to formulate strategic alliances, joint ventures, or other collaborative arrangements with third parties; to commercialize and market our proposed products and services; and to monitor and manage these relationships on a long-term basis. If our management is unable to integrate these resources and manage growth effectively, the quality of our products and services, our ability to retain key personnel, and the results of our operations would be materially and adversely affected.

If we provide software products that are unreliable, we could lose customers and revenues.

Software products may contain unknown and undetected errors or performance problems. Many serious defects in software products are frequently found during the period immediately following introduction of new or enhancements to existing products. Although we will attempt to resolve all errors we believe our customers would consider serious, no technology is error-free. Undetected errors or performance problems may be discovered after customers begin using our products. This could result in lost revenues or delays in customer acceptance and could be detrimental to our reputation, which could harm our business, operating results, and financial condition.

We will be exposed to the risk of product liability.

The implementation of our business plan entails risks of product liability. We will seek to obtain product liability insurance, but we cannot assure that we will be able to obtain such insurance or, if we are able to do so, that we will be able to do so at rates that will make it cost-effective. Any successful product liability claim made against us could substantially reduce or eliminate any economic return to us or our stockholders and could have a significant adverse impact on our future.
 
10
 
 
 


If we become subject to service-related liability claims, they could be time-consuming and costly to defend.

Because our customers will use our products and services for mission-critical applications in the medical and other fields, any errors, defects, or other performance problems could result in liability or financial or other damages to our customers. They could seek damages for losses from us that, if successful, could have a material adverse effect on our business, operating results, or financial condition. Although we intend for our agreements with customers to contain provisions designed to limit exposure to service-related liability claims, existing or future laws or unfavorable judicial decisions could negate these limitations of liability provisions. A service-related liability claim brought against us, even if unsuccessful, could be time-consuming, costly to defend, and harm our reputation.

We are authorized to issue substantial additional shares of stock, which would dilute the ownership of our stockholders.

We have authorized 100,000,000 shares of common stock and 5,000,000 shares of preferred stock. Of these, 53,404,140 shares of common stock were issued and outstanding as of December 31, 2015, and 20,775,201 were reserved for exercise of a warrant and conversion of outstanding promissory note balances. Our board of directors also has authority, without action or vote of the stockholders, to issue all or part of the authorized but unissued shares. Any such issuance will dilute the percentage ownership of stockholders and may further dilute the book value of the shares of common stock.

Penny stock regulations will impose certain restrictions on resales of our securities, which may cause an investor to lose some or all of its investment.

The Securities and Exchange Commission (SEC) has adopted regulations that generally define a “penny stock” to be any equity security that has a market price (as defined) of less than $5.00 per share that is not traded on a national securities exchange or that has an exercise price of less than $5.00 per share, subject to certain exceptions. As a result, our common stock is subject to rules that impose additional sales practice requirements on broker-dealers that sell these securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of these securities and have received the purchaser’s written consent to the transaction before the purchase. Further, if the price of the stock is below $5.00 per share and the issuer does not have $2.0 million or more net tangible assets or is not listed on a registered national securities exchange, sales of such stock in the secondary trading market are subject to certain additional rules promulgated by the SEC. These rules generally require, among other things, that brokers engaged in secondary trading of penny stocks provide customers with written disclosure documents, monthly statements of the market value of penny stocks, disclosure of the bid and asked prices, and disclosure of the compensation to the broker-dealer and the salesperson working for the broker-dealer in connection with the transaction. These rules and regulations may affect the ability of broker-dealers to sell our common stock, thereby effectively limiting the liquidity of our common stock. These rules may also adversely affect the ability of persons that acquire our common stock to resell their securities in any trading market that may exist at the time of an intended sale.


ITEM 1B. UNRESOLVED STAFF COMMENTS

This item is not applicable to our company.
 
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ITEM 2. PROPERTIES

Our principal executive offices are located at 800 South Queen Street, Lancaster, Pennsylvania 17603, telephone number (717) 715-0238, where we share fully furnished offices with JPF and obtain miscellaneous clerical services for $2,500 per month under an oral arrangement.


ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings and no material legal proceedings have been threatened by us or, to the best of our knowledge, against us.


ITEM 4. MINE SAFETY DISCLOSURES

This item is not applicable to our company.


PART II

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

The following table sets forth for the periods indicated the high and low closing sales prices for our common stock as quoted under the symbol TDYS on the Over-The-Counter Bulletin Board for years 2015 and 2014. Such quotations do not include commissions or retail mark-ups or mark-downs and may not represent actual transactions:

 
Low
 
High
       
2016:
     
First Quarter (through March 23, 2016)
$0.030
 
$0.050
       
2015:
     
Fourth Quarter
0.040
 
0.060
Third Quarter
0.041
 
0.060
Second Quarter
0.030
 
0.0795
First Quarter
0.010
 
0.080
       
2014:
     
Fourth Quarter
0.010
 
0.010
Third Quarter
0.010
 
0.010
Second Quarter
0.010
 
0.010
First Quarter
0.010
 
0.010

On December 31, 2015, the closing price per share of our common stock on the Over-The-Counter Quotation Board was $0.04.

We have never paid cash dividends on our common stock and do not anticipate that we will pay dividends in the foreseeable future. We intend to reinvest any future earnings to further expand our business. We estimate that, as of December 31, 2015, we had approximately 820 stockholders of record.
 
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Equity Compensation Plans

We have no equity compensation plans under which our equity securities are authorized for issuance.


ITEM 6. SELECTED FINANCIAL DATA

This item is not applicable to our company.


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

The following discussion should be read in conjunction with our audited consolidated financial statements and notes to our financial statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors discussed elsewhere in this report.

Certain information included herein contains statements that may be considered forward-looking statements, such as statements relating to our anticipated revenues, gross margin and operating results, future performance and operations, plans for future expansion, capital spending, sources of liquidity, and financing sources. This forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include those relating to our liquidity requirements, the continued growth of the software industry, the success of our product development, marketing and sales activities, vigorous competition in the software industry, dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), domestic or global economic conditions, the inherent uncertainty and costs of prolonged arbitration or litigation, and changes in federal or state tax laws or the administration of such laws.

Overview

We optimize business and IT processes by using systems engineering methodologies, strategic development, and integration to add efficiency and value to our customers’ business processes and to help our customers identify critical success factors in their business.

We provide business IT solutions to the healthcare industry. We are expanding our service offerings into select other professional industries as those markets develop and as we develop new applications for our integrated system of radio-frequency identification and software solutions for tracking, management, and diagnostic systems.

Description of Expenses

General and administrative expenses consist primarily of salaries and related costs for accounting, administration, finance, human resources, and information systems.

Professional fees expenses consist primarily of fees related to legal, outside accounting, auditing, and investor relations services.

Selling and marketing expenses consist primarily of advertising, promotional activities, trade shows, travel, and personnel-related expenses.
 
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Research and development expenses consist of payroll and related costs for software engineers, management personnel, and the costs of materials used by these employees in the development of new or enhanced product offerings.

In accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification (“ASC”) 985, Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed, development costs incurred in the research and development of new software products to be sold, leased, or otherwise marketed are expensed as incurred until technological feasibility in the form of a working model has been established. Internally generated, capitalizable software development costs have not been material to date. We have charged our software development costs to research and development expense in our statements of operations.

Property and equipment are recorded at cost. Maintenance, repairs, and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Gains or losses on dispositions of property and equipment are included in the results of operations when realized.

Results of Operations

Comparison of Years Ended December 31, 2015 and 2014

Revenues and Costs of Revenue

Our revenue of $3,856 and $8,347 for 2015 and 2014, respectively, was not material.

Our cost of revenue of $40 and $3,099 for 2015 and 2014, respectively, was not material.

Although the net changes and percent changes for our revenues and our cost of revenue for 2015 and 2014 are summarized above, these trends should not be viewed as a definitive indication of our future results.

Operating Expenses and Other Expenses

General and administrative expenses for our operations, including noncash compensation expense, were $66,692 and $19,387 for 2015 and 2014, respectively, representing an increase of $47,305, or 244%, in 2015. The increase in our general and administrative expenses in 2015, as compared to 2014, reflects additional costs related to corporate transactions, increased marketing efforts, and related matters.

Professional fees expenses for our operations, including noncash compensation expense, were $172,092 and $33,759 for 2015 and 2014, respectively, an increase of $138,333, or 410%, in 2015. The increase in professional fees expenses was a result of legal fees related to the Merger and filing past-due periodic reports with the Securities and Exchange Commission.

Research and development expenses for our operations, including noncash compensation expense, of $0 and $341 for 2015 and 2014, respectively, were not material.

Gain on sale of securities was $0 and $75,000 in 2015 and 2014, respectively. The gain on sale of securities resulted from the sale of stock of our variable interest entity, Southfork Solutions, Inc., for $75,000 in 2014.

Interest expense was $111,774 and $51,110 in 2015 and 2014, respectively, an increase of $60,664, or 119%, in 2015. The change in interest expense for the year-end periods was due to an increase in outstanding indebtedness in the later year.
 
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Liquidity and Capital Resources

At December 31, 2015, our principal source of liquidity for our operations consisted of $4,667 of cash, as compared to $178 of cash at December 31, 2014. In addition, our stockholders’ deficit was $1,555,654 at December 31, 2015, as compared to $1,383,579 at December 31, 2014, an increase in the deficit of $172,075.

Our operations used net cash of $183,011 during 2015, as compared to using $86,280 during 2014. The $96,731 increase in the net cash used in our operating activities during 2015 primarily resulted from amortization of note discounts and increases in accrued expenses and accounts payable.

Investing activities provided $0 and $75,000 net cash in 2015 and 2014, respectively. The net cash provided by investing activities in 2014 resulted from the sale of the Southfork Solutions securities for $75,000. We had no similar transaction in 2015.

Financing activities provided net cash of $187,500 and $0 during 2015 and 2014, respectively. The increase cash from financing activities in 2015 results from the sale of common stock for $100,000 and the issuance of $87,500 in promissory notes to a related party.

We are focusing our efforts on completion of beta testing of our Silver Key Solutions product before proceeding with large-scale commercialization, while we explore external funding alternatives as our current cash is insufficient to fund planned operations for the next 12 months. We expect that additional funding support the development of other products and perhaps reduce indebtedness. Our independent auditors have expressed substantial doubt about our ability to continue as a going concern. As in 2015, we will continue to rely on the sale of debt and equity securities to meet our funding shortfalls, including issuances to affiliates. We expect that we will require additional investments and revenues from product sales in order to become financially viable.

As we continue development of new products and identify specific commercialization opportunities, we will focus on those product markets and opportunities for which we might be able to get external funding through joint venture agreements, strategic partnerships, or other direct investments.

We have no significant contractual obligations or commercial commitments not reflected on our balance sheet as of this date.

Critical Accounting Policies

We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management’s judgment in their application. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the notes to our December 31, 2015, consolidated financial statements. Note that our preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. We cannot assure that actual results will not differ from those estimates.
 
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Revenue Recognition

Revenue from software licenses and related installation and support services is recognized when earned and realizable. Revenue is earned and realizable when persuasive evidence of an arrangement exists; services, if requested by the customers, have been rendered and are determinable; and ability to collect is reasonably assured. Amounts billed to customers before these criteria being met are deferred. Revenue from the sale of software is recognized when delivered to the customer or upon installation of the software if an installation contract exists. Revenue from post-contract telephone support service contracts is recognized as the services are provided, determined on an hourly basis.

Revenue applicable to multiple-element fee arrangements is divided among the software, the installation, and post-contract support service contracts using vendor-specific objective evidence of fair value, as evidenced by the prices charged when the software and the services are sold as separate products or arrangements.

Income Taxes

We use the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and on the amount of operating loss carry-forwards and are measured using the enacted tax rates and laws that will be in effect when the temporary differences and carry-forwards are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.

Recent Accounting Pronouncements

In June 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers . The update gives entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide goods or services to customers. This ASU, which would apply to any entity that enters into contracts to provide goods or services, supersedes the revenue recognition requirements in Topic 605, Revenue Recognition , and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the update supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition–Construction-Type and Production-Type Contracts . The update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. This updated guidance is not expected to have a material impact on the Company’s results of operations, cash flows, or financial condition.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern , which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on the Company’s consolidated financial statements.
 
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In April 2015, the FASB issued ASU No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, to simplify presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU does not affect the recognition and measurement guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on its results of operations, cash flows, or financial condition.

In April 2015, the FASB issued ASU No. 2015-05, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement , which provides guidance to customers about whether a cloud computing arrangement includes a software license. If such an arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for it as a service contract. For public business entities, the ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on its results of operations, cash flows, or financial condition.

In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , which defers the effective date of ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on its results of operations, cash flows, or financial condition.

All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities.”


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This item is not applicable to our company.
 
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements, including the Report of Independent Registered Public Accounting Firm on our consolidated financial statements, are included beginning on page F-1 of this report, immediately following the signature page and supplemental information.


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

None.


ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us, in the reports that we file or submit to the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the periods specified by the SEC’s rules and forms and that information is accumulated and communicated to our management, including our principal executive and principal financial officer (whom we refer to in this periodic report as our Certifying Officer), as appropriate to allow timely decisions regarding required disclosure. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management evaluated, with the participation of our Certifying Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2015, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officer concluded that, as of December 31, 2015, our disclosure controls and procedures were not effective to provide reasonable assurance as of December 31, 2015, because certain deficiencies involving internal controls constituted material weaknesses, as discussed below. The material weaknesses identified did not result in the restatement of any previously reported financial statements or any other related financial disclosure, and management does not believe that the material weaknesses had any effect on the accuracy of our financial statements for the current reporting period.

Limitations on Effectiveness of Controls

A system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the system will meet its objectives. The design of a control system is based, in part, upon the benefits of the control system relative to its costs. Control systems can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. In addition, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. In addition, the design of any control system is based in part upon assumptions about the likelihood of future events.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fourth quarter of fiscal year 2015 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
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Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control of over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. We have assessed the effectiveness of those internal controls as of December 31, 2015, using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control—Integrated Framework (2013) as a basis for our assessment.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance respecting financial statement preparation and presentation. 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.

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected.

Based on our evaluation of internal control over financial reporting, our management concluded that our internal control over financial reporting was not effective as of December 31, 2015.

As of December 31, 2015, management identified the following material weaknesses:

●
Control Environment —We did not maintain an effective control environment for internal control over financial reporting.

●
Segregation of Duties —As a result of limited resources and staff, we did not maintain proper segregation of incompatible duties. The effect of the lack of segregation of duties potentially affects multiple processes and procedures.

●
Entity Level Controls —We failed to maintain certain entity-level controls as defined by the 2013 framework issued by COSO. Specifically, our lack of staff does not allow us to effectively maintain a sufficient number of adequately trained personnel necessary to anticipate and identify risks critical to financial reporting. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, due to lack of adequate staff with such expertise.

●
Access to Cash —One executive had the ability to transfer from our bank accounts.

These weaknesses are continuing. Management and the board of directors are aware of these weaknesses that result because of limited resources and staff. Management has begun the process of formally documenting our key processes as a starting point for improved internal control over financial reporting. Efforts to fully implement the processes we have designed have been put on hold due to limited resources, but we anticipate a renewed focus on this effort in the near future. Due to our limited financial and managerial resources, we cannot assure when we will be able to implement effective internal controls over financial reporting.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
 
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ITEM 9B. OTHER INFORMATION

None.


PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Name
 
Age
 
Title
         
Jeremy P. Feakins
 
62
 
Chairman of the Board, Chief Executive Officer,
Chief Financial Officer and Secretary/Treasurer
Peter H. Wolfson
 
51
 
Director

Jeremy P. Feakins has served as our chief executive officer, chief financial officer, and secretary/treasurer since March 2015. Mr. Feakins is also the chairman, chief executive officer, and principal financial officer for Ocean Thermal Energy Corporation, a Nevada corporation that develops projects for renewable power generation, desalinated water production, and air conditioning using its proprietary technologies designed to extract energy from the temperature differences between warm surface water and cold deep water. Mr. Feakins has over 35 years of experience as an entrepreneur and investor, having founded two technology-based companies. Between 1990 and 2006, Mr. Feakins was the chairman and chief executive officer of Medical Technology & Innovations, Inc. (MTI), a developer and manufacturer of a microprocessor-based, vision-screening device and other medical devices located in Lancaster, PA. In 1996, he managed the public listing of MTI on the over-the-counter markets and subsequently structured the sale of the rights to MTI’s vision-screening product to a major international eyewear company. Between 1998 and 2006, he was a managing member of Growth Capital Resources LLC, a venture capital company located in Lancaster, PA, where he successfully managed the public listings for four small companies on the over-the-counter market. Between 2005 and 2008, he served as executive vice chairman and member of the board of directors of Caspian International Oil Corporation (OTC: COIC), an oil exploration and services company located in Houston, TX and Almaty, KZ, where he managed its public listing. Since 2008, Mr. Feakins has been the chairman and managing partner of the JPF Venture Fund 1, LP, an early-stage venture capital company located in Lancaster, PA, focused on companies involved with humanitarian and/or sustainability projects. Since 2014, Mr. Feakins has been chairman and chief executive officer of JPF Venture Group, Inc. JPF Venture Group, Inc., provides strategic and operational business assistance to start-up, early-stage, and middle-market high-growth businesses and is a principal shareholder of our stock.

Mr. Feakins graduated from the Defence College of Logistics and Personnel Administration, Shrivenham, UK, and served seven years in the British Royal Navy. He is a member of the Institute of Directors in the United Kingdom and the British American Business Council in the United States.

Based on his background in the technology industry and his financial and management background, the board has concluded that Mr. Feakins is qualified to serve as a member of our board.

Peter Wolfson has served as one of our directors since March 2015. Mr. Wolfson is also the founder, president, and chief executive officer of Hans Construction, a developer and builder of upscale homes located in Lancaster, PA. Mr. Wolfson is a qualified commercial pilot at a major U.S.-owned international airline company and has over 30 years’ experience in the aviation business. He also has 10 years’ experience as a financial consultant with a subsidiary of Mass Mutual, developing financial strategies and tax planning.

Based on his financial background, the board has concluded that Mr. Wolfson is qualified to serve as a member of our board.
 
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Board of Directors’ Committees

Neither director is considered to be an independent member of our board of directors under NASD Rule 4200(a)(15) during 2015.

Our board as a whole acted as the audit committee, compensation committee, and nominating committee.

Change in Directors and Management

On March 23, 2015, in connection with the Investment Agreement with JPF Venture Group, Inc. (“JPF”), Orville J. Hendrickson and Larry J. Ybarrondo resigned their positions on our board of directors, and Jeremy P. Feakins and Peter Wolfson (as nominees of JPF) were appointed by board consent to our board. On December 7, 2015, Antoinette Knapp Hempstead resigned from all positions as an officer and director of our company, effective immediately upon acceptance by our board of directors. The resignations of Messrs. Hendrickson and Ybarrondo and Ms. Hempstead are not the result of any disagreement with us on any matter relating to our operations, policies, or practices.

Code of Ethics

We have adopted a code of ethics that applies to all of our employees, including our executive officers, a copy of which is included as an exhibit to this report.

Corporate Governance Matters

We have not adopted any material changes to the procedures by which security holders may recommend nominees to our board of directors.


ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth, for the fiscal years ended December 31, 2015 and 2014, the dollar value of all cash and noncash compensation earned by any person that was our principal executive officer, or PEO, during the preceding fiscal year. No executive officer earned more than $100,000 during the last fiscal year:

Summary Compensation
Name and Principal Position
Year
Ended
Dec. 31
Salary
($)
Bonus
($)
Stock
Award(s)
($)
Option
Awards ($)
Non-
Equity
Incentive
Plan
Compen-
sation
Change in
Pension
Value and
Non-Qualified
Deferred
Compen-
sation
Earnings ($)
All Other
Compen-
sation ($)
Total ($)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Jeremy P. Feakins
2015
  19,000 (1)
--
--
--
--
--
--
    19,000 (1)
PEO and PFO
                 
Antoinette K. Hempstead (2)
2015
        --
--
--
--
--
--
--
       --
PEO
2014
12,500
--
--
--
--
--
--
12,500
_______________
(1)      To date, $13,000 of Mr. Feakins’ salary has been accrued but unpaid.
(2)      Ms. Hempstead resigned as a director and officer in December 2015.

We currently pay our chief executive officer, Jeremy P. Feakins, $2,500 per month, under an oral arrangement.
 
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Outstanding Equity Awards at Fiscal Year-End

No stock option awards were exercisable or unexercisable as of December 31, 2015, for any executive officer.

Directors’ Compensation

Directors who are not employees are not compensated for their services.


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

The following table sets forth, as of December 31, 2015, the outstanding shares of common stock owned of record or beneficially by each person that owned of record, or was known by us to own beneficially, more than 5% of our issued and outstanding shares, and the name and share holdings of each director and all of the executive officers and directors as a group:

Name and Address of Person or Group (1)
Nature of Ownership
Amount
Percent
Principal Stockholders:
     
       
JPF Venture Group, Inc.
Common stock
29,372,277
55.0%
 
Warrant (2)
1,033,585
1.9
 
Convertible promissory notes (3)
20,775,201
28.0
   
51,181,063
48.9
       
Sawtooth Meadows, LP (4)
Common stock
12,279,111
23.0
       
Directors:
     
       
Jeremy P. Feakins (5)
Common stock
29,372,277
 
 
Warrant (2)
1,033,585
1.9
 
Convertible promissory notes (3)
20,775,201
28.0
   
51,181,063
48.9
       
Peter H. Wolfson
Common stock
--
 
       
All Executive Officers and Directors as a Group (2 persons):
Common stock
29,372,277
 
 
Warrant (2)
1,033,585
1.9
 
Convertible promissory notes (3)
20,775,201
28.0
   
51,181,063
48.9

(1)
800 South Queen Street, Lancaster, PA 17603, is the address for all stockholders in the table.
(2)
Warrant to purchase 1,033,585 shares of common stock at $0.003 per share that expires March 22, 2018.
(3)
Consists of common stock issuable on the conversion of a $394,380 promissory note dated March 2015, convertible at $0.025 per share into 15,775,200 shares of common stock; a $50,000 promissory note dated June 2015, convertible at $0.03 per share into 1,666,667 shares of common stock; a $50,000 promissory note dated November 2015, convertible at $0.03 per share into 1,666,667 shares of common stock; and a $50,000 promissory note dated February 2016, convertible at $0.03 per share into 1,666,667 shares of common stock. All calculations in this footnote are based on conversion of the principal only, without accrued interest, as of December 31, 2015, of $18,606, $1,200, $199, and $0 on the above notes, respectively.
(4)
Consists of 51,840 shares owned of record by Antoinette K. Hempstead and 12,227,271 shares owned of record by Sawtooth Meadows, LP. Antoinette Knapp Hempstead is owner of, and controls, Sawtooth Meadows, LP, and as such, is deemed to be the beneficial owner of shares owned of record by Sawtooth Meadows, LP.
(5)
JPF Venture Group, Inc., is an investment entity that is majority-owned by Jeremy P. Feakins. Jeremy Feakins also controls JPF Venture Group, Inc., and as such, is deemed to be the beneficial owner of shares owned of record by it.
 
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The terms of the following transactions were not the result of arm’s-length negotiations.

Related-Party Loans

On March 19, 2015, we exchanged convertible notes payable to our officers and directors in the aggregate principal amount of $320,246, plus accrued but unpaid interest of $74,134, for an aggregate of $394,380 as of December 31, 2014, into a single, $394,380 consolidated convertible note dated December 31, 2014, which was assigned to JPF Venture Group, Inc. (“JPF”), our principal stockholder and an investment entity that is majority-owned by Jeremy Feakins, our director, chief executive officer, and chief financial officer. The new consolidated convertible note has payment and other terms identical to the notes exchanged, except that the conversion provisions were changed from a conversion price to be equal to the stock’s fair value as of the conversion date to a fixed conversion price under the consolidated note of $0.025 per share, the approximate market price of our common stock as of the date of the issuance of the consolidated note in March 2015. The note is due and payable within 90 days after demand.

On June 23, 2015, we borrowed $50,000 from our principal stockholder, JPF, pursuant to a promissory note. The terms of the note are as follows: (i) interest is payable at 6% per annum; (ii) the note is payable 90 days after demand; and (iii) payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of our common stock at the rate of one share for each $0.03 of principal amount of the note.

On November 23, 2015, we borrowed $50,000 from our principal stockholder, JPF, pursuant to a promissory note. The terms of the note are as follows: (i) interest is payable at 6% per annum; (ii) the note is payable 90 days after demand; and (iii) payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of our common stock at the rate of one share for each $0.03 of principal amount of the note.

On February 25, 2016, we borrowed $50,000 from our principal stockholder, JPF, pursuant to a promissory note. The terms of the note are as follows: (i) interest is payable at 6% per annum; (ii) the note is payable 90 days after demand; and (iii) payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of our common stock at the rate of one share for each $0.03 of principal amount of the note.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The firm of Liggett & Webb, P.A., formerly Liggett, Vogt & Webb, P.A., has served as our independent registered public accounting firm since year ended December 31, 2006, and the board has appointed Liggett & Webb, P.A. to act in that capacity for the year ending December 31, 2016. We anticipate that representatives of Liggett & Webb, P.A. will be present at any annual meeting and will be provided the opportunity to make a statement, if they desire to do so, and respond to appropriate questions.

Audit Fees

For our fiscal year ended December 31, 2015, we were billed approximately $8,511 for professional services rendered for the audit and reviews of our consolidated financial statements. For our fiscal year ended December 31, 2014, we were billed approximately $7,118 for professional services rendered for the audit and reviews of our consolidated financial statements.

Audit Related Fees

For our fiscal years ended December 31, 2015 and 2014, we did not incur any audit-related fees.
 
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Tax Fees

For our fiscal years ended December 31, 2015 and 2014, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.

All Other Fees

We did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2015 and 2014.

Audit and Non-Audit Service Preapproval Policy

In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder, the audit committee has adopted an informal approval policy that it believes will result in an effective and efficient procedure to preapprove services performed by the independent registered public accounting firm.

Audit Services . Audit services include the annual financial statement audit (including quarterly reviews) and other procedures required to be performed by the independent registered public accounting firm to be able to form an opinion on our consolidated financial statements. The audit committee preapproves specified annual audit services engagement terms and fees and other specified audit fees. All other audit services must be specifically preapproved by the audit committee. The audit committee monitors the audit services engagement and may approve, if necessary, any changes in terms, conditions, and fees resulting from changes in audit scope or other items.

Audit-Related Services . Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements, which historically have been provided to us by the independent registered public accounting firm and are consistent with the SEC’s rules on auditor independence. The audit committee has approved specified audit-related services within preapproved fee levels. All other audit-related services must be preapproved by the audit committee.

Tax Services . The audit committee preapproves specified tax services that the audit committee believes would not impair the independence of the independent registered public accounting firm and that are consistent with Securities and Exchange Commission’s rules and guidance. The audit committee must specifically approve all other tax services.

All Other Services . Other services are services provided by the independent registered public accounting firm that do not fall within the established audit, audit-related, and tax services categories. The audit committee preapproves specified other services that do not fall within any of the specified prohibited categories of services.

Procedures . All proposals for services to be provided by the independent registered public accounting firm, which must include a detailed description of the services to be rendered and the amount of corresponding fees, are submitted to the chairman of the audit committee and the Chief Financial Officer. The Chief Financial Officer authorizes services that have been preapproved by the audit committee. If there is any question as to whether a proposed service fits within a preapproved service, the audit committee chair is consulted for a determination. The Chief Financial Officer submits requests or applications to provide services that have not been preapproved by the audit committee, which must include an affirmation by the Chief Financial Officer and the independent registered public accounting firm that the request or application is consistent with the Securities and Exchange Commission’s rules on auditor independence, to the audit committee (or its chair or any of its other members pursuant to delegated authority) for approval.
 
24
 
 
 


PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 
Exhibit
Number*
 
 
Title of Document
 
 
Location
         
Item 3.
 
Articles of Incorporation and Bylaws
   
3.01
 
Articles of Incorporation of TetriDyn Solutions, Inc. dated May 15, 2006
 
Incorporated by reference from the current report on Form 8-K filed June 7, 2006.
         
3.02
 
Bylaws of TetriDyn Solutions, Inc. adopted May 26, 2006
 
Incorporated by reference from the current report on Form 8-K filed June 7, 2006.
         
3.03
 
Designation of Rights, Privileges, and Preferences of Series A Preferred Stock
 
 
Incorporated by reference from the annual report on Form 10-K for the year ended December 31, 2009, filed March 31, 2010.
         
Item 4.
 
Instruments Defining the Rights of Security Holders, Including Debentures
   
4.01
 
Specimen stock certificate
 
Incorporated by reference from the current report on Form 8-K filed June 7, 2006.
         
Item 10.
 
Material Contracts
   
10.07
 
Loan Agreement between TetriDyn Solutions, Inc., and Southeast Idaho Council of Governments, Inc., together with related promissory notes, dated December 23, 2009
 
Incorporated by reference from the annual report on Form 10-K for the year ended December 31, 2009, filed March 31, 2010.
         
10.18
 
Consolidated Promissory Note for $394,350 dated December 31, 2014
 
Incorporated by reference from the current report on Form 8-K filed June 8, 2015.
         
10.19
 
Investment Agreement between and among TetriDyn Solutions, Inc., Antoinette Knapp Hempstead, on behalf of herself and the estate of her late husband, David W. Hempstead, and JPF Venture Group, Inc.
 
Incorporated by reference from the current report on Form 8-K filed June 8, 2015.
         
10.20
 
Agreement and Plan of Merger between TetriDyn Solutions, Inc. and Ocean Thermal Energy Corporation
 
Incorporated by reference from the current report on Form 8-K filed June 8, 2015.
 
         
10.22
 
Amendment to Merger Agreement
 
Incorporated by reference from the quarterly report on Form 10-Q for the quarter ended June 30, 2015, filed October 2 2015.
         
10.23
 
Promissory Note dated June 23, 2015
 
Incorporated by reference from the quarterly report on Form 10-Q for the quarter ended June 30, 2015, filed October 2, 2015.
         
10.24
 
Agreement to Terminate Agreement and Plan of Merger between TetriDyn Solutions, Inc. and Ocean Thermal Energy Corporation
 
Incorporated by reference from the current report on Form 8-K filed December 10, 2015.
 
 
25
 
 
 
 
 
Exhibit
Number*
 
 
Title of Document
 
 
Location
         
10.25
 
Promissory Note dated February 25, 2016
 
Incorporated by reference from the current report on Form 8-K filed March 1, 2016.
         
10.26
 
Promissory Note dated November 23, 2015
 
This filing.
         
10.27
 
Summary of Compensatory Arrangements with Directors and Named Executive Officers
 
This filing.
         
Item 14.
 
Code of Ethics
   
14.01
 
TetriDyn Solutions, Inc., Code of Ethics
 
Incorporated by reference from the annual report on Form 10-KSB for the year ended December 31, 2006, filed April 2, 2007.
         
Item 21.
 
Subsidiaries of the Registrant
   
21.01
 
Schedule of subsidiaries
 
Incorporated by reference from the annual report on Form 10-K for the year ended December 31, 2010, filed April 13, 2011.
         
Item 31.
 
Rule 13a-14(a)/15d-14(a) Certifications
   
31.01
 
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14
 
This filing.
         
Item 32.
 
Section 1350 Certifications
   
32.01
 
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
This filing.
         
Item 101.
 
Interactive Data
   
101
 
Interactive Data Files
 
This filing.
 
_______________
*
The number preceding the decimal indicates the applicable SEC reference number in Item 601, and the number following the decimal indicating the sequence of the particular document. Omitted numbers in the sequence refer to documents previously filed with the SEC as exhibits to previous filings, but no longer required.
 
26
 
 
 


SIGNATURES

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

 
TETRIDYN SOLUTIONS, INC.
 
       
       
Date:  March 30, 2016
By:
/s/ Jeremy P. Feakins
 
   
Jeremy P. Feakins
 
   
Chief Executive Officer and
 
   
Chief Financial Officer
 


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 date indicated.

Dated: March 30, 2016
 
/s/ Jeremy P. Feakins
 
Jeremy P. Feakins, Director
 
Chief Executive Officer and
 
Chief Financial Officer
 
   
/s/ Peter Wolfson
 
Peter Wolfson, Director
 


SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT

We will furnish to the Securities and Exchange Commission, at the same time that it is sent to stockholders, any proxy or information statement that we send to our stockholders in connection with any annual stockholders’ meeting.
 
27
 
 
 


TETRIDYN SOLUTIONS, INC.


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AND
CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 and 2014















TETRIDYN SOLUTIONS, INC.

INDEX TO FINANCIAL STATEMENTS



 
Page
   
Report of Independent Registered Public Accounting Firm
F-2
   
Consolidated Balance Sheets–December 31, 2015 and December 31, 2014
F-3
   
Consolidated Statements of Operations for the Years Ended December 31, 2015 and 2014
F-4
   
Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2015 and 2014
F-4
   
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015 and 2014
F-6
   
Notes to Consolidated Financial Statements for the Years Ended December 31, 2015 and 2014
F-7




F-1
 
 
 



 
 
 
 
 
 
 
 
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors of:
Tetridyn Solutions, Inc.
 
 
We have audited the accompanying consolidated balance sheets of Tetridyn Solutions, Inc. (the “Company”) as of December 31, 2015 and 2014 and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the two years ended December 31, 2015 and 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly in all material respects, the financial position of Tetridyn Solutions, Inc., as of December 31, 2015 and 2014 and the results of its operations and its cash flows for the two years ended December 31, 2015 and 2014 in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company reported a net loss and cash used in operations of $346,742 and $183,011, respectively, and has a working capital deficiency and an accumulated deficit of $1,555,654 and $4,774,049, respectively at December 31, 2015. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans as to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
 
Liggett & Webb, P.A.
 
LIGGETT & WEBB, P.A.
Certified Public Accountants
 
Boynton Beach, Florida
March 30, 2016

F-2
 
 
 


TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
         
   
December 31,
 
December 31,
   
2015
 
2014
ASSETS
       
   Current Assets
       
      Cash
 
 $          4,667
 
 $             178
      Prepaid expenses
 
             2,478
   
   Total Current Assets
             7,145
 
               178
Total Assets
 
 $          7,145
 
 $             178
         
LIABILITIES
       
   Current Liabilities
       
      Accounts payable
 
 $       473,732
 
 $       406,705
      Accrued liabilities
 
         321,827
 
         353,749
      Customer deposits
 
                   -
 
             3,445
      Notes payable
 
         299,612
 
         299,612
      Convertible note payable to related party, net of debt discount
         467,628
 
         320,246
   Total Current Liabilities
       1,562,799
 
       1,383,757
Total Liabilities
 
 $    1,562,799
 
 $    1,383,757
         
COMMITMENTS AND CONTINGENCIES (See Note 9)
     
         
STOCKHOLDERS' DEFICIT
       
   Preferred stock - $0.001 par value
     
      Authorized:
5,000,000 shares      
      Issued and outstanding:
0 and 1,200,000 shares respectively
                   -
 
             1,200
   Common stock - $0.001 par value
     
      Authorized:
100,000,000 shares      
      Issued and outstanding:
53,404,140 shares and      
  24,031,863 shares, respectively 
           53,404
 
           24,032
   Additional paid-in capital
       3,164,991
 
       3,018,496
   Accumulated deficit
 
     (4,774,049)
 
     (4,427,307)
Total Stockholders' Deficit
     (1,555,654)
 
     (1,383,579)
         
Total Liabilities and Stockholders' Deficit
 $          7,145
 
 $             178
         
See the accompanying notes to consolidated financial statements.


F-3
 
 
 

TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
       
 
 For the Years Ended
 
 December 31,
 
2015
 
2014
Revenue
 $        3,856
 
 $        8,347
Cost of Revenue
               40
 
           3,099
Gross Profit
           3,816
 
           5,248
Operating Expenses
     
   General and administrative
         66,692
 
         19,387
   Professional fees
        172,092
 
         33,759
   Research and development
                  -
 
              341
Total Operating Expenses
        238,784
 
         53,487
Net Loss from Operations
      (234,968)
 
        (48,239)
Other Income (Expenses)
     
   Sale of Securities
                  -
 
         75,000
   Interest Expense
      (111,774)
 
        (51,110)
Total Other Income (Expenses)
      (111,774)
 
         23,890
Net Loss before Provision for Income Taxes
      (346,742)
 
        (24,349)
Provision for Income Taxes
                  -
 
                  -
Net Loss
 $   (346,742)
 
 $     (24,349)
       
Total Basic and Diluted Loss Per Common Share
 $        (0.01)
 
 $             -
       
Basic and Diluted Weighted-Average
     
   Common Shares Outstanding
46,222,457
 
24,031,863
       
See the accompanying notes to consolidated financial statements.

F-4
 
 
 

TETRIDYN SOLUTIONS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Years Ended December 31, 2015 and December 31, 2014
                 
           
Additional
 
Total
   
Preferred Stock
Common Stock
Paid In
Accumulated
Stockholders'
   
Shares
Amount
Shares
Amount
Capital
Deficit
Deficit
Balance, December 31, 2013
   1,200,000
 $ 1,200
  24,031,863
 $24,032
 $ 3,001,752
 $   (4,402,958)
 $   (1,375,974)
In kind contribution of rent
 
                -
          -
                -
           -
          4,350
                   -
             4,350
In kind contribution of salaries
         
        12,394
 
           12,394
Net loss
 
                -
          -
                -
           -
                -
          (24,349)
          (24,349)
Balance, December 31, 2014
 
   1,200,000
    1,200
  24,031,863
   24,032
    3,018,496
     (4,427,307)
      (1,383,579)
Preferred stock cancelled
 
  (1,200,000)
  (1,200)
                -
           -
          1,200
                   -
                    -
Discount on note payable
         
        74,667
 
           74,667
Sale of Common Stock
     
  29,372,277
   29,372
        70,628
 
          100,000
Net loss
 
                -
          -
                -
           -
                -
        (346,742)
        (346,742)
Balance, December 31, 2015
 
                -
 $        -
  53,404,140
 $53,404
 $ 3,164,991
 $   (4,774,049)
 $   (1,555,654)
                 
See the accompanying notes to consolidated financial statements.



F-5
 
 
 

TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
       
 
 For the Years Ended
 
 December 31,
 
2015
 
2014
Cash Flows from Operating Activities
     
Net Loss
 $       (346,742)
 
 $         (24,349)
Adjustments to reconcile net loss to net cash used in operating activities:
   
   Depreciation
                        -
 
                2,701
   In-kind contribution of rent
                        -
 
                4,350
   In-kind contribution of executive salaries
                        -
 
              12,394
   Amortization of note discount
              60,415
 
                        -
   Gain on sale of securities
                        -
 
            (75,000)
Changes in operating assets and liabilities:
     
   Accounts receivable
                        -
 
                1,960
   Prepaid expenses
              (2,478)
 
                        -
   Accrued expenses
              42,212
 
              38,439
   Accounts payable
              67,027
 
            (41,733)
   Customer deposits
              (3,445)
 
              (5,042)
Net Cash Used in Operating Activities
          (183,011)
 
            (86,280)
Cash Flows from Investing Activities
     
Proceeds from sale of securities
                        -
 
              75,000
Net Cash Provided by Investing Activities
                        -
 
              75,000
Cash Flows from Financing Activities
     
   Proceeds from sale of securities
            100,000
 
                        -
   Proceeds from related party debt
              87,500
 
                        -
Net Cash Provided By Financing Activities
            187,500
 
                        -
Net Increase(Decrease) in Cash
                4,489
 
            (11,280)
Cash at Beginning of Year
                   178
 
              11,458
Cash at End of Year
 $             4,667
 
 $                178
       
Supplemental Disclosure of Cash Flow Information:
     
Cash paid for income taxes
 $                     -
 
 $                     -
Cash paid for interest expense
 $           14,577
 
 $           12,554
       
 
See the accompanying notes to consolidated financial statements.

F-6
 
 
 
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014



Note 1 — Organization and Summary of Significant Accounting Policies

Nature of Business –TetriDyn Solutions, Inc. (the “Company”), optimizes business and information technology (IT) processes by using systems engineering methodologies, strategic planning, and system integration to develop radio-frequency identification products to address location tracking issues in the healthcare industry, including issues surrounding patient care; optimization of business processes for healthcare providers; improved reporting of incidents; and increased revenues for provided services.

Prior to 2015, as the Company’s marketing efforts were constrained by shortages of capital and management resources, it sought to obtain management and entrepreneurial services as well as new external funding as a bridge to marketing its Silver Key Solutions and ChargeCatcher products to both domestic and international markets. This led to a March 2015 investment by an unrelated firm that purchased a controlling block of the Company’s common stock and assumed management control of the Company to advance its marketing efforts. The Company is pursuing marketing with a residential healthcare provider that is exploring the installation of Silver Key Solutions and ChargeCatcher in its combined rehabilitation services, ancillary senior care services, senior care facilities, and other affiliates as a platform for third-party sales and installations. This provider recently agreed it will carry out a beta trial of the Silver Key Solutions product line, including a peer review.

During 2015, the Company also focused on completing a possible acquisition of Ocean Thermal Energy Corporation, a Delaware corporation, which is developing deep-water hydrothermal technologies to provide renewable energy and drinkable water. The parties terminated the proposed merger on December 7, 2015. See Current Reports on Form 8-K filed June 8, 2015, and December 10, 2015, which are incorporated herein by reference.

Principles of Consolidation — The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, an Idaho corporation also named TetriDyn Solutions, Inc. Intercompany accounts and transactions have been eliminated in consolidation.

Business Segments — The Company had only one business segment for the years ended December 31, 2015 and 2014.

Use of Estimates — In preparing financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Estimates include the valuation of deferred tax assets, in-kind contribution of rent, and reserve for accounts receivable. Actual results could differ from these estimates.

Cash and Cash Equivalents — For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

Revenue Recognition — Revenue from software licenses, related installation, and support services is recognized when earned and realizable. Revenue is earned and realizable when persuasive evidence of an arrangement exists, services, if requested by the customers, have been rendered and are determinable, and collectability is reasonably assured. Amounts received from customers before these criteria being met are deferred. Revenue from the sale of software is recognized when delivered to the customer or upon installation of the software if an installation contract exists. Revenue from post-contract support service contracts is recognized as the services are provided, determined on an hourly basis. The Company recognizes the revenue received for unused support hours under support service contracts that have had no support activity after two years. Revenue applicable to multiple-element fee arrangements is divided among the software, the installation, and post-contract support service contracts using vendor-specific objective evidence of fair value, as evidenced by the prices charged when the software and the services are sold as separate products or arrangements.

F-7
 
 
 
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014



Long-Lived Assets — The Company accounts for long-lived assets under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350, Accounting for Goodwill and Other Intangible Assets , and FASB ASC 360, Accounting for Impairment or Disposal of Long-Lived Assets . In accordance with FASB ASC 350 and FASB ASC 360, long-lived assets, goodwill, and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, goodwill, and intangible assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets.

Going Concern — The accompanying consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern. As reflected in the accompanying consolidated financial statements, the Company had a net loss of $346,742 and used cash of $183,011 in operating activities for the year ended December 31, 2015. The Company had a working capital deficiency of $1,555,654 and a stockholders’ deficit of $1,555,654 as of December 31, 2015. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on its ability to increase its sales and obtain external funding for its product development. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

Income Taxes — The Company accounts for income taxes under FASB ASC 740-10-25, Income Taxes . Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, 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.

Fair Value of Financial Instruments — FASB ASC 820, Fair Value Measurements and Disclosures , requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1
 
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
     
Level 2
 
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
     
Level 3
 
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.


F-8
 
 
 
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014




The Company’s financial instruments consist of accounts receivable, prepaid expenses, accounts payable, accrued liabilities, customer deposits, notes payable, and related-party convertible notes payable. Pursuant to ASC 820, Fair Value Measurements and Disclosures , and FASB ASC 825, Financial Instruments , the fair value of the Company’s cash equivalents is determined based on Level 1 inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of the other financial instruments approximate fair value due to the relatively short period to maturity for these instruments.

Property and Equipment — Property and equipment are recorded at cost. Maintenance, repairs, and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful life of the asset, which is set at five years for computing equipment and vehicles and seven years for office equipment. Gains or losses on dispositions of property and equipment are included in the results of operations when realized. Depreciation expense for the years ended December 31, 2015 and 2014, was $0 and $2,701, respectively.

Net Loss per Common Share — Basic and diluted net loss per common share are computed based upon the weighted-average stock outstanding as defined by FASB ASC 260, Earnings Per Share . As of December 31, 2015 and 2014, 1,033,585 and 0, respectively, of common share equivalents for granted warrants were antidilutive and not used in the calculation of diluted net loss per share. Additionally, as of December 31, 2015 and 2014, 19,579,279 and 39,721,800, respectively, of common share equivalents for convertible note payables were antidilutive and not used in the calculation of diluted net loss per share.

Stock-Based Compensation — On June 17, 2009, at the Company’s annual shareholders meeting, the Company’s shareholders approved the 2009 Long-Term Incentive Plan under which up to 4,000,000 shares of common stock may be issued. The 2009 plan is to be administered either by the board of directors or by the appropriate committee to be appointed from time to time by the board of directors. Awards granted under the 2009 plan may be incentive stock options (“ISOs”) (as defined in the Internal Revenue Code), appreciation rights, options that do not qualify as ISOs, or stock bonus awards that are awarded to employees, officers, and directors that, in the opinion of the board or the committee, have contributed or are expected to contribute materially to the Company’s success. In addition, at the discretion of the board of directors or the committee, options or bonus stock may be granted to individuals who are not employees, officers, or directors, but contribute to the Company’s success.

Equity instruments issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB ASC 505, Share-Based Payment . Emerging Issues Task Force, or EITF, Issue 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, defines the measurement date and recognition period for such instruments. In general, the measurement date is when either: (a) a performance commitment, as defined, is reached; or (b) the earlier of: (i) the nonemployee performance is complete; or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the EITF.

Effective January 1, 2006, the Company adopted the provisions of FASB ASC 505 for its stock-based compensation plan. Under FASB ASC 505, all employee stock-based compensation is measured at the grant date, based on the fair value of the option or award, and is recognized as an expense over the requisite service, which is typically through the date the options or awards vest. The Company adopted FASB ASC 505 using the modified prospective method. Under this method, for all stock-based options and awards granted before January 1, 2006, that remain outstanding as of that date, compensation cost is recognized for the unvested portion over the remaining requisite service period, using the grant-date fair value measured under the original provisions of FASB ASC 505 for pro forma and disclosure purposes. Furthermore, compensation costs will also be recognized for any awards issued, modified, repurchased, or cancelled after January 1, 2006.

F-9
 
 
 
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014




As the result of adoption of FASB ASC 505, the Company recognized $0 and $0 in stock-based compensation during the years ended December 31, 2015 and 2014, respectively.

Recent Accounting Pronouncements — In June 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers . The update gives entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide goods or services to customers. This ASU, which would apply to any entity that enters into contracts to provide goods or services, supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the update supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition–Construction-Type and Production-Type Contracts. The update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. This updated guidance is not expected to have a material impact on the Company’s results of operations, cash flows, or financial condition.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern , which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on the Company’s consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, to simplify presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU does not affect the recognition and measurement guidance for debt issuance costs. For public companies, the ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on its results of operations, cash flows, or financial condition.

In April 2015, the FASB issued ASU No. 2015-05, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement , which provides guidance to customers about whether a cloud computing arrangement includes a software license. If such an arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for it as a service contract. For public business entities, the ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on its results of operations, cash flows, or financial condition.

F-10
 
 
 
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014




In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , which defers the effective date of ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on its results of operations, cash flows, or financial condition.

All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.

Note 2 — Investments

On August 26, 2014, the Company sold to Southfork Solutions, Inc., its 39% minority, nonoperating interest in Southfork Solutions for $75,000. This operation had been discontinued in 2009.

Note 3 — Accounts Payable and Accrued Liabilities

As of December 31, 2015, the Company had $473,732 in accounts payable, $261,609 of which was due on multiple revolving credit cards under the names of former executive officers of the Company. These amounts represent advances to the Company from funds borrowed on credit cards in the names of these officers as an accommodation to the Company at a time when it was unable to obtain advances on its own credit. The obligations bear varying rates of interest between 5.25% and 27.24%.

The Company is responsible for reimbursing Dave Hempstead, its former chief executive officer, principal financial officer, and director, for personal credit card account expenditures on its behalf. The balance due on these credit card accounts was $261,609 as of the date of Mr. Hempstead’s death on April 26, 2013. The credit card companies have not sought collection from assets owned jointly with Mr. Hempstead’s surviving spouse, who in turn advised the Company on July 15, 2015, that she will not seek reimbursement from the Company unless the credit card companies hereafter seek payment. The full amount of this liability has been recorded and disclosed as part of accounts payable and will continue to be accrued until the statute of limitations has expired.
 
As of December 31, 2015, the Company had $321,827 in accrued liabilities. The accrued liabilities also included $213,436 in unpaid salaries to two of its former officers, which were assigned by those officers to JPF Venture Group, Inc., the Company’s principal stockholder and an investment entity that is majority-owned by Jeremy Feakins, the Company’s director, chief executive officer, and chief financial officer, pursuant to an investment agreement dated March 12, 2015.

F-11
 
 
 
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014



Note 4 — Convertible Notes Payable to Related Parties and Office Rental

On March 19, 2015, the Company exchanged convertible notes issued in 2010, 2011, and 2012, payable to its officers and directors in the aggregate principal amount of $320,246, plus accrued but unpaid interest of $74,134, into a single, $394,380 consolidated convertible note. The consolidated convertible note was assigned to JPF Venture Group, Inc. (“JPF”), the Company’s principal stockholder and an investment entity that is majority-owned by Jeremy Feakins, the Company’s director, chief executive officer, and chief financial officer. The new consolidated note is convertible to common stock at $0.025 per share, the approximate market price of the Company’s common stock as of the date of the issuance. The note bears interest at 6% per annum and is due and payable within 90 days after demand. As of December 31, 2015, accrued but unpaid interest on this note was $18,606.

On June 23, 2015, the Company borrowed $50,000 from its principal stockholder JPF, pursuant to a promissory note. The Company received $25,000 on July 31, 2015, and the remaining $25,000 on August 18, 2015. The terms of the note are as follows: (i) interest is payable at 6% per annum; (ii) the note is payable 90 days after demand; and (iii) payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of the Company’s common stock at the rate of one share each for $0.03 of principal amount of the note. As of December 31, 2015, the outstanding balance was $50,000, plus accrued interest of $1,200. The Company recorded a debt discount of $50,000 for the fair value of the beneficial conversion feature. As of December 31, 2015, the Company amortized $50,000 of the debt discount.

On November 23, 2015, the Company borrowed $50,000 from its principal stockholder JPF, pursuant to a promissory note. The Company received $37,500 before December 31, 2015, and the remaining $12,500 was received after the year-end. The terms of the note are as follows: (i) interest is payable at 6% per annum; (ii) the note is payable 90 days after demand; and (iii) payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of the Company’s common stock at the rate of one share each for $0.03 of principal amount of the note. As of December 31, 2015, the outstanding balance was $37,500, plus accrued interest of $205. The Company recorded a debt discount of $24,667 for the fair value of the beneficial conversion feature. As of December 31, 2015, the Company amortized $10,415 of the debt discount.

As of December 31, 2015, the Company had $87,500 in convertible notes payable due to related parties, with $1,405 in accrued interest.

During 2015, the Company paid JPF a total of $25,000 ($2,500 per month) for the shared use of furnished office space and clerical services. We recorded $2,500 as a prepaid expense.

Note 5 — Notes Payable in Default

As of October 25, 2011, a loan from one economic development entity was in default. The loan principal was $50,000, with accrued interest of $13,164 through December 31, 2015.
 
As of December 31, 2015, the Company was delinquent in payments on two loans to a second economic development entity. The Company owed this economic entity $73,470 in late payments with an outstanding principal balance of $163,791 and accrued interest of $33,417 as of December 31, 2015. Both loans are guaranteed by two of the Company’s officers. One loan is secured by liens on intangible software assets and the other loan is secured by the officers’ personal property. The Company is working with this entity to bring the payments current as soon as cash flow permits.
 

F-12
 
 
 
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014



As of December 31, 2015, the Company was delinquent in payments on a loan to a third economic development entity. The Company owed the third economic entity $76,070 in late payments with an outstanding principal balance of $85,821 and accrued interest of $21,209 as of December 31, 2015. This loan is secured by a junior lien on all the Company’s assets and shares of founders’ common stock. The Company is working with this entity to bring the payments current as soon as cash flow permits.

The above notes payable are summarized as follows:

  December 31,   December 31,
  2015   2014
Note payable to third party, due in monthly payments of
         
$2,000 through September 2015, bearing interest at 7%
         
per annum, secured by a junior lien on all of the Company’s
         
assets and shares of founders’ common stock
$ 
  85,821
  $ 
$  85,821
Note payable to third party, due in monthly payments of
         
$979 through January 2013, bearing interest at 6.25%
         
per annum, guaranteed by two shareholders, secured by liens
         
on intangible software assets
 
22,072
   
22,072
Note payable to third party, due in monthly payments of
         
$1,742 through December 2014, bearing interest at 7.00%
         
per annum, guaranteed by two shareholders secured by
         
shareholders' personal property
 
141,719
   
141,719
Note payable to third party, originally due in full September
         
2010, and extended during 2010 until October 2011,
         
bearing interest up to 5.00%, unsecured , in default
 
50,000
   
50,000
Total Notes Payable
$ 
299,612
  $ 
299,612
Less: Current Portion
 
299,612
   
299,612
Long-Term Notes Payable
$ 
           --
  $
           --

Note 6 — Stockholders’ Deficit

Common Stock — As of January 1, 2014, the Company had 24,031,863 shares of common stock issued and outstanding. During 2014, options to purchase 203,000 shares of common stock expired. No additional shares or options were granted during 2014. As of December 31, 2014, the Company had 24,031,863 common shares issued and outstanding.

As of January 1, 2015, the Company had 24,031,863 shares of common stock outstanding. In March 2015, the Company issued 29,372,277 shares of common stock and a warrant to purchase up to 1,033,585 shares of its common stock, at an exercise price of $0.003 per share, to its principal stockholder, JPF Venture Group, Inc., an investment entity that is majority-owned by the Company’s director, chief executive officer, and chief financial officer. No options were granted during 2015. As of December 31, 2015, the Company had 53,404,140 shares of common stock and no options outstanding.

F-13
 
 
 
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014



A summary of the status of the Company’s stock options as of December 31, 2015, and the changes during the period ended is presented below:

Weighted Average Fixed Options
 
Shares
 
Exercise Price
         
Outstanding at beginning of year
 
--
 
--
Outstanding at December 31, 2015
 
--
 
--
Exercisable at December 31, 2015
 
--
 
--
Weighted average exercise price of options granted to
       
employees in the year ended December 31, 2015
 
$     --       
 
--

A summary of the status of the Company’s stock options as of December 31, 2014, and the changes during the period ended is presented below:

Weighted Average Fixed Options
 
Shares
 
Exercise Price
         
Outstanding at beginning of year
 
203,000
   
Expired
 
(203,000)
 
$0.09
Outstanding at December 31, 2014
 
         --
 
--   
Exercisable at December 31, 2014
 
         --
 
--   
Weighted average exercise price of options granted to
       
employees in the year ended December 31, 2014
 
  $             --        
 
--   

The following table summarizes changes in outstanding and exercisable warrants as of December 31, 2015:

 
Number of Shares
 
Price Range
Warrants outstanding:
     
End of December 31, 2014
--
 
--
Issued March 23, 2015
1,033,585
 
$0.003
End of December 31, 2015
1,033,585
   
 
Preferred Stock — On November 12, 2009, the Company’s compensation committee, consisting of two independent directors, authorized the issuance of 600,000 shares Series A Preferred Stock to each of the Company’s executives (1,200,000 total shares) at a total value of $53,455. Each share of Series A Preferred Stock is entitled to 100 votes, voting with the common stock as a single class, except when voting as a separate class is required by law, and to 1/20 of the dividends on common stock and in distributions on dissolution and liquidation.

On March 23, 2015, 1,200,000 shares of Series A Preferred Stock, were returned to the Company and cancelled. No preferred shares or options were granted in 2015. As of December 31, 2015, no shares of preferred stock were issued and outstanding.

In-Kind Contribution of Rent and Salaries — For the year ended December 31, 2014, in-kind contribution of rent and salaries of $4,350 and $12,394, respectively, total was recognized.


F-14
 
 
 
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014


 
Note 7 — Concentrations

Sales — The Company had six customers that represented 25%, 17%, 14%, 12%, 12%, and 11% of the sales for the year ended December 31, 2015. The Company had three customers that represented 54%, 24%, and 18% of sales for the year ended December 31, 2014. The three customers were two healthcare facilities that purchased services, hardware, and software from the Company, and a claims company that paid the Company residual commissions.

Note 8 — Income Taxes

As of December 31, 2015, the Company has net operating loss carryforwards of approximately $3,354,000 that expire, if not used, from 2023 through 2035. The valuation allowance at December 31, 2014, was $1,257,606. The net change in the valuation allowance for the year ended December 31, 2015, was an increase of $135,298. The Company paid no income taxes during the years ended December 31, 2015 and 2014. Deferred tax assets and related valuation allowance were as follows at December 31, 2015 and 2014:

 
December 31
 
2015
2014
Accrued liabilities
$      83,972    
$      83,972   
Operating loss carryforwards
1,308,932
1,173,634
Total Deferred Income Tax Assets
1,392,904
1,257,606
Valuation allowance
(1,392,904)
(1,257,606)
Net Deferred Income Tax Asset
$              --  
$              --  

The following is a reconciliation of the tax benefit of pretax loss at the U.S. federal statutory rate with the benefit from income taxes:

 
For the Years Ended December 31
 
2015
2014
Benefit at statutory rate (34%)
$(117,892)  
$(8,279)    
Nondeductible permanent differences
          --
6,533
Change in valuation allowance
135,298
2,968
State tax benefit, net of federal tax
  (17,406)
(1,222)
Benefit from Income Taxes
$           --  
$        --    

Note 9 — Commitments and Contingencies

In March 2012, the compensation committee set the annual salary for the chief executive officer to be $50,000 through calendar year 2012 and for subsequent calendar years until otherwise modified in a subsequent compensation committee resolution. The former chief executive officer voluntarily forfeited her salary for the years ended December 31, 2014 and 2015, and contributed the services in-kind.


F-15
 
 
 
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014


 
Note 10--2015 Investment and Merger Agreements

Investment Agreement — On March 23, 2015, the Company entered into an Investment Agreement dated March 12, 2015, with JPF Venture Group, Inc. (“JPF”). JPF is an investment entity that is majority-owned by Jeremy P. Feakins (“Feakins”), the chairman and chief executive officer of Ocean Thermal Energy Corporation (“OTE”). Presently, JPF is also the Company’s principal stockholder and Feakins is also the Company’s director, chief executive officer, and chief financial officer. Before entering into this agreement, there was no material relationship between the Company and its affiliates and JPF and its affiliates. Under the terms of the Investment Agreement, JPF purchased for $100,000 in cash 29,372,277 shares of the Company’s common stock at $0.003405 per share (the “JPF Stock”) and a warrant to purchase up to 1,033,585 shares of the Company’s common stock at an exercise price of $0.003 per share. The JPF Stock represents a 55% ownership interest by JPF in the Company, without giving effect to the issuance of additional shares of the Company’s common stock on the conversion of outstanding convertible notes.

JPF’s investment was used principally to initiate and pursue an updated technical and commercialization review of the Company’s intellectual properties with a view toward possible broadened marketing introduction and, in general, advance the Company’s business activities and bring its regulatory filings current.

Concurrently with the execution of the Investment Agreement, Antoinette Knapp Hempstead the estate of her late husband, David W. Hempstead (together, the “Hempsteads”), JPF, and Feakins entered into an agreement whereby, among other things: (i) JPF agreed to execute supplemental guarantees for the Hempsteads in connection with certain debt obligations to economic development entities owed by the Company and guaranteed by the Hempsteads; (ii) the Hempsteads transferred to JPF the consolidated convertible note payable by the Company to the Hempsteads with an outstanding principal balance of $394,380 as of December 31, 2014, together with accrued and unpaid payroll of $213,436, for a total of $607,816; and (iii) the Hempsteads returned to the Company for cancellation 1,200,000 shares of Series A Preferred Stock, which were cancelled. The Company has filed a Certificate of Withdrawal of Certificate of Designation for the preferred stock with the Nevada Secretary of State.

As required by the Investment Agreement, two designees of JPF, Feakins and Peter Wolfson, were appointed as directors of the Company to replace incumbent directors Orville J. Hendrickson and Larry J. Ybarrondo, who resigned.

Agreement and Plan of Merger

Also on March 23, 2015, the Company entered into an Agreement and Plan of Merger with OTE, under which it would have acquired OTE in exchange for what would have constituted 95% of its outstanding stock, after giving effect to the transaction. Before entering into this agreement, there were no material relationships between the Company and its affiliates and OTE and its affiliates.

The completion of the Company’s acquisition of OTE was subject to a number of conditions, including approval of the transaction to the OTE shareholders by the California Corporations Commission, No action was taken on that application after nine months of consideration, so the parties agreed to terminate the proposed acquisition, with each party paying its own costs.

F-16
 
 
 
TETRIDYN SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014



Note 11 — Subsequent Events

2015 Convertible Note Payable to Related Party

In January and February of 2016, the Company received the remaining $12,500 from the November 23, 2015, note.

2016 Convertible Note Payable to Related Party

On February 25, 2016, the Company borrowed $50,000 from JPF Venture Group, Inc. (“JPF”), the Company’s principal stockholder and an investment entity that is majority-owned by Jeremy Feakins, the Company’s director, chief executive officer, and chief financial officer, pursuant to a promissory note. The terms of the note are as follows: (i) interest is payable at 6% per annum; (ii) the note is payable 90 days after demand; and (iii) payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of our common stock at the rate of one share for each $0.03 of principal amount of the note.

F-17
 

 

PROMISSORY NOTE

$50,000
Lancaster, PA
November 23, 2015

FOR VALUE RECEIVED, the undersigned, TETRIDYN SOLUTIONS, INC. (“ Maker ”), a Nevada corporation whose mailing address and principal office is 800 South Queen Street, Lancaster, PA 17603, USA, hereby promises to pay to JPF VENTURE GROUP, INC., a Delaware corporation (“ Payee ”), whose mailing address is 800 South Queen Street, Lancaster, PA 17603, up to the principal sum of FIFTY THOUSAND DOLLARS AND NO CENTS ($50,000), as represented by advances from time to time of the principal amount of this Note in lawful money of the United States of America for payment of private debts, together with interest (calculated on the basis of the actual number of days elapsed but computed as if each year consisted of 360 days) on the unpaid principal balance from time to time outstanding at a rate, except as otherwise provided in this Note, of six percent (6%) per annum.

1.              Payments . All unpaid principal and all accrued and unpaid interest shall be due and payable within 90 days after demand.

2.              Time and Place of Payment . If any payment falls due on a day that is considered a legal holiday in the state of Delaware, Maker shall be entitled to delay such payment until the next succeeding regular business day, but interest shall continue to accrue until the payment is in fact made. Each payment or prepayment hereon must be paid at the office of Payee set forth above or at such other place as the Payee or other holder hereof may, from time to time, designate in writing.

3.              Prepayment . Maker reserves the right and privilege of prepaying this Note in whole or in part, at any time or from time to time, upon 30 days’ written notice, without premium, charge, or penalty. Prepayments on this Note shall be applied first to accrued and unpaid interest to the date of such prepayment, next to expenses for which Payee is due to be reimbursed under the terms of this Note, and then to the unpaid principal balance hereof.

4.              Conversion . Subject to and in compliance with the provisions contained herein, Payee is entitled, at its option, at any time prior to maturity, or in the case this Note or some portion hereof shall have been called for prepayment before such date, then for this Note or such portion hereof, until and including, but not after, the close of business within 30 days after the date of notice of prepayment, to convert this Note (or any portion of the principal amount hereof or accrued and unpaid interest hereon) into fully paid and nonassessable shares (calculated as to each conversion to the nearest share) of common stock, par value $0.0001 per share, of Maker (the “Shares”) at the rate of one share for each $0.03 of principal amount of this Note, by surrender of this Note, duly endorsed (if so required by Maker) or assigned to Maker or in blank, to Maker at its offices, accompanied by written notice to Maker, in the form set forth below, that Payee elects to convert this Note or, if less than the entire principal amount hereof is to be converted, the portion thereof to be converted. On conversion, Payee shall be entitled to payment of accrued interest on this Note through the date of conversion. No fractions of Shares will be issued on conversion, but instead of any fractional interest, Maker will pay cash adjustments as provided herein. Payee is entitled, at its option, to require that the exercise price be appropriately adjusted in the event of any stock splits, reverse-split, merger, consolidation, conversion, or any similar change in Maker’s common stock. Payee is also entitled, at its option, to require that the conversion price and number of shares issuable on conversion of this Note be appropriately adjusted in the event of any stock splits, reverse-split, merger, consolidation, conversion, or similar change in Maker’s common stock.  For the avoidance of doubt, it is explicitly agreed that if the Payee does not exercise these options, the exercise price, conversion price and number of shares shall remain unchanged after any stock splits, reverse-split, merger, consolidation, conversion, or any similar change in Maker’s common stock.

 
 
 


5.              Default .

(a)           Without notice or demand (which are hereby waived), the entire unpaid principal balance of, and all accrued interest on, this Note shall immediately become due and payable at Payee’s option upon the occurrence of one or more of the following events of default (“ Events of Default ”):

(i)           the failure or refusal of Maker to pay principal or interest on this Note within 10 days of when the same becomes due in accordance with the terms hereof;

(ii)          the failure or refusal of Maker punctually and properly to perform, observe, and comply with any covenant or agreement contained herein, and such failure or refusal continues for a period of 30 days after Maker has (or, with the exercise of reasonable investigation, should have) notice hereof;

(iii)         Maker shall: (1) voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law (defined hereinafter); or (2) become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law, other than as a creditor or claimant, that could suspend or otherwise adversely affect the Rights (defined hereinafter) of Payee granted herein (unless, in the event such proceeding is involuntary, the petition instituting same is dismissed within 60 days of the filing of same). “ Debtor Relief Law ” means the Bankruptcy Code of the United States of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar Laws from time to time in effect affecting the Rights of creditors generally. “ Rights ” means rights, remedies, powers, and privileges. “ Laws ” means all applicable statutes, laws, ordinances, regulations, orders, writs, injunctions, or decrees of any state, commonwealth, nation, territory, possession, county, parish, municipality, or Tribunal. “ Tribunal ” means any court or governmental department, commission, board, bureau, agency, or instrumentality of the United States or of any state, commonwealth, nation, territory, possession, county, parish, or municipality, whether now or hereafter constituted and/or existing;

(iv)         the failure to have discharged within a period of 30 days after the commencement thereof any attachment, sequestration, or similar proceeding against any of the assets of Maker, or the loss, theft, or destruction of, or occurrence of substantial damage to, a material part of the assets of Maker, except to the extent adequately covered by insurance; and

(v)          Maker fails to pay any money judgment against it at least 10 days prior to the date on which any of Maker’s assets may be lawfully sold to satisfy such judgment.

(b)           If any one or more of the Events of Default specified above shall have happened, Payee may, at its option: (i) declare the entire unpaid balance of principal and accrued interest on this Note to be immediately due and payable without notice or demand; (ii) offset against this Note any sum or sums owed by Payee to Maker; (iii) reduce any claim to judgment; (iv) foreclose all liens and security interests securing payment thereof or any part thereof; and (v) proceed to protect and enforce its rights by suit in equity, action of law, or other appropriate proceedings, whether for the specific performance of any covenant or agreement contained in this Note, in aid of the exercise granted by this Note of any right, or to enforce any other legal or equitable right or remedy of Payee.
 
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6.              Cumulative Rights . No delay on Payee’s part in the exercise of any power or right, or single partial exercise of any such power or right, under this Note or under any other instrument executed pursuant hereto shall operate as a waiver thereof. Enforcement by Payee of any security for the payment hereof shall not constitute any election by it of remedies, so as to preclude the exercise of any other remedy available to it.

7.              Collection Costs . If this Note is placed in the hands of an attorney for collection, or if it is collected through any legal proceeding at law or in equity or in bankruptcy, receivership, or other court proceedings, Maker agrees to pay all costs of collection, including Payee’s court costs and reasonable attorney’s fees.

8.              Waiver . Maker, and each surety, endorser, guarantor, and other party liable for the payment of any sums of money payable on this Note, jointly and severally waive presentment and demand for payment, protest, and notice of protest and nonpayment, or other notice of default, except as specified herein, and agree that their liability on this Note shall not be affected by any renewal or extension in the time of payment hereof, indulgences, partial payment, release, or change in any security for the payment of this Note, before or after maturity, regardless of the number of such renewals, extensions, indulgences, releases, or changes.

9.              Notices . Any notice, demand, request, or other communication permitted or required under this Note shall be in writing and shall be deemed to have been given as of the date so delivered, if personally served; as of the date so sent, if transmitted by facsimile and receipt is confirmed by the facsimile operator of the recipient; as of the date so sent, if sent by electronic mail and receipt is acknowledged by the recipient; one day after the date so sent, if delivered by overnight courier service; or three days after the date so mailed, if mailed by certified mail, return receipt requested, addressed to Maker at its address on the first page.

10.            Successor and Assigns . All of the covenants, stipulations, promises, and agreements in this Note contained by or on behalf of Maker shall bind its successors and assigns, whether so expressed or not; provided , however , that neither Maker nor Payee may, without the prior written consent of the other, assign any rights, powers, duties, or obligations under this Note.

11.            Headings . The headings of the sections of this Note are inserted for convenience only and shall not be deemed to constitute a part hereof.

12.            Applicable Law . This Note is being executed and delivered, and is intended to be performed, in the state of Delaware, and the substantive laws of such state shall govern the validity, construction, enforcement, and interpretation of this Note, except insofar as federal laws shall have application.

13.            Security . This Note is unsecured.

EXECUTED effective the year and date first above written.

 
TETRIDYN SOLUTIONS, INC.
   
 
By: /s/ Antoinette K. Hempstead
 
Antoinette K. Hempstead, President


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SUMMARY OF COMPENSATORY ARRANGEMENTS
WITH DIRECTORS AND NAMED EXECUTIVE OFFICERS


Director Compensation .  Directors who are not employees are not compensated for their services.

Named Executive Officer Compensation .  TetriDyn Solutions, Inc. currently pays its chief executive officer, Jeremy P. Feakins, $2,500 per month, under an oral arrangement.


Exhibit 31.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14

I, Jeremy P. Feakins, certify that:

1.           I have reviewed this Annual Report on Form 10-K of TetriDyn Solutions, 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(s) 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(s) 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 30, 2016


/s/ Jeremy P. Feakins
Jeremy P. Feakins
Principal Executive Officer and Principal Financial Officer


Exhibit 32.01

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 TetriDyn Solutions, Inc. (the “Company”), on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission (the “Report”), I, Jeremy P. Feakins, 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, to the best of my knowledge and belief:

 
(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 the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.


/s/ Jeremy P. Feakins
Jeremy P. Feakins
Chief Executive Officer
Chief Financial Officer
March 30, 2016

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.