Operating Lease

 

On November 26, 2012, the Company entered into an operating lease with a company related to a Director of Cloud Security for its corporate office on a month to month basis for $650 per month. The rent has decreased to $125 per month effective in January 2014. There is a $175 deposit with the related entity recorded on the accompanying balance sheet due to prepayment of rents.

Payroll

 

The Company has processed compensation to its chief executive officer as an independent contractor under Form 1099 instead of processing it as payroll under Form W-2.  The Company intended to start processing its payroll under Form W-2 in the first or second fiscal quarter of 2013; however, such was not processed due to lack of liquidity considerations.  The Company does not expect that any fees or penalties incurred as a result will cause significant misreporting of our financial condition and results of operations.

 

The Company has not filed income tax returns since 2010. We expect to file these income tax returns in the near future.  We are subject to the minimum California franchise taxes of $800 per year, plus penalties and interest for 2012 through 2014.