U.S. SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




FORM 10-Q/A





þQuarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2011





 ̈Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934





Commission File No. 0-52810





ITRACKR SYSTEMS, INC.


(Exact name of registrant as specified in its charter)




Florida

05-0597678(State or other jurisdiction ofincorporation or organization)

(I.R.S. Employer Identification Number)




20423 State Road 7 Suite F6490Boca Raton, FL

33498(Address of principal executive offices)

(Zip Code)




(561) 213-4458


(Registrant’s telephone number, including area code)




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 requirement for the past 90 days.  Yes þ  No  ̈




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




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 (Check One):




Large accelerated filer
o
Accelerated filer
oNon-accelerated filer
o
Smaller reporting company
þ





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




Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.  At May 5, 2011 the registrant had outstanding 20,319,997 shares of common stock, no par value per share.













EXPLANATORY NOTE





This Form 10-Q/A is being filed as a result of a material misstatement that was determined by the Public Company Oversight Board (“PCAOB”) as a result of their triennial inspection of our auditors, Bedinger and Company’s audit records relating to their work performed during the audit of our financial statements for the year ended December 31, 2010.  In November 2010, the Company recorded $25,000 of revenue and accounts receivable related to the initial license fee charged to RespondQ pursuant to the Master “Click2Chat Software as a Service” Managed Services Agreement.  Given the fee was one-time only, non-refundable and non-cancellable, the Company determined it was recognizable as revenue pursuant to ASC 985-605.  However, as noted by the PCAOB, pursuant to ASC 985-605-55-121 the agreement did not meet certain criteria that would have allowed the full recognition of the initial $25,000 fee.  Thus, the Company should have applied the guidance in ASC 605-10-S99-1, SAB Topic 13 wherein the initial license fee should be recognized ratably over the term of the agreement, which in this case is 1 year, or $2,083.33 per month.  As a result, the financial statements as of March 31, 2011 and for the three months then ended and related disclosures contained herein have been adjusted to reduce accounts receivable by $14,583 ($25,000 original accounts receivable less $4,167 2010 revenue and less $6,250 Q1 2011 revenue) and increase revenue by $6,250.





In addition, we are including a previously omitted disclosure regarding the relationship of RespondQ, LLC, to iTrackr Systems, Inc.  RespondQ, LLC who represented 96% of our first quarter 2011 revenue is 30% owned by Idiama, LLC which is 100% owned by Mrs. Rizzo, the spouse of our Chief Executive Officer John Rizzo (See Note L – Related Party Transactions in the notes to our financial statements on page 13).








2




ITRACKR SYSTEMS, INC.


FORM 10-Q/A


TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION




PAGEItem 1.
Financial Statements
4Consolidated Balance Sheets as of March 31, 2011 (Unaudited) and  December 31, 2010
4Consolidated Statements of Operations (Unaudited) For the Three Months Ended March 31, 2011 and 2010
5Consolidated Statement of Stockholders' Equity (Unaudited) For the Three Months Ended March 31, 2011
6Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2011 and 2010
7Notes to Consolidated Financial Statements (Unaudited)
8-16Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
17Item 3.
Quantitative and Qualitative Disclosures About Market Risk
23Item 4.
Controls and Procedures
23Item 4(T).
Controls and Procedures
23


PART II - OTHER INFORMATION




Item 1.
Legal Proceedings
25Item 1A.
Risk Factors
25Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
25Item 3.
Defaults Upon Senior Securities
25Item 4.
Submission of Matters to a Vote of Security Holders
25Item 5.
Other Information
25Item 6.
Exhibits
25Signatures

26




3





Item 1.  Financial Statements.





iTrackr Systems, Inc.Consolidated Balance Sheets (Restated)March 31,


December 31,2011


2010(Unaudited)


(Audited)(Restated)


(Restated)AssetsCurrent AssetsCash

$
285


$
9,051Accounts receivable (Note B)


22,505



24,335Total Current Assets


22,790



33,386Fixed assets (Note C)


206,211



206,211Accumulated depreciation


(151,035
)


(142,339
)Net fixed assets


55,176



63,872Total Assets

$
77,966


$
97,258Liabilities and Stockholders' DeficitCurrent LiabilitiesAccounts payable & accrued expenses (Note D)

$
150,644


$
108,051Accrue payroll (Note D)


702,000



639,500Accrued Interest payable (Note E)


21,394



15,949Convertible promissory notes (Note E)


56,000



56,000Promissory notes - related party (Note E)


192,812



192,812Total Current Liabilities


1,122,850



1,012,312Total Liabilities


1,122,850



1,012,312Stockholders' Deficit (Note F)Common stock, no par value 100,000,000 shares authorized; issued and outstanding 20,319,997 at March 31, 2011 and December 31, 2010, respectively.


3,142,538



3,142,538Common stock payable


37,500



37,500Deficit accumulated during the development stage


(4,224,922
)


(4,095,092
)Total Stockholders' Deficit


(1,044,884
)


(915,054
)Total Liabilities and Stockholders' Deficit

$
77,966


$
97,258
 The accompanying notes are an integral part of these financial statements
  4
 iTrackr Systems, Inc.Consolidated Statements of Operations (Unaudited)For the Three Months Ended March 31, 2011 (Restated) and 2010Three Months EndedMarch 31,2011


2010(Restated)Revenue

$
46,250


$
10,742Operating expensesGeneral and administrative


112,289



105,263Research and development


49,651



47,652Depreciation


8,695



9,051Stock compensation


-



378,459Total operating expenses


170,635



540,425Loss from operations


(124,385
)


(529,683
)Other Income and (Expense)Interest expense


(5,445
)


(3,743
)Total other income and expense


(5,445
)


(3,743
)Earnings before taxes


(129,830
)


(533,426
)Provision for income taxes


-



-NET LOSS

$
(129,830
)

$
(533,426
)Net (loss) per common share basic

$
(0.01
)

$
(0.03
)Weighted average common shares outstanding basic


20,319,997



19,428,983The average shares listed below were not included in the computation of diluted lossesper share because to do so would have been antidilutive for the periods presented:Warrants


2,105,333



1,844,133Stock options


5,505,000



5,505,000Convertible promissory notes


1,608,809



-
 The accompanying notes are an integral part of these financial statements
  5
  iTrackr Systems, Inc.Consolidated Statement of Stockholders' Deficit (Unaudited)For the Three Months Ended March 31, 2011 (Restated)Common Stock





TotalNumber of








Accumulated


Stockholders'Shares


Amount


Payable


(Deficit)


(Deficit)BALANCES December 31, 2010 (Restated)


20,319,997


$
3,142,538


$
37,500


$
(4,095,092
)

$
(915,054
)Net loss














(129,830
)


(129,830
)BALANCES March 31, 2011 (Restated)


20,319,997


$
3,142,538


$
37,500


$
(4,224,922
)

$
(1,044,884
)
 The accompanying notes are an integral part of these financial statements
  6
  iTrackr Systems, Inc.Consolidated Statements of Cash Flows (Unaudited)For the Three Months Ended March 31, 2011 (Restated) and 2010Three Months EndedMarch 31,2011


2010(Restated)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(129,830
)

$
(533,426
)Adjustments to reconcile net lossto net cash provided (used) by operating activities:Depreciation


8,695



9,051Compensation expense on fair value of warrants issued


-



270,459Stock compensation expense


-



108,000Common stock issued for accrued interest


-



466Changes in operating accounts:Accounts receivable


1,830



(1,478
)Accounts payable and accrued expenses


42,594



(4,513
)Accrued compensation


62,500



62,500Accrued interest


5,445



3,277CASH USED BY OPERATING ACTIVITIES


(8,766
)


(85,664
)CASH FLOWS FROM INVESTING ACTIVITIES:Cash acquired in merger


-



95CASH PROVIDED BY INVESTING ACTIVITIES


-



95CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from the issuance of stock warrants


-



50,000Issuance of common stock for cash


-



50,000Proceeds from promissory notes


-



17,000Proceeds from related party notes


-



1,000CASH PROVIDED BY FINANCING ACTIVITIES


-



118,000NET INCREASE (DECREASE) IN CASH


(8,766
)


32,431CASH, beginning of period


9,051



3,223CASH, end of period

$
285


$
35,654SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCASH PAID DURING THE YEAR FOR:Taxes paid

$
-


$
-Interest paid

$
-


$
-NON-CASH OPERATING ACTIVITIES:Value of Common Stock issued in exchange for services

$
-


$
108,000Value of Common Stock issued for accrued interest

$
-


$
466Value of Common Stock issued for debt principle

$
-


$
42,000Value of warrants issued

$
-


$
270,459
 The accompanying notes are an integral part of these financial statements
 
 7
  ITRACKR SYSTEMS, INC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 THREE MONTHS ENDED MARCH 31, 2011 AND 2010


Note A-Organization




Basis of Presentation


The unaudited financial statements of iTrackr Systems, Inc. as of March 31, 2011 and for the three months ended March 31, 2011 and 2010 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting.  Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2010 as filed with the Securities and Exchange Commission as part of our Form 10-K.  In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included.  The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.





Organization


iTrackr, Inc. (the “Company” or “iTrackr”) was formed on May 10, 2006 to develop, market and commercialize a product and inventory search application through a social networking site designed to leverage the best of Internet and Mobile technologies.  iTrackr has taken several markets, including eCommerce, social networking and mobile content, and developed a platform that drives value to consumers, retailers and advertising and marketing firms.





In 2009, iTrackr purchased online customer support software technology from ChatStat for approximately $95,000.  iTrackr has launched its customer support chat software which facilitates real-time customer support, expert advice, and paid transactions.





On January 12, 2010, the Company closed a share exchange transaction pursuant to which it (i) became the 100% parent of iTrackr, Inc., a Florida corporation (“iTrackr”), (ii) assumed the operations of iTrackr, and (iii) changed its name from Must Haves, Inc. to iTrackr Systems, Inc.  iTrackr, Inc. was deemed to be the acquirer in the reverse merger.  Consequently, the assets and liabilities and the historical operations of iTrackr, Inc. prior to the Merger are reflected in the financial statements and have been recorded at the historical cost basis of iTrackr, Inc.  Our financial statements, after completion of the Merger, include the assets and liabilities of both Must Haves, Inc. and iTrackr, Inc.  We accounted for the merger under recapitalization accounting whereby the equity of the acquiring enterprise (iTrackr, Inc.) is presented as the equity of the combined enterprise and the capital stock account of the acquiring enterprise is adjusted to reflect the par value of the outstanding stock of the legal acquirer (Must Haves, Inc.) after giving effect to the number of shares issued in the business combination (1,303,638 shares).  Shares retained by the legal acquirer (Must Haves, Inc. 1,303,638 shares) are reflected as an issuance as of the reverse merger date (January 12, 2010) for the historical amount of the net assets of the acquired entity which is in this case is a net liability of $27,515.





During 2010 we completed the development of our Chat software and TrackiT, PriceiT and iTrackr community applications thereby leaving the Development Stage and focusing increasing attention on sales.





Going Concern


The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern. Since inception, the Company has been engaged primarily in product development.  In the course of funding development activities, the Company has sustained operating losses since inception and has an accumulated deficit of $4,224,922 and $4,095,092 at March 31, 2011and December 31, 2010, respectively.  In addition, the Company has negative working capital of $1,100,060 and $978,926 at March 31, 2011 and December 31, 2010, respectively.





The Company has and will continue to use significant capital to commercialize its products.  These factors raise substantial doubt about the ability of the Company to continue as a going concern.  In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans or through additional sales of their common stock.  There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.




8




ITRACKR SYSTEMS, INC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 THREE MONTHS ENDED MARCH 31, 2011 AND 2010





NOTE B – ACCOUNTS RECEIVABLE





The accounts receivable balance of $22,505 ($20,617 due from Respond Q and $1,888 due from Saveology) and $24,335 ($10,867 due from Respond Q and $13,468 due from Saveology) as of March 31, 2011 and December 31, 2010, respectively, is reported at the gross amount without an allowance.  The Company has not experienced any bad debts to date.  However, the Company periodically reviews accounts receivable for collectibility and will create an allowance for bad debts if the analysis so warrants.





NOTE C – FIXED ASSETS





Fixed assets consisted of the following:




March 31,


December 31,2011


2010Computers and office equipment


78,974



78,974Software

$
127,237


$
127,237Total fixed assets


206,211



206,211Accumulated depreciation


(151,035
)


(142,339
)Fixed assets, net

$
55,176


$
63,872
  During the three months ended March 31, 2011 and 2010, the Company recognized $8,695 and $9,051, respectively in depreciation expense.





NOTE D – ACCOUNTS PAYABLE AND ACCRUED PAYROLL





Accounts payable and accrued expenses at March 31, 2011 consisted of $51,000 of health insurance premium reimbursement due to John Rizzo, CEO, for which no payments have been made from January 2007 through present, $58,798 of professional services and $40,846 of trade payables.





Accounts payable and accrued expenses at December 31, 2010 consisted of $48,000 of health insurance premium reimbursement due to John Rizzo, CEO, $48,397 of professional services and $11,654 of trade payables.




Accrued payroll represents amounts accrued and unpaid as of the related balance sheet date and due to our CEO, John Rizzo.  Pursuant to Mr. Rizzo’s employment agreement(s) effective each year starting in 2007 through present (approximately 4.25 years), the Company has been and is obligated to pay Mr. Rizzo and annual salary of $250,000.  Mr. Rizzo, received 5,000,000 shares in lieu of salary for the fiscal year ended December 31, 2007 and $90,000 in cash payments during 2009.  Mr. Rizzo has received no other cash payments.





NOTE E – NOTES





Promissory Notes – 3rdParty




March 31,


December 31,2011


2010Note payable bears interest at 9% per year, Matures July 31, 2011 and is convertible into shares of common stock upon default at a conversion price of $0.25 per share.


25,000



25,000Note payable bears interest at 8% per year, Matures March 31, 2011 and is convertible into shares of common stock upon default at a conversion price of $0.25 per share.


25,000



25,000Note payable bears interest at 8% per year, Matures December 31, 2011 and is convertible into shares of common stock upon default at a conversion price of $0.25 per share.


6,000



6,000Totals


56,000



56,000
  9
  ITRACKR SYSTEMS, INC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 THREE MONTHS ENDED MARCH 31, 2011 AND 2010





NOTE E – NOTES (Continued)





Promissory Notes – 3rdParty (Continued)


During the three months ended March 31, 2011, the Company did not receive any loan proceeds or make any payments against the above outstanding notes.





During the year ended December 31, 2010, the Company 1) received $17,000 in exchange for two convertible notes that were also converted along with the $25,102 of notes outstanding on December 31, 2009, 2) received a short term loan totaling $25,000 that was repaid seven days later, and 3) received $56,000 in exchange for promissory notes that accrue interest at eight (8%) and nine (9%) per annum (see table above).  In total, during the year ended December 31, 2010, the Company received $98,000 of notes, repaid $25,000 and converted $42,466, including $42,000 of principle and $466 of accrued interest into 121,332 shares of common stock.





During the three months ended March 31, 2011and 2010, the Company recognized $1,530 of interest expense and $0 on our non related party notes payable.  As of March 31, 2011 and December 31, 2010, the Company has outstanding $2,236 and $694, respectively, of accrued interest due under the note above.





Promissory Notes - Related Party


March 31,


December 31,2011


2010Note payable convertible into common stock (conversion price 50% belowthe previous 10 day average closing price) upon default, bears interest at9% per year, Matured December 31, 2010

$
192,812


$
192,812
  During the year ended December 31, 2010, the Company received $41,500 from Bluewater Advisors a company owned by John Rizzo, CEO.  Interest expense during the year ended December 31, 2010 was $14,879.





During the three months ended March 31, 2011and 2010, the Company recognized $4,279 and $3,379 on notes payable to Bluewater advisors.  As of March 31, 2011 and December 31, 2010, the Company has outstanding $19,158 and $14,879, respectively, of accrued interest due under the note above.





NOTE F – STOCKHOLDERS EQUITY





Preferred Stock


The Company has authorized 10,000,000 shares of no par value preferred stock available for issuance.  No shares of preferred stock have been issued as of March 31, 2011.





Common Stock


The Company has authorized 100,000,000 shares of no par value common stock available for issuance.  20,319,997 shares have been issued as of March 31, 2010.





Stock Issued for Debt Repayment


No stock was issued to repay any debt during the three months ended March 31, 2011.





During the year ended December 31, 2010, the Company converted $42,000 of principle and $466 of accrued interest into 121,332 shares of restricted common stock.





Stock Issued for Cash


No stock was issued in exchange for cash during the three months ended March 31, 2011.





During the year ended December 31, 2010, the Company 1) received $50,000 as a direct purchase and issued 166,666 shares of restricted common stock, and 2) received $50,000 upon the exercise of warrants to purchase 166,666 shares of restricted common stock.





10




ITRACKR SYSTEMS, INC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 THREE MONTHS ENDED MARCH 31, 2011 AND 2010





NOTE F – STOCKHOLDERS EQUITY (Continued)





Stock Issued for Services


No stock was issued in exchange for services during the three months ended March 31, 2011.





During the year ended December 31, 2010, the Company finalized a legal settlement with Marc Falcone whereby in exchange for $108,000 or $0.30 per share we issued 360,000 shares of restricted common stock.





During the year ended December 31, 2010, the Company:





1) Issued 100,000 shares of restricted common stock for services valued at $30,000 or $0.30 per share.  The shares were issued for services to be provided through the end of 2010.


2) Issued 125,000 shares valued at $37,500, or $0.30 per share.  The shares were issued for services performed during the quarter and have been fully expensed.


3) Is obligated to issue 125,000 shares which are valued at $37,500, or $0.30 per share and included in common stock payable.





Stock issued for Accounts Payable


No stock was issued in exchange for accounts payable during the three months ended March 31, 2011.





During the year ended December 31, 2010, the Company issued 101,000 shares of restricted common stock at $0.32 per share to settle $32,000 of the balance owing ChatStat for the purchase of their Chat software.





Stock Options (See footnote H below)


During the three months ended March 31, 2011, no option activity occurred.





During the year ended December 31, 2010, no option activity occurred.





NOTE G – WARRANTS





At March 31, 2011 and December 31, 2010, the Company had 2,105,333 Warrants outstanding entitling the holder thereof the right to purchase one share of common stock for each warrant held as follows:





ExerciseIssuance

Number of


Price Per

ExpirationDate

Warrants


Warrant

Date1/19/2010


36,000


$
0.75

1/19/151/19/2010


56,000


$
0.75

1/19/152/1/2010


13,333


$
0.75

2/1/152/5/2010


1,000,000


$
0.40

12/31/153/1/2010


1,000,000


$
0.10

10/31/11Total


2,105,333
 
 During the year ended December 31, 2010, the Company:





·
Issued 2,271,999 warrants to purchase one share of common stock for each warrant issued.


·
Received $50,000 upon the exercise of a warrant and issued 166,666 shares of restricted common stock.


·
Received $50,000 upon the sale of a warrant to an accredited investor.


·
Canceled two warrants totaling 800,000 shares as a result of expiration.





All the warrants issued through December 31, 2010 are classified as equity on our balance sheet as they require physical settlement, contain no performance contingencies, have a fixed exercise price and are exercisable by the holder at any time through the expiration date of the warrant.  Each warrants fair value was calculated on the date of grant using the Black-Scholes Option Pricing Model using the following inputs: volatility; 250% based on the Dow Jones Internet Composite Index, risk free interest rate; 3.71%, spot price; $0.15, and the exercise price attributable to]




11




ITRACKR SYSTEMS, INC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 THREE MONTHS ENDED MARCH 31, 2011 AND 2010


NOTE G – WARRANTS (Continued)





that warrant.  The fair value of the warrants issued was $320,459 offset by the $50,000 warrant sale resulting in $270,459 of net stock compensation expense.





During the year ended December 31, 2009, the Company canceled 250,000 warrants issued to Marc Falcone as a result of the settlement agreement dated February 16, 2010.  No warrants were issued or exercised during the three months ended March 31, 2011.





NOTE H – 2007 LONG-TERM EQUITY INCENTIVE PLAN





In June 2007 the Board of Directors of the Company adopted the 2007 Long-Term Equity Incentive Plan. The purpose of this Plan is to attract and retain directors, officers and other employees of iTrackr, Inc. and its Subsidiaries and to provide to such persons incentives and rewards for performance.





The Company may issue each of the following under this Plan: Incentive Option, Nonqualified Option, Stock Appreciation Right, Restricted Stock Award or Performance Stock Award.  The Plan was ratified at the 2007 shareholder’s meeting (the "Effective Date").  No Incentive Option, Nonqualified Option, Stock Appreciation Right, Restricted Stock Award or Performance Stock Award shall be granted pursuant to the Plan ten years after the Effective Date.  The total number of shares available under the Plan is Fifteen Million (15,000,000).  No Plan participant will be granted the right, in the aggregate, for more than Two Million (2,000,000) Common Shares during any calendar year.





Stock Options


During the three Months ended March 31, 2011, no option activity occurred.





During the year ended December 31, 2010, the Company made one grant of 250,000 fully vested common stock options.  The options value was nominal as calculated on the date of grant using the Black-Scholes Option Pricing Model using the following inputs: volatility; 38% based on the Dow Jones Internet Composite Index, risk free interest rate; 3.28%, spot price; $0.20, expected term; 1.5 years and exercise price; $0.25.





The following table summarizes the Company's stock option activity for the three months ended March 31, 2011:





March 31, 2011Weighted AverageShares


Exercise PriceOutstanding at beginning of year


5,505,000


$
0.18Granted


-



-Forfeited


-



-Exercised


-



-Outstanding at end of quarter


5,505,000


$
0.18Options exerciseable at March 31, 2011


5,505,000
 
 12
  ITRACKR SYSTEMS, INC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 THREE MONTHS ENDED MARCH 31, 2011 AND 2010





NOTE H – 2007 LONG-TERM EQUITY INCENTIVE PLAN (Continued)





Stock Options (Continued)


The following table summarizes information about the Company's stock options outstanding at March 31, 2011:





Options Outstanding


Options ExercisableNumber


Weighted


Weighted





WeightedRange of


Outstanding


Average


Average





AverageExercise


At March 31,


Contractural


Exercise


Number


ExercisePrices


2011


Life (years)


Price


Outstanding


Price$
0.40



1,000,000



-


$
0.40



1,000,000


$
0.070.25



1,250,000



-



0.25



1,250,000



0.060.10



2,375,000



-



0.10



2,375,000



0.040.05



880,000



-



0.05



880,000



0.01Total



5,505,000



-


$
0.18



5,505,000


$
0.18


The Company measures the fair market value of stock options granted using the Black-Scholes Option Pricing Model on the date of grant and recognizes related compensation expense ratably over the options vesting period for all future grants.





During the three months ended March 31, 2011 and the year ended December 31, 2010, the Company recognized $0 of compensation expense related to stock options.  From inception to date, the Company has recognized $178,844 of compensation expense related to stock options.





NOTE J – SUBSEQUENT EVENTS





Pursuant to FASB Accounting Standards Codification 855, Subsequent Events, Including ASC 855-10-S99-2, the Company evaluated subsequent events through May 5, 2011.





NOTE K – 2011 RESTATEMENT





This Form 10-Q/A is being filed as a result of a material misstatement that was determined by the Public Company Oversight Board (“PCAOB”) as a result of their triennial inspection of our auditors, Bedinger and Company’s audit records relating to their work performed during the audit of our financial statements for the year ended December 31, 2010.  In November 2010, the Company recorded $25,000 of revenue and accounts receivable related to the initial license fee charged to RespondQ pursuant to the Master “Click2Chat Software as a Service” Managed Services Agreement.  Given the fee was one-time only, non-refundable and non-cancellable, the Company determined it was recognizable as revenue pursuant to ASC 985-605.  However, as noted by the PCAOB, pursuant to ASC 985-605-55-121 the agreement did not meet certain criteria that would have allowed the full recognition of the initial $25,000 fee.  Thus, the Company should have applied the guidance in ASC 605-10-S99-1, SAB Topic 13 wherein the initial license fee should be recognized ratably over the term of the agreement, which in this case is 1 year, or $2,083.33 per month.  As a result, the financial statements as of March 31, 2011 and for the three months then ended and related disclosures contained herein have been adjusted to reduce accounts receivable by $14,583 ($25,000 original accounts receivable less $4,167 2010 revenue and less $6,250 Q1 2011 revenue) and increase revenue by $6,250.





13




ITRACKR SYSTEMS, INC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 THREE MONTHS ENDED MARCH 31, 2011 AND 2010





NOTE K – 2011 RESTATEMENT (Continued)





iTrackr Systems, Inc.Consolidated Balance Sheet (Restated)As of March 31, 2011OriginallyRestated


Reported


DifferenceAssetsCurrent AssetsCash

$
285


$
285


$
-Accounts receivable (Note B)


22,505



37,088



(14,583
)Total Current Assets


22,790



37,373



(14,583
)Fixed assets, net


55,176



55,176



-Total Assets

$
77,966


$
92,549


$
(14,583
)Liabilities and Stockholders' DeficitCurrent LiabilitiesTotal Current Liabilities


1,122,850



1,122,850



-Total Liabilities


1,122,850



1,122,850



-Stockholders' DeficitCommon stock, no par value 100,000,000 shares authorized; issued and outstanding 20,319,997 at March 31, 2011.


3,142,538



3,142,538



-Common stock payable


37,500



37,500



-Deficit accumulated during the development stage


(4,224,922
)


(4,210,339
)


(14,583
)Total Stockholders' Deficit


(1,044,884
)


(1,030,301
)


(14,583
)Total Liabilities and Stockholders' Deficit

$
77,966


$
92,549


$
(14,583
)
 
 14
  ITRACKR SYSTEMS, INC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 THREE MONTHS ENDED MARCH 31, 2011 AND 2010





NOTE K – 2011 RESTATEMENT (Continued)





iTrackr Systems, Inc.Consolidated Statement of Operation (Restated)For the Three Months Ended March 31, 2011OriginallyRestated


Reported


DifferenceRevenue

$
46,250


$
40,000


$
6,250Operating expenses


170,635



170,635



-Loss from operations


(124,385
)


(130,635
)


6,250Total other (expense)


(5,445
)


(5,445
)


-NET LOSS

$
(129,830
)

$
(136,080
)

$
6,250Net loss per common share basic and diluted

$
(0.006
)

$
(0.007
)

$
0.000Weighted average common shares outstandingbasic


20,319,997



20,319,997



-
   iTrackr Systems, Inc.Statement of Stockholders' (Deficit) (Restated)For the Three Months Ended March 31, 2011OriginallyRestated


Reported


DifferenceNet (Loss)


(129,830
)


(136,080
)


6,250Prior period:Common stock amount


3,142,538



3,142,538



-Common stock payable


37,500



37,500



-Accumulated deficit


(4,095,092
)


(4,074,259
)


(20,833
)Total shareholder's (Deficit)

$
(1,044,884
)

$
(1,030,301
)

$
(14,583
)
 15
 ITRACKR SYSTEMS, INC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 THREE MONTHS ENDED MARCH 31, 2011 AND 2010





NOTE K – 2011 RESTATEMENT (Continued)





iTrackr Systems, Inc.Consolidated Statement of Cash Flows (Restated)For the Three Months Ended March 31, 2011OriginallyRestated


Reported


DifferenceCASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(129,830
)

$
(136,080
)

$
6,250Adjustments to reconcile net lossto net cash provided (used) by operating activities:Depreciation


8,695



8,695



-Changes in operating accounts:Accounts receivable


1,830



8,080



(6,250
)Other current assets


-



-



-Accounts payable and accrued expenses


42,594



42,594



-Accrued compensation


62,500



62,500



-Accrued interest


5,445



5,445



-Other current liabilities


-



-



-CASH (USED) BY OPERATING ACTIVITIES


(8,766
)


(8,766
)


-CASH FLOWS FROM INVESTING ACTIVITIES:CASH PROVIDED (USED) BY INVESTING ACTIVITIES


-



-



-CASH FLOWS FROM FINANCING ACTIVITIES:CASH PROVIDED BY FINANCING ACTIVITIES


-



-



-NET INCREASE (DECREASE) IN CASH


(8,766
)


(8,766
)


-CASH, beginning of period


9,051



9,051



-CASH, end of period

$
286


$
286


$
-


NOTE L – RELATED PARTY TRANSACTIONS





During the three months ended March 31, 2011, the Company generated 96%, or $44,350 of our sales from RespondQ, LLC pursuant to the Master “Click2Chat Software as a Service” Managed Services Agreement dated November 1, 2010.  RespondQ, LLC is 30% owned by Idiama, LLC which is 100% owned by Mrs. Rizzo the spouse of our CEO, John Rizzo.  Mrs. Rizzo holds no position as an officer, director or otherwise in RespondQ, LLC or iTrackr Systems, Inc.




16




Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.




This quarterly report contains forward-looking statements including statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expects,” “anticipates,” “intends,” “believes” or similar language.  These forward-looking statements involve risks, uncertainties and other factors.  All forward-looking statements included in this quarterly report are based on information available to us on the date hereof and speak only as of the date hereof.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.  The factors discussed elsewhere in this quarterly report are among those factors that in some cases have affected our results and could cause the actual results to differ materially from those projected in the forward-looking statements.




The following discussion should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this quarterly report.




Recent Events





On February 1, 2010, Must Haves, Inc. amended its articles of incorporation with the State of Florida, changing its name to iTrackr Systems, Inc.





On December 10, 2009, Must Haves, Inc., iTrackr Acquisition, Inc. (“Merger Sub”) and iTrackr, Inc., a Florida corporation (“iTrackr”), entered into an Agreement and Plan of Merger (the “Agreement”), which closed January 12, 2010. On the Closing Date, iTrackr was merged with and into Merger Sub, which is the surviving corporation and became a wholly-owned subsidiary of the Registrant.





At the closing of the Merger, subject to and pursuant to the terms and conditions of the Agreement, each outstanding share of Purchaser common stock was converted into one share of common stock of the Registrant. Upon consummation of the Merger, the shareholders of the Purchaser received an aggregate of 17,875,695 shares of Registrant common stock and thus owned 93.5% of Must Have’s common stock. Must Haves also assumed 6,555,000 options and warrants of iTrackr, which are exercisable at prices from $0.01 to $0.40.





In addition, pursuant to the Plan of Merger Agreement, on January 12, 2010 Stella Gostfrand submitted her resignation as an officer and director of the Company, and also on January 12, 2010 Michael Uhl, Dave Baesler and John Rizzo were appointed to serve as members of the board of directors of the Company, all of which will be effective following the expiration of the ten day period following the mailing of the information statement required by Rule 14f-1 under the Exchange Act. Upon the consummation of the Reverse Merger on January 12, 2010 Ramesh Anand was appointed to serve as Chief Operating of the Company, and Mr. Rizzo was appointed to serve as Chief Executive Officer and Chief Financial Officer of the Company.





Overview





iTrackr Systems, Inc. (“iTrackr”, the “Company”, “we”, “us” or “our”) was formed in May 2006 to develop, market and commercialize a product and inventory search application through a social networking site designed to leverage the best of Internet and Mobile technologies.  We have taken the best of several burgeoning markets, including eCommerce, social networking and mobile content, and developed what we believe is a powerful platform that drives value to consumers, retailers and advertising and marketing firms.





iTrackr Systems intends to introduce and commercialize Internet and Mobile social merchandizing technology platforms to retailers and consumers.  “Social merchandizing” applies the variety of traditional marketing practices to promote products and services to a community of individuals via social networking technologies.  iTrackr is similar to MySpace and Facebook; however, our members’ interests are not in diary or event blogging, but in the timely location of products and services which can be acquired and consumed on a local level.




17




iTrackr Systems’ technology enables consumers to search and track merchandise, letting the consumer know which retail locations in a local zip code are stocking the queried merchandise, as well as the comparative prices.  In addition, if the item is not in stock, the consumer can request that iTrackr Systems notify them via mobile text message or email when the item is delivered to a local retailer and where that retailer is located.





In 2009, iTrackr purchased online customers support software technology from Chatstat for approximately $95,000.  iTrackr has subsequently launched its customer support chat software (“ChatTrackr”) which facilitates real-time customer support and expert advice, and paid transactions.





iTrackr generates revenues primarily through the licensing of its ChatTrackr to Saveology and RespondQ. These customers use our application service provider (“ASP”) system, outsourcing our chat applications for a monthly fee-per-agent, or license fee and in certain cases, an annual enterprise fee.





In addition, we offer customers a hosted ChatTrackr solution, enabling them to download our software on their website, where agents download a fee-based desktop application, while we manage the service on our network for an additional fee.  Examples of websites we manage include www.buycomcast.com and www.buytimewarner.com.  We also bill customers for maintenance and upgrades to our service.





Our plans to grow our customer support business is to position ChatTrackr as a sales tool for online retailers, increasing fees through customer additions, traffic and through the number of agents using ChatTrackr.  We intend to expand our product search business by offering this service to existing ChatTrackr customers as a means of driving further traffic to their own websites and transactional volume.  Our target markets include all ecommerce businesses, financial services, healthcare and automotive.





Our primary sources of operating funds have been historically through the issuance of debt and equity.  For the year ended December 31, 2010 we raised $50,000 from the sale of a warrant, $100,000 from the sale of common stock and $139,500 in debt.  For the year ended December 31, 2009, we raised $333,312 in debt.  To finance our growth strategy, we may continue to actively pursue additional funds through equity financing, including the sale of additional shares of common and preferred stock, asset sales, accelerated payments of maintenance and management fees, debt financing, or a combination thereof.





At March 31, 2011, iTrackr Systems had assets of $92,549, including cash on hand of $285 and accounts receivable of $37,088.  For the three months ended March 31, 2011 and the year ended December 31, 2010 the Company had revenue of $40,000 and $106,409, respectively.  For the three months ended March 31, 2011 and the year ended December 31, 2010 the Company had and net losses of $136,080 and $981,805, respectively, of which $0 and $483,459, respectively, was related to stock compensation expense.  iTrackr has incurred losses since inception and may not be able to generate sufficient net revenue from its business in the future to achieve or sustain profitability.  The Company believes that its cash on hand is insufficient to continue operations.  The Company currently receives approximately $13,000 to $23,000 per month in sales revenue.  The Company currently needs approximately $15,000 to $20,000 per month to fund our minimum cash outflows and $43,300 to $53,300 per month to maintain and expand our sales and operations.  The difference between the required minimum cash outflows of $15,000 to$20,000 per month and $43,300 to $53,300 per month primarily represents the salaries of 4 to 8 additional sales and administrative personnel, whom we intend to gradually hire as our cash flow increases.  Thus, the Company will need approximately $180,000 to $300,000 to continue through March 31, 2012.  In order to meet our cash needs, management is working to secure additional sales and debt and equity financing.  In the event no outside funding is achieved or sales remain flat  Mr. Rizzo, our CEO will continue to provide personal funds as needed to fund our required minimum cash outflows.  During the three months ended March 31, 2011 no borrowings from Mr. Rizzo were required.  During 2010, Mr. Rizzo loaned the Company $41,500.   Mr. Rizzo is an accredited investor and has committed to fund up to and additional $250,000.  However, the Company does not expect to need the full commitment amount primarily as a result of increasing sales.





Impact of Inflation





General inflation in the economy has driven the operating expenses of many businesses higher, and, accordingly we have experienced increased salaries and higher prices for supplies, goods and services. We continuously seek methods of reducing costs and streamlining operations while maximizing efficiency through improved internal operating procedures and controls. While we are subject to inflation as described above, our management believes that inflation currently does not have a material effect on our operating results. However, inflation may become a factor in the future.




18




Critical Accounting Estimates





The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions and estimates that affect the amounts reported. Note A of Notes to Financial Statements describes the significant accounting policies used in the preparation of the financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.





A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes:





·
We are required to make assumptions about matters that are highly uncertain at the time of the estimate; and·
Different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.





Estimates and assumptions about future events and their effects cannot be determined with certainty.  We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances.  These estimates may change as new events occur, as additional information is obtained and as our operating environment changes.  These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations.





In preparing our financial statements to conform to accounting principles generally accepted in the United States, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes.  These estimates include useful lives for fixed assets for depreciation calculations and assumptions for valuing options and warrants. Actual results could differ from these estimates.





Stock-Based Compensation





The Company accounts for all compensation related to stock, options and warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.  We use the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees.





In calculating this fair value, there are certain assumptions that we use consisting of:





1)
The expected life of the option.  No incentive stock options have been granted to date.  In the event the Company issues employee options, we will base our determination of expected life on the guidance in ASC 718-10-55-29 to 34.  The Company utilizes the contract term of each non qualified option except in the event that the option is not transferrable in which case we apply the aforementioned guidance in determining the expected term.


2)
Risk-free interest rate.  We use the treasury bill rate that most closely aligns with the duration of the derivative.


3)
Dividend yield.  Until a dividend is offered this input will always be zero.


4)
Volatility.  We use the Dow Jones Internet Composite Index (Ticker: FDN) from inception of the index to the date of grant.


5)
Forfeiture rate.  To date this rate has been zero.


6)
Stock price (see discussion below).





The use of a different estimate for any one of these components could have a material impact on the amount of calculated compensation expense.




19




We periodically issue common stock as compensation.  Pursuant to ASC 505-50-30-6 issuances are valued using the market price of the stock or value of the services rendered on the date of the related agreement, whichever is more readily determinable.  To date, common stock granted and issued for services has been issued free of obligation to the recipient and for no consideration.  The shares are valued at the price non-employees are willing to accept as payment in lieu of cash, which, historically, has been the price per share of recent sales of unregistered securities or value of debt converted to common stock.





Long-lived Assets





Long-lived assets, comprised of equipment, and identifiable intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.  Factors that may cause an impairment review include significant changes in technology that make current computer-related assets that we use in our operations obsolete or less useful and significant changes in the way we use these assets in our operations.  When evaluating long-lived assets for potential impairment, we first compare the carrying value of the asset to the asset’s estimated future cash flows (undiscounted and without interest charges).  If the estimated future cash flows are less than the carrying value of the asset, we calculate an impairment loss.  The impairment loss calculation compares the carrying value of the asset to the asset’s estimated fair value, which may be based on estimated future cash flows (discounted and with interest charges).  We recognize an impairment loss if the amount of the asset’s carrying value exceeds the asset’s estimated fair value.  If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis.  The new cost basis will be depreciated (amortized) over the remaining useful life of that asset.  Using the impairment evaluation methodology described herein, there have been no long-lived asset impairment charges for each of the last two years.





Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.





We have not made any material changes in our impairment loss assessment methodology during the past two fiscal years.  We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses.  However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material.





Income Taxes





Provisions for income taxes are based on taxes payable or refundable for the current period and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled.





When accounting for Uncertainty in Income Taxes, first, the tax position is evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements.  The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement.  As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company underwent a change of control for income tax purposes on October 8, 2003 according to Section 381 of the Internal Revenue Code.  The Company’s utilization of U.S. Federal net operating losses will be limited in accordance to Section 381 rules.  As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.




20




Results of Operations




Three Months Ended March 31, 2011 Compared With the Three Months Ended March 31, 2010.




Revenues




Revenues for the three months ended March 31, 2011 were $46,250 compared to revenues of $10,742 for the three months ended March 31, 2010.  The increase in revenue is primarily due to the purchase of ChatStat late in 2009 and sales to RespondQ in 2011 for which there were no sales in Q1 2010.  Of the $46,250 in 2011 sales, $12 relates to click through referral fees and $46,238 to sales related to ChatTrackr.  Two customers, Saveology and RespondQ, accounted for 4% and 96%, respectively of our ChatTrackr related sales.  These results compare to 2010 where $155 related to click through referral fees and $10,587 to sales related to ChatTrackr made to Saveology.





During the three months ended March 31, 2011 and the year ended December 31, 2010, Saveology and RespondQ were our only ChatTrackr customers.  Both customers’ contracts are identical except for the payment terms where the Company bills Saveology monthly on net 30 day payment terms at the rate of $0.75 per chat hour and RespondQ pays a flat $12,700 per month on net 30 day payment terms with an initial fee of $25,000 due 90 days from the agreement date.  The Saveology agreement was entered into on September 1, 2009 and the Respond Q agreement was entered into on November 1, 2010.  Under both agreements, the Company provides Click2Chat (i.e., ChatTrackr) software as a service.  The initial contract term is 12 months and renews for successive 12 month periods unless terminated by the Company.  Services that are voluntarily terminated are payable to the Company through the then current 12 month term.  Both contracts are currently in force.





Operating Expenses




Total operating expenses for the three months ended March 31, 2011 were $170,635 or 68% lower compared to $540,425 for the three months ended March 31, 2010.  The $369,790 decrease in operating expenses is primarily the result of a $378,459 decrease in non-cash stock compensation expense recorded as a result of warrant issuances and stock paid for services in 2010 offset by a $9,025 increase in personnel related costs.





Other Income and Expense




Other expense related to interest on our notes payable increased $1,702 to $5,445 for the three months ended March 31, 2011 compared to $3,743 of expense during the same period of 2010.  The increase is due to higher notes payable as of March 31, 2011 compared to March 31, 2010.




Net Loss




Our net loss was $129,830 for the three months ended March 31, 2011, compared to a loss of $533,426 for the three months ended March 31, 2010.  The $403,596 or 76% decrease in net loss was primarily due to the $378,459 decreases in stock compensation expense.





Liquidity and Capital Resources





From inception to March 31, 2011, we have incurred an accumulated deficit of $4,224,922.  This loss has been incurred through a combination of stock compensation of $1,154,316, professional fees and expenses supporting our plans to develop our website and brand our services as well as continued operating losses.  Since inception, we have financed our operations primarily through debt and equity financing.  However, we cannot provide assurance that management will be successful in acquiring such sources of capital in the future.  During the three months ended March 31, 2011 we had a net decrease in cash of $8,766.  Total cash resources as of March 31, 2011 were $285 compared with $9,051 at December 31, 2010.




21




Our accounts payable and accrued expense balance at March 31, 2011 were approximately $874,000 and includes $753,000 due to our CEO for unpaid salary and benefits and $121,038 of accounts payable and accrued liabilities.  As of March 31, 2011, we have $37,088 of accounts receivable and cash of $285.  Between accounts receivable and cash on hand we have enough to fund approximately seven to ten weeks of required minimum cash outflows (See discussion below).





Our available working capital and capital requirements will depend upon numerous factors, including the sale of live chat services, the timing and cost of expanding into new markets, the cost of developing competitive technologies, the resources that we devote to developing new products and commercializing capabilities, the status of our competitors, our ability to establish collaborative arrangements with other organizations, and our ability to attract and retain key employees.  We believe that approximately $43,300 to $53,300 per month or $520,000 to $640,000 will be required to maintain and expand our sales and operations and cover our operating and public company administrative expenses for the next 12 months. These costs are comprised of wages, professional fees, communications (i.e., cell phone and internet service) internet hosting and supplies.  In addition to covering our operating expenses, we may require additional cash resources due to changing business conditions or other future developments, including any acquisitions we may decide to pursue.





The Company currently receives approximately $13,000 to $15,000 per month in sales revenue compared to $15,000 to$20,000 per month in required minimum cash outflows.  Due to our limited operating history, we cannot estimate the level of future sales and may not generate enough cash to cover our required minimum cash outflows.  With the acquisition of RespondQ in November 2010 as a new customer combined with Saveology, we are in a much better position to fund our required minimum cash outflows.  However, in order to expand our sales efforts we will gradually need approximately $43,300 to $53,300 per month.  The difference between the required minimum cash outflows of $15,000 to$20,000 per month and $43,300 to $53,300 per month primarily represents the salaries of 4 to 8 additional sales and administrative personnel, whom we intend to gradually hire as our cash flow increases.  In order to meet this increase our management continues to work diligently to secure either debt or equity based financing for which we are currently in discussions.  In the event no outside funding is achieved or sales remain flat Mr. Rizzo, our CEO will continue to provide personal funds as needed to fund our required minimum cash outflows.  During the three months ended March 31, 2011 no borrowings from Mr. Rizzo were required.  During 2010, Mr. Rizzo loaned the Company $41,500.   Mr. Rizzo is an accredited investor and has committed to fund up to an additional $250,000.  However, the Company does not expect to need the full commitment amount primarily as a result of increasing sales.




Net cash used by operating activities was $8,766 for the three months ended March 31, 2011 as compared to $85,664 for the three months ended March 31, 2010.




Net cash provided by investing activities was $0 for the three months ended March 31, 2011 as compared to $95 for the three months ended March 31, 2010.




Net cash provided by financing activities was $0 for the three months ended March 31, 2011 as compared to $118,000 for the three months ended March 31, 2010.




During the year ended December 31, 2010, iTrackr Systems, Inc.:




●
Received $50,000 in exchange for the issuance of 166,666 shares of restricted common stock.


●
Received $50,000 upon the exercise of warrants to purchase 166,666 shares of restricted common stock.


●
Received $50,000 in exchange for a warrant to purchase 1,000,000 shares of common stock.


●
Converted $42,000 of principle and $466 of accrued interest into 121,332 shares of restricted common stock.


●
Received gross proceeds of $139,500 from promissory notes.


●
Issued 360,000 shares of restricted common stock valued at $108,000 to settle a legal dispute with Marc Falcone.


●
Issued 101,000 shares of restricted common stock to settle accounts payable valued at $32,000.


●
Issued 350,000 shares of restricted common stock in exchange for services valued at 105,000.





Off-Balance Sheet Arrangements





We have no material off-balance sheet transactions.




22




Item 3.  Quantitative and Qualitative Disclosures About Market Risk.





Not applicable.





Item 4.  Controls and Procedures.





See Item 4(T) below.





Item 4(T).  Controls and Procedures.




Evaluation of Disclosure Controls and Procedures





As of March 31, 2011, under the direction of the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a — 15(e) under the Securities Exchange Act of 1934, as amended.  Based on the evaluation of these controls and procedures required by paragraph (b) of Sec. 240.13a-15 or 240.15d-15 the disclosure controls and procedures have been found to be ineffective.





The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in our reports filed under the securities Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms.  Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.





Evaluation of Internal Control Over Financial Reporting





Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of March 31, 2011.  In making this assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. In management’s assessment of the effectiveness of internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) as required by Exchange Act Rule 13a-15(c), our management concluded as of the end of the period covered by this Report, due to a lack of segregation of duties that our internal control over financial reporting has not been effective.  However, at this time, our resources and size prevent us from being able to employ sufficient resources to enable us to have adequate segregation of duties within our internal control system.  Management will periodically reevaluate this situation.  If the volume of business increases and sufficient capital is secured, it is the Company’s intention to further increase staffing to mitigate the current lack of segregation of duties within the general, administrative and financial functions.





This 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 prospectus.





Changes in Internal Controls





Management of the Company has evaluated, with the participation of the Chief Executive Officer of the Company, any change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2011.  There was no change in the Company’s internal control over financial reporting identified in that evaluation that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting, other than what has been reported above.




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Limitations on the Effectiveness of Controls and Other Matters





Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended).  Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.  Additionally, controls may be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.





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





Risk Factor Related to Controls and Procedures





The Company has limited segregation of duties amongst its employees with respect to the Company’s preparation and review of the Company’s financial statements due to the limited number of employees, which is a material weakness in internal controls, and if the Company fails to maintain an effective system of internal controls, it may not be able to accurately report its financial results or prevent fraud.  As a result, current and potential stockholders could lose confidence in the Company’s financial reporting which could harm the trading price of the Company’s stock.





Management has found it necessary to limit the Company’s administrative staffing in order to conserve cash until the Company’s level of business activity increases.  As a result, there is limited segregation of duties amongst the employees.  The Company and its independent public accounting firm have identified this as a material weakness in the Company’s internal controls.  The Company intends to remedy this material weakness by hiring additional employees and reallocating duties, including responsibilities for financial reporting, among the employees as soon as there are sufficient resources available.  However, until such time, this material weakness will continue to exist.




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PART II -- OTHER INFORMATION





Item 1.  Legal Proceedings.




Not applicable.




Item 1a.  Risk Factors.




Not applicable.




Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.




During the three months ended March 31, 2011, the Company did not enter into any stock related transactions.




Item 3.  Defaults Upon Senior Securities.




Not applicable.




Item 4.  Submission of Matters to a Vote of Security Holders.




Not applicable.




Item 5.  Other Information.




Not applicable.




Item 6.  Exhibits.




Exhibit No.

Identification of Exhibit31.1*

Certification of John Rizzo, Chief Executive Officer and Chief Financial Officer of iTrackr Systems, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.32.1*

Certification of John Rizzo, Chief Executive Officer and Chief Financial Officer of iTrackr Systems, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.




*      Filed Herewith




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SIGNATURES




In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




ITRACKR SYSTEMS, INC.Date: July__, 2011
By:
/s/ John RizzoJohn Rizzo,Chief Executive Officer




By:
/s/ John RizzoJohn Rizzo,Chief Financial Officer





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




Signature

Title

Date/s/ John Rizzo

Chief Executive Officer, Chief Financial Officer and Director

July__, 2011




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