Notes
to Consolidated Financial Statements
|
|
September
30, 2016
|
|
|
December
31, 2015
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
194,871
|
|
|
$
|
9,103
|
|
Accounts receivable,
net
|
|
|
49,489
|
|
|
|
1,591
|
|
Prepaid expenses
|
|
|
2,900
|
|
|
|
2,573
|
|
Inventories
|
|
|
10,650
|
|
|
|
10,365
|
|
Total Current
Assets
|
|
|
257,910
|
|
|
|
23,632
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
18,225
|
|
|
|
6,225
|
|
Furniture
and equipment, net
|
|
|
188,824
|
|
|
|
45,647
|
|
Total
Assets
|
|
$
|
464,959
|
|
|
$
|
75,504
|
|
Liabilities and Stockholders'
Equity (Deficit)
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
21,135
|
|
|
$
|
10,367
|
|
Accrued expenses
|
|
|
43,884
|
|
|
|
53,881
|
|
Accrued interest
|
|
|
3,452
|
|
|
|
2,000
|
|
Income taxes payable
|
|
|
5,700
|
|
|
|
4,100
|
|
Deferred revenue
|
|
|
63,553
|
|
|
|
81,674
|
|
Derivative liability
|
|
|
54,123
|
|
|
|
51,325
|
|
Notes payable, current
portion
|
|
|
22,943
|
|
|
|
10,200
|
|
Notes payable - related
party, current portion
|
|
|
46,683
|
|
|
|
54,341
|
|
Convertible
note payable
|
|
|
3,065
|
|
|
|
-
|
|
Total Current
Liabilities
|
|
|
264,538
|
|
|
|
267,888
|
|
Long term liabilities
|
|
|
|
|
|
|
|
|
Notes payable, net
of current portion and discount
|
|
|
47,943
|
|
|
|
-
|
|
Notes payable - related
party, net of current portion and discount
|
|
|
74,384
|
|
|
|
86,066
|
|
Convertible note
payable, net of current portion and discount
|
|
|
23,545
|
|
|
|
12,614
|
|
Accrued
royalties payable
|
|
|
120,000
|
|
|
|
-
|
|
Total
Liabilities
|
|
|
530,410
|
|
|
|
366,568
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
|
Preferred stock,
$0.001 par value, 20,000,000 shares authorized; none outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.001
par value, 100,000,000 shares authorized. 16,477,167 and 15,006,750 shares outstanding at September 30, 2016 and December
31, 2105, respectively. 18,044,588 and 15,006,750 shares issued or issuable at September 30, 2016 and December 31, 2015, respectively
|
|
|
1,803
|
|
|
|
1,500
|
|
Additional paid-in
capital
|
|
|
1,179,785
|
|
|
|
438,547
|
|
Accumulated
deficit
|
|
|
(1,247,039
|
)
|
|
|
(731,111
|
)
|
Total
Stockholders' Deficit
|
|
|
(65,451
|
)
|
|
|
(291,064
|
)
|
Total Liabilities
and Stockholders' Equity (Deficit)
|
|
$
|
464,959
|
|
|
$
|
75,504
|
|
The accompanying
notes are an integral part of these consolidated financial statements.
Blow
& Drive Interlock Corporation
|
Consolidated
Statement of Operations
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
September 30,
|
|
|
Nine
Months Ended
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monitoring revenues
|
|
$
|
65,533
|
|
|
$
|
2,134
|
|
|
$
|
200,188
|
|
|
$
|
2,134
|
|
Distributorship
revenues
|
|
|
78,225
|
|
|
|
-
|
|
|
|
78,225
|
|
|
|
-
|
|
Total
revenues
|
|
|
143,758
|
|
|
|
2,134
|
|
|
|
278,413
|
|
|
|
2,134
|
|
Monitoring cost
of revenue
|
|
|
8,899
|
|
|
|
801
|
|
|
|
26,617
|
|
|
|
801
|
|
Total
cost of revenues
|
|
|
8,899
|
|
|
|
801
|
|
|
|
26,617
|
|
|
|
801
|
|
Gross Profit
|
|
|
134,859
|
|
|
|
1,333
|
|
|
|
251,796
|
|
|
|
1,333
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll
|
|
|
30,739
|
|
|
|
40,658
|
|
|
|
95,986
|
|
|
|
133,152
|
|
Professional fees
|
|
|
4,266
|
|
|
|
12,554
|
|
|
|
65,887
|
|
|
|
59,554
|
|
General and administrative
expenses (including $166,883 of stock based payments)
|
|
|
115,868
|
|
|
|
55,193
|
|
|
|
341,827
|
|
|
|
105,172
|
|
Research and development
|
|
|
-
|
|
|
|
2,155
|
|
|
|
-
|
|
|
|
59,785
|
|
Depreciation
|
|
|
16,041
|
|
|
|
972
|
|
|
|
32,971
|
|
|
|
1,655
|
|
Total
operating expenses
|
|
|
166,914
|
|
|
|
111,532
|
|
|
|
536,671
|
|
|
|
359,318
|
|
Loss from operations
|
|
|
(32,055
|
)
|
|
|
(110,199
|
)
|
|
|
(284,875
|
)
|
|
|
(357,985
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(41,789
|
)
|
|
|
(6,575
|
)
|
|
|
(111,714
|
)
|
|
|
(12,619
|
)
|
Change in fair value
of derivative liability
|
|
|
16,814
|
|
|
|
6,985
|
|
|
|
(2,798
|
)
|
|
|
(6,985
|
)
|
Gain
(loss) on extinguishment of debt
|
|
|
(116,541
|
)
|
|
|
-
|
|
|
|
(116,541
|
)
|
|
|
-
|
|
Total other income
(expense)
|
|
|
(141,516
|
)
|
|
|
410
|
|
|
|
(231,053
|
)
|
|
|
(19,604
|
)
|
Net income (loss)
|
|
$
|
(173,571
|
)
|
|
$
|
(109,789
|
)
|
|
$
|
(515,928
|
)
|
|
$
|
(377,589
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and dilutive
loss per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic and diluted
|
|
|
16,333,870
|
|
|
|
15,004,000
|
|
|
|
15,646,423
|
|
|
|
14,956,476
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
Blow
& Drive Interlock Corporation
|
Consolidated
Statement of Shareholders' Deficit
|
|
|
|
Common
Stock
|
|
|
Additional
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-In Capital
|
|
|
Deficit
|
|
|
Equity (Deficit)
|
|
Balance
December 31, 2015
|
|
|
15,006,750
|
|
|
$
|
1,500
|
|
|
$
|
438,547
|
|
|
$
|
(731,111
|
)
|
|
$
|
(291,064
|
)
|
Shares issued for services
|
|
|
326,417
|
|
|
|
33
|
|
|
|
166,850
|
|
|
|
-
|
|
|
|
166,883
|
|
Shares issued for cash
|
|
|
1,142,667
|
|
|
|
114
|
|
|
|
172,386
|
|
|
|
-
|
|
|
|
172,500
|
|
Shares issued related to debt
|
|
|
1,568,754
|
|
|
|
156
|
|
|
|
402,002
|
|
|
|
-
|
|
|
|
402,158
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(515,928
|
)
|
|
|
(515,928
|
)
|
Balance September
30, 2016 (Unaudited)
|
|
|
18,044,588
|
|
|
$
|
1,803
|
|
|
$
|
1,179,785
|
|
|
$
|
(1,247,039
|
)
|
|
$
|
(65,451
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
Blow
& Drive Interlock Corporation
|
Consolidated
Statement of Cash Flows
|
(unaudited)
|
|
|
|
|
|
|
Nine
Months Ended September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(515,928
|
)
|
|
$
|
(377,589
|
)
|
Adjustments to reconcile from net loss
to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
32,971
|
|
|
|
1,655
|
|
Shares issues for
services
|
|
|
166,883
|
|
|
|
-
|
|
Loss on extinguishments
of debt
|
|
|
116,541
|
|
|
|
-
|
|
Amortization of debt
discount
|
|
|
89,109
|
|
|
|
530
|
|
Change in fair value
of derivative liability
|
|
|
2,798
|
|
|
|
6,985
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(47,898
|
)
|
|
|
(32,500
|
)
|
Prepaid expenses
|
|
|
(327
|
)
|
|
|
(2,828
|
)
|
Deposits
|
|
|
(12,000
|
)
|
|
|
(6,225
|
)
|
Accounts payable
|
|
|
10,767
|
|
|
|
-
|
|
Accrued expenses
|
|
|
(8,397
|
)
|
|
|
23,656
|
|
Accrued interest
|
|
|
1,452
|
|
|
|
(9,412
|
)
|
Deferred
revenue
|
|
|
(18,121
|
)
|
|
|
92,885
|
|
Net cash used
in operating activities
|
|
|
(182,150
|
)
|
|
|
(302,843
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of furniture and equipment
|
|
|
(176,433
|
)
|
|
|
(63,649
|
)
|
Net cash used
in investing activities
|
|
|
(176,433
|
)
|
|
|
(63,649
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from notes
payable
|
|
|
471,199
|
|
|
|
15,000
|
|
Repayments of notes
payable
|
|
|
(99,348
|
)
|
|
|
(10,738
|
)
|
Proceeds
from issuance of common stock
|
|
|
172,500
|
|
|
|
101,235
|
|
Net cash provided
by financing activities
|
|
|
544,351
|
|
|
|
105,497
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
185,768
|
|
|
|
(260,995
|
)
|
Cash, beginning of period
|
|
|
9,103
|
|
|
|
272,692
|
|
Cash, end of period
|
|
$
|
194,871
|
|
|
$
|
11,697
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
21,288
|
|
|
$
|
18,286
|
|
Income
taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Supplemental disclosure
of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
$
|
166,883
|
|
|
$
|
-
|
|
Establishment
of debt discount for accrued royalties payable
|
|
$
|
120,000
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
BLOW & DRIVE INTERLOCK CORPORATION
Note 1 - Organization and Nature of Business
Blow & Drive Interlock (“the Company”)
was incorporated on July 2, 2013 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including,
but not limited to, selected mergers and acquisitions. The Company markets and rents alcohol ignition interlock devices to DUI/DWI
offenders as part of their mandatory court or motor vehicle department programs. The Company has approval for its device in the
following states: California, Colorado, Kansas, New York, Tennessee, Arizona, Oregon, Kentucky, Pennsylvania, and Texas.
In 2015, The Company formed BDI Manufacturing,
Inc., an Arizona corporation, which is a 100% wholly owned subsidiary of Blow & Drive Interlock Corporation.
The Company markets, installs and monitors
a breath alcohol ignition interlock device (BAIID) called the BDI-747/1, which is a mechanism that is installed on the steering
column of an automobile and into which a driver exhales. The device in turn provides a blood-alcohol concentration analysis. If
the driver’s blood-alcohol content is higher than a certain pre-programmed limit, the device prevents the ignition from engaging
and the automobile from starting. These devices are often required for use by DUI or DWI (“driving under the influence”
or “driving while intoxicated”) offenders as part of a mandatory court or motor vehicle department program.
During the year ended December 31, 2015, the
Company began to license others to distribute the BDI-747/1 and provide services related to the device. The distributorships are
for specific geographical areas (either entire states or certain counties within states). The Company currently has entered into
four distributorship agreements. Under the distribution agreements the Company typically receives a onetime fee, and then is entitled
to receive a per unit registration fee and a per unit monthly fee for each BDI-747/1 unit the distributor has in inventory or on
the road beginning thirty (30) days after the distributor receives the unit.
Since December 31, 2015, the Company has received
the monthly fees related to one distributor. In addition, the company has begun recognizing monthly fee income from units the Company
has installed into customer’s vehicles
Note 2 – Basis of Presentation and
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements
have been prepared by the Company in accordance with generally accepted accounting principles in the United States of America,
and pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments, consisting of
normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations
and cash flows of the Company.
Going Concern
The Company’s unaudited condensed consolidated
financial statements are prepared using generally accepted accounting principles in the United States of America applicable to
a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The
Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as
a going concern. As of September 30, 2016, the Company had an accumulated deficit of $1,247,039. The ability of the Company to
continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.
If the Company is unable to obtain adequate capital, it could be forced to cease or reduce its operations.
In order to continue as a going concern, the
Company will need, among other things, additional capital resources. The Company will continue to raise funds through the sale
of its equity securities or issuance of notes payable to obtain additional operating capital. The Company is dependent upon its
ability, and will continue to attempt to secure additional equity and/or debt financing until the Company can earn revenue and
realize positive cash flow from its operations. There are no assurances that the Company will be successful in earning revenue
and realizing positive cash flow from its operations. Without sufficient financing it would be unlikely that the Company will continue
as a going concern.
BLOW & DRIVE INTERLOCK CORPORATION
Based on the Company’s current rate of
cash outflows, cash on hand and proceeds from the prior sale of equity securities and issuance of convertible notes, management
believes that its current cash will not be sufficient to meet the anticipated cash needs for working capital for the next 12 months.
The Company’s plans with respect to its liquidity issues include, but are not limited to, the following:
|
1)
|
Continue to issue restricted stock for compensation due to consultants and for its legacy accounts payable in lieu of cash payments; and
|
|
|
|
|
2)
|
Seek additional capital to continue its operations as it rolls out its current products. The Company is currently evaluating additional debt or equity financing opportunities and may execute them when appropriate. However, there can be no assurances that the Company can consummate such a transaction, or consummate a transaction at favorable pricing.
|
The ability of the Company to continue as a
going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually
secure other sources of financing and achieve profitable operations. These condensed consolidated 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.
Reclassifications
Certain reclassifications have been made to
amounts in prior periods to conform to the current period presentation. All reclassifications have been applied consistently to
the periods presented.
Use of Estimates
The preparation of financial statements in
conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those
estimates.
Revenue Recognition
The Company recognizes revenue when earned
and related costs of sales and expenses when incurred. The Company recognizes revenue in accordance with FASB ASC Topic 605-10-S99,
Revenue Recognition, Overall, SEC Materials
(“Section 605-10-S74”). Section 605-10-S99 requires that four basic
criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred
or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. Cost of revenue consists
of the cost of the purchased goods and labor related to the corresponding sales transaction. When a right of return exists, the
Company defers revenues until the right of return expires. The Company recognizes revenue from services at the time the services
are completed.
Distributorships
Revenue is recognized pursuant to ASC Topic
605, “Revenue Recognition” (ASC 605). Monthly per unit fee revenue is earned and recognized over the term of the contract
as support services are provided. Revenues from territory exclusivity are earned when there is persuasive evidence of an arrangement,
delivery has occurred, the sales price has been determined and collectability has been reasonably assured.
The Company enters into arrangements that include
multiple deliverables, which typically consist of the sale of exclusive distributorship territory rights, startup supplies package,
promotional material, three weeks of onsite training and ongoing monthly support services. The Company accounts for each material
element within an arrangement with multiple deliverables as separate units of accounting. Revenue is allocated to each unit of
accounting under the guidance of ASC Topic 605-25, Multiple-Element Revenue Arrangements, which provides criteria for separating
consideration in multiple-deliverable arrangements by establishing a selling price hierarchy for determining the selling price
of a deliverable. The selling price used for each deliverable is based on vendor-specific objective evidence (“VSOE”)
if available, third-party evidence if VSOE is not available, or estimated selling price if neither VSOE nor third-party evidence
is available. The Company is required to determine the best estimate of selling price in a manner that is consistent with that
used to determine the price to sell the deliverable on a standalone basis. The Company generally does not separately sell distributorships
or training on a standalone basis. Therefore, the Company does not have VSOE for the selling price of these units nor is third
party evidence available and thus management uses its best estimate of selling prices in their allocation of revenue to each deliverable
in the multiple element arrangement.
BLOW & DRIVE INTERLOCK CORPORATION
Monitoring fees on Company installed
units
The Company rents units directly to customers
and installs the units in the customer’s vehicles. The rental periods range from a few months to 2 years and include a combination
of down payments made by the customer and monthly payments paid under the agreements with the Company. Revenue is recognized from
these companies on the straight line basis over the term of the agreement. Amounts collected in excess of those earned are classified
as deferred revenue in the balance sheet, and amounts earned in excess of amounts collected are reflected in accounts receivable
in the balance sheet at September 30, 2016 and December 31, 2015.
Accounts Receivable and Allowance for Doubtful
Accounts
The Company’s accounts receivable primarily
consist of trade receivables. The Company records an allowance for doubtful accounts that is based on historical trends, customer
knowledge, any known disputes, and the aging of the accounts receivable balances combined with management’s estimate of future
potential recoverability. Receivables are written off against the allowance after all attempts to collect a receivable have failed.
The Company believes its allowance for doubtful accounts as of September 30, 2016 and December 31, 2015 is adequate, but actual
write-offs could exceed the recorded allowance.
Convertible Debt and Warrants Issued with
Convertible Debt
Convertible debt is accounted for under the
guidelines established by ASC 470,
Debt with Conversion and Other Options
and ASC 740,
Beneficial Conversion Features
.
The Company recorded a beneficial conversion feature (“BCF”) when convertible debt is issued with conversion features
at fixed or adjustable rates that are below market value when issued. If, however, the conversion feature is dependent upon a condition
being met or the occurrence of a specific event, the BCF will be recorded when the related contingency is met or occurs. The BCF
for the convertible instrument is recorded as a reduction, or discount, to the carrying amount of the convertible instrument equal
to the fair value of the conversion feature. The discount is then amortized to interest over the life of the underlying debt using
the effective interest method.
The Company calculates the fair value of warrants
issued with the convertible instruments using the Black-Scholes valuation method, using the same assumptions used for valuing employee
options for purposes of ASC 718,
Compensation – Stock Compensation
, except that the contractual life of the warrant
is used. Under these guidelines, the Company allocates the value of the proceeds received from a convertible debt transaction between
the conversion feature and any other detachable instruments (such as warrants) on a relative fair value basis. The allocated fair
value is recorded as a debt discount or premium and is amortized over the expected term of the convertible debt to interest expense.
For modifications of convertible debt, the
Company recorded a modification that changes the fair value of an embedded conversion feature, including a BCF, as a debt discount
which is then amortized to interest expense over the remaining life of the debt. If modification is considered substantial (i.e.
greater than 10% of the carrying value of the debt), an extinguishment of debt is deemed to have occurred, resulting in the recognition
of an extinguishment gain or loss.
Fair Value of Financial Instruments
The Company utilizes ASC 820-10, Fair Value
Measurement and Disclosure, for valuing financial assets and liabilities measured on a recurring basis. Fair value is defined as
the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring
fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most
observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability
and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect
the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance
establishes three levels of inputs that may be used to measure fair value:
Level 1. Observable inputs such as quoted prices
in active markets;
Level 2. Inputs, other than the quoted prices
in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there
is little or no market data, which require the reporting entity to develop its own assumptions.
BLOW & DRIVE INTERLOCK CORPORATION
As of September 30, 2016 and December 31, 2015,
the Company did not have any level 3 assets or liabilities. As of September 30, 2016 and December 31, 2015, the derivative liabilities
are considered level 2 items.
Net Income (Loss) Per Share
Basic earnings per share is calculated by dividing
income available to common stockholders by the weighted-average number of common shares outstanding during each period. Diluted
earnings per share is computed using the weighted average number of common and dilutive common share equivalents outstanding during
the period.
Stock Based Compensation
The Company recognizes stock-based compensation
in accordance with FASB ASC Topic 718
Stock Compensation
, which requires the measurement and recognition of compensation
expense for all share-based payment awards made to employees and directors including employee stock options and employee stock
purchases related to an employee stock purchase plan based on the estimated fair values.
For non-employee stock-based compensation,
the Company applies FASB ASC Topic 505
Equity-Based Payments to Non-Employees
, which requires stock-based compensation related
to non-employees to be accounted for based on the fair value of the related stock or options or the fair value of the services
on the grant date, whichever is more readily determinable in accordance with FASB ASC Topic 718.
Concentrations
All of the Company’s ignition interlock
devices are purchased from one supplier in China. The loss of this supplier could have a material impact on the Company’s
ability to timely obtain additional units.
Income Taxes
The Company accounts for its income taxes in
accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets and liabilities for future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and tax credit carry forwards. 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.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes
the enactment date.
The Company also follows ASC 740-10-25, which
provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized
in an enterprise’s financial statements in accordance with ASC Topic 740, “
Accounting for Income Taxes”
.
ASC 740-10-25 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure and transition.
Recently Issued Accounting Pronouncements
In May 2014, the FASB and the International
Accounting Standards Board jointly issued ASU No. 2014-9,
Revenue from Contracts with Customers
, which clarifies the principles
for recognizing revenue and develops a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The
core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
and services. The ASU, as amended, is effective for public entities for annual and interim periods beginning after December 15,
2017. Early adoption is not permitted under U.S. GAAP and retrospective application is permitted, but not required. The Company
is currently evaluating the impact of adopting this guidance on its consolidated financial position and results of operations.
In August 2014, the FASB issued ASU No. 2014-15,
Presentation of Financial Statement-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability
to Continue as a Going Concern
, which provides guidance under U.S. GAAP about management’s responsibility to evaluate
whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote
disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The ASU is
effective for all entities and for annual periods ending after December 15, 2016, and interim periods within annual periods beginning
after December 15, 2016. Early adoption is permitted. The adoption of ASU No. 2014-15 is not expected to have a significant impact
on the Company’s consolidated financial statements and related disclosures.
BLOW & DRIVE INTERLOCK CORPORATION
In November 2015, the FASB issued guidance
related to the presentation of deferred income taxes. The guidance requires that deferred tax assets and liabilities are classified
as non-current in a consolidated balance sheet. This guidance is effective in the first quarter of 2017 and is not expected to
materially impact financial position or net earnings.
In February 2016, the FASB issued a new accounting
standard on leasing. The new standard will require companies to record most leased assets and liabilities on the balance sheet,
and also proposes a dual model for recognizing expense. This guidance will be effective in the first quarter of 2019 with early
adoption permitted. The Company is evaluating the impact that adopting this guidance will have on consolidated financial statements.
Note 3 – Furniture and Equipment
Furniture and equipment consist of the following:
|
|
September 30, 2016
|
|
|
December 31, 2015
|
|
Monitoring Units
|
|
$
|
219,898
|
|
|
$
|
46,150
|
|
Furniture, Fixtures, and Equipment
|
|
|
4,798
|
|
|
|
2,398
|
|
Total Assets
|
|
|
224,696
|
|
|
|
48,548
|
|
Less: accumulated depreciation
|
|
|
(35,872
|
)
|
|
|
(2,901
|
)
|
Furnitue and Equipment, net
|
|
|
188,824
|
|
|
|
45,647
|
|
Depreciation expense for the three and nine
months ended September 30, 2016 and 2015 amounted to $16,041 and $32,971 and $972, and $1,655, respectively.
Note 4 – Accrued Expenses
Accrued Expense consist of the following:
|
|
September 30, 2016
|
|
|
December 31, 2015
|
|
Accrued professional fees
|
|
$
|
750
|
|
|
$
|
27,013
|
|
Accrued wages
|
|
|
18,700
|
|
|
|
1,949
|
|
Accrued payroll taxes
|
|
|
24,434
|
|
|
|
7,419
|
|
Refundable distributorship deposit
|
|
|
-
|
|
|
|
17,500
|
|
Total
|
|
$
|
43,884
|
|
|
$
|
53,881
|
|
Note 5 - Deferred revenue
The Company classifies income as deferred until
the terms of the contract or time frame have been met within the Company’s revenue recognition policy. As of September 30,
2016 and December 31, 2015 deferred revenue totaled $63,553 and 81,674, with $0, and $50,000, respectively, related to distributorship
agreements. The remaining deferred revenue relates to Company serviced ignition interlock monitoring customers.
BLOW & DRIVE INTERLOCK CORPORATION
Note 6 – Notes Payable
Notes payable consist of the following:
|
|
September 30, 2016
|
|
|
December 31, 2015
|
|
|
|
Principal
|
|
|
Accrued Interest
|
|
|
Principal
|
|
|
Accrued Interest
|
|
Convertible notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convetible note #1
|
|
|
7,500
|
|
|
|
86
|
|
|
|
15,000
|
|
|
|
-
|
|
Debt Discount
|
|
|
(4,435
|
)
|
|
|
-
|
|
|
|
(8,426
|
)
|
|
|
|
|
Convertible note #2
|
|
|
50,000
|
|
|
|
1,667
|
|
|
|
50,000
|
|
|
|
-
|
|
Debt Discount
|
|
|
(26,455
|
)
|
|
|
-
|
|
|
|
(43,960
|
)
|
|
|
|
|
Subtotal convertible notes net
|
|
|
26,610
|
|
|
|
1,753
|
|
|
|
12,614
|
|
|
|
-
|
|
Promissory notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory note #1
|
|
|
4,750
|
|
|
|
368
|
|
|
|
10,200
|
|
|
|
333
|
|
Promissory note #2
|
|
|
25,740
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Debt Discount
|
|
|
(7,547
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Promissory note #3
|
|
|
50,000
|
|
|
|
750
|
|
|
|
-
|
|
|
|
-
|
|
Debt Discount
|
|
|
(38,542
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Promissory note #4
|
|
|
10,000
|
|
|
|
(200
|
)
|
|
|
-
|
|
|
|
1,667
|
|
Debt Discount
|
|
|
(9,615
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Promissory note #5
|
|
|
36,100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Subtotal promissory notes
|
|
|
70,886
|
|
|
|
918
|
|
|
|
10,200
|
|
|
|
2,000
|
|
Royalty notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty note #1
|
|
|
55,313
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Debt Discount
|
|
|
(55,313
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Royalty note #2
|
|
|
50,938
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Debt Discount
|
|
|
(50,938
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Royalty note #3
|
|
|
192,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Debt Discount
|
|
|
(192,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Subtotal royalty notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Related party promissory note
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party promissory note
|
|
|
121,067
|
|
|
|
782
|
|
|
|
140,407
|
|
|
|
-
|
|
Total
|
|
|
218,563
|
|
|
|
3,453
|
|
|
|
163,221
|
|
|
|
2,000
|
|
Current portion
|
|
|
72,691
|
|
|
|
3,453
|
|
|
|
66,541
|
|
|
|
2,000
|
|
Long-term portion
|
|
$
|
145,872
|
|
|
$
|
-
|
|
|
$
|
96,680
|
|
|
$
|
-
|
|
Convertible note #1:
On August 7, 2015, the Company entered into
an agreement with a third party non-affiliate and issued a 7.5% interest bearing convertible debenture for $15,000 due on August
7, 2017, with conversion features commencing after 180 days following the date of the note. Payments of interest only are due monthly
beginning September 2015. The loan is convertible at 70% of the average of the closing prices for the common stock during the five
trading days prior to the conversion date. In connection with this Convertible note payable, the Company recorded a $5,770 discount
on debt, related to the beneficial conversion feature of the note to be amortized over the life of the note or until the note is
converted or repaid. This note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value
(See Note 8). On May 6, 2016 the note holder elected to convert $7,500 in principal into 30,000 shares of common stock.
In connection with the issuance of the August
Convertible Note Payable, the Company issued a warrant on August 7, 2015 to purchase 30,000 shares of the Company’s common
stock at a purchase price of $0.50 per share. The Black Scholes model was used in valuing the warrants in determining the relative
fair value of the warrants issued in connection with the convertible note payable using the following inputs: Expected Term –
3 years, Expected Dividend Rate – 0%, Volatility – 100%, Risk Free Interest Rate -1.08%. The Company recorded an additional
$4,873 discount on debt, related to the relative fair value of the warrants issued associated with the note to be amortized over
the life of the note.
Convertible note #2
On November 24, 2015, the Company entered into
an agreement with an existing non-affiliated shareholder, and issued a 10% interest bearing convertible debenture for $50,000 due
on November 19, 2017. Payments of interest only are due monthly beginning December 2015. The loan is convertible at 70% of the
average of the closing prices for the common stock during the five trading days prior to the conversion date, but may not be converted
if such conversion would cause the holder to own more than 9.9% of outstanding common stock after giving effect to the conversion
(which limitation may be removed by the holder upon 61 days advanced notice to the company). In connection with this Convertible
Note Payable, the Company recorded a $32,897 discount on debt, related to the beneficial conversion feature of the note to be amortized
over the life of the note or until the note is converted or repaid. This note was bifurcated with the embedded conversion option
recorded as a derivative liability at fair value (See Note 7). As of September 30, 2016 this note has not been converted.
BLOW & DRIVE INTERLOCK
CORPORATION
In connection with the issuance of the November
convertible note payable, the Company issued a warrant to purchase 80,000 shares of common stock at an exercise price of $0.80
per share. The warrant has an exercise period of two years from the date of issuance. The Black Scholes model was used in valuing
the warrants in determining the relative fair value of the warrants issued in connection with the convertible note payable using
the following inputs: Expected Term – 2 years, Expected Dividend Rate – 0%, Volatility – 100%, Risk Free Interest
Rate -.61%. The Company recorded an additional $13,783 discount on debt, related to the relative fair value of the warrants issued
associated with the note to be amortized over the life of the note.
Promissory note #1:
On December 18, 2015, the Company entered into
a borrowing facility with a third party. The initial note value was for a principal balance of $10,200. The Company is allowed
to draw limited additional funds at any time. The interest due is dependent on a cost schedule that is tied to the date of repayment
of the principle. Due dates for each draw are 6 months from the draw date and range from December 1, 2016 through February 16,
2017.
Promissory note #2:
On January 29, 2016, the Company entered into
a note payable agreement with a third party. The note was for a principal balance of $44,850 in exchange for $29,505 in cash. The
initial borrowing was paid back in August 2016. Subsequent to this initial repayment, the Company borrow an additional $28,600
in September of 2016. The current borrowing is paid back via daily ACH debits for $204 per business day with a target extinguishment
in March 2017.
Promissory note #3:
On March 30, 2016, the Company provided an
agreement to a third party to obtain a $50,000 promissory note in exchange for 50,000 restricted common shares and $50,000 in cash.
The promissory note has a maturity date of June 30, 2018, and bears interest at 18% per annum. The purchaser did not sign the agreement
nor deliver the proper consideration prior to March 31, 2016. The exchange of the $50,000 in cash consideration by the purchaser
and the issuance of the 50,000 restricted common shares by the Company was made in conjunction with delivery of the signed purchase
agreement and promissory note on April 5, 2016. The Company recorded a debt discount of $50,000 related to the relative fair value
of the issued shares associated with the note to be amortized over the life of the note.
Promissory note #4:
On September 23, 2016, the Company provided
an agreement to a third party to obtain a $10,000 promissory note in exchange for 100,000 restricted common shares and $10,000
in cash. The promissory note has a maturity date of October 31, 2017 and bears interest at 24% per annum. The Company recorded
a debt discount of $10,000 related to the relative fair value of the issued shares associated with the note to be amortized over
the life of the note.
Promissory note #5:
On September 30, 2016, the Company provided
an agreement to a third party to obtain a $36,100 promissory note in exchange for $36,100 in cash. The promissory note has a maturity
date of October 1, 2017 and bears interest payments of $376 per month and a balloon payment for principle upon maturity.
Royalty note #1:
On January 20, 2016, the company entered into
a non-interest bearing note payable and royalty agreement with a third party. Under the note, the Company borrowed $65,000 and
begin to repay the principal amount at a rate of approximately $937 per month with escalations to approximately $3,531 per month
as of February 2017 until the note is paid in full. In addition, starting in February 2018, the Company will pay the lender a royalty
fee of five ($5) dollars per month for every ignition interlock devise that the Company has on the road in customers’ vehicles
up to eight hundred (800) in perpetuity, and for every unit over 800, the Company will owe the lender $1 per month per device in
perpetuity. In connection with this note, the Company recorded a debt discount of $65,000 relating to the future royalty payments
BLOW & DRIVE INTERLOCK CORPORATION
On September 30, 2016, the Company entered
into Amendment No. 1 to Royalty note #1 in order to remove a security interest in the Company’s assets to secure repayment
of the original note and amend the royalty provisions of the original note to be $1 for each Device on the road beginning in the
25
th
month after the date of the original note. In connection with this amendment, the Company issued 425,000 shares
of restricted common stock. Pursuant to ASC 470 this amendment is a deemed extinguishment of the debt and the resulting revised
debt is set up as a new note. In connection therewith, the Company recorded a loss on extinguishment of $116,541.
Royalty note #2:
On March 29, 2016, the company consummated
a non-interest bearing note payable and royalty agreement with a relative of the CEO with terms almost identical to the note referenced
above. Under the note, the Company borrowed $55,000 and begin to repay the principal amount at a rate of approximately $937 per
month with escalations to approximately $3,531 per month as of April 2017 until the note is paid in full. In addition, starting
in February 2018, the Company will pay the lender a royalty fee of five ($5) dollars per month for every ignition interlock devise
that the Company has on the road in customers’ vehicles up to eight hundred (800) in perpetuity, and for every unit over
800, the Company will owe the lender $1 per month per device in perpetuity. In connection with this note, the Company recorded
a debt discount of $55,000 relating to the future royalty payments
On September 30, 2016, the Company entered
into Amendment No. 1 to Royalty note #2 to amend the royalty provisions of the original note to be $1 for each Device on the road
beginning in the 25
th
month after the date of the Edris Original Note. In connection with this amendment, the Company
issued 50,000 shares of restricted common stock and recorded an additional debt discount of $8,959. This amendment was accounted
for as a debt modification pursuant to ASC 470.
Royalty note #3:
On September 30, 2016,
the Company entered into a Loan and Security Agreement (the “LSA”) with Doheny Group, LLC, a Delaware limited liability
company (“Doheny”), under which Doheny agreed to loan up to $542,400 in two phases, to be used to acquire additional
parts and supplies to manufacture the Company’s proprietary breath alcohol ignition interlock devices. Under the terms of
the LSA, the first phase will be a loan of up to $192,000 to acquire parts and supplies to manufacture 600 Devices; and the second
phase will be a loan of up to $350,400 to acquire parts and supplies to manufacture 1,000 Devices.
The Phase 1 Loan was
funded in the amount of $192,000 by Doheny on September 30, 2016, upon which the Company forwarded the funds to its supplier on
or about October 5, 2016, in order to acquire parts and supplies to manufacture 600 Devices. Both the Phase 1 Loan and the Phase
2 Loan mature three years from the date of funding, and are at an interest rate of 25% per annum. The Company can prepay the Phase
1 Loan and the Phase 2 Loan (if applicable) at any time without penalty. In exchange for Doheny funding the Phase 1 Loan, the Company
issued Doheny a promissory note for $192,000 and also issued Doheny shares of common stock equal to 4.99% of the then-outstanding
common stock, pursuant to the terms of a stock purchase agreement. As a result, on or about October 7, 2016, the Company issued
Doheny 845,913 shares of common stock. If Doheny funds the Phase 2 Loan then the Company is obligated to issue Doheny that number
of additional shares of common stock that equals 5% of the then-outstanding common stock. Until the Company repays the Phase 1
Loan and the Phase 2 Loan, as applicable, Doheny has anti-dilution rights for the percentage of stock Doheny owns in the event
the Company issues additional shares of common stock during that period. The Company also entered into a Royalty Agreement with
Doheny, under which Doheny was granted perpetual royalty rights on all Devices when the Company has 500 or more Devices in service
whether leased to end users or distributors. The royalty amounts vary between $1 and $2 per Device depending on a variety of factors.
The Company recorded a debt discount of $192,000 related to the relative fair value of the issued shares associated with the Phase
1 note to be amortized over the life of the note.
Subsequent to September
30, 2016, the Company has issued an additional 54,508 common shares in connection with the anti-dilution provisions of this note.
Related party promissory note
On February 16, 2014, the Company entered into
a note payable agreement with Laurence Wainer, the director, President and sole officer of the Company. The note was for a principal
balance of $160,000 and bears interest at 7.75% per annum. Principal and interest payments are due in 60 equal monthly installments
beginning in March 2014 of $3,205. The Company and Laurence Wainer entered into an additional agreement effective April 2014 suspending
loan repayments until January 2015. As of January 2015, the payments have resumed.
BLOW & DRIVE INTERLOCK CORPORATION
Note 7 – Derivative Financial Instruments
The Company applies the provisions of ASC Topic
815-40, Contracts in Entity’s Own Equity (“ASC Topic 815-40”), under which convertible instruments, which contain
terms that protect holders from declines in the stock price, may not be exempt from derivative accounting treatment. As a result,
embedded conversion options (whose exercise price is not fixed and determinable) in convertible debt (which is not conventionally
convertible due to the exercise price not being fixed and determinable) are initially recorded as a liability and are revalued
at fair value at each reporting date using the Black Sholes Model.
The Company has a $7,500 and a $50,000 convertible
note with variable conversion pricing outstanding at September 30, 2016. The following inputs were used in within the Black Sholes
Model to determine the initial relative fair value: Expected Term – .85 and 1.11 years, Expected Dividend Rate – 0%,
Volatility – 312%, Risk Free Interest Rate - 0.55%.
The Company revalues these derivatives each
quarter using the Black Sholes Model. The change in valuation is accounted for as a gain or loss in derivative liability. The following
table describes the Derivative liability as of September 30, 2016 and December 31, 2015.
Balance December 31, 2015
|
|
|
51,325
|
|
Change in fair market value of derivative
|
|
|
2,798
|
|
Balance September 30, 2016
|
|
|
54,123
|
|
Note 8 – Accrued Royalties Payable
In connection with the Royalty Notes number
1 and 2 as discussed in Note 6 above the Company has estimated the royalties to be paid out in perpetuity. No payments are due
for royalties until February 2018 unless the Company hits certain sales milestones as set forth in the royalty agreements earlier.
Note 9 – Stockholders’ Equity
Preferred Stock
The Company’s articles of incorporation
authorize the Company to issue up to 50,000,000 preferred shares of $0.001 par value, having preferences to be determined by the
Board of Directors for dividends, and liquidation of the Company’s assets. As of September 30, 2016 and December 31, 2015,
the Company had no preferred shares outstanding.
Common Stock
Holders of common stock are entitled to one
vote for each share held. There are no restrictions that limit the Company’s ability to pay dividends on its common stock,
subject to the requirements of the Delaware Revised Statutes. The Company has not declared any dividends since incorporation. During
the nine months ended September 30, 2016, the Company issued 326,417 shares of $0.001 par value common stock for services with
a value of $166,883. The Company also issued shares in connection with debt of 1,568,754 for an aggregate fair value of $402,158.
Additionally, the Company issued and sold 1,142,667 shares of its common stock to several investors for an aggregate purchase price
of $172,500. The total number of shares issued or issuable as of September 30, 2016 was 18,044,588.
BLOW & DRIVE INTERLOCK CORPORATION
Note 10 – Warrants
The following table
reflects warrant activity as during the nine months ended September 30, 2016:
|
|
Warrants for
|
|
|
Weighted
|
|
|
|
Common
|
|
|
Average
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
Outstanding as of December 31, 2015
|
|
|
110,000
|
|
|
$
|
0.72
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited, cancelled, expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of September 30, 2016
|
|
|
110,000
|
|
|
$
|
0.72
|
|
Note 11 – Income (Loss) Per Share
Net income (loss) per share is provided in
accordance with FASB ASC 260-10,
“Earnings per Share”.
Basic net income (loss) per common share (“EPS”)
is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average shares outstanding,
assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive.
The following shares are not included in the
computation of diluted income (loss) per share, because their inclusion would be anti-dilutive:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Preferred shares
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Convertible notes
|
|
|
194,008
|
|
|
|
3,594
|
|
|
|
205,737
|
|
|
|
1,211
|
|
Warrants
|
|
|
110,000
|
|
|
|
-
|
|
|
|
110,000
|
|
|
|
-
|
|
Options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total anti-dilutive weighted average shares
|
|
|
304,008
|
|
|
|
3,594
|
|
|
|
315,737
|
|
|
|
1,211
|
|
If all dilutive securities had been exercised
at September 30, 2016 the total number of common shares outstanding would be as follows:
|
|
September 30, 2016
|
|
Common Shares
|
|
|
15,040,750
|
|
Preferred Shares
|
|
|
-
|
|
Convertible notes
|
|
|
194,008
|
|
Warrants
|
|
|
110,000
|
|
Options
|
|
|
-
|
|
Total potential shares
|
|
|
15,344,758
|
|
BLOW & DRIVE INTERLOCK CORPORATION
Note 12 – Commitments and Contingencies
On January 21, 2015, the Company and Mr. Wainer
entered into a two-year lease with Marsel Plaza LLC for a storefront location at 1080 South La Cienega Boulevard, Suite 304, Los
Angeles, California 90035. Base rent under the lease is $1,450 per month. The lease began on February 1, 2015.
Legal Proceedings
In the ordinary course of business, the Company
from time to time is involved in various pending or threatened legal actions. The litigation process is inherently uncertain and
it is possible that the resolution of such matters might have a material adverse effect upon the Company’s financial condition
and/or results of operations. However, in the opinion of management, other than as set forth herein, matters currently pending
or threatened against the Company are not expected to have a material adverse effect on the Company’s financial position
or results of operations.
Note 16 – Subsequent Events
The Company follows the guidance in FASB ASC
Topic 855,
Subsequent Events
(“ASC 855”), which provides guidance to establish general standards of accounting
for and disclosures of events that occur after the balance sheet date but before the consolidated financial statements are issued
or are available to be issued. ASC 855 sets forth (i) the period after the balance sheet date during which management of a reporting
entity evaluates events or transactions that may occur for potential recognition or disclosure in the consolidated financial statements,
(ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in
its consolidated financial statements, and (iii) the disclosures that an entity should make about events or transactions that occurred
after the balance sheet date.
In October and November 2016, the Company issued
1,320,513 shares of common stock that were issuable at September 30, 2016.