UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF
SECURITIES
Pursuant to Section 12(b) or (g) of The Securities
Exchange Act of 1934
Helix TCS, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or
organization)
81-4046024
(I.R.S. Employer Identification No.)
5300 DTC Parkway
Suite 300
Greenwood Village, CO 80111
(Address of principal executive offices)
(720) 328-5372
(Registrant's telephone number, including area code)
Securities to be registered
pursuant to Section 12(b) of the Act:
Title
of each class to be so registered:
None
Name
of each exchange on which each class is to be registered:
None
Securities to be registered
pursuant to Section 12(g) of the Act:
Common
(Title
of class)
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 12b2 of the Exchange Act.
Large
accelerated filer
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Accelerated
filer
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Non-accelerated
filer
(Do
not check if a smaller reporting company)
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Smaller
reporting company
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ITEM 1. BUSINESS
The Company
Helix TCS Inc. ("we," "us," "Helix," or the "Company")
was incorporated in Delaware on March 13, 2014 until its acquisition of the assets
of Helix TCS, LLC discussed below. We changed our name from Jubilee4 Gold, Inc.
to Helix TCS, Inc. effective October 25, 2015.
Our Acquisition of Helix
Effective Oct 25, 2015 (the "Effective Date"), we
entered into an acquisition and exchange agreement (the "Agreement") with Helix
TCS LLC (the "LLC"). We closed the transaction contemplated under the Agreement
(the "Acquisition") on December 23, 2015 and Helix TCS, LLC was merged into and
with Helix.
Pursuant to the terms and conditions of the Agreement,
the member who owned 100% of the issued and outstanding units of Helix TCS, LLC
immediately prior to the closing of the Acquisition exchanged its units for an
aggregate of 22,225,000 shares of our common stock (post-reverse split), and
all of our issued Class A Preferred Stock.
The
Opportunity
Legal cannabis businesses operate facilities for the cultivation,
processing/infused products manufacturing, wholesale distribution, and retail
distribution of cannabis products. Cultivation sites may operate indoors with
the use of artificial light, or outdoors in the open air or inside greenhouses.
Processors include operations that trim and package raw marijuana flowers for
sale, as well as businesses that extract oils from raw marijuana to produce
cannabis-related consumable products. Distribution facilities include medical
marijuana dispensaries serving patient populations, as well as cannabis
retailers in states with recreational marijuana laws. Some legal cannabis
facilities combine groups of these operations under one roof. All facility
types require security services to protect against theft, and in many cases to
comply with regulatory requirements. Thousands of cannabis facilities currently
comprise the potential market for security services.
The Helix Mission
It is our mission to be a leading comprehensive
security and operating environment solutions provider catering to businesses in
the legalized cannabis industry. As a security industry expert based in Denver,
Colorado, Helix plans to expand its operations to serve additional legalized
U.S. states as cannabis sale regulations are implemented.
Commercial Services
Security is a primary concern for licensed cannabis
businesses and the state regulators who oversee each program. Permitted
facilities must adopt strong security systems to protect their businesses and
comply with regulations. These businesses maintain valuable inventories onsite,
and typically also have significant cash holdings since transactions are often
conducted in cash. Facilities are exposed to theft both from outsiders and
employees. In addition, business operators in most legal cannabis states must
show regulatory agencies that security systems carefully protect and track
inventories and transactions. Failure to do so could not only result in large
losses, but would also threaten businesses' operating permits and force
closure. In Washington and Colorado, the new adult cannabis use laws introduced
and stressed the need for on premise security to control and enforce the age
restrictions and act as a deterrent to the general public who are now able to
freely enter cannabis shops.
We provide effective security solutions to cannabis
businesses, including assessments and planning, security system design and
implementation, asset protection, transport, and assurance of security for the
state licensing process. All systems and services are guaranteed to meet
individual state regulatory requirements and to achieve compliance.
Security Systems
We
provide security system assessment services for our customers and licensed
cannabis business operators. Our core existing products and services include
the following:
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Physical Security
In 2015, Helix commenced offering armed and unarmed guards and armed
transport services to the cannabis industry in Colorado. We now provide site
risk assessments and consulting services as well. The Company has made significant
investments in specialized vehicles, state security licenses, and high-level
training programs, which have generated positive results in customer acquisition
and retention. We have expanded our market further in 2016 by signing new
clients in Colorado and forming strategic partnerships to facilitate the
potential for national expansion.
Our physical security solutions
include the following:
Industry and
Regulatory Background
In the 1930's, Congress made marijuana illegal on the federal level, and
it was scheduled as a narcotic. In the 1960s and 1970s, as the popularity of
marijuana use grew, states began to realize that they needed drug policies
consistent with the community and consumer use of marijuana. Under the Federal
Controlled Substances Act (CSA) of 1970, marijuana is currently classified as a
"Schedule I drug". The level of enforcement in states varies widely regarding
marijuana.
In 1996, Oregon and California passed legislation that legalized the
possession and consumption of marijuana and use for medical purposes. As of August
1, 2016, 23 states and the District of Columbia have legalized marijuana in one
form or another. The Colorado, Washington, Oregon, and Alaska state policies to
legalize recreational marijuana were not challenged by federal authorities,
which was largely due to the guidance put forth in the August 29, 2013
memorandum from James Cole, the U.S. Deputy Attorney General, titled "Guidance
Regarding Marijuana Enforcement". This memorandum states that federal
enforcement agencies are unlikely to enforce the Controlled Substances Act ("CSA")
in states where marijuana has been legalized, and where the regulation and
control is functional.
On the federal level, marijuana has been considered an illegal
substance since 1930. This has caused various impediments, the most prominent
of which is banking. Although the U.S. Treasury has provided guidance intended
to give banks the confidence that they can work with marijuana businesses in legal
cannabis states, many banks are still reluctant to do so.
The
Market
The market has two categories of participants: consumers (i.e. users,
retail buyers, individuals) and businesses (i.e. operators, cultivators,
retailers, processors, etc.). Consumers are those that are permitted to use
marijuana for medicinal purposes and have received medical advice from
physicians for conditions that qualify for treatment with cannabis under state-specific
guidelines. In Colorado, Washington, Oregon, and Alaska, anyone who is 21 years
or older can consume cannabis products for medical purposes as described above,
or for recreational purposes.
Businesses include companies that handle or touch marijuana directly,
including cultivators, processors, dispensaries and retail distributors. Also,
included in businesses are companies that do not directly handle the marijuana plant
or products, but benefit from the industry as participating ancillary
businesses (i.e. equipment manufacturers, insurance companies, lenders, etc.).
Legal cannabis businesses that produce and distribute cannabis products
serve patient and adult consumer populations in states that have passed and
enforce cannabis laws. As more states adopt marijuana regulations to legalize
cannabis, the number of businesses in the industry may accelerate rapidly.
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Sales and Marketing Strategy
For 2017, Helix is targeting customers in seven states and Washington
D.C., which we believe are the most active legal cannabis territories in the national
market. While market data sources are limited for the industry, Helix estimates
that there may be over 6,600 permitted cannabis facilities within its targeted territories
in 2016-2017.
Growth within these states, in addition to new states coming online and
the expansion of cannabis programs in mature state markets, will increase the
addressable market. These expanded state regulatory approvals that permit larger
patient bases for medical and recreational cannabis use further imply and
emphasize the potential for substantial expansion beyond the near-term
opportunities.
Many states are emulating Colorado's regulatory model, which requires
tight business security, compliance, and adherence to regulations enforced by
state and industry oversight agencies. Helix's experience with compliance in
multiple states and municipalities provides a significant competitive advantage
for serving businesses in new markets, especially those that are adopting rules
similar to Colorado cannabis laws.
The cannabis industry is expanding, not only in terms of the number of
states with cannabis laws, but also in the scope of business transactions
allowed under state regulations. Colorado and Washington, for example, have
approved the legal sale of both recreational use and medical use marijuana. This
has increased cannabis sales, revenue, and taxes in those states, when compared
to the market size of medical cannabis alone. The successful results of these
state cannabis programs provide viable incentives for other states to legalize
cannabis for recreational use.
Helix
expanded operations through acquisition of new customers in the growing
cannabis market both by entering new states and capitalizing on the growth of
its large customer base in Colorado. In addition, Helix will continue to
achieve market penetration in key states by working with state regulatory
agencies to influence security compliance, adding key personnel, word of mouth,
client expansion into new markets and targeted marketing campaigns in Arizona,
Alaska, Oregon and California which characterize the lion's share of new
opportunities outside of Colorado and Washington.
Employees
As of September 30, 2016, we employed 64 full time employees. We
believe that the employer-employee relationships in our Company are positive. We
have no labor union contracts.
Competition
We have positioned ourselves as an innovative security firm with a
recognizable brand that offers effective and consistent services. Our
competition in the security services sector of the cannabis industry includes: Blue
Line Protection Group, Security Grade Protective Services, Safe Systems, Inc.,
Canna Security America (CSA), Iron Protection Group, and a variety of smaller,
local security companies. Certain of these security providers are larger than
we are and have greater financial resources than we do. We believe that we can
continue to compete with these companies based on our favorable reputation for
outstanding reliability, customer service, and value added. There is no
assurance, however, that our ability to deliver services successfully will not
be impacted by competition that currently exists or may arise in the future.
Government Regulation
Marijuana is categorized as a "Schedule I" controlled substance by the
Drug Enforcement Agency and the United States Department of Justice. It is
illegal to grow, possess, sell, purchase, and/or consume cannabis under Federal
law. A Schedule I controlled substance is defined as a substance that has no
currently accepted medical use in the United States, a lack of safety for use
under medical supervision and a high potential for abuse. The Department of
Justice also characterizes Schedule I controlled substances as the most
dangerous drugs of all the drug schedules with potentially severe psychological
and/or physical dependence.
Despite this, there have been 23 states and the District of Columbia that
have passed state laws that permit doctors to prescribe cannabis for medical
use. Additionally, Colorado, Washington, Alaska, Oregon, and the District of
Columbia have enacted laws that allow recreational adult use of cannabis. This
has created an unpredictable business environment for cannabis companies that can
legally operate under state laws but are nonetheless openly in violation of
Federal laws. On August 29, 2013, United States Deputy Attorney General James
Cole issued the Cole Memorandum (the "Cole Memo") to United States Attorneys
guiding them to prioritize enforcement of Federal law away from the cannabis
industry operating as permitted under state law, so long as:
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cannabis
is not being distributed to minors and dispensaries are not located around
schools and public buildings;
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the
proceeds from sales are not going to gangs, cartels or criminal enterprises;
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cannabis
grown in states where it is legal is not being diverted to other states;
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cannabis-related
businesses are not being used as a cover for sales of other illegal drugs or
illegal activity;
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there
is not any violence or use of fire-arms in the cultivation and sale of
marijuana;
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there
is strict enforcement of drugged-driving laws and adequate prevention of
adverse health consequences; and
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cannabis
is not grown, used, or possessed on Federal properties.
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The Cole Memo is intended only as a guide for United States Attorneys
and does not alter in any way the Department of Justice's Federal authority to
enforce Federal law, including Federal laws relating to cannabis, regardless of
state law. We believe and have implemented procedures and policies to ensure that
we are operating in compliance with the Cole Memo. However, we cannot provide
assurance that our actions are in full compliance with the Cole Memo or any
other laws or regulations.
While initially it was difficult for us to access the banking system it
has become easier with less stringent interpretations of the Cole Memo. Our
banks have requested information from us through questionnaires based on the
Cole Memo and believe the banks have realized that our participation in the
marijuana industry is limited by the amounts of marijuana that our employees
are exposed to and the vendors that we pay.
The Obama administration has effectively stated that it is not an
efficient use of resources to direct federal law enforcement agencies to
prosecute those lawfully abiding by state-designated laws allowing the use and
distribution of medical marijuana. However, there is no guarantee that the
administration will not change its stated policy regarding the low-priority
enforcement of federal laws. Additionally, any new administration that follows
could change this policy and decide to enforce the federal laws strongly. Any
such change in the federal government's enforcement of current federal laws
could cause significant financial damage to us. While we do not intend to
harvest, distribute or sell cannabis, we may be irreparably harmed by a change
in enforcement by the Federal or state governments.
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below as well as
other information provided to you in this document, including information in
the section of this document entitled "Forward Looking Statements." The risks
and uncertainties described below are not the only ones we are facing.
Additional risks and uncertainties not presently known to us or that we
currently believe are immaterial may also impair our business operations. If
any of the following risks actually occur, our business, financial condition or
results of operations could be materially adversely affected and our
shareholder may lose all or part of their investment in our company.
RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY
Our
business is heavily dependent on state laws pertaining to the cannabis
industry.
As of 2016, 23 states and the District of Columbia allow individuals to
use medical cannabis legally. Furthermore, Colorado, Washington, Oregon and
Alaska have legalized cannabis for adult recreational use. Continued growth and
innovation in the cannabis industry is dependent upon continued legislative acceptance
and approval of cannabis use at the state level. Any number of factors could
slow or halt progress in this area. Further, progress in the cannabis industry,
while encouraging, is not assured. While there may be ample public support for
legislative action, numerous factors impact the legislative process. Any one of
these factors could slow or halt the use or sale of cannabis, which would
negatively impact our business.
Cannabis
remains illegal under Federal law.
Despite the emergence of a cannabis industry legal under state laws,
state laws legalizing medicinal and adult cannabis use are in conflict with the
Federal Controlled Substances Act, which classifies cannabis as a Schedule I
controlled substance and makes cannabis use and possession illegal on the Federal
level. The United States Supreme Court has ruled that it is the Federal
government that has the right to regulate and criminalize cannabis, even for
medical purposes, and thus, Federal law criminalizing the use of cannabis
preempts state laws that legalize its use. However, the Obama Administration
has effectively stated that it is not an efficient use of resources to direct
Federal law enforcement agencies to prosecute those lawfully abiding by
state-designated laws allowing the use and distribution of medical and
recreational cannabis. Yet, there is no guarantee that the Obama Administration
will not change its stated policy regarding the low-priority enforcement
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of Federal laws
in states where cannabis has been legalized. Additionally, we face another
presidential election cycle in 2016, and a new administration could introduce a
less favorable policy or decide to increase enforcement of Federal laws. Any
negative material change in the Federal government's policy on enforcement of
these laws could potentially cause significant financial damage to us and our
shareholders.
Laws
and regulations affecting the cannabis industry are constantly changing, which
could potentially have a detrimental effect on our business. We cannot predict
the impact that future regulation may have on us.
Local, state, and federal cannabis laws and regulations are constantly
changing and they are subject to evolving interpretations, which could require
us to incur substantial costs associated with compliance or to alter one or
more of our service offerings. In addition, violations of these laws, or
allegations of such violations, could disrupt our business and result in a
material adverse effect on our revenues, profitability, and financial
condition.
We cannot predict the nature of any future laws, rules, regulations,
interpretations, or applications, nor can we predict or determine what effect
additional governmental regulations or administrative policies and procedures,
when and if promulgated, could have on our business. Changes in laws or
interpretation of laws could potentially have a material adverse effect on our
business, financial condition, and results of operations. It is possible that
we could be forced to alter our service offerings for various reasons.
As
possession and use of cannabis are illegal under the Federal Controlled Substances
Act ("CSA"), we may be deemed to be aiding and abetting illegal activities
through the services that we provide to users. As a result, we may be subject
to enforcement actions by law enforcement authorities, which would materially
and adversely affect our business.
Under Federal law, and more specifically the Federal Controlled
Substances Act, the possession, use, cultivation, and transfer of cannabis is
illegal. Our business provides services to customers that are engaged in the
business of possession, use, cultivation, and/or transfer of cannabis. As a
result, law enforcement authorities, in their attempt to regulate the illegal
use of cannabis, may seek to bring an action or actions against us, including,
but not limited, to a claim of aiding and abetting another's criminal
activities. The Federal aiding and abetting statute provides that anyone who "commits
an offense against the United States or aids, abets, counsels, commands,
induces or procures its commission, is punishable as a principal." 18 U.S.C.
§2(a). As a result of such an action, we may be forced to cease operations and
our investors could lose their entire investment. Such an action would have a
material negative effect on our business and operations.
Federal
enforcement practices could change with respect to services providers to
participants in the cannabis industry, which could adversely impact us. If the
federal government were to change its practices, or were to expand its
resources attacking providers in the cannabis industry, such action could have
a materially adverse effect on our operations, our customers, or the sales of
our products.
It is possible that additional Federal or state legislation could be
enacted in the future that would prohibit our customers from selling cannabis,
and if such legislation were enacted, such customers may discontinue the use of
our services, our potential source of customers would be reduced, causing
revenues to decline. Further, additional government disruption in the cannabis
industry could cause potential customers and users to be reluctant to use our
services, which would be detrimental to the Company. We cannot predict the
nature of any future laws, regulations, interpretations or applications, nor
can we determine what effect additional governmental regulations or
administrative policies and procedures, when and if promulgated, could have on
our business.
Expansion
by well-established security companies into the cannabis industry could prevent
us from realizing anticipated growth in customers and revenues.
Traditional security companies may expand their businesses into
cannabis security services. If they decided to expand into cannabis security
services, this could hurt the growth of our business and cause our revenues to
be lower than we expect.
Due to
our involvement in the cannabis industry, we may have a difficult time
obtaining the insurance coverage that is desired to operate our business, which
may expose us to additional risk and financial liabilities.
Insurance that is otherwise readily available, such as workers
compensation, general liability, and directors and officers insurance, is more
difficult for us to find, and more expensive, because we are service providers
to companies in the cannabis industry. There are no guarantees that we will be
able to find such insurances in the future, or that the cost will be affordable
to us. If we are forced to go without such insurances, it may prevent us from
entering into certain business sectors, may inhibit our growth, and may expose
us to additional risk and financial liabilities.
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Participants
in the cannabis industry may have difficulty accessing the service of banks,
which may make it difficult for us to operate.
Despite recent rules issued by the United States Department of the
Treasury mitigating the risk to banks who do business with cannabis companies
permitted under state law, as well as recent guidance from the United States
Department of Justice, banks remain wary to accept funds from businesses in the
cannabis industry. Since the use of cannabis remains illegal under Federal law,
there remains a compelling argument that banks may be in violation of Federal
law when accepting for deposit, funds derived from the sale or distribution of
cannabis. Consequently, businesses involved in the cannabis industry continue
to have trouble establishing banking relationships. An inability to open bank
accounts may make it difficult for us, or some of our customers, to do
business.
We
have a limited operating history and if we are not successful in continuing to
grow our business, then we may have to scale back or even cease our ongoing
business operations.
We have a limited operating history. Our operations will be subject to
all the risks inherent in the establishment of a developing enterprise and the
uncertainties arising from the absence of a significant operating history. We
have not generated positive earnings and there can be no assurance that we will
achieve profitable operations. If our business plan is not successful, and we
are not able to operate profitably, investors may lose some or all of their
investment in our company.
We may
need additional capital to fund our operations.
Even with the proceeds of the September Private Placement, we will
require additional capital to fund our current operations and anticipated
expansion of our business and to pursue targeted revenue opportunities. We
cannot assure you that we will be able to raise additional capital. If we are
able to raise additional capital, we do not know what the terms of any such
capital raising would be, and whether they will be on terms acceptable to us. In
addition, any future sale of our equity securities would dilute the ownership
and control of our current shareholders and could be at prices substantially
below prices at which our shares currently trade. Our inability to raise
capital could require us to significantly curtail or terminate our operations.
Our
failure to manage growth effectively could impair our business.
Our business strategy envisions a period of rapid growth that may put a
strain on our administrative, operational resources and funding requirements.
Our ability to effectively manage growth will require us to continue to expand
the capabilities of our operational and management systems and to attract,
train, manage and retain qualified personnel. There can be no assurance that we
will be able to do so, particularly if losses continue and we are unable to
obtain sufficient financing. If we are unable to successfully manage growth,
our business, prospects, financial condition, and results of operations could
be adversely affected.
Our
plans are dependent upon key individuals and the ability to attract qualified
personnel.
In order to execute our business plan, we will be dependent on Zachary
Venegas, our Chief Executive Officer and Director. The loss of Mr. Venegas
could have a material adverse effect upon our business prospects. Moreover our
success continues to depend to a significant extent on our ability to identify,
attract, hire, train and retain qualified professional, creative, technical and
managerial personnel. Competition for such personnel is intense, and there can
be no assurance that we will be successful in identifying, attracting, hiring,
training, and retaining such personnel in the future. If we are unable to hire,
assimilate and retain such qualified personnel in the future, our business,
operating results, and financial condition could be materially adversely
effected. We may also depend on third party contractors and other partners, to
assist with the execution of our business plan. There can be no assurance that
we will be successful in either attracting and retaining qualified personnel,
or creating arrangements with such third parties. The failure to succeed in
these endeavors would have a material adverse effect on our ability to
consummate our business plans.
We have taken various steps to address our ability to retain our key
employees. We have nondisclosure and non-compete agreements with all of our
employees.
Our
lack of patent and/or copyright protection and any unauthorized use of our
proprietary information and technology, may adversely affect our business.
Information technology, network and data security
risks could harm our business.
We currently rely on a
combination of protections by contracts, including confidentiality and
nondisclosure agreements, and common law rights, such as trade secrets, to
protect our intellectual property which includes business processes. However, we
cannot assure you that we will be able to adequately protect our intellectual
property from misappropriation in the U.S. This risk may be increased due to the
lack of any patent and/or copyright protection. Despite our efforts to
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protect our
intellectual property rights, others may independently develop similar marks or
duplicate our service offerings. In addition, it is difficult to monitor
compliance with, and enforce, our intellectual property rights in the U.S. in a
cost-effective manner. If any of our proprietary rights are misappropriated or
we are forced to defend our intellectual property rights, we will have to incur
substantial costs. Such litigation could result in substantial costs and
diversion of our resources, including diverting the time and effort of our
senior management, and could disrupt our business, as well as have a material
adverse effect on our business, prospects, financial condition and results of
operations. We can provide no assurance that we will have the financial
resources to oppose any actual or threatened infringement by any third party.
Security
breaches and other disruptions could compromise our information and expose us
to liability, which could cause our business and reputation to suffer.
Our business faces security risks. Our failure to adequately address
these risks could have an adverse effect on our business and reputation.
Computer viruses, break-ins, or other security problems could lead to
misappropriation of proprietary information and interruptions, delays, or
cessation in service to our customers.
As a
public company, we are required to incur substantial expenses.
We are subject to the periodic reporting requirements of the Exchange
Act, which requires, among other things, review, audit, and public reporting of
our financial results, business activities, and other matters. SEC regulations,
including regulations enacted as a result of the Sarbanes-Oxley Act of 2002,
have also substantially increased the accounting, legal, and other costs
related to compliance with SEC reporting obligations. If we do not have current
information about our Company available to market makers, they will not be able
to trade our stock. The public company costs of preparing and filing annual and
quarterly reports, and other information with the SEC will cause our expenses
to be higher than they would be if we were privately-held. These increased
costs may be material and may include the hiring of additional employees and/or
the retention of additional advisors and professionals. Our failure to comply
with the federal securities laws could result in private or governmental legal
action against us and/or our officers and directors, which could have a
detrimental effect on our business and finances, the value of our stock, and
the ability of stockholders to resell their stock.
RISKS RELATED TO OUR COMMON STOCK
Our
officers and directors own a large amount of our common stock and are in a
position to affect all matters requiring shareholder approval, which may limit
minority shareholders' ability to influence corporate affairs.
As of November 7, 2016, our control entity, Helix Opportunities, LLC,
and its officers and directors beneficially own an aggregate of 23,185,000
shares of our common stock (84.2%). We have approximately 27,725,697 outstanding
shares of common stock as of November 7, 2016 (out of which 960,000 have not
been issued). These persons are in a position to significantly affect all
matters requiring shareholder approval, including the election of directors. This
level of control may also have an adverse impact on the market value of our
shares, as the control entity can institute or undertake transactions, policies
or programs, that result in losses. In addition, they might not take steps to
increase visibility and presence in the financial community and/or may sell
sufficient numbers of shares to significantly decrease the appropriate price
per share.
The interests of our officers, directors and their affiliates may
differ from the interests of other shareholders with respect to the issuance of
shares, business transactions with and/or sales to other companies, selection
of officers and directors, and other business decisions. The non-controlling
shareholders would be severely limited in their ability to override the
decisions of controlling shareholders. This level of control may also have an
adverse impact on the market value of our shares because they may institute or
undertake transactions, policies or programs that result in losses, may not
take steps to increase our visibility in the financial community and/or may
sell sufficient numbers of shares to significantly decrease our price per
share.
Trading
in our common stock has been limited, and there is no significant trading
market or price discovery available for our common stock. Purchasers of our
common stock may be unable to sell their shares.
Our common stock is
currently quoted on the OTC Pink, however trading to date has been limited. If
activity in the market for shares of our common stock does not increase,
purchasers of our shares may find it difficult to sell their shares. We
currently do not meet the initial listing criteria for any registered securities
exchange, including the NASDAQ Stock Market. The OTC Pink is a less recognized
market than the foregoing exchanges and is often characterized by low trading
volume and significant price fluctuations. These and other factors may further
impair our stockholders' ability to sell their shares when they want to and/or
could depress our stock price. As a result, stockholders may find it difficult
to dispose of, or obtain accurate quotations of the price of our securities
because smaller
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quantities of
shares could be bought and sold, transactions could be delayed and security
analyst and news coverage of our Company may be limited. These factors could
result in lower prices and larger spreads in the bid and ask prices for our
shares of common stock.
Applicable
SEC rules governing the trading of "penny stocks" may limit the trading and
liquidity of our common stock which may affect the trading price our
common stock.
Our common stock is a "penny stock" as defined under Rule 3a51-1 of the
Exchange Act, and is accordingly subject to SEC rules and regulations that
impose limitations upon the manner in which our common stock can be publicly
traded. Penny stocks generally are equity securities with a per share
price of less than $5.00 (other than securities registered on some national
securities exchanges or quoted on NASDAQ). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the nature and level of risks in
the penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and, if the broker-dealer
is the sole market maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, broker-dealers who sell these securities to persons other
than established customers and "accredited investors" must make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction. Consequently,
these requirements may have the effect of reducing the level of trading
activity, if any, of our common stock and reducing the liquidity of an
investment in our common stock.
We
have outstanding shares of preferred stock with rights and preferences superior
to those of our common stock
.
The issued and outstanding shares of Class A Preferred super majority
voting stock grant the holders of such preferred stock anti-dilution, voting,
dividend and liquidation rights that are superior to those held by the holders
of our common stock. The issuance of shares of common stock in the future,
issuances or deemed issuances of additional shares of common stock for a price
below the applicable preferred stock conversion price, will have the effect of
diluting current shareholders.
If we
fail to establish and maintain an effective system of internal controls, we may
not be able to report our financial results accurately or prevent fraud. Any
inability to report and file our financial results accurately and timely could
harm our reputation and adversely impact the trading price of our common stock
.
Effective internal control is necessary for us to provide reliable
financial reports and prevent fraud. If we cannot provide reliable financial
reports or prevent fraud, we may not be able to manage our business as
effectively as we would if an effective control environment existed, and our
business and reputation with investors may be harmed. As a result, our small
size and any current internal control deficiencies may adversely affect our
financial condition, results of operation and access to capital. We have not
performed an in-depth analysis to determine if historical un-discovered
failures of internal controls exist, and may in the future discover areas of
our internal control that need improvement.
Public
company compliance may make it more difficult to attract and retain officers
and directors
.
The Sarbanes-Oxley Act and rules implemented by the SEC have required
changes in corporate governance practices of public companies. As a public
company, we expect these rules and regulations to increase our compliance costs
and to make certain activities more time consuming and costly. As a public
company, we also expect that these rules and regulations may make it more difficult
and expensive for us to obtain director and officer liability insurance and we
may be required to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar coverage. As a result,
it may be more difficult for us to attract and retain qualified persons to
serve on our board of directors or as executive officers, and to maintain
insurance at reasonable rates, or at all.
Our
operating results may fluctuate causing volatility in our stock price
.
Our operating results may fluctuate as a result of a number of factors,
many of which are outside of our control. The following factors may affect our
operating results causing volatility in our stock price:
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Our
ability to execute our business plan;
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Our
ability to compete effectively;
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Our
ability to continue to attract customers;
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The
amount and timing of operating costs and capital expenditures related to the
maintenance and expansion of our business, operations, and infrastructure;
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General
economic conditions and those economic conditions specific to the cannabis
industry; and
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Our
ability to attract, motivate and retain high quality employees.
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Our
stock price may be volatile
.
The market price of our common stock is highly volatile and subject to
wide fluctuations in price in response to various factors, some of which are
beyond our control. These factors include:
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Competitive
pricing pressure;
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Our
ability to obtain working capital financing;
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Quarterly
variations in our results of operations;
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Changes
in estimates of our financial results;
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Investors'
general perception of the Company;
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Disruption
to our operations;
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The
emergence of new sales channels in which we are unable to compete
effectively;
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Commencement
of, or our involvement in, litigation;
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Any
major change in our board or management; and
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Changes
in governmental regulations or in the status of our regulatory approvals.
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Our
shares of common stock are thinly traded, and therefore the price may not accurately
reflect our value. There can be no assurance that there will be an active
market for our shares of common stock either now or in the future
.
Our shares of common stock are thinly traded. Only a small percentage
of our common stock is available to be traded, and is held by a small number of
holders and the price, if traded, may not reflect our actual or perceived
value. There can be no assurance that there will be an active market for our
shares of common stock either now or in the future. The market liquidity will
be dependent on the perception of our operating business, among other things.
We will take certain steps including utilizing investor awareness campaigns, press
releases, road shows and conferences to increase awareness of our business and
any steps that we might take to bring us to the awareness of investors may
require that we compensate consultants with cash and/or stock. There can be no
assurance that there will be any awareness generated or the results of any
efforts will result in any impact on our trading volume. Consequently,
investors may not be able to liquidate their investment or liquidate it at a
price that reflects the value of the business and trading may be at an inflated
price relative to the performance of our company due to, among other things,
availability of sellers of our shares. If a market should develop, the price
may be highly volatile. Because there may be a low price for our shares of common
stock, many brokerage firms or clearing firms may not be willing to effect
transactions in the securities or accept our shares for deposit in an account.
Even if an investor finds a broker willing to effect a transaction in the
shares of our common stock, the combination of brokerage commissions, transfer
fees, taxes, if any, and any other selling costs may exceed the selling price.
Further, many lending institutions will not permit the use of low priced shares
of common stock as collateral for any loans.
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Offers
or availability for sale of a substantial number of shares of our common stock
may cause the price of our common stock to decline
.
If our stockholders sell substantial amounts of our common stock in the
public market, including shares issued in the September Private Placement upon
the effectiveness of the registration statement required to be filed, or upon
the expiration of any statutory holding period under Rule 144, it could create
a circumstance commonly referred to as an "overhang" and in anticipation of
which, the market price of our common stock could fall. The existence of an
overhang, whether or not sales have occurred or are occurring, also could make
more difficult our ability to raise additional financing through the sale of equity
or equity-related securities in the future at a time and price that we deem
reasonable or appropriate.
We do not pay dividends on our common
stock.
We have not paid any dividends on our common stock and do not
anticipate paying dividends in the foreseeable future. We plan to retain
earnings, if any, to finance the development and expansion of our business.
ITEM 2. FINANCIAL
INFORMATION
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our
financial statements, including the notes to those statements, included
elsewhere in this report, and the Section entitled "Cautionary Statement
Regarding Forward-Looking Statements" in this report. As discussed in more detail
in the Section entitled "Cautionary Statement Regarding Forward-Looking
Statements," this discussion contains forward-looking statements which involve
risks and uncertainties. Our actual results may differ materially from the
results discussed in the forward-looking statements.
We define
our annual accounting periods as follows:
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"Fiscal
2014"-January 1, 2014 through December 31, 2014, and
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"Fiscal 2015"-January 1, 2015
through December 31, 2015.
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We define
our quarterly accounting periods as follows:
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"First Quarter"-January 1 through
March 31,
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"Second Quarter"-April 1 through
June 30,
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"Third Quarter"-July 1 through
September 30, and
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"Fourth Quarter"-October 1 through
December 31.
OVERVIEW
The Company
We changed our name from Jubilee4 Gold, Inc. to Helix TCS, Inc.
effective October 25, 2015. On December 21, 2015, we completed the acquisition
of the LLC referenced below.
Acquisition
of Helix TCS, LLC
Effective December 21, 2015 (the "Effective Date"), we completed
the acquisition and exchange agreement (the "Agreement") with Helix TCS, LLC
(the "Acquisition Subsidiary") and Helix TCS, Inc. We closed the transaction
and Helix TCS, LLC was merged into and with Helix. The LLC is operated as a
wholly-owned subsidiary of the Company.
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Pursuant to the terms and conditions of the Agreement, the members who
collectively owned 100% of the issued and outstanding units of Helix
immediately prior to the closing of the Acquisition exchanged their units for
an aggregate of 20,000,000 shares of our common stock and 1,000,000 shares of
Class A Preferred super majority voting stock.
Private Placement of Convertible Debt
On December 16, 2015, the Company entered into a Convertible Promissory
Note ("Note One") with a lender ("the Holder"). The Holder provided the Company
with $100,000 in cash, and the Company promised to pay the principal amount,
together with interest at an annual rate of 7%, under the terms and provisions
as set forth below. Note One was issued by the Company pursuant to a certain
Subscription Agreement by and between the Company and the Holder. The principal
balance of Note One is convertible at the election of the Holder of the Note
One, in whole or in part, at any time or from time to time, into the Company's
common stock at a 40% discount to the average market closing price for the
previous 5 trading days, preceding the date that the notice of conversion is
delivered to the Company in writing. A form of the convertible promissory notes
is filed herewith as Exhibit 4.1.
On December 18, 2015, the Company entered into a Convertible Promissory
Note ("Note Two") with another lender ("the Second Holder"). The Second Holder
provided the Company with $100,000 in cash, and the Company promised to pay the
principal amount, together with interest at the annual rate of 7%, under the
terms and provisions as set forth below. Note Two was issued by the Company
pursuant to a certain Subscription Agreement by and between the Company and the
Second Holder. The principal balance of Note Two shall be convertible at the
election of the holder of the Note Two, in whole or in part, at any time or
from time to time, into the Company's common stock at a 40% discount to the
average market closing price for the previous 5 trading days, preceding the
date that the notice of conversion is delivered to the Company in writing.
As of December 31, 2015 and December 31, 2014, the Company had
principal outstanding of $90,436 and $0, respectively. For the year ended
December 31, 2015, the Company accrued an interest expense of $537.
On February 12, 2016, the Company entered into a
Convertible Promissory Note ("Note Three") with a lender ("the Third Holder")
in which the Third Holder provided the Company $100,000, and the Company
promised to pay the principal amount, together with interest at the annual rate
of 7%. Note Three is issued by the Company pursuant to a certain Subscription
Agreement by and between the Company and the Third Holder. The principal
balance of Note Three shall be convertible at the election of the holder of the
Note Three, in whole or in part, at any time of from time to time, into the
Company's common stock at a 40% discount to the average market closing price
for the previous 5 trading days, preceding the date that the notice of
conversion is delivered to the Company in writing.
On March 11, 2016, the Company entered into a Convertible
Promissory Note ("Note Four") with a lender ("the Fourth Holder") in which the
Fourth Holder provided the Company $150,000, and the Company promised to pay
the principal amount, together with interest at the annual rate of 7%. Note
Four is issued by the Company pursuant to a certain Subscription Agreement by
and between the Company and the Fourth Holder. The principal balance of Note
Four shall be convertible at the election of the holder of the Note Four, in
whole or in part, at any time of from time to time, into the Company's common
stock at a 40% discount to the average market closing price for the previous 5
trading days, preceding the date that the notice of conversion is delivered to
the Company in writing.
The above Notes One to Four may convert to an indeterminate
number of shares of the Company's common stock, with fluctuating conversion
prices, causing uncertainty. This information should be considered along with
the other risks listed in "Risk Factors."
Private
Placement of Equity
Preferred Stock
On December 23, 2015, the Company issued a total of 1,000,000 shares of
its Class A Preferred Stock as part of a reorganization in which Helix
Opportunities LLC contributed 100% of itself and its wholly-owned subsidiaries,
Security Consultants Group, LLC and Boss Security Solutions, to the Company in
exchange for 1,000,000 convertible preferred shares of the Company. The Class A
Preferred Stock includes super majority voting rights and are convertible into
60% of common stock.
As of December 31, 2015 and September 30, 2016, the Company was
authorized to issue 20,000,000 shares of preferred stock, with a par value of
$0.001, of which 1,000,000 shares were issued and outstanding.
-12-
Common Stock
On October 9, 2015, the Company issued a total of 8,900,000 shares of
its common stock as part of the Purchase Agreement for $51,700, from which
certain transaction expenses were paid.
On November 17, 2015, the Company had a net issuance of 1,087 shares of
its common stock on the open market for $21.
On December 23, 2015, the Company issued a total of 20,000,000 post-reverse
split shares of its restricted common stock as part of a reorganization in
which Helix Opportunities LLC contributed 100% of Helix TCS, LLC, and its
wholly-owned subsidiary, Security Consultants Group, LLC, to the Company in
exchange for 1,000,000 convertible preferred shares of the Company.
As of December 31, 2015, the Company was authorized to issue
200,000,000 shares of common stock, with a par value of $0.001, of which
23,203,211 shares were issued and outstanding.
In March 2016, the Company issued 960,000 restricted common shares for
$150,000 with an option to acquire up to 1,920,000 shares for $300,000. In
April 2016, the Company issued: 200,000 restricted common shares to Uptick
Capital for capital formation assistance; 75,000 restricted common shares to
Odeon Capital Group; 75,000 restricted common shares to a related party;
714,286 restricted common shares for $250,000; and the Company acquired all the
assets of Revolutionary Software, LLC for $300,000 cash and 2,320,000
restricted common shares. Revolutionary Software, LLC created Cannabase, a
network for licensed cannabis businesses. The Company will operate
Cannabase as a separate line of business and the financials for Cannabase are
incorporated in the Company's consolidated financial statements.
As of September 30, 2016, the Company was
authorized to issue 200,000,000 shares of common stock, with a par value of
$0.001, of which 27,547,497 shares were outstanding.
Reverse Split
In October 2015, the
Company's shareholders and its Board of Directors approved a 1-for-4 reverse
split of the Company's common stock. The reverse split was effective on October
27, 2015. Prior to the reverse split, the Company had 3,908,617 shares issued
and outstanding. Following the split, the Company had 977,154 shares issued and
outstanding.
RESULTS OF OPERATIONS
For the Years ended December
31, 2014 and 2015
The following comparative analysis on results of operations for 2014
and 2015 is based on the comparative audited financial statements, footnotes,
and related information for the periods identified. This analysis should be
read in conjunction with the financial statements and the notes to those
statements that are included elsewhere in this report. The results related to the
business operations of Helix TCS, LLC replace those of Jubilee4 Gold, Inc., which
is due to the treatment of the Purchase Agreement between Helix TCS, LLC and
Jubliee4 Gold, Inc. as a recapitalization mechanism.
Revenue
Total revenue increased to $244,898 for fiscal 2015 compared to $0 in
fiscal 2014. This increase was a result of the acquisition of Helix TCS, LLC
and its operating subsidiaries.
Operating Expenses
Total operating expenses for fiscal 2015 increased to $350,593,
compared to $0 in fiscal 2014, which is primarily a result of an increase of $167,764
in general and administrative expenses and $100,683 in professional expenses. We
expect a significant increase in our operating expenses as we continue to
operate as a cannabis security provider.
-13-
Net Loss
The net loss for fiscal 2015 was $315,955, compared to $0 for fiscal
2014, which is a result of the increases in operating expenses as discussed
above.
Liquidity
and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts
of cash to meet its needs for cash. As of December 31, 2015, our working
capital amounted to $263,453. Working capital at December 31, 2015 was made up
of accounts receivable, cash, and prepaid expenses. Working capital was $0 as
of December 31, 2014.
Net cash used in operating activities was ($449,078) during fiscal 2015,
compared to $0 in fiscal 2014. The increase in cash used in operating
activities is due to our net loss, which is partially offset by an increase in
accounts payable. The rate of increase in net cash used in operating activities
in 2016 reflects the overall growth of the company and an increase in sales.
Net cash provided by financing activities during fiscal 2015 was $663,337,
compared to $0 in fiscal 2014. The increase was primarily a result of proceeds
from the issuance of stock and additional loans made to the Company by
shareholders.
For the Three and Nine Months
Ended September 30, 2016
The following comparative analysis on results of operations for the
three and nine months ended September 30, 2016 is based on the comparative unaudited
financial statements, footnotes, and related information for the periods
identified. This analysis should be read in conjunction with the financial
statements and the notes to those statements that are included elsewhere in
this report. The results related to the business operations of Helix TCS, LLC
replace those of Jubilee4 Gold, Inc., which is due to the treatment of the
Purchase Agreement between Helix TCS, LLC and Jubliee4 Gold, Inc. as a
recapitalization mechanism.
Revenue
During the three months ended September 30, 2016, we recognized total
revenues of $607,600 compared to $0 for the three months ended September 30,
2015. For the nine months ended September 30, 2016, we recognized total
revenues of $1,471,275 compared to $0 for the nine months ended September 30,
2015. This increase was a result of the acquisition of Helix TCS, LLC and its
operating subsidiaries, and the acquisition of Revolutionary Software, LLC ("Cannabase"),
though Cannabase is still in a development stage.
Operating Expenses
For the three months ended September 30, 2016, total operating expenses
were $721,653, compared to $0 for the three months ended September 30, 2015. For
the nine months ended September 30, 2016, total operating expenses were $2,088,300
compared to $0 for the nine months ended September 30, 2015. This increase in
operating expenses reflects ramping up of operations, including but not limited
to payroll, professional fees, rent, insurance, office, travel, meals,
entertainment, advertising and promotion, uniforms, and automobile expenses. We
expect a significant increase in our operating expenses as we continue to
operate as a cannabis security provider.
Net Loss
The net loss for the three months ended September 30, 2016 was $(513,780),
compared to $0 for the three months ended September 30, 2015. The net loss for
the nine months ended September 30, 2016 was $(1,031,739), compared to $0 for
the nine months ended September 30, 2015. This is largely attributed to the
increase in operating expenses, especially payroll expenses and professional
fees.
Liquidity
and Capital Resources
As of September 30, 2016, our working capital was $97,790, a decrease
of $165,663 from the year ended December
31, 2015. The decrease is primarily due
to a large increase in current liabilities. Working capital at September 30,
2016 was made up of accounts receivable, cash, and prepaid expenses. Working
capital was $500 as of September 30, 2015.
-14-
As of September 30, 2016, net cash used in operating activities was $529,523
compared to $0 for the nine months ended September 30, 2015. The rate of
increase in net cash used in operating activities in 2016 reflects the overall
growth of the company and an increase in sales.
Net cash used in investing activities for the nine months ended
September 30, 2016 was $459,790, compared to $0 for the nine months ended
September 30, 2015. The increase was primarily a result of the investments made
into BOSS Security, Cannabase, and SCG LLC.
Net cash provided by financing activities for the nine months ended September
30, 2016 was $850,000, compared to $0 for the nine months ended September 30,
2015. The increase was primarily a result of proceeds from the issuance of
stock, additional loans made to the Company by shareholders, and convertible
promissory notes.
Cash
Requirements
Our ability to continue to fund our growth and meet our obligations on
a timely basis is dependent on our ability to align our financial resources with
our growth strategy, which includes plans to increase the scope of our product
and service offerings in existing and new markets. The effort we make to
execute our growth strategy will impact the amount of capital required to meet
our financial obligations.
If we are unable to generate cash flow from operations and financing, we
will most likely have to reduce the size and scope of our operations and modify
our expansion plans. We have analyzed our liquidity requirements and concluded
that we do not have sufficient liquidity to execute our business plan over the
next 12 months.
Dividends.
The Series A Preferred will not carry an annual
dividend per share on the sum of the Stated Value, except that in the event
dividends are declared for common stock, and the same rate of dividend per
share shall be due and payable to the Class A Preferred shareholders on the
same terms.
Optional Conversion.
The Holders
of Series A Preferred will, at any time, be entitled to convert all of their
Series A Preferred Stock into 60% of the issued and outstanding common stock of
the Company as of the date of conversion, computed on a post-conversion basis. The
Series A Preferred contain provisions that protect their holders against
dilution by adjustment of the purchase price in certain events such as stock
dividends, stock splits, combinations and other similar events.
Adjustment Due to Merger, Consolidation, Etc.
If, prior to the conversion of all Class A Preferred
Stock, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Company shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities of the Company or another entity or there is a sale of all or
substantially all the Company's assets, then the Holders of Class A Preferred
Stock shall thereafter have the right to receive upon conversion of Class A
Preferred Stock, and upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately theretofore
issuable upon conversion, such stock, securities and/or other assets ("New
Assets") that the Holder would have been entitled to receive in such
transaction had the Class A Preferred Stock been convertible into New Assets
from the date hereof, at the market price of such New Assets on the date of
conversion, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the Holders of the Class A Preferred
Stock to the end that the provisions hereof (including, without limitation,
provisions for the adjustment of the conversion price and of the number of
shares of Common Stock issuable or New Assets deliverable upon conversion of
the Class A Preferred Stock) shall thereafter be applicable, as nearly as may
be practicable in relation to any securities thereafter deliverable upon the
exercise here.
Voting Rights.
The Series A
Preferred shareholders will vote as one class, and they shall be entitled to
vote that number of votes equal to that number of common shares which is not
less than 60% of the vote required to approve any action on matters submitted
to a vote of the stockholders of the Company.
Protective Provisions.
As
long as any shares of Series A Preferred are outstanding, unless the Holders of
at least 51% of the then outstanding shares of Series A Preferred shall have
otherwise given prior written consent, the Company shall not, and shall not
permit any of the subsidiaries to, directly or indirectly, do the following:
a)
Liquidate, dissolve, or wind-up
the affairs of the Company, or effect any Liquidation Event, or otherwise amend
the Certificate of Incorporation or Bylaws in a manner adverse to the Class A
Preferred;
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b)
Create or issue any other security
or class of securities senior in rights, privileges, or preferences to the
Class A Preferred; or
c)
Purchase, redeem, or pay any
dividends on any capital stock prior to the Class A Preferred, other than stock
repurchased from former employees or consultants in connection with the
cessation of their employment/services.
Inflation
In the opinion
of management, inflation has not and will not have a material effect on our
operations in the immediate future. Management will continue to monitor
inflation and evaluate the possible future effects of inflation on our business
and operations.
Off-Balance
Sheet Arrangements
Per SEC regulations, we are required to disclose our off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, such as changes in financial condition,
revenues, expenses, results of operations, liquidity, capital expenditures, or
capital resources that are material to investors. As of December 31, 2015 and September
30, 2016, we have no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are disclosed in Note 1 of our
Financial Statements included elsewhere in this Form 10. The following
discussion addresses our most critical accounting policies, which are those
that are both important to the portrayal of our financial condition and results
of operations and that require significant judgment or use of complex
estimates.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards
Codification No. 605, "Revenue Recognition" ("ASC-605"). ASC-605 requires that
four basic criteria must be met before revenue can be recognized: (1)
persuasive evidence of an arrangement exists; (2) delivery has occurred; (3)
the selling price is fixed and determinable; and (4) collectability is
reasonably assured. Determination of criteria (3) and (4) are based on
management's judgments regarding the fixed nature of the selling prices of the
products delivered and the collectability of those amounts. Provisions for
discounts and rebates to customers, estimated returns and allowances, and other
adjustments are provided for in the same period that the related sales are
recorded. The Company will defer any revenue for which the product or servicers
has not been delivered or provided, or is subject to refund, until such time
that the Company and the customer jointly determine that the product has been
delivered or that no refund will be required.
Income Taxes
The Company accounts for income taxes using an asset and liability
approach. This approach involves a process of calculating the temporary and
permanent differences between the carrying amounts of the assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes. The temporary differences result in deferred tax assets and
liabilities. These values would be recorded on the Company's balance sheets in
accordance with ASC 740, which established financial accounting and reporting
standards for the effect of income taxes. The Company must assess the
likelihood that its deferred tax assets will be recovered from future taxable
income and, to the extent the Company believes that recovery is not likely, the
Company must establish a valuation allowance. Changes in the Company's
valuation allowance in a period are recorded through the income tax provision
on the statements of operations.
The Company records interest and penalties arising from the
underpayment of income taxes in the "Statement of Income" under General and Administrative
Expenses. As of December 31, 2015 and December 31, 2014, the Company had no
accrued interest or penalties related to uncertain tax positions. The Company
did not have any uncertain tax benefits during these years. The tax years 2014,
2013 and 2012 remain open to examination.
-16-
CONTROLS
AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management conducted an evaluation, with the participation of our
Chief Executive Officer, who is our principal executive officer and our
principal financial and accounting officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as
of the end of the period covered by this registration statement on Form 10.
Based on that evaluation, we concluded that because of the material weakness
and significant deficiencies in our internal control over financial reporting
described below, our disclosure controls and procedures were not sufficient as
of December 31, 2015.
Management's
Annual Report on Internal Control over Financial Reporting
Management is responsible for the preparation of our financial
statements and related information. Management uses its best judgment to ensure
that the financial statements present accurately, in material respects, our
financial position and results of operations in fairness and conformity with
generally accepted accounting principles.
Management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in the Exchange Act. These
internal controls are designed to provide reasonable assurance that the
reported financial information is presented fairly, that disclosures are
adequate, and that the assumptions and opinions in the preparation of
financial statements are reasonable. There are inherent limitations in the
effectiveness of any system of internal controls, including the possibility of
human error and overriding of controls. Consequently, an ineffective internal
control system can only provide reasonable, not absolute, assurance with
respect to reporting financial information.
Our internal control over financial reporting includes policies and
procedures that: (i) pertain to maintaining records that, in reasonable detail,
accurately and fairly reflect our transactions; (ii) provide reasonable
assurance that transactions are recorded as necessary for preparation of our
financial statements in accordance with generally accepted accounting
principles and that the receipts and expenditures of company assets are made in
accordance with our management's and directors' authorization; and (iii)
provide reasonable assurance regarding the prevention or timely detection of
unauthorized acquisition, use, or disposition of assets that could have a
material effect on our financial statements.
We conducted an evaluation of the effectiveness of our internal control
over financial reporting, based on the framework in "Internal Control -
Integrated Framework" issued by the Committee of Sponsoring Organizations of
the Treadway Commission ("COSO") and published in 2013, and subsequent guidance
prepared by COSO specifically for smaller public companies. Based on that
evaluation, management concluded that our internal control over financial
reporting was not sufficient as of December 31, 2015 and 2014 for the reasons discussed
below.
A significant deficiency is a deficiency, or combination of
deficiencies in internal control over financial reporting, that adversely
affects the entity's ability to initiate, authorize, record, process, or report
financial data reliably in accordance with generally accepted accounting
principles such that there is more than a remote likelihood that a misstatement
of the entity's financial statements that is more than inconsequential will not
be prevented or detected by the entity's internal control. A material weakness
is a deficiency or a combination of deficiencies in internal control over financial
reporting such that there is a reasonable possibility that a material
misstatement of the annual or interim consolidated financial statements will
not be prevented or detected on a timely basis.
Management identified the following material weakness and significant
deficiencies in its assessment of the effectiveness of internal control over
financial reporting as of December 31, 2015:
-
Material Weakness - The Company did not maintain effective controls over
certain aspects of the financial reporting process because we lacked
personnel with accounting expertise and an adequate supervisory review
structure that is commensurate with our financial reporting requirements.
|
-
Material Weakness - Inadequate segregation of duties.
|
We expect to be materially dependent on a third party that can provide
us with accounting consulting services for the foreseeable future. Until such
time as we have a chief financial officer with the requisite expertise in U.S.
GAAP, there are no assurances that the material weaknesses and significant
deficiencies in our disclosure controls and procedures and internal control
over financial reporting will not result in errors in our financial statements,
which could lead to a restatement of those financial statements.
-17-
Our management does not expect that our disclosure controls and
procedures or our internal controls will prevent all error and all fraud. A control
system, no matter how well conceived and maintained, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must account for resource
constraints. In addition, the benefits of controls must be considered relative
to their costs. Due to 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, can and will be detected.
This registration statement on Form 10 does not include an attestation
report from our registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation by
the Company's registered public accounting firm pursuant to rules of the
Commission that permit us to provide only management's report in this
registration statement on Form 10.
Changes
in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial
reporting during the quarter ended December 31, 2015 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 3.
PROPERTIES
The Company does not own property and leases a property at 5300 DTC
Parkway, Suite 300, Greenwood Village, CO 80111, pursuant to a five-year lease
expiring on February 28, 2021 requiring monthly payments of $ 6,010.92 and
growing in year 5 to $6,718.08.
ITEM 4. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information as of September 30, 2016, with respect
to the shares of our common stock owned by (i) Holders of more than 5% of the
outstanding shares of common stock, (ii) each of our directors as individuals,
and (iii) all of our directors and officers as a group. Unless otherwise
indicated, all shares are held by the person named and are subject to sole
voting and investment by such person.
As
of September 30, 2016, there are currently 27,547,497* shares issued and
outstanding.
Name and Address of Beneficial Owner
|
Amount and Nature of Beneficial
Owner
Common Stock
|
Warrants and/or Options
|
Series A Preferred Stock
|
Percent of Common Stock Issued and
Outstanding (1)
|
Helix
Opportunities, LLC (2)
|
22,225,000
|
-
|
1,000,000
|
80.7%
|
|
|
|
|
|
Zachary
Venegas, CEO, Director (2)
|
-
|
-
|
-
|
-
|
|
|
|
|
|
Paul
Hodges, Director (3)
|
960,000
|
-
|
-
|
3.5%
|
|
|
|
|
|
All
Directors and Executive Officers as
|
|
|
|
|
a Group (2 persons)
|
23,185,000
|
-
|
1,000,000
|
84.2%
|
-
Based on 27,547,497* shares of
common stock issued and outstanding as of September 30, 2016. Does not include
the granted option shares outstanding.
-
Helix Opportunities, LLC is
controlled by Zachary Venegas, CEO and Director of the Company, and as such, the
shares were counted as shares controlled by officer(s) or director(s) of our
Company.
-
Mr. Hodges 960,000 shares were not
processed for issuances as of September 30, 2016.
*Note: 960,000 common shares were
authorized in March of 2016, but were not processed for issuance as of September
30, 2016. These shares are included in the total of 27,547,497 shares issued
and outstanding.
-18-
ITEM
5. DIRECTORS, EXECUTIVE OFFICERS
Set forth below are the names, ages, positions, and biographies of our
directors and executive officers.
Name
|
|
Age
|
|
Positions and Offices to be
Held
|
Zachary Venegas
|
|
45
|
|
Chief Executive Officer and
Director, Principal Financial Officer
|
Paul E. Hodges III
|
|
62
|
|
Director
|
Our
directors are appointed for a one-year term to hold office until the next
annual general meeting of our shareholders or until they are removed from
office in accordance with our bylaws. Our officers are appointed by our board
of directors and hold office until removed by the board. All officers and
directors listed above will remain in office until the next annual meeting of
our stockholders, and until their successors have been duly elected and
qualified. There are no written agreements with respect to the election of
directors. Our board of directors appoints officers annually and each executive
officer serves at the discretion of our board of directors.
Zachary Venegas, age 45,
CEO and Director
Before
joining Helix TCS, Zachary L. Venegas was a Managing Director at Spruce
Investment Advisors, where he managed a private equity portfolio with NAV of
$500 million USD. He was the co-founder and managing partner of Scimitar, a
Dubai-based private equity and venture firm focused on Europe, Africa and the
Middle East. During his 9 years at Scimitar, Mr. Venegas led the firm's activities
in deal origination, negotiations, capital raising and macroeconomic and
geopolitical analysis, leading investments across four continents and multiple
industries. He represented Scimitar in numerous media appearances, including
Bloomberg Television, CNBC and Barron's.
In
addition, Mr. Venegas was the founder and CEO of Omega Strategic Services, a
dynamic corporate/competitive intelligence and security advisory firm with
operations in the Middle East and Africa that supported investors and corporations
in creating successful operating environments and helping them to succeed by
providing them with distinct, actionable intelligence and real-time data
analytics. Earlier in his career, he worked at JPMorgan in Geneva, Switzerland
focused on the Middle East, and went on to lead the bank's Bahrain office
before leaving to found Scimitar.
Mr.
Venegas received his MBA in Finance and International Business from NYU's Stern
School of Business and a BS in Classical Arabic and Portuguese Languages from
the United States Military Academy, West Point. Prior to his business career,
he served with distinction in the U.S. Army as an Infantry officer. Born in
Brooklyn, NY, he has lived in Switzerland, England, France, Brazil, Egypt,
Jordan, Bahrain, the UAE, Saudi Arabia, Ghana, DR Congo, South Africa,
Singapore, and Thailand and has operated in over 70 countries throughout the
Middle East, Asia, Europe and Africa. Mr. Venegas speaks Arabic, French,
Portuguese, Romanian and Spanish and has a conversational command of
Afrikaans and Swahili.
Paul
Hodges, age 62, Director
Mr.
Hodges is a Director and Senior Advisor of Helix TCS, Inc. He currently serves
as Principal, President and CEO of Yottabyte, LLC. Mr. Hodges has a 20-year
track record as a successful entrepreneur. Most recently, he served as
principal of Netarx, a network integration and services organization, which he
helped grow substantially during his tenure. Earlier, Mr. Hodges co-founded and
was CEO of Codespear, a developer of broadcast alert and interoperable
communications software, now part of Federal Signal. In 2007 he was a founder
of First Michigan Bancorp, Inc. (now Chemical Bank, Inc.), an $18 billion bank
of which he is director. Other companies he has founded include Bloomfield
Computer Systems (BCS), later purchased by Datatec, an international IT and
managed services provider, and the marketing and advertising agencies ePrize
and Alteris Group. Mr. Hodges served as a director of the Michigan Strategic
Fund from 2007 through 2012 an appointment by the Governor of Michigan. Mr.
Hodges studied computer engineering at Lawrence Technological University.
Other Key Employees
Grant Whitus, Chief Operating Officer
Sergeant
Grant Whitus, Helix TCS's Chief Operating Officer, is a 26-year veteran of a Colorado
sheriff's office. He served 17 years on SWAT, the last seven of which were as
the Team Leader.
Mr.
Whitus is a certified Explosive Breacher and a Colorado POST Certified
Instructor for the Law Enforcement Training Academy. He teaches Officer Survival,
Building Searches, Rapid and Immediate Deployment (RAID), Single Officer
Response (Lone Wolf), SWAT, Responding to In-Progress Calls, Law Enforcement
Driving, Precision Immobilization Technique, Building Searches, Close Combat
Techniques, Traffic Stops and Civil Law for the Patrol Officer, as well as many
other disciplines.
-19-
Mr.
Whitus has led SWAT teams in some of the most significant tactical operations
in the nation's history. He has received 16 medals, including five Medals for
Valor, and was at one time, the most decorated deputy sheriff in the Jefferson
County Sheriff's office. In 2002, he and his SWAT Team were honored as "Police
Officer of the Year."
Prior
to joining Helix TCS, Mr. Whitus served as the Director of Training for Blue
Line Protection Group.
Chase Beck, Chief Technology Officer
Chase
Beck, Helix TCS's Chief Technology Officer, is a full-stack web developer
with years of app and agency experience. Mr. Beck brings a designer's eye to
sophisticated engineering problems with a focus on cutting edge user
experiences, powerful branding, and scalability.
Before
co-founding Cannabase in 2013, Mr. Beck held leadership roles in a
variety of technical capacities, ranging from an industry-leading
syndicated content distribution service to Zerista, an event software company,
and the e-commerce space Magento.
Mr.
Beck graduated magna cum laude from the Art Institute of Colorado with a degree
in Web Design & Interactive Media.
Jennifer
Beck, Chief Marketing Officer
Jennifer
Beck, Helix TCS's Chief Marketing Officer, specializes in creating intelligent,
purpose-driven frameworks with an intuitive voice and brand. Ms. Beck's diverse
background in human psychology, product design, online marketing, business and
brand development has played a critical role in Cannabase's vision and
strategic development. Today, she is focused on utilizing her deep experience
in the cannabis industry to help Helix TCS maintain its rapid market
penetration and remarkable execution-based track record.
She
began her career in online marketing, directing brand and product
engagement initiatives for various Denver technology startups before
co-founding Cannabase, the largest online wholesale marketplace in the legal
cannabis industry. Ms. Beck serves as Vice Chair on the board of the Colorado
Cannabis Chamber of Commerce as well as the Chair of its women council, WOW
(The Women of Weed), believing strongly in the responsibility of the
marijuana business community to create and reinforce a transparent and compliant
marketplace.
Ms.
Beck graduated from CU Boulder with an honors degree in psychology.
John
DeLue, Head of Compliance and Quality Control
John DeLue
helps to maintain Helix TCS's role as the largest provider of Technology,
Compliance and Security solutions for the cannabis industry by ensuring site,
client and staff adherence to policy, laws and regulations. Mr. DeLue
previously led Helix's sales efforts by developing strong, trusted
relationships with the most prominent players in the lawful cannabis industry. Not
only does he bring extensive sales experience, Mr. DeLue also brings 27 years
of law enforcement experience to the table.
As
a deputy at the Jefferson County Sheriff's Office, Mr. DeLue was instrumental
in developing training procedures for new recruits, providing officer safety
and operational guidance to ensure that new law enforcement officers were
properly trained to provide the highest level of public service to the
community.
Mr.
DeLue was also involved in tactical police activities, being on the front lines
in riot response operations in Denver and Boulder, Colorado. Mr. DeLue
also served as a school resource officer, ensuring student safety and
developing trusted relationships between students, school administrative staff
and law enforcement.
Mr.
DeLue's customer relationship, sales and law enforcement experience have
enabled him to provide unique insights into the lawful cannabis industry and
help shape best practices for new and existing businesses facing the particular
local, state and federal regulation challenges. His leadership and public
speaking talents have served Helix TCS well in creating positive relationships
with clients, at professional business forums and in front of government
regulatory agencies.
ITEM 6. EXECUTIVE
COMPENSATION
The
following summary compensation table sets forth all compensation awarded to,
earned by, or paid to the named executive officers paid by us during the year
ended December 31, 2015, as the acquiree company, Jubilee4 Gold, Inc., was a
shell company in 2014:
-20-
SUMMARY EXECUTIVES COMPENSATION TABLE
Name & Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock awards
($)
|
Option awards
($)
|
Non-equity incentive plan compen-sation
($)
|
Non-qualified deferred compensa-tion earnings
($)
|
All other compen-sation
($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
Zachary Venegas,
President/CEO, Director (1)
|
2015
|
0
|
0
|
0
|
0
|
0
|
0
|
$63,249.05
|
$63,249.05
|
(1) Mr. Venegas received shares of
common stock and Class A Preferred Stock in a business combination transaction
whereby the assets of his limited liability company were exchanged for shares
in Helix TCS. Mr. Venegas received $63,249.05 as consulting fees in the year
ended December 31, 2015.
Option Grants Table
We
made no individual grants of stock options to purchase our common stock to the
executive officers named in the Summary Compensation Table for the period from March
13, 2014 (inception) through December 31, 2015.
Aggregated
Option Exercises and Fiscal Year-End Option Value Table.
There
were no stock options exercised during the period ending December 31, 2015 by
the executive officers named in the Summary Compensation Table.
Long-Term Incentive Plan
("LTIP") Awards Table
We made no awards to named
executive officers in the last completed fiscal year under any LTIP.
Compensation of Directors
Our
Directors are permitted to receive fixed fees and other compensation in
exchange for their services as directors. Our Board of Directors has the
authority to fix the compensation of directors. No amounts have been paid to,
or accrued to, directors in any such capacity.
Directors
Compensation Table
Name
|
Fees earned or paid in cash
($)
|
Stock awards ($)
|
Option awards ($)
|
Non-equity incentive plan compensation ($)
|
Non-qualified deferred compensation earnings
($)
|
All other compensation ($)
|
Total
($)
|
|
|
|
|
|
|
|
|
Zachary Venegas (1) 2015
|
$ -0-
|
$-0-
|
$ -0-
|
$ -0-
|
$ -0-
|
$-0-
|
$-0-
|
|
|
|
|
|
|
|
|
Paul Hodges (2)
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
|
|
|
|
|
|
|
|
Totals
|
$ -0-
|
$ -0-
|
$ -0-
|
$ -0-
|
$ -0-
|
$ -0-
|
$ -0-
|
|
|
|
|
|
|
|
|
-
Mr. Venegas was the only Director
for the year ended December 31, 2015 and received no compensation for services
as a director.
-
Mr. Hodges was appointed as a
Director on March 14, 2016. Mr. Hodges was granted the warrant to purchase
1,920,000 shares for $300,000 on March 9, 2016, pursuant to a share purchase
agreement, and not as compensation for services as a director.
-21-
Employment Agreements
Currently,
we have no employment agreements in place with our officers and directors, or with
our key employees of the Company.
ITEM 7. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Helix Opportunities, LLC
("Fund") is controlled and managed by the CEO, Mr. Venegas.
ITEM 8. LEGAL PROCEEDINGS
We are not presently a party to any material litigation, nor to the
knowledge of management is any litigation threatened against us that may
materially affect us.
ITEM 9.
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Our common stock is quoted on the OTC Pink tier of the OTC Markets,
Inc. and has traded under the symbol "HLIX". Our stock has been thinly traded
on the OTC Pink and there can be no assurance that a liquid market for our
common stock will continue.
As of December 31, 2015, there were approximately 70 record holders and
23,203,211 shares of common stock issued and outstanding.
During the fiscal years ended
December 31, 2015 and 2014 it had a trading history as follows:
|
|
HIGH
|
|
LOW
|
Fiscal Year 2015
|
|
|
|
|
Quarter Ended:
|
|
|
|
|
March 31, 2015
|
|
$ 0.24
|
|
$ 0.24
|
June 30, 2015
|
|
$ 0.07
|
|
$ 0.07
|
September 30, 2015
|
|
$ 0.06
|
|
$ 0.06
|
December 31, 2015
|
|
$ 0.14
|
|
$ 0.14
|
|
|
|
|
|
Fiscal Year 2014
|
|
|
|
|
Quarter Ended:
|
|
|
|
|
March 31, 2014
|
|
$ 0.54
|
|
$ 0.54
|
June 30, 2014
|
|
$ 3.00
|
|
$ 0.28
|
September 30, 2014
|
|
$ 0.04
|
|
$ 0.04
|
December 31, 2014
|
|
$ 0.05
|
|
$ 0.05
|
We have never declared or paid cash dividends on our capital stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business, and we do not anticipate paying
any cash dividends in the foreseeable future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Sales and issuances by the Company of the unregistered securities listed below
were made by the Company in reliance upon Rule 506 of Regulation D. All the
individuals and/or entities that purchased the unregistered securities were all
known to the Company and its management, through pre-existing business
relationships,
-22-
as long standing business associates,
friends, and employees. These purchasers were provided access to all material
information, which they requested, and all information necessary to verify such
information and were afforded access to management of the Company in connection
with their purchases. All purchasers of the unregistered securities acquired
such securities for investment and not with a view toward distribution,
acknowledging such intent to the Company. All certificates or agreements
representing such securities that were issued contained restrictive legends,
prohibiting further transfer of the certificates or agreements representing such
securities, without such securities either being first registered or otherwise
exempt from registration in any further resale or disposition. Each purchaser
made written representation under Rule 506 of Regulation D, including net worth
and sophistication. The Company required written representation that each
purchaser who was not an accredited investor, either alone or with his purchaser
representative, had such knowledge and experience in financial and business
matters that he was capable of evaluating the merits and risks of the
prospective investment, and the issuer reasonably believed (based on written
representations) immediately prior to making any sale that the purchaser came
within this description.
The following table shows our
recent sales of unregistered securities up to September 30, 2016.
Transaction Date
|
Number of Shares
|
Consideration
|
Relationship to Company
|
April 2014
|
1,944,000
|
Services
|
Control Party
|
April 2014
|
44,000
|
Services
|
Officer/Director
|
October 5, 2015
|
8,900,000
|
$51,700
|
Control Party
|
October 2015
Reverse Split 1-for-4
|
Above are pre-reverse split
Below are post-reverse split
|
|
December 23, 2015
|
20,000,000 shares,
1,000,000 Class A Preferred shares
|
Exchange for Business Assets
|
Control Party
|
February - March 2016
|
200,000 shares
|
Financial Consulting Services
|
Business Associate
|
March 2016
|
150,000 shares
|
Financial Consulting Services
|
Business Associate
|
March 2016
|
960,000*
|
Financial Consulting Services
|
Officer/Director
|
April 2016
|
2,320,000
|
Acquisition of Assets of Revolutionary Software, LLC
|
Business Associate
|
April 2016
|
714,286
|
$250,000
|
Business Associate
|
*960,000 common shares were
authorized for issuance in March 2016, but were not processed for issuance as
of 9/30/2016.
ITEM 11. DESCRIPTION OF
REGISTRANT'S SECURITIES TO BE REGISTERED
The Company
is presently authorized to issue Two Hundred Million (200,000,000) Common
Shares of its $0.001 par value shares. A total of approximately 27,725,697 Common
Shares were issued and outstanding at November 7, 2016 (of which 960,000 had
yet to be issued). The Company is presently authorized to issue Twenty Million
(20,000,000) Preferred Shares at $0.001 par value. A total of 1,000,000
Preferred Shares were issued and outstanding at November 7, 2016.
COMMON
SHARES
The Common Shares
have a par value of $0.001 per share. The Holders of HLIX common stock are
entitled to one vote for each share on all matters voted on by stockholders, including
elections of directors. Except as otherwise required by law or provided in any
resolution adopted by the Company's board of directors, with respect to any
series of preferred stock, the Holders of HLIX common stock possess all voting power.
The Company's articles of incorporation do not provide for cumulative voting in
the election of directors. Subject to any preferential rights of any
outstanding series of HLIX preferred stock created by the board of directors from
time to time, the holders of common stock are entitled to dividends, if any, as
may be declared from time to time by the board of directors, from funds
available therefore and upon liquidation are entitled to receive pro rata all
assets available for distribution to such Holders.
The Holders of
HLIX common stock have no preemptive rights. The rights, preferences and
privileges of Holders of common stock are subject to, and may be adversely affected
by, the rights of the Holders of shares of any series of preferred stock which the
Company may designate and issue in the future.
The Company has not paid dividends on its
common stock and does not anticipate paying such dividends in the foreseeable
future
-23-
PREFERRED STOCK
The
Preferred Shares have a par value of $0.001 per share. The holders of Class A Preferred
Super Majority Voting Stock (1,000,000 outstanding as of November 7, 2016) have
that number of votes equal to that number of common shares which is not less
than 60% of the vote required to approve any action.
TRANSFER
AGENT AND REGISTRAR
The transfer
agent for our securities is Corporate Stock Transfer, 3200 Cherry Creek Drive
South, Suite #130, Denver, CO 80209. The telephone number is 303-282-4800.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Helix TCS, Inc.
is a Delaware corporation. The Delaware General Corporation Law provides that to
the extent that a present or former director or officer of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this section, or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection therewith.
The Delaware
General Corporation Law provides that a Delaware corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
The Delaware
General Corporation Law also provides that a Delaware corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
According to
our bylaws, we are authorized to indemnify our directors to the fullest extent authorized
under Delaware Law subject to certain specified limitations.
Insofar as indemnification
for liabilities arising under the Securities Act of 1933 (the "Act") may
be permitted to directors, officers and persons controlling us pursuant to the
foregoing provisions or otherwise, we are advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
-24-
ITEM 13. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
The audited
financial statements of Helix TCS, Inc. for the years ended December 31, 2015 and
2014 appear on pages F-1 - F-14.
The unaudited
financial statements of Helix TCS, Inc. for the three and nine months ended September
30, 2016 appear on pages F-15 - F-24.
TABLE
OF CONTENTS:
|
|
Report
of Independent Registered Public Accounting Firm for the years ended December
31, 2015 and 2014
|
F-1
|
Consolidated
Balance Sheet as of December 31, 2015 and 2014
|
F-3
|
Consolidated
Statements of Operations for the Years Ended December 31, 2015 and 2014
|
F-4
|
Consolidated
Statements of Changes in Stockholder's Equity for the Years Ended December
31, 2015 and 2014
|
F-5
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2015 and 2014
|
F-6
|
Notes
to the Consolidated Financial Statements for the Years Ended December 31,
2015 and 2014
|
F-7
|
|
|
Consolidated
Balance Sheets for the Three Months Ended September 30, 2016 (unaudited)
|
F-16
|
Consolidated
Statements of Operations for the Three and Nine Months Ended September 30,
2016 (unaudited)
|
F-17
|
Consolidated
Statements of Cash Flows for the Nine Months Ended September 30, 2016
(unaudited)
|
F-18
|
Notes
to the Consolidated Financial Statements for the Period Ended September 30,
2016 (unaudited)
|
F-19
|
-25-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of
Directors and Stockholders of Helix TCS, Inc.:
We have audited the accompanying consolidated balance sheet
of Helix TCS, Inc. ("the Company") as of December 31, 2015 and 2014, and the
related statement of operations, stockholders' equity (deficit) and cash flows
for the period March 26, 2015 (inception) through December 31, 2015. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above
present fairly, in all material respects, the financial position of Helix TCS,
Inc., as of December 31, 2015 and 2014, and the results of its operations and
its cash flows for the period March 26, 2015 (inception) through December 31,
2015, in conformity with generally accepted accounting principles in the United
States of America.
The company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the Company's internal control
over financial reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 2 to the financial statements, the Company's significant operating losses
raise substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ B F Borgers CPA PC
B F Borgers CPA PC
Lakewood, CO
December 8, 2016
F-1
HELIX TCS, INC FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
AUDITED
F-2
|
HELIX TCS, INC.
|
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
$
|
154,282
|
$
|
-
|
|
Accounts receivable
|
|
|
|
|
|
|
94,779
|
|
-
|
|
Prepaid expenses
|
|
|
|
|
|
|
16,648
|
|
-
|
|
Total Current assets
|
|
|
|
|
|
|
265,709
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
$
|
54,357
|
$
|
-
|
|
Other assets
|
|
|
|
|
|
$
|
20,008
|
$
|
-
|
|
Total Assets
|
|
|
|
|
|
$
|
340,074
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
$
|
2,256
|
$
|
-
|
|
Total current liabilties
|
|
|
|
|
|
|
2,256
|
|
-
|
|
Convertible notes payable
|
|
|
|
|
|
|
90,436
|
|
|
|
Total liabilties
|
|
|
|
|
|
|
92,692
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value, 20,000,000 shares authorized;
1,000,000
|
|
|
|
|
|
|
|
|
|
|
shares issued and outstanding as of December 31, 2015
|
|
|
|
|
|
|
1,000
|
|
-
|
|
Common stock, $0.001 par value, 200,000,000 shares authorized;
23,203,241 and 977,154
|
|
|
|
|
|
|
-
|
|
-
|
|
shares issued and outstanding as of December 31, 2015 and 2014,
respectively
|
|
|
|
|
|
|
23,203
|
|
977
|
|
Additional paid-in capital
|
|
|
|
|
|
|
539,134
|
|
(977)
|
|
Accumulated deficit
|
|
|
|
|
|
|
(315,955)
|
|
-
|
|
Total Stockholders' Equity
|
|
|
|
|
|
|
246,382
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Deficit
|
|
|
|
|
|
$
|
340,074
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
|
F-3
HELIX TCS, INC.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
|
|
|
|
$
|
244,898
|
$
|
-
|
|
Cost of revenues
|
|
|
|
|
|
|
219,824
|
|
-
|
|
GROSS MARGIN
|
|
|
|
|
|
|
25,074
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
|
|
|
|
167,764
|
|
-
|
|
Payroll
|
|
|
|
|
|
|
82,146
|
|
-
|
|
Professional services
|
|
|
|
|
|
|
100,683
|
|
-
|
|
Total operating expenses
|
|
|
|
|
|
|
350,593
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
|
|
|
|
(325,519)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivative instrument
|
|
|
|
|
|
|
9,564
|
|
-
|
|
Other income (expense) net
|
|
|
|
|
|
|
9,564
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
$
|
(315,955)
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
|
|
|
|
(Basic and fully diluted)
|
|
|
|
|
|
$
|
(0.20)
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares - basic and diluted
|
|
|
|
|
|
|
1,568,387
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
|
F-4
HELIX TCS, INC.
|
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Paid-in Capital
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances - December 31, 2014
|
|
|
|
977,154
|
|
$ 977
|
|
-
|
|
$ -
|
|
$ (977)
|
|
$ -
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share purchase agreement issuance of common stock
|
|
|
|
2,225,000
|
|
2,225
|
|
-
|
|
-
|
|
49,475
|
|
-
|
|
51,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred shares as part of reorganization
|
|
|
|
-
|
|
-
|
|
1,000,000
|
|
1,000
|
|
-
|
|
-
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock as part of reorganization
|
|
|
|
20,000,000
|
|
20,000
|
|
-
|
|
-
|
|
490,616
|
|
-
|
|
510,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock on the open market
|
|
|
|
1,087
|
|
1
|
|
-
|
|
-
|
|
20
|
|
-
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(315,955)
|
|
(315,955)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances - December 31, 2015
|
|
|
|
23,203,241
|
|
23,203
|
|
1,000,000
|
|
1,000
|
|
539,134
|
|
(315,955)
|
|
247,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
|
F-5
HELIX TCS, INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
$
|
(315,955)
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used
|
|
|
|
|
|
|
|
|
|
in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
5,620
|
|
-
|
|
Gain on change in fair value of derivative instrument
|
|
|
|
|
|
(9,564)
|
|
-
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
|
(94,779)
|
|
-
|
|
Prepaid expenses
|
|
|
|
|
|
(16,648)
|
|
|
|
Other assets
|
|
|
|
|
|
(20,008)
|
|
-
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
2,256
|
|
-
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
|
|
|
(449,078)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
(59,977)
|
|
-
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
|
|
|
(59,977)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible notes payable
|
|
|
|
|
|
100,000
|
|
-
|
|
Proceeds from issuance of preferred stock
|
|
|
|
|
|
1,000
|
|
-
|
|
Proceeds from issuance of common stock
|
|
|
|
|
|
562,337
|
|
-
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
|
|
|
663,337
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase In Cash
|
|
|
|
|
|
154,282
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Cash At The Beginning Of Year
|
|
|
|
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Cash At The End Of Year
|
|
|
|
|
$
|
154,282
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
|
F-6
Notes to the Financial Statements
December 30, 2015 and 2014
Audited
Note 1
- Organization and Operations
Helix TCS, Inc. ("the Company"), formerly
Jubilee4Gold, Inc. ("Jubilee4Gold"), a Delaware corporation, was initially
formed on April 18, 2004. On October 9, 2015, Helix Opportunities, LLC entered
into a Share Purchase Agreement ("the Purchase Agreement") acquiring the shares
of the Company owned by Syndicated Equity, Inc. and acquired 8.9 million new
shares of the Company's common stock. The Company then initiated a 1 for 4
reverse stock split whereby each previously issued share of common stock
subsequently represented one quarter of a new share. Effective October 1,
2015, as part of a reorganization, Helix Opportunities LLC contributed 100% of itself
and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss
Security Solutions to the Company in exchange for 20 million common shares and
1 million convertible preferred shares of the Company. The Company provides
security, compliance, and technology services to the legal cannabis industry.
The Purchase
Agreement was treated as a recapitalization for financial accounting purposes.
Jubilee4 Gold, Inc. is considered the acquiree for accounting purposes and
their historical financial statements before the Purchase Agreement will be
replaced with the historical financial statements of the Company. The common
stock account of the Company continues post-merger, while the retained earnings
of the acquiree is eliminated. The historical information of the Helix TCS,
Inc. is presented for comparative purposes. Helix TCS, Inc. was formed in 2015
and therefore has no operations in prior year.
Note 2
- Going Concern
The Company's financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
financial statements for the years ended December 31, 2015 and 2014, the
Company has generated minimal revenues and has incurred losses. . These
conditions raise substantial doubt as to the Company's ability to continue as a
going concern. These 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 be necessary should the
Company be unable to continue as a going concern.
The continuation of the Company as a going concern is dependent upon
the ability to raise equity or debt financing, and the attainment of profitable
operations from the Company's planned business. Management cannot provide any
assurances that the Company will be successful in accomplishing any of its
plans.
Note 3
-
Significant and Critical Accounting Policies and Practices
The management of the Company is
responsible for the selection and use of appropriate accounting policies and
the appropriateness of accounting policies and their
application. Critical accounting policies and practices are those
that are both most important to the portrayal of the Company's financial
condition and results and require management's most difficult, subjective, or
complex judgments, often as a result of the need to make estimates about the
effects of matters that are inherently uncertain. The Company's
significant and critical accounting policies and practices are disclosed below
as required by accounting principles generally accepted in the United States of
America ("U.S. GAAP").
Basis of Presentation
The accompanying consolidated financial
statements have been prepared in accordance with U.S. GAAP for year-end
financial information and the rules and regulations of the Securities and
Exchange Commission (the "SEC"). Accordingly, since they are
year-end statements, the accompanying consolidated financial statements include
all of the information and notes required by U.S. GAAP for annual financial
statements, but reflect all adjustments consisting of normal, recurring
adjustments, that are necessary for a fair presentation of the financial
position for the year ended December 31, 2015 and the results of
operations and cash flows for the annual periods presented.
Principles of Consolidation
The Company's consolidated financial
statements include all of its accounts and any intercompany balances have been
eliminated in accordance with U.S. GAAP. The Company has three
subsidiaries, BOSS Security Solutions, Helix TCS LLC, and Security Consultants LLC.
F-7
Use of Estimates and Assumptions and
Critical Accounting Estimates and Assumptions
The preparation of consolidated financial
statements in conformity with U.S. GAAP 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(s) of the financial
statements and the reported amounts of revenues and expenses during the
reporting period(s).
The preparation of financial statements
and related disclosures in conformity with U.S. GAAP, and the Company's
discussion and analysis of its financial condition and operating results
require the Company's management to make judgments, assumptions and estimates
that affect the amounts reported in its consolidated financial statements and
accompanying notes. Management bases its estimates on historical
experience and on various other assumptions it believes to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities. Actual results
may differ from these estimates and such differences may be material.
Management believes the Company's critical
accounting policies and estimates are those related to revenue recognition,
allowances, leases and income taxes.
Cash
Cash consists of checking accounts. The
Company considers all highly-liquid investments purchased with an original
maturity of three months or less to be cash.
Accounts Receivable and Allowance for
Doubtful Accounts
Accounts receivable are recorded at the
invoiced amount, net of an allowance for doubtful accounts. The
Company performs ongoing credit evaluations of its customers and adjusts credit
limits based upon payment history and the customer's current credit worthiness,
as determined by the review of their current credit information; and determines
the allowance for doubtful accounts based on historical write-off experience,
customer specific facts and economic conditions.
Management charges balances off against
the allowance after all means of collection have been exhausted and the
potential for recovery is considered remote. The Company determines
when receivables are past due or delinquent based on how recently payments have
been received.
Outstanding account balances are reviewed
individually for collectability. The allowance for doubtful accounts
is the Company's best estimate of the amount of probable credit losses in the
Company's existing accounts receivable. For the year ended
December 31, 2015, the allowance for doubtful accounts was not
material. Additionally, there were no write-offs of the Company
accounts receivables for the year ended December 31, 2015. The Company does not
have any off-balance-sheet credit exposure to its customers.
Property and Equipment
Property and equipment is recorded at
cost. Expenditures for major additions and betterments are
capitalized. Maintenance and repairs are charged to operations as
incurred. Depreciation of property and equipment is computed by the
straight-line method (after taking into account their respective estimated
residual values) over the estimated useful lives of the respective assets.
Property and equipment consists of vehicles, which have an estimated useful
life of 1 to 3 years.
Leases
Lease agreements are evaluated to
determine if they are capital leases meeting any of the following criteria at
inception: (a) transfer of ownership; (b) bargain purchase option; (c) the
lease term is equal to 75 percent or more of the estimated economic life of the
leased property; or (d) the present value at the beginning of the lease term of
the minimum lease payments, excluding that portion of the payments representing
executory costs such as insurance, maintenance, and taxes to be paid by the
lessor, including any profit thereon, equals or exceeds 90 percent of the
excess of the fair value of the leased property to the lessor at lease
inception over any related investment tax credit retained by the lessor and
expected to be realized by the lessor.
If at its inception a lease meets any of
the four lease criteria above, the lease is classified by the Company as a
capital lease; and if none of the four criteria are met, the lease is
classified by the Company as an operating lease.
Revenue Recognition
The Company provides its services under
time-based contracts. Revenues earned under time-based arrangements
are recognized as services are provided. The Company recognizes
revenue from the provision of professional services when it is realized or
realizable and earned. The Company considers revenue realized or
F-8
realizable and earned when all of the following criteria are met: (i)
persuasive evidence of an arrangement exists, (ii) the services have been
rendered to the customer, (iii) the sales price is fixed or determinable and
(iv) collectability is reasonably assured. Appropriate allowances
for discounts are recorded concurrent with revenue recognition.
Advertising Costs
Advertising costs are expensed as incurred
and included in selling, general and administrative expenses and amounted to $7,854
and $0 for the years ended December 31, 2015 and 2014, respectively.
Operating Expenses
The Company's operating expenses encompass
selling, general and administrative expenses consisting primarily of compensation
and related costs for personnel and costs related to the Company's facilities,
finance, human resources, information technology and fees for professional
services. Professional services are principally comprised of outside
legal, audit, information technology consulting, marketing and outsourcing
services as well as the costs related to being a publically traded company.
Earnings (Loss) Per Share Applicable to
Common Stockholders
The Company follows ASC 260,
"Earnings Per Share"
,
which requires presentation of basic and diluted earnings per share ("EPS") on
the face of the income statement for all entities with complex capital
structures, and requires a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of the diluted EPS
computation.
In the accompanying financial statements,
basic loss per share is computed by dividing net loss by the weighted average
number of shares of common stock outstanding during the period.
Potential common shares includable in the
computation of fully-diluted per share results are not presented for the year
ended December 31, 2015 in the consolidated financial statements as their
effect would be anti-dilutive.
Diluted loss per share is computed in a
manner similar to the basic loss per share, except the weighted-average number
of shares outstanding is increased to include all common shares, including
those with the potential to be issued by virtue of warrants, options,
convertible debt and other such convertible instruments. Diluted loss per share
contemplates a complete conversion to common shares of all convertible
instruments only if they are dilutive in nature with regards to earnings per
share.
The anti-dilutive shares of common stock
outstanding for the year ended December 31, 2015 and 2014 were as follows:
|
|
For the Year Ended
|
|
|
December 31, 2015
|
|
December 31, 2014
|
Potentially dilutive securities:
|
|
|
|
|
Convertible notes payable
|
|
1,412,429
|
|
-
|
Convertible preferred stock
|
|
36,921,875
|
|
-
|
Common Stock, Additional Paid-In Capital
and share data at December 31, 2014 have been adjusted retroactively to reflect
a 1-for-4 reverse stock split effective October 24, 2015.
Income Taxes
The Company accounts for income taxes
under the asset and liability method. This approach requires the
recognition of deferred tax assets and liabilities of the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities. The U.S. GAAP guidance for income
taxes prescribes a two-step approach for the financial statement recognition
and measurement of income tax positions taken or expected to be taken in an
income tax return. The first step evaluates an income tax position
in order to determine whether it is more likely than not that the position will
be sustained upon examination, based on the technical merits of the position. The
second step measures the benefit to be recognized in the financial statements
for those income tax positions that meet the more likely than not recognition
threshold. U.S. GAAP also provides guidance on derecognition, classification,
recognition and classification of interest and penalties, accounting in interim
periods, disclosers and transition. Under U.S. GAAP, the Company may
recognize a previously unrecognized tax benefit if the tax position is
effectively (rather than "ultimately") settled through examination, negotiation
or litigation. The Company reevaluates these uncertain tax positions
on a quarterly basis. This evaluation is based on factors including,
but not limited to, changes in facts and circumstances, changes in tax law,
effectively settled issues, and new audit activity. Any changes in
these factors could result in changes to a tax benefit or tax provision.
F-9
Recently Issued Accounting Pronouncements
In April 2015, the Financial Accounting
Standards Board (the "FASB") issued Accounting Standards Update ("ASU") ASU
2015-03, "Simplifying the Presentation of Debt Issuance Costs". ASU 2015-03
requires debt issuance costs to be presented in the balance sheet as a direct
deduction from the associated debt liability. ASU 2015-03 is effective for
interim and annual reporting periods beginning after December 15, 2015. The
new guidance will be applied on a retrospective basis and early adoption is
permitted. The Company does not expect the adoption of ASU 2015-03 to have a
significant impact on the Company's consolidated results of operations,
financial position or cash flows.
In November 2015, the FASB issued ASU
2015-17, "Income Taxes (Topic 740) - Balance Sheet Classification of Deferred
Taxes". To simplify the presentation of deferred income taxes, the amendments
in this Update require that deferred tax liabilities and assets be classified
as noncurrent in a classified statement of financial position. The amendments
in this Update apply to all entities that present a classified statement of
financial position. The current requirement that deferred tax liabilities and
assets of a tax-paying component of an entity be offset and presented as a
single amount is not affected by the amendments in this Update. For public
business entities, the amendments in this Update are effective for financial
statements issued for annual periods beginning after December 15, 2016, and
interim periods within those annual periods. For all other entities, the
amendments in this Update are effective for financial statements issued for
annual periods beginning after December 15, 2017, and interim periods within
annual periods beginning after December 15, 2018. Earlier application is
permitted for all entities as of the beginning of an interim or annual
reporting period. The amendments in this Update may be applied either
prospectively to all deferred tax liabilities and assets or retrospectively to
all periods presented. If an entity applies the guidance prospectively, the
entity should disclose in the first interim and first annual period of change,
the nature of and reason for the change in accounting principle and a statement
that prior periods were not retrospectively adjusted. If an entity applies the
guidance retrospectively, the entity should disclose in the first interim and
first annual period of change the nature of and reason for the change in
accounting principle and quantitative information about the effects of the
accounting change on prior periods. The Company does not expect the adoption
of ASU 2015-17 to have a significant impact on the Company's consolidated
results of operations, financial position or cash flows.
In January 2016, the FASB issued ASU
2016-01 - "Financial Instruments - Overall (Subtopic 825-10) - Recognition and
Measurement of Financial Assets and Financial Liabilities." ASU 2016-01, among
other changes, requires equity investments (except those accounted for under
the equity method of accounting or those that result in consolidation of the
investee) to be measured at fair value with changes in fair value recognized in
net income. This Update also simplifies the impairment assessment of equity
investments without readily determinable fair values by requiring a qualitative
assessment to identify impairment. The amendments in ASU 2016-01 will become
effective for public business entities for fiscal years beginning after
December 15, 2017, including interim periods within those fiscal years. The
Company is currently evaluating the effect of the adoption of ASU 2016-01 will
have on its consolidated results of operations, financial position or cash
flows.
In February 2016, the FASB issued ASU
2016-02 - "Leases (Topic 842)." Under ASU 2016-02, entities will be required to
recognize of lease asset and lease liabilities by lessees for those leases classified
as operating leases. Among
other changes in accounting for leases, a lessee should recognize in the
statement of financial position a liability to make lease payments (the lease
liability) and a right-of-use asset representing its right to use the
underlying asset for the lease term. When measuring assets and liabilities
arising from a lease, a lessee (and a lessor) should include payments to be
made in optional periods only if the lessee is reasonably certain to exercise
an option to extend the lease or not to exercise an option to terminate the
lease. Similarly, optional payments to purchase the underlying asset should be
included in the measurement of lease assets and lease liabilities only if the
lessee is reasonably certain to exercise that purchase option. The amendments
in ASU 2016-02 will become effective for fiscal years beginning after December
15, 2018, including interim periods with those fiscal years, for public
business entities. The Company is currently evaluating the effect of the
adoption of ASU 2016-02 will have on its consolidated results of operations,
financial position or cash flows.
In April 2016 the FASB issued ASC 2016-10
- "Revenue from Contracts with Customers (Topic 606) - Identifying Performance
Obligations and Licensing." The core principle of the guidance in Topic 606 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 or
services. To achieve that core principle, an entity should apply the following
steps:
-
Identify the contract(s) with a customer.
-
Identify the performance obligations in the contract.
-
Determine the transaction price.
-
Allocate the transaction price to the performance obligations in
the contract.
-
Recognize revenue when (or as) the entity satisfies a performance
obligation.
The amendments
in this Update do not change the core principle of the guidance in Topic 606.
Rather, the amendments in this Update clarify the following two aspects of Topic
606: identifying performance obligations and the licensing implementation
guidance, while retaining the related principles for those areas. The
F-10
amendments in
this Update affect the guidance in Accounting Standards Update 2014-09, Revenue
from Contracts with Customers (Topic 606), which is not yet effective. The
effective date and transition requirements for the amendments in this Update are
the same as the effective date and transition requirements in Topic 606 (and any
other Topic amended by Update 2014-09). Accounting Standards Update 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective
Date, defers the effective date of Update 2014-09 by one year. The Company is
currently evaluating the effect of the adoption of ASU 2016-10 will have on its
consolidated results of operations, financial position or cash flows.
Note 4
- Reverse Recapitalization
On October 9, 2015, the Company executed the Purchase Agreement,
with Jubilee4 Gold, Inc. ("Jubilee4 Gold"), a then non-reporting shell
corporation. The Purchase Agreement was treated as a recapitalization for financial
accounting purposes. Jubilee4 Gold, Inc. is considered the acquiree for
accounting purposes and their historical financial statements before the Purchase
Agreement will be replaced with the historical financial statements of the
Company. The common stock account of the Company continues post-merger, while
the retained earnings of the acquiree is eliminated. The historical information
of the Helix TCS, Inc. is presented for comparative purposes. Helix TCS, Inc.
was formed in 2015 and therefore has no operations in prior year.
Since the transaction
is considered a reverse recapitalization, the presentation of pro-forma
financial information was not required. All share and per share amounts have
been retroactively restated to the earliest periods presented to reflect the
transaction. At the recapitalization date, Jubilee4 Gold sold 1,944,000
restricted shares of its Common Stock for $148,300 and issued 8,900,000 shares
of its Common Stock for $51,700, from which certain Purchase Agreement expenses
were paid
Note 5
- Fair Value
of Financial Instruments
The Company has categorized its financial
assets and liabilities measured at fair value into a three level hierarchy in
accordance with U.S. GAAP. Fair value is defined as an exit price,
the amount that would be received upon the sale of an asset or paid upon the
transfer of a liability in an orderly transaction between market participants
at the measurement date. The degree of judgment utilized in
measuring the fair value of assets and liabilities generally correlates to the
level of pricing observability. Financial assets and liabilities
with readily available, actively quoted prices or for which fair value can be
measured from actively quoted prices in active markets generally have more
pricing observability and require less judgment in measuring fair
value. Conversely, financial assets and liabilities that are rarely
traded or not quoted have less price observability and are generally measured
at fair value using valuation models that require more
judgment. These valuation techniques involve some level of
management estimation and judgment, the degree of which is dependent on the
price transparency of the asset, liability or market and the nature of the
asset or liability.
The three levels of fair value hierarchy
are described below:
Level 1
|
Quoted market prices available in active
markets for identical assets or liabilities as of the reporting date.
|
|
|
Level 2
|
Pricing inputs other than quoted prices
in active markets included in Level 1, which are either directly or
indirectly observable as of the reporting date.
|
|
|
Level 3
|
Pricing inputs that are generally
observable inputs and not corroborated by market data.
|
The carrying amounts of the Company's
financial assets and liabilities, such as cash, accounts receivable and
accounts payable approximate their fair values because of the short maturity of
these instruments.
Note 6
- Prepaid expenses
Prepaid expenses consist of the following
for the periods indicated:
|
|
December 31,
2015
|
|
December 31,
2014
|
|
|
|
|
|
Prepaid expenses
|
|
$8,578
|
|
$-
|
Prepaid insurance
|
|
8,070
|
|
-
|
Total Prepaid expenses and other currentassets
|
|
$ 16,648
|
|
$-
|
F-11
Note 7
- Property
and Equipment, net
The following is a summary of property and
equipment, net for the periods indicated:
|
December 31, 2015
|
|
December 31, 2014
|
Property and equipment
|
$
|
|
59,977
|
|
|
$
|
|
-
|
|
Less accumulated depreciation
|
|
|
(5,620)
|
|
|
|
|
-
|
|
|
$
|
|
54,357
|
|
|
$
|
|
-
|
|
Depreciation and amortization expense
totaled $5,334 and $0 for the years ended December 31, 2015, and 2014,
respectively
Note 8
- Other Assets
Other assets consist of the following for
the periods indicated:
|
|
December 31,
2015
|
|
December 31,
2014
|
|
|
|
|
|
Deposits
|
|
$ 20,008
|
|
$ -
|
Total Other assets
|
|
$ 20,008
|
|
$ -
|
Note 9
-
Convertible Promissory Notes
On December 16, 2015 the Company entered into a Convertible
Promissory Note ("Note One") with a lender ("the Holder) in which the Holder
provided the Company $100,000, and the Company promised to pay the principal amount,
together with interest at the annual rate of 7%, under the terms and provisions
as set forth below. Note One is issued by the Company pursuant to a certain
Subscription Agreement by and between the Company and the Holder. The principal
balance of Note One shall be convertible at the election of the holder of the Note
One, in whole or in part, at any time of from time to time, into the Company's
common stock at a 40% discount to the average market closing price for the
previous 5 trading days, preceding the date that the notice of conversion is
delivered to the Company in writing.
On December 18, 2015, the Company entered into a Convertible
Promissory Note ("Note Two") with a lender ("the Second Holder") in which the
Second Holder provided the Company $100,000, and the Company promised to pay the
principal amount, together with interest at the annual rate of 7%. Note Two is
issued by the Company pursuant to a certain Subscription Agreement by and
between the Company and the Second Holder. The principal balance of Note Two
shall be convertible at the election of the holder of the Note Two, in whole or
in part, at any time of from time to time, into the Company's common stock at a
40% discount to the average market closing price for the previous 5 trading
days, preceding the date that the notice of conversion is delivered to the
Company in writing.
In accordance with ASC 480, Note One and
Note Two will be accounted for as a liability initially measured at fair value
and subsequently at fair value with changes in fair value recognized in
earnings. At each measurement date the 40% discount must be taken into
consideration when recording the instrument at fair value. While the shares
issued are based upon the principal value of the debt, the 40% discount in
place results in the holder having the ability to receive value beyond the
principal amount of the debt by settling the at their market value.
Accordingly, the fair value of the instrument is calculated at market value of
the shares to be received upon conversion at each measurement date and a gain
or loss is recorded as such. The market value of the shares as of December 31,
2015 is the Company's common stock at a 40% discount to the average market
closing price for the previous 5 trading days.
As of December 31, 2015 and 2014, the
Company had principal outstanding of $90,436 and $0, respectively. For the year
ended December 31, 2015, the Company accrued interest expense of $537.
Note 10
-
Stockholders' Equity
Preferred Stock
On October 1,
2015 the Company issued a total of 1,000,000 shares of its Class A Preferred
Stock as part of a reorganization in which Helix Opportunities LLC
F-12
contributed
100% of itself and its wholly-owned subsidiaries, Security Consultants Group,
LLC and Boss Security Solutions to the Company in exchange for 1,000,000
convertible preferred shares of the Company. The Class A Preferred Stock
includes super majority voting rights and are convertible into 60% of common
stock.
As of December 31, 2015, the Company was authorized to issue 20,000,000
shares of preferred stock, with a par value of $0.001, of which 1,000,000
shares were issued and outstanding.
Common Stock
On October 1, 2015 the Company issued
a total of 20,000,000 shares of its restricted common stock as part of a
reorganization in which Helix Opportunities LLC contributed 100% of Helix TCS,
LLC, and its wholly-owned subsidiary, Security Consultants Group, LLC, to the
Company in exchange for 1,000,000 convertible preferred shares of the Company.
On October 9, 2015 the Company issued
a total of 8,900,000 shares of its common stock as part of the Purchase
Agreement for $51,700, from which certain transaction expenses were paid.
On November 17, 2015 the Company has a
net issuance of 1,087 shares of its common stock on the open market for
$21.
As of December 31, 2015, the Company was authorized to issue
200,000,000 shares of common stock, with a par value of $0.001, of which 23,203,241
shares were issued and outstanding.
Reverse Split
In October 2015, the Company's shareholders and its Board of
Directors approved a 1 for 4 reverse split of the Company's common stock. Such
reverse split was effective on October 27, 2015. Prior to the reverse split the
Company had 3,908,617 shares issued and outstanding, post-split the Company had
977,154 shares issued and outstanding.
Note 11
- Commitments and Contingencies
Operating Leases
The Company is obligated under an
operating lease agreement for an office facility in Colorado.
Rent expense under all office leases
aggregated to $14,728 and $0 for the years ended December 31, 2015 and 2014,
respectively. Rent expense was recorded in selling general and administrative
expenses in the accompanying Consolidated Statements of Operations.
Future minimum payments of the Company's
operating leases are as follows:
2016
|
$
|
57,280
|
2017
|
|
76,374
|
2018
|
|
76,374
|
2019
|
|
76,374
|
2020
|
|
76,374
|
Thereafter
|
|
19,093
|
Total
|
$
|
381,870
|
Note 12
- Income Taxes
No
provision for U.S. federal or state income taxes has been recorded as the
Company has incurred net operating losses since inception. Significant components
of the Company's net deferred income tax assets as of December 31, 2015 and
2014 consist of income tax loss carryforwards. These amounts are available for
carryforward for use in offsetting taxable income of future years through 2035.
Realization of the future tax benefits is dependent on the Company's ability to
generate sufficient taxable income within the carry-forward period. Utilization
of the net operating loss carry-forwards may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986, as amended, and
similar state provisions. Due to the Company's history of operating
losses, these deferred tax assets arising from the future tax benefits are
currently not likely to be realized and are thus reduced to zero by an
offsetting valuation allowance. As a result, there is no provision for income
taxes.
F-13
Note 13
- Subsequent
Events
In
February 2016 the Company issued a $100,000 convertible note payable.
In
March 2016 the Company issued a $150,000 convertible note payable.
In
March 2016, the Company issued 960,000 restricted common shares for $150,000
with option to acquire up to 1,920,000 shares for $300,000.
In
April 2016, the Company issued 200,000 restricted common shares to Uptick Capital
for fundraising assistance.
In
April 2016, the Company issued 75,000 restricted common shares to Odeon Capital
Group and 75,000 restricted common shares to related party.
In
April 2016, the Company issued 714,286 restricted common shares for $250,000.
In
April 2016, the Company acquired all of the assets of Revolutionary Software,
LLC for $300,000 cash and 2,320,000 restricted common shares.
F-14
HELIX TCS, INC. FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016
UNAUDITED
F-15
HELIX TCS, INC.
|
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
$
|
14,969
|
$
|
154,282
|
|
Accounts receivable
|
|
|
|
|
|
|
205,140
|
|
94,779
|
|
Prepaid expenses
|
|
|
|
|
|
|
4,056
|
|
16,648
|
|
Total Current assets
|
|
|
|
|
|
$
|
224,165
|
$
|
265,709
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
$
|
55,201
|
$
|
54,357
|
|
Other assets
|
|
|
|
|
|
|
|
|
20,008
|
|
Goodwill
|
|
|
|
|
|
|
1,656,750
|
|
0
|
|
Deposits
|
|
|
|
|
|
|
20,000
|
|
0
|
|
Total Assets
|
|
|
|
|
|
$
|
1,956,115
|
$
|
340,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
$
|
126,375
|
$
|
2,256
|
|
Total current liabilties
|
|
|
|
|
|
|
126,375
|
|
2,256
|
|
Convertible notes payable (long term liabilities)
|
|
|
|
|
|
|
1,041,946
|
|
90,436
|
|
Total liabilties
|
|
|
|
|
|
$
|
1,168,321
|
$
|
92,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
787,794
|
|
246,382
|
|
Total Stockholders' Equity
|
|
|
|
|
|
$
|
787,794
|
$
|
246,382
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
|
|
|
|
$
|
1,956,115
|
$
|
340,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
|
F-16
HELIX TCS, INC.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
$
|
607,600
|
$
|
-
|
$
|
1,471,275
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll Expenses
|
|
|
|
|
|
|
609,020
|
|
-
|
$
|
1,579,804
|
$
|
-
|
|
Professional Fees
|
|
|
|
|
|
|
33,751
|
|
-
|
|
209,097
|
|
-
|
|
Rent Expense
|
|
|
|
|
|
|
18,033
|
|
-
|
|
62,697
|
|
-
|
|
Insurance Expense
|
|
|
|
|
|
|
17,990
|
|
-
|
|
36,247
|
|
-
|
|
Office Expenses
|
|
|
|
|
|
|
14,723
|
|
-
|
|
43,480
|
|
-
|
|
Travel, Meals, and Entertainment
|
|
|
|
|
|
|
1,736
|
|
-
|
|
29,557
|
|
-
|
|
Advertising and Promotion
|
|
|
|
|
|
|
11,131
|
|
-
|
|
30,100
|
|
-
|
|
Uniforms
|
|
|
|
|
|
|
7,178
|
|
-
|
|
23,476
|
|
-
|
|
Automobile Expense
|
|
|
|
|
|
|
5,444
|
|
-
|
|
14,218
|
|
-
|
|
Other Operating Expenses
|
|
|
|
|
|
|
2,648
|
|
-
|
|
59,624
|
|
-
|
|
Total Operating Expenses
|
|
|
|
|
|
$
|
721,653
|
|
-
|
$
|
2,088,300
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
|
|
|
$
|
(114,053)
|
|
|
$
|
(617,025)
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on Convertible Note Mark-to-Market
|
|
|
|
|
|
|
391,321
|
|
-
|
|
391,321
|
|
-
|
|
Depreciation
|
|
|
|
|
|
|
467
|
|
-
|
|
1,386
|
|
-
|
|
Interest Expense
|
|
|
|
|
|
|
7,940
|
|
-
|
|
22,007
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
$
|
(513,780)
|
$
|
-
|
$
|
(1,031,739)
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
|
F-17
HELIX TCS, INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
$
|
(1,031,739)
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income
|
|
|
|
|
|
|
|
|
|
to net cash provided by operations:
|
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
|
|
|
|
34,873
|
|
-
|
|
Advance from Shareholder
|
|
|
|
|
|
76,500
|
|
-
|
|
Mark-to-market loss on convertible notes
|
|
|
|
|
|
391,321
|
|
-
|
|
Stock-based expenses
|
|
|
|
|
|
88,000
|
|
-
|
|
Interest Payable
|
|
|
|
|
|
22,007
|
|
-
|
|
Accounts Receivable, Net
|
|
|
|
|
|
(110,361)
|
|
-
|
|
Change in other assets and liabilities
|
|
|
|
|
|
(124)
|
|
-
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
|
|
|
|
$
|
(529,523)
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Furniture and Equipment
|
|
|
|
|
$
|
4,491
|
$
|
-
|
|
Investment in BOSS Security
|
|
|
|
|
|
(30,000)
|
|
-
|
|
Investment in Cannabase
|
|
|
|
|
|
(430,246)
|
|
-
|
|
Investment in SCG LLC
|
|
|
|
|
|
(4,034)
|
|
-
|
|
NET CASH PROVIDED BY INVESTING ACTIVITIES
|
|
|
|
|
$
|
(459,790)
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Capital Stock
|
|
|
|
|
$
|
2,018
|
$
|
-
|
|
Convertible Notes due 12/31/17:Conv Note 3
|
|
|
|
|
|
100,000
|
|
-
|
|
Convertible Notes due 12/31/17:Conv Note 4
|
|
|
|
|
|
150,000
|
|
-
|
|
Due from Noteholder
|
|
|
|
|
|
100,000
|
|
-
|
|
Cash received for Stock Sales
|
|
|
|
|
|
497,982
|
|
-
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
|
|
$
|
850,000
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase In Cash
|
|
|
|
|
$
|
(139,313)
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Cash At The Beginning Of Period
|
|
|
|
|
$
|
154,282
|
$
|
500
|
|
|
|
|
|
|
|
|
|
|
|
Cash At The End Of Period
|
|
|
|
|
$
|
14,969
|
$
|
500
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
|
F-18
Notes to the Financial Statements
September 30, 2016
Unaudited
Note 1
-
Organization
and Operations
Helix TCS, Inc. ("the Company"), formerly
Jubilee4Gold, Inc. ("Jubilee4Gold"), a Delaware corporation, was initially
formed on April 18, 2004. On October 9, 2015, Helix Opportunities, LLC entered
into a Share Purchase Agreement ("the Purchase Agreement") acquiring the shares
of the Company owned by Syndicated Equity, Inc. and acquired 8.9 million new
shares of the Company's common stock. The Company then initiated a 1 for 4
reverse stock split whereby each previously issued share of common stock
subsequently represented one quarter of a new share. Effective October 1,
2015, as part of a reorganization, Helix Opportunities LLC contributed 100% of itself
and its wholly-owned subsidiaries, Security Consultants Group, LLC and Boss
Security Solutions to the Company in exchange for 20 million common shares and
1 million convertible preferred shares of the Company. The Company provides
security, compliance, and technology services to the legal cannabis industry.
The Purchase
Agreement was treated as a recapitalization for financial accounting purposes.
Jubilee4 Gold, Inc. is considered the acquiree for accounting purposes and
their historical financial statements before the Purchase Agreement will be
replaced with the historical financial statements of the Company. The common
stock account of the Company continues post-merger, while the retained earnings
of the acquiree is eliminated. The historical information of the Helix TCS,
Inc. is presented for comparative purposes. Helix TCS, Inc. was formed in 2015
and therefore has no operations in prior year.
Note 2
- Going Concern
The Company's financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the financial
statements for the 9 months ended September 30, 2016, the Company has generated
minimal revenues and has incurred losses. These conditions raise substantial
doubt as to the Company's ability to continue as a going concern. These
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 be necessary should the Company be
unable to continue as a going concern.
The continuation of the Company as a going concern is dependent upon
the ability to raise equity or debt financing, and the attainment of profitable
operations from the Company's planned business. Management cannot provide any
assurances that the Company will be successful in accomplishing any of its
plans.
Note 3
-
Significant and Critical Accounting Policies and Practices
The management of the Company is
responsible for the selection and use of appropriate accounting policies and
the appropriateness of accounting policies and their
application. Critical accounting policies and practices are those
that are both most important to the portrayal of the Company's financial
condition and results and require management's most difficult, subjective, or
complex judgments, often as a result of the need to make estimates about the
effects of matters that are inherently uncertain. The Company's
significant and critical accounting policies and practices are disclosed below
as required by accounting principles generally accepted in the United States of
America ("U.S. GAAP").
Basis of Presentation
The accompanying consolidated financial
statements have been prepared in accordance with U.S. GAAP for year-end
financial information and the rules and regulations of the Securities and
Exchange Commission (the "SEC"). Accordingly, since they are
year-end statements, the accompanying consolidated financial statements include
all of the information and notes required by U.S. GAAP for annual financial
statements, but reflect all adjustments consisting of normal, recurring
adjustments, that are necessary for a fair presentation of the financial
position for the year ended December 31, 2015 and the results of
operations and cash flows for the annual periods presented.
Principles of Consolidation
The Company's consolidated financial
statements include all of its accounts and any intercompany balances have been
eliminated in accordance with U.S. GAAP. The Company has three
subsidiaries, BOSS Security Solutions, Helix TCS LLC, and Security Consultants
LLC.
Use of Estimates and Assumptions and
Critical Accounting Estimates and Assumptions
The
preparation of consolidated financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the
F-19
reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date(s) of the financial statements and the reported amounts
of revenues and expenses during the reporting period(s).
The preparation of financial statements
and related disclosures in conformity with U.S. GAAP, and the Company's
discussion and analysis of its financial condition and operating results
require the Company's management to make judgments, assumptions and estimates
that affect the amounts reported in its consolidated financial statements and
accompanying notes. Management bases its estimates on historical
experience and on various other assumptions it believes to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities. Actual results
may differ from these estimates and such differences may be material.
Management believes the Company's critical
accounting policies and estimates are those related to revenue recognition,
allowances, leases and income taxes.
Cash
Cash consists of checking accounts. The
Company considers all highly-liquid investments purchased with an original
maturity of three months or less to be cash.
Accounts Receivable and Allowance for
Doubtful Accounts
Accounts receivable are recorded at the
invoiced amount, net of an allowance for doubtful accounts. The
Company performs ongoing credit evaluations of its customers and adjusts credit
limits based upon payment history and the customer's current credit worthiness,
as determined by the review of their current credit information; and determines
the allowance for doubtful accounts based on historical write-off experience,
customer specific facts and economic conditions.
Management charges balances off against
the allowance after all means of collection have been exhausted and the
potential for recovery is considered remote. The Company determines
when receivables are past due or delinquent based on how recently payments have
been received.
Outstanding account balances are reviewed
individually for collectability. The allowance for doubtful accounts
is the Company's best estimate of the amount of probable credit losses in the
Company's existing accounts receivable. For the 9 months ended September 30,
2016, the allowance for doubtful accounts was not material. The
Company does not have any off-balance-sheet credit exposure to its customers.
Property and Equipment
Property and equipment is recorded at
cost. Expenditures for major additions and betterments are
capitalized. Maintenance and repairs are charged to operations as
incurred. Depreciation of property and equipment is computed by the
straight-line method (after taking into account their respective estimated
residual values) over the estimated useful lives of the respective assets.
Property and equipment consists of vehicles, which have an estimated useful
life of 1 to 3 years.
Leases
Lease agreements are evaluated to
determine if they are capital leases meeting any of the following criteria at
inception: (a) transfer of ownership; (b) bargain purchase option; (c) the
lease term is equal to 75 percent or more of the estimated economic life of the
leased property; or (d) the present value at the beginning of the lease term of
the minimum lease payments, excluding that portion of the payments representing
executory costs such as insurance, maintenance, and taxes to be paid by the
lessor, including any profit thereon, equals or exceeds 90 percent of the
excess of the fair value of the leased property to the lessor at lease
inception over any related investment tax credit retained by the lessor and
expected to be realized by the lessor.
If at its inception a lease meets any of
the four lease criteria above, the lease is classified by the Company as a
capital lease; and if none of the four criteria are met, the lease is
classified by the Company as an operating lease.
Revenue Recognition
The Company provides its services under
time-based contracts. Revenues earned under time-based arrangements
are recognized as services are provided. The Company recognizes
revenue from the provision of professional services when it is realized or
realizable and earned. The Company considers revenue realized or
realizable and earned when all of the following criteria are met: (i)
persuasive evidence of an arrangement exists, (ii) the services have been
rendered to the customer, (iii) the sales price is fixed or determinable and
(iv) collectability is reasonably assured. Appropriate allowances
for discounts are recorded concurrent with revenue recognition.
F-20
Operating Expenses
The Company's operating expenses encompass
selling, general and administrative expenses consisting primarily of
compensation and related costs for personnel and costs related to the Company's
facilities, finance, human resources, information technology and fees for
professional services. Professional services are principally
comprised of outside legal, audit, information technology consulting, marketing
and outsourcing services as well as the costs related to being a publically
traded company.
Income Taxes
The Company accounts for income taxes
under the asset and liability method. This approach requires the
recognition of deferred tax assets and liabilities of the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities. The U.S. GAAP guidance for income
taxes prescribes a two-step approach for the financial statement recognition
and measurement of income tax positions taken or expected to be taken in an
income tax return. The first step evaluates an income tax position
in order to determine whether it is more likely than not that the position will
be sustained upon examination, based on the technical merits of the
position. The second step measures the benefit to be recognized in
the financial statements for those income tax positions that meet the more
likely than not recognition threshold. U.S. GAAP also provides guidance on
derecognition, classification, recognition and classification of interest and
penalties, accounting in interim periods, disclosers and
transition. Under U.S. GAAP, the Company may recognize a previously
unrecognized tax benefit if the tax position is effectively (rather than
"ultimately") settled through examination, negotiation or
litigation. The Company reevaluates these uncertain tax positions on
a quarterly basis. This evaluation is based on factors including,
but not limited to, changes in facts and circumstances, changes in tax law,
effectively settled issues, and new audit activity. Any changes in
these factors could result in changes to a tax benefit or tax provision.
Recently Issued Accounting Pronouncements
In April 2015, the Financial Accounting
Standards Board (the "FASB") issued Accounting Standards Update ("ASU") ASU
2015-03, "Simplifying the Presentation of Debt Issuance Costs". ASU 2015-03
requires debt issuance costs to be presented in the balance sheet as a direct
deduction from the associated debt liability. ASU 2015-03 is effective for
interim and annual reporting periods beginning after December 15, 2015. The
new guidance will be applied on a retrospective basis and early adoption is
permitted. The Company does not expect the adoption of ASU 2015-03 to have a
significant impact on the Company's consolidated results of operations,
financial position or cash flows.
In November 2015, the FASB issued ASU
2015-17, "Income Taxes (Topic 740) - Balance Sheet Classification of Deferred
Taxes". To simplify the presentation of deferred income taxes, the amendments
in this Update require that deferred tax liabilities and assets be classified
as noncurrent in a classified statement of financial position. The amendments
in this Update apply to all entities that present a classified statement of
financial position. The current requirement that deferred tax liabilities and
assets of a tax-paying component of an entity be offset and presented as a
single amount is not affected by the amendments in this Update. For public
business entities, the amendments in this Update are effective for financial
statements issued for annual periods beginning after December 15, 2016, and
interim periods within those annual periods. For all other entities, the
amendments in this Update are effective for financial statements issued for
annual periods beginning after December 15, 2017, and interim periods within
annual periods beginning after December 15, 2018. Earlier application is
permitted for all entities as of the beginning of an interim or annual
reporting period. The amendments in this Update may be applied either
prospectively to all deferred tax liabilities and assets or retrospectively to
all periods presented. If an entity applies the guidance prospectively, the
entity should disclose in the first interim and first annual period of change,
the nature of and reason for the change in accounting principle and a statement
that prior periods were not retrospectively adjusted. If an entity applies the
guidance retrospectively, the entity should disclose in the first interim and
first annual period of change the nature of and reason for the change in
accounting principle and quantitative information about the effects of the
accounting change on prior periods. The Company does not expect the adoption
of ASU 2015-17 to have a significant impact on the Company's consolidated
results of operations, financial position or cash flows.
In January 2016, the FASB issued ASU
2016-01 - "Financial Instruments - Overall (Subtopic 825-10) - Recognition and
Measurement of Financial Assets and Financial Liabilities." ASU 2016-01, among
other changes, requires equity investments (except those accounted for under
the equity method of accounting or those that result in consolidation of the
investee) to be measured at fair value with changes in fair value recognized in
net income. This Update also simplifies the impairment assessment of equity
investments without readily determinable fair values by requiring a qualitative
assessment to identify impairment. The amendments in ASU 2016-01 will become
effective for public business entities for fiscal years beginning after
December 15, 2017, including interim periods within those fiscal years. The
Company is currently evaluating the effect of the adoption of ASU 2016-01 will
have on its consolidated results of operations, financial position or cash
flows.
In February 2016, the FASB issued ASU 2016-02
- "Leases (Topic 842)." Under ASU 2016-02, entities will be required to
recognize of lease asset and lease liabilities by lessees for those leases
classified as operating leases. Among other changes in accounting for leases, a lessee should
recognize in the statement of
F-21
financial position a liability to make lease
payments (the lease liability) and a right-of-use asset representing its right
to use the underlying asset for the lease term. When measuring assets and
liabilities arising from a lease, a lessee (and a lessor) should include
payments to be made in optional periods only if the lessee is reasonably
certain to exercise an option to extend the lease or not to exercise an option
to terminate the lease. Similarly, optional payments to purchase the
underlying asset should be included in the measurement of lease assets and
lease liabilities only if the lessee is reasonably certain to exercise that
purchase option. The amendments in ASU 2016-02 will become effective for fiscal
years beginning after December 15, 2018, including interim periods with those
fiscal years, for public business entities. The Company is currently evaluating
the effect of the adoption of ASU 2016-02 will have on its consolidated results
of operations, financial position or cash flows.
In April 2016 the FASB issued ASC 2016-10
- "Revenue from Contracts with Customers (Topic 606) - Identifying Performance
Obligations and Licensing." The core principle of the guidance in Topic 606 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 or
services. To achieve that core principle, an entity should apply the following
steps:
-
Identify the contract(s) with a customer.
-
Identify the performance obligations in the contract.
-
Determine the transaction price.
-
Allocate the transaction price to the performance obligations in
the contract.
-
Recognize revenue when (or as) the entity satisfies a performance
obligation.
The amendments in this Update do not
change the core principle of the guidance in Topic 606. Rather, the amendments
in this Update clarify the following two aspects of Topic 606: identifying
performance obligations and the licensing implementation guidance, while
retaining the related principles for those areas. The amendments in this Update
affect the guidance in Accounting Standards Update 2014-09, Revenue from
Contracts with Customers (Topic 606), which is not yet effective. The effective
date and transition requirements for the amendments in this Update are the same
as the effective date and transition requirements in Topic 606 (and any other
Topic amended by Update 2014-09). Accounting Standards Update 2015-14, Revenue
from Contracts with Customers (Topic 606): Deferral of the Effective Date,
defers the effective date of Update 2014-09 by one year. The Company is
currently evaluating the effect of the adoption of ASU 2016-10 will have on its
consolidated results of operations, financial position or cash flows.
Note 4
- Reverse Recapitalization
On October 9, 2015, the Company executed the Purchase Agreement,
with Jubilee4 Gold, Inc. ("Jubilee4 Gold"), a then non-reporting shell
corporation. The Purchase Agreement was treated as a recapitalization for financial
accounting purposes. Jubilee4 Gold, Inc. is considered the acquiree for
accounting purposes and their historical financial statements before the Purchase
Agreement will be replaced with the historical financial statements of the
Company. The common stock account of the Company continues post-merger, while
the retained earnings of the acquiree is eliminated. The historical information
of the Helix TCS, Inc. is presented for comparative purposes. Helix TCS, Inc.
was formed in 2015 and therefore has no operations in prior year.
Since the transaction
is considered a reverse recapitalization, the presentation of pro-forma
financial information was not required. All share and per share amounts have
been retroactively restated to the earliest periods presented to reflect the
transaction. At the recapitalization date, Jubilee4 Gold sold 1,944,000
restricted shares of its Common Stock for $148,300 and issued 8,900,000 shares
of its Common Stock for $51,700, from which certain Purchase Agreement expenses
were paid.
Note 5
- Convertible Promissory Notes
On December 16, 2015 the Company entered into a Convertible
Promissory Note ("Note One") with a lender ("the Holder) in which the Holder
provided the Company $100,000, and the Company promised to pay the principal amount,
together with interest at the annual rate of 7%, under the terms and provisions
as set forth below. Note One is issued by the Company pursuant to a certain
Subscription Agreement by and between the Company and the Holder. The principal
balance of Note One shall be convertible at the election of the holder of the Note
One, in whole or in part, at any time of from time to time, into the Company's
common stock at a 40% discount to the average market closing price for the
previous 5 trading days, preceding the date that the notice of conversion is
delivered to the Company in writing.
On December 18, 2015, the Company entered into a Convertible
Promissory Note ("Note Two") with a lender ("the Second Holder") in which the
Second Holder provided the Company $100,000, and the Company promised to pay
the principal amount, together with interest at the annual rate of 7%. Note Two
is issued by the Company pursuant to a certain Subscription Agreement by and
between the Company and the Second Holder. The principal balance of Note Two
shall be convertible at the election of the holder of the Note Two, in whole or
in part, at any time of from time to time, into the Company's common stock at a
40% discount to the average market closing price for the previous 5 trading
days, preceding the date that the notice of conversion is delivered to the
Company in writing.
F-22
On February 12, 2016, the Company entered into a Convertible
Promissory Note ("Note Three") with a lender ("the Third Holder") in which the
Third Holder provided the Company $100,000, and the Company promised to pay the
principal amount, together with interest at the annual rate of 7%. Note Three
is issued by the Company pursuant to a certain Subscription Agreement by and between
the Company and the Third Holder. The principal balance of Note Three shall be
convertible at the election of the holder of the Note Three, in whole or in
part, at any time of from time to time, into the Company's common stock at a
40% discount to the average market closing price for the previous 5 trading
days, preceding the date that the notice of conversion is delivered to the
Company in writing.
On March 11, 2016, the Company entered into a Convertible
Promissory Note ("Note Four") with a lender ("the Fourth Holder") in which the
Fourth Holder provided the Company $150,000, and the Company promised to pay
the principal amount, together with interest at the annual rate of 7%. Note
Four is issued by the Company pursuant to a certain Subscription Agreement by
and between the Company and the Fourth Holder. The principal balance of Note
Four shall be convertible at the election of the holder of the Note Four, in
whole or in part, at any time of from time to time, into the Company's common
stock at a 40% discount to the average market closing price for the previous 5
trading days, preceding the date that the notice of conversion is delivered to
the Company in writing.
In accordance with ASC 480, Note One, Note
Two, Note Three, and Note Four will be accounted for as a liability initially
measured at fair value and subsequently at fair value with changes in fair
value recognized in earnings. At each measurement date the 40% discount must be
taken into consideration when recording the instrument at fair value. While the
shares issued are based upon the principal value of the debt, the 40% discount
in place results in the holder having the ability to receive value beyond the
principal amount of the debt by settling the at their market value.
Accordingly, the fair value of the instrument is calculated at market value of
the shares to be received upon conversion at each measurement date and a gain
or loss is recorded as such. The market value of the shares as of September 30,
2016 is the Company's common stock at a 40% discount to the average market
closing price for the previous 5 trading days.
In accordance with ASC 480, Notes One,
Note Two, Note Three, and Note Four will be accounted for as a liability
initially measured at fair value and subsequently at fair value with changes in
fair value recognized in earnings. At each measurement date the 40% discount
must be taken into consideration when recording the instrument at fair value.
While the shares issued are based upon the principal value of the debt, the 40%
discount in place results in the holder having the ability to receive value
beyond the principal amount of the debt by settling the at their market value.
Accordingly, the fair value of the instrument is calculated at market value of
the shares to be received upon conversion at each measurement date and a gain
or loss is recorded as such. The market value of the shares as of September 30,
2016 is the Company's common stock at a 40% discount to the average market
closing price for the previous 5 trading days.
The table below details the outstanding
convertible notes as of September 30, 2016 with the amounts owed and the
carrying value at that date. The income statement impact column in the table
reflects activity since the inception of each note through September 30, 2016.
The income statement impact of all four notes during the 9 months ended
September 30, 2016 was $391,320.52, as shown on the income statement.
Date Issued
|
Principal Amount
|
Carrying Value at Sept. 30, 2016
|
Income Statement Impact
|
|
|
|
|
Dec. 16, 2015
|
$100,000.00
|
$182,709.45
|
$82,709.45
|
Dec. 18, 2015
|
$100,000.00
|
$182,709.45
|
$82,709.45
|
Feb. 12, 2016
|
$100,000.00
|
$182,709.45
|
$82,709.45
|
Mar. 11, 2016
|
$150,000.00
|
$274,064.17
|
$124,064.17
|
Note 6
- Other Assets
Other assets at September 30, 2016 were
comprised primarily of acquisition costs associated with agreements with
Revolutionary Software and BOSS Security Solutions. Collectively these
amounted to $490,246. Additionally, there were $20,000 of security deposits
accounted for in Other Assets.
The acquisition of the assets of
Revolutionary Software, LLC occurred via two transactions - one on March 14,
2016 and one on April 11, 2016. The total consideration Helix agreed to pay
was $650,000.00 in cash and 2,395,000 shares of restricted common stock of
Helix. A portion of the cash was paid at each transaction closing, and a
portion is being paid over time to the relevant sellers. Revolutionary Software,
LLC was the founder and operator of Cannabase, the oldest wholesale marketplace
for the legal cannabis industry. Cannabase will now be a new business line for
Helix, and is under development and expansion into new states and verticals.
F-23
Note 7
- Stock-based fundraising expenses
Helix engaged Uptick Capital LLC
("Uptick") and Odeon Capital Group LLC ("Odeon") to assist in fundraising
efforts. In accordance with the agreements with these vendors, Helix issued a
total of 200,000 shares of restricted common stock to Uptick and a total of
150,000 restricted common shares to Odeon and its affiliates during the 9
months ended September 30, 2016.
F-24
ITEM 14. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 15. FINANCIAL
STATEMENTS AND EXHIBITS.
(a) Audited financial statements for
the years ended December 31, 2015 and 2014.
Unaudited
financial statements for the three and nine months ended September 30, 2016.
(b)
Exhibit No.
|
Description
|
|
|
|
|
2.1
|
Acquisition Agreement between
Helix TCS, LLC and Helix TCS, Inc.
|
Filed Herewith
|
|
|
|
3(i).1
|
Articles of Incorporation
of Jubilee4 Gold, Inc.
|
Filed Herewith
|
|
|
|
3(i).2
|
Certificate of Amendment to
Articles of Incorporation of Helix TCS, Inc.
|
Filed Herewith
|
|
|
|
3(i).3
|
Certificate of Amendment to
Articles of Incorporation of Helix TCS, Inc. - Designation of Rights and
Privileges Class A Preferred Stock
|
Filed Herewith
|
|
|
|
3(ii).1
|
Bylaws of Helix TCS, Inc.
|
Filed Herewith
|
|
|
|
4.1
|
Form of Convertible
Promissory Notes
|
Filed Herewith
|
|
|
|
10.1
|
Asset Purchase Agreement
dated April 11, 2016
|
Filed Herewith
|
|
|
|
23.1
|
Consent of Independent Registered Public Accounting Firm
|
Filed Herewith
|
-26-
SIGNATURES
Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
HELIX
TCS, INC.
/s/ Zachary L. Venegas
|
|
Date: December 8, 2016
|
Zachary L. Venegas
|
|
|
Chief Executive Officer
|
|
|
Principal Executive Officer
|
|
|
Principal Financial Officer
|
|
|
In
accordance with the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates stated.
/s/ Zachary L. Venegas
|
|
Date: December 8, 2016
|
Zachary L. Venegas
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Paul Hodges
|
|
Date: December 8, 2016
|
Paul Hodges
|
|
|
Director
|
|
|
-27-