UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10
(Amendment
No. 1)
GENERAL
FORM FOR REGISTRATION OF SECURITIES
Pursuant
to Section 12(b) or (g) of The Securities Exchange Act of 1934
LANDSTAR,
INC.
(Exact
name of registrant as specified in its charter)
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NEVADA
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86-0914051
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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10 1
J Morris Commons Lane , Suite 1 5 5,
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Morrisville
,
North Carolina
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27 5 60
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(Address
of principal executive offices)
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(Zip
code)
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Registrant’s
telephone number, including area code:
919-858-6542
COPIES
TO
:
Keith
A. Rosenbaum
SPECTRUM
LAW GROUP, APC
23
Corporate Plaza, Suite 150
Newport
Beach, California 92660
949-851-4300
Securities
to be registered pursuant to Section 12(b) of the Act:
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Title
of each class
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Name
of each exchange on which
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to
be so registered
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each
class is to be registered
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None
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None
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Securities
to be registered pursuant to Section 12(g) of the Act:
COMMON
STOCK, Par Value $0.001
(Title
of class)
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large
Accelerated Filer
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[ ]
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Accelerated
Filer
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[ ]
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Non-Accelerated
Filer
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[ ]
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Smaller
reporting company
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[X]
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Emerging
growth company
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[ X ]
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
EXPLANATORY
NOTE
We
are filing this General Form for Registration of Securities on Form 10 to register our common stock, par value $0.001 per share
(the “Common Stock”), pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Once this Registration Statement is deemed effective, we will be subject to the requirements of Regulation 13A under
the Exchange Act, which will require us to file annual reports on Form 10-K; quarterly reports on Form 10-Q; and, current reports
on Form 8-K, and we will be required to comply with all other obligations of the Exchange Act applicable to issuers filing registration
statements pursuant to Section 12(g) of the Exchange Act. Unless otherwise noted, references in this Registration Statement to
the “Registrant”, the “Company”, “LandStar” “we”, “our”, or “us”
means LandStar, Inc.
FORWARD
LOOKING STATEMENTS
There
are statements in this Registration Statement that are not historical facts. These “forward-looking statements” can
be identified by use of terminology such as “believe,” “hope,” “may,” “anticipate,”
“should,” “intend,” “plan,” “will,” “expect,” “estimate,”
“project,” “positioned,” “strategy” and similar expressions. You should be aware that these
forward-looking statements are subject to risks and uncertainties that are beyond our control. For a discussion of these risks,
you should read this entire Registration Statement carefully, especially the risks discussed under the section entitled “Risk
Factors.” Although management believes that the assumptions underlying the forward looking statements included in this Registration
Statement are reasonable, they do not guarantee our future performance, and actual results could differ from those contemplated
by these forward looking statements. The assumptions used for purposes of the forward-looking statements specified in the following
information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative,
industry, and other circumstances. As a result, the identification and interpretation of data and other information and their
use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly,
no opinion is expressed on the achievability of those forward-looking statements. In light of these risks and uncertainties, there
can be no assurance that the results and events contemplated by the forward-looking statements contained in this Registration
Statement will in fact transpire. You are cautioned to not place undue reliance on these forward-looking statements, which speak
only as of their dates. We do not undertake any obligation to update or revise any forward-looking statements.
TRADEMARKS,
SERVICE MARKS AND TRADE NAMES
This
Form 10 contains references to our trademarks, service marks and trade names and to trademarks, service marks and trade names
belonging to other entities. Solely for convenience, trademarks, service marks and trade names referred to in this Form 10, including
logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to
indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
Except as set forth in this Form 10, we do not intend our use or display of other companies’ trade names, service marks
or trademarks or any artists’ or other individuals’ names to imply a relationship with, or endorsement or sponsorship
of us by, any other companies or persons.
TABLE
OF CONTENTS
Business
History
LandStar,
Inc. was incorporated as a Nevada corporation on May 4, 1998, for the purpose of purchasing, developing and reselling real property,
with its principal focus on the development of raw land. From incorporation through December 31, 1998, LandStar had no business
operations and was a development-stage company. LandStar did not purchase or develop any properties and decided to change its
business plan and operations. On March 31, 1999, the Company acquired approximately 98.5% of the common stock of Rebound Rubber
Corp. pursuant to a share exchange agreement with Rebound Rubber Corp. (“
Rebound Rubber
”) and substantially
all of Rebound Rubber’s shareholders. The acquisition was effected by issuing 14,500,100 shares of common stock, which constituted
14.5% of the 100,000,000 authorized shares of LandStar, and 50.6% of the 28,622,100 issued and outstanding shares on completion
of the acquisition. The acquisition was treated for accounting purposes as a continuation of Rebound Rubber under the LandStar
capital structure. If viewed from a non-consolidated perspective, on March 31, 1999 LandStar issued 14,500,100 shares for the
acquisition of the outstanding shares of Rebound Rubber.
The
share exchange with Rebound Rubber (and other transactions occurring in March, 1999) resulted in a change of control of LandStar
and the appointment of new officers and directors of the Company. These transactions also redefined the focus of the Company on
the development and exploitation of the technology to de-vulcanize and reactivate recycled rubber for resale as a raw material
in the production of new rubber products. The Company’s business strategy was to sell the de-vulcanized material (and compounds
using the materials) to manufacturers of rubber products.
Prior
to 2001 the Company had no revenues. In 2001 and 2002 revenues were derived from management services rendered to a rubber recycling
company.
In
August 2001 the Company amended its Articles of Incorporation to authorize 500,000,000 shares of common stock, $0.001 par value;
and, 150,000,000 shares of preferred stock, $0.01 par value. Preferred stock. Preferred shares could be designated into specific
classes and issued by action of the Company’s Board of Directors. In May 2008 the Company’s Board established a class
of Convertible Preferred Series A (the “
Series A
”), authorizing 10,000,000 shares. The Series A provided for,
among other things, (i) each share of Series A was convertible into 1,000 shares of the Company’s common stock; and, (ii)
a holder of Series A was entitled to vote 1,000 shares of common stock for each share of Series A on all matters submitted to
a vote by shareholders.
In
September 2008 the Company amended its Articles to increase the number of authorized shares to 985,000,000, $0.001 par value.
In January 2009 the Company amended its Articles to increase the number of authorized shares to 4,000,000,000, $0.001 par value.
In January 2010 the Company once again amended its Articles to increase the number of authorized shares to 8,888,000,000, $0.001
par value.
The
Company’s last filing of financial information with the SEC was the Form 10-QSB it filed on December 19, 2002 for the quarter
ended 30 September 2002. No other filings were effected with the SEC until the Company filed a Form 15 May 19, 2008, which terminated
the Company’s filing obligations with SEC.
The
Company was effectively dormant for a number of years. In or around February 2014 there was a change in control when Kevin Hayes
acquired 1,000,000 shares of the Series A, and was appointed as the sole director and officer. In or around April 2017 there was
another change in control when Kevin Hayes sold the 1,000,000 shares of Series A to Hybrid Titan Management, which then proceeded
to assign the Series A to William Alessi. Mr. Alessi was then appointed as the sole director and officer of the Company. Mr. Alessi
initiated legal action in his home state of North Carolina to confirm, among other things, his ownership of the Series A; his
“control” over the Company; and, the status of creditors of the Company. In or around June 2017 the court entered
judgment in favor of Mr. Alessi.
In
or around July 2017, while under the majority ownership and management of Mr. Alessi, the Company sought to effect a merger transaction
(the “
Merger
”) under which the Company would be merged into Data443 Risk Mitigation, Inc. (“
Data443
”).
Data443 was formed as a North Carolina corporation in July 2017 under the original name LandStar, Inc. The name of the North Carolina
corporation was changed to Data443 in December 2017. In November 2017 the controlling interest in the Company was acquired by
our current chief executive officer and sole board member, Jason Remillard, when he acquired all of the Series A shares from Mr.
Alessi. In that same transaction Mr. Remillard also acquired all of the shares of Data443 from Mr. Alessi. Mr. Remillard was then
appointed as the sole director and sole officer of the Company, and of Data443. Initially, Mr. Remillard sought to recognize the
Merger initiated by Mr. Alessi and respect the results of the Merger. The Company relied upon documents previously prepared and
proceeded as if the Merger had been effected.
In
January 2018 the Company acquired substantially all of the assets of Myriad Software Productions, LLC, which is owned 100% by
Mr. Remillard. Those assets were comprised of the software program known as ClassiDocs, and all intellectual property and goodwill
associated therewith. This acquisition changed the Company’s status to no longer being a “shell” under applicable
securities rules. In consideration for the acquisition, the Company agreed to a purchase price of $1,500,000 comprised of (i)
$50,000 paid at closing; (ii) $250,000 in the form of our promissory note; and, (iii) $1,200,000 in shares of our common stock,
valued as of the closing, which equated to 1,200,000,000 shares of our common stock. The shares have not yet been issued and are
not included as part of the issued and outstanding shares of the Company. However, these shares have been recorded as “Common
Shares Issuable” within our financial statements for the period ending 30 June 2018.
In
April 2018 the Company amended the designation for its Series A Preferred Stock by providing that a holder of Series A was entitled
to (i) vote 15,000 shares of common stock for each share of Series A on all matters submitted to a vote by shareholders; and,
(ii) convert each share of Series A into 1,000 shares of our common stock.
In
May 2018 the Company amended and restated its Articles of Incorporation. The total authorized number of shares is: 8,888,000,000
shares of common stock, $0.001 par value; and, 50,000,000 shares of preferred stock, $0.001 par value, designated in the discretion
of the Board of Directors. The Series A remains in full force and effect.
In
June 2018, after careful analysis and in reliance upon professional advisors retained by the Company, it was determined that the
Merger had, in fact, not been completed, and that the Merger was not in the best interests of the Company and its shareholders.
As such, the Merger was legally terminated. In place of the Merger, in June 2018 the Company acquired all of the issued and outstanding
shares of stock of Data443 (the “
Share Exchange
”). As a result of the Share Exchange, Data443 became a wholly-owned
subsidiary of the Company, with both the Company and Data443 continuing to exist as corporate entities. The finances and business
conducted by the respective entities prior to the Share Exchange will be treated as related party transactions in anticipation
of the Share Exchange. As consideration in the Share Exchange, we agreed to issue to Mr. Remillard: (a) One hundred million (100,000,000)
shares of our common stock; and (b) On the eighteen (18) month anniversary of the closing of the Share Exchange (the “
Earn
Out Date
”), an additional 100,000,000 shares of our common stock (the “
Earn Out Shares
”) provided
that Data 443 has at least an additional $1MM in revenue by the Earn Out Date (not including revenue directly from acquisitions).
None of our shares of our common stock to be issued to Mr. Remillard under the Share Exchange have been issued. As such, none
of said shares are included as part of the issued and outstanding shares of the Company. However, these shares have been recorded
as “Common Shares Issuable” within our financial statements for the period ending 30 June 2018.
On
or about June 29, 2018 we secured the rights to the WordPress GDPR Framework through our wholly owned subsidiary Data443 for a
total consideration of €40,001, or $46,521, payable in four payments of €10,000, with the first payment due at closing,
and the remaining payments issuable at the end of July, August and September, 2018. Upon issuance of the final payment, we have
the right to enter into an asset transfer agreement for the nominal cost of one euro (€1).
On
or about October 22, 2018 we entered into an asset purchase agreement with Modevity, LLC (“Modevity”) to acquire certain
assets collectively known as ARALOC™, a software-as-a service (“SaaS”) platform that provides cloud-based data
storage, protection, and workflow automation. The acquired assets consist of intellectual and related intangible property
including applications and associated software code, and trademarks. Access to books and records related to the customers
and revenues Modevity created on the ARALOC™ platform were also included in the asset purchase agreement. These assets
were substantially less than the total assets of Modevity, and revenues from the platform comprised a portion of the overall sales
of Modevity. We are required to create the technical capabilities to support the ongoing operation of this SaaS platform. A substantial
effort on the part of the Company is needed to continue generating ARALOC™ revenues through development of a sales force,
as well as billing and collection processes. We paid Modevity (i) $200,000 in cash; (ii) $750,000, in the form of our 10-month
promissory note; and, (iii) 164,533,821 shares of our common stock.
Business
Overview
The
Company is in the data security business, seeking to operate as a cybersecurity software and services provider. As cybersecurity
is a large market place, the Company is focused primarily on the data security sector of the market. Data security and privacy
legislation, such as the European Union’s General Data Protection Regulation (“GDPR”), is driving significant
investment by organizations to offset risks from data breaches and damaging information disclosures of various types. The Company
will seek to provide solutions for the marketplace that are designed to protect data via cloud, hybrid, and on-premise architectures.
Sensitive files and emails; confidential customer, patient, and employee data; financial records; strategic and product plans;
intellectual property; and, all other data requiring security are the focus of the Company’s suite of security products
and protocols, allowing our clients to create, share, and protect their data wherever it is stored.
Data443
delivers its solutions and capabilities via all technical architectures, and in formats designed for each client. Licensing and
subscription models are available to conform to customer purchasing requirements. Our solutions are driven by several proprietary
technologies and methodologies that we have developed and acquired, giving us our primary competitive advantage.
We
intend to sell substantially all of our products and services directly to end-users, though some sales may also be effected through
channel partners, including distributors and resellers which sell to end-user customers. We believe that our sales model, which
combines the leverage of a channel sales model with our highly trained and professional sales force, will play a significant role
in our ability to grow and to successfully deliver our value proposition for data security. While our products serve customers
of all sizes, in all industries and all geographies, the marketing focus and majority of our sales focus is on targeting organizations
with 100 users or more who can make larger purchases with us over time and have a greater potential lifetime value. We also intend
to focus on the European Union as the GDPR has driven increased IT spending as companies seek to securely manage data and comply
with the GDPR. Targeted industries include the financial services, healthcare, public, industrial, insurance, energy and utilities,
consumer and retail, education, media and entertainment and technology sectors.
Size
of Our Market Opportunity
Companies
are expected to spend $124 billion worldwide on information security products and services in 2019, and a large portion of that
spending is to ensure GDPR compliance. As cloud-based services increase in popularity, that market increases to an estimated $300
billion by 2021. The International Data Corporation’s Data Age 2025: The Evolution of Data to Life-Critical study estimates
that the amount of data created in the world will grow to 163 Zettabytes (or 151 trillion gigabytes) in 2025, representing a nearly
tenfold increase from the amount created in 2016. They estimate that nearly 20% of that data will be critical to our daily lives
(and nearly 10% hypercritical). The study also suggests that by 2025, almost 90% of all data will require a meaningful level of
security, but less than half will be secured. Every enterprise and governmental agency will almost certainly require new technologies
to protect and manage data.
We
believe that the functionalities offered by our programs and services position us to benefit from this growing market. Further,
as we continue to grow our business, we believe that we may have opportunities to expand into collateral growing markets, such
IT operations management; storage management; and, data integration.
Our
Products
We
currently have four (4) major product lines, each of which provides features and functionality which enable our clients to fully
secure the value of their data. This architecture easily extends through modular functionalities giving our clients the flexibility
to select the features they require for their business needs and the flexibility to expand their usage simply by adding a license.
ClassiDocs
.
ClassiDocs is our flagship/signature product, launched in the First Quarter of 2018. ClassiDocs is enterprise software that runs
on premises or in the cloud. It provides our customers with data classification, governance, and discovery across local devices,
networks, the cloud, and databases for data that is at rest and in flight. It also allows our customers to respond to 12 of the
GDPR Articles.
WordPress
GDPR Framework
. WordPress GDPR Framework is our data protocol to identify and classify regulated data in the European Union
that falls under the GDPR.
ARALOC
Board Meeting Management Software
. This software product enables secure distribution of board materials to board members using
custom branded and configured applications for iPad, iPhone, Android, PC and Mac.
ARALOC
Sales Content Management Software
. This software product provides marketing and sales teams with a mobile content management
and distribution tool allowing them to increase productivity while engaging their prospects more effectively in order to convert
more leads to customers.
ARALOC
K-12 Education – E-Learning Digital Publishing Platform
. This product is a key technology component in supporting E-Learning,
K-12, and continuing education companies for distributing, protecting and tracking any digital training program initiative.
SPARK
Employee Communications Program
. SPARK enables instant outbound critical messaging to all staff, rapid onboarding of new staff,
mobile training, and secure content sharing across multiple devices.
Key
Benefits of Our Products and Services
Protect
Data Against Data Breaches and Cyber-attacks.
Highly
Scalable and Flexible.
Broad
Range of Functionality.
Satisfy
Regulatory Compliance.
Usable
Across All Major Enterprise Platforms & Systems.
Quick
Implementation.
Easy
to Use.
Our
Growth Strategy
Our
objective is to be a leading provider of data security products and services. The following are key elements of our growth strategy:
Acquisitions
.
We intend to aggressively pursue acquisitions of other cybersecurity software and services providers focused on the data security
sector. Targets are companies with a steady client base, as well as companies with complementary product offerings.
Research
& Development; Innovation
. We intend to increase our spending on research and development in order to drive innovation
to improve existing products and to deliver new products. We will work towards proactively identifying and solving the data security
needs of our clients.
Grow
Our Customer Base.
We believe that the continued rise in enterprise data and increased cybersecurity concerns will increase
demand for our services and products. We intend to capitalize on this demand by targeting new customers.
Expand
Our Sales Force.
Continuing to expand our salesforce will be essential to achieving our customer base expansion goals. At
the appropriate time, we intend to expand our sales capacity by adding headcount throughout our sales and marketing department.
Focus
on EU Opportunities
. We believe there is a significant opportunity for our products and services in the EU, and other international
markets, in order to enable compliance with the GDPR. We believe that a focus on the international market will be a key component
of our growth strategy.
Our
Customers
Our
current customer base is comprised primarily of the (i) customers purchasing AraLoc products; and, (ii) customers purchasing ArcMail
products. Our customers vary greatly in size ranging from small and medium businesses to large enterprises.
Services
Maintenance
and Support
Our
intended customers will typically purchase software maintenance and support as part of their initial purchase of our products.
These maintenance agreements provide customers the right to receive support and unspecified upgrades and enhancements when and
if they become available during the maintenance period and access to our technical support services. We will maintain a customer
support organization that provides all levels of support to our customers.
Professional
Services
While
users can easily download, install and deploy our software on their own, we anticipate that certain enterprises will use our professional
service team to provide fee-based services, which include training our customers in the use of our products, providing advice
on deployment planning, network design, product configuration and implementation, automating and customizing reports and tuning
policies and configuration of our products for the particular characteristics of the customer’s environment.
Sales
and Marketing
Sales
We
intend to sell the majority of our products and services directly to our end users/clients. We will also propose to effect sales
through a network of channel partners, which in turn, sell the products they purchase from us. We have a highly trained professional
sales force that is responsible for overall market development, including the management of the relationships with our channel
partners and supporting channel partners.
Marketing
Our
marketing strategy focuses on building our brand and product awareness, increasing customer adoption and demand, communicating
advantages and business benefits and generating leads for our channel partners and sales force. We will market our products as
a solution for securing and managing file systems and enterprise data and protecting against cyber-attacks. Our internal marketing
organization will be responsible for branding, content generation and product marketing. Our marketing efforts will also include
public relations in multiple regions, analyst relations, customer marketing, and extensive content development available through
our web site and social media outlets.
Seasonality
Our
business is not subject to seasonality.
Research
and Development
While
currently limited, our planned research and development efforts will be focused on improving and enhancing our existing products
and services, as well as developing new products, features and functionality. We plan to regularly release new versions of our
products which incorporate new features and enhancements to existing ones.
Intellectual
Property
We
currently make use of the following trademarks in our business:
ClassiDocs
AraLoc
SPARK
Unlike
copyrights and patents, trademark rights can last indefinitely so long as the owner continues to use the mark to identify its
goods or services. The term of a federal trademark is 10 years, with 10-year renewal terms. The number of years remaining for
the federal trademark on the three trademarks we make use of in our business is as follows:
ClassiDocs:
Nine (9) years
AraLoc:
Five (5) years
SPARK:
Has not applied for federal trademark protection. A trademark doesn’t have to be registered with the USPTO to qualify for
legal protection.
Despite
our efforts to protect our proprietary technologies and intellectual property rights, unauthorized parties may attempt to copy
aspects of our products or obtain and use our trade secrets or other confidential information. We generally enter into confidentiality
agreements with our employees, consultants, service providers, vendors and customers and generally limit internal and external
access to, and distribution of, our proprietary information and proprietary technology through certain procedural safeguards.
These agreements may not effectively prevent unauthorized use or disclosure of our intellectual property or technology and may
not provide an adequate remedy in the event of unauthorized use or disclosure of our intellectual property or technology. We cannot
assure you that the steps taken by us will prevent misappropriation of our trade secrets or technology or infringement of our
intellectual property. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent
as the laws of the United States, and many foreign countries do not enforce these laws as diligently as government agencies and
private parties in the United States.
Competition
The
industry in which the Company competes is highly competitive. Many companies offer similar products and services for data security.
We may be at a substantial disadvantage to our competitors who have more capital than we do to carry out operations and marketing
efforts. We hope to maintain our competitive advantage by offering quality at a competitive price, and by utilizing the experience,
knowledge, and expertise of our management team.
We
will face competition from more established companies that have competitive advantages, such as greater name recognition, larger
sales, marketing, research and acquisition resources, access to larger customer bases and channel partners, a longer operating
history and lower labor and development costs, which may enable them to respond more quickly to new or emerging technologies and
changes in customer requirements or devote greater resources to the development, promotion and sale of their products than we
do. Increased competition could result in us failing to attract customers or maintaining them. It could also lead to price cuts,
alternative pricing structures or the introduction of products available for free or a nominal price, reduced gross margins, longer
sales cycles and loss of market share. If we are unable to compete successfully against current and future competitors, our business
and financial condition may be harmed.
Employees
As
of September 30, 2018, we had 12 employees and independent contractors, of which 3 were considered to be part of our management
team; 1 of those three is our sole director and sole officer, Jason Remillard. We have not experienced any work stoppages, and
we consider our relations with our employees to be good.
Government
regulation
We
are subject to the laws and regulations of the jurisdictions in which we operate, which may include business licensing requirements,
income taxes and payroll taxes. In general, the development and operation of our business is not subject to special regulatory
and/or supervisory requirements.
Going
Concern
We
are dependent upon the receipt of capital investment and other financing to fund our ongoing operations and to execute our business
plan. If continued funding and capital resources are unavailable at reasonable terms, we may not be able to implement our plan
of operations. We may be required to obtain alternative or additional financing, from financial institutions or otherwise, in
order to maintain and expand our existing operations. The failure by us to obtain such financing would have a material adverse
effect upon our business, financial condition and results of operations.
Our
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. Our independent registered public accounting firm has included an explanatory
paragraph in their report in our audited financial statements for the fiscal year ended December 31, 2017 to the effect that our
losses from operations and our negative cash flows from operations raise substantial doubt about our ability to continue as a
going concern. Our financial statements do not include any adjustments that might be necessary should we be unable to continue
as a going concern within one year after the date that the financial statements are issued. We may be required to cease operations
which could result in our stockholders losing all or almost all of their investment.
Investing
in our common stock involves a high degree of risk. You should carefully consider the following risks, together with all of the
other information contained in this Registration Statement, including our consolidated financial statements and related notes,
before making a decision to invest in our common stock. Any of the following risks could have an adverse effect on our business,
operating results, financial condition and prospects, and could cause the trading price of our common stock to decline, which
would cause you to lose all or part of your investment. Our business, operating results, financial condition and prospects could
also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.
We
consider the following to be the material risks for an investor regarding our common stock. Our Company should be viewed as a
high-risk investment and speculative in nature. An investment in our common stock may result in a complete loss of the invested
amount. An investment in our common stock is highly speculative, and should only be made by persons who can afford to lose their
entire investment in us. You should carefully consider the following risk factors and other information in this Registration Statement
before deciding to become a holder of our common stock. If any of the following risks actually occur, our business and financial
results could be negatively affected to a significant extent.
Risks
Relating to Our Company and Our Industry
We
will require additional funds in the future to achieve our current business strategy and our inability to obtain funding will
cause our business to fail.
We
will need to raise additional funds through public or private debt or equity sales in order to fund our future operations and
fulfill contractual obligations in the future. These financings may not be available when needed. Even if these financings are
available, it may be on terms that we deem unacceptable or are materially adverse to your interests with respect to dilution of
book value, dividend preferences, liquidation preferences, or other terms. Our inability to obtain financing would have an adverse
effect on our ability to implement our current business plan and develop our products, and as a result, could require us to diminish
or suspend our operations and possibly cease our existence.
Even
if we are successful in raising capital in the future, we will likely need to raise additional capital to continue and/or expand
our operations. If we do not raise the additional capital, the value of any investment in our Company may become worthless. In
the event we do not raise additional capital from conventional sources, it is likely that we may need to scale back or curtail
implementing our business plan.
Technology
is constantly undergoing significant changes and evolutions and it is imperative that we keep up with an ever changing technological
landscape in order to ensure the continued viability of our products and services.
Our
industry is categorized by rapid technological progression, ever increasing innovation, changes in customer requirements, legal
and regulatory compliance mandates, and frequent new product introductions. As a result, we must continually change and improve
our products in response to such changes, and our products must also successfully interface with products from other vendors,
which are also subject to constant change. While we believe we have the competency to aid our clients in all aspects of data security,
we will need to constantly work on improving our current assets in order to keep up with technological advances that will almost
certainly occur.
We
cannot guarantee that we will be able to anticipate future market needs and opportunities or be able to develop new products or
expand the functionality of our current products in a timely manner or at all. Even if we are able to anticipate, develop and
introduce new products and expand the functionality of our current products, there can be no assurance that enhancements or new
products will achieve widespread market acceptance. Should we fail to do so our business may be adversely affected and in the
worst possible scenario we may have to cease operations altogether if we do not adapt to the constant changes that occur in the
way business is conducted.
We
intend to acquire or invest in companies, which may divert our management’s attention and result in additional dilution
to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits
of such acquisitions.
Our
success will depend, in part, on our ability to expand our solutions and services and grow our business in response to changing
technologies, customer demands and competitive pressures. It is express plan to do so through the acquisition of, or investment
in, new or complementary businesses and technologies rather than through internal development. The identification of suitable
acquisition or investment candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete
identified acquisitions or investments. The risks we face in connection with acquisitions and/or investments include:
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an
acquisition may negatively affect our operating results because it may require us to incur charges or assume substantial debt
or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and
disputes by stockholders and third parties, including intellectual property claims and disputes, or may not generate sufficient
financial return to offset additional costs and expenses related to the acquisition;
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we
may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations
of any company that we acquire;
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an
acquisition or investment may disrupt our ongoing business, divert resources, increase our expenses and distract our management;
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an
acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer
uncertainty about continuity and effectiveness of service from either company;
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we
may encounter difficulties in, or may be unable to, successfully sell any acquired products or effectively integrate them
into or with our existing solutions;
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our
use of cash to pay for acquisitions or investments would limit other potential uses for our cash;
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if
we incur debt to fund any acquisitions or investments, such debt may subject us to material restrictions on our ability to
conduct our business; and
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if
we issue a significant amount of equity securities in connection with future acquisitions, existing stockholders may be diluted
and earnings per share may decrease.
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The
occurrence of any of these risks could adversely affect our business, operating results and financial condition.
We
will face intense competition in our market, especially from larger, well established companies, and we may lack sufficient financial
and other resources to maintain and improve our competitive position.
The
market for data security and data governance solutions is intensely competitive and is characterized by constant change and innovation.
We face competition from both traditional, larger software vendors offering enterprise-wide software frameworks and services,
and smaller companies offering point solutions for specific identity and data governance issues. We also compete with IT equipment
vendors and systems management solution providers whose products and services address identity and data governance requirements.
Our principal competitors vary depending on the product we offer. Many of our existing competitors have, and some of our potential
competitors could have, substantial competitive advantages, such as:
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greater
name recognition and longer operating histories;
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more
comprehensive and varied products and services;
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broader
product offerings and market focus;
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greater
resources to develop technologies or make acquisitions;
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more
expansive intellectual property portfolios;
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broader
distribution and established relationships with distribution partners and customers;
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greater
customer support resources; and
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substantially
greater financial, technical and other resources.
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Given
their larger size, greater resources and existing customer relationships, our competitors may be able to compete and respond more
effectively than we can to new or changing opportunities, technologies, standards or customer requirements. Our competitors may
also seek to extend or supplement their existing offerings to provide data security and data governance solutions that more closely
compete with our offerings. Potential customers may also prefer to purchase, or incrementally add solutions, from their existing
suppliers rather than a new or additional supplier regardless of product performance or features.
In
addition, with the recent increase in large merger and acquisition transactions in the technology industry, particularly transactions
involving cloud-based technologies, there is a greater likelihood that we will compete with other large technology companies in
the future. Some of our competitors have made acquisitions or entered into strategic relationships to offer a more comprehensive
product than they individually had offered. Companies and alliances resulting from these possible consolidations and partnerships
may create more compelling product offerings and be able to offer more attractive pricing, making it more difficult for us to
compete effectively. In addition, continued industry consolidation may adversely impact customers’ perceptions of the viability
of small and medium-sized technology companies and consequently their willingness to purchase from those companies. Conditions
in our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors
or continuing market consolidation. These competitive pressures in our market or our failure to compete effectively may result
in price reductions, fewer orders, reduced revenue and gross margins, increased net losses, and loss of market share. Any failure
to meet and address these factors could adversely affect our business, financial condition and operating results.
We
are dependent on the continued services and performance of our founder, Jason Remillard, the loss of whom could adversely affect
our business.
Our
future performance depends in large part on the continued services and continuing contributions of our founder, Chief Executive
Officer, and sole Director, Jason Remillard, to successfully manage our company, to execute on our business plan, and to identify
and pursue new opportunities and product innovations. The loss of services of Mr. Remillard could significantly delay or prevent
the achievement of our development and strategic objectives and adversely affect our business.
Our
Officer and Directors lack experience in and with the reporting and disclosure obligations of publicly-traded companies.
Our
CEO, CFO, and sole director, Jason Remillard, lacks experience in and with the reporting and disclosure obligations of publicly-traded
companies and with serving as an Officer and Director of a publicly-traded company. Such lack of experience may impair our ability
to maintain effective internal controls over financial reporting and disclosure controls and procedures, which may result in material
misstatements to our financial statements and an inability to provide accurate financial information to our stockholders. Consequently,
our operations, future earnings and ultimate financial success could suffer irreparable harm due to Mr. Remillard’s lack
of experience with publicly-traded companies and their reporting requirements in general.
A
failure to hire and integrate additional sales and marketing personnel or maintain their productivity could adversely affect our
results of operations and growth prospects.
Our
business requires intensive sales and marketing activities. Our sales and marketing personnel are essential to attracting new
customers and expanding sales to the customers we recently acquired through acquisitions; this is key to our future growth. We
face a number of challenges in successfully expanding our sales force. We must locate and hire a significant number of qualified
individuals, and competition for such individuals is intense. We may be unable to achieve our hiring or integration goals due
to a number of factors, including, but not limited to, the number of individuals we hire; challenges in finding individuals with
the correct background due to increased competition for such hires; and, increased attrition rates among new hires and existing
personnel. Furthermore, based on our past experience, it often can take up to 12 months before a new sales force member is trained
and operating at a level that meets our expectations. We plan to invest significant time and resources in training new members
of our sales force, and we may be unable to achieve our target performance levels with new sales personnel as rapidly as we have
done in the past due to larger numbers of hires or lack of experience training sales personnel to operate in new jurisdictions.
Our failure to hire a sufficient number of qualified individuals, to integrate new sales force members within the time periods
we have achieved historically or to keep our attrition rates at levels comparable to others in our industry may materially impact
our projected growth rate.
If
we are unable to attract new customers and expand sales to existing customers, both domestically and internationally, our growth
could be slower than we expect, and our business may be harmed.
Our
future growth depends in part upon increasing our customer base. Our ability to achieve significant growth in revenues in the
future will depend, in large part, upon the effectiveness of our sales and marketing efforts, both domestically and internationally,
and our ability to attract new customers. If we fail to attract new customers and maintain and expand those customer relationships,
our revenues will grow more slowly than expected, and our business will be harmed.
Our
future growth also depends upon expanding sales of our products to existing customers and their organizations. If our customers
do not purchase additional licenses or capabilities, our revenues may grow more slowly than expected, may not grow at all, or
may decline. There can be no assurance that our efforts would result in increased sales to existing customers and additional revenues.
If our efforts are not successful, our business would suffer.
If
we are unable to maintain successful relationships with our channel partners, our business could be adversely affected.
We
intend to rely on channel partners, such as distribution partners and resellers, to sell licenses and support and maintenance
agreements. Our ability to achieve revenue growth in the future may depend in part on our success in maintaining successful relationships
with our channel partners. Agreements with channel partners tend to be non-exclusive, meaning our channel partners may offer customers
the products of several different companies. If our channel partners do not effectively market and sell our products and services,
choose to use greater efforts to market and sell their own products or those of others, or fail to meet the needs of our customers,
our ability to grow our business may be adversely affected. Further, agreements with channel partners generally allow them to
terminate their agreements for any reason upon 30 days’ notice. A termination of the agreement has no effect on orders already
placed. The loss of a substantial number of our channel partners, our possible inability to replace them, or the failure to recruit
additional channel partners could materially and adversely affect our results of operations. If we are unable to maintain our
relationships with these channel partners, our business, results of operations, financial condition or cash flows could be adversely
affected.
Breaches
in our security, cyber-attacks or other cyber-risks could expose us to significant liability and cause our business and reputation
to suffer.
Our
operations involve transmission and processing of our customers’ confidential, proprietary and sensitive information. We
have legal and contractual obligations to protect the confidentiality and appropriate use of customer data. Despite our security
measures, our information technology and infrastructure may be vulnerable to attacks as a result of third party action, employee
error or misconduct. Security risks, including, but not limited to, unauthorized use or disclosure of customer data, theft of
proprietary information, loss or corruption of customer data and computer hacking attacks or other cyber-attacks, could expose
us to substantial litigation expenses and damages, indemnity and other contractual obligations, government fines and penalties,
mitigation expenses and other liabilities. We are continuously working to improve our information technology systems, together
with creating security boundaries around our critical and sensitive assets. We provide advance security awareness training to
our employees and contractors that focuses on various aspects of the cyber security world. All of these steps are taken in order
to mitigate the risk of attack and to ensure our readiness to responsibly handle any security violation or attack. However, because
techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until
successfully launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative
measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security
measures and our products could be harmed, we could lose potential sales and existing customers, our ability to operate our business
could be impaired, and we may incur significant liabilities.
Failure
to protect our proprietary technology and intellectual property rights could substantially harm our business.
The
success of our business depends on our ability to obtain, protect, and enforce our trade secrets, trademarks, copyrights, patents
and other intellectual property rights. We attempt to protect our intellectual property under patent, trademark, copyrights and
trade secret laws, and through a combination of confidentiality procedures, contractual provisions and other methods, all of which
offer only limited protection. The process of obtaining patent protection is expensive and time-consuming, and we may choose not
to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions. In
addition, issuance of a patent does not guarantee that we have an absolute right to practice the patented invention.
Our
policy is to require our employees (and our consultants and service providers that develop intellectual property included in our
products) to execute written agreements in which they assign to us their rights in potential inventions and other intellectual
property created within the scope of their employment (or, with respect to consultants and service providers, their engagement
to develop such intellectual property), but we cannot assure you that we have adequately protected our rights in every such agreement
or that we have executed an agreement with every such party. Finally, in order to benefit from intellectual property protection,
we must monitor, detect, and pursue infringement claims in certain circumstances in relevant jurisdictions, all of which is costly
and time-consuming. As a result, we may not be able to obtain adequate protection of our intellectual property.
The
data security, cyber-security, data retention, and data governance industries are characterized by the existence of a large number
of relevant patents and frequent claims and related litigation regarding patent and other intellectual property rights. From time-to-time,
third parties have asserted and may assert their patent, copyright, trademark and other intellectual property rights against us,
our channel partners, or our customers. Successful claims of infringement or misappropriation by a third party could prevent us
from distributing certain products or performing certain services or could require us to pay substantial damages (including, for
example, treble damages if we are found to have willfully infringed patents and increased statutory damages if we are found to
have willfully infringed copyrights), royalties or other fees. Such claims also could require us to cease making, licensing or
using solutions that are alleged to infringe or misappropriate the intellectual property of others or to expend additional development
resources to attempt to redesign our products or services or otherwise to develop non-infringing technology. Even if third parties
may offer a license to their technology, the terms of any offered license may not be acceptable, and the failure to obtain a license
or the costs associated with any license could cause our business, results of operations or financial condition to be materially
and adversely affected. In some cases, we indemnify our channel partners and customers against claims that our products infringe
the intellectual property of third parties. Defending against claims of infringement or being deemed to be infringing the intellectual
property rights of others could impair our ability to innovate, develop, distribute and sell our current and planned products
and services. If we are unable to protect our intellectual property rights and ensure that we are not violating the intellectual
property rights of others, we may find ourselves at a competitive disadvantage to others who need not incur the additional expense,
time and effort required to create the innovative products that have enabled us to be successful to date.
Real
or perceived errors, failures or bugs in our technology could adversely affect our growth prospects.
Because
we use complex technology, undetected errors, failures, or bugs may occur. Our technology is often installed and used in a variety
of computing environments with different operating system management software, and equipment and networking configurations, which
may cause errors or failures of our technology or other aspects of the computing environment into which it is deployed. In addition,
deployment of our technology into computing environments may expose undetected errors, compatibility issues, failures, or bugs
in our technology. Despite testing by us, errors, failures, or bugs may not be found it is released to our customers. Moreover,
our customers could incorrectly implement or inadvertently misuse our technology, which could result in customer dissatisfaction
and adversely impact the perceived utility of our products. Any of these real or perceived errors, compatibility issues, failures,
or bugs could result in negative publicity, reputational harm, loss of or delay in market acceptance, loss of competitive position,
or claims by customers for losses sustained by them. In such an event, we may be required, or may choose, for customer relations
or other reasons, to expend additional resources in order to help correct the problem.
We
are subject to federal, state and industry privacy and data security regulations, which could result in additional costs and liabilities
to us or inhibit sales of our software.
The
regulatory framework for privacy issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.
Many federal, state and foreign government bodies and agencies have adopted or are considering adopting laws and regulations.
In addition, privacy advocates and industry groups may propose new and different self-regulatory standards that either legally
or contractually apply to us. Because the interpretation and application of privacy and data protection laws are still uncertain,
it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data security
practices. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change
our business activities and practices or modify our technology, which could have an adverse effect on our business. Any inability
to adequately address privacy concerns, even if unfounded, or comply with applicable privacy or data protection laws, regulations
and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our
business.
Because
our long-term success depends, in part, on our ability to expand the sales and marketing of our technology and solutions to customers
located outside of the United States, our business will be susceptible to risks associated with international operations.
We
intend to expand our international sales and marketing operations. Conducting international operations subjects us to risks that
we do not generally face in the United States. These risks include:
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political
instability, war, armed conflict or terrorist activities;
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challenges
developing, marketing, selling and implementing our technology and solutions caused by language, cultural, and ethical differences
and the competitive environment;
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heightened
risks of unethical, unfair or corrupt business practices, actual or claimed, in certain geographies and of improper or fraudulent
sales arrangements that may impact financial results and result in restatements of, and irregularities in, financial statements;
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competition
from bigger and stronger companies in the new markets;
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laws
imposing heightened restrictions on data usage and increased penalties for failure to comply with applicable laws, particularly
in the EU;
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currency
fluctuations;
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management
communication and integration problems resulting from cultural differences and geographic dispersion;
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potentially
adverse tax consequences, including multiple and possibly overlapping tax structures, the complexities of foreign value added
tax systems, restrictions on the repatriation of earnings and changes in tax rates;
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uncertainty
around how the United Kingdom’s decision to exit the EU will impact its access to the European Union Single Market,
the related regulatory environment, the global economy, and the resulting impact on our business; and
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lack
of familiarity with local laws, customs and practices, and laws and business practices favoring local competitors or commercial
parties.
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The
occurrence of any one of these risks could harm our international business and, consequently, our operating results. Additionally,
operating in international markets requires significant management attention and financial resources. We cannot be certain that
the investment and additional resources required to operate in other countries will produce desired levels of revenue or net income.
The
adoption of the recent tax reform and the enactment of additional legislation changing the United States taxation of international
business activities could materially impact our financial position and results of operations.
On
December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “
TCJA
”), which significantly
reformed the Internal Revenue Code. The TCJA, among other things, included changes to U.S. federal tax rates, imposes significant
additional limitations on the deductibility of interest, restricts the use of net operating loss carry-forwards arising after
December 31, 2017, allows for the expensing of capital expenditures, and puts into effect the migration from a “worldwide”
system of taxation to a territorial system. We continue to examine the impact this tax reform legislation may have on our business.
Due to the proposed expansion of our international business activities, any changes in the U.S. taxation of such activities may
increase our worldwide effective tax rate and adversely affect our financial position and results of operations. Further, foreign
governments may enact tax laws in response to the TCJA that could result in further changes to global taxation and materially
affect our financial position and results of operations. The impact of the TCJA on holders of our securities is uncertain. We
urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences.
Changes
in financial accounting standards may cause adverse and unexpected revenue fluctuations and impact our reported results of operations.
A
change in accounting standards or practices could harm our operating results and may even affect our reporting of transactions
completed before the change is effective. New accounting pronouncements have occurred and may occur in the future. Changes to
existing rules or the questioning of current practices may harm our operating results or the way we conduct our business. Additionally,
the adoption of new or revised accounting principles may require that we make significant changes to our systems process and controls.
Our
business is subject to the risks of fire, power outages, floods, earthquakes and other catastrophic events, and to interruption
by manmade problems such as terrorism.
A
significant natural disaster, such as a fire, flood or an earthquake, or a significant power outage could have a material adverse
impact on our business, results of operations and financial condition. In the event our customers’ information technology
systems or our channel partners’ selling or distribution abilities are hindered by any of these events, we may miss financial
targets, such as revenues and sales targets, for a particular quarter. Further, if a natural disaster occurs in a region from
which we derive a significant portion of our revenue, customers in that region may delay or forego purchases of our products,
which may materially and adversely impact our results of operations for a particular period. In addition, acts of terrorism could
cause disruptions in our business or the business of channel partners, customers or the economy as a whole. All of the aforementioned
risks may be exacerbated if the disaster recovery plans for us and our channel partners prove to be inadequate. To the extent
that any of the above results in delays or cancellations of customer orders, or the delay in the manufacture, deployment or shipment
of our products, our business, financial condition and results of operations would be adversely affected.
We
anticipate that our operations will continue to increase in complexity as we grow, which will add additional challenges to the
management of our business in the future.
We
expect that our business will grow as we execute on our business, and that as we grow our operations will increase in complex.
To effectively manage this growth, we have made and continue to make substantial investments to improve our operational, financial
and management controls as well as our reporting systems and procedures. Further, as our customer base grows we will need to expand
our professional services and other personnel. We also will need to effectively manage our direct and indirect sales processes
as the number and type of our sales personnel and channel partners grows and becomes more complex, and as we expand into foreign
markets. If we are unable to effectively manage the increasing complexity of our business and operations, the quality of our technology
and customer service could suffer, and we may not be able to adequately address competitive challenges. These factors could all
negatively impact our business, operations, operating results, and financial condition.
We
expect our quarterly financial results to fluctuate.
We
expect our net sales and operating results to vary significantly from quarter to quarter due to a number of factors, including
changes in:
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Demand
for data security;
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Our
ability to retain existing customers or encourage repeat purchases;
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Advertising
and other marketing costs; and
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General
economic conditions
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The
variability and unpredictability of these and other factors, many of which are outside of our control, could result in our failing
to meet or exceed financial expectations for a given period. If our operating results in future quarters fall below the expectations
of investors or any securities analysts that cover our stock, the price of our common stock could decline substantially.
The
recently enacted JOBS Act will allow the Company to postpone the date by which it must comply with certain laws and regulations
intended to protect investors and to reduce the amount of information provided in reports filed with the SEC.
The
recently enacted JOBS Act is intended to reduce the regulatory burden on “emerging growth companies”. The Company
meets the definition of an “emerging growth company” and so long as it qualifies as an “emerging growth company,”
it will be, among other things:
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exempt
from the provisions of Section 404(b) of the Sarbanes-Oxley Act, which requires that its independent registered public accounting
firm provide an attestation report on the effectiveness of its internal control over financial reporting;
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exempt
from the “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain
executive officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to
approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business
combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and certain
disclosure requirements of the Dodd-Frank Act relating to compensation of Chief Executive Officers;
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permitted
to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Exchange Act and
instead provide a reduced level of disclosure concerning executive compensation; and
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exempt
from any rules that may be adopted by the Public Company Accounting Oversight Board (the “PCAOB”) requiring mandatory
audit firm rotation or a supplement to the auditor’s report on the financial statements.
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Although
the Company is still evaluating the JOBS Act, it currently intends to take advantage of all of the reduced regulatory and reporting
requirements that will be available to it so long as it qualifies as an “emerging growth company”. The Company has
elected not to opt out of the extension of time to comply with new or revised financial accounting standards available under Section
102(b)(1) of the JOBS Act. Among other things, this means that the Company’s independent registered public accounting firm
will not be required to provide an attestation report on the effectiveness of the Company’s internal control over financial
reporting so long as it qualifies as an “emerging growth company”, which may increase the risk that weaknesses or
deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an “emerging
growth company”, the Company may elect not to provide certain information, including certain financial information and certain
information regarding compensation of executive officers, which would otherwise have been required to provide in filings with
the SEC, which may make it more difficult for investors and securities analysts to evaluate the Company. We will remain an “emerging
growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we
issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is
held by non-affiliates exceeds $700 million. As a result, investor confidence in the Company and the market price of its common
stock may be adversely affected.
Notwithstanding
the above, we are also currently a “smaller reporting company”, meaning that we are not an investment company, an
asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public
float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In
the event that we are still considered a “smaller reporting company”, at such time are we cease being an “emerging
growth company”, the disclosure we will be required to provide in our SEC filings will increase, but will still be less
than it would be if we were not considered either an “emerging growth company” or a “smaller reporting company”.
Specifically, similar to “emerging growth companies”, “smaller reporting companies” are able to provide
simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley
Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal
control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among
other things, being required to provide only two years of audited financial statements in annual reports. Decreased disclosures
in our SEC filings due to our status as an “emerging growth company” or “smaller reporting company” may
make it harder for investors to analyze the Company’s results of operations and financial prospects.
Adverse
economic conditions may negatively impact our business.
Our
business depends on the overall demand for information technology and on the economic health of our current and prospective customers.
Any significant weakening of the economy in the United States or Europe and of the global economy, more limited availability of
credit, a reduction in business confidence and activity, decreased government spending, economic uncertainty and other difficulties
may affect one or more of the sectors or countries in which we sell our solutions. Global economic and political uncertainty may
cause some of our customers or potential customers to curtail spending generally or IT and data security spending specifically,
and may ultimately result in new regulatory and cost challenges to our operations. In addition, a strong dollar could reduce demand
for our products in countries with relatively weaker currencies. These adverse conditions could result in reductions in sales
of our solutions, longer sales cycles, slower adoption of new technologies and increased price competition. Any of these events
could have an adverse effect on our business, operating results and financial position.
We
cannot predict every event and circumstance that may impact our business and, therefore, the risks discussed herein may not be
the only ones you should consider.
As
we continue to grow our business, we may encounter other risks of which we are not aware as of the date of this Registration Statement.
These additional risks may cause serious damage to our business in the future, the impact of which we cannot estimate at this
time.
Risks
Relating to Our Common Stock
Our
common stock is currently quoted on the OTC Pink under the trading symbol “LDSR”. However, trading in stocks quoted
on the OTC Pink is often thin. Therefore, you may be unable to liquidate your investment in our stock.
Trading
in stocks quoted on the OTC Pink is often thin and is characterized by wide fluctuations in trading prices due to many factors
that may have little to do with a company’s operations or business prospects. We cannot assure you that there will be a
market for our common stock in the future. We do not have intention to apply for quotation on the OTCQB at this moment, but we
could apply for OTCQB in the near future.
We
have had a history of losses and may incur future losses, which may prevent us from attaining profitability.
We
have had a history of operating losses since our inception and, as of 30 September 2018, we had an accumulated deficit of $13,368,350.
We may incur operating losses in the future, and these losses could be substantial and impact our ability to attain profitability.
We do not expect to significantly increase expenditures for product development, general and administrative expenses, and sales
and marketing expenses; however, if we cannot increase revenue growth, we will not achieve or sustain profitability or positive
operating cash flows. Even if we achieve profitability and positive operating cash flows, we may not be able to sustain or increase
profitability or positive operating cash flows on a quarterly or annual basis.
There
is substantial doubt about our ability to continue as a going concern.
We
have not generated any profit from combined operations since our inception. We expect that our operating expenses will increase
over the next twelve months to continue our business development activities. Based on our average monthly expenses and current
burn rate, we estimate that our cash on hand as of 30 September 2018 will not sufficiently support our operation for the next
twelve months.
Our
independent registered public accounting firm has included an explanatory paragraph in their report in our audited financial statements
for the fiscal year ended December 31, 2017 to the effect that our losses from operations and our negative cash flows from operations
raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments
that might be necessary should we be unable to continue as a going concern within one year after the date that the financial statements
are issued. We may be required to cease operations which could result in our stockholders losing all or almost all of their investment.
Because
we will become a reporting company under the Exchange Act by means other than a traditional underwritten initial public offering,
we may not be able to attract the attention of research analysts at major brokerage firms.
Because
we will not become a reporting company by conducting an underwritten initial public offering, or IPO, of our common stock, and
because we will not be listed on a national securities exchange, security analysts of brokerage firms may not provide coverage
of our company. In addition, investment banks may be less likely to agree to underwrite secondary offerings on our behalf than
they might if we were to become a public reporting company by means of an IPO because they may be less familiar with our company
as a result of more limited coverage by analysts and the media, and because we became public at an early stage in our development.
Our
common stock is subject to the SEC’s penny stock rules, which may make it difficult for broker-dealers to complete customer
transactions and could adversely affect trading activity in our securities.
The
SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price
of less than $5.00 per share, subject to specific exemptions. The market price of our common stock may be less than $5.00 per
share for some period of time and therefore would be a “penny stock” according to SEC rules, unless we are listed
on a national securities exchange. Under these rules, broker-dealers who recommend such securities to persons other than institutional
accredited investors must:
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make
a special written suitability determination for the purchaser;
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receive
the purchaser’s prior written agreement to the transaction;
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provide
the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks”
and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies; and
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obtain
a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk
disclosure document before a transaction in a “penny stock” can be completed.
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If
required to comply with these rules, broker-dealers may find it difficult to effectuate customer transactions and trading activity
in our securities may be adversely affected.
The
market price of our common stock may be volatile and may fluctuate in a way that is disproportionate to our operating performance.
Our
stock price may experience substantial volatility as a result of a number of factors, including:
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sales
or potential sales of substantial amounts of our common stock;
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the
success of competitive products or technologies;
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announcements
about us or about our competitors, including new product introductions and commercial results;
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the
recruitment or departure of key personnel;
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litigation
and other developments;
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actual
or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
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variations
in our financial results or those of companies that are perceived to be similar to us; and
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general
economic, industry and market conditions.
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Many
of these factors are beyond our control. The stock markets in general, and the market for Pink Sheet companies in particular,
have historically experienced extreme price and volume fluctuations. These fluctuations often have been unrelated or disproportionate
to the operating performance of these companies. Broad market and industry factors could reduce the market price of our common
stock, regardless of our actual operating performance.
We
currently have outstanding shares of preferred stock that have special rights that could limit our ability to undertake corporate
transactions, inhibit potential changes of control and reduce the proceeds available to our common stockholders in the event of
a change in control.
We
currently have outstanding two classes of stock, common stock and preferred stock, and there is one series of preferred stock,
Series A Preferred Stock. The holders of Series A Preferred Stock are entitled to vote on all matters submitted to holders of
common stock at a conversion ratio of 15,000 votes for each share of Series A Preferred Stock.
As
a result of the rights our preferred stockholders have, we may not be able to undertake certain corporate transactions, including
equity or debt offerings necessary to raise sufficient capital to run our business, change of control transactions or other transactions
that may otherwise be beneficial to our businesses. These provisions may discourage, delay or prevent a merger, acquisition or
other change in control of us that stockholders may consider favorable, including transactions in which our common stockholders
might otherwise receive a premium price for their shares. The market price of our common stock could be adversely affected by
the rights of our preferred stockholders.
We
have never paid and do not intend to pay cash dividends.
We
have never paid cash dividends on any of our capital stock and we currently intend to retain future earnings, if any, to fund
the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be our common
stockholders’ sole source of gain for the foreseeable future. Under the terms of our existing Articles of Incorporation,
we cannot declare, pay or set aside any dividends on shares of any class or series of our capital stock, other than dividends
on shares of common stock payable in shares of common stock, unless we pay dividends to the holders of our preferred stock. Additionally,
without special stockholder and board approvals, we cannot currently pay or declare dividends and will be limited in our ability
to do so until such time, if ever, that we are listed on a stock exchange.
Our
sole director and sole officer has the ability to control all matters submitted to stockholders for approval.
Our
sole director and sole officer, Jason Remillard, holds 1,000,000 shares of our Series A Preferred Stock (each share votes as the
equivalent of 15,000 shares of common stock on all matters submitted for a vote by the common stockholders), and as such, Mr.
Remillard would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs.
For example, Mr. Remillard would control the election of directors and approval of any merger, consolidation or sale of all or
substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms
that other stockholders may desire.
Provisions
in our Articles of Incorporation and Bylaws and under Nevada law could make an acquisition of us, which may be beneficial to our
stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions
in our Articles of Incorporation and Bylaws, respectively, may discourage, delay or prevent a merger, acquisition or other change
in control of us that stockholders may consider favorable, including transactions in which our common stockholders might otherwise
receive a premium price for their shares. These provisions could also limit the price that investors might be willing to pay in
the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board
of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts
by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members
of our board of directors.
We
will incur increased costs as a result of operating as a public reporting company, and our management will be required to devote
substantial time to new compliance initiatives.
As
a public reporting company, we will incur significant legal, accounting and other expenses that we did not incur as a private
company. In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the SEC, have imposed various requirements
on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance
practices. Complying with these laws and regulations requires the time and attention of our Board of Directors and management,
and increases our expenses. After we file this Registration Statement with the SEC we will become fully subject to the information
and reporting requirements of the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and other federal securities laws, rules and regulations related thereto, including compliance with the Sarbanes-Oxley Act. We
estimate that we will incur approximately $150,000 to $200,000 in 2019 to comply with public company compliance requirements with
many of those costs recurring annually thereafter.
Among
other things, we will be required to:
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maintain
and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404 of
the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;
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maintain
policies relating to disclosure controls and procedures;
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prepare
and distribute periodic reports in compliance with our obligations under federal securities laws;
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institute
a more comprehensive compliance function, including corporate governance; and
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involve,
to a greater degree, our outside legal counsel and accountants in the above activities.
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The
costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing
audited reports to stockholders are expensive and much greater than that of a privately-held company, and compliance with these
rules and regulations may require us to hire additional financial reporting, internal controls and other finance personnel, and
will involve a material increase in regulatory, legal and accounting expenses and the attention of management. There can be no
assurance that we will be able to comply with the applicable regulations in a timely manner, if at all. In addition, being a public
company makes it more expensive for us to obtain director and officer liability insurance. In the future, we may be required to
accept reduced coverage or incur substantially higher costs to obtain this coverage.
We
may be exposed to potential risks resulting from requirements under Section 404 of the Sarbanes-Oxley Act of 2002.
As
a reporting company we are required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, to include in our annual report
our assessment of the effectiveness of our internal control over financial reporting. We do not have a sufficient number of employees
to segregate responsibilities and may be unable to afford increasing our staff or engaging outside consultants or professionals
to overcome our lack of employees.
We
do not currently have independent audit or compensation committees. As a result, our sole director has the ability, among other
things, to determine his own level of compensation. Until we comply with such corporate governance measures, regardless of whether
such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections
against interested director transactions, conflicts of interest and similar matters and investors may be reluctant to provide
us with funds necessary to expand our operations.
We
currently have outstanding, and we may in the future issue, instruments which are convertible into shares of common stock, which
will result in additional dilution to you.
We
currently have outstanding instruments which are convertible into shares of common stock, and we may need to issue similar instruments
in the future. In the event that these convertible instruments are converted into shares of common stock outstanding stock, or
that we make additional issuances of other convertible or exchangeable securities, you could experience additional dilution. Furthermore,
we cannot assure you that we will be able to issue shares or other securities in any other offering at a price per share that
is equal to or greater than the price per share paid by investors or the then current market price.
We
may, in the future, issue additional shares of our common stock, which may have a dilutive effect on our current stockholders.
Our
Articles of Incorporation authorizes the issuance of 8,888,000,000 shares of common stock, of which 4,847,676,982 shares were
issued and outstanding as of 31 October 2018. The future issuance of our common shares may result in substantial dilution in the
percentage of our common shares held by our then existing stockholders. We may value any common stock issued in the future on
an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect
of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common
stock.
State
Securities Laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell shares.
Secondary
trading in our common stock may not be possible in any state until the common stock is qualified for sale under the applicable
securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals,
is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the
secondary trading of, the common stock in any particular state, the common stock cannot be offered or sold to, or purchased by,
a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock,
the liquidity for the common stock could be significantly impacted.
An
investment in our common stock is speculative and there can be no assurance of any return on any such investment.
An
investment in our common stock is speculative and there is no assurance that investors will obtain any return on their investment.
Investors will be subject to substantial risks involved in an investment in our Company, including the risk of losing their entire
investment.
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ITEM
2.
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FINANCIAL
INFORMATION
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The
discussion of our financial condition and operating results should be read together with our accompanying audited consolidated
financial statements included in this Registration Statement.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
Forward
Looking Statements
You
should read the following discussion of our financial condition and results of operations together with our audited consolidated
financial statements and notes to such financial statements included elsewhere in this Form 10.
The
following discussion contains forward-looking statements that involve risks and uncertainties regarding, among other things, (a)
our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future
financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the
words “may,” “will,” “should,” “anticipate,” “estimate,” “plan,”
“potential,” “project,” “continuing,” “ongoing,” “expects,” “management
believes,” “we believe,” “we intend,” or the negative of these words or other variations on these
words or comparable terminology. In light of these risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.
The
forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and
projections about our industry, business and future financial results. The forward-looking statements speak only as of the date
on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any
forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the
occurrence of unanticipated events. Our actual results could differ materially from the results contemplated by these forward-looking
statements due to a number of factors, including those discussed under “Item 1A. Risk Factors” and other sections
in this Form 10.
Overview
LandStar,
Inc. was incorporated as a Nevada corporation on May 4, 1998, for the purpose of purchasing, developing and reselling real property,
with its principal focus on the development of raw land. From incorporation through December 31, 1998, LandStar had no business
operations and was a development-stage company. LandStar did not purchase or develop any properties and decided to change its
business plan and operations. On March 31, 1999, the Company acquired approximately 98.5% of the common stock of Rebound Rubber
Corp. pursuant to a share exchange agreement with Rebound Rubber Corp. (“
Rebound Rubber
”) and substantially
all of Rebound Rubber’s shareholders. The acquisition was effected by issuing 14,500,100 shares of common stock, which constituted
14.5% of the 100,000,000 authorized shares of LandStar, and 50.6% of the 28,622,100 issued and outstanding shares on completion
of the acquisition. The acquisition was treated for accounting purposes as a continuation of Rebound Rubber under the LandStar
capital structure. If viewed from a non-consolidated perspective, on March 31, 1999 LandStar issued 14,500,100 shares for the
acquisition of the outstanding shares of Rebound Rubber.
The
share exchange with Rebound Rubber (and other transactions occurring in March, 1999) resulted in a change of control of LandStar
and the appointment of new officers and directors of the Company. These transactions also redefined the focus of the Company on
the development and exploitation of the technology to de-vulcanize and reactivate recycled rubber for resale as a raw material
in the production of new rubber products. The Company’s business strategy was to sell the de-vulcanized material (and compounds
using the materials) to manufacturers of rubber products.
Prior
to 2001 the Company had no revenues. In 2001 and 2002 revenues were derived from management services rendered to a rubber recycling
company.
In
August 2001 the Company amended its Articles of Incorporation to authorize 500,000,000 shares of common stock, $0.001 par value;
and, 150,000,000 shares of preferred stock, $0.01 par value. Preferred stock. Preferred shares could be designated into specific
classes and issued by action of the Company’s Board of Directors. In May 2008 the Company’s Board established a class
of Convertible Preferred Series A (the “
Series A
”), authorizing 10,000,000 shares. The Series A provided for,
among other things, (i) each share of Series A was convertible into 1,000 shares of the Company’s common stock; and, (ii)
a holder of Series A was entitled to vote 1,000 shares of common stock for each share of Series A on all matters submitted to
a vote by shareholders.
In
September 2008 the Company amended its Articles to increase the number of authorized shares to 985,000,000, $0.001 par value.
In January 2009 the Company amended its Articles to increase the number of authorized shares to 4,000,000,000, $0.001 par value.
In January 2010 the Company once again amended its Articles to increase the number of authorized shares to 8,888,000,000, $0.001
par value.
The
Company’s last filing of financial information with the SEC was the Form 10-QSB it filed on December 19, 2002 for the quarter
ended 30 September 2002. No other filings were effected with the SEC until the Company filed a Form 15 May 19, 2008, which terminated
the Company’s filing obligations with SEC.
The
Company was effectively dormant for a number of years. In or around February 2014 there was a change in control when Kevin Hayes
acquired 1,000,000 shares of the Series A, and was appointed as the sole director and officer. In or around April 2017 there was
another change in control when Kevin Hayes sold the 1,000,000 shares of Series A to Hybrid Titan Management, which then proceeded
to assign the Series A to William Alessi. Mr. Alessi was then appointed as the sole director and officer of the Company. Mr. Alessi
initiated legal action in his home state of North Carolina to confirm, among other things, his ownership of the Series A; his
“control” over the Company; and, the status of creditors of the Company. In or around June 2017 the court entered
judgment in favor of Mr. Alessi.
In
or around July 2017, while under the majority ownership and management of Mr. Alessi, the Company sought to effect a merger transaction
(the “
Merger
”) under which the Company would be merged into Data443 Risk Mitigation, Inc. (“
Data443
”).
Data443 was formed as a North Carolina corporation in July 2017 under the original name LandStar, Inc. The name of the North Carolina
corporation was changed to Data443 in December 2017. In November 2017 the controlling interest in the Company was acquired by
our current chief executive officer and sole board member, Jason Remillard, when he acquired all of the Series A shares from Mr.
Alessi. In that same transaction Mr. Remillard also acquired all of the shares of Data443 from Mr. Alessi. Mr. Remillard was then
appointed as the sole director and sole officer of the Company, and of Data443. Initially, Mr. Remillard sought to recognize the
Merger initiated by Mr. Alessi and respect the results of the Merger. The Company relied upon documents previously prepared and
proceeded as if the Merger had been effected.
In
January 2018 the Company acquired substantially all of the assets of Myriad Software Productions, LLC, which is owned 100% by
Mr. Remillard. Those assets were comprised of the software program known as ClassiDocs, and all intellectual property and goodwill
associated therewith. This acquisition changed the Company’s status to no longer being a “shell” under applicable
securities rules. In consideration for the acquisition, the Company agreed to a purchase price of $1,500,000 comprised of (i)
$50,000 paid at closing; (ii) $250,000 in the form of our promissory note; and, (iii) $1,200,000 in shares of our common stock,
valued as of the closing, which equated to 1,200,000,000 shares of our common stock. The shares have not yet been issued and are
not included as part of the issued and outstanding shares of the Company. However, these shares have been recorded as “Common
Shares Issuable” within our financial statements for the period ending 30 June 2018.
In
April 2018 the Company amended the designation for its Series A Preferred Stock by providing that a holder of Series A was entitled
to (i) vote 15,000 shares of common stock for each share of Series A on all matters submitted to a vote by shareholders; and,
(ii) convert each share of Series A into 1,000 shares of our common stock.
In
May 2018 the Company amended and restated its Articles of Incorporation. The total authorized number of shares is: 8,888,000,000
shares of common stock, $0.001 par value; and, 50,000,000 shares of preferred stock, $0.001 par value, designated in the discretion
of the Board of Directors. The Series A remains in full force and effect.
In
June 2018, after careful analysis and in reliance upon professional advisors retained by the Company, it was determined that the
Merger had, in fact, not been completed, and that the Merger was not in the best interests of the Company and its shareholders.
As such, the Merger was legally terminated. In place of the Merger, in June 2018 the Company acquired all of the issued and outstanding
shares of stock of Data443 (the “
Share Exchange
”). As a result of the Share Exchange, Data443 became a wholly-owned
subsidiary of the Company, with both the Company and Data443 continuing to exist as corporate entities. The finances and business
conducted by the respective entities prior to the Share Exchange will be treated as related party transactions in anticipation
of the Share Exchange. As consideration in the Share Exchange, we agreed to issue to Mr. Remillard: (a) One hundred million (100,000,000)
shares of our common stock; and (b) On the eighteen (18) month anniversary of the closing of the Share Exchange (the “
Earn
Out Date
”), an additional 100,000,000 shares of our common stock (the “
Earn Out Shares
”) provided
that Data 443 has at least an additional $1MM in revenue by the Earn Out Date (not including revenue directly from acquisitions).
None of our shares of our common stock to be issued to Mr. Remillard under the Share Exchange have been issued. As such, none
of said shares are included as part of the issued and outstanding shares of the Company. However, these shares have been recorded
as “Common Shares Issuable” within our financial statements for the period ending 30 June 2018.
On
or about 29 June 2018 we secured the rights to the WordPress GDPR Framework through our wholly owned subsidiary Data443 for a
total consideration of €40,001, or $46,521, payable in four payments of €10,000, with the first payment due at closing,
and the remaining payments issuable at the end of July, August and September, 2018. Upon issuance of the final payment, we have
the right to enter into an asset transfer agreement for the nominal cost of one euro (€1).
On
or about October 22, 2018 we closed on an acquisition under which we acquired certain assets of Modevity, LLC (“Modevity”).
The assets acquired, which were less than substantially all of the assets of Modevity and which did not constitute a “business”,
were related to an enterprise cloud-based data storage, protection, and workflow automation platform known as ARALOC™. Included
as part of the proposed purchase we would also acquire all technology, sales assets, and customers of Modevity as related to ARALOC.
We paid Modevity (i) $200,000 in cash; (ii) $750,000, in the form of our 10-month promissory note; and, (iii) 164,533,821 shares
of our common stock.
Recent
Accounting Pronouncements
From
time-to-time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), or other
standard setting bodies, relating to the treatment and recording of certain accounting transactions. Unless otherwise discussed
herein, management of the Company has determined that these recent accounting pronouncements will not have a material impact on
the financial position or results of operations of the Company.
Critical
Accounting Policies
Critical
Accounting Policies and Significant Judgments and Estimates
Our
management’s discussion and analysis of our financial condition and results of operations is based on our financial statements
which we have been prepared in accordance with U.S. generally accepted accounting principles. In preparing our financial statements,
we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting periods.
Critical
accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and
judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact
of the estimate on financial condition or operating performance is material.
These
significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached
to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management
bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the
financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources.
Management
regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes
in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those
estimates are adjusted accordingly.
Actual
results could differ from those estimates.
While
our significant accounting policies are described in more detail in Note 2 of our annual financial statements included in this
Annual Report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation
of our financial statements:
Assumption
as a Going Concern
Management
assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets,
and liquidation of liabilities in the normal course of business. However, given our current financial position and lack of liquidity,
there is substantial doubt about our ability to continue as a going concern.
Convertible
Financial Instruments
The
Company bifurcates conversion options from their host instruments and accounts for them as free standing derivative financial
instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks
of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host
contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured
at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings
as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative
instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under
applicable GAAP.
When
the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, discounts
are recorded for the intrinsic value of conversion options embedded in the instruments based upon the differences between the
fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded
in the instrument.
Beneficial
Conversion Feature
The
issuance of the convertible debt issued by the Company (described in Note 4 to the Financial Statements) generated a beneficial
conversion feature (“BCF”), which arises when a debt or equity security is issued with an embedded conversion option
that is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that
is less than the market price of the underlying stock at the commitment date. The Company recognized the BCF by allocating the
intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by
the difference between the effective conversion price per share and the fair value of common stock per share on the commitment
date, resulting in a discount on the convertible debt (recorded as a component of additional paid in capital).
Fair
Value of Financial Instruments
The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial
instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”)
to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value
in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37
establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three
(3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
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Level
1:
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Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date.
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Level
2:
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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.
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Level
3:
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Pricing
inputs that are generally unobservable inputs and not corroborated by market data.
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Financial
assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or
similar techniques and at least one significant model assumption or input is unobservable.
The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within
more than one level described above, the categorization is based on the lowest level input that is significant to the fair value
measurement of the instrument.
Transactions
involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of
competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply
that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions
unless such representations can be substantiated.
Stock-Based
Compensation
We
measure the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For
employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the
award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The
fair value amount is then recognized over the period during which services are required to be provided in exchange for the award,
usually the vesting period. Stock-based compensation expense is recorded by us in the same expense classifications in the consolidated
statements of operations, as if such amounts were paid in cash.
Deferred
Tax Assets and Income Taxes Provision
The
Company adopted the provisions of paragraph 740-10-25-13 of the FASB Accounting Standards Codification. Paragraph 740-10-25-13
which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded
in the financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position
only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on
the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured
based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.
Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting
in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized
income tax benefits according to the provisions of paragraph 740-10-25-13.
The
estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying
balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred
tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
Management
makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous
estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in
these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual
taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Management
assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”)
carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more
likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance.
Management made this assumption based on (a) the Company has incurred recurring losses and presently has no revenue-producing
business; (b) general economic conditions; and, (c) its ability to raise additional funds to support its daily operations by way
of a public or private offering, among other factors.
Results
of Operations
For
the year ended December 31, 2017 compared with the year ended December 31, 2016
Revenues
The
Company has not generated any revenue for the year ended December 31, 2017, as compared to zero revenue generated for the year
ended December 31, 2016.
General
and Administrative Expenses
General
and administrative expenses for the year ended December 31, 2017 amounted to $13,227 as compared to $6,808 for the year ended
December 31, 2017, an increase of $6,419. The expenses for the years ended December 31, 2017 and 2016 primarily consisted of audit
and review fees, filing fees, and professional fees.
Net
Loss
The
net loss for the year ended December 31, 2017 was $271,187 as compared to $6,808 for the year ended December 31, 2016. The net
loss mainly derived from the loss from change in fair value of derivative liability of $276,100 associated with warrants attached
to convertible notes payable. The net loss for the year ended December 31, 2016 was derived from general and administrative expenses
incurred.
Related
Party Transactions
The
following individuals and entities have been identified as related parties based on their affiliation with our CEO and sole director,
Jason Remillard:
Jason
Remillard
Myriad
Software Productions, LLC
The
following amounts were owed to related parties, affiliated with the CEO and Chairman of the Board, at the dates indicated:
|
|
|
December
31, 2017
|
|
|
Jason
Remillard
|
|
$
|
7,990
|
|
|
|
|
|
|
|
|
Myriad
Software Productions, LLC
|
|
$
|
0
|
|
Liquidity
and Capital Resources
As
of December 31, 2017 and 2016, we had no cash or cash equivalents and a working capital deficit of $481,627 and $210,440 respectively.
During the fourth quarter of fiscal year 2017 and through the date of this Registration Statement, we have faced an increasingly
challenging liquidity situation that has severely hamstrung our ability to execute our operating plan. We have generated no revenue
though we have actively prepared to initiate business in the data security market, and we acquired an active business subsequent
to December 31, 2017. We have also been required to maintain our corporate existence; satisfy the requirements of being a public
company; and, have chosen to become a mandatory filer with the SEC. We will need obtain capital to continue operations. There
is no assurance that our Company will be able to secure such funding on acceptable (or any) terms. During the year ended December
31, 2017 we reported a net loss of $271,187 and had negative cash flows from operating activities totaling $0 for the same period.
Combined with a beginning cash balance of $0 as of January 01, 2017.
As
of December 31, 2017, we had assets of cash in the amount of $0, and no other assets as the Company was just commencing operations.
As of December 31, 2017, we had liabilities of $481,627. The Company’s accumulated deficit was $5,717,106.
The
revenues, if any, generated from our acquisitions alone will not be sufficient to fund our operations or planned growth. We will
require additional capital to continue to operate our business, and to further expand our business. Sources of additional capital
through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or
revolving credit facilities. We may not be successful in locating suitable financing transactions in the time period required
or at all, and we may not obtain the capital we require by other means. Unless the Company can attract additional investment,
the future of the Company operating as a going concern is in serious doubt.
We
will now be obligated to file annual, quarterly and current reports with the SEC pursuant to the Exchange Act. In addition, the
Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules subsequently implemented by the SEC and the Public Company
Accounting Oversight Board have imposed various requirements on public companies, including requiring changes in corporate governance
practices. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities
of ours more time- consuming and costly. In order to meet the needs to comply with the requirements of the Securities Exchange
Act, we will need investment of capital.
Management
has determined that additional capital will be required in the form of equity or debt securities. There is no assurance that management
will be able to raise capital on terms acceptable to the Company. If we are unable to obtain sufficient amounts of additional
capital, we may have to cease filing the required reports and cease operations completely. If we obtain additional funds by selling
any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our
shareholders will be reduced, shareholders may experience additional dilution, or the equity securities may have rights preferences
or privileges senior to the common stock.
For
the Nine Month Period Ended September 30, 2018, as Compared to the Comparable Prior Period Ended September 30, 2017
Revenues
and Cost of Goods Sold
. No revenue was recorded for the nine month period ended September 30, 2018. No revenue was recorded
in the comparable prior period ended September 30, 2017. No cost of goods sold were recorded during either period in 2018 or 2017.
General
and Administrative
. General and administrative expenses for the nine month period ended September 30, 2018 were $1,854,051,
a significant increase of $1,845,576 from $5,475 incurred in the comparable prior period ended September 30, 2017. The increase
was the result of the Company no longer being a shell company and having higher staffing levels, professional and service provider
costs, and associated operating costs involved with the business operations.
Other
income/expense.
The Company had no “Other income” for the nine months ended September 30, 2018 and “Other
expense” of $2,978,103 consisting mainly of interest expense and loss on the change in fair value of derivative liability.
During the comparable prior period ended September 30, 2017, the Company had no “Other Income” or “Other expenses”.
Interest
expense
. Interest expense accrued for the nine month period ended September 30, 2018 was $22,115, compared with no interest
expense for the comparable prior period in 2017. The increase in the accrued interest expense was due to the related increase
in outstanding notes payable.
Net
loss.
Net loss for the nine month period ended September 30, 2018 was $4,832,154, compared to a net loss of $5,475 for the
comparable period in 2017.
For
the Three Month Period Ended September 30, 2018, as Compared to the Comparable Prior Period Ended September 30, 2017
Revenues
and Cost of Goods Sold
. We had no revenues for the three month period ended September 30, 2018, compared to no revenue in
the comparable prior period ended September 30, 2017. No cost of goods sold were recorded during either period in 2018 or 2017.
General
and Administrative
. General and administrative expenses for the three month period ended September 30, 2018 were $562,838,
as compared to no such expenses incurred in the comparable prior period ended September 30, 2017. The increase was the result
of the Company no longer being a shell and commencing business operations.
Interest
expense.
The Company had interest expense of $13,408 for the three month period ended September 30, 2018, compared to no interest
expense for the comparable prior three month period ended 2017.
Net
loss.
Net income for the three month period ended September 30, 2018 was $3,382,742 compared to a net loss of $0 in the comparable
prior three month period in 2017.
Going
Concern
Our
consolidated financial statements included elsewhere in this Form 10 have been prepared assuming that we will continue as a going
concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course
of business. As reflected in such consolidated financial statements, we had a stockholders’ deficit of $481,627 at December
31, 2017 and incurred a net loss of $271,187 for the year ended December 31, 2017. These factors raise substantial doubt about
our ability to continue as a going concern. In addition, our independent registered public accounting firm in their audit report
to our financial statements for the years ended December 31, 2017 and 2016 expressed substantial doubt about our ability to continue
as a going concern. Our ability to continue as a going concern was raised due to our net losses and negative cash flows from operations
since inception and our expectation that these conditions may continue for the foreseeable future. In addition, we will require
additional financing to fund future operations. Our consolidated financial statements included elsewhere in this Form 10 do not
include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification
of liabilities that might be necessary should we be unable to continue as a going concern.
The
ability of the Company to continue its operations in the future is dependent on the plans of the Company’s management, which
will include the raising of capital through debt and/or equity markets, until such time that funds provided by operations are
sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties
to sustain the Company’s existence. There can be no assurance that the Company will be able to raise any additional capital.
Off-Balance
Sheet Arrangements
There
are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to investors.
Our
principal executive office is located at 1053 E. Whitaker Mill Rd. Suite 115 Raleigh, North Carolina, 27604. The space is a shared
office space, which at the current time is suitable for the conduct of our business.
|
ITEM
4.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
|
The
following table sets forth, as of January 10, 2019, certain information with regard to the record and beneficial ownership of
the Company’s common stock by (i) each person known to the Company to be the record or beneficial owner of more than 5%
of the Company’s common stock, (ii) each director of the Company, (iii) each of the named executive officers, and (iv) all
executive officers and directors of the Company as a group:
|
|
|
Number
of Shares
|
|
|
Percentage
of
|
|
|
Name
& Address (1)
|
|
Beneficially
Owned (2)
|
|
|
Outstanding
Shares (2)
|
|
|
|
|
|
|
|
|
|
|
Executive
Officers & Directors
|
|
|
|
|
|
|
|
|
|
Jason
Remillard
|
|
|
2,300,000,000
|
(3)
|
|
|
31.03
|
%(4)
|
|
|
|
|
|
|
|
|
|
|
|
All
current executive officers and directors as a group (1 person)
|
|
|
2,300,000,000
|
|
|
|
31.03
|
%
|
|
|
|
|
|
|
|
|
|
|
|
5%
Shareholders
|
|
|
|
|
|
|
|
|
|
Jason
Remillard
|
|
|
2,300,000,000
|
|
|
|
31.03
|
%
|
(1)
The mailing address for each person is c/o LandStar, Inc., 1053 E. Whitaker Mill Rd. Suite 115 Raleigh, North Carolina, 27604.
(2)
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with
respect to securities. Beneficial ownership also includes shares of stock subject to options and warrants currently exercisable
or exercisable within 60 days of the date of this table. In determining the percent of common stock owned by a person or entity
as of the date of this Registration Statement (a) the numerator is the number of shares of the class beneficially owned by such
person or entity, including shares which may be acquired within 60 days on exercise of warrants or options and conversion of convertible
securities, and (b) the denominator is the sum of (i) the total shares of common stock outstanding as of the date of this Form
10, which is 5,112,210,803 shares, and (ii) the total number of shares that the beneficial owner may acquire upon exercise of
the derivative securities. Unless otherwise stated, each beneficial owner has sole power to vote and dispose of its shares.
(3)
Includes (i) 1,000,000,000 shares which would be issued to Mr. Remillard upon conversion of his Series A Preferred Stock; (ii)
1,200,000,000 shares to be issued to Mr. Remillard from the Myriad acquisition; and, (iii) 100,000,000 shares to be issued to
Mr. Remillard from the Data443 acquisition.
(4)
Based upon assuming 7,412,210,803 issued and outstanding shares.
|
ITEM
5.
|
DIRECTORS
AND EXECUTIVE OFFICERS.
|
The
following table sets forth certain information regarding our current executive officers and directors as of December 31, 2017:
|
NAME
|
|
AGE
|
|
POSITION
|
|
|
|
|
|
|
|
Jason
Remillard
|
|
44
|
|
President;
Chief Executive Officer;
|
|
|
|
|
|
Chief
Financial Officer; Secretary;
|
|
|
|
|
|
Director
|
Our
directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until
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 shareholders,
and until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors.
Set
forth below is a brief description of the background and business experience of our executive officers and directors for the past
five years.
Jason
Remillard.
Started his career in the early 1990’s with an internet service provider, Mr. Remillard has led software
organizations of all sizes throughout his career. In addition to product management, development, and marketing, he has delivered
strategic consulting for leading organizations worldwide and in both cyber-security and IT operations capabilities. He has had
a distinguished career of over 25-years in the business of enterprise information technology, providing services world-wide. He
has been on all three of the recognized aspects of information technology: (i) as a vendor; (ii) as an implementer; and, (iii)
as the customer. Mr. Remillard has developed, delivered, and sold pervasive solutions and products for companies culminating in
four successful market exits.
Immediately
prior to forming Data443, Mr. Remillard focused on building an award winning data privacy and compliance product – ClassiDocs™.
During this time he focused on enterprise customer relationships, strategic industry partnerships and setting the foundation for
a new and unique entry into the global and growing data privacy and compliance marketplace. Prior to this, he relocated to
New York City to serve as VP of Security Architecture and Engineering for Deutsche Bank and managed a large and complex portfolio
of technology and staff globally, including risk management, data security and enterprise compliance programs. During the last
five years Mr. Remillard also led a large global diversified security products portfolio for Dell Software (formerly Quest Software),
with over 4,000 active customers, development & marketing teams, and international distribution channels. In addition
to Mr. Remillard’s previous years as a management consultant for IBM Corporation, he has also developed, marketed and successfully
managed five other startups in the cyber security space. With almost 30 years of enterprise IT, business development and product
sales experience, Mr. Remillard continues to execute on his vision of simplifying important security capabilities to protect important
assets.
Mr.
Remillard holds an MBA from the Richard Ivey School of Business (London, ON Canada). He is also a Certified Information Systems
Security Professional (CISSP). Mr. Remillard is a founding member of the Blockchain Executive Group; former VP of CISO Global
Security Architecture and Engineering at Deutsche Bank; Senior Product Manager for Dell/Quest Software; Management Consultant
for IBM; and, Strategic Consultant for RBC Bank, TD Bank. Based upon his experience, and expertise, in the data security space,
Mr. Remillard lends himself to be an ideal candidate to head the Company and serve on the Board.
Mr.
Remillard devotes virtually all of his time to us.
Family
Relationships
There
are no family relationships between any of our officers and directors.
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Exchange Act, as amended, will require our executive officers and directors and persons who own more than 10% of
a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial
ownership, reports of changes in ownership and annual reports concerning their ownership of the our common stock and other equity
securities, on Form 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the
Securities and Exchange Commission regulations to furnish our company with copies of all Section 16(a) reports they file.
Board
Committee
The
Company does not have a formal Audit Committee, Nominating Committee and Compensation Committee. As the Company’s business
expands, the directors will evaluate the necessity of an Audit Committee.
Code
of Ethics
The
Company has not adopted a code of ethics to apply to its principal executive officer, principal financial officer, principal accounting
officer and controller, or persons performing similar functions.
|
ITEM
6.
|
EXECUTIVE
COMPENSATION.
|
Our
named executive officers, consisting of our principal executive officer, as of December 31, 2017 and December 31, 2016 (the “
Named
Executive Officers
”), were:
|
|
William
Alessi
|
Chief
Executive Officer; Chief Financial Officer; Sole Director
|
Summary
Compensation Table
The
following table sets forth, for the fiscal years ended December 31, 2017 and 2016, compensation awarded or paid to our Named Executive
Officers:
|
Name
&
Principal
Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
Non-Equity
Incentive
Plan
Compensation
|
|
|
Non-Qualified
Deferred
Compensation
Earnings
|
|
|
All
Other
Compensation
|
|
|
Total
|
|
|
William
Alessi;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO,
CFO, Sole
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Board
Member
|
|
|
2017
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jason
Remillard;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO,
CFO, Sole
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Board
Member
|
|
|
2017
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jason
Remillard;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO,
CFO, Sole
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Board
Member
|
|
|
2018
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
$
|
180,000
|
|
|
$
|
132,692
|
|
|
$
|
78,500
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
$
|
391,192
|
|
There
were no officers or directors in 2016.
Employment
Agreements
We
do not have an employment or consulting agreement with any officers or directors.
Director
Compensation
Our
Board of Directors does not currently receive any consideration for their services as members of the Board of Directors. The Board
of Directors reserves the right in the future to award the members of the Board of Directors cash or stock based consideration
for their services to the Company, which awards, if granted shall be in the sole determination of the Board of Directors.
Executive
Compensation Philosophy
Our
Board of Directors determines the compensation given to our executive officers in their sole determination. Our Board of Directors
reserves the right to pay our executive or any future executives a salary, and/or issue them shares of common stock in consideration
for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive
officer’s performance. This package may also include long-term stock based compensation to certain executives, which is
intended to align the performance of our executives with our long-term business strategies. Additionally, while our Board of Directors
has not granted any performance base stock options to date, the Board of Directors reserves the right to grant such options in
the future, if the Board in its sole determination believes such grants would be in the best interests of the Company.
Incentive
Bonus
The
Board of Directors may grant incentive bonuses to our executive officer and/or future executive officers in its sole discretion,
if the Board of Directors believes such bonuses are in the Company’s best interest, after analyzing our current business
objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result
of the actions and ability of such executives.
Long-term,
Stock Based Compensation
In
order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy we
may award our executive and any future executives with long-term, stock-based compensation in the future, at the sole discretion
of our Board of Directors, which we do not currently have any immediate plans to award.
|
ITEM
7.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
|
Certain
Relationships and Related Transactions
There
were none in 2016 or 2017 .
In
January 2018 the Company acquired substantially all of the assets of Myriad Software Productions, LLC (“Myriad”),
which was wholly owned by our sole director and officer, Jason Remillard. Those assets were comprised of the software program
known as ClassiDocs, and all intellectual property and goodwill associated therewith. This acquisition changed the Company’s
status to no longer being a “shell” under applicable securities rules. In consideration for the acquisition, the Company
agreed to a purchase price of $1,500,000 comprised of the following: $50,000 paid at closing, (ii) $250,000 in the form of a promissory
note, and (iii) $1,200,000 in shares of common stock, valued as of the closing, which equated to 1,200,000,000 shares of Company
common stock.
Review,
Approval and Ratification of Related Party Transactions
Given
our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or
ratification of transactions, such as those described above, with our executive officer(s), Director(s) and significant stockholders.
We intend to establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional
Directors, so that such transactions will be subject to the review, approval or ratification of our Board of Directors, or an
appropriate committee thereof. On a moving forward basis, our Directors will continue to approve any related party transaction.
Director
Independence
Our
board of directors is currently composed of a single member, Jason Remillard, who does not qualify as an independent director
in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes
a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees
and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition,
our board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion
of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a
director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations,
our board of directors would have reviewed and discussed information provided by the directors and us with regard to each director’s
business and personal activities and relationships as they may relate to us and our management.
|
ITEM
8.
|
LEGAL
PROCEEDINGS.
|
From
time to time we may be involved in litigation relating to claims arising out of the operation of our business in the normal course
of business. Other than as described below, as of the date of this Registration Statement we are not aware of potential dispute
or pending litigation and are not currently involved in a litigation proceeding or governmental actions the outcome of which in
management’s opinion would be material to our financial condition or results of operations. An adverse result in these or
other matters may have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating
results.
On
or about April 9, 2018, a Current Report on Form 8-K (the “8-K”) was filed under the name “Landstar, Inc.”
The filing was not authorized by the Company and the Company has had no communication with the named filer. The 8-K purports to
present financial statements for the years ended December 31, 2017 and 2016, and includes an entry for “long-term debt with
interest” for $1,000,000 on the balance sheet. Although the Company is aware of an unsubstantiated claim for a $500,000
debt obligation, the Company is not familiar with the allegations that form the basis for this claim. The Company intends to vigorously
dispute this claim.
On
25 February 2019 the Company filed a lawsuit (the “
Complaint
”) in the United States District Court for the
Eastern District of New York. The Complaint was filed against Hubai Chuguan Industry Co., Ltd. (“
Chuguan
”).
The Complaint also names Madison Stock Transfer Inc., the Company’s transfer agent, as a nominal defendant. With the filing
of the Complaint, the Company seeks to cancel and return to the status of unissued and authorized shares, 1.5 billion shares of
the Company’s common stock which currently stand in the name of Chuguan (the “
Shares
”). The Company believes
that, among other things, the Shares were mistakenly issued and were never delivered to Chuguan; that Chuguan never delivered
consideration for the Shares to the Company; and, that Chuguan has no claim of right to the Shares. Although the ultimate outcome
of this matter cannot be determined with certainty, the Company believes that its allegations stated in the Complaint are true
and correct. The Company intends to vigorously prosecute the Complaint and cancel the Shares, with the Shares then returned to
the status of authorized and unissued shares of the Company.
The
Company recently received a demand Mina Mar Group, Inc. (“Mina Mar”) for the conversion of a purported $90,000 note
purportedly issued by the Company in 2008 and now owned by Mina Mar. The Company has no record of this obligation and there is
indication that this purported obligation was ever recorded in the financial records of the Company. The Company believes that
any action or collection or conversion of this purported note will be barred by the statute of limitations. As such, the Company
has denied the existence and viability of the note, and will vigorously dispute this claim.
The
Company also recently received a separate demand from Mina Mar claiming that it also owns one million shares of the Company preferred
stock. No stock certificate has been presented by Mina Mar, despite repeated requests for Mina Mar to do so, and there are no
records indicating that the Company ever issued these shares to Mina Mar, or to the party from which Mina Mar contends it acquired
the shares. Further, we believe that any such claim, if there is one, is barred by the statute of limitations. As such, the Company
has rejected the claim to the shares, and the Company will vigorously dispute this claim.
The
Company recently received a demand from a former consultant, Don Murray, demanding payment of amounts purportedly owed to Mr.
Murray. The Company believes that no amounts are owed to Mr. Murray. The Company continues to review all relevant facts and circumstances
and is considering all available legal options.
|
Item
9.
|
Market
Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.
|
Our
common stock is currently quoted on the OTC Pink under the trading symbol “LDSR”. Trading in stocks quoted on the
OTC Pink is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to
do with a company’s operations or business prospects. We cannot assure you that there will be a market for our common stock
in the future.
For
the periods indicated, the following table sets forth the high and low bid prices per share of common stock based on inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
|
Fiscal
Year 2016
|
|
High
Bid
|
|
|
Low
Bid
|
|
|
First
Quarter
|
|
$
|
0.0001
|
|
|
$
|
0.0001
|
|
|
Second
Quarter
|
|
$
|
0.0001
|
|
|
$
|
0.0001
|
|
|
Third
Quarter
|
|
$
|
0.0001
|
|
|
$
|
0.0001
|
|
|
Fourth
Quarter
|
|
$
|
0.0001
|
|
|
$
|
0.0001
|
|
|
Fiscal
Year 2017
|
|
High
Bid
|
|
|
Low
Bid
|
|
|
First
Quarter
|
|
$
|
0.0001
|
|
|
$
|
0.0001
|
|
|
Second
Quarter
|
|
$
|
0.0003
|
|
|
$
|
0.0001
|
|
|
Third
Quarter
|
|
$
|
0.0009
|
|
|
$
|
0.0002
|
|
|
Fourth
Quarter
|
|
$
|
0.0011
|
|
|
$
|
0.0001
|
|
|
Fiscal
Year 2018
|
|
High
Bid
|
|
|
Low
Bid
|
|
|
First
Quarter
|
|
$
|
0.0266
|
|
|
$
|
0.0005
|
|
|
Second
Quarter
|
|
$
|
0.0183
|
|
|
$
|
0.0085
|
|
|
Third
Quarter
|
|
$
|
0.018
|
|
|
$
|
0.0004
|
|
|
Fourth
Quarter
|
|
$
|
0.0098
|
|
|
$
|
0.0017
|
|
Holders
As
of December 31, 201 8 , we had 5,112,210,803 shares of our Common Stock, par value $.001, issued and outstanding.
There were 496 beneficial owners of our Common Stock.
Transfer
Agent and Registrar
The
transfer agent for our capital stock is Madison Stock Transfer Inc., with an address of 2500 Coney Island Ave, Sub Level Brooklyn,
New York 11223, with a telephone of 718-627-4453.
Penny
Stock Regulations
The
Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be an equity security
that has a market price of less than $5.00 per share. Our Common Stock is currently within the definition of a penny stock and
will be subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes
exceeding $200,000 individually, or $300,000, together with their spouse).
For
transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such
securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction,
other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable
to both the broker-dealer and the registered representative, current quotations for the securities 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.
Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information
on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers
to sell our Common Stock and may affect the ability of investors to sell their Common Stock in the secondary market.
In
addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, the Financial Industry
Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending
speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain
information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for
at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy
our Common Stock, which may limit the investors’ ability to buy and sell our stock.
Dividend
Policy
Any
future determination as to the declaration and payment of dividends on shares of our Common Stock will be made at the discretion
of our board of directors out of funds legally available for such purpose. We are under no contractual obligations or restrictions
to declare or pay dividends on our shares of Common Stock. In addition, we currently have no plans to pay such dividends. Our
board of directors currently intends to retain all earnings for use in the business for the foreseeable future.
Equity
Compensation Plan Information
Currently,
there is no equity compensation plan in place.
Purchases
of Equity Securities by the Registrant and Affiliated Purchasers
We
have not repurchased any shares of our common stock during the fiscal years ended December 31 2017 or 2016, respectively.
|
ITEM
10.
|
RECENT
SALES OF UNREGISTERED SECURITIES.
|
The
following information represents securities sold by the Company within the past three years which were not registered under the
Securities Act. Included are sales of reacquired securities, as well as new issues, securities issued in exchange for property,
services, or other securities, and new securities resulting from the modification of outstanding securities.
|
|
●
|
On
26 January 2018 the Company agreed to issue $1,200,000 in shares of our common stock, valued as of that date, to Jason Remillard
under the transaction in which we acquired substantially all of the assets of Myriad Software Productions, LLC. This equated
to 1,200,000,000 shares of our common stock, none of which have been issued to Mr. Remillard. The issuance was exempt under
Section 4(a)(2) of the Securities Act.
|
|
|
●
|
On
or about February 6, 2018, the Company entered into a Securities Purchase Agreement (the “
SPA
”) with Blue
Citi LLC (“Blue Citi”) under which Blue Citi would purchase $500,000 in 8% interest accruing, convertible notes,
maturing 18 months after issue. Subsequently, the Company and Blue Citi reached a verbal agreement to extend the SPA to $1,000,000.
Each note was previously convertible at the option of Blue Citi into common shares at a 25% discount to the lowest trading
price during the ten consecutive trading days immediately preceding the date of conversion. See, below, the discussion for
the September 30, 2018 transactions involving the Restructuring Agreement and the Consolidated Note.
|
|
|
|
|
|
|
●
|
On
March 16, 2018, the Company converted $2,000 of a promissory note into 40,000,000 shares of its common stock. The issuance
was exempt under Section 4(a)(2) of the Securities Act.
|
|
|
|
|
|
|
●
|
On
March 20, 2018, the Company converted $1,750 of a promissory note into 35,000,000 shares of its common stock. The issuance
was exempt under Section 4(a)(2).
|
|
|
|
|
|
|
●
|
On
April 18, 2018, the Company converted $3,100 of a promissory note into 62,000,000 shares of its common stock. The issuance
was exempt under Section 4(a)(2) of the Securities Act.
|
|
|
|
|
|
|
●
|
On
April 19, 2018, the Company converted $3,150 of a promissory note into 63,000,000 shares of its common stock. The issuance
was exempt under Section 4(a)(2) of the Securities Act.
|
|
|
|
|
|
|
●
|
On
29 June 2018 the Company agreed to issue 100,000,000 shares of our common stock, and an additional 100,000,000 shares upon
satisfaction of certain conditions, to Mr. Remillard under the transaction in which we acquired all of the shares of Data443.
The issuance was exempt under Section 4(a)(2) of the Securities Act.
|
|
|
|
|
|
|
●
|
Through
Data443, we have signed consulting contracts with a team of consultants and advisors, of which, four provide senior leadership
to the Company in corporate development, technology development, finance, operations, and sale and marketing, with the others
providing services in administration, marketing, sales, and engineering. Additionally, we engage junior and mid-level engineering
consultants on a project-by-project basis to further develop technology and to implement services for prospective clients.
Collectively, the team is paid approximately $200,000 each quarter. Additionally, we have granted stock and stock options
to some of these consultants and advisors as part of their compensation or in lieu of cash to reduce cash outlays. Grants
of stock and stock options are awarded selectively to consultants upon their start dates, and every quarter thereafter throughout
the term of their engagement at a fixed dollar amount. Each grant of stock and stock options is irrevocable, and some stock
grants include registration rights; however, each grant of stock is restricted until the one-year anniversary from the grant
date, and each grant of stock options vests on the one-year anniversary of the grant date. For the nine-month period ended
September 30, 2018: (i) 133,567,651 common shares were granted as restricted stock awards; and, (ii) options to purchase 182,550,551
common shares were granted. The exercise prices for the grants of stock options range from $0.0014 to $0.018. One of our consulting
contracts is with Myriad Software. Of the shares and options reserved for consultants during the period ending September 30,
2018, approximately 36,055,901 common shares and 36,287,144 in stock options were granted to Myriad Software. Of the approximately
$400,000 payable to consultants and advisors in the period ending September 30, 2018, $30,000 of the Company’s consultant
expense was due to Myriad Software for services rendered by Jason Remillard during the period. None of the shares committed
under this paragraph have been issued as of the date of this Statement. These shares have been recorded as common shares issuable
and included in additional paid-in capital – stock subscription within our financial statements for the period ending
September 30, 2018 and have not been included in the total number of issued and outstanding shares reflected herein.
|
|
|
●
|
On
July 2, 2018, the Company converted $10,000 of a promissory note into 200,000,000 shares of its common stock. The issuance
was exempt under Section 4(a)(2) of the Securities Act.
|
|
|
|
|
|
|
●
|
On
August 9, 2018, the Company converted $5,000 of a promissory note into 100,000,000 shares of its common stock. The issuance
was exempt under Section 4(a)(2) of the Securities Act.
|
|
|
|
|
|
|
●
|
O
n
September 30, 2018, the Company entered into a Debt Restructuring Agreement with Blue Citi (the “
Restructuring Agreement
”).
Pursuant to the Restructuring Agreement, the parties agreed, among other things, to combine all of the Convertible Notes and
other amounts owed to Blue Citi into a single note dated 30 September 2018 (the “
Consolidated Note
”). The
Consolidated Note made the Convertible Notes null and void, and provided for, among other things, (i) an original principal
amount of $829,680; (ii) 8% annual interest; (iii) 18-month maturity; (iv) reduction in the conversion discount from 25% to
10%, meaning that the Conversion Note, at the option of Blue Citi, is convertible into common shares at a price equal to 90%
of the lowest trading price during the ten consecutive trading days immediately preceding the date of conversion; and, (v)
Blue Citi waived all known and unknown breaches under the Convertible Notes. The outstanding principal for the Consolidated
Note as of September 30, 2018 was $829,680.
Based on this amount, and the Company’s lowest stock price of $0.0056
per share during the preceding ten day period, the Consolidated Note is convertible into approximately 148,157,143 shares
of our common stock. However, the Consolidated Note contains a limiter prohibiting the holder from converting if the conversion
would cause the holder to own more than 4.99% of the Company’s then outstanding common stock after giving effect to
the conversion of the stock. The issuance of the Consolidated Note was exempt under Section 4(a)(2) of the Securities Act.
|
|
|
|
|
|
|
●
|
On
October 12, 2018, the Company issued to AFT Funding Corp. the Company’s promissory note in the amount of $110,000 in
exchange for $100,000 in net proceeds. The note provides for a maturity date of July 16, 2019; 8% interest; and, the right
of the holder to convert all amounts due into shares of the Company’s common stock at a price equal to 70% of the lesser
of (i) the lowest price for our common stock during the 20-days preceding the conversion; or, (ii) the lowest price for our
common stock for the 20-days preceding the issuance of the note. The issuance of the note was exempt under Section 4(a)(2)
of the Securities Act.
|
|
|
|
|
|
|
●
|
On
16 October 2018, the Company converted $20,000 of a promissory note into 400,000,000 shares of its common stock. The issuance
was exempt under Section 4(a)(2) of the Securities Act.
|
|
|
|
|
|
|
●
|
On
22 October 2018 the Company agreed to issue 164,533,821 shares of our common stock Modevity,
LLC under the transaction in which we acquired certain assets of Modevity, LLC.
The issuance was exempt under Section 4(a)(2) of the Securities Act.
|
|
|
|
|
|
|
●
|
On
October 23, 2018, the Company issued to Smea2z LLC the Company’s promissory note in the amount of $220,000 in exchange
for $200,000 in net proceeds. The note provides for a maturity date of July 23, 2019; 8% interest; and, the right of the holder
to convert all amounts due into shares of the Company’s common stock at a price equal to 70% of the lesser of (i) the
lowest price for our common stock during the 20-days preceding the conversion; or, (ii) the lowest price for our common stock
for the 20-days preceding the issuance of the note. The issuance of the note was exempt under Section 4(a)(2) of the Securities
Act.
|
|
|
|
|
|
|
●
|
On
15 November 2018 the Company converted $5,000 of a promissory note into 100,000,000 shares of its common stock. The issuance
was exempt under Section 4(a)(2) of the Securities Act.
|
|
|
|
|
|
|
●
|
From
October 01, 2018 through December 13, 2018, Blue Citi loaned to the Company an additional $175,000, which amount is to be
added to the Consolidated Note and subject to the same terms and conditions therein. These amounts added to the Consolidated
Note was exempt under Section 4(a)(2) of the Securities Act.
|
|
|
|
|
|
|
●
|
On
December 20, 2018 the
Company issued a total of 252,016,130 restricted shares of its common
stock for subscriptions of $500,000. The Company received the entire amount of the proceeds. In connection with the issuance
of the shares, the Company also issued to the subscribers warrants to acquire a total of 50,403,226 shares of our common stock
at a strike price of $0,003 per share, with a cashless exercise feature and a five (5) year term. The issuance was exempt
under Section 4(a)(2) of the Securities Act.
|
|
ITEM
11.
|
DESCRIPTION
OF REGISTRANT’S SECURITIES TO BE REGISTERED.
|
Common
Stock
This
Form 10 relates to our common stock, $0.001 par value per share (the “Common Stock”). We are authorized to issue 8,888,000,000
shares of Common Stock. We are also authorized to issue 50,000,000 shares of preferred stock, par value $0.001(the “Preferred
Stock”). As of December 31, 2017, there were 3,947,676,982 shares of Common Stock and 1,000,000 shares of Preferred Stock
outstanding. As of December 31, 2018, there were 5,112,210,803 shares of Common Stock and 1,000,000 shares of Preferred Stock
outstanding.
The
holders of our Common Stock have equal ratable rights to dividends from funds legally available therefore, when, as and if declared
by our board of directors. Holders of Common Stock are also entitled to share ratably in all of our assets available for distribution
to holders of Common Stock upon liquidation, dissolution or winding up of the affairs.
The
holders of shares of our Common Stock do not have cumulative voting rights, which means that the holders of more than 50% of such
outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose and
in such event, the holders of the remaining shares will not be able to elect any of our directors. The holders of 50% percent
of the outstanding Common Stock constitute a quorum at any meeting of shareholders, and the vote by the holders of a majority
of the outstanding shares or a majority of the shareholders at a meeting at which quorum exists are required to effect certain
fundamental corporate changes, such as liquidation, merger or amendment of our articles of incorporation.
Preferred
Stock
We
have authority to issue 50,000,000 shares of “blank check” Preferred Stock. Our Board of Directors may issue the authorized
Preferred Stock in one or more series and may fix the number of shares of each series of preferred stock. Our Board of Directors
also has the authority to set the voting powers, designations, preferences and relative, participating, optional or other special
rights of each series of Preferred Stock, including the dividend rights, dividend rate, terms of redemption, redemption price
or prices, conversion and voting rights and liquidation preferences. Preferred Stock can be issued and its terms set by our Board
of Directors without any further vote or action by our stockholders.
Series
A Preferred Stock
As
of December 31, 2017 and 2018, there were 1,000,000 shares of Series A Preferred Stock issued and outstanding , respectively.
The Series A Preferred shares (i) vote on all matters with the holders of common stock as if each shares of Series A was converted
into 15,000 shares of common stock; and, (ii) are convertible into shares of common stock, at any time in the discretion of the
holders of the Series A shares, at a ratio of 1,000 shares of common stock for each share of Series A.
|
ITEM
12.
|
INDEMNIFICATION
OF DIRECTORS AND OFFICERS.
|
Under
our Bylaws, every person who was or is a party to, or is threatened to be made a party to, or is involved in any action, suit,
or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he, or a person of whom he
is the legal representative, is or was a director or officer of the Company, or is or was serving at the request of the Company
as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust, or other enterprise,
shall be indemnified and held harmless to the fullest extent legally permissible under the laws of the State of Nevada from time
to time against all expenses, liability, and loss (including attorneys’ fees judgments, fines, and amounts paid or to be
paid in settlement) reasonably incurred or suffered by him in connection therewith. Such right of indemnification shall be a contract
right, which may be enforced in any manner desired by such person. The expenses of officers and directors incurred in defending
a civil or criminal action, suit, or proceeding must be paid by the Company as they are incurred and in advance of the final disposition
of the action, suit, or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the company.
Such right of indemnification shall not be exclusive of any other right which such directors, officers, or representatives may
have or hereafter acquire, and, without limiting the generality of such statement, they shall be entitled to their respective
rights of indemnification under any bylaw, agreement, vote of shareholders, provision of law, or otherwise.
Without
limiting the application of the foregoing, the Board of Directors may adopt bylaws from time to time with respect to indemnification,
to provide at all times the fullest indemnification permitted by the laws of the State of Nevada, and may cause the Company to
purchase and maintain insurance on behalf of any person who is or was a director or officer of the Company, or is or was serving
at the request of the Company as a director or officer of another corporation, or as its representative in a partnership, joint
venture, trust, or other enterprise against any liability asserted against such person and incurred in any such capacity or arising
out of such status, whether or not the Company would have the power to indemnify such person. The indemnification provided shall
continue as to a person who has ceased to be a director, officer, employee, or agent, and shall inure to the benefit of the heirs,
executors and administrators of such person.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
We
have not entered into any agreements with our directors and executive officers that require us to indemnify these persons against
expenses, judgments, fines, settlements and other amounts actually and reasonably incurred (including expenses of a derivative
action) in connection with any proceeding, whether actual or threatened, to which any such person may be made a party by reason
of the fact that the person is or was a director or officer of our Company or any of our affiliated enterprises. We do not maintain
any policy of directors’ and officers’ liability insurance that insures its directors and officers against the cost
of defense, settlement or payment of a judgment under any circumstances.
|
ITEM
13.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
|
Our
financial statements, notes thereto and the related independent registered accounting firm’s report are set forth immediately
following the signature page to this registration statement beginning at page F-1 and are incorporated herein by reference.
|
ITEM
14.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|
None.
|
ITEM
15.
|
FINANCIAL
STATEMENTS AND EXHIBITS.
|
(a)
Financial Statements
The
following financial statements are being filed as part of this Registration Statement:
Index
to Consolidated Financial Statements
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Board of Directors and Stockholders
Landstar,
Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Landstar, Inc. (the “Company”) as of December 31, 2017 and 2016, and
the related statements of operations, stockholders’ deficit, and cash flows, for each of the years in the two-year period
ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion,
the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017
and 2016, and the results of its operations and cash flows for each of the years in the two-year period ended December 31, 2017,
in conformity with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Emphasis
of Matter
The
accompanying financial statements have been prepared assuming that the Company will become a going concern. As described in Note
3 to the financial statements, the Company has not generated any revenue and has limitations as limitations on its operating capital
resources, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding
these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Thayer
O’Neal Company, LLC
We
have served as the Company’s auditor since 2018.
Houston,
Texas
January
10, 2019
LANDSTAR,
INC.
Balance
Sheets
December
31, 2017 and 2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
52,837
|
|
|
$
|
65,740
|
|
|
Convertible
notes payable
|
|
|
125,000
|
|
|
|
125,000
|
|
|
Derivative
liability
|
|
|
295,800
|
|
|
|
19,700
|
|
|
Due
to related party
|
|
|
7,990
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
481,627
|
|
|
|
210,440
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
481,627
|
|
|
|
210,440
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 50,000,000 shares authorized; 1,000,000 issued and outstanding as of December 31, 2017 and 2016
|
|
|
1,000
|
|
|
|
1,000
|
|
|
Common
stock, $0.001 par value; 8,888,000,000 shares authorized; 3,947,676,982 issued and outstanding as of December 31, 2017 and
2016
|
|
|
3,947,677
|
|
|
|
3,947,677
|
|
|
Additional
paid-in capital
|
|
|
1,286,802
|
|
|
|
1,286,802
|
|
|
Accumulated
deficit
|
|
|
(5,717,106
|
)
|
|
|
(5,445,919
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ deficit
|
|
|
(481,627
|
)
|
|
|
(210,440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
-
|
|
|
$
|
-
|
|
See
the accompanying Notes, which are an integral part of these Financial Statements
LANDSTAR,
INC.
Statements
of Operations
For
the Years Ended December 31, 2017 and 2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
13,227
|
|
|
|
6,808
|
|
|
Sales
and marketing
|
|
|
1,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
14,227
|
|
|
|
6,808
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(14,227
|
)
|
|
|
(6,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
19,140
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from change in fair value of derivative liability
|
|
|
(276,100
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(271,187
|
)
|
|
$
|
(6,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share, basic and diluted
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares, basic and diluted
|
|
|
3,947,676,982
|
|
|
|
3,947,676,982
|
|
See
the accompanying Notes, which are an integral part of these Financial Statements
LANDSTAR,
INC.
Statements
of Stockholders’ Deficit
For
the Years Ended December 31, 2017 and 2016
|
|
|
Convertible
Preferred Series A
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholder
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2016
|
|
|
1,000,000
|
|
|
$
|
1,000
|
|
|
|
3,947,676,982
|
|
|
$
|
3,947,677
|
|
|
$
|
1,286,802
|
|
|
$
|
(5,439,111
|
)
|
|
$
|
(203,632
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,808
|
)
|
|
|
(6,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of
December 31, 2016
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
3,947,676,982
|
|
|
|
3,947,677
|
|
|
|
1,286,802
|
|
|
|
(5,445,919
|
)
|
|
|
(210,440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(271,187
|
)
|
|
|
(271,187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2017
|
|
|
1,000,000
|
|
|
$
|
1,000
|
|
|
|
3,947,676,982
|
|
|
$
|
3,947,677
|
|
|
$
|
1,286,802
|
|
|
$
|
(5,717,106
|
)
|
|
$
|
(481,627
|
)
|
See
the accompanying Notes, which are an integral part of these Financial Statements
LANDSTAR,
INC.
Statements
of Cash Flows
For
the Years Ended December 31, 2017 and 2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(271,187
|
)
|
|
$
|
(6,808
|
)
|
|
Adjustments
to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Loss
from change in fair value of derivative liability
|
|
|
276,100
|
|
|
|
-
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(12,903
|
)
|
|
|
6,808
|
|
|
Due
to related party
|
|
|
7,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
as of beginning of year
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
as of end of year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Cash
paid for income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
See
the accompanying Notes, which are an integral part of these Financial Statements
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Description
LandStar,
Inc. (the “Company”) was incorporated as a Nevada corporation on May 4, 1998. The Company is developing products that
enable secure data, at rest and in flight, across local devices, network, cloud, and databases.
Basis
of Presentation
The
accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”).
Use
of Estimates
The
preparation of 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 as of the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Convertible
Financial Instruments
The
Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial
instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks
of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host
contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured
at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings
as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative
instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under
applicable U.S. GAAP.
When
the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, discounts
are recorded for the intrinsic value of conversion options embedded in the instruments based upon the differences between the
fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded
in the instrument.
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Common
stock purchase warrants and derivative financial instruments
-
Common stock purchase warrants and other derivative
financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement, or (2)
give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement).
Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and
if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement
in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope
exception are classified as liabilities. The Company assesses classification of its common stock purchase warrants and other derivatives
at each reporting date to determine whether a change in classification between equity and liabilities is required.
Beneficial
Conversion Feature
- The issuance of the convertible debt described in Note 4, below, generated a beneficial conversion
feature (“BCF”), which arises when a debt or equity security is issued with an embedded conversion option that is
beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less
than the market price of the underlying stock at the commitment date. The Company recognized the BCF by allocating the intrinsic
value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference
between the effective conversion price per share and the fair value of common stock per share on the commitment date, resulting
in a discount on the convertible debt (recorded as a component of additional paid-in capital).
Income
Taxes
The
liability method is used in the Company’s accounting for income taxes. Under this method, deferred tax assets and liabilities
are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using
the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.
Deferred
tax assets and liabilities are determined based on the temporary differences between the financial statement carrying amounts
and the tax bases of assets and liabilities using the enacted tax rates in effect in the years in which the differences are expected
to reverse. In estimating future tax consequences, all expected future events are considered other than enactment of changes in
the tax law or rates.
The
Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities based on the technical merits of the position.
The
tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that
has a greater than 50% likelihood of being realized upon ultimate settlement.
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The
determination of recording or releasing tax valuation allowance is made, in part, pursuant to an assessment performed by management
regarding the likelihood that the Company will generate future taxable income against which benefits of its deferred tax assets
may or may not be realized. This assessment requires management to exercise significant judgment and make estimates with respect
to its ability to generate taxable income in future periods.
Fair
Value Measurements
The
framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
The
three levels of the fair value hierarchy are described as follows:
|
|
Level
1
|
Inputs
to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company
has the ability to access.
|
|
|
|
|
|
|
|
Level
2
|
Inputs
to the valuation methodology include:
|
|
|
●
|
quoted
prices for similar assets or liabilities in active markets;
|
|
|
|
|
|
|
●
|
quoted
prices for identical or similar assets or liabilities in inactive markets;
|
|
|
|
|
|
|
●
|
inputs
other than quoted prices that are observable for the asset or liability;
|
|
|
|
|
|
|
●
|
inputs
that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
|
|
|
|
If
the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full
term of the asset or liability.
|
|
|
Level
3
|
Inputs
to the valuation methodology are unobservable and significant to the fair value measurement.
|
The
asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input
that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and
minimize the use of unobservable inputs.
Net
Loss Per Common Share
The
Company calculates net loss per common share as a measurement of the Company’s performance while giving effect to all dilutive
potential common shares that were outstanding during the reporting period. As the Company had a net loss for all periods presented,
the inclusion of common stock options or other similar instruments would be anti-dilutive. Therefore, the weighted average shares
used to calculate both basic and diluted earnings per share are the same.
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Segments
Operating
segments are defined as components of an enterprise engaging in business activities for which discrete financial information is
available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing
performance. The Company operates and manages its business as one operating segment and all of the Company’s operations
are in North America.
Recently
Issued Accounting Pronouncements
In
March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment
. The FASB issued
ASU 2016-09 to simplify several aspects of the accounting for share-based payment transactions, including income tax consequences.
The guidance is currently effective for the Company for the year-ending December 31, 2018. The Company is currently evaluating
the effect of this guidance on its financial statements.
In
November 2015, FASB issued ASU No. 2015-17,
Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes
. The
new standard requires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial
position. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016, and
interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim
or annual report period. The amendments in this ASU may be applied either prospectively to all deferred tax assets and liabilities
or retrospectively to all periods presented. The Company adopted this standard as of December 31, 2017.
In
August 2014, FASB issued ASU No. 2014-15,
Presentation of Financial Statements - Going Concern
, which requires management
to assess an entity’s ability to continue as a going concern and to provide related disclosures in certain circumstances.
Under the new guidance, disclosures are required when conditions give rise to substantial doubt about an entity’s ability
to continue as a going concern within one year from the financial statement issuance date. The guidance is effective for annual
periods ending after December 15, 2016, and all annual and interim periods thereafter. The Company adopted ASU 2014-15 for the
year ended December 31, 2016.
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)
In
February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
(“ASU 2016-02”). The provisions of ASU 2016-02
set out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The
new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the
principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether
lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee
is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months, regardless
of their classification. Leases with a term of 12 months or less will be accounted for in a similar manner as under existing guidance
for operating leases. ASU 2016-02 supersedes the previous lease standard, Topic 840,
Leases
. This guidance is effective
for the Company for the year ending December 31, 2020. The Company is currently evaluating the impact that the implementation
of this standard will have on the Company’s financial statements.
Note
2: Restatement of Previously Issued Financial Statements
The
Company has restated previously issued financial statements as of December 31, 2017 and 2016, to reflect the correction of errors
related to understatements of accounts payable and amounts due to a related party, and accounting for liabilities created by a
beneficial conversion feature associated with the issuance of a convertible note payable.
The
following sets forth the previously reported and restated amounts of selected items within the balance sheet and statement of
operations as of and for the year ended December 31, 2017 and 2016:
|
|
|
2017
|
|
|
|
|
As
Previously Reported
|
|
|
Correction
of
Errors
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
-
|
|
|
$
|
52,837
|
|
|
$
|
52,837
|
|
|
Due
to related party
|
|
|
-
|
|
|
|
7,990
|
|
|
|
7,990
|
|
|
Derivative
liability
|
|
|
-
|
|
|
|
295,800
|
|
|
|
295,800
|
|
|
Stockholders’
deficit, December 31, 2017
|
|
|
125,000
|
|
|
|
356,627
|
|
|
|
481,627
|
|
|
Net
loss for the year ended December 31, 2017
|
|
|
-
|
|
|
|
271,187
|
|
|
|
271,187
|
|
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
Note
2: Restatement of Previously Issued Financial Statements
(concluded)
|
|
|
2016
|
|
|
|
|
As
Previously Reported
|
|
|
Correction
of Errors
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
-
|
|
|
$
|
65,740
|
|
|
$
|
65,740
|
|
|
Derivative
liability
|
|
|
-
|
|
|
|
19,700
|
|
|
|
19,700
|
|
|
Stockholders’
deficit, January 1, 2016
|
|
|
125,000
|
|
|
|
78,632
|
|
|
|
203,632
|
|
|
Stockholders’
deficit, December 31, 2016
|
|
|
125,000
|
|
|
|
85,540
|
|
|
|
210,440
|
|
|
Net
loss for the year ended December 31, 2016
|
|
|
-
|
|
|
|
6,808
|
|
|
|
6,808
|
|
NOTE
3: LIQUIDITY AND GOING CONCERN
The
accompanying financial statements have been prepared (i) in accordance with accounting principles generally accepted in the United
States, and (ii) assuming that the Company will continue as a going concern, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The Company has not generated significant income to date. The
Company is subject to the risks and uncertainties associated with a business with no substantive revenue, as well as limitations
on its operating capital resources. These matters, among others, raise substantial doubt about the ability of the Company to continue
as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue as a going concern.
In
light of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s
ability to raise capital and generate revenue and profits in the future.
During
2018, the Company has made one product acquisition, ClassiDocs, and completed the acquisition of one entity, Data443 Risk Mitigation,
Inc. (“Data443”). The Company is actively seeking new products and entities to acquire, with several candidates identified.
The Company has developed, and continues to develop, large scale relationships with cyber security, marketing and product organizations,
and to market and promote ClassiDocs and other products the Company may develop or acquire. As of December 31, 2017, the Company
had operating losses, negative net working capital, and an accumulated deficit. These factors, among others, raise substantial
doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
NOTE
4: CONVERTIBLE NOTE PAYABLE
Convertible
note payable consists of a non-interest bearing convertible note for the original principal of $125,000, payable on demand and
convertible at the option of the holder into common shares at the conversion price of $0.00005 per share. The outstanding principal
for the convertible note was $125,000 as of December 31, 2017 and 2016. The embedded conversion feature in this note created a
beneficial conversion feature (“BCF”) totaling $296,000 and $375,000 as of December 31, 2017 and 2016.
NOTE
5: DERIVATIVE LIABILITY
Management
determined that liabilities created by a beneficial conversion feature associated with the issuance of a convertible note payable
(see Note 4) meets the criteria of a derivative and is required to be measured at fair value. The fair value of this derivative
liability was determined based on management’s estimate of the expected future cash flows required to settle the liability.
This valuation technique involves management’s estimates and judgment based on unobservable inputs and is classified in
level 3.
|
Derivative
liability as of December 31, 2016
|
|
$
|
19,700
|
|
|
Change
in fair value of derivative liability
|
|
|
276,100
|
|
|
|
|
|
|
|
|
Derivative
liability as of December 31, 2017
|
|
$
|
295,800
|
|
|
|
|
|
|
|
|
The
amount of net loss for the period attributable to the unrealized losses relating to liability still held at the reporting
date
|
|
$
|
276,100
|
|
NOTE
6: CAPITAL STOCK
Preferred
Stock
The
Company is authorized to issue 50,000,000 shares of preferred stock with a par value of $0.001, of which 1,000,000 shares have
been designated as Series A. As of December 31, 2017 and 2016, 1,000,000 shares of Series A were issued and outstanding, and each
share of Series A was (i) convertible into 1,000 shares of common stock, and (ii) entitled to vote 1,000 shares of common stock
on all matters submitted to a vote by shareholders voting common stock. All issued and outstanding shares of Series A Preferred
Stock are held by Mr. Jason Remillard, (“Mr. Remillard”) sole director and sole officer of the Company.
Common
Stock
The
Company is authorized to issue 8,888,000,000 shares of common stock with a par value of $0.001 per share. All shares have equal
voting rights, are non-assessable, and have one vote per share. The total number of shares of Company common stock issued and
outstanding as of December 31, 2017 and 2016 was 3,947,676,982.
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
NOTE
7: INCOME TAXES
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets
and deferred tax liabilities are as follows as of December 31:
|
|
|
2017
|
|
|
2016
|
|
|
Noncurrent:
|
|
|
|
|
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
|
Tax
loss
|
|
$
|
1,250,100
|
|
|
$
|
1,941,500
|
|
|
Valuation
allowance
|
|
|
(1,250,100
|
)
|
|
|
(1,941,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
deferred tax assets, noncurrent
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization
of such assets. During 2017 and 2016, the valuation allowance decreased by $691,400 and increased by $2,400, respectively. The
Company has net operating and economic loss carryforwards of $5,441,000 available to offset future federal and state taxable income.
The
reasons for the difference between actual income tax expense (benefit) for the years ended December 31, 2017 and 2016, and the
amount computed by applying the statutory federal income tax rate to losses before income tax (benefit) are as follows:
|
|
|
2017
|
|
|
2016
|
|
|
|
|
Amount
|
|
|
%
of Pretax Earnings
|
|
|
Amount
|
|
|
%
of Pretax Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit at statutory rate
|
|
$
|
(92,200
|
)
|
|
|
(34.0
|
%)
|
|
|
(2,300
|
)
|
|
|
(34.0
|
%)
|
|
State
income taxes, net of federal tax benefit
|
|
|
(5,400
|
)
|
|
|
(2.0
|
%)
|
|
|
(100
|
)
|
|
|
(1.5
|
%)
|
|
Change
in valuation allowance
|
|
|
97,600
|
|
|
|
36.0
|
%
|
|
|
2,400
|
|
|
|
35.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit
|
|
$
|
-
|
|
|
|
0.0
|
%
|
|
$
|
-
|
|
|
|
0.0
|
%
|
NOTE
8: RELATED PARTY TRANSACTIONS
During
2017, Mr. Remillard made certain advances to the Company totaling $7,990 to be used for operating expenses. As of December 31,
2017, $7,990 was included in due from related party for those advances.
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
NOTE
9: LEGAL AND OTHER MATTERS
On
or about April 9, 2018, a Current Report on Form 8-K
(“8-K”)
was filed
under the name “Landstar, Inc.” The filing was not authorized by the Company and the Company has had no communication
with the named filer. The 8-K purports to present financial statements for the years ended December 31, 2017 and 2016, and includes
an entry for “long-term debt with interest” for $1,000,000 on the balance sheet. Although the Company is aware of
an unsubstantiated claim for a $500,000 debt obligation, the Company is not familiar with the allegations that form the basis
for this claim.
The Company has yet to initiate action in response, though
the Company
intends to vigorously dispute this claim.
Chuguan
Industry Co. Ltd., which the Company believes is located in Beijing, China, appears on the Company’s shareholder list as
a shareholder of record for 1,500,000,000 shares of Company common stock. However, the Company’s research has uncovered
credible documentation that these shares were cancelled and should not be listed as issued and outstanding. The Company continues
to investigate the validity of the cancellation documentation in order to determine if these shares are actually outstanding.
The
Company recently received a demand for conversion of a purported $90,000 note purportedly issued by the Company in 2008. The Company
has no record of this obligation and there is indication that this purported obligation was ever recorded in the financial records
of the Company. The Company believes that any action or collection or conversion of this purported note will be barred by the
statute of limitations. As such, the Company has denied the existence and viability of the note, and will vigorously dispute this
claim.
The
Company recently received a demand from the same party claiming to have ownership of one million shares of the Company preferred
stock. No stock certificate has been presented by the party claiming ownership, and there are no records indicating that the Corporation
ever issued these shares to the claimant, or to the party from which the claimant contends it acquired the shares. Further, we
believe that any such claim, if there is one, is barred by the statute of limitations. As such, the Company has rejected the claim
to the shares, and the Company will vigorously dispute this claim.
The
Company recently received a demand from a former consultant demanding payment of amounts purportedly owed to the consultant. The
Company believes that no amounts are owed to the consultant. The Company is reviewing all relevant facts and circumstances and
considering all available legal options.
In
the normal course of business, the Company may become a party to litigation matters involving claims against the Company. The
Company’s management is unaware of any other pending or threatened assertions and there are no current matters that would
have a material effect on the Company’s financial position or results of operations.
NOTE
10: SUBSEQUENT EVENTS
Myriad
Software Productions, LLC Acquisition
In
January 2018 the Company acquired substantially all of the assets of Myriad Software Productions, LLC (“Myriad”),
which was wholly owned by Mr. Remillard. Those assets were comprised of the software program known as ClassiDocs, and all intellectual
property and goodwill associated therewith. This acquisition changed the Company’s status to no longer being a “shell”
under applicable securities rules. In consideration for the acquisition, the Company agreed to a purchase price of $1,500,000
comprised of the following: $50,000 paid at closing, (ii) $250,000 in the form of a promissory note, and (iii) $1,200,000 in shares
of common stock, valued as of the closing, which equated to 1,200,000,000 shares of Company common stock.
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
NOTE
10: SUBSEQUENT EVENTS (continued)
As
the transaction was a business combination among entities under common control, the Company recorded the assets and liabilities
of Myriad at carrying value, as though the transaction occurred at the beginning of the applicable period, or January 1, 2018.
The following table summarizes the carrying value of the assets acquired and liabilities assumed as of January 1, 2018:
|
Carrying
value of operating assets acquired:
|
|
|
|
|
Cash
|
|
$
|
4,478
|
|
|
|
|
|
|
|
|
Carrying
value of liabilities assumed:
|
|
|
|
|
|
Accounts
payable
|
|
|
116,039
|
|
|
|
|
|
|
|
|
Net
carrying value acquired
|
|
$
|
(111,561
|
)
|
Data443
Risk Mitigation, Inc. Acquisition
During
June 2018, the Company acquired Data443 through a share exchange whereby the outstanding common stock in Data443, which was wholly
owned by Mr. Remillard, was exchanged for shares of common stock of the Company. The total consideration issued for the acquisition
of Data443 was as follows:
|
|
(a)
|
100,000,000
shares of Company common stock, and
|
|
|
|
|
|
(b)
|
On
the 18-month anniversary of the closing of the share exchange (the “Earn Out Date”), an additional 100,000,000
shares of Company common stock (the “Earn Out Shares”) provided that Data443 has at least an additional $1,000,000
in revenue
by
the Earn Out Date (not including revenue directly from acquisitions).
|
None
of the shares of common stock to be issued to Mr. Remillard under the share exchange have been issued.
As
the transaction was a business combination among entities under common control, the Company recorded the assets and liabilities
of Data443 at carrying value, as though the transaction occurred at the beginning of the applicable period, or January 1, 2018.
The following table summarizes the carrying value of the liabilities assumed as of January 1, 2018:
|
Carrying
value of liabilities assumed:
|
|
|
|
|
Accounts
payable
|
|
$
|
17,993
|
|
|
|
|
|
|
|
|
Net
carrying value acquired
|
|
$
|
(17,993
|
)
|
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
NOTE
10: SUBSEQUENT EVENTS (continued)
Equity
Purchase Agreement
On
or about February 5, 2018, the Company entered into the EPA with Blue Citi, under which Blue Citi could purchase up to $10,000,000
of the Company’s common stock over a period of time terminating on the earlier of, (i) 24 months from the date on which
the EPA was executed, or (ii) the date on which Blue Citi purchased the aggregate maximum purchase price of $10,000,000 pursuant
to the EPA. The purchase price for the Company’s shares of common stock to be paid
by
Blue Citi was 85% of the price of Company shares traded on the principal market of the Company’s common stock pursuant
to a specific time period and formula in the EPA.
Additionally,
in connection with the EPA, the Company agreed to a $100,000 commitment fee (the “Commitment Fee”), payable in common
shares which equated to 28,571,429 shares of Company common stock (the “Commitment Shares”).
During
September 2018, in connection with the Convertible Note Amendment (note 5), the Company and Blue Citi agreed to terminate the
EPA.
Consulting
Agreements
During
2018, through Data443, the Company has signed consulting contracts with a team of consultants and advisors, of which, four provide
senior leadership to the Company in corporate development, technology development, finance, operations, and sales and marketing,
with the others providing services in administration, marketing, sales, and engineering. Additionally, the Company engages
j
unior
-
and mid-level engineering consultants on a project-by-project basis to further develop technology and to implement services
for prospective clients. Collectively, the team is paid approximately $200,000 each quarter. Additionally, the Company has granted
stock and stock options to some of these consultants and advisors as part of their compensation and/or in lieu of cash to reduce
cash outlays. Stock and stock option grants are awarded selectively to consultants upon their start dates, and every quarter thereafter,
during the term of their engagement, at a fixed dollar amount. Each stock and stock option grant is irrevocable, and some stock
grants include registration rights; however, each stock and stock option grant is restricted until the one-year anniversary from
the date of each respective grant.
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
NOTE
10: SUBSEQUENT EVENTS (continued)
Convertible
Notes Payable
During
2018, the following convertible notes payable were issued:
|
|
1.
|
Non-interest
bearing convertible note held by Blue Citi LLC (“Blue Citi”) for the original principal of $125,000, payable on
demand and convertible at the option of the holder into common shares at the conversion price of $0.00005 per share. The outstanding
principal for the convertible note was $100,000 and $125,000 as of September 30, 2018 and December 31, 2017. During the nine-month
period ending September 30, 2018, Blue Citi converted $25,000 of this convertible note into 500,000,000 shares of common stock.
During the period of October 01, 2018 to December 20, 2018, Blue Citi converted an additional $25,000 of this convertible
note into 500,000,000 shares of common stock.
|
|
|
|
|
|
|
2.
|
Convertible
note held by Blue Citi for a total principal of $829,680 (the “Consolidated Note”). The Consolidated Note (i)
accrues interest at the rate of 8% per annum; (ii) can be converted into shares of our common stock at a 10% discount to the
lowest trading price during the ten consecutive trading days immediately preceding the date of conversion (40% discount upon
an event of default under the note), and (iii) is due and payable upon the 18-month anniversary of its issuance.
|
|
|
|
|
|
|
|
During
September 2018, the Consolidated Note was issued to Blue Citi in connection with a restructuring (the “Convertible Note
Restructuring”) of previously outstanding convertible notes with Blue Citi. Immediately prior to the issuance of this
note, various convertible notes totaling $810,000, which had been issued between February and September 2018, were outstanding
with Blue Citi, along with associated accrued interest total $19,680. Those notes (i) accrued interest at the rate of 8% per
annum; (ii) could be converted into shares of the Company’s common stock at a 25% discount to the lowest trading price
during the ten consecutive trading days immediately preceding the date of conversion (50% discount upon an event of default
under the note), and (iii) were due and payable upon the 12-month or 18-month anniversary of their issuance.
|
|
|
|
|
|
|
3.
|
Blue
Citi loaned an additional $175,000 to the Company during the period of October 01, 2018 to December 20, 2018. This amount
was added to the principal balance of the Consolidated Note and is subject to the same terms and conditions therein.
|
|
|
|
|
|
|
4.
|
On
October 12, 2018, the Company issued to AFT Funding Corp. the Company’s promissory note in the amount of $110,000 in
exchange for $100,000 in net proceeds. The note provides for a maturity date of July 16, 2019; 8% interest; and, the right
of the holder to convert all amounts due into shares of the Company’s common stock at a price equal to 70% of the lesser
of (i) the lowest price for our common stock during the 20-days preceding the conversion; or, (ii) the lowest price for our
common stock for the 20-days preceding the issuance of the note.
|
|
|
|
|
|
|
5.
|
On
October 23, 2018, the Company issued to Smea2z LLC the Company’s promissory note in the amount of $220,000 in exchange
for $200,000 in net proceeds. The note provides for a maturity date of July 23, 2019; 8% interest; and, the right of the holder
to convert all amounts due into shares of the Company’s common stock at a price equal to 70% of the lesser of (i) the
lowest price for our common stock during the 20-days preceding the conversion; or, (ii) the lowest price for our common stock
for the 20-days preceding the issuance of the note. The issuance of the note was exempt under Section 4(a)(2) of the Securities
Act.
|
Each
of these convertible notes (collectively the “Convertible Notes”) contains an embedded conversion feature that the
Company has determined is a derivative requiring bifurcation.
Stock
Purchases
During
2018, the Company issued shares of its common stock in the following transactions:
On
December 20, 2018 the Company issued a total of 252,016,130 restricted shares of its common stock for subscriptions of $500,000.
The Company received the entire amount of the proceeds. In connection with the issuance of the shares, the Company also issued
to the subscribers warrants to acquire a total of 50,403,226 shares of our common stock at a strike price of $0,003 per share,
with a cashless exercise feature and a five (5) year term.
LANDSTAR,
INC.
Notes
to Financial Statements
December
31, 2017 and 2016
NOTE
10: SUBSEQUENT EVENTS (concluded)
Stock
Options and Restricted Stock
During
2018, the Company granted options to purchase common stock and restricted stock awards to certain consultants and advisors as
consideration for services rendered. The terms of the stock option grants and awards of restricted stock are determined by the
Company’s Board of Directors. The Company’s stock options and awards of restricted stock generally vest over a period
of one year and have a maximum term of ten years. As of November 16, 2018 approximately 207,970,754 options and approximately
151,844,997 shares of restricted stock had been granted.
Other
Items
On
or about July 29, 2018, the Company entered into a letter of intent to acquire from Modevity, LLC (“Modevity”), an
enterprise cloud-based data storage, protection, and workflow automation platform known as ARALOC™. Included as part of
the proposed purchase, the Company would also acquire all technology, sales assets, and customers of Modevity , as related to
ARALOC. It will take substantial effort on the part of the Company to continue selling ARALOC to its customers. The total
consideration for this agreement includes a deposit of $50,000 which was made in July 2018, and (i) an additional $150,000, payable
at closing, (ii) $750,000, in the form of a 10-month promissory note, and (iii) 164,533,821 shares of Company common stock.
On
or about 22 October 2018 we closed on the acquisition with Modevity. We paid Modevity (i) $200,000 in cash; (ii) $750,000, in
the form of our 10-month promissory note; and, (iii) 164,533,821 shares of our common stock.
The
Company has evaluated subsequent events through January 10, 2019, the date at which the financial statements were available for
issuance.
LANDSTAR,
INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September
30, 2018 and December 31, 2017 (Unaudited)
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
17,555
|
|
|
$
|
-
|
|
|
Prepaid
expenses and other current assets
|
|
|
2,662
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
20,217
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
noncurrent assets:
|
|
|
|
|
|
|
|
|
|
Intellectual
property
|
|
|
46,800
|
|
|
|
-
|
|
|
Deposits
|
|
|
50,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
117,017
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
404,342
|
|
|
$
|
52,837
|
|
|
Accrued
consulting expense
|
|
|
78,500
|
|
|
|
-
|
|
|
Convertible
notes payable, current portion
|
|
|
100,000
|
|
|
|
125,000
|
|
|
Derivative
liability, current portion
|
|
|
3,088,000
|
|
|
|
295,800
|
|
|
Due
to related party
|
|
|
315,409
|
|
|
|
7,990
|
|
|
Common
stock issuable
|
|
|
2,440,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
6,426,252
|
|
|
|
481,627
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
|
|
|
Convertible
notes payable, net of current portion and unamortized discount of $829,680
|
|
|
-
|
|
|
|
-
|
|
|
Derivative
liability, net of current portion
|
|
|
1,205,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
7,631,752
|
|
|
|
481,627
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 50,000,000 shares authorized; 1,000,000 issued and outstanding as of September 30, 2018 and December
31, 2017
|
|
|
1,000
|
|
|
|
1,000
|
|
|
Common
stock, $0.001 par value; 8,888,000,000 shares authorized; 4,447,676,982 issued and outstanding as of September 30, 2018; 3,947,676,982
issued and outstanding as of December 31, 2017
|
|
|
4,447,677
|
|
|
|
3,947,677
|
|
|
Additional
paid-in capital
|
|
|
-
|
|
|
|
1,286,802
|
|
|
Additional
paid-in capital - stock subscription
|
|
|
1,607,322
|
|
|
|
-
|
|
|
Accumulated
deficit
|
|
|
(13,570,734
|
)
|
|
|
(5,717,106
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ deficit
|
|
|
(7,514,735
|
)
|
|
|
(481,627
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ deficit
|
|
$
|
117,017
|
|
|
$
|
-
|
|
See
accompanying notes to condensed consolidated financial statements
LANDSTAR,
INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three
and Nine Months Ended September 30, 2018 and 2017 (Unaudited)
|
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
37,262
|
|
|
|
-
|
|
|
|
104,732
|
|
|
|
-
|
|
|
General
and administrative
|
|
|
514,058
|
|
|
|
-
|
|
|
|
1,714,372
|
|
|
|
5,475
|
|
|
Sales
and marketing
|
|
|
11,518
|
|
|
|
-
|
|
|
|
34,947
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
562,838
|
|
|
|
-
|
|
|
|
1,854,051
|
|
|
|
5,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(562,838
|
)
|
|
|
-
|
|
|
|
(1,854,051
|
)
|
|
|
(5,475
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(13,408
|
)
|
|
|
-
|
|
|
|
(22,115
|
)
|
|
|
-
|
|
|
Loss
on change in fair value of derivative liability
|
|
|
3,194,580
|
|
|
|
-
|
|
|
|
(3,168,020
|
)
|
|
|
-
|
|
|
Other
income
|
|
|
-
|
|
|
|
-
|
|
|
|
10,462
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other expense
|
|
|
3,382,742
|
|
|
|
-
|
|
|
|
(2,978,103
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
gain (loss)
|
|
$
|
2,618,334
|
|
|
$
|
-
|
|
|
$
|
(5,034,538
|
)
|
|
$
|
(5,475
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
gain (loss) per common share, basic and diluted
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
average common shares, basic
|
|
|
4,699,850,895
|
|
|
|
3,947,676,982
|
|
|
|
4,594,907,672
|
|
|
|
3,947,676,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
average common shares, diluted
|
|
|
5,700,728,525
|
|
|
|
**
|
|
|
|
**
|
|
|
|
**
|
|
*
Less than $(0.01) per share
* Weighted
average diluted is the same as basic for periods with net loss
See
accompanying notes to condensed consolidated financial statements
LANDSTAR,
INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine
Months Ended September 30, 2018 and 2017 (Unaudited)
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(5,034,538
|
)
|
|
$
|
(5,475
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Loss
from change in fair value of derivative liability
|
|
|
3,168,020
|
|
|
|
-
|
|
|
Consulting
fees settled through common shares issuable
|
|
|
407,322
|
|
|
|
-
|
|
|
Share-based
compensation expense
|
|
|
469,950
|
|
|
|
-
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses and other assets
|
|
|
(2,662
|
)
|
|
|
-
|
|
|
Accounts
payable
|
|
|
160,621
|
|
|
|
5,475
|
|
|
Due
to related party
|
|
|
7,419
|
|
|
|
-
|
|
|
Accrued
consulting expense
|
|
|
78,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(744,554
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
received from acquisition of Myriad Software Productions, LLC
|
|
|
4,478
|
|
|
|
-
|
|
|
Deposit
on acquisition of Modevity, LLC
|
|
|
(50,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used by investing activities
|
|
|
(45,522
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of convertible notes payable
|
|
|
829,680
|
|
|
|
-
|
|
|
Distributions
to shareholders
|
|
|
(22,049
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
807,631
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash
|
|
|
17,555
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
as of beginning of period
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
as of end of period
|
|
$
|
17,555
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Noncash
investing and financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets acquired through issuance of accounts payable
|
|
$
|
46,800
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement
of convertible notes payable through issuance of common stock
|
|
$
|
25,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issuable from acquisitions
|
|
$
|
2,440,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in due to related party from acquisition
|
|
$
|
300,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement
of accrued interest through issuance of convertible notes payable
|
|
$
|
19,680
|
|
|
$
|
-
|
|
See
accompanying notes to condensed consolidated financial statements
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Description
LandStar,
Inc. (“LandStar”) was incorporated as a Nevada corporation on May 4, 1998. LandStar and its Subsidiaries are developing
products that enable secure data, at rest and in flight, across local devices, network, cloud, and databases.
Basis
of Presentation
The
unaudited condensed consolidated financial statements as of September 30, 2018, and for the three and nine months ended September
30, 2018 and 2017, have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”) for interim financial reporting. These condensed consolidated financial statements are unaudited and, in the
opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary for a fair
statement of the consolidated balance sheets, operating results, and cash flows for the periods presented in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”). Operating results for the three and nine
months ended September 30, 2018, are not necessarily indicative of the results that may be expected for the fiscal year ending
December 31, 2018. Certain information and footnote disclosures normally included in the annual consolidated financial statements
prepared in accordance with U.S. GAAP have been omitted in accordance with the SEC’s rules and regulations for interim reporting.
The Company’s financial position, results of operations, and cash flows are presented in U.S. Dollars.
The
accompanying condensed consolidated financial statements include the accounts of Landstar, Inc. and its wholly owned subsidiary,
Data443 Risk Mitigation, Inc. and an entity under common control, Myriad Software Productions, LLC (together, the “Company”).
Intercompany transactions and balances have been eliminated upon consolidation.
Use
of Estimates
The
preparation of condensed 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
as of the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Convertible
Financial Instruments
The
Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial
instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks
of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host
contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured
at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings
as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative
instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under
applicable U.S. GAAP.
When
the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, discounts
are recorded for the intrinsic value of conversion options embedded in the instruments based upon the differences between the
fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded
in the instrument.
Common
stock purchase warrants and derivative financial instruments
-
Common stock purchase warrants and other derivative
financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement, or (2)
give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement).
Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and
if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement
in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope
exception are classified as liabilities. The Company assesses classification of its common stock purchase warrants and other derivatives
at each reporting date to determine whether a change in classification between equity and liabilities is required.
Beneficial
conversion feature
- The issuance of the convertible debt described in Note 5, below, generated a beneficial conversion
feature (“BCF”), which arises when a debt or equity security is issued with an embedded conversion option that is
beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less
than the market price of the underlying stock at the commitment date. The Company recognized the BCF by allocating the intrinsic
value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference
between the effective conversion price per share and the fair value of common stock per share on the commitment date, resulting
in a discount on the convertible debt (recorded as a component of additional paid-in capital).
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Share-Based
Compensation
Employees
- The Company accounts for share-based compensation under the fair value method which requires all such compensation to
employees, including the grant of employee stock options, to be calculated based on its fair value at the measurement date (generally
the grant date), and recognized in the condensed consolidated statement of operations over the requisite service period.
Nonemployees
- During June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2018-07,
Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
(“ASU
2018-07”) to simplify the accounting for share- based payments to nonemployees by aligning it with the accounting for share-based
payments to employees. The Company elected to early adopt ASU 2018-07. Under the requirements of ASU 2018-07, the Company accounts
for share-based compensation to non-employees under the fair value method which requires all such compensation to be calculated
based on the fair value at the measurement date (generally the grant date), and recognized in the statement of operations over
the requisite service period.
The
Company recorded approximately $240,700 in nonemployee share-based compensation expense for the nine -month period ended September,
2018. There was no share-based compensation expense for the nine-month period ended September 30, 2017.
Determining
the appropriate fair value model and the related assumptions requires judgment. There were no option grants during 2017. During
2018, the fair value of each option grant was estimated using a Black-Scholes option-pricing model on the date of the grant as
follows:
|
|
|
Nonemployees
|
|
|
|
|
|
|
|
Estimated
dividend yield
|
|
|
0.00
|
%
|
|
Expected
stock price volatility
|
|
|
340.00
|
%
|
|
Weighted-average
risk-free interest rate
|
|
|
2.70
|
%
|
|
Expected
life of options
|
|
|
5.00
|
|
|
Weighted-average
fair value per share
|
|
$
|
0.0040
|
|
The
expected volatility represents the historical volatility of the Company’s publicly traded common stock. Due to limited historical
data, the Company calculates the expected life based on the mid-point between the vesting date and the contractual term which
is in accordance with the simplified method. The expected term for options granted to nonemployees is the contractual life. The
risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of stock options. The
Company has not paid and does not anticipate paying cash dividends on its shares of common stock; therefore, the expected dividend
yield is assumed to be zero.
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangible
Assets
Intangible
assets with finite lives are amortized over their respective estimated useful lives to their estimated residual values. Estimated
lives are reviewed annually. During June 2018, the Company purchased the rights to the WordPress GDPR framework for $46,800.
Impairment
of Long-Lived Assets
Long-lived
assets, such as intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for an amount
by which the carrying amount of the asset exceeds the fair value of the asset.
Income
Taxes
The
liability method is used in the Company’s accounting for income taxes. Under this method, deferred tax assets and liabilities
are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using
the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Although no changes
were made to provisional amounts during the nine months ended September 30, 2018, the Company will continue to evaluate their
estimates related to the new legislation as clarifying guidance and interpretations are issued and the 2017 tax returns are completed.
On
December 22, 2017, the SEC staff issued Staff Accounting Bulletin (“SAB”) 118 (“SAB 118”), which provides
guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (“TCJA”). SAB 118 provides a measurement period
that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under ASC 740,
Income
Taxes
.
Fair
Value Measurements
The
framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The
three levels of the fair value hierarchy are described as follows:
|
|
Level
1
|
Inputs
to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company
has the ability to access.
|
|
|
|
|
|
|
Level
2
|
Inputs
to the valuation methodology include:
|
|
|
●
|
quoted
prices for similar assets or liabilities in active markets;
|
|
|
●
|
quoted
prices for identical or similar assets or liabilities in inactive markets;
|
|
|
●
|
inputs
other than quoted prices that are observable for the asset or liability;
|
|
|
●
|
inputs
that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
If
the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full
term of the asset or liability.
|
|
|
Level
3
|
Inputs
to the valuation methodology are unobservable and significant to the fair value measurement.
|
The
asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input
that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and
minimize the use of unobservable inputs.
Following
is a description of the valuation methodology used for significant liabilities measured at fair value:
Management
determined that liabilities created by beneficial conversion features associated with the issuance of certain convertible notes
payable (see Note 5), meet the criteria of derivatives and are required to be measured at fair value. The fair value of these
derivative liabilities was determined based on management’s estimate of the expected future cash flows required to settle
the liabilities. This valuation technique involves management’s estimates and judgment based on unobservable inputs and
is classified in level 3.
|
Derivative
liability as of December 31, 2017
|
|
$
|
295,800
|
|
|
Addition
of new derivatives recognized as debt discounts
|
|
|
829,680
|
|
|
Change
in fair value of derivative liabilities
|
|
|
3,168,020
|
|
|
|
|
|
|
|
|
Derivative
liability as of September 30, 2018
|
|
$
|
4,293,500
|
|
|
|
|
|
|
|
The
amount of net loss for the nine-month period ending September 30, 2018,
attributable
to the unrealized losses relating to liability still held at the
reporting date
|
|
$
|
3,168,020
|
|
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)
Net
Loss Per Common Share
The
Company calculates net income or loss per common share as a measurement of the Company’s performance while giving effect
to all dilutive potential common shares that were outstanding during the reporting period. For periods when the Company had a
net loss, the inclusion of common stock options or other similar instruments would be anti-dilutive. Therefore, potential common
shares are excluded from such periods.
Segments
Operating
segments are defined as components of an enterprise engaging in business activities for which discrete financial information is
available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing
performance. The Company operates and manages its business as one operating segment and all of the Company’s operations
are in North America.
Recently
Issued Accounting Pronouncements
In
February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
(“ASU 2016-02”). The provisions of ASU 2016-02
set out the principles for the recognition, measurement, presentation, and disclosure of leases for both lessees and lessors.
The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on
the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine
whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.
A lessee is also required to record a right-of- use asset and a lease liability for all leases with a term of greater than 12
months, regardless of their classification. Leases with a term of 12 months or less will be accounted for in a similar manner
as under existing guidance for operating leases. ASU 2016-02 supersedes the previous lease standard, Topic 840,
Leases
.
This guidance is effective for the Company for the year ending December 31, 2019. The Company is currently evaluating the impact
that the implementation of this standard will have on the Company’s consolidated financial statements.
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
2: LIQUIDITY AND GOING CONCERN
The
accompanying condensed consolidated financial statements have been prepared (i) in accordance with U.S. GAAP, and (ii) assuming
that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company has not generated significant income to date. The Company is subject to the risks
and uncertainties associated with a business with no substantive revenue, as well as limitations on their operating capital resources.
These matters, among others, raise substantial doubt about the ability of the Company to continue as a going concern. These condensed
consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that
may be necessary should the Company be unable to continue as a going concern. In light of these matters, the Company’s ability
to continue as a going concern is dependent upon the Company’s ability to raise capital and generate revenue and profits
in the future.
During
the last nine months, the Company has made one product acquisition, ClassiDocs (see Note 4), and completed the acquisition of
one entity, Data443 Risk Mitigation, Inc. (“Data443,” see note
4).
The Company is actively seeking new products and entities to acquire, with several candidates identified. The Company has developed,
and continues to develop, large scale relationships with cybersecurity, marketing and product organizations, and to market and
promote ClassiDocs and other products the Company may develop or acquire. As of September 30, 2018, the Company had operating
losses, negative net working capital, and an accumulated deficit. These factors, among others, raise substantial doubt about the
Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
3: ACQUISITIONS
Data443
Risk Mitigation, Inc. Acquisition
During
June 2018, the Company acquired Data443 through a share exchange whereby the outstanding common stock in Data443, which was wholly
owned by Mr. Jason Remillard (“Mr. Remillard”), sole director and sole officer of the Company, was exchanged for shares
of common stock of the Company. The total consideration issued for the acquisition of Data443 was as follows:
|
|
(a)
|
100,000,000
shares of the Company’s common stock, valued at $1,220,000, and
|
|
|
|
|
|
|
(b)
|
On
the 18-month anniversary of the closing of the share exchange (the “Earn Out Date”), an additional 100,000,000
shares of the Company’s common stock (the “Earn Out Shares”), valued at $1,220,000, provided that Data443
has at least an additional $1,000,000 in revenue by the Earn Out Date (not including revenue directly from acquisitions).
|
None
of the shares of common stock to be issued to Mr. Remillard under the share exchange have been issued. As such, none of said shares
are included as part of the issued and outstanding shares. However, these shares, including the Earn Out Shares, have been recorded
as common shares issuable within the condensed consolidated financial statements as of September 30, 2018.
As
the transaction was a business combination among entities under common control, the Company recorded the assets and liabilities
of Data443 at carrying value, as though the transaction occurred at the beginning of the applicable period, or January 1, 2018.
The following table summarizes the carrying value of the liabilities assumed as of January 1, 2018:
|
Carrying
value of liabilities assumed:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
27,232
|
|
|
Net
carrying value acquired
|
|
$
|
(27,232
|
)
|
Myriad
Software Productions, LLC Acquisition
In
January 2018 the Company acquired substantially all of the assets of Myriad Software Productions, LLC (“Myriad”),
which was wholly owned by Mr. Remillard. Those assets were comprised of the software program known as ClassiDocs, and all intellectual
property and goodwill associated therewith. This acquisition changed the Company’s status to no longer being a “shell”
under applicable securities rules. In consideration for the acquisition, the Company agreed to a purchase price of $1,500,000
comprised of the following: (i) $50,000 paid at closing, (ii) $250,000 in the form of a promissory note, and (iii) $1,200,000
in shares of common stock, valued as of the closing, which equated to 1,200,000,000 shares of Company common stock. The shares
have not yet been issued and are not included as part of the issued and outstanding shares. However, these shares have been recorded
as common shares issuable and included in additional paid-in capital - stock subscription within the condensed consolidated financial
statements as of September 30, 2018.
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
3: ACQUISITIONS (concluded)
As
the transaction was a business combination among entities under common control, the Company recorded the assets and liabilities
of Myriad at carrying value, as though the transaction occurred at the beginning of the applicable period, or January 1, 2018.
The following table summarizes the carrying value of the assets acquired and liabilities assumed as of January 1, 2018:
|
Carrying
value of operating assets acquired:
|
|
|
|
|
|
Cash
|
|
$
|
4,478
|
|
|
Carrying
value of liabilities assumed:
|
|
|
|
|
|
Accounts
payable
|
|
|
116,039
|
|
|
Net
carrying value acquired
|
|
$
|
(111,561
|
)
|
Modevity,
LLC Acquisition
On
or about October 22, 2018 the Company entered into an asset purchase agreement with Modevity, LLC (“Modevity”) to
acquire certain assets collectively known as ARALOC™, a software-as-a service (“SaaS”) platform that provides
cloud-based data storage, protection, and workflow automation. The acquired assets consist of intellectual and related intangible
property including applications and associated software code, and trademarks. Access to books and records related to the
customers and revenues Modevity created on the ARALOC™ platform were also included in the asset purchase agreement.
These assets were substantially less than the total assets of Modevity, and revenues from the platform comprised a portion of
the overall sales of Modevity. We are required to create the technical capabilities to support the ongoing operation of this SaaS
platform. A substantial effort on the part of the Company is needed to continue generating ARALOC™ revenues through development
of a sales force, as well as billing and collection processes. We paid Modevity (i) $200,000 in cash; (ii) $750,000, in the form
of our 10-month promissory note; and, (iii) 164,533,821 shares of our common stock.
NOTE
4: CONVERTIBLE NOTES PAYABLE
The
convertible notes payable consist of:
|
|
1)
|
Non-interest
bearing convertible note held by Blue Citi LLC (“Blue Citi”) for the original principal of $125,000, payable on
demand and convertible at the option of the holder into common shares at the conversion price of $0.00005 per share. The outstanding
principal for the convertible note was $100,000 and $125,000 as of September 30, 2018 and December 31, 2017. During the nine-month
period ending September 30, 2018, Blue Citi converted $25,000 of this convertible note into 500,000,000 shares of common stock.
The embedded conversion feature in this note created a BCF totaling approximately $3,088,000 as of September 30, 2018.
|
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
4: CONVERTIBLE NOTES PAYABLE (concluded)
|
|
2)
|
Convertible
note held by Blue Citi for a total principal of $829,680 as of September 30, 2018. The
note (i) accrues interest at the rate of 8% per annum; (ii) can be converted into shares
of our common stock at a 10% discount to the lowest trading price during the ten consecutive
trading days immediately preceding the date of conversion (40% discount upon an event
of default under the note), and (iii) is due and payable upon the 18-month anniversary
of its issuance.
|
|
|
|
|
|
|
|
During
September 2018, this convertible note was issued to Blue Citi in connection with a restructuring
(the “Convertible Note Restructuring”) of previously outstanding convertible
notes with Blue Citi. Immediately prior to the issuance of this note, various convertible
notes totaling $810,000 were outstanding with Blue Citi, along with associated accrued
interest total $19,680. Those notes (i) accrued interest at the rate of 8% per annum;
(ii) could be converted into shares of the Company’s common stock at a 25% discount
to the lowest trading price during the ten consecutive trading days immediately preceding
the date of conversion (50% discount upon an event of default under the note), and (iii)
were due and payable upon the 12-month or 18-month anniversary of their issuance.
|
|
|
|
|
|
|
|
The
Company evaluated the terms of the conversion features of this convertible note in accordance with ASC 815,
Derivatives
and Hedging
, and determined it is indexed to the Company's common stock and that the conversion features meet the definition
of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. The
Company determined the value of the conversion feature using the binomial valuation model as follows:
|
|
Expected
term
|
|
|
18
months
|
|
|
Expected
stock price volatility
|
|
|
340.00
|
%
|
|
Weighted-average
risk-free interest rate
|
|
|
2.70
|
%
|
|
Expected
dividend
|
|
$
|
0.00
|
|
|
|
|
As
of September 30, 2018, which was also the date of issuance of the convertible note, a liability totaling $1,205,500 was recorded
and is included in long-term liabilities. This derivative liability was recorded with $829,680 of the value recognized as
a debt discount on the convertible note which will be amortized over the life of the convertible note, and the remaining balance
of $375,820 included in the change in fair value of the derivative liability within the consolidated statement of operations
as of September 30, 2018.
|
|
|
|
|
|
|
|
As
of September 30, 2018, the outstanding principal balance of the note was $829,680, offset by an unamortized debt discount
balance of $829,680.
|
NOTE
5: COMMITMENTS AND CONTINGENCIES
Through
Data443, the Company has signed consulting contracts with a team of consultants and advisors, of which, four provide senior leadership
to the Company in corporate development, technology development, finance, operations, and sales and marketing, with the others
providing services in administration, marketing, sales, and engineering. Additionally, the Company engages junior- and mid-level
engineering consultants on a project-by-project basis to further develop technology and to implement services for prospective
clients. Collectively, the team is paid approximately $200,000 each quarter. Additionally, the Company has granted stock and stock
options to some of these consultants and advisors as part of their compensation and/or in lieu of cash to reduce cash outlays.
Stock and stock option grants are awarded selectively to consultants upon their start dates, and every quarter thereafter, during
the term of their engagement, at a fixed dollar amount. Each stock and stock option grant is irrevocable, and some stock grants
include registration rights; however, each stock and stock option grant is restricted until the one-year anniversary from the
date of each respective grant.
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
5: COMMITMENTS AND CONTINGENCIES (concluded)
On
or about February 5, 2018, the Company entered into the Equity Purchase Agreement (“EPA”) with Blue Citi, under which
Blue Citi could purchase up to $10,000,000 of the Company’s common stock over a period of time terminating on the earlier
of (i) 24 months from the date on which the EPA was executed, or (ii) the date on which Blue Citi purchased the aggregate maximum
purchase price of $10,000,000 pursuant to the EPA. The purchase price for the Company’s shares of common stock to be paid
by Blue Citi was 85% of the price of Company shares traded on the principal market of the Company’s common stock pursuant
to a specific time period and formula in the EPA. The embedded conversion feature in the EPA created a BCF totaling approximately
$1,500,000 which was previously recognized as of June 30, 2018.
Additionally,
in connection with the EPA, the Company agreed to a $100,000 commitment fee (the “Commitment Fee”), payable in common
shares which equated to 28,571,429 shares of Company common stock (the “Commitment Shares”). The Commitment Fee was
previously recognized in general and administrative expenses and the Commitment Shares, which were not issued, were recorded as
common shares issuable and included in additional paid-in capital - stock subscription within the condensed consolidated financial
statements as of June 30, 2018.
During
September 2018, in connection with the Convertible Note Amendment (See Note 5), the Company and Blue Citi agreed to terminate
the EPA. As a result of the termination, a gain on the change in fair value of the derivative liability totaling $1,500,000 was
recognized during September 2018. As noted in the above paragraph, the Commitment Fee was previously recognized in general and
administrative expenses and the Commitment Shares were never issued. As such, a reduction in general administrative expenses totaling
$100,000 was recognized as of September 30, 2018.
NOTE
6: CAPITAL STOCK
Preferred
Stock
The
Company is authorized to issue 50,000,000 shares of preferred stock with a par value of $0.001, of which 1,000,000 shares have
been designated as Series A. As of September 30, 2018 and December 31, 2017, 1,000,000 shares of Series A were issued and outstanding.
Each share of Series A is (i) convertible into 1,000 shares of common stock, and (ii) entitled to vote 15,000 shares of common
stock on all matters submitted to a vote by shareholders voting common stock. All issued and outstanding shares of Series A Preferred
Stock are held by Mr. Remillard.
Common
Stock
The
Company is authorized to issue 8,838,000,000 shares of common stock with a par value of $0.001 per share. All shares have equal
voting rights, are non-assessable, and have one vote per share. The total number of shares of Company common stock issued and
outstanding as of September 30, 2018 and December 31, 2017, was 4,447,676,982 and 3,947,676,982. This number does not include
shares of common stock which the Company is obligated to issue.
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
6: CAPITAL STOCK (concluded)
On
or about January 26, 2018, the Company committed to issue 1,200,000,000 shares to Myriad, a company wholly owned by the Chief
Executive Officer and controlling shareholder Mr. Remillard, as part of the payment for the Company’s purchase of ClassiDocs
from Myriad. Those shares will now be issued to Mr. Remillard pursuant to instructions from Myriad. While not yet issued as of
this filing, these shares have been recorded as common shares issuable and included in additional paid-in capital - stock subscription
within the condensed consolidated financial statements as of September 30, 2018. These shares have not been included in the total
number of issued and outstanding shares reflected herein.
During
June 2018, the Company committed to issue 100,000,000 shares to Mr. Remillard, and an additional estimated 100,000,000 shares
as an earn out, to Mr. Remillard, under the transaction in which the Company acquired all of the shares of Data443. While not
yet issued as of this filing, these shares have been recorded as common shares issuable and included in additional paid-in capital
- stock subscription within the condensed consolidated financial statements as of September 30, 2018. These shares have not been
included in the total number of issued and outstanding shares reflected herein.
NOTE
7: SHARE-BASED COMPENSATION
Stock
Options
During
2018, the Company granted options to purchase common stock to certain consultants and advisors as consideration for services rendered.
The terms of the stock option grants are determined by the Company’s Board of Directors. The Company’s stock options
generally vest upon the one-year anniversary date of the grant and have a maximum term of ten years.
The
following summarizes the stock option activity for the nine-month period ended September 30, 2018:
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Available
for
|
|
|
Options
|
|
|
Exercise
|
|
|
|
|
Grant
|
|
|
Outstanding
|
|
|
Price
|
|
|
Balance
as of January 1, 2018
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
Authorization
of awards
|
|
|
182,550,551
|
|
|
|
-
|
|
|
|
-
|
|
|
Grants
of stock options
|
|
|
(182,550,551
|
)
|
|
|
182,550,551
|
|
|
|
0.0046
|
|
|
Balance
as of September 30, 2018
|
|
|
-
|
|
|
|
182,550,551
|
|
|
$
|
0.0046
|
|
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
7: SHARE-BASED COMPENSATION (continued)
The
following summarizes certain information about stock options vested and expected to vest as of September 30, 2018:
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Contractual
Life
|
|
|
Average
|
|
|
|
|
Number
of Options
|
|
|
(In
Years)
|
|
|
Exercise
Price
|
|
|
Outstanding
|
|
|
182,550,551
|
|
|
|
9.45
|
|
|
$
|
0.0046
|
|
|
Exercisable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
The
following table summarizes certain information about the stock options outstanding and exercisable as of September 30, 2018:
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
Number
of Options
|
|
|
Remaining
Life
|
|
|
Number
of Options
|
|
|
Exercise
Price
|
|
|
Outstanding
|
|
|
(In
Years)
|
|
|
Exercisable
|
|
|
$
|
0.0080
|
|
|
|
1,562,500
|
|
|
|
9.25
|
|
|
|
-
|
|
|
|
0.0014
|
|
|
|
121,428,571
|
|
|
|
9.34
|
|
|
|
-
|
|
|
|
0.0105
|
|
|
|
2,380,952
|
|
|
|
9.68
|
|
|
|
-
|
|
|
|
0.0106
|
|
|
|
1,000,000
|
|
|
|
9.67
|
|
|
|
-
|
|
|
|
0.0114
|
|
|
|
11,030,701
|
|
|
|
9.67
|
|
|
|
-
|
|
|
|
0.0115
|
|
|
|
14,782,607
|
|
|
|
9.58
|
|
|
|
-
|
|
|
|
0.0141
|
|
|
|
1,773,050
|
|
|
|
9.52
|
|
|
|
-
|
|
|
|
0.0144
|
|
|
|
1,666,666
|
|
|
|
9.64
|
|
|
|
-
|
|
|
|
0.0148
|
|
|
|
844,595
|
|
|
|
9.50
|
|
|
|
-
|
|
|
|
0.0150
|
|
|
|
1,600,000
|
|
|
|
9.40
|
|
|
|
-
|
|
|
|
0.0179
|
|
|
|
1,675,978
|
|
|
|
9.42
|
|
|
|
-
|
|
|
|
0.0100
|
|
|
|
8,737,864
|
|
|
|
9.84
|
|
|
|
-
|
|
|
|
0.0103
|
|
|
|
3,398,058
|
|
|
|
9.84
|
|
|
|
-
|
|
|
|
0.0070
|
|
|
|
3,428,572
|
|
|
|
9.90
|
|
|
|
-
|
|
|
|
0.0096
|
|
|
|
4,166,667
|
|
|
|
9.92
|
|
|
|
-
|
|
|
|
0.0122
|
|
|
|
3,073,770
|
|
|
|
9.75
|
|
|
|
-
|
|
|
|
|
|
|
|
182,550,551
|
|
|
|
|
|
|
|
-
|
|
As
of September 30, 2018, there was approximately $400,000 of total unrecognized compensation cost related to nonvested share-based
compensation arrangements which is expected to be recognized within the next year.
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
7: SHARE-BASED COMPENSATION (concluded)
Restricted
Stock Awards
During
2018, the Company issued restricted stock awards for shares of common stock which have been reserved for the holders of the awards.
Restricted stock awards were issued to certain consultants and advisors as consideration for services rendered. The terms of the
restricted stock units are determined by the Company’s Board of Directors. The Company’s restricted stock shares generally
vest over a period of one year and have a maximum term of ten years.
The
following summarizes the nonvested restricted stock activity for the nine-month period ended September 30, 2018:
|
|
|
|
|
|
Weighted-
Average
|
|
|
|
|
Shares
|
|
|
Fair
Value
|
|
|
Nonvested
as of January 1, 2018
|
|
|
-
|
|
|
|
-
|
|
|
Shares
of restricted stock reserved
|
|
|
133,567,651
|
|
|
|
0.0039
|
|
|
Nonvested
as of September 30, 2018
|
|
|
133,567,651
|
|
|
|
0.0039
|
|
Share-based
compensation expense for restricted stock grants during the nine months ended September 30, 2018, was approximately $229,250.
As
of September 30, 2018, there was approximately $296,000 of total unrecognized compensation cost related to nonvested share-based
compensation, which is expected to be recognized over the next year.
NOTE
8: LEGAL AND OTHER MATTERS
On
or about April 9, 2018, a Current Report on Form 8-K (“8-K”) was filed under the name “Landstar, Inc.”
The filing was not authorized by the Company and the Company has had no communication with the named filer. The 8-K purports to
present financial statements for the years ended December 31, 2017 and 2016, and includes an entry for “long-term debt with
interest” for $1,000,000 on the balance sheet. Although the Company is aware of an unsubstantiated claim for a $500,000
debt obligation, the Company is not familiar with the allegations that form the basis for this claim. The Company intends to vigorously
dispute this claim.
LANDSTAR,
INC. AND SUBSIDIARIES
Notes
to Consolidated Financial Statements
September
30, 2018 and December 31, 2017 (Unaudited)
NOTE
8: LEGAL AND OTHER MATTERS (concluded)
Chuguan
Industry Co. Ltd., which the Company believes is located in Beijing, China, appears on the Company’s shareholder list as
a shareholder of record for 1,500,000,000 shares of Company common stock. However, the Company’s research has uncovered
credible documentation that these shares were cancelled and should not be listed as issued and outstanding. The Company continues
to investigate the validity of the cancellation documentation in order to determine if these shares are actually outstanding.
The
Company recently received a demand for conversion of a purported $90,000 note purportedly issued by the Company in 2008. The Company
has no record of this obligation and there is indication that this purported obligation was ever recorded in the financial records
of the Company. The Company believes that any action or collection or conversion of this purported note will be barred by the
statute of limitations. As such, the Company has denied the existence and viability of the note, and will vigorously dispute this
claim.
The
Company recently received a demand from the same party claiming to have ownership of one million shares of the Company preferred
stock. No stock certificate has been presented by the party claiming ownership, and there are no records indicating that the Corporation
ever issued these shares to the claimant, or to the party from which the claimant contends it acquired the shares. Further, we
believe that any such claim, if there is one, is barred by the statute of limitations. As such, the Company has rejected the claim
to the shares, and the Company will vigorously dispute this claim.
The
Company recently received a demand from a former consultant demanding payment of amounts purportedly owed to the consultant. The
Company believes that no amounts are owed to the consultant. The Company is reviewing all relevant facts and circumstances and
considering all available legal options.
In
the normal course of business, the Company may become a party to litigation matters involving claims against the Company. The
Company’s management is unaware of any other pending or threatened assertions and there are no current matters that would
have a material effect on the Company’s condensed consolidated financial position or results of operations.
NOTE
9: SUBSEQUENT EVENTS
During
October and November 2018, the Company converted $25,000 of an existing promissory note into 500,000,000 shares of common stock.
During
October 2018, the Company amended an existing convertible note with Blue Citi to increase the outstanding principal from $829,680
to $1,004,680. Otherwise, there was no change to the existing terms of this convertible note.
During
October 2018, the Company issued a convertible promissory note to AFT Funding Corp.
totaling
$110,000 in exchange for net proceeds of $100,000. The note (i) accrues interest at the rate of 8% per annum; (ii) is scheduled
to mature in July 2019; and (iii) can be converted into shares of our common stock at a 30% discount to (a) the lowest trading
price during the 20 consecutive trading days immediately preceding the date of conversion or (b) the lowest price of our common
stock during the 20 consecutive trading days preceding the issuance of the note. (40% discount upon an event of default under
the note), and (iii) is due and payable upon the 18-month anniversary of its issuance. The note can be converted at any time in
the discretion of the holder. The embedded conversion feature in this note creates a BCF for which the value has not yet been
determined as of the date of these condensed consolidated financial statements.
During
October 2018, the Company issued a convertible promissory note to Smea2z LLC
totaling
$220,000 in exchange for net proceeds of $200,000. The note (i) accrues interest at the rate of 8% per annum; (ii) is scheduled
to mature in July 2019; and (iii) can be converted into shares of our common stock at a 30% discount to (a) the lowest trading
price during the 20 consecutive trading days immediately preceding the date of conversion or (b) the lowest price of our common
stock during the 20 consecutive trading days preceding the issuance of the note. (40% discount upon an event of default under
the note), and (iii) is due and payable upon the 18-month anniversary of its issuance. The note can be converted at any time in
the discretion of the holder. The embedded conversion feature in this note creates a BCF for which the value has not yet been
determined as of the date of these condensed consolidated financial statements.
During
December 2018, the Company issued 252,016,130 share of common stock at price of approximately $0.002 per share for net proceeds
of $500,000. In connection with the issuance of the common stock, the subscribers received warrants to purchase an additional
50,403,226 shares of common stock at a price of $0.003 per share. The warrants have a five year term and cashless exercise is
permitted.
The
Company has evaluated subsequent events through January 10, 2019, the date at which the condensed financial statements were available
for issuance.
(b)
Exhibits
|
Exhibit
Number
|
|
Description
of Document
|
|
|
|
|
|
2.1
|
|
Share Exchange Agreement dated December 31, 1998, by and between the Registrant and Rebound Corp., incorporated by reference to Exhibit 10.7 to Form 10-SB/A as filed by the Registrant with the Securities and Exchange Commission on January 7, 2000.
|
|
|
|
|
|
3.1
|
|
Articles of Incorporation of the Registrant, dated May 04, 1998, incorporated by reference to Exhibit 3(I) to Form 10-SB as filed by the Registrant with the Securities and Exchange Commission on January 4, 2000.
|
|
|
|
|
|
3.2*
|
|
Amended and Restated Articles of Incorporation of the Registrant, dated May 01, 2018.
|
|
|
|
|
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3.3*
|
|
Certificate of Designation for Preferred Series A Stock of the Registrant, dated May 28, 2008.
|
|
|
|
|
|
3.4*
|
|
Amendment to Certificate of Designation for Preferred Series A Stock of the Registrant, dated April 27, 2018.
|
|
|
|
|
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3.5
|
|
Bylaws of the Registrant, incorporated by reference to Exhibit I to Form 10-SB as filed by the Registrant with the Securities and Exchange Commission on January 4, 2000.
|
|
|
|
|
|
4.1*
|
|
Convertible Note issued by the Registrant on October 17, 2014 in favor of Atlantic Holding Corp. in the original principal amount of $125,000.
|
|
|
|
|
|
4.2*
|
|
8% Convertible Redeemable Note issued by the Registrant on October 16, 2018 in favor of AFT Funding Corp. in the original principal amount of $110,000.
|
|
|
|
|
|
4.3*
|
|
8% Convertible Redeemable Note issued by the Registrant on October 23, 2018 in favor of Smea2Z LLC in the original principal amount of $220,000.
|
|
|
|
|
|
10.1*
|
|
Asset Purchase Agreement dated January 26, 2018 by and between Myriad Software Productions, LLC and Data443 Risk Management, Inc.
|
|
|
|
|
|
10.2*
|
|
Secured Promissory Note dated January 26, 2018 issued by Data443 Risk Management, Inc. in favor of Myriad Software Productions, LLC in the original principal amount of $250,000.
|
|
|
|
|
|
10.3*
|
|
Security Agreement dated January 26, 2018 executed by Data443 Risk Management, Inc. in favor of Myriad Software Productions, LLC.
|
|
|
|
|
|
10.4*
|
|
Share Exchange Agreement dated June 29 2018 by and between LandStar, Inc.; Data443 Risk Mitigation, Inc.; and, Jason Remillard.
|
|
|
|
|
|
10.5*
|
|
Asset Purchase Agreement dated October 22, 2018 by and between Data443 Risk Mitigation, Inc.; Modevity, LLC; and, Jim Coyne.
|
|
|
|
|
|
10.6*
|
|
Secured Promissory Note dated October 22, 2018 issued by Data443 Risk Management, Inc. in favor of Modevity, LLC in the original principal amount of $750,000.
|
|
|
|
|
|
10.7*
|
|
Security Agreement dated October 22, 2018 executed by Data443 Risk Management, Inc. in favor of Modevity, LLC.
|
|
|
|
|
|
10.8*
|
|
Debt Restructuring Agreement dated September 30, 2018 by and between LandStar, Inc. and Blue Citi LLC.
|
|
|
|
|
|
10.9*
|
|
Consolidated Note dated September 30, 2018 issued by LandStar, Inc. in favor of Blue Citi LLC Modevity, LLC in the original principal amount of $829,680.
|
|
|
|
|
|
10.10*
|
|
Form of Common Stock Purchase Agreement executed in connection with the issuance in December 2018 of 252.016,130 shares of the Registrant’s common stock in exchange for $500,000.
|
|
|
|
|
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10.11*
|
|
Form of Common Stock Purchase Warrant issued in December 2018 in connection with the Common Stock Purchase Agreement and the issuance thereunder, for a total of 50,403,226 warrants.
|
|
|
|
|
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21.1*
|
|
List of subsidiaries of the Registrant.
|
*
Filed herewith.
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.
|
|
LANDSTAR,
INC.
|
|
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DATED:
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April
24,
2019
|
|
BY:
|
/s/
JASON REMILLARD
|
|
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JASON
REMILLARD,
|
|
|
|
President;
Chief Executive Officer;
|
|
|
|
Chief
Financial Officer
|