Quarterly Report (10-q)

Date : 11/26/2019 @ 10:20PM
Source : Edgar (US Regulatory)
Stock : DLT Resolution Inc (PK) (DLTI)
Quote : 1.39  0.0 (0.00%) @ 8:21PM

Quarterly Report (10-q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2019

 

OR

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 333-148546

 

DLT RESOLUTION, INC

(Exact name of registrant as specified in its charter)

 

Nevada

 

20-8248213

(State of Incorporation)

 

(I.R.S. Employer Identification No.)

 

5940 S. Rainbow Blvd., Ste 400-32132, Las Vegas, NV

 

89118

(Address of principal executive offices)

 

(Zip Code)

 

(702) 796-6363

(Registrant’s telephone number, including area code)

 

Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ¨ No x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

 

Large accelerated filer

¨

Non‑accelerated filer

¨

Accelerated filer

¨

Smaller reporting company

x

(Do not check if a smaller reporting company)

Emerging growth company

x

 

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. ¨

 

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

 

As of November 21, 2019, 24,855,614 shares of the registrant’s Common Stock, $0.0001 par value, were issued and 20,890,537 were outstanding.

 

 
 
 
 

FORWARD-LOOKING STATEMENTS

 

This Form 10-Q for the quarterly period ended June 30, 2019 contains forward-looking statements that involve risks and uncertainties. Forward-looking statements in this document include, among others, statements regarding our capital needs, business plans and expectations. Such forward-looking statements involve assumptions, risks and uncertainties regarding, among others, the success of our business plan, availability of funds, government regulations, operating costs, our ability to achieve significant revenues, our business model and products and other factors. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other comparable terminology. In evaluating these statements, you should consider various factors, including the assumptions, risks and uncertainties set forth in reports and other documents we have filed with or furnished to the SEC. These factors or any of them may cause our actual results to differ materially from any forward-looking statement made in this document. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding future events, our actual results will likely vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. The forward-looking statements in this document are made as of the date of this document and we do not intend or undertake to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.

 

 
2
 
Table of Contents

 

TABLE OF CONTENTS

 

FORM 10-Q

 

QUARTER ENDED JUNE 30, 2019

 

PART I

 

FINANCIAL INFORMATION

 

 

 

 

Page

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

 

Unaudited Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

 

4

 

 

 

Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018

 

5

 

 

 

Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018

 

8

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

9

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

14

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

17

 

 

 

 

Item 4.

Controls and Procedures

 

17

 

 

 

PART II - OTHER INFORMATION

 

18

 

 

Item 1.

Legal Proceedings

 

18

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

18

 

 

 

Item 3.

Defaults Upon Senior Securities

 

18

 

 

 

Item 4.

Mine Safety Disclosures

 

18

 

 

 

Item 5.

Other Information

 

18

 

 

 

Item 6.

Exhibits

 

19

 

 

 
3
 
Table of Contents

 

Item 1: Financial Statements

 

DLT RESOLUTION, INC

 

Consolidated Balance Sheets

 

(Unaudited)

 

 

 

 

 

 

 

June 30,

2019

 

 

December 31,

2018

 

ASSETS

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 43,387

 

 

$ 12,908

 

Accounts receivable

 

 

50,085

 

 

 

12,217

 

Assets held for sale

 

 

-

 

 

 

656,735

 

Total current assets

 

 

93,472

 

 

 

681,860

 

 

 

 

 

 

 

 

 

 

Intangible assets, net of accumulated amortization

 

 

424,916

 

 

 

460,491

 

Goodwill

 

 

163,396

 

 

 

156,774

 

 

 

 

 

 

 

 

 

 

Total assets

 

$ 681,784

 

 

$ 1,299,125

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$ 64,612

 

 

$ 48,921

 

Accounts payable, related party

 

 

15,000

 

 

 

40,000

 

Interest payable, related party

 

 

30,503

 

 

 

26,875

 

Related party payables

 

 

15,777

 

 

 

17,713

 

Current notes payables, related party

 

 

81,500

 

 

 

81,500

 

Liabilities held for sale

 

 

-

 

 

 

146,127

 

Total current liabilities

 

 

207,392

 

 

 

361,136

 

 

 

 

 

 

 

 

 

 

Notes payable, net of current portion

 

 

5,000

 

 

 

5,000

 

Other long term liability

 

 

709,236

 

 

 

196,142

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

921,628

 

 

 

562,278

 

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit)

 

 

 

 

 

 

 

 

Series A convertible preferred stock, $1.00 par value; 5,000,000 shares authorized; 0 and 0 issued and outstanding at June 30, 2019 and December 31, 2018

 

 

-

 

 

 

-

 

Series B convertible preferred stock, $1.00 par value; 500,000 shares authorized; 64,000 and 64,000 issued and outstanding at June 30, 2019 and December 31, 2018

 

 

64,000

 

 

 

64,000

 

Common stock, $0.001 par value; 275,000,000 shares authorized; 24,982,537 and 24,982,537 issued; 21,167,537 and 21,167,537 outstanding at June 30, 2019 and December 31, 2018

 

 

24,983

 

 

 

24,983

 

Additional paid in capital

 

 

4,192,678

 

 

 

4,192,678

 

Other comprehensive income

 

 

(22,102 )

 

 

(37,689 )

Treasury stock, 3,815,000 shares

 

 

(5,300 )

 

 

(5,300 )

Accumulated deficit

 

 

(4,494,103 )

 

 

(3,595,912 )

Total equity (deficit) attributable to parent

 

 

(239,844 )

 

 

642,760

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

 

-

 

 

 

94,087

 

Total stockholder's equity (deficit)

 

 

(239,844 )

 

 

736,847

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' deficit

 

$ 681,784

 

 

$ 1,299,125

 

  

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 
4
 
Table of Contents

 

DLT RESOLUTION, INC.

 

Consolidated Statements of Operations

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

 

 

113,358

 

 

$ 218,965

 

 

$ 235,367

 

 

$ 367,353

 

Cost of revenue

 

 

38,738

 

 

 

91,466

 

 

 

72,412

 

 

 

120,533

 

Gross margin

 

 

74,620

 

 

 

127,499

 

 

 

162,955

 

 

 

246,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

86,213

 

 

 

129,762

 

 

 

171,222

 

 

 

201,783

 

Professional fees

 

 

31,850

 

 

 

62,244

 

 

 

64,421

 

 

 

78,619

 

Total operating expenses

 

 

118,063

 

 

 

192,006

 

 

 

235,643

 

 

 

280,402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

(43,443 )

 

 

(64,507 )

 

 

(72,688 )

 

 

(33,582 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain/(loss) on change in fair market value of deriviative liability

 

 

-

 

 

 

2,703

 

 

 

-

 

 

 

(2,427 )

Gain/(loss) on stock based liability

 

 

31,133

 

 

 

-

 

 

 

(495,438 )

 

 

-

 

Other expense

 

 

-

 

 

 

(212 )

 

 

-

 

 

 

(212 )

Foreign exchange gain/(loss)

 

 

(17 )

 

 

-

 

 

 

5,349

 

 

 

-

 

Loss on investment

 

 

-

 

 

 

-

 

 

 

(331,787 )

 

 

-

 

Interest expense

 

 

(1,823 )

 

 

859

 

 

 

(3,627 )

 

 

(1,070 )

Total other income (expense)

 

 

29,293

 

 

 

3,350

 

 

 

(825,503 )

 

 

(3,709 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

(14,150 )

 

$ (61,157 )

 

$ (898,191 )

 

$ (37,291 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss attributable to non-controlling interest

 

 

 

 

 

 

5,908

 

 

 

 

 

 

 

(6,303 )

Preferred stock dividends declared

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,488 )

Net loss attributable to common stockholders

 

 

(14,150 )

 

 

(55,249 )

 

 

(898,191 )

 

 

(45,082 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per basic share outstanding

 

 

(0.00 )

 

$ (0.00 )

 

$ (0.04 )

 

$ (0.00 )

Net income per diluted share outstanding

 

 

(0.00 )

 

$ (0.00 )

 

$ (0.04 )

 

$ (0.00 )

Weighted average basic shares outstanding

 

 

19,263,408

 

 

 

18,789,268

 

 

 

20,594,092

 

 

 

19,012,104

 

Weighted average diluted shares outstanding

 

 

19,263,408

 

 

 

19,279,268

 

 

 

20,594,092

 

 

 

19,502,104

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 
5
 
Table of Contents

 

DLT RESOLUTION, INC.

Consolidated Statements of Comprehensive Loss

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income (loss)

 

 

(14,150 )

 

$ (61,157 )

 

$ (898,191 )

 

$ (37,291 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(15,189 )

 

 

(8 )

 

 

15,587

 

 

 

(8 )

Total other comprehensive loss

 

 

(15,189 )

 

 

(8 )

 

 

15,587

 

 

 

(8 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 

(29,339 )

 

$ (61,165 )

 

$ (882,604 )

 

$ (37,299 )
 

See accompanying notes to consolidated financial statements.

 
 
6
 
Table of Contents

 

DLT RESOLUTION, INC

(fka HEMCARE HEALTH SERVICES INC.)

Statement of Changes in Stockholders' Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Preferred Stock

 

 

Series B Preferred Stock

 

 

Common Stock

 

 

Additional Paid-in

 

 

Other comprehensive

 

 

Treasury

 

 

Accumulated

 

 

Non-Controlling

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

income

 

 

Stock

 

 

Deficit

 

 

Interest

 

 

Total

 

Balance, December 31, 2017

 

 

25,000

 

 

$ 25,000

 

 

 

64,000

 

 

$ 64,000

 

 

 

21,572,871

 

 

$ 21,573

 

 

$ 3,129,894

 

 

$ 16

 

 

$ (5,300 )

 

$ (3,394,701 )

 

 

-

 

 

 

(159,518 )

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

Issuance of common stock for cash proceeds

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

381,818

 

 

 

382

 

 

 

77,118

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

77,500

 

Written back of dividends payable for preferred stock converted to common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,697

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

26,697

 

Issuance of common stock for acquisitions

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

525,000

 

 

 

525

 

 

 

117,996

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

118,521

 

Stock split rounding

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

63,888

 

 

 

64

 

 

 

(64 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Conversion of preferred stock to common stock

 

 

(25,000 )

 

 

(25,000 )

 

 

-

 

 

 

-

 

 

 

25,000

 

 

 

25

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(24,975 )

Non-controlling interest in acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

Net income, three months ended March 31, 2018

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(39,144 )

 

 

-

 

 

 

23,126

 

 

 

(12,211 )

 

 

(28,229 )

Balance, March 31, 2018

 

 

-

 

 

$ -

 

 

 

64,000

 

 

$ 64,000

 

 

 

22,568,577

 

 

$ 22,569

 

 

$ 3,351,641

 

 

$ (39,128 )

 

$ (5,300 )

 

$ (3,371,575 )

 

 

(12,211 )

 

$ 9,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 21, 2018

 

 

-

 

 

$ -

 

 

 

64,000

 

 

 

64,000

 

 

 

24,982,537

 

 

 

24,983

 

 

 

4,192,678

 

 

 

(37,688 )

 

 

(5,300 )

 

 

(3,595,912 )

 

 

94,087

 

 

 

736,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,775

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,775

 

Net loss, period ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(884,041 )

 

 

(94,087 )

 

 

(978,128 )

Balance, March 31, 2019

 

 

-

 

 

 

-

 

 

 

64,000

 

 

 

64,000

 

 

 

24,982,537

 

 

 

24,983

 

 

 

4,192,678

 

 

 

(6,913 )

 

 

(5,300 )

 

 

(4,479,953 )

 

 

-

 

 

 

(210,505 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,188 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,188 )

Net loss, period ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,150 )

 

 

-

 

 

 

(14,150 )

Balance, June 30, 2019

 

 

-

 

 

 

-

 

 

 

64,000

 

 

 

64,000

 

 

 

24,982,537

 

 

 

24,983

 

 

 

4,192,678

 

 

 

(22,101 )

 

 

(5,300 )

 

 

(4,494,103 )

 

 

-

 

 

 

(239,843 )

 

 
7
 
Table of Contents

 

DLT RESOLUTION, INC

Consolidated Statements of Cash Flows

 

 

 

Six Months

Ended

June 30,

2019

 

 

Six Months

Ended

June 30,

2018

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Net income (loss)

 

$ (898,191 )

 

$ (37,291 )

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

Loss on investment

 

 

331,787

 

 

 

212

 

Loss on stock based liability

 

 

495,438

 

 

 

-

 

Loss related items

 

 

(50,581 )

 

 

-

 

Depreciation and amortization expense

 

 

51,212

 

 

 

85,487

 

Loss on change in fair market value of derivative liability

 

 

-

 

 

 

2,427

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(33,436 )

 

 

(47,460 )

Related party receivable

 

 

 

 

 

 

(39,964 )

Interest payable, related party

 

 

3,628

 

 

 

3,638

 

Accounts payable and accrued liabilities

 

 

14,471

 

 

 

(66 )

Accounts payable, related party

 

 

(25,000 )

 

 

(15,000 )

Net cash used in operating activities

 

 

(110,672 )

 

 

(48,017 )

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

 

 

 

 

 

 

Purchase of investments

 

 

-

 

 

 

(575 )

Purchase of equipment

 

 

 

 

 

 

(5,996 )

Net cash provided by acquisition

 

 

 

 

 

 

(9,370 )

Net cash used in investing activities

 

 

-

 

 

 

(15,941 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from bank overdraft

 

 

-

 

 

 

3,056

 

Proceeds from related party payables

 

 

-

 

 

 

(307 )

Payments to related party

 

 

(1,947 )

 

 

(17,657 )

Proceeds from sale of common stock

 

 

 

 

 

 

153,500

 

Proceeds from related parties

 

 

138,354

 

 

 

-

 

Net cash provided by financing activities

 

 

136,407

 

 

 

138,592

 

 

 

 

 

 

 

 

 

 

Net change in cash

 

 

25,735

 

 

 

74,634

 

Effect of exchange rate on cash

 

 

4,744

 

 

 

(20,517 )

Cash at beginning of period

 

 

12,908

 

 

 

8,609

 

Cash at end of period

 

$ 43,387

 

 

$ 62,726

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ -

 

 

$ -

 

Cash paid for income taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

 

Other long term liability entered into for acquisition of AJD Data Services

 

$ -

 

 

$ 841,702

 

Common shares issued for acquisition of AJD Data Services

 

$ -

 

 

$ 120,243

 

Common shares issued in exchange for preferred shares

 

$ -

 

 

$ 25,000

 

Preferred dividend declared

 

$ -

 

 

$ 1,488

 

Common shares issued for asset purchase

 

$ -

 

 

$ 275,000

 

Payable entered into for asset purchase

 

$ -

 

 

$ 420,017

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 
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DLT RESOLUTION, INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2019

 

Note 1 - Basis of Presentation

 

The accompanying unaudited interim consolidated financial statements of DLT Resolution, Inc. collectively referred to herein as (“DLT,” or the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements for the period ended December 31, 2018 and notes thereto contained in the Company’s Form 10-K filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2018 as reported in the Form 10-K have been omitted.

 

During the three months ended June 30, 2019, the Company divested itself of 70 of the 80 shares it owned from the acquisition of A.J.D. Data Services (“A.J.D.”) that was made in the prior fiscal year. A.J.D. Data Services is no longer operating and has been presented in the financial statements as a loss on investment.

 

Note 2 - Going Concern

 

The Company had an accumulated deficit of $4,494,103 and a working capital deficit of $113,920 as of June 30, 2019. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Continuation of the Company’s existence depends upon its ability to obtain additional capital. Management’s plans in regards to this matter include raising additional equity financing and borrowing funds under a private credit facility and/or other credit sources. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Note 3 - Significant Accounting Policies

 

Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash

 

For the Statements of Cash Flows, all highly liquid investments with maturity of three months or less are considered to be cash equivalents.

 

Income taxes

 

Income taxes are provided for using the liability method of accounting in accordance with FASB ASC Topic 740 (formally SFAS No. 109 “Accounting for Income Taxes”). A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.

 

At June 30, 2019, there were no uncertain tax positions that require accrual.

 

Accounts Receivable

 

Accounts receivable balances are established for amounts owed to the Company from its customers from the sales of services and products. The Company closely monitors the collectability of outstanding accounts receivable and provide an allowance for doubtful accounts based on estimated collections of outstanding amounts.

 

Revenue Recognition

 

The Company follows ASC 606 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue upon the transfer of promised services to customers in amounts that reflect the consideration to which the Company expects to be entitled the transfer of services. The Company considers revenue earned when all the following criteria are met: (i) the contract with the customer has been identified, (ii) the performance obligations have been identified, (iii) the transaction price has been determined, (iv) the transaction price has been allocated to the performance obligations, and (v) the performance obligations have been satisfied. The Company primarily generates revenues through the sale of products through its website and at industry tradeshows. The Company will be performing a modified retrospective adoption of ASC 606 and this retrospective adoption will have no material impact to the prior year amounts recorded as revenue.

 

During the three and six months ended June 30, 2019, the Company generated revenues from the sale of general information technology services focused on telephone system set up. The Company generated revenues of $113,358 and $235,367 and $218,965 and $367,353 during the three and six months ended June 30, 2019 and 2018, respectively.

 

 
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Property and equipment

 

Property and equipment are stated at cost less accumulated depreciation. The Company provides for depreciation using the straight-line method over the estimated useful lives of the related assets, which range from three to five years. Maintenance and repair costs are expensed as they are incurred while renewals and improvements which extend the useful life of an asset are capitalized. At the time of retirement or disposal of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the consolidated results of operations.

 

Intangible Assets

 

Intangible assets primarily consist of customer relationships, software, non-compete agreements and domain names. The Company amortizes, to cost of revenue and operating expenses, these definite‑lived intangible assets on a straight‑line basis over the life of the assets which range from five to seven years.

 

Impairment of Long‑Lived Assets and Goodwill

 

The carrying value of long‑lived assets is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis.

 

The Company tests goodwill for impairment annually as of December 31, or whenever events or changes in circumstances indicate that goodwill may be impaired. The Company initially assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company compares the reporting unit’s carrying amount to its fair value. If the reporting unit’s carrying amount exceeds its fair value, an impairment charge is recorded based on that difference.

 

There was no impairment of long-lived assets or goodwill during the periods presented.

 

Convertible debt

 

The Company records beneficial conversion features related to the issuance of convertible debts that have conversion features at fixed or adjustable rates that are less than the Company’s stock prices on the respective issuance dates. The beneficial conversion features for the convertible instruments are recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instruments equal to the intrinsic value of the conversion features based on the difference between the effective conversion rates and the Company’s stock prices on the issuance dates. The beneficial conversion features are accreted by recording additional non-cash interest expense over the expected life of the convertible notes.

 

Software Development Costs and Amortization

 

The Company capitalizes software development costs in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 985-20. Software development costs are capitalized after technological feasibility is established. Once the software products become available for general release to the public, the Company amortizes such costs over the related product’s estimated economic useful life to general and administrative expenses.

 

Reclassification of Prior Year Presentation

 

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operation.

 

Share Based Expenses

The Company complies with FASB ASC Topic 718 Compensation—Stock Compensation, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that is based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. FASB ASC Topic 718 primarily focuses on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This statement requires a public entity to expense the cost of employee services received in exchange for an award of equity instruments. This statement also provides guidance on valuing and expensing these awards, as well as disclosure requirements of these equity arrangements.

 

Net Income (Loss) Per Share

 

Net loss per share is calculated in accordance with FASB ASC topic 260.Basic earnings (loss) per share is computed by dividing net income, or loss, by the weighted average number of shares of common stock outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income, or loss, by the weighted average number of shares of common stock outstanding for the period, assuming conversion or exercise of all potentially dilutive securities outstanding during each reporting period presented. Potentially dilutive securities are not presented or used in the computation of diluted loss per share on the statement of operations for periods when the Company incurs net losses, as their effect would be anti-dilutive.

 

As of June 30, 2019, and December 31, 2018, the Company had 0 and 0 shares, respectively, of Series A Preferred Stock issued and outstanding, which were convertible into 0 and 0 shares, respectively, of the Company’s common stock. Also, as of June 30, 2019 and December 31, 2018, the Company had 64,000 shares of Series B Convertible Preferred Stock issued and outstanding, which were convertible into 12,800 shares of the Company’s common stock. As of June 30, 2019 there is a potential earn out of an additional 500,000 restricted common shares of stock from the acquisition of 1922861 Ontario Inc (see Note 10 – Acquisition of 1922861 Ontario Inc).

 

 
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Principals of Consolidation

 

The consolidated financial statements represent the results of DLT Resolution, Inc.; its wholly owned subsidiary, DLT Resolution Corp.; its wholly owned subsidiary, DLT Data Services; and the assets, processes, and results therefrom of 1922861 Ontario Inc. Note 10 – Acquisition of 1922861 Ontario Inc.) All intercompany transactions and balances have been eliminated.

 

Foreign Currency Translation

 

The functional currency of the Company’s subsidiaries in Canada is the Canadian Dollar. The subsidiaries’ assets and liabilities have been translated to U.S. dollars using exchange rates of 0..763884 and 0.732902 in effect at the balance sheet dates of June 30, 2019 and December 31, 2018, respectively. Statements of operations amounts have been translated using the annual weighted average exchange rates of 0.749703 for the six months ended June 30, 2019. Resulting gains or losses from translating foreign currency financial statements are recorded as other comprehensive income (loss). Foreign currency transaction gains and losses resulting from exchange rate fluctuations on transactions denominated in a currency other than the local currency are included in other income (expense). There was a $5,366 currency transaction gain recognized during the periods presented.

 

Fair Value of Financial Instruments

 

Fair value of certain of the Company’s financial instruments including cash, prepaid expenses, accounts payable, accrued expenses, notes payable, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments.

 

Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of non-performance, which includes, among other things, the Company’s credit risk.

 

Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

 

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

 

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

 

Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.

 

Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.

 

Recently Issued Accounting Pronouncements

 

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. This analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule was effective as of November 5, 2018. The adoption of this final rule did not have a material impact on the financial statements.

 

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from non-employees. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company elected to early-adopt this standard in the current period; the adoption of this standard did not impact the financial statements.

 

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which provides amendments to current guidance to address the classifications and presentation of changes in restricted cash in the statement of cash flows. The effective date for the standard is for fiscal years beginning after December 15, 2017. The Company adopted the standard effective January 1, 2018; the adoption of this standard did not have a material impact on the financial statements.

 

 
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In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” The amendments in this update will require recognition of current and deferred income taxes resulting from an intra-entity transfer of an asset other than inventory when the transfer occurs. This update is effective for annual and interim periods beginning after December 15, 2017. The Company adopted the standard effective January 1, 2018; the adoption of this standard did not have a material impact on the financial statements.

 

In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02, Income Statement Reporting, Comprehensive Income (Topic 220). Effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this guidance by the Company is not expected to have a material impact on our condensed financial statements and related disclosures.

 

Management believes recently issued accounting pronouncements will have no impact on the financial statements of the Company.

 

Note 4 - Related Party Transactions

 

No salaries were paid to directors or executives during the periods ended June 30, 2019 or 2018.

 

During the six months ended June 30, 2019, the Company had payments of $1,947 to related parties and had proceeds on outstanding payables from other related parties of $138,354. The related party payables and receivables to and from the Company are unsecured and due on demand. There was $115,777 and $17,713 due to related parties as of June 30, 2019 and December 31, 2018, respectively. During the six months ended June 30, 2019, the Company also made payments for services rendered by related parties totaling $25,000, resulting in balances owed for such services of $15,000 and $40,000 at June 30, 2019 and December 31, 2018.

 

See Note 6 for Related Party Notes Payable.

 

Note 5 – Stockholders’ Equity

 

Series A Convertible Preferred Stock

 

The Company is authorized to issue up to 5,000,000 shares of Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock can be converted to common shares at the option of the holder at a rate of $0.10 per share.

 

There were 0 and 0 shares of series A convertible preferred stock issued and outstanding as of June 30, 2019 and December 31, 2018, respectively.

 

Series B Convertible Preferred Stock

 

The Company is authorized to issue up to 500,000 shares of Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock can be converted to common shares at the option of the holder at a rate of $0.20 per share.

 

There were 64,000 shares of series B convertible preferred stock issued and outstanding as of June 30, 2019 and December 31, 2018.

 

Common Stock

 

The authorized common stock of the Company consists of 275,000,000 shares and carries a par value of $0.001. During the year ended December 31, 2014, the Company bought back 380,000 post-split shares of common stock into treasury from a former officer for $100. The shares are being carried as treasury shares as reflected on the balance sheet.

 

During the year ended December 31, 2017, the Company issued a $5,000 note payable and $200 related party payable for a total of 3,777,000 outstanding common shares which are carried as treasury stock. There were 3,815,000 common shares held as treasury stock as of June 30, 2019 and December 31, 2018, respectively.

 

There were 24,982,537 and 24,982,537 common shares issued and 21,167,537 and 21,167,537 outstanding at June 30, 2019 and December 31, 2018, respectively.

 

Note 6 – Notes Payable

 

Related Party

 

During the year ended December 31, 2015, the Company entered into a note payable with a related party as a settlement for payment of consulting services provided valued at $350,000. The note carries interest of 9% compounded annually and was due on November 19, 2016. During the year ended December 31, 2016, the Company issued 50,000 shares of series A convertible preferred stock as repayment of $31,500 of accrued interest and $18,500 of outstanding principal. Additionally, on January 31, 2017, the Company issued 1,250,000 shares of common stock as repayment of $250,000 of principal. There was $81,500 and $81,500 of principal and $30,503 and $26,875 of accrued interest due as of June 30, 2019 and December 31, 2018.

 

Non – Related Party

 

On August 1, 2017, the Company entered into a note payable with an unrelated party to purchase common stock held by the unrelated party. The note is due on July 1, 2019 and bears no interest. There was $5,000 and $5,000 due as of June 30, 2019 and December 31, 2018.

 

 
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Note 7 Acquisition of 1922861 Ontario Inc.

 

Acquisition of Operating Assets

 

On April 12, 2018, the Company entered into and closed the transactions contemplated by the definitive asset purchase agreement and plan of re-organization by and among the Company, 1922861 Ontario Inc. a corporation organized under the laws of Ontario (“ 1922861 Ontario Inc. ”), the stockholders of 1922861 Ontario Inc. and other parties signatory thereto to acquire all the operating assets of 1922861 Ontario Inc. for 500,000 restricted common shares of DLT Resolution valued at $212,520, and a payment of CAD $19,200 to 1922861 Ontario’s supplier. On September 21, 2018 the 1922861 Ontario Inc acquisition reached the first milestone and received another 500,000 restricted commons shares of DLT Resolution valued at $205,295. The acquisition is considered a business combination for accounting purposes under ASC 805, and resulted in the integration of 1922861 Ontario Inc.’s operating assets and processes into the Company’s Canadian subsidiary DLT Resolution Corp.

 

In addition to the consideration on closing, an additional 500,000 restricted common shares may potentially be issued upon meeting the following milestone:

 

·

500,000 shares will be issued upon the acquired base generating CAD $500,000 in cumulated gross sales with a 10% pre-tax profit.

 

The Company has allotted 24 months to achieve this milestone. There is full acceleration to allow for full vesting as quickly as the cumulative sales milestones are reached. Share issuances will be issued under reliance of appropriate exemptions from registration with the Securities & Exchange Commission and will contain substantial resale restrictions.

 

The Company applied the acquisition method to the business combination and valued each of the assets acquired (cash, accounts receivable, equipment, customer relationships, software, domain names and non-compete agreements) and liabilities assumed (accounts payable and related party payable) at fair value as of the acquisition date. The carrying values of cash, accounts receivable, accounts payable and related party payable were deemed to be fair value as of the acquisition date. The Company determined the fair value of the equipment to be historical net book value. The preliminary allocation of the purchase price was based on estimates of the fair value of the assets and liabilities assumed based on provisional amounts. However, the allocation of excess purchase and the amounts allocated to intangible assets are now as per valuation of assets and liabilities performed by independent valuer. Under the purchase agreement, the Company issued 1,000,000 shares of common stock valued at $417,815 and committed to issue an additions 500,000 shares of common stock at certain milestones which was determined to have a fair value of $709,236 with mark to market pricing of DLT stock price as of June 30, 2019. Listed stock price was $1.39 on June 28th to determine value. The estimated fair value of the common stock to be issued of $709,236 is shown as an “other long-term liability” on the face of the balance sheet. The following table shows the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

 

ASSETS ACQUIRED

 

 

 

Accounts receivable

 

$ 18,663

 

Customer list

 

 

103,255

 

Developed technology

 

 

321,679

 

Domain and trade name

 

 

3,971

 

Non-compete

 

 

37,330

 

Goodwill

 

 

169,896

 

TOTAL ASSETS ACQUIRED

 

$ 654,794

 

 

 

 

 

 

LIABILITIES ASSUMED

 

 

 

 

Accounts payable

 

 

22,197

 

HST payable

 

 

2,147

 

TOTAL LIABILITIES ASSUMED

 

 

24,344

 

 

 

 

 

 

 

 

 

 

 

NET ASSETS ACQUIRED

 

$ 630,450

 

 

Note 8 – Concentrations of Revenue

 

During the three months ended June 30, 2019, seven customers accounted for 45% of the Company’s total revenue.

 

Note 9 – Subsequent Events

 

Litigation

 

On March 29, 2019, DLT Resolution Corp. and DLT Resolution Inc. was served with a Statement of Claim ats 300-306 Town Centre Boulevard Limited Partnership/Court File No. CV-19-00617228-000 (Toronto) for unpaid rent and lost revenue related to the premises. In this action, the Plaintiff has claimed damages against the Defendants DLT Resolution Corp. and DLT Resolution Inc. in the amount of $567,385.13 for an alleged breach of lease. The Plaintiff has claimed damages against the Defendant DLT Resolution Inc. in the amount of $567,385.13 for allegedly wrongfully inducing a breach of lease and tortious interference with contractual relations. The Plaintiff has further claimed damages against the Defendant DLT Resolution Inc. in the amount of $567,385.13 for allegedly oppressive conduct under the Ontario Business Corporations Act. The Plaintiff has further claimed compensation for its legal costs and for pre-judgment interest. The Company filed a statement of Defense citing, amongst other things, that it has never entered into any agreement with the landlord, nor guaranteed any such liability. The Defendants DLT Resolution Corp. and DLT Resolution Inc. intend to contest the claim vigorously. There is no intention to make a settlement offer nor have instructions been received to make a settlement offer at this juncture. Since the statement of defense was delivered on 16 May 2019, the Company had no further communication from counsel for the Plaintiff nor have any steps been taken to move the litigation forward. Although there can be no assurance of the Company’s ability to dismiss the claim, management feels the claim is without merit and is confident it will receive a ruling in its favor.

 

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation. Shareholders’ Equity General

 

DLT Resolution Inc. (“The Company”) was incorporated on January 17, 2007, under the laws of the State of Nevada. The principal offices are located at 5940 S. Rainbow Blvd, Ste 400-32132, Las Vegas, NV 89118. The telephone number is 1 (702) 796-6363. The Company has never declared bankruptcy or been in receivership. The only legal action or proceeding to which the Company has been a party is a claim filed on August 4, 2018 against the Company by a minority shareholder and former officer of the Company’s 80% subsidiary, A.D.J. Data Services. The claim alleges damages in the amount of CAD $650,000, but Management is of the belief that this claim is frivolous and without merit and is retaining counsel to defend this action and counter-claim for damages. See Note 12 - Subsequent Events for further details.

 

Description of Business

 

DLT is a Distributed Ledger Technology “Blockchain” Information Technology company operating in the telecommunication and Health Care industries. Additionally, the Company formed a wholly-owned Canadian subsidiary to carry on business in Canada effective November 23, 2017 and formed DLT Data Services. The Company offers secure data management, Information Technology (IT) and other telecommunications services in Canada and the United States. Through its RecordsBank.org portal it operates a Health Information Exchange. DLT is creating a single unified platform enabling the ability to request and retrieve medical information and records while meeting all of today’s Security & Compliance demands for HIPAA, PIPEDA and PHIPA. The Company is preparing to launch a Distributed Ledger Technology “Blockchain” version of the service placing electronic health records on this secure platform. The Company has been ready for the launch for some time and is prepared to initiate the launch upon filing of this 10 Q.

 

DLT operates in Canada through its wholly-owned subsidiary DLT Resolution Corp. and its majority owned subsidiary A.J.D. Data Services Ltd.

 

As a result of the business combination with 1922861 Ontario Inc. in the second quarter of 2018, our business now includes vital customers within the Resolution Telecom business. The Resolution Telecom business has been providing a wide range of innovative solutions that are reliable, scalable and flexible to hundreds of Canadian businesses for more than two decades. The Company's infrastructure solutions are delivered as a monthly service with substantial flexibility in the packaging and the delivery to ensure the solution is one that best meets each business's needs.

 

At the core of its offerings, Resolution Telecom Hosted PBX provides customers with cloud-based technology and infrastructure for IP voice communications at a significant savings over on premise solutions. Customers have the flexibility to utilize all the features such as voicemail to email, email transcription, call recording, CRM integration, remote workers, and mobile user apps without the capital expenditure of a traditional legacy system. By offering a truly supported hosted PBX platform, customers no longer require the expense of technicians making programming changes or deploying on site hardware.

 

Expansive Voice Portfolio - Traditional and Hosted IP. The Company's feature-rich Hosted PBX platform eliminates the cost and complexity of owning and maintaining a traditional premise-based system.

 

Hosted PBX is an advanced, fully hosted, and managed service that is continually upgraded to support market leading business productivity features for all customers.

 

Research and Development Expenditures

 

In 2017, the Company incurred costs of $55,000 in its development efforts of its online Health Information Exchange portal which was launched live in late 2017. The Company has also incurred an additional $64,000 in development expenses on utilizing a Distributed Ledger Technology “Blockchain” solution for placing health information on this platform during the fourth quarter of 2017. Management anticipates further research and development expenses as it creates new applications using Blockchain technology.

 

There were no additional R&D expenditures in the first quarter of 2019, however the Company expects to incur additional R&D expenses for the fiscal year not to exceed $15,000.

 

Business Strategy

 

DLT Resolution’s strategy is to provide secure data management to organizations large and small across Canada and the USA. Included with data management are telecom and other IT solutions to assist organizations with offloading burdensome back office services and thus helping clients achieve operational efficiency.

 

Through the deployment of the Company’s Distributed Ledger Technology “Blockchain” solution, DLT aims to leverage our offerings adding benefits previously unattainable in the marketplace.

 

 
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Distributed Ledger Technology “Blockchain”

 

Our Distributed Ledger Technology “Blockchain” permits trust to be intrinsically embedded into a technological solution, enabling smooth partnerships and transactions dramatically reducing friction between stakeholders. Our solutions focus primarily within the Health Information Exchange and Telecommunications space.

 

Workflow Automation

 

Distributed Ledger Technology “Blockchain” enabled trust improves coordination between various partners, due to a shared view of transactions and liabilities. This in turn permits the elimination of third parties, resulting in cost savings

 

Audit Trail

 

Facilitates a single view of data instead of the need for consolidation across various disparate systems. Resulting in reliable audit trails due to the history of all transactions being available in the ledger.

 

Data Privacy

 

Provable privacy protects clients’ data from being visible to unauthorized parties in compliance with all of today's HIPPA requirements

 

Revenue Assurance

 

Implementation of smart contracts allows for near-instantaneous charging, thus leading to improved revenue assurance and fraud reduction.

 

Health Information Exchange

 

DLT Resolution has developed and recently launched RecordsBank.org, a Centralized System for Patients, Lawyers & Insurers to retrieve and access Medical Records. The centralized system and portal is a cloud-based PIPEDA & HIPAA compliant network of Providers and Record Requestors. Utilizing a secure platform, providers will be able to securely exchange records electronically with third-party requestors. Health care providers with proper authorization can also share records with each other. The system works on a fee per record basis with future plans of licensing medical data, stripped of identifiers for medical research.

 

Addressing a $7 Billion a Year Problem

 

In national terms, across the U.S., hospitals spend more than $7 billion annually on customer intake. More than $7 billion, before any sort of medical procedure is done; before a patient even steps out of a waiting room, representing an incredible amount of time and money spent on intake administration.

 

Despite the adoption of electronic health records (EHR) and health information exchanges (HIE), providers are still mailing and faxing paper records because they have no PIPEDA or HIPAA compliant method to exchange records electronically with these third-party requestors. Based on our research, the Company estimates the current method of exchanging patient health information may cost a single clinician practice approximately $17,000 per year.

 

The Company aims to remove these substantial burdens both on an administrative and financial basis. People or firms simply use our secure online request form, pay a small service fee and the Company retrieves, digitizes and stores the records. At this point the requesting client can access the record globally 24 hours a day - 7 days a week to view it or transfer it securely. In fact, clients can upload any new records to consolidate and keep all of their records securely in one place.

 

Results of Operations

 

Revenues

 

Revenues during the three months ended June 30, 2019 and 2018 were $122,009 and $148,388 respectively. Additionally, cost of revenues during the three months ended June 30, 2019 and 2018 were $33,674 and $29,067 respectively. The increase in revenue and cost of revenue is the result of the Company’s formation of DLT. Data Services and 1922861 Ontario Inc.

 

Operating Expenses

 

Total operating expenses were $117,580 and $88,396 during the three months ended June 30, 2019 and 2018, respectively. The increase in operating expenses relates to the Company incurring additional general office expenses during the current period as it executed its business plan and form DLT Data Services and acquire 1922861 Ontario Inc, whereas the Company was stagnant in the prior period.

 

Other Income (Loss)

 

The Company had net other expense of $328,225 during the three months ended June 30, 2019 compared to net other expense of $7,059 during the three months ended March 30, 2018. The large change is due to the disposition of the investment in A.J.D. Data Services.

 

Net Income

 

The Company had a net loss and net income of $357,470 and $23,866 during the three months ended June 30, 2019 and 2018. While there is not a significant year over year change in total net income, net loss in the current year was generated from the execution of divesting of the investment in A.J.D. Data Services.

 

 
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Liquidity and Capital Resources

 

As of June 30, 2019, we had $54,330 of cash, total current assets of $109,686 and current liabilities of $193,989 creating a working capital deficit of $84,303. Current assets consisted of cash of $54,330, and accounts receivable, net of allowance of doubtful accounts of $55,356. Current liabilities as of June 30, 2019 consisted of $50,559 of accounts payable and accrued liabilities, $15,000 of accounts payable to related parties, $28,679 of interest payable to related parties, $18,251 of related party payables, and notes payable of $81,500.

 

As of December 31, 2018, we had $12,908 of cash, total current assets of $681,860 and current liabilities of $361,136 creating a working capital of $320,724. Current assets consisted of cash of $12,908, accounts receivable, net of allowance of doubtful accounts of $12,217 and assets held for sale (from A.J.D. Data Services) of $656,735. Current liabilities as of December 31, 2018 consisted of $48,921 of accounts payable and accrued liabilities, $40,000 of accounts payable to related parties, $26,875 of interest payable to related parties, $17,713 of related party payables, notes payable of $81,500, and liabilities held for sale (from A.J.D. Data Services) of $146,127.

 

Cash Used in Operating Activities

 

Net cash used in operating activities was $110,672 during the six months ended June 30, 2019 compared to $48,017 for the same period in 2018. The increase in cash used in operating activities is from an increase in the change in working capital during the six months ended June 30, 2019 when compared to the six months ended June 30, 2018.

 

Cash Used in Investing Activities

 

Net cash used in investing activities was $0 during the six months ended June 30, 2019 compared to $15,941 for the same period in 2018.

 

Cash from Financing Activities

 

During the six months ended June 30, 2019, the Company generated $136,407 of cash from financing activities. Cash generated from financing activities was mostly comprised of $138,354 of total cash proceeds from related parties totaling.

 

Going Concern

 

As of June 30, 2019, the Company has a working capital deficit of $113,920 and used $110,672 of cash in operations during the six months ended June 30, 2019 which raises substantial doubt for the entity to be able to continue as a going concern.

 

Future Financing

 

We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned operations.

 

Off-Balance Sheet Arrangements

 

We have 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 is material to stockholders.

 

 
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Lawsuits

 

See Note 9 - Subsequent Events.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a smaller reporting company, we are not required to provide the information required by this item.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer (as our chief executive officer and chief financial officer), to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As of the end of the period covered by this report, and under the supervision and with the participation of management, including our Chief Executive Officer, who is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, conducted an evaluation of the effectiveness of the design and operation of these disclosure controls and procedures. Based on this evaluation and subject to the foregoing, our Chief Executive Officer concluded that these controls are not effective considering the level and nature of the Company’s operations and the number and types of transactions concluded by the Company.

 

Changes in Internal Control Over Financial Reporting

 

During the period covered by this report management of the Company was expanded to include more than one individual. As such, there were significant changes in our internal controls during the period. For example, for the time being and until the operations of the company make this impractical all financial transactions involving the Company, including all payments and all agreed upon incurrences of liabilities, require a signature from, or other approval from, the CEO or CFO of DLT Resolution, Inc. Notwithstanding these changes, as the company was previously a shell company owned and managed by one person, management has no reason to believe that the internal controls in place at that time were insufficient. Furthermore, management believes that until the operations of the Company progress to the point where tight control impedes smooth operations, it will be appropriate and sufficient (from the perspective of internal controls over financial reporting) if approval of the CEO and CFO is required for transactions that are or are reasonably likely to require disclosure in the financial statements.

 

 
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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

See Note 9 - Subsequent Events.

 

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

 

During the six months ended June 30, 2019, the Company has not issued any securities.

 

Description of Registrant’s Securities to be Registered

 

The authorized capital stock of our Company consists of 275,000,000 shares of common stock, par value $0.001 per share, of which there are currently 24,982,537 issued and 21,167,537 outstanding, and 5,000,000 shares of series A convertible preferred stock authorized of which there are 0 shares issued and outstanding.

 

All outstanding shares of common stock are of the same class and have equal rights and attributes. The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders of the Company. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the sole director out of funds legally available. In the event of liquidation, the holders of common stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not have cumulative or preemptive rights.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

None

 

Item 5. Other Information.

 

None.

 

 
18
 
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Item 6. Exhibits.

 

The following exhibits are attached hereto:

 

Exhibit No.

 

Description of Exhibit

 

 

 

31.1

 

Certification of Principal Executive Officer pursuant to Rule 13a-15(e) and 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended, filed herewith.

 

 

 

31.2

 

Certification of Principal Accounting Officer pursuant to Rule 13a-15(e) and 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended, filed herewith.

 

 

 

32.1

 

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

 

 
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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

DLT Resolution, Inc.

 

 

 

 

 

 

 

 

By:

/s/ John Wilkes

/s/ John Wilkes

 

 

John Wilkes

John Wilkes

 

 

President and Chief Executive Officer

Chief Financial Officer, Secretary and Treasurer

 

 

(Principal Executive Officer)

(Principal Financial Officer)

 

 

 

 

November 21, 2019

November 21, 2019

 

 

 
20

 

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