NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
NOTE 1 – ORGANIZATION AND BUSINESS
Brightlane Corp. (“we”, “our”, “us”, the “Company” or the “Registrant”) was initially incorporated under the laws of the State of Delaware in December 2006 under the name “Cold Gin Corporation.” On December 27, 2010, in connection with an Agreement and Plan of Reorganization we changed our domicile from Delaware to Nevada, our name to Bonanza Gold Corp. In the third quarter of 2015, Brightlane Acquisition Corp. acquired a controlling interest in the Company from existing shareholders. This change of control began the transitioning to a lease-to-own real estate company. In connection with this transition, effective September 22, 2015 we changed our name to Brightlane Corp.
Brightlane Corp. provides non-traditional methods of specialty financing on an international scale with fully underwritten solutions in a variety of industries. Brightlane is building a diversified, low-volatility and current yield portfolio of services for middle market companies. The company has distinctive abilities to execute the acquisition and effective management of right-priced, real property via its experienced management and strategic partners in the multi-tenant, single-family and commercial market sectors through various rental, lease and right-to-purchase options. Additionally, Brightlane is further developing its lending platform and proprietary deal flow to include direct lending tools and payment technologies to expand value creation.
The recent acquisition of VAT Bridge Limited (see Note 4 below) provides specialty bridge financing in the UK which caters predominantly to facilitate the VAT, Value Added Tax, element payable on commercial property purchases. VAT is a general, broadly based consumption tax in the European Union assessed on the value added to goods and services. Other specialty areas include the funding of VAT payable on property development costs, the VAT payable on high-value assets and occasionally, other property related services in the area of high-end sourcing and income earnings. Since the VAT cannot be financed as a part of tradition lending practices, VAT Bridge provides bridge loans to commercial property acquires, charging them a fee, and subsequently recaptures the VAT from the respective government and taxation bodies.
NOTE 2 – GOING CONCERN
The accompanying 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. The Company has only generated minimal revenues since inception, has sustained operating losses since inception, and has an accumulated deficit of $(3,899,757) and a working capital deficit of $1,463,746 at September 30, 2019. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon, among other things, its ability to generate revenues and its ability to obtain capital from third parties. No assurance can be given that the Company will be successful in these efforts.
Management plans to identify adequate sources of funding to provide operating capital for continued growth. The Company intends to continue accessing the $5 million credit facility obtained by its Brightlane – CLOC Acquisitions, LLC subsidiary in order to acquire additional homes that will provide a profitable revenue stream for the Company.
On May 17, 2019, the registrant entered into a loan agreement with Corporate Commercial Collections Limited (“CCC”). Pursuant to this agreement, CCC provides the Company with a 24 month loan facility, up to £8,000,000, for the financing of working and capital expenditures. This loan facility is available to the Company to draw upon in multiple advances as required.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
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NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the SEC. The Financial Statements have been prepared under accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a December 31 fiscal year end.
Use of 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principals of Consolidation
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents
The Company accounts for cash and cash equivalents under FASB ASC 305, “Cash and Cash Equivalents”, and considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Cash Flows Reporting
The Company follows ASC 230, “Statement of Cash Flows,” for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230 to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. 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 other GAAP 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.
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
Revenue Recognition
Effective January 1, 2018, the Company adopted guidance issued by the FASB regarding recognizing revenue from contracts with customers. The revenue recognition policies as enumerated below reflect the Company's accounting policies effective January 1, 2018, which did not have a materially different financial statement result than what the results would have been under the previous accounting policies for revenue recognition.
Brightlane Corp.’s revenue results from four sources related to the acquisition/disposal and renting/leasing of real estate properties:
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(1)Short-term bridge financing (for Value Added Tax in the UK). We collect professional fees comprised of legal fees, administrative fees, loan facility fees and interest. Rates are agreed with the customer in advance with interest accruing daily and each contract is tailored to the customer’s individual requirements. Performance obligations under the contract are deemed to be met once the advance of finance has been repaid in full. Where an amount is advanced before the period end but not repaid until the following accounting period revenue is recognized by apportioning total revenue due under the contract based on the length of the loan.
(2)Fees related to the management of properties. We collect a monthly management fee for each home that we manage on a third-party basis for our portfolio clients. In many instances we also collect late fees.
(3)Interest income on notes receivable. We carry principle balances on notes receivable and in return for carrying these notes we receive monthly principal and interest payments on these notes receivable. We apportion the payments as received to reducing the principle balance and book the balance to fees due us as well as interest income.
(4)Rental income on properties we own. We own properties and rent or lease them to our tenants and book this as rental income.
(5)Sale of real estate. Periodically, as market conditions allow, we dispose of a property. Once sold, book the net proceeds after customary closing costs as sale of real estate.
The following table disaggregates revenue by major source for the three and nine months ended September 30, 2019:
|
Three Months Ended
September 30, 2019
|
Nine Months Ended
September 30, 2019
|
Fees Income
|
25,091
|
204,091
|
Interest Income – VAT lending
|
-
|
31,318
|
Interest Income – Notes receivable
|
3,834
|
14,751
|
Rental Income
|
11,500
|
38,583
|
Sale of Real Estate
|
-
|
-
|
Total Revenue
|
40,425
|
288,743
|
Deferred Income Taxes and Valuation Allowance
The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized at September 30, 2019 and December 31, 2018. The Company has provided a full valuation allowance for its deferred tax asset resulting from net operating losses.
Earnings (Loss) Per Share
The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, “Earnings per Share.” Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.
Financial Instruments
The Company’s balance sheet includes certain financial instruments: primarily accounts payable, accruals and debt obligations. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
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ASC 820, “Fair Value Measurements and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1 -Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 -Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including 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 (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 -Inputs that are both significant to the fair value measurement and unobservable.
The estimated fair value of certain financial instruments, including cash, loans receivables, loans and accounts payable and accrued liabilities are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
The Company does not have any assets or liabilities measured at fair value on a recurring basis.
Investments in non-consolidated subsidiaries
Investments in non-consolidated entities are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company's ability to exercise significant influence over the operating and financial policies of the investee. When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company's proportionate share of the investees' net income or losses after the date of investment. When net losses from an investment accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company's share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.
Long-lived Assets
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any periods presented.
Property and Equipment
The Company follows ASC 360, Property, Plant, and Equipment, for its fixed assets. Equipment is stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets (3 years).
Related Parties
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
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Restricted Stock
The Company issues restricted stock to consultants for various services. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is measurable more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.
Stock-Based Compensation
FASB ASC 718 “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, may be classified as either equity or liabilities. The Company determines if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity’s past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50 “Equity – Based Payments to Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Recently Issued Accounting Pronouncements
We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
Loans Receivable
Loans receivable are stated at current unpaid principal balances, net of the allowance for loan losses and deferred loan origination fees and costs. Management has the ability and intent to hold its loans receivable for the foreseeable future or until maturity or pay-off. Interest income is accrued on the unpaid principal balance. Deferred loan origination fees and costs are amortized using the effective interest method without anticipating prepayments.
Interest income on loans is discontinued and placed on non-accrual status at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not received for loans placed on non-accrual status is reversed against interest income. Interest received on such loans is accounted for on the cost-recovery method until qualifying for return to accrual status. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Allowance for Loan Losses
The allowance for loan losses is a reserve for probable incurred credit losses. Loan losses are charged against the allowance when management believes a loan has become uncollectable. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.
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The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk.
Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payments shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on case-by-case basis, taking into consideration all circumstance surrounding the loan and the borrower, including the length of delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
NOTE 4 – ACQUISITION
On April 4, 2019, we acquired 100% of the outstanding shares of VAT Bridge Ltd. (“VAT Bridge”), a United Kingdom based entity. Pursuant to this agreement, Brightlane issued 21,000,000 common shares to the shareholders of VAT Bridge in return for all outstanding shares of VAT Bridge. These shares were issued to VAT Bridge shareholders proportionately to their current ownership interest in VAT Bridge. As a result of this agreement, VAT Bridge became a wholly owned subsidiary of Brightlane. On April 4, 2019, the Company's stock was valued at $0.17 a share, making the purchase valued at $3,570,000.
This acquisition facilitated the development of our specialty lending platform. Specifically, VAT Bridge currently provides bridge lending for the VAT, Value Added Tax, element payable on commercial property purchases. VAT is a general, broadly based consumption tax in the European Union assessed on the value added to goods and services.
In accordance with the acquisition method of accounting, the Company allocated the consideration to the net tangible and identifiable intangible assets based on their estimated fair values. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets and will be tested for impairment on an annual basis.
The assets acquired and liabilities assumed as part of our acquisition were recognized at their fair values as of the effective acquisition date, April 4, 2019. The following table summarizes the preliminary allocation of the fair value assigned to the assets acquired and liabilities assumed.
Cash
|
|
$
|
431,035
|
|
Loans Receivable
|
|
|
1,137,765
|
|
Accounts receivable
|
|
|
189,776
|
|
Accounts receivable – related party
|
|
|
520,397
|
|
Goodwill
|
|
|
2,956,321
|
|
Accounts Payable
|
|
|
(1,533,184)
|
|
Tax Liabilities
|
|
|
(132,110)
|
|
|
|
|
|
|
Net assets acquired - intangible
|
|
$
|
3,570,000
|
|
Acquisition costs of $0 were incurred and expensed for the quarter ended September 30, 2019.
Pending Acquisition
On July 9, 2019, the Company entered into a sale and purchase agreement with Real Capital International Limited, a company incorporated with limited liability in the British Virgin Islands, (“Real Capital”) and AFM Corp., a wholly owned subsidiary of the Company (“AFM”). Real Capital is the sole and 100% owner, on a fully unencumbered basis, of 196 (one hundred and ninety-six) cable drums containing 986 kilometers of glass fiber cable. The cable has an estimated value of $33.00 per meter. Pursuant to this agreement, Real Capital will sell this cable to AFM for a cash consideration of $6,000,000 from AFM and a share consideration of 40,000,000 common shares issued by the Company as a contributor. These shares will be granted to non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933, as amended) in an offshore transaction relying on the registration exemption provided for in Regulation S. This transaction remains pending.
NOTE 5 – LINE OF CREDIT FACILITIES
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On May 19, 2017, Brightlane – CLOC Acquisitions, L.L.C., a Delaware limited liability company and a wholly owned subsidiary of the registrant entered into a $5,000,000 revolving credit facility with CoreVest Finance (f/k/a Colony American Finance Lender, LLC). This credit facility is for the acquisition of residential homes providing the Company an acquisition vehicle. General provisions of this credit facility are an 18 month term at 9%, with a loan to value of 80%. At September 30, 2019 the Company had utilized this credit facility to complete two transactions resulting in the acquisition of real estate assets totaling $488,750 of which $373,850 was financed utilizing the credit facility. The balance of the line of credit was $373,850 at September 30, 2019.
On May 17, 2019, we entered into a loan agreement with Corporate Commercial Collections Limited (“CCC”), a related party, formally replacing the prior agreement entered into with the same lender on February 15, 2019. Pursuant to this agreement, CCC will provide the Company with a 24 month loan facility, up to £8,000,000, for the financing of working and capital expenditures by fulfilling individual drawdown requests on an as-required basis. The advances on this loan bear an annual interest rate of 10%, which is calculated daily. At September 30, 2019 the Company received advances on this credit facility in the amount of $511,357. On September 27, 2019, the Company made a payment of $420,352, resulting a remaining principal balance due of $91,005 at September 30, 2019. Interest expense incurred during the three and nine months ended September 30, 2019 was $10,807 and $19,134, respectively.
Our VAT Bridge Limited subsidiary maintains a revolving credit facility with a related party in the United Kingdom entered into on February 19, 2017. Pursuant to this agreement, the lender will provide VAT Bridge Limited with a 5 year loan facility of up to £5,000,000 to provide the capital used in bridge funding our VAT Bridge customers. The advances on this facility are drawn down in varied amounts on an as needed basis to facilitate the VAT lending process. The advances on this credit facility bear an annual interest rate of 10%, which is calculated daily. At September 30, 2019 the amounts due on this credit facility are $169,159. Interest expense incurred during the three months ended September 30, 2019 was $0.
NOTE 6 – NOTES RECEIVABLE
The Company has nine notes receivable. These notes are secured by residential properties. The terms associated with these notes range from 11 years to 30 years, with interest rates ranging from 9.3% to 10%. During the three and nine months ended September 30, 2019, principal payments towards notes receivables totaled $1,150 and $5,069 respectively, reducing notes receivable to $231,072. The current portion of these notes is $31,643.
NOTE 7 – LOANS RECEIVABLE
VAT Bridge Limited carries net loans receivable due to VAT Bridge Limited which are the aggregate of bridge funding, professional services fees, and interest. The terms associated with these loans receivable include a loan origination fee, legal fees, daily interest accrual ranging from 0.04% and 0.055%, and repayment terms ranging from 90 to 120 day based on the size of the loan. The majority of these loans receivables are recovered by VAT Bridge directly from Her Majesty’s Revenue and Customs (HMRC) in the United Kingdom as part of the bridge lending and recovery process. The balance of these loans receivable is $381,493.
NOTE 8 – NOTES PAYABLE
On February 28, 2017 the Company borrowed $400,000 from a third party. The promissory note carries an interest rate of 6% per annum with a maturity date of February 28, 2020. The lender may convert into shares of our common stock after one year, at $0.20 per share. The lender has the option of accruing interest or receiving interest only payment annually. On the anniversary of this note, the lender elected to have interest accrued thereby increasing the principal due to $448,900 at September 30, 2019. On September 20, 2018 the Company and the lender agreed to amend certain terms of the note due to market conditions extending the maturity date by one year and setting the conversion rate to the current $0.20 per share. Interest expense for this note for the three and nine months ended September 30, 2019 was $6,789 and $19,898 respectively.
On February 5, 2018 the Company issued a note to a third party for the remaining balance owed on properties acquired in a real estate transaction for $63,750. The promissory note carries an interest rate of 9% per annum with a maturity date of February 5, 2021. The lender may convert into shares of our common stock after one year, at $0.20 per share. The lender has the option of accruing interest or receiving interest only payment annually. On the anniversary of this note, the lender elected to have interest accrued thereby increasing the principal due to $69,503, and on September 30, 2019, the Company made a principal payment of $19,542 bringing the outstanding principal to $49,961 on this note. On September 20, 2018 the Company and the lender agreed to amend certain terms of the note due to market conditions extending the maturity date by one year and setting the conversion rate
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to the current $0.20 per share. Interest expense for this note for the three and nine months ended September 30, 2019 was $1,577 and $4,645 respectively.
NOTE 9 – RELATED PARTY TRANSACTIONS
On December 9, 2015, we entered into a subscription agreement to sell one unit consisting of a $250,000 promissory note, one share of Series A Preferred Voting Stock and one share of Series B Preferred Voting Stock to a related-party in exchange for $250,000 and the investor’s agreement to utilize its best efforts to cause a capital injection of up to $3,000,000.00 into the Company on or before January 1, 2017 (extended to January 1, 2019). The promissory note carries an interest rate of 6% per annum with a maturity date of December 9, 2019. The lender may convert into shares of our common stock after one year, at $0.20 per share. The lender has the option of accruing interest or receiving interest only payment annually. On the anniversary of this note, the lender elected to have interest accrued thereby increasing the principal due to $297,754 at September 30, 2019. On September 20, 2018 the Company and the lender agreed to amend certain terms of the note due to market conditions extending the maturity date by one year and setting the conversion rate to the current $0.20 per share. Interest expense for this note for the three and nine months ended September 30, 2019 was $4,503 and $13,362 respectively.
On March 24, 2016, we received an additional $110,000 in capital from the aforementioned related party as an advance on the commitments this related party has to us. The promissory note carries an interest rate of 6% per annum with a maturity date of March 24, 2020. The lender may convert into shares of our common stock after one year, at $0.20 per share. The lender has the option of accruing interest or receiving interest only payment annually. On the anniversary of this note, the lender elected to have interest accrued thereby increasing the principal due to $131,032 at September 30, 2019. On September 20, 2018 the Company and the lender agreed to amend certain terms of the note due to market conditions extending the maturity date by one year and setting the conversion rate to the current $0.20 per share. Interest expense for this note for the three and nine months ended September 30, 2019 was $1,982 and $5,781 respectively.
On July 27, 2016, we received an additional $499,200 in capital from the aforementioned related party as an advance on the commitments this related party has to us. The promissory note carries an interest rate of 6% per annum with a maturity date of July 27, 2020. The lender may convert into shares of our common stock after one year, at $0.50 per share. The lender has the option of accruing interest or receiving interest only payment annually. During the year ended December 31, 2016, we repaid a total of $360,000 to the related party toward this promissory note. On the anniversary of this note, the lender elected to have interest accrued thereby increasing the principal due to $171,319 at September 30, 2019. On September 20, 2018 the Company and the lender agreed to amend certain terms of the note due to market conditions extending the maturity date by one year and setting the conversion rate to the current $0.20 per share. Interest expense for this note for the three and nine months ended September 30, 2019 was $2,546 and $7,355 respectively.
Mr. Steve Helm sits on the board of directors and also serves as the Company’s Chief Executive Officer. As compensation for his services we were accruing annual compensation of $25,000 as of January 1, 2016. On July 3, 2018, the Company issued 1,250,000 shares of its common stock to Mr. Helm in return for a total investment into the Company of $248,938. The total investment into the Company consisted of a contribution of funds as well as the assumption of certain liabilities and accrued expenses. The accrued expenses were a result of the accrual of the annual compensation at a rate of $6,250 per quarter from January 1, 2016 through May 15, 2018. From May 15, 2018 through March 31, 2019 we continued to accrue an annual compensation for Mr. Helm at a rate of $6,250 per quarter. At April 1, 2019, we ceased accruing this compensation in lieu of paying Mr. Helm on a monthly basis. Accrued compensation for the three and nine months ended September 30, 2019 was $0 and $6,250 respectively.
See Note 5 for notes regarding line of credit facilities with related parties.
NOTE 10 – SHAREHOLDERS’ EQUITY
Common Stock
The Company has 250,000,000 authorized common shares with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
The Company issued 100,000 shares of its common stock on May 9, 2018, for the conversion of a $50,000 principal balance of a convertible note payable.
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On July 3, 2018, the Company issued 1,250,000 shares of its common stock to its Chief Executive Officer in return for a total investment into the Company of $248,938. The total investment into the Company consisted of a contribution of funds as well as the assumption of certain liabilities and accrued expenses.
On April 4, 2019, the Company entered into a share exchange agreement with VAT Bridge Ltd., a United Kingdom based entity. Pursuant to this agreement, on April 11, 2019, Brightlane issues 21,000,000 common shares to the owners of VAT Bridge in return for all outstanding shares of VAT Bridge. These shares were issued to VAT Bridge shareholders proportionately to their ownership interest in VAT Bridge. As a result of this agreement, VAT Bridge became a wholly owned subsidiary of Brightlane.
There were 39,692,654 common shares issued and outstanding at September 30, 2019.
Common Stock Options
On July 23, 2019, the Company granted incentive stock options to Stephen Helm and Peter Hellwig. Mr. Helm and Mr. Hellwig were granted the option to purchase 1,000,000 (one million) common shares at a purchase price of $0.30 per share. These options vest on the following schedule: 333,333 common shares on July 23, 2020, 333,333 common shares on July 23, 2021, and 333,334 common shares on July 23, 2022. The options expire on July 23, 2023 and any un-exercised options shall lapse. In the event that either Mr. Helm or Mr. Hellwig’s employment status with the Company or any of its subsidiaries terminates for cause or that either Mr. Helm or Mr. Hellwig decides to voluntarily terminate his employment status with the Company, the un-exercised options shall be terminated and any vested but un-exercised options shall immediately expire and may not be exercised.
Preferred Stock
On March 12, 2019, the Company terminated the subscription agreement entered into with Brightlane Acquisition Corp. (the “Investor”). on December 9, 2015. The Investor is an affiliate shareholder of the Company. Pursuant to this agreement, the Company sold a $250,000 promissory note, one share of Series A Preferred Voting Stock, and one share of Series B Preferred Voting Stock to the Investor in exchange for $250,000 and for the Investor’s agreement to utilize its best efforts to cause a capital injection of up to $3,000,000 into the Company on or before January 1, 2017. This agreement has been renewed up through March 12, 2019. The agreement was terminated due to the Board determining that it was no longer desirable to continue extending the agreement. As a result of this termination, the Series A and Series B Preferred Voting Stock has been returned to the Company for cancellation. There are no penalties incurred by terminating this agreement.
At September 30, 2019, there is no preferred stock outstanding.
Warrants issued in connection with sale of common shares
At September 30, 2019 there are no warrants outstanding.
NOTE 11 – SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation no material events have occurred that require disclosure.
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