BLPG Blue Line Protection Group Inc (PK)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2023

 

OR

 

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________________ to _________________

 

Commission file number: 000-52942

 

BLUE LINE PROTECTION GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		20-5543728
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
5765 Logan St. Denver, CO		80216
(Address of principal executive offices)		(Zip Code)

 

(800) 844-5576

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		N/A		N/A

 

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 ☐

 

Indicate by a checkmark whether the registrant has submitted electronically every Interactive Date File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

 

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 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	☐		Accelerated filer	☐
	Non-accelerated filer	☒		Smaller reporting company	☒
				Emerging growth company	☐

 

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 ☒

 

As of November 13, 2023, the registrant had 8,250,144 outstanding shares of common stock.

 

 

 

FORWARD-LOOKING STATEMENTS

 

The information in this report contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (“the Exchange Act”), which are subject to the “safe harbor” created by those sections. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “should,” “could,” “predicts,” “potential,” “continue,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. All forward-looking statements in this Form 10-Q are made based on our current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, you should specifically consider various factors, uncertainties and risks that could affect our future results or operations. These factors, uncertainties and risks may cause our actual results to differ materially from any forward-looking statement set forth in this Form 10-Q. You should carefully consider these risk and uncertainties described and other information contained in the reports we file with or furnish to the SEC before making any investment decision with respect to our securities. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

 

 

TABLE OF CONTENTS

 

		Page No.
	PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS.
	Consolidated Balance Sheets – As of September 30, 2023 (unaudited) and December 31, 2022	F-1
	Consolidated Statements of Operations – Nine months ended September 30, 2023 and 2022(unaudited)	F-2
	Consolidated Statements of Cash Flows – Nine months ended September 30, 2023 and 2022 (unaudited)	F-3
	Consolidated Statements of Stockholders’ Deficit – Nine months ended September 30, 2023 and 2022 (unaudited)	F-4
	Notes to Financial Statements (Unaudited)	F-5
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	4
ITEM 4.	CONTROLS AND PROCEDURES.	6
	PART II. OTHER INFORMATION
ITEM 6.	EXHIBITS.	7

 

 

BLUE LINE PROTECTION GROUP, INC.
CONSOLIDATED BALANCE SHEETS

 

		September 30,				December 31,
		2023				2022
		(unaudited)				(audited)
Assets
Current assets:
Cash and equivalents		$	514,695			$	280,073
Accounts receivable			362,159				373,175
Prepaid expenses and deposits			33,601				31,553
Total current assets			910,455				684,801
Long-term assets:
Right to use assets			621,300				408,616
Machinery and equipment, net of accumulated depreciation of $754,281 and $687,725, respectively			263,048				254,227
Fixed assets of discontinued operations			2,782				2,782
Total long term assets			887,130				665,625
Security Deposit			31,920				31,920
Total assets			1,829,505				1,382,346
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable and accrued liabilities		$	662,746			$	555,445
Financed lease liabilities			23,344				31,719
Notes payable - related parties			152,771				152,771
Convertible notes payable - related parties, net of unamortized discount			539,863				604,256
Current portion of operating lease obligation			156,498				112,250
Derivative liabilities			394,757				451,119
Total current liabilities			1,929,979				1,907,560
Long-term liabilities:
Financed lease liabilities - long term			19,760				37,568
Notes payable - related parties			831,681				1,000,500
Operating lease liability-long term			494,215				328,116
Total long-term liabilities			1,345,656				1,366,184
Total liabilities			3,275,635				3,273,744
Stockholders’ deficit:
Preferred Stock, $0.001 par value, 100,000,000 shares authorized, 20,000,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively			20,000				20,000
Common Stock, $0.001 par value, 14,000,000 shares authorized, 8,250,144 and 8,250,144 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively			8,251				8,251
Common Stock, owed but not issued, 129 shares and 129 shares as of September 30, 2023 and December 31, 2022, respectively			13				13
Additional paid-in capital			10,160,368				10,046,096
Accumulated deficit			(11,634,762	)			(11,965,758	)
Total stockholders’ deficit			(1,446,130	)			(1,891,398	)
Total liabilities and stockholders’ deficit		$	1,829,505			$	1,382,346

 

The accompanying notes are an integral part of these consolidated financial statements. 

 

 

BLUE LINE PROTECTION GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 

		2023				2022				2023				2022
		For the three months ended								For the nine months ended
		September 30,								September 30,
		2023				2022				2023				2022
Revenue		$	1,105,945				912,453			$	3,219,512			$	2,897,520
Cost of revenue			(388,852	)			(345,485	)			(1,117,431	)			(939,182	)
Gross profit			717,093				566,968				2,102,081				1,958,338
Operating expenses:
General and administrative expenses			495,919				611,613				1,607,904				1,667,229
Total expenses			495,919				611,613				1,607,904				1,667,229
Operating Income			221,174				(44,645	)			494,177				291,109
Other income (expenses):
Gain on sale of fixed asset			1,000				-				1,000				-
Interest expense			(44,927	)			(11,197	)			(143,861	)			(151,935	)
Income / (Loss) on derivative			28,399				(44,086	)			(20,320	)			(203,362	)
Total other income / (expenses)			(15,528	)			(55,283	)			(163,181	)			(355,297	)
Net income / (loss)		$	205,646			$	(99,928	)		$	330,996			$	(64,188	)
Net income per common share: Basic and Diluted		$	0.02			$	(0.01	)		$	0.04			$	(0.01	)
Weighted average number of
common shares outstanding- Basic			8,250,144				8,448,001				8,250,144				8,374,927
common shares outstanding- Diluted			17,474,060				8,448,001				17,474,060				8,374,927
Weighted average number of common shares outstanding- Basic			8,250,144				8,448,001				8,250,144				8,374,927
Weighted average number of common shares outstanding- Diluted			17,474,060				8,448,001				17,474,060				8,374,927

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

BLUE LINE PROTECTION GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)

 

		2023				2022
		For the nine months ended
		September 30,
		2023				2022
Operating activities
Net income (loss)		$	330,996			$	(64,188	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			95,372				96,034
Amortization of right to use			99,748				89,405
Stock Option expense			37,590				-
Change in fair value of derivative liabilities			20,320				203,362
Changes in operating assets and liabilities:
(Increase) / decrease in accounts receivable			11,016				50,881
(Increase) / decrease in deposits and prepaid expenses			(2,048	)			208
Increase (decrease) in accounts payable and accrued liabilities			107,301				74,637
Increase (decrease) in lease obligations			(102,085	)			(91,873	)
Net cash provided by operating activities			598,210				358,466
Cash flows from investing activities
Purchase of fixed assets			(104,193	)			(18,882	)
Net cash used in investing activities			(104,193	)			(18,882	)
Financing activities
Repayments of convertible notes payable - related party			(64,392	)			(338,570	)
Repayments of notes payable - related party			(168,820	)			(258,434	)
Payments on notes payable			(26,183	)			(30,484	)
Net cash used in financing activities			(259,395	)			(627,488	)
Net increase in cash			234,622				(287,904	)
Cash - beginning			280,073				662,177
Cash - ending		$	514,695			$	374,273
Supplemental disclosures of cash flow information:
Interest paid		$	58,799			$	28,400
Income taxes paid		$	-			$	-
Non-cash investing and financing activities:
Capitalized leased fixed assets		$	-			$	68,872
Derivative resolution		$	76,682			$	417,018
Cancellation of common stock		$	-			$	260
Gain on the forgiveness of accrued interest - related party		$	-			$	250,000
Initial recognition of right of use asset and lease liability		$	312,432			$	-

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

BLUE LINE PROTECTION GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)

 

		Shares				Amount				Shares				Amount				Capital				Payable				Deficit				Deficit
		Preferred Stock								Common Stock								Paid-in				Stock				Accumulated				Stockholders’
		Shares				Amount				Shares				Amount				Capital				Payable				Deficit				Deficit
Balance, June 30, 2022			20,000,000			$	20,000				8,485,144			$	8,486			$	9,252,938				13			$	(11,635,490	)		$	(2,354,053	)
Cancellation of common stock			-				-				(260,000	)			(260	)			260				-				-				-
Forgiveness of interest - related party			-				-				-				-				250,000				-				-				250,000
Derivative resolution			-				-				-				-				185,206				-				-				185,206
Net income for the three months ended September 30, 2022			-				-				-				-				-				-				(99,928	)			(99,928	)
Balance, September 30, 2022			20,000,000			$	20,000				8,225,144			$	8,226			$	9,688,404				13			$	(11,735,418	)		$	(2,018,775	)
Balance, June 30, 2023			20,000,000			$	20,000				8,250,144			$	8,251			$	10,116,348				13			$	(11,840,408	)		$	(1,695,796	)
Stock options expense			-				-				-				-				14,431				-				-				14,431
Derivative resolution			-				-				-				-				29,589				-				-				29,589
Net income for the three months ended September 30, 2023			-				-				-				-				-				-				205,646				205,646
Balance, September 30, 2023			20,000,000			$	20,000				8,250,144			$	8,251			$	10,160,368				13			$	(11,634,762	)		$	(1,446,130	)

 

																		Additional
		Preferred Stock								Common Stock								Paid-in				Stock				Accumulated				Stockholders’
		Shares				Amount				Shares				Amount				Capital				Payable				Deficit				Deficit
Balance, December 31 , 2021			20,000,000			$	20,000				8,485,144			$	8,486			$	9,021,126				13			$	(11,671,230	)		$	(2,621,605	)
Cancellation of common stock			-				-				(260,000	)			(260	)			260				-				-				-
																															-
Forgiveness of interest - related party			-				-				-				-				250,000				-				-				250,000
Derivative resolution			-				-				-				-				417,018				-				-				417,018
Net income for the nine months ended September 30, 2022			-				-				-				-				-				-				(64,188	)			(64,188	)
Balance, September 30, 2022			20,000,000			$	20,000				8,225,144			$	8,226			$	9,688,404				13			$	(11,735,418	)		$	(2,018,775	)
Balance, December 31 , 2022			20,000,000			$	20,000				8,250,144			$	8,251			$	10,046,096				13			$	(11,965,758	)		$	(1,891,398	)
Stock options expense			-				-				-				-				37,590				-				-				37,590
Derivative resolution			-				-				-				-				76,682				-				-				76,682
Net income for the nine months ended September 30, 2023			-				-				-				-				-				-				330,996				330,996
Balance, September 30, 2023			20,000,000			$	20,000				8,250,144			$	8,251			$	10,160,368				13			$	(11,634,762	)		$	(1,446,130	)

 

The accompanying notes are an integral part of these consolidated financial statements. 

 

 

Blue Line Protection Group, Inc.

Notes to Consolidated Financial Statements

 

Note 1 – History and organization of the company

 

The Company was originally organized on September 11, 2006 (Date of Inception) under the laws of the State of Nevada as The Engraving Masters, Inc. The Company was authorized to issue up to 100,000,000 shares of its common stock and 100,000,000 shares of preferred stock, each with a par value of $0.001 per share.

 

On March 14, 2014, the Company acquired Blue Line Protection Group, Inc., a Colorado corporation formed in February 2014 (“Blue Line Colorado”), as a wholly-owned subsidiary of the Company. Blue Line Colorado provides protection, compliance, and financial services to the lawful cannabis industry.

 

On May 2, 2014, the Company changed its name from The Engraving Masters, Inc. to Blue Line Protection Group, Inc. (“BLPG”)

 

On May 6, 2014, the Company effected a forward stock split and a pro-rata increase in its authorized common stock on a basis of 14-to-1, whereby each shareholder received 14 newly issued shares of common stock for each 1 share held. Additionally, the authorized capital of the Company concurrently increased to 1,400,000,000 shares of common stock. All references to share and per share amounts in the consolidated financial statements and accompanying notes thereto have been retroactively restated to reflect the forward stock split.

 

On July 6, 2021, the Company effected a reverse stock split and a pro-rata decrease in its authorized common stock on a basis of 1-for-100, the authorized capital of the Company concurrently decreased to 14,000,000 shares of common stock. All references to share and per share amounts in the consolidated financial statements and accompanying notes thereto have been retroactively restated to reflect the reverse stock split.

 

The Company provides logistics, and compliance services for businesses engaged in the legal cannabis industry. The Company offers asset logistic services, such as armed transportation services; including shipment protection, money escorts, asset vaulting, financial services, such as handling transportation and storage of currency; training; and compliance services.

 

Note 2 – Accounting policies and procedures

 

Principles of consolidation

 

For the periods ended September 30, 2023 and September 30, 2022 the consolidated financial statements include the accounts of Blue Line Protection Group, Inc. (formerly The Engraving Masters, Inc.), Blue Line Advisory Services, Inc. (a Nevada corporation; “BLAS”), Blue Line Capital, Inc. (a Colorado corporation; “Blue Line Capital”), Blue Line Protection Group (California), Inc. (a California corporation; “Blue Line California”), Blue Line Colorado, Blue Line Protection Group Illinois, Inc. (an Illinois corporation; “Blue Line Illinois”), BLPG, Inc. (a Nevada corporation; “Blue Line Nevada”), Blue Line Protection Group (Washington), Inc. (a Washington corporation; “Blue Line Washington”), and Blue Line Protection Group, Inc. (an Arizona corporation; “Blue Line Arizona”). All significant intercompany balances and transactions have been eliminated. BLPG and its subsidiaries are collectively referred herein to as the “Company.”

 

Interim financial statements

 

The unaudited interim consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

 

F-5

 

In the opinion of management, these statements reflect all adjustments, all of which are of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2022 and notes thereto included in the Company’s annual report on Form 10-K. The Company follows the same accounting policies in the preparation of interim reports.

 

Results of operations for the interim periods are not indicative of annual results.

 

Basis of presentation

 

The consolidated financial statements present the balance sheets, statements of operations, stockholders’ equity (deficit) and cash flows of the Company and its subsidiaries. The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.

 

The Company has adopted December 31 as its 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 of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

 

Cash and cash equivalents

 

The Company maintains a cash balance in a non-interest-bearing account. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. As of September 30, 2023 the Company has cash in excess of FDIC insured limits of $264,695. There were no cash equivalents as of September 30, 2023 or December 31, 2022.

 

Accounts receivable

 

Accounts receivable are stated at the amount the Company expects to collect from outstanding balances and do not bear interest. The Company provides for probable uncollectible amounts through an allowance for doubtful accounts, if an allowance is deemed necessary. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. On a periodic basis, management evaluates its accounts receivable and determines the requirement for an allowance for doubtful accounts based on its assessment of the current and collectible status of individual accounts with past due balances over 90 days. Account balances are charged against the allowance after all collection efforts have been exhausted and the potential for recovery is considered remote.

 

Allowance for uncollectible accounts

 

The Company estimates losses on receivables based on known troubled accounts, if any, and historical experience of losses incurred. There was no allowance for doubtful customer receivables at September 30, 2023 and December 31, 2022.

 

F-6

 

Property and equipment

 

Property and equipment is recorded at cost and capitalized from the initial date of service. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective periods. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:

 

Schedule of Estimated Useful Lives of Property and Equipment

Automotive Vehicles		5 years
Furniture and Equipment		5 years
Buildings and Improvements		the lesser of the life of the lease or the estimated useful life of the lease

 

The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment there was no impairment as September 30, 2023 and December 31, 2022. Depreciation expense for the three and nine months ended September 30, 2023 and, 2022 was $26,960, $95,372, $38,767, and $96,034 respectively. During the nine months ended September 30, 2023 the Company recognized $1,000 from the sale of a vehicle.

 

Impairment of long-lived assets

 

The Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost or carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and its fair value or disposable value. As of September 30, 2023 and December 31, 2022, the Company determined that none of its long-lived assets were impaired.

 

Concentration of business and credit risk

 

The Company has no significant off-balance sheet risks such as foreign exchange contracts, option contracts or other hedging arrangements. The Company’s financial instruments that are exposed to concentration of credit risks consist primarily of cash. The Company maintains its cash in bank accounts, which may at times exceed federally insured limits.

 

The Company had one major customer which generated 10% of total revenue for the nine months ended September 30, 2023 and one customer comprised 17% of the account receivable balance at September 30, 2023.

 

The Company had one major customer which generated 21% of total revenue for the nine months ended September 30, 2022 and one customer comprised 10% of the account receivable balance at September 30, 2022.

 

Related party transactions

 

FASB ASC 850, “Related Party Disclosures” requires companies to include in their financial statements disclosures of material related party transactions. The Company discloses all material related party transactions. Related parties are defined to include any principal owner, director or executive officer of the Company and any immediate family members of a principal owner, director or executive officer.

 

F-7

 

Fair value of financial instruments

 

The carrying amounts reflected in the balance sheets for cash, accounts payable and related party payables approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

 

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

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:	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3:	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

The following table presents the derivative financial instruments, the Company’s only financial liabilities, measured and recorded at fair value on the Company’s consolidated balance sheet on a recurring basis, and their level within the fair value hierarchy as of September 30, 2023 and December 31, 2022:

 

September 30, 2023

 

Schedule of Fair Value of Liabilities Measured on Recurring Basis

		Amount				Level 1				Level 2				Level 3
Embedded conversion derivative liability		$	394,757			$	-			$	-			$	394,757
Warrant derivative liabilities		$	-			$	-			$	-			$	-
Total		$	394,757			$	-			$	-			$	394,757

 

December 31, 2022

 

		Amount				Level 1				Level 2				Level 3
Embedded conversion derivative liability		$	451,119			$	-			$	-			$	451,119
Warrant derivative liabilities		$	-			$	-			$	-			$	-
Total		$	451,119			$	-			$	-			$	451,119

 

The embedded conversion feature in the convertible debt instruments that the Company issued that became convertible qualified them as derivative instruments since the number of shares issuable under the notes are indeterminate based on guidance in FASB ASC 815, Derivatives and Hedging. These convertible notes tainted all other equity linked instruments including outstanding warrants and fixed rate convertible debt on the date that the instrument became convertible. The valuation of the derivative liability of the warrants was determined through the use of Black Scholes option-pricing model (See Note 7).

 

F-8

 

Revenue Recognition

 

The Company recognizes revenue when delivery of the promised goods or services is transferred to its customers in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods or services. We determine revenue recognition through the following five steps:

 

	●	Identify the contract with the customer;
	●	Identify the performance obligations in the contract;
	●	Determine the transaction price;
	●	Allocate the transaction price to the performance obligations in the contract; and
	●	Recognize revenue when, or as, the performance obligations are satisfied.

 

We generate substantially all our revenue from providing services to customers. The Company records revenue when the 5 steps above have been completed.

 

In general, the Company’s business segmentation is aligned according to the nature and economic characteristics. Revenue is characterized by several lines of services and typically the pricing is fixed.

 

Schedule of Revenue by Major Customers by Reporting Segments

Revenue Breakdown by Streams		2023				2022
Three months ended September 30,
Revenue Breakdown by Streams		2023				2022
Service: Transportation		$	505,352			$	386,339
Service: Currency Processing		$	585,888			$	509,327
Service: Compliance		$	14,705			$	16,787
Total		$	1,105,945			$	912,453

 

Revenue Breakdown by Streams		2023				2022
Nine months ended September 30,
Revenue Breakdown by Streams		2023				2022
Service: Transportation		$	1,429,758			$	1,175,417
Service: Currency Processing		$	1,755,196			$	1,696,898
Service: Compliance		$	34,558			$	25,205
Total		$	3,219,512			$	2,897,520

 

Advertising costs

 

The Company expenses all costs of advertising as incurred. Advertising expense for the three and nine months ended September 30, 2023 and September 30, 2022 amounted to $0, $0, $4,704 and $0, respectively.

 

General and administrative expenses

 

The significant components of general and administrative expenses consist mainly of rent and compensation.

 

F-9

 

Share-Based Compensation

 

Share-based compensation expense is recorded as a result of stock options granted in return for services rendered. Previously, the share-based payment arrangements with employees were accounted for under ASC 718. On June 20, 2018, the FASB issued ASU 2018-07, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The Company has adopted the new standard and has made some adjustment with regard to the share-based compensation costs. Under the ASU 2018-07, the measurement of equity-classified nonemployee share-based payments is generally fixed on the grant date and the options are no longer revalued on each reporting date. The expenses related to the share-based compensation are recognized on each reporting date. The amount is calculated as the difference between total expenses incurred and the total expenses already recognized.

 

Cost of Revenue

 

The Company’s cost of revenue primarily consists of labor, fuel costs and items purchased by the Company specifically for the benefit of the Company’s clients.

 

Basic and Diluted Earnings per share

 

Net loss per share is provided in accordance with FASB ASC 260-10, “Earnings per Share”. Basic loss per share is computed by dividing losses available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. For the three and nine months ended September 30, 2023 all common stock equivalents of 9,223,916 and 9,223,916, respectively were included in the calculation of diluted income per share as their effect would be dilutive.

 

Dividends

 

The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid or declared since inception.

 

Income Taxes

 

The Company follows FASB Codification Topic 740-10-25 (ASC 740-10-25) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

 

Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

 

Recent Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, Leases, which amended current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard was effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company elected the practical expedient under ASU 2018-11 “Leases: Targeted Improvements” which allows the Company to apply the transition provision for Topic 842 at the Company’s adoption date instead of at the earliest comparative period presented in the financial statements. Therefore, the Company recognized and measured leases existing at January 1, 2019 but without retrospective application. Therefore, there was no impact recorded to beginning retained earnings or the statement of operations.

 

The Company evaluated all other recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations or cash flows of the Company.

 

F-10

 

Note 3 – Going concern

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has an accumulated deficit and had a working capital deficit as of September 30, 2023. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is significantly dependent upon its ability, and will continue to attempt, to secure additional equity and/or debt financing. There are no assurances that the Company will be successful in obtaining additional capital.

 

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These financial statements do not include any adjustments that might arise from this uncertainty.

 

Note 4 – Commitments and contingencies

 

Contingencies

 

On November 6, 2015, Daniel Sullivan sent a wage claim demand to the Company. Mr. Sullivan purports to have had an Independent Contractor Agreement with the Company which provides he is entitled to certain compensation and to be reimbursed for Company expenses. The demand claims unpaid compensation in the amount of $8,055 and unreimbursed expenses in the amount of $154,409. The Company denies the agreement was ever signed. If litigation is commenced the Company will defend any claims by Mr. Sullivan.

 

Mile High Real Estate Group, an entity owned by Mr. Sullivan, sent correspondence to the Company stating the Mr. Sullivan and/or Mile High Real Estate loaned the Company either directly or directly to contractors, material suppliers or utilities for operating and building remodeling in the amount of $98,150. Counsel for Mr. Sullivan stated that he was still compiling information. The Company is investigating whether Mr. Sullivan and/or Mile High Real Estate Group ever made the alleged loans. The Company will defend any claims of Mile High Real Estate Group.

 

On April 14, 2016, the Company entered into an agreement with a third party to provide the Company with investor relations services. Upon signing the agreement, the Company paid the investor relations consultant $75,000 and agreed to issue the consultant 1,500,000 shares of its restricted common stock. The agreement required the Company to pay the consultant an additional $75,000 prior to June 14, 2016. The Company cancelled the agreement and is of the opinion that the shares are not owed to the consultant. As of September 30, 2023 and December 31, 2022 there was a payable recorded of $34,346.

 

Finance leases

 

On March 1, 2019, the Company recorded finance lease obligation for a leased a vehicle for $64,354. The Company made a down payment of $30,000 which included delivery fees, taxes and its first month payment and agreed to make 36 monthly payments of $1,129.76, including sales tax. The Company recognized this arrangement as a finance lease based on the determination that the lease exceeded 75% of the economic life of the underlying assets.

 

On June 2, 2021, the Company recorded finance lease obligation for a leased a vehicle for $56,733. The Company made a down payment of $3,510 which included delivery fees, taxes and its first month payment and agreed to make 24 monthly payments of $2,765.19, including sales tax. The Company recognized this arrangement as a finance lease based on the determination that the lease exceeded 75% of the economic life of the underlying assets.

 

F-11

 

On June 17, 2022, the Company recorded finance lease obligation for a leased vehicle for $69,255. The Company made a down payment of $2,882 which included delivery fees, taxes and its first month payment and agreed to make 36 monthly payments of $2,338, including sales tax. The Company recognized this arrangement as a finance lease based on the determination that the lease exceeded 75% of the economic life of the underlying assets.

 

Schedule of Future Minimum Lease Payments

Future minimum lease payments as September 30, 2023
2023		$	23,344
2024			19,706
Total minimum lease payments		$	43,050

 

Operating Leases

 

On October 27, 2016 the Company sold its building located at 5765 Logan Street Denver, Colorado to an unrelated third party for $1,400,000. The Company repaid the mortgage on the building in the amount of $677,681. After the sale, the Company leased the building from the purchaser of the property. The lease is for an initial term of ten years, with the Company having the option to extend the term of the lease for two additional five-year periods. The lease requires rental payments of $10,000 per month which will increase 2% annually. The Company paid a $30,000 deposit at the inception of the lease.

 

On May 29, 2018 the Company leased a building located at 4328 E. Magnolia Street, Phoenix, Arizona. The lease is for an initial term of one year, with the Company having the option to extend the term of the lease for additional four year periods. The lease requires rental payments of $3,880 per month which will increase 2% annually. The Company paid a $4,369 deposit at the inception of the lease. The lease was renewed and extended for an additional five year period, with a starting rent of $6,379.20 per month which will increase 4% annually.

 

On January 22, 2019 the Company leased a building located at 7490 Bridgewater Road, Huber Heights, Ohio. The lease is for an initial term of 63 months. The lease requires rental payments of $3,200 per month and will increase to $3,400 between months 28 through 63. The Company paid a $3,200 deposit at the inception of the lease. During the year ended December 31, 2020 the Company terminated the lease agreement. The Company paid a $35,760 cancellation fee included in rent expense and recorded a gain of $8,800 on the termination of the lease.

 

On March 14, 2023 effective June 2023 the Company extended the lease on a building located at 4328 E. Magnolia Street, Phoenix, Arizona. The lease is for an initial term of one year, with the Company having the option to extend the term of the lease for additional four-year periods. The lease requires rental payments of $6,379 per month which will increase 4% annually. The Company recorded a capital lease in the amount of $312,432.

 

The Company adopted ASC 842 and recorded right of use asset and operating lease liability of $1,082,241. The Company used 12% as incremental borrowing rate as is the average interest rate of the Company’s outstanding third party note. The lease agreement gives the Company the option to renew it for two additional 5 year terms but the Company did not consider it likely to exercise that option. Therefore, the Company did not include such amounts in its computations of the present value of remaining lease payment on the adoption date.

 

Supplemental balance sheet information related to leases is as follows:

 

September 30, 2023

Schedule of Operating Leases 

Operating Leases		Classification		September 30, 2023
Right-of-use assets		Operating right of use assets		$	621,300
Total				$	621,300
Current lease liabilities		Current operating lease liabilities		$	156,498
Non-current lease liabilities		Long-term operating lease liabilities		$	494,215
Total				$	650,713

 

F-12

 

Lease term and discount rate were as follows:

Summary of Operating Lease Liabilities

		September 30, 2023
Weighted average remaining lease term (years)			45.50
Weighted average discount rate			12	%

 

 The following summarizes lease expenses for the nine months ended September 30, 2023:

 

Finance lease expenses:

Summary of Lease Expenses

Depreciation/amortization expense		$	99,978
Interest on lease liabilities			48,010
Finance lease expense		$	147,988

 

Supplemental disclosures of cash flow information related to leases were as follows:

Schedule of Cash Flow Information Related to Lease

		September 2023
Cash paid for operating lease liabilities		$	102,085

 

Maturities of lease liabilities were as follows as of September 30, 2023:

Schedule of Maturities of Lease Liabilities

		Operating Leases
2023		$	54,153
2024		$	218,833
2025		$	224,230
2026		$	193,112
2027		$	88,179
2028		$	39,197
Total		$	817,704
Less: Imputed interest		$	(166,991	)
Present value of lease liabilities		$	650,713

 

December 31, 2022

 

Operating Leases		Classification		December 31, 2022
Right-of-use assets		Operating right of use assets		$	408,616
Total				$	408,616
Current lease liabilities		Current operating lease liabilities		$	112,250
Non-current lease liabilities		Long-term operating lease liabilities		$	328,116
Total				$	440,366

 

F-13

 

Lease term and discount rate were as follows:

 

		December 31, 2022
Weighted average remaining lease term (years)			2.50
Weighted average discount rate			12	%

 

 

The following summarizes lease expenses for the year ended December 31, 2022:

 

Finance lease expenses:

 

Depreciation/amortization expense		$	121,095
Interest on lease liabilities			6,673
Finance lease expense		$	127,768

 

 

Supplemental disclosures of cash flow information related to leases were as follows:

 

		December 31, 2022
Cash paid for operating lease liabilities		$	125,266

 

Note 5 – Notes payable

 

Convertible notes payable to non-related parties

 

On October 18, 2017, the Company borrowed $150,000 from an unrelated third party. The Company paid $15,250 of fees associated with the loan, which was recorded as discount and to be amortized over the term of the debt and was fully amortized as of December 31, 2018. The loan bears interest at a rate of 10% (default interest 24%) and has a maturity date of July 16, 2018. The Holder has the option to convert the outstanding principal and accrued interest into common stock of the Company. The conversion price is the lesser of (1) lowest trading price during the previous 25 days prior to the note agreement or (2) 50% lowest trading price during the 25 days prior to conversion. Covenants: The Borrower shall not, without the Holder’s consent, sell, lease or dispose of any significant portion of its assets outside the ordinary course of business. During the year ended December 31, 2018 the Company paid $150,000 to extend the maturity date until May 11, 2019. During the year ended December 31, 2019, the Company paid $75,000 in extension fees. The note was discounted for a derivative (see note 8 for details) and the discount of $134,750 is being amortized over the life of the note using the effective interest method which was fully amortized as of December 31, 2018. During the year ended December 31, 2019 the holder converted $39,478 of accrued interest into 2,178,825 shares of common stock resulting in a loss of $61,624. As of December 31, 2021 and December 31, 2020 the balance outstanding on the loan is $0 and $150,000, respectively. On May 28, 2021 the Company entered into a settlement and release agreement with the Lender and agreed to pay the Lender a settlement of $400,000. The first payment of $200,000 was due upon signing and the Company agreed to make additional $100,000 payments on the 30^th and 60^th day after signing. The additional $250,000 settlement was recorded as interest during the year ended December 31, 2021. As of September 30, 2023 and December 31, 2022 accrued interest and the note balance had been repaid.

 

On March 21, 2018, the Company borrowed $45,000 from an unrelated third party. The Company paid $4,500 of fees associated with the loan and had amortized $3,514 of the costs as of December 31, 2018. The note bears an interest rate: 12% (default interest lesser of 15% or maximum permitted by law) and matures on March 21, 2019. The Holder has the option to convert the outstanding principal and accrued interest into common stock of the Company. The Conversion price is 55% of the lowest trading price during the 25 Trading Day periods prior to the Conversion. Covenants: The Borrower shall not, without the Holder’s consent, sell, lease or dispose of any significant portion of its assets outside the ordinary course of business. The note was discounted for a derivative (see note 8 for details) and the discount of $40,500 has been fully amortized over the life of the note using the effective interest method. As of September 30, 2023 and December 31, 2022 the amount had been fully amortized. As of September 30, 2023 and December 31, 2022 accrued interest and the note balance had been repaid.

 

F-14

 

Note 6 – Notes payable – related parties

 

Long-term liabilities: Notes payable - related parties

 

As of December 31, 2021 the Company owed MKM Capital Advisors and two related entities $128,600 plus accrued interest of $70,088. The amount owed to the MKM entities was represented by three Promissory Notes dated between February 6, 2015 and July 7, 2016. In March 2022 the MKM entities agreed to (i) consolidate the Promissory Notes into a new note in the principal amount of $128,600 and (ii) forgive the accrued interest of $70,088. The new Promissory Note is due and payable on December 27, 2026 and bears an interest (from December 27, 2021 to the date of payment) of 5% per year. During the six months ended June 30, 2023, the Company repaid $10,947 of principal. Accrued interest as of September 30, 2023 and December 31, 2022, amounted to $0. As of September 30, 2023 the balance owed on the loan is $86,979.

 

As of December 31, 2021 the Company owed CGDK, LLC $1,185,217, plus accrued interest of $452,246. The amount owed to CGDK was represented by seven Promissory Notes dated between July 9, 2015 and August 6, 2018. In March 2022, CGDK agreed to (i) consolidate the Promissory Notes into a new note in the principal amount of $1,185,217 and (ii) forgive the accrued interest of $452,246. The new Promissory Note is due and payable on December 31, 2026 and bears interest (from January 1, 2022 to the date of payment) at 5% per year. During the year ended December 31, 2022, the loan was assumed by Doyle Knudson a related party. During the nine months ended September 30, 2023 the Company repaid $152,293 of principal and accrued interest. As of September 30, 2023 and December 31, 2022, the balance on the loan is $750,278 and $902,574, respectively.

 

Current liabilities: Notes payable – related parties

 

On July 31, 2014, the Company borrowed $98,150 from an entity controlled by a former officer and shareholder of the Company. The loan is due and payable on demand and bears no interest. As of September 30, 2023 and December 31, 2022, the principal balance owed on this loan is $98,150 and $98,150, respectively.

 

As of December 31, 2014, a related party loaned the Company $180,121, in the form of cash and expenses paid on behalf of the Company. The loan is due and payable on demand and bears no interest. The Company repaid $125,500 towards this note during 2015 and as of September 30, 2023 and December 31, 2022 the principal balance owed on this loan was $54,621 and $54,621, respectively.

 

Current Liabilities: Convertible notes payable to related parties

 

As of December 31, 2021 the Company owed Hypur Inc. $688,500 plus accrued interest. The amounts owed to Hypur were represented by eight Promissory Notes dated between September 20, 2016 and September 3, 2019. By an agreement effective January 31, 2022 the Company and Hypur agreed to the following:

 

	●	On March 3, 2022 the Company paid Hypur $137,500, which was applied to principal of the notes.
	●	On or before each date shown below, the Company paid Hypur $12,500, which applied to principal of the notes.

 Schedule of Related Debt Maturity

Date		Amount
March 31, 2022		$	12,500
April 30, 2022		$	12,500
May 31, 2022		$	12,500
June 30, 2022		$	12,500

 

F-15

 

	●	On or before July 31, 2022 the Company agreed to pay Hypur $137,500, which will apply to principal of the notes.
	●	All principal amounts owed to Hypur under the Promissory Notes will bear interest at 7.5% per year between January 31, 2022 and July 31, 2022 as long as the Company is not in default under the terms of its agreement with Hypur.
	●	If by July 31, 2022 all payments required by the Company’s agreement with Hypur have been made in a timely fashion, Hypur will forgive $250,000 of accrued interest owed by the Company under the Promissory Notes.
	●	After July 31, 2022 future payment plans will be negotiated, provided however that any principal amounts owed to Hypur under the Promissory Notes after July 31, 2022 will not bear interest in excess of 7.5% per year with a default rate of 12% per year.
	●	Hypur will waive any default rights between January 31, 2022 and August 31, 2022 on a month-to-month basis so long as all payments required by the Company’s agreement with Hypur have been made.

 

During the nine months ended September 30, 2023 the Company repaid a total of $64,393. The amount due as of September 30, 2023 and December 31, 2022 is $264,863 and $329,256, respectively. Hypur forgave $250,000 of accrued interest owed by the Company under the Promissory Notes, which was recognized as additional paid in capital.