UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

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

 

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020

 

DLT RESOLUTION, INC

(FORMERLY HEMCARE HEALTH SERVICES, INC)

(Exact name of registrant as specified in its charter)

  

Commission File Number: 333-148546

 

Nevada

 

20-8248213

(State of Incorporation)

 

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

 

 

 

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

 

89118

(Address of principal executive offices)

 

(Zip Code)

 

(702) 796-6363

(Registrant’s telephone number, including area code)

 

Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☒

 

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

 

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 check mark whether the registrant has submitted electronically on its corporate Web site, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation ST (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒   No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10-K. ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Nonaccelerated 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 12b2 of the Exchange Act). Yes ☐  No ☒

 

The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2020 was approximately $20,973,259 (based on a closing sale price of $1.60 per share as reported for the NASDAQ Global Select Market on June 30, 2020). For purposes of this calculation, shares of common stock held by officers, directors and their affiliated holders and shares of common stock held by persons who hold more than 10% of the outstanding common stock of the registrant have been excluded from this calculation because such persons may be deemed to be affiliates. This determination of executive officer or affiliate status is not necessarily a conclusive determination for other purposes.

 

As of May 10, 2021, 25,926,287 shares of the registrant’s Common Stock, $ 0.001 par value, were outstanding.

    

 

  

INDEX

DLT RESOLUTION, INC.

(FORMERLY HEMCARE HEALTH SERVICES, INC.)

 

 

 

 

PAGE NO

 

PART I

 

 

 

 

 

 

 

 

 

ITEM 1

BUSINESS

 

3

 

ITEM 1A

RISK FACTORS

 

7

 

ITEM 1B

UNRESOLVED STAFF COMMENTS

 

7

 

ITEM 2

PROPERTIES

 

7

 

ITEM 3

LEGAL PROCEEDINGS

 

7

 

ITEM 4

MINE SAFETY DISCLOSURES

 

7

 

 

 

 

 

 

PART II

 

 

 

 

 

 

 

 

 

ITEM 5

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

8

 

ITEM 6

SELECTED FINANCIAL DATA

 

8

 

ITEM 7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

9

 

ITEM 7A

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

10

 

ITEM 8

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

10

 

ITEM 9

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

10

 

ITEM 9A

CONTROLS AND PROCEDURES

 

11

 

ITEM 9B

OTHER INFORMATION

 

13

 

 

 

 

 

 

PART III

 

 

 

 

 

 

 

 

 

ITEM 10

DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

14

 

ITEM 11

EXECUTIVE COMPENSATION

 

15

 

ITEM 12

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

15

 

ITEM 13

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

16

 

ITEM 14

PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

16

 

 

 

 

 

 

PART IV

 

 

 

 

 

 

 

 

 

ITEM 15

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

17

 

 

 

 

 

 

SIGNATURES

 

18

 

  

 
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PART I.

 

Cautionary Note

 

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are subject to a number of risks and uncertainties. All statements that are not historical facts are forward-looking statements, including statements about our business strategy, the effect of Generally Accepted Accounting Principles ("GAAP") pronouncements, uncertainty regarding our future operating results and our profitability, anticipated sources of funds and all plans, objectives, expectations and intentions and the statements regarding future potential revenue, gross margins and our prospects for fiscal 2020. These statements appear in a number of places and can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "future," "intend," or "certain" or the negative of these terms or other variations or comparable terminology, or by discussions of strategy.

 

Actual results may vary materially from those in such forward-looking statements as a result of various factors that are identified in "Item 1A.—Risk Factors" and elsewhere in this document. No assurance can be given that the risk factors described in this Annual Report on Form 10-K are all of the factors that could cause actual results to vary materially from the forward-looking statements. References in this Annual Report on Form 10-K to (i) the "Company," the "Registrant," "DLT” "we," "our," “DLTI,” and "us" refer to DLT Resolution Inc. (formerly HCRE, Hemcare Health Services Inc.).

 

Investors and security holders may obtain a free copy of the Annual Report on Form 10-K and other documents filed by DLT Resolution Inc. with the Securities and Exchange Commission ("SEC") at the SEC's website at http://www.sec.gov. Free copies of the Annual Report on Form 10-K and other documents filed by DLT Resolution Inc. with the SEC may also be obtained from DLT Resolution Inc. by directing a request to DLT Resolution Inc., Attention: John Wilkes. 5940 S. Rainbow Blvd, Ste 400-32132, Las Vegas, NV 89118 or tel. 1 (702) 796-6363

 

ITEM 1 BUSINESS.

 

General

 

DLT Resolution Inc. (formerly Hemcare Health Services Inc.) (“The Company”) was incorporated on January 17, 2007, under the laws of the State of Nevada. The principal offices are located at 5940 S. Rainbow Blvd, Ste 400-32132, Las Vegas, NV 89118. The telephone number is 1 (702) 796-6363. The Company has never declared bankruptcy and it has never been in receivership. Our fiscal year end is December 31.

 

Description of Business

 

DLT Resolution Inc. (“DLT”) currently operates in three high-tech industry segments: Blockchain Applications; Telecommunications; and Data Services which includes Image Capture, Data Collection, Data Phone Center Services, and Payment Processing. Its clients represent some of the top businesses from a variety of sectors. Additionally, the Company formed a wholly-owned Canadian subsidiary to carry on business in Canada on effective November 23, 2017 and acquired A.J.D. Data Services on January 21, 2018. The Company offers secure data management, Information Technology (IT) and other telecommunications services in Canada and the United States. DLT Resolution helps organizations that have invoices, ledgers, statements, applications, surveys, employee and customer rewards programs and a wide range of other non-core functions benefit from data management. DLT Resolution also operates a Health Information Exchange providing the ability to request and retrieve medical information & records while meeting all of today's Security & Compliance demands for HIPAA, PIPEDA and PHIPA. Through RecordsBank.org, the Company offers an easy to use online gateway to its centralized system for patients, lawyers and insurers to retrieve and access medical records.

 

 
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DLT Telecom (DLT Resolution Corp.)
As a result of the business combination with 1922861 Ontario Inc. on April 12, 2018, our business now includes vital customers within the Resolution Telecom business. The Resolution Telecom business has been providing a wide range of innovative solutions that are reliable, scalable and flexible to hundreds of Canadian businesses for more than two decades. The Company’s infrastructure solutions are delivered as a monthly service with substantial flexibility in the packaging and the delivery to ensure the solution is one that best meets each business’s needs.

 

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

 

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

 

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

 

DLT operates in Canada through its wholly owned subsidiaries DLT Resolution Corp., DLT Data Services Ltd. formed in December 2018 and Union Strategies Inc. (“USI)” acquired on February 9, 2020..

 

Union Strategies Inc.
USI has been providing a suite of products and services to Unions for over 10 years. The company designs, builds, and executes programs resulting in greater success for unions. Programs are designed to engage the membership, decrease expenses, and save time for a more productive business. The Company's suite includes secure electronic voting, Telecommunications, Event Management, Professional Writing, Social Media Management, Web Design, Graphic Services, and Promotional Offerings. The company is a one-stop-shop for all things union. The company has more than 130 clients that are considered "mid-market" in terms of overall size of the particular local with 450,000 members. USI operates nationally in Canada and looks to expand into the USA in 2021.


Data Services Ltd.

DLT Data is a content management and data collection company. DLT Data enables automation and processing by tying service needs to your organization’s business and mobile applications. Seamless, Paperless, Clutter-free. DLT Data help companies – big and small, replace manual paper processes. Eliminate paper and increase productivity and space. Consolidate paper at the point of entry and turn documents into safe, secure, searchable images all within the cloud or on customer premise servers. With DLT Data's Enterprise Content Management Solution, all files, images and records of any kind are only a click away.

 

Employees

 

Currently there are 30 employees of the Company through its wholly owned subsidiaries. Management works at the pleasure of the board and for the foreseeable future, additional work on its development efforts are to be contracted out.

 

 
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Research and Development Expenditures

 

During the year ended December 31, 2020, the Company has not incurred any research expenses.

 

Business Strategy

 

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

Secure, Online & Remote Voting

Since the launch of Vote YourChoice (™) - Secure Online and Remote Voting Application in June 2020, we have seen significant acceptance and demand for our service. To date, we have already signed up a number of new public sector unions, deployed online & remote voting for a number of new and existing union clients and are planning the launch into new markets outside of our current union customer base.


Vote YourChoice™ - Secure Online and Remote Voting

Vote YourChoice™ fulfils the need for an ever-growing demand of online and remote voting requirements for all types of public and private elections. This requirement is now, more than ever, a fundamental change in the way people are able to cast their ballot and maintain physical distancing requirements. This remote ability is also estimated to increase voter participation by 18% to 35%. Vote YourChoice(™) software includes union elections and voting, condominium corporation voting, publicly traded company voting, municipal and provincial elections to name but a few applications globally.

 

Voting Integrity

Secure, cost-effective and integrated with all organizations requirements. Organizations stakeholders are assured that their votes are processed by a neutral third party and in a transparent manner due in part to our unique voter-verified audit trail. Organizations can also count on our support team as a virtual part of its elections staff.

 

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

 

Distributed Ledger Technology “Blockchain”

Distributed Ledger Technology “Blockchain” permits trust to be intrinsically embedded into a technological solution, enabling smooth partnerships and transactions dramatically reducing friction between stakeholders. Our
first commercial application launch is expected to be in the online and remote voting application space, leveraging the Company’s own Vote Your Choice(™) voting application deployed to its Canadian Clients. These clients are primarily private and public sector unions. 
 

 
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Blockchain benefits to clients and stakeholders:


Workflow Automation

 

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

 

Audit Trail

 

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

 

Data Privacy

 

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

 

Revenue Assurance

 

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

 

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

 

Reports to Security Holders

We file our quarterly and annual report with the Securities and Exchange Commission (SEC), which the public may view and copy at the Public Reference Room at 100 F Street, N.E. Washington D.C. 20549. SEC filings, including supplemental schedule and exhibits, can also be accessed free of charge through the SEC website www.sec.gov.

 

 
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ITEM 1A RISK FACTORS

 

Not Applicable

 

ITEM 1B UNRESOLVED STAFF COMMENTS

 

None

 

ITEM 2 PROPERTIES.

 

We do not own any property; the principal offices are located at 5940 S. Rainbow Blvd, Ste 400-32132, Las Vegas, NV 89118. The telephone number is 1 (702) 796-6363.

 

ITEM 3 LEGAL PROCEEDINGS.

 

On March 29, 2019, DLT Resolution Corp. and DLT Resolution Inc. was served with a Statement of Claimants 300-306 Town Centre Boulevard Limited Partnership/Court File No. CV-19-00617228-000 (Toronto) for unpaid rent and lost revenue related to the premises. In this action, the Plaintiff has claimed damages against the Defendants DLT Resolution Corp. and DLT Resolution Inc. in the amount of $567,385 for an alleged breach of lease. The Plaintiff has claimed damages against the Defendant DLT Resolution Inc. in the amount of $567,385 for allegedly wrongfully inducing a breach of lease and tortious interference with contractual relations. The Plaintiff has further claimed damages against the Defendant DLT Resolution Inc. in the amount of $567,385 for allegedly oppressive conduct under the Ontario Business Corporations Act. The Plaintiff has further claimed compensation for its legal costs and for pre-judgment interest. The Company filed a statement of Defense citing, amongst other things, that it has never entered into any agreement with the landlord, nor guaranteed any such liability. The Defendants DLT Resolution Corp. and DLT Resolution Inc. intend to contest the claim vigorously. There is no intention to make a settlement offer nor have instructions been received to make a settlement offer at this juncture. Since the statement of defense was delivered on May 16, 2019, the Company had no further communication from counsel for the Plaintiff nor have any steps been taken to move the litigation forward. Although there can be no assurance of the Company’s ability to dismiss the claim, management feels the claim is without merit and is confident it will receive a ruling in its favor.

 

ITEM 4 MINE SAFETY DISCLOSURES.

 

None

 

 
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PART II

 

ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Our common stock is quoted on the Over-the-Counter Bulletin Board (OTCBB) under the ticker symbol DLTI. The stock trades are limited and sporadic; there is no established public trading market for our common stock.

 

Dividends

 

We declared $0 and $0 of dividends on preferred stock during the years ended December 31, 2020 and 2019.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

There is no stock option plan in place for the company.

 

Recent Sales of Unregistered Securities

 

There was no sale of unregistered securities during the year ended December 31, 2020.

 

Securities issued in 2019

 

During the year ended December 31, 2019, the Company issued 62,500 shares of common stock for $25,000 in cash.

 

Securities issued in 2020

 

During the year ended December 31, 2020, the Company issued 1,500,000 shares of common stock to acquire 100% ownership of Union Strategies, Inc. and 31,250 shares of common stock for $25,000 in cash.

 

ITEM 6 SELECTED FINANCIAL DATA.

 

Summary of Financial Data

 

 

 

December 31,

2020

 

 

December 31,

2019

 

Revenues

 

$ 2,160,606

 

 

$ 463,325

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

$ 1,410,748

 

 

$ 546,542

 

 

 

 

 

 

 

 

 

 

Earnings (Loss)

 

$ (503,929 )

 

$ (1,039,318 )

 

 

 

 

 

 

 

 

 

Total Assets

 

$ 3,523,068

 

 

$ 589,253

 

 

 

 

 

 

 

 

 

 

Liabilities

 

$ 2,834,195

 

 

$ 957,553

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity (Deficit)

 

$ 688,873

 

 

$ (368,300 )

  

 
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ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion is intended to assist in the understanding and assessment of significant changes and trends related to the results of operations and financial condition of DLT Resolution, Inc. This discussion and analysis should be read in conjunction with our financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

 

Critical Accounting Policies

 

Use of Estimates

 

The preparation of our consolidated financial statements and notes thereto requires management to make estimates and assumptions that affect the amounts and disclosures reported within those financial statements. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, contingencies, litigation and income taxes. Management bases its estimates and judgments on historical experiences and on various other factors believed to be reasonable under the circumstances. Actual results under circumstances and conditions different than those assumed could result in differences from the estimated amounts in the financial statements. There have been no material changes to these policies during the year ended December 31, 2020.

 

Revenue Recognition

 

Revenue is recognized when persuasive evidence of an agreement exists, the price is fixed or determinable, goods are delivered, or services performed and collectability is reasonably assured.

 

Going concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flow from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management’s plans in regards to this matter include raising additional equity financing and borrowing funds under a private credit facility and/or other credit sources.

 

Principals of Consolidation

 

The consolidated financial statements represent the results of Union Strategies, Inc. (“USI”) and DLT Resolution, Inc.; its wholly owned subsidiary, DLT Resolution Corp.; its 100%-owned subsidiary, DLT Data Services; and the assets, processes, and results therefrom of 1922861 Ontario Inc. Note 7 – Acquisition of 1922861 Ontario Inc.) All intercompany transactions and balances have been eliminated.

 

Plan of Operations

 

Liquidity and Capital Resources. As of December 31, 2020, we had $7,666 of cash on hand and total liabilities of $2,834,195. We must secure additional funds in order to continue our business. We were required to secure a loan to pay expenses relating to filing this report including legal, accounting and filing fees and may be required to secure additional financing to fund future filings. We believe that we will be able to obtain this loan from a current shareholder of the Company. Furthermore, there is no guarantee we will receive the required financing to complete our business strategies; we cannot provide any assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. If we are unable to accomplish raising adequate funds then it would be likely that any investment made into the Company would be lost in its entirety.

 

Results of Operations. Total revenues were $2,160,606 and $463,325 in 2020 and 2019, respectively, with the increase attributable to the Company’s acquisition of USI on January 30, 2020. USI contributed $1,756,687 in 2020 revenues. Total operating expenses were $1,410,748 during the year ended December 31, 2020 compared to $546,542 during the year ended December 31, 2019. The increase in operating expenses relates to the Company’s acquisition of USI.

 

 
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Other Income (Expense): Other Expenses totaled ($45,873) during the year ended December 31, 2020 compared to ($801,227) during the year ended December 31, 2019. The reduction in other expenses relates primarily to one-time losses on an investment and a stock based liability in 2019.

 

Off-Balance Sheet Arrangements. We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

 

Contractual Obligations. None

 

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

We do not currently hold any market risk sensitive instruments entered into for hedging transaction risks related to foreign currencies. In addition, we have not entered into any transactions with derivative financial instruments for trading purposes.

 

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

Our financial statements appear beginning on page F-1, immediately following the signature page of this report.

 

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

During 2019 the Company engaged BFBorgers CPA, PC as its new independent registered accounting firm and dismissed AJSH & Co LLP as its independent registered accounting firm.

 

Since the appointment of BFBorgers CPA, PC as our independent registered accounting firm through present, which included the audit of our financial statements for the years ended December 31, 2019 and 2020, there were (i) no disagreements between the Company and BFBorgers CPA, PC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement, if not resolved to the satisfaction of BFBorgers CPA, PC, would have caused BFBorgers CPA, PC to make reference thereto in their reports on the financial statements for such years, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

 

During years ended December 31, 2019 and 2020, and in the subsequent interim period through to present, the Company has not consulted with BFBorgers CPA, PC regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company that Heaton & Company concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).

 

 
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Disclaimer: This filing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These forward-looking statements are based largely on the expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond the control of management. Therefore, actual results could differ materially from the forward-looking statements contained in this press release. Additional information respecting the factors that could materially affect the Company and its operations are contained in its annual report on Form 10-K, Form 10-Q’s, 8-K’s and other periodic reporting as filed with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statement.

 

ITEM 9A CONTROLS AND PROCEDURES.

 

Disclosure Controls and Procedures

 

Management of DLT Resolution Inc. is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

 

In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.

 

At the end of the period covered by this report, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was carried out under the supervision and with the participation of our Principal Executive Officer, Principal Financial and Accounting Officer. Based on his evaluation of our disclosure controls and procedures, he concluded that during the period covered by this report, such disclosure controls and procedures were not effective to detect the inappropriate application of US GAAP standards. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our disclosure controls and that may be considered to be “material weaknesses.”

 

The Company will continue to create and refine a structure in which critical accounting policies and estimates are identified, and together with other complex areas, are subject to multiple reviews by accounting personnel. In addition, the Company will enhance and test our year-end financial close process. Additionally, the Company’s management will increase its review of our disclosure controls and procedures. Finally, we plan to designate individuals responsible for identifying reportable developments. We believe these actions will remediate the material weakness by focusing additional attention and resources in our internal accounting functions. However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

 

 
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Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; (iii) provide reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and (iv) provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because changes in conditions may occur or the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In assessing the effectiveness of our internal control over financial reporting as of December 31, 2020, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on its assessment, management concluded that our internal control over financial reporting as of December 31, 2018 was not effective in the specific areas described in the “Disclosure Controls and Procedures” section above and as specifically described in the paragraphs below.

 

As of December 31, 2020 the Principal Executive Officer/Principal Financial Officer identified the following specific material weaknesses in the Company’s internal controls over its financial reporting processes:

 

 

Policies and Procedures for the Financial Close and Reporting Process — Currently there are no policies or procedures that clearly define the roles in the financial close and reporting process. The various roles and responsibilities related to this process should be defined, documented, updated and communicated. Failure to have such policies and procedures in place amounts to a material weakness to the Company’s internal controls over its financial reporting processes.

 

 

 

 

Representative with Financial Expertise — For the year ending December 31, 2020, the Company did not have a representative with the requisite knowledge and expertise to review the financial statements and disclosures at a sufficient level to monitor the financial statements and disclosures of the Company. Failure to have a representative with such knowledge and expertise amounts to a material weakness to the Company’s internal controls over its financial reporting processes.

 

 

 

 

Adequacy of Accounting Systems at Meeting Company Needs — The accounting system in place at the time of the assessment lacks the ability to provide high quality financial statements from within the system, and there were no procedures in place or built into the system to ensure that all relevant information is secure, identified, captured, processed, and reported within the accounting system. Failure to have an adequate accounting system with procedures to ensure the information is secure and accurately recorded and reported amounts to a material weakness to the Company’s internal controls over its financial reporting processes.

 

 

 

 

Segregation of Duties — Management has identified a significant general lack of definition and segregation of duties throughout the financial reporting processes. Due to the pervasive nature of this issue, the lack of adequate definition and segregation of duties amounts to a material weakness to the Company’s internal controls over its financial reporting processes.

  

 
12

Table of Contents

  

In light of the foregoing, once we have the adequate funds, management plans to develop the following additional procedures to help address these material weaknesses:

 

 

The Company will create and refine a structure in which critical accounting policies and estimates are identified, and together with other complex areas, are subject to multiple reviews by accounting personnel. In addition, we plan to enhance and test our month-end and year-end financial close process. Additionally, our audit committee will increase its review of our disclosure controls and procedures. We also intend to develop and implement policies and procedures for the financial close and reporting process, such as identifying the roles, responsibilities, methodologies, and review/approval process. We believe these actions will remediate the material weaknesses by focusing additional attention and resources in our internal accounting functions. However, the material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

  

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

 

This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

Changes in Internal Controls

 

There have been no changes in our internal control over financial reporting that occurred during our fiscal year ended December 31, 2020 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

 

ITEM 9B OTHER INFORMATION.

 

None.

 

 
13

Table of Contents

   

PART III

 

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

The Company’s executive officers and directors and their respective age as of December 31, 2018 are as follows:

 

Director:

 

Name of Director

 

Age

John Wilkes

 

59

 

Executive Officer:

 

Name of Officer

 

Age

 

Office

John Wilkes

 

59

 

President, CEO and CFO

  

The term of office for each director is one year, or until the next annual meeting of the shareholders.

 

Biographical Information

 

Set forth below is a brief description of the background and business experience of our officers and director for the past year.

 

John Wilkes

 

Mr. Wilkes, M.B.A., C.P.A., C.A. (59) earned his C.A. designation with Price Waterhouse in Toronto, Canada. Since 2005, Mr. Wilkes has been an Independent Investment Management Professional, making private investments in both private and public companies that, for the most part, have their core business in the environmental space.

 

Significant Employees

 

We employ Fred Vecchio who makes significant contributions to the Company. John Wilkes is an officer and Director and Dan Cullen is the Chief Technology Officer (CTO) of the Company.

 

Corporate Governance

 

Nominating Committee. We have not established a Nominating Committee because of our limited operations; and because we have only two officers, as mentioned above which are John Wilkes and Dan Cullen and one director who is John Wilkes, we believe that we are able to effectively manage the issues normally considered by a Nominating Committee.

 

Audit Committee. We have not established an Audit Committee because of our limited operations; and because we have only two officers and one director, we believe that we are able to effectively manage the issues normally considered by an Audit Committee.

 

Code of Ethics. We have not adopted a Code of Ethics for our principal executive and financial officers.

 

 
14

Table of Contents

  

ITEM 11 EXECUTIVE COMPENSATION.

 

Summary Compensation Table

 

Name and principal position

 

Fiscal

Year

 

Salary

 

 

Bonus

 

 

Other annual compensation

 

 

Restricted stock

award(s)

 

 

Securities underlying

options/ SARs

 

 

LTIP

payouts

 

 

All other

compensation

 

John Wilkes Director

 

2020

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

John Wilkes Director

 

2019

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

There has been no cash payment outside of the amounts above paid to the individuals above for services rendered in all capacities to us for the year ended December 31, 2018 and 2017. Minimal compensation is anticipated within the next six months to any officer or director of the Company.

 

Stock Option Grants

 

We did not grant any stock options to the executive officer during the year ended December 31, 2019 and 2018.

 

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The following table provides the names and addresses of each person known to the Company to own more than 5% of the outstanding common stock as of December 31, 2020 and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly.

 

Beneficial Owner

 

Number of

Shares Owned

 

 

Percent

Ownership

 

Mind Tech Group

 

 

5,000,000

 

 

 

24 %

John Wilkes

 

 

4,003,000

 

 

 

19 %

Total

 

 

9,003,000

 

 

 

43 %

  

 
15

Table of Contents

  

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

During the year ended December 31, 2020, there were no other material transactions between the Company and any Officer, Director or related party that has not been disclosed in footnote 4 to the financial statements. Additionally, there are no Officers, Directors or other related parties that since the date of incorporation had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:

 

-The Officers and Directors;

 

-Any person proposed as a nominee for election as a director;

 

-Any other person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to the outstanding shares of common stock;

 

-Any relative or spouse of any of the foregoing persons who have the same house as such person.

 

Any future transactions between us and our Officers, Directors, and Affiliates will be on terms no less favorable to us than can be obtained from unaffiliated third parties. Such transactions with such persons will be subject to approval of our Board of Directors.

 

ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

During the years ended December 31, 2020 and 2019, the Company incurred auditing expenses of approximately $17,000 and $8,000. There were no other audit related services or tax fees incurred.

   

 
16

Table of Contents

  

PART IV

 

ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

 

(a)

The following documents have been filed as a part of this Annual Report on Form 10-K.

 

1.

Consolidated Financial Statements

  

 

 

Page

 

Report of Independent Registered Public Accounting Firm – 2020

 

F-3

 

Report of Independent Registered Public Accounting Firm – 2019

 

F-4

 

Consolidated Balance Sheets

 

F-5

 

Consolidated Statements of Operations

 

F-6

 

Consolidated Statement of Stockholders' Deficit

 

F-8

 

Consolidated Statements of Cash Flows

 

F-9

 

Notes to Consolidated Financial Statements

 

F-10-20

 

  

2.

Financial Statement Schedules.

  

All schedules are omitted because they are not applicable or not required or because the required information is included in the Financial Statements or the Notes thereto.

 

3.

Exhibits.

  

The following exhibits are filed as part of, or incorporated by reference into, this Annual Report:

 

EXHIBIT

NUMBER

 

DESCRIPTION

 

 

 

3.1

 

Articles of Incorporation

 

 

 

3.2

 

By-Laws

 

 

 

31.1

 

SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

 

 

 

32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION

 

 

 

101

 

Interactive data files pursuant to Rule 405 of Regulation S-T.

  

 
17

Table of Contents

  

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

/s/ John Wilkes

 

/s/ John Wilkes

 

John Wilkes

 

John Wilkes

 

President and Chief Executive Officer

 

Chief Financial Officer, Secretary and Treasurer

 

(Principal Executive Officer)

 

(Principal Financial Officer)

 

 

 

 

 

May 10, 2021

 

May 10, 2021

 

  

 
18

Table of Contents

 

DLT RESOLUTION INC.

(FORMERLY HEMCARE HEALTH SERVICES INC.)

 

Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

 

 
F-1

Table of Contents

 

DLT RESOLUTION INC.

(FORMERLY HEMCARE HEALTH SERVICES INC.)

 

Consolidated Financial Statements

December 31, 2020 and 2019

 

CONTENTS

 

 

 

Page(s)

 

Report of Independent Registered Accounting Firm – 2020 and 2019

 

F-3

 

 

 

 

 

Consolidated Balance Sheets as of December 31, 2020 and 2019

 

F-4

 

 

 

 

 

Consolidated Statements of Operations for the years ended December 31, 2020 and 2019

 

F-5

 

 

 

 

 

Consolidated Statement of Changes in Stockholders’ Deficit for the years ended December 31, 2020 and 2019

 

F-7

 

 

 

 

 

Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019

 

F-8

 

 

 

 

 

Notes to the Consolidated Financial Statements

 

F-9 - F-20

 

  

 
F-2

Table of Contents

   

Report of Independent Registered Public Accounting Firm

   

To the shareholders and the board of directors of DLT Resolution, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of DLT Resolution, Inc. as of December 31, 2020 and 2019, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

/S/ BF Borgers CPA PC

BF Borgers CPA PC

 

We have served as the Company's auditor since 2019

Lakewood, CO

May 10, 2021

    

 
F-3

Table of Contents

 

DLT RESOLUTION, INC

Consolidated Balance Sheets

As of December 31

 

 

 

 

 

2020

 

 

2019

 

ASSETS 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 7,666

 

 

$ 13,140

 

Accounts receivable

 

 

346,948

 

 

 

34,631

 

Prepaid expenses and other current assets

 

 

111,141

 

 

 

-

 

Total current assets

 

 

465,755

 

 

 

47,771

 

Property and equipment, net of accumulated depreciation

 

 

77,000

 

 

 

-

 

Right of use asset, net of accumulated depreciation

 

 

7,814

 

 

 

-

 

Intangible assets, net of accumulated amortization

 

 

2,016,645

 

 

 

376,460

 

Goodwill

 

 

955,854

 

 

 

165,022

 

Total assets

 

$ 3,523,068

 

 

$ 589,253

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Bank overdraft

 

$ 30,577

 

 

$ 16,782

 

Accounts payable and accrued liabilities

 

 

634,914

 

 

 

99,201

 

Accounts payable, related party

 

 

15,000

 

 

 

15,000

 

Interest payable, related party

 

 

41,565

 

 

 

34,190

 

Related party payables

 

 

20,884

 

 

 

20,880

 

Notes payables, related party

 

 

81,500

 

 

 

81,500

 

Notes payable, current portion

 

 

109,778

 

 

 

-

 

Lease obligation – operating lease

 

 

6,268

 

 

 

-

 

Total current liabilities

 

 

940,486

 

 

 

267,553

 

 

 

 

 

 

 

 

 

 

Notes payable, net of current portion

 

 

5,000

 

 

 

5,000

 

Other long term liability

 

 

1,887,711

 

 

 

685,000

 

Lease obligation – operating lease, net of current portion

 

 

998

 

 

 

-

 

Total liabilities

 

 

2,834,195

 

 

 

957,553

 

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit)

 

 

 

 

 

 

 

 

Series A convertible preferred stock, $1.00 par value; 5,000,000 shares authorized; 0 and 0 issued and outstanding at December 31, 2020 and December 31, 2019

 

 

-

 

 

 

-

 

Series B convertible preferred stock, $1.00 par value; 500,000 shares authorized; 64,000 and 64,000 issued and outstanding at December 31, 2020 and December 31, 2019

 

 

64,000

 

 

 

64,000

 

Common stock, $0.001 par value; 275,000,000 shares authorized; 24,395,037 and 24,982,537 issued; 21,167,537 and 21,167,537 outstanding at December 31, 2020 and December 31, 2019

 

 

25,926

 

 

 

24,395

 

Common stock subscribed

 

 

14,000

 

 

 

-

 

Additional paid in capital

 

 

4,913,010

 

 

 

4,218,265

 

Other comprehensive income

 

 

816,396

 

 

 

(34,430 )

Treasury stock, 3,815,000 shares at December 31, 2020 and 2019

 

 

(5,300 )

 

 

(5,300 )

Accumulated deficit

 

 

(5,139,159 )

 

 

(4,653,230 )

Total stockholders’ equity (deficit)

 

 

688,873

 

 

 

(368,300 )

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity (deficit)

 

$ 3,523,068

 

 

$ 589,253

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

  

 
F-4

Table of Contents

    

DLT RESOLUTION, INC.

Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

 

 

2020

 

 

2019

 

Revenue

 

$ 2,160,606

 

 

$ 463,325

 

Cost of revenue and operating expenses

 

 

 

 

 

 

 

 

Cost of revenue

 

 

1,207,914

 

 

 

154,874

 

General and administrative

 

 

758,465

 

 

 

263,260

 

Depreciation and amortization

 

 

370,552

 

 

 

102,753

 

Professional fees

 

 

117,551

 

 

 

180,529

 

Goodwill impairment loss

 

 

164,180

 

 

 

-

 

Total operating expenses

 

 

1,410,748

 

 

 

546,542

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(458,056 )

 

 

(238,091 )

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain/(loss) on stock based liability

 

 

-

 

 

 

(467,487 )

Foreign exchange gain/(loss)

 

 

33

 

 

 

5,362

 

Loss on investment

 

 

-

 

 

 

(331,787 )

Interest expense

 

 

(46,906 )

 

 

(7,315 )

Total other income (expense)

 

 

(45,873 )

 

 

(801,227 )

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

$ (503,929 )

 

$ (1,039,318 )

 

 

 

 

 

 

 

 

 

Income taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ (503,929 )

 

$ (1,039,318 )

 

 

 

 

 

 

 

 

 

Loss from per common share, basic and diluted

 

$ (0.02 )

 

$ (0.05 )

Weighted average basic shares outstanding

 

 

25,806,082

 

 

 

20,871,886

 

Weighted average diluted shares outstanding

 

 

25,806,082

 

 

 

20,871,886

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 
F-5

Table of Contents

  

DLT RESOLUTION, INC.

Consolidated Statements of Comprehensive Income (Loss)

 

 

 

 

 

 

 

Year ended December 31,

 

 

 

2020

 

 

2019

 

Net loss

 

$ (503,929 )

 

$ (1,039,318 )

Other comprehensive income

 

 

 

 

 

 

 

 

Gain on valuation adjustment to other long-term liabilities

 

 

360,024

 

 

 

-

 

Foreign currency translation adjustment

 

 

490,802

 

 

 

3,258

 

Total other comprehensive income

 

 

850,826

 

 

 

3,258

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$ 346,897

 

 

$ (1,036,060 )

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

  

 
F-6

Table of Contents

 

DLT RESOLUTION, INC

Consolidated Statements of Changes in Stockholders’ Deficit

 

Year Ended December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series B

Preferred Stock

 

 

Common Stock

 

 

Common

Stock

 

 

Additional

Paid-in

 

 

Treasury

 

 

Other

Comprehensive

 

 

Accumulated

 

 

Non-Controlling

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Subscribed

 

 

Capital

 

 

Stock

 

 

income

 

 

Deficit

 

 

Interest

 

 

Total

 

Balance, December 31, 2019

 

 

64,000

 

 

$ 64,000

 

 

 

24,395,037

 

 

$ 24,395

 

 

$ -

 

 

$ 4,218,265

 

 

$ (5,300 )

 

$ (34,430 )

 

$ (4,635,230 )

 

 

-

 

 

 

(368,300 )

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

Issuance of common stock for cash proceeds

 

 

-

 

 

 

-

 

 

 

31,250

 

 

 

31

 

 

 

-

 

 

 

24,969

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

25,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

 

Issuance of common stock for acquisitions

 

 

-

 

 

 

-

 

 

 

1,500,000

 

 

 

1,500

 

 

 

-

 

 

 

669,776

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

671,276

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock subscription

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

490,802

 

 

 

-

 

 

 

-

 

 

 

490,802

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on adjusted value of other long-term liability

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

360,024

 

 

 

-

 

 

 

-

 

 

 

360,024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

(503,929 )

 

 

-

 

 

 

(503,929 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2020

 

 

64,000

 

 

$ 64,000

 

 

 

25,926,287

 

 

$ 25,926

 

 

$ 14,000

 

 

$ 4,913,010

 

 

$ (5,300 )

 

$ 816,396

 

 

$ (5,139,159 )

 

 

-

 

 

$ 688,873

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

 

64,000

 

 

$ 64,000

 

 

 

24,982,537

 

 

$ 24,983

 

 

$ -

 

 

$ 4,192,678

 

 

$ (37,688 )

 

$ (5,300 )

 

$ (3,595,912 )

 

$ 94,087

 

 

$ 736,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recission of common shares

 

 

-

 

 

 

-

 

 

 

(650,000 )

 

(650

)

 

 

-

 

 

 

650

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash proceeds

 

 

 

 

 

 

 

 

 

 

62,500

 

 

 

62

 

 

 

-

 

 

 

24,937

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

24,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,258

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,039,318 )

 

 

(94,087 )

 

 

(1,133,405 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2019

 

 

64,000

 

 

$ 64,000

 

 

 

24,395,037

 

 

$ 24,395

 

 

$ -

 

 

$ 4,218,265

 

 

$ (34,430 )

 

$ (5,300 )

 

$ (4,635,230 )

 

$ -

 

 

$ (368,300 )

 

See accompanying notes to consolidated financial statements.

 

 
F-7

Table of Contents

 

DLT RESOLUTION, INC

Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

December 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

Net (loss) from continuing operations

 

$ (503,929 )

 

$ (1,039,318 )

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Goodwill impairment loss

 

 

164,180

 

 

 

-

 

Loss on investment

 

 

-

 

 

 

331,787

 

Loss on stock based liability

 

 

-

 

 

 

467,487

 

Loss related items

 

 

-

 

 

 

(50,581 )

Depreciation and amortization expense

 

 

370,552

 

 

 

102,754

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(142,378 )

 

 

(18,686 )

Prepaid expenses and other current assets

 

 

(108,791 )

 

 

(18,686 )

(Repayments) proceeds from related parties, net

 

 

(57,683 )

 

 

132,491

 

 

 

 

 

 

 

 

 

 

Interest payable, related party

 

 

7,375

 

 

 

7,315

 

Accounts payable and accrued liabilities

 

 

138,165

 

 

 

48,429

 

Accounts payable, related party

 

 

-

 

 

 

(25,000 )

Lease obligation

 

 

(6,771 )

 

 

-

 

Net cash used in operating activities

 

 

(139,279 )

 

 

(43,322 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

(800 )

 

 

-

 

Net cash used in investing activities

 

 

(800 )

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from notes payable

 

 

107,457

 

 

 

-

 

(Repayments) proceeds from bank overdrafts

 

 

(12,043 )

 

 

16,782

 

Proceeds from sale of common stock subscription

 

 

14,000

 

 

 

-

 

Proceeds from sale of common stock

 

 

25,000

 

 

 

25,000

 

Net cash provided by financing activities

 

 

134,414

 

 

 

41,782

 

 

 

 

 

 

 

 

 

 

Net change in cash

 

 

(5,665 )

 

 

(1,540 )

Effect of exchange rate on cash

 

 

191

 

 

 

1,772

 

Cash and cash equivalents at beginning of year

 

 

13,140

 

 

 

12,908

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of year

 

 

7,666

 

 

$ 13,140

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ -

 

 

$ -

 

Cash paid for income taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

 

Retiring of common shares

 

$ -

 

 

$ 650

 

Other long term liability entered into for acquisition of Union Strategies, Inc.

 

$ 1,240,000

 

 

$ -

 

Common shares issued for acquisition of Union Strategies, Inc.

 

$ 2,400,000

 

 

$ -

 

Net of Union Strategies, Inc. assets acquired and liabilities assumed

 

$ 4,000,000

 

 

$ -

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 
F-8

Table of Contents

 

DLT RESOLUTION INC.

(FORMERLY HEMCARE HEALTH SERVICES INC.)

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

 

Note 1 - Organization and Significant Accounting Policies

 

The Company was organized on January 17, 2007 (Date of Inception) under the laws of the State of Nevada, as DBL Senior Care, Inc. and subsequently changed its name to DLT Resolution Inc. on December 4, 2017.

 

DLT Resolution Inc. (“DLT, the “Company”, “we” and “our”) operates in three high-tech industry segments: Blockchain Applications; Telecommunications; and Data Services which includes Image Capture, Data Collection, Data Phone Center Services, and Payment Processing. The Company offers secure data management, Information Technology (IT) and other telecommunications services in Canada and the United States. The Company operates a Health Information Exchange providing the ability to request and retrieve medical information and records while meeting all of today’s Security & Compliance demands for HIPAA, PIPEDA and PHIPA. Through our acquisition of Union Strategies, Inc. (“USI”), the Company operates a business focused on designing, installing and maintaining telephony, data, video, storage, and LAN/WAN networks. USI’s clients encompass K-12 and higher education institutions, trades industry organizations, and local government entities having memberships ranging from 100 to 10,000 people that utilize products and services that USI provides by deploying a variety of technologies to keep client networks up and running efficiently.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flow from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management’s plans in regards to this matter include raising additional equity financing and borrowing funds under a private credit facility and/or other credit sources.

 

Estimates

 

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

 

Cash

 

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

 

Income taxes

 

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

 

At December 31, 2020, there were no uncertain tax positions that require accrual.

 

Accounts Receivable

 

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

 

Revenue Recognition

 

The Company follows ASC 606 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue upon the transfer of promised services to customers in amounts that reflect the consideration to which the Company expects to be entitled the transfer of services. The Company considers revenue earned when all the following criteria are met: (i) the contract with the customer has been identified, (ii) the performance obligations have been identified, (iii) the transaction price has been determined, (iv) the transaction price has been allocated to the performance obligations, and (v) the performance obligations have been satisfied. The Company primarily generates revenues through the sale of products through its website and at industry tradeshows.

 

Property and equipment

 

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

 

 
F-9

Table of Contents

 

Intangible Assets

 

Intangible assets consist of developed technology, customer relationships, the Company’s website, non-compete agreements and domain names. The Company amortizes, to cost of revenue and operating expenses, these definitelived intangible assets on a straightline basis over the life of the assets which range from five to seven years.

 

Impairment of LongLived Assets and Goodwill

 

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

 

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

 

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

 

Reclassification of Prior Year Presentation

 

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

 

Share Based Expenses

 

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

 

Net Income (Loss) Per Share

 

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

 

 
F-10

Table of Contents

 

As of December 31, 2020 and 2019, the Company had 0 shares of Series A Preferred Stock issued and outstanding. As of December 31, 2020 and 2019, the Company had 64,000 shares of Series B Convertible Preferred Stock issued and outstanding that converts into 12,800 shares of the Company’s Common Stock. As of December 31, 2020 and 2019, the Company expects to issue 1,500,000 and 500,000 shares of its Common Stock, respectively, in connection with its acquisitions (See Note 2).

 

Principals of Consolidation

 

The consolidated financial statements represent the results of Union Strategies, Inc. and DLT Resolution, Inc.; its wholly owned subsidiaries, DLT Resolution Corp. and DLT Data Services; and the assets, processes, and results therefrom of 1922861 Ontario Inc. Note 7 – Acquisition of 1922861 Ontario Inc.) All intercompany transactions and balances have been eliminated.

 

Foreign Currency Translation

 

The functional currency of the Company’s subsidiaries in Canada is the Canadian Dollar. The subsidiaries’ assets and liabilities have been translated to U.S. dollars using exchange rates of 0.784129 and 0.771486 in effect at the balance sheet dates of December 31, 2020 and December 31, 2019, respectively. Statements of operations amounts have been translated using the annual weighted average exchange rates of 0.767548 and 0.753670 for the years ended December 31, 2020 and 2019, respectively. Resulting gains or losses from translating foreign currency financial statements are recorded as other comprehensive income (loss). Foreign currency transaction gains and losses resulting from exchange rate fluctuations on transactions denominated in a currency other than the local currency are included in other income (expense). There were $33 and $5,362 currency transaction gains recognized during the years ended December 31, 2020 and 2019, respectively.

 

Fair Value of Financial Instruments

 

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

 

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

 

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

 

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

 

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

 

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

 

 
F-11

Table of Contents

 

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

 

Recently Adopted Accounting Pronouncements

 

In 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 requires entities to establish an allowance for credit losses for most financial assets. Prior US GAAP was based on an incurred loss methodology for recognizing credit losses on financial assets measured at amortized cost and available-for sale debt securities. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 31, 2018. The amendments in this ASU did not have a material impact on our condensed consolidated financial statements.

 

In 2018, the FASB issued ASU 2018-13, Fair Value Measurement (ASC 820) — Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. ASU 2018-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The amendments in this ASU did not have a material impact on our condensed consolidated financial statements.

 

Recent Accounting Pronouncements

 

In 2019, the FASB issued ASU 2019-12, Income Taxes (ASC 740) — Simplifying the Accounting for Income Taxes. ASU 2019-12 which modifies ASC 740 to simplify the accounting for income taxes. The ASU removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2020. We have not yet completed the full assessment of the impact on our condensed consolidated financial statements or related disclosures.

 

In March 2020, The FASB issued ASU 2020-03, Codification Improvements to Financial Instruments – Issue 4: Cross-Reference to Line of-Credit or Revolving-Debt Arrangements Guidance in Subtopic 470-50. Stakeholders the ASU requests that paragraphs 470-50-40-17 through 40-18, which describe the accounting for fees between debtor and creditor and third-party costs directly related to exchanges or modifications of debt instruments, reference paragraph 470-50-40-21 for line-of-credit or revolving-debt arrangements. We have not yet completed the full assessment of the impact on our condensed consolidated financial statements or related disclosures.

 

Note 2 – Acquisitions

 

Acquisition of 1922861 Ontario Inc

 

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

 

In addition to the consideration on closing, an additional 500,000 restricted shares of Company Common Stock may potentially be issued upon the acquired base generating CAD $500,000 in cumulated gross sales with a 10% pre-tax profit. The Company has allotted 24 months to achieve this milestone. There is full acceleration to allow for full vesting as quickly as the cumulative sales milestones are reached.

 

 
F-12

Table of Contents

 

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

 

The Company applied the acquisition method to the business combination and valued each of the assets acquired (cash, accounts receivable, equipment, customer relationships, software, domain names and non-compete agreements) and liabilities assumed (accounts payable and related party payable) at fair value as of the acquisition date. The carrying values of cash, accounts receivable, accounts payable and related party payable were deemed to be fair value as of the acquisition date. The Company determined the fair value of the equipment to be historical net book value. The preliminary allocation of the purchase price was based on estimates of the fair value of the assets and liabilities assumed based on provisional amounts. However, the allocation of excess purchase and the amounts allocated to intangible assets are now as per valuation of assets and liabilities performed by independent valuer. Under the purchase agreement, the Company issued 1,000,000 shares of Common Stock valued at $417,815 and committed to issue an additional 500,000 shares of Common Stock at certain milestones. The obligation to issue the 500,000 shares of Company Common Stock is shown as an “other long-term liabilities” on the face of the balance sheet and was valued at $647,711 and $685,000 as of December 31, 2020 and 2019, respectively. The following table shows the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

 

ASSETS ACQUIRED

 

 

 

 

 

 

 

Accounts receivable

 

$ 18,663

 

Customer list

 

 

103,255

 

Developed technology

 

 

321,679

 

Domain and trade name

 

 

3,971

 

Non-compete

 

 

37,330

 

Goodwill

 

 

169,896

 

TOTAL ASSETS ACQUIRED

 

$ 654,794

 

 

 

 

 

 

LIABILITIES ASSUMED

 

 

 

 

Accounts payable

 

 

22,197

 

HST payable

 

 

2,147

 

TOTAL LIABILITIES ASSUMED

 

 

24,344

 

 

 

 

 

 

NET ASSETS ACQUIRED

 

$ 630,450

 

 

 
F-13

Table of Contents

 

Acquisition of Union Strategies Inc.

 

On January 30, 2020, the Company entered into transactions contemplated by the definitive share for share exchange agreement and plan of re-organization (the “Purchase Agreement”) by and among the Company, Union Strategies. Inc. (“USI”), the stockholders of USI and other parties signatory thereto to acquire all the issued and outstanding capital stock of USI for 1,500,000 shares of the Company’s restricted Common Stock (the “Closing Shares”). The acquisition resulted in USI becoming a wholly-owned subsidiary of the Company.

 

In the event that USI’s gross revenue for 2020 exceeds CAD $3,100,000 and it generates a minimum $75,000 in EBITDA (the “Performance Targets”), the Company agreed to issue an additional 1,000,000 shares of restricted Company Common Stock (“the Contingent Shares”) as additional purchase price consideration, which the Company estimates is probable that the Performance Targets will be achieved. The Company engaged an independent third party professional valuation firm to determine the value of the consideration that the Company paid and the values of the tangible assets, intangible assets and liabilities acquired.

 

The valuation firm determined that based on a 30-day average closing share of the Company’s Common Stock on January 30, 2020 and a 22.7% discount factor to reflect the shares’ resale restriction; the Closing and Contingent Shares are valued at $1.47 per share for a total purchase price consideration of $2,564,122.

 

The Company applied the acquisition method to the business combination and valued each of the assets acquired and liabilities assumed at fair value as of the acquisition date. The carrying values of accounts receivable, property and equipment, right to use asset, accounts payable, HST payable, accrued liabilities and lease obligation were deemed to be fair value as of the acquisition date. The obligation to issue the Contingent Shares is subject mark to market pricing of DLT stock price and is included in “other long-term liabilities” on the face of the balance sheet and valued at $1,240,000 on December 31, 2020.

 

The following table shows the estimated fair values of USI’s assets acquired and liabilities assumed at the January 30, 2020 date of acquisition:

 

ASSETS ACQUIRED

 

 

 

Customer list

 

$ 874,631

 

Non-compete agreement

 

 

779,299

 

Developed technology

 

 

133,918

 

Domain name

 

 

129,379

 

Total intangible assets acquired

 

 

1,917,228

 

Tangible assets acquired

 

 

140,723

 

TOTAL ASSETS ACQUIRED

 

$ 2,057,951

 

 

 

 

 

 

TOTAL LIABILITIES ASSUMED

 

 

416,126

 

 

 

 

 

 

NET ASSETS ACQUIRED

 

 

1,641,825

 

 

 

 

 

 

Goodwill

 

 

922,297

 

NET ASSETS ACQUIRED

 

$ 2,564,122

 

  

 
F-14

Table of Contents

 

Pro Forma

 

The following table presents the unaudited pro forma results of the Company for the years ended December 31, 2019 and 2018 as if the acquisitions of USI and the combined 1922861 Ontario Inc. and DLT Resolution Corp. occurred on January 1, 2018. The pro forma results include estimates and assumptions which management believes are necessary. However, pro forma results do not include an anticipated cost savings or their effects of the planned integration of USI and 1922861 Ontario Inc. and are not necessarily indicative of the result that would have occurred if the business combination had been in effect on the dates indicated, or which may result in the future. The unaudited pro forma revenue and net loss for USI was approximately $2,730,000 and $175,000, respectively, for 2019. The unaudited pro forma revenue and net income for USI was approximately $2,700,000 and $88,000, respectively, for 2018. The unaudited pro forma revenue and net loss for the combined 1922861 Ontario Inc. and DLT Resolution Corp. was approximately $953,000 and $374,000, respectively, for the year ended December 31, 2018. The pro forma information includes adjustments for the amortization of intangible assets.

 

 

 

Year ended December 31,

 

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

Revenue

 

$ 3,193,000

 

 

$ 3,653,000

 

Net loss

 

 

(1,472,000 )

 

 

(544,000 )

 

Note 3 – Goodwill and Intangible Assets

 

Due to a sustained decline in the market capitalization of our Common Stock during the first quarter of 2020, we performed an interim goodwill impairment test. Management considered that, along with other possible factors affecting the assessment of the Company’s reporting unit for the purposes of performing a goodwill impairment assessment, including management assumptions about expected future revenue forecasts and discount rates, changes in the overall economy, trends in the stock price, estimated control premium, other operating conditions, and the effect of changes in estimates and assumptions that could materially affect the determination of fair value and goodwill. As a result of the significant decline in the current market capitalization despite any of the other positive factors contemplated and relatively little change in our ongoing business operations, the outcome of this goodwill impairment test resulted in a charge for the impairment of goodwill related to the acquisition of A.J.D. Data Services of $160,594 recorded in the unaudited consolidated financial statements for the year ended December 31, 2020.

 

We amortize identifiable intangible assets on a straight-line basis over their estimated useful lives. As of December 31, 2020 and 2019, identifiable intangibles were as follows:

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Developed technology

 

$ 456,363

 

 

$ 312,452

 

Customer relationships

 

 

1,008,390

 

 

 

100,293

 

Website

 

 

119,000

 

 

 

119,000

 

Domain and trade name

 

 

138,007

 

 

 

3,857

 

Non-compete

 

 

844,507

 

 

 

36,260

 

Accumulated amortization

 

 

(549,622 )

 

 

(195,402 )

Total intangible assets, net

 

$ 2,016,645

 

 

$ 376,460

 

  

 
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Table of Contents

 

Expected future amortization expense related to identifiable intangibles based on our carrying amount as of December 31, 2020 for the following five years is as follows (in thousands):

 

For the Twelve Months ended December 31,

 

 

 

2021

 

$ 339,767

 

2022

 

 

332,906

 

2023

 

 

332,906

 

2024

 

 

316,778

 

2025

 

 

116,259

 

Thereafter

 

 

578,030

 

 

 

$ 2,020,359

 

  

Note 4 - Related Party Transactions

 

No compensation was incurred for the services of the Company’s directors or executives during the years ended December 31, 2020 and 2019.

 

As of December 31, 2020 and December 31, 2019, the Company had outstanding amounts payable to related parties of $20,884 and $20,880. The obligations are unsecured, non-interest bearing, due on demand and payable in Canadian dollars, with the change in the liability from December 31, 2019 to December 31, 2020 attributable to the change in the exchange rate for U.S. and Canadian dollars.

 

During the year ended December 31, 2019, the Company also made payments for services rendered by related parties totaling $25,000, resulting in balances owed for such services of $15,000 as of December 31, 2020 and 2019.

 

The Company has a note payable to a related party as settlement for consulting services. The note carries interest of 9% compounded annually and is due on demand. As of December 31, 2020 and December 31, 2019, $81,500 of principal and $41,565 and $34,190 of accrued interest was due, respectively.

 

 
F-16

Table of Contents

 

During the year ended December 31, 2020, the Company advanced a total of $111,471 to two individuals who manage USI’s operations. The advances are repayable upon demand.

 

Note 5 - Stockholders’ Equity

 

Series A Convertible Preferred Stock

 

The Company is authorized to issue up to 5,000,000 shares of Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock can be converted to common shares at the option of the holder at a rate of $1 per share.

 

There were 0 and 0 shares of series A convertible preferred stock issued and outstanding as of December 31, 2020 and December 31, 2019, respectively.

 

Series B Convertible Preferred Stock

 

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

 

There were 64,000 shares of series B convertible preferred stock issued and outstanding as of December 31, 2020 and December 31, 2019.

 

Common Stock

 

On January 13, 2020, the Company issued 31,250 shares of restricted Company Common Stock to a third party individual in a stock subscription agreement for $25,000 in cash.

 

The Company issued 1,500,000 shares of restricted Common Stock pursuant to the Purchase Agreement to acquire USI. See Note 2.

 

The Company retired 650,000 shares of its Common Stock in 2019.

 

Treasury Stock

 

There are 3,815,000 shares of Common Stock held as treasury stock as of December 31, 2020 and December 31, 2019, respectively, as a result of a 2014 buy-back of 38,000 post-split shares of Common Stock for cash and a 2017 buy-back of 3,777,000 shares of Common Stock in exchange for $5,000 note payable and $200 related party payable.

 

Note 6 – Notes Payable

 

Related Party

 

In 2015, the Company entered into a $350,000 note payable with a related party as a settlement for payment of consulting services provided valued at $350,000. The note carries interest of 9% compounded annually and was due on November 19, 2016. In 2016, the Company issued 50,000 shares of Series A Preferred Stock as repayment of $31,500 of accrued interest and $18,500 of outstanding principal. In 2017, the Company issued 1,250,000 shares of its Common Stock as repayment of $250,000 of principal. As of December 31, 2020 and 2019, $81,500 of principal and $41,565 and $34,190 of accrued interest due was due, respectively.

 

Non – Related Party

 

On August 1, 2017, the Company entered into a $5,000 note payable with an unrelated party to purchase Company Common Stock held by the unrelated party. The note was due on July 1, 2019 and bears no interest. As of December 31, 2020 and 2019, the $5,000 note principal is outstanding.

 

 
F-17

Table of Contents

 

The Government of Canada launched CEBA to assist businesses during the current challenges by providing interest-free unsecured loans. During the year ended December 31, 2020, the Company’s three Canadian subsidiaries each received CEBA loans. The loans bear zero interest and may be repaid any time after October 1, 2020 and if repaid on or before December 31, 2022, CEBA will forgive CAD 10,000 in loan principal. Should a CEBA loan be unpaid as of December 31, 2022, the loan converts to a three-year term loan having a 5% annual fixed rate of interest. As of December 31, 2020, the Company has a total of $109,778 (CAD 140,000) in outstanding CEBA loans.

 

Note 7 - Income Taxes

 

We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Pursuant to FASB ASC Topic 740, when it is more likely than not that a tax asset cannot be realized through future income, the Company must provide an allowance for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry-forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry-forward period. The Company records estimated losses from interest and penalties arising from taxes remitted late as well as unrecognized tax benefits as they are incurred as general and administrative expenses. The Company did not have accrued interest or penalties related to income taxes as of December 31, 2020 or 2019. The Company has not filed its 2020 and 2019 tax returns as of the date of this filing.

 

The sources and tax effects of the temporary differences for the periods presented are as follows (rounded to the nearest thousand):

 

 

 

December 31,

2020

 

 

December 31

2019

 

Net operating loss carry forward

 

$ 2,541,000

 

 

$ 2,201,000

 

Applicable Canadian Federal and Provincial tax rates

 

 

26.5 %

 

 

26.5 %

Deferred tax asset related to net operating losses

 

 

673,000

 

 

 

585,000

 

Deferred tax asset relating to debt discounts and derivative liability (at 26.5%)

 

 

-

 

 

 

-

 

Valuation allowance

 

 

(673,000 )

 

 

(585,000 )

Net deferred tax asset

 

$ -

 

 

$ -

 

 

A reconciliation of income taxes computed at the United States federal statutory rate of 21% and 35% to the income tax recorded is as follows:

 

 

 

December 31,

2020 (21%)

 

 

December 31,

2019 (21%)

 

Tax benefit at United States Federal statutory rate

 

$ 141,000

 

 

$ 110,000

 

Differences in U.S. and Canadian tax rates on provision

 

 

53,000

 

 

 

29,000

 

Increase in valuation allowance

 

 

(88,000 )

 

 

(139,000 )

Income tax provision

 

$ -

 

 

$ -

 

  

 
F-18

Table of Contents

 

The Company did not pay any income taxes during the years ended December 31, 2020 or 2019, or since inception.

 

The net federal operating loss carry forward will begin to expire in 2026. This carry forward may be limited upon the consummation of a business combination under IRC Section 381. Tax years commencing at inception remain open for examination by the IRS, where applicable.

 

Effective January 1, 2018, the U.S. Congress enacted the “Tax Jobs and Cuts Act” which, among other things, reduced the maximum corporate tax rate to 21%. There is no impact on deferred tax asset valuations related to this change due to the fact that the Company’s operations primarily reside in Canada.

 

Note 8 – Concentrations

 

During the years ended December 31, 2020 and 2019, no single customer accounted for more than 10% of total revenue for the respective periods. As of December 31, 2020, one customer had an outstanding accounts receivable balance that was 15% of our total accounts receivable at that time. As of December 31, 2019, no single customer had an outstanding accounts receivable balance that exceeded 10% of our total accounts receivable at that time.

 

Note 9 – Commitments and contingencies

 

Litigation

 

On March 29, 2019, DLT Resolution Corp. and DLT Resolution Inc. was served with a Statement of Claimants 300-306 Town Centre Boulevard Limited Partnership/Court File No. CV-19-00617228-000 (Toronto) for unpaid rent and lost revenue related to the premises. In this action, the Plaintiff has claimed damages against the Defendants DLT Resolution Corp. and DLT Resolution Inc. in the amount of $567,385 for an alleged breach of lease. The Plaintiff has claimed damages against the Defendant DLT Resolution Inc. in the amount of $567,385 for allegedly wrongfully inducing a breach of lease and tortious interference with contractual relations. The Plaintiff has further claimed damages against the Defendant DLT Resolution Inc. in the amount of $567,385 for allegedly oppressive conduct under the Ontario Business Corporations Act. The Plaintiff has further claimed compensation for its legal costs and for pre-judgment interest. The Company filed a statement of Defense citing, amongst other things, that it has never entered into any agreement with the landlord, nor guaranteed any such liability. The Defendants DLT Resolution Corp. and DLT Resolution Inc. intend to contest the claim vigorously. There is no intention to make a settlement offer nor have instructions been received to make a settlement offer at this juncture. Since the statement of defense was delivered on May 16, 2019, the Company had no further communication from counsel for the Plaintiff nor have any steps been taken to move the litigation forward. Although there can be no assurance of the Company’s ability to dismiss the claim, management feels the claim is without merit and is confident it will receive a ruling in its favor.

 

Leases Commitment

 

Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. USI has an operating lease for its Edmonton, Canada facility that started in March 2019 and terminates in February 2022. There was no sublease rental income for the year ended December 31, 2020. USI paid approximately $7,993 against the Lease obligation in the year ended December 31, 2020.

 

USI’s lease agreement does not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments.

 

 
F-19

Table of Contents

 

ROU lease asset and lease liability for the operating lease is recorded in the balance sheet as follows:

 

 

 

As of

 

 

 

December 31,

2020

 

Operating lease - right of use asset

 

$ 7,814

 

 

 

 

 

 

Lease obligations — operating leases, current portion

 

$ 6,267

 

Lease obligations — operating leases, net of current portion

 

 

998

 

Total lease liability

 

$ 7,265

 

 

 

 

 

 

Weighted average remaining lease term (in years)

 

 

1.2

 

Weighted average discount rate

 

 

7.75 %

  

Future lease payments included in the measurement of lease liabilities on the balance sheet as of December 31, 2020, for the following five fiscal years and thereafter were as follows:

 

 

 

For the year

ending

 

 

 

December 31,

 

 

 

 

 

2021

 

$ 7,528

 

2022

 

 

1,254

 

 

 

 

 

 

Total future minimum lease payments

 

 

8,782

 

Present value adjustment

 

 

1,517

 

Total

 

$ 7,265

 

  

Other Commitments

 

As permitted under Canadian Corporations Business Act, USI agrees to indemnify officers and directors for certain events or occurrences while the officer or director is, or was, serving at USI’s request in this capacity. The term of the indemnification period is indefinite. There is no limit on the amount of future payments USI could be required to make under these indemnification agreements; however, USI maintains insurance policy coverage that may enable USI to recover a portion of any amounts paid. As a result of USI’s insurance policy coverage, management believes the estimated fair value of these indemnifications is minimal. Accordingly, USI did not record any indemnification liabilities as of December 31, 2020 and 2019.

 

 
F-20

 

DLT Resolution (PK) (USOTC:DLTI)
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