DLTI 8-K/A
DLT Resolution Inc. (DLTI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 30, 2020
| DLT RESOLUTION, INC. |
| (Exact name of registrant as specified in its charter) |
| Nevada |
| 333-148546 |
| 20-8248213 |
| (State or other jurisdiction |
| (Commission File Number) |
| (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)
n/a
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Explanatory Note
We hereby amend Item 9.01 of our current report on Form 8-K filed on February 5, 2020, as amended on March 1, 2020, to include financial statements of the business acquired and pro forma financial information in accordance with Items 9.01(a). Except as set forth in Item 9.01 below, no other changes are being made to our current report on Form 8-K filed on February 5, 2020.
Item 9.01 Financial Statements and Exhibits.
| (a) | Financial Statements of business acquired. |
Balance sheets as of December 31, 2019 and 2018, Statements of Operations, Statement of Deficiency of Stockholders’ Equity, Statements of Cash Flows and Notes to Financial Statements for the years then ended.
| (b) | Pro forma financial information. |
Pro forma Consolidated Balance Sheets as of December 31, 2019 and 2018 and Pro Forma Consolidated Statements of Operations for the years then ended.
| (d) | Exhibits |
| Exhibit Number |
| Description |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| DLT Resolution, Inc. |
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| Date: February 23, 2021 | By: | /s/ John S. Wilkes |
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| Name: | John S. Wilkes |
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| Title: | President and Chief Exectutive Officer |
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EXHIBIT 99.1
UNION STRATEGIES INC.
Financial Statements
December 31, 2019 and 2018
December 31, 2019 and 2018
CONTENTS
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| 3 |
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| Financial Statements |
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| 8 - 12 |
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| Table of Contents |
Boyle CPA, LLC
Certified Public Accountants & Consultants
To the Board of Directors and Stockholders’ of
Union Strategies, Inc.
Report on the Financial Statements
We have audited the accompanying financial statements of Union Strategies, Inc., which comprise the balance sheets as of December 31, 2019 and 2018, and the related statements of operations, changes in stockholders' equity (deficit), and cash flows for the years then ended, and the related notes to the financial statements.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
As discussed in Note 2 to the financial statements, the Company had a net loss during the year ended December 31, 2019, and had a working capital deficiency and accumulated deficit at December 31, 2019. These factors raise substantial doubt about its ability to continue as a going concern for one year from the issuance of these financial statements. Management’s plans are also described in Note 2. The financial statements do not include adjustments that might result from the outcome of this uncertainty.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Union Strategies, Inc. as of December 31, 2019 and 2018, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
/s/ Boyle CPA, LLC
Bayville, New Jersey
February 9, 2021
| 361 Hopedale Drive SE |
| P (732) 822-4427 |
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| Bayville, NJ 08721 |
| F (732) 510-0665 |
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BALANCE SHEETS
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| December 31, 2019 |
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| December 31, 2018 |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
| $ | 9,905 |
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| $ | 50,132 |
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| Accounts receivable, net of allowance for doubtful accounts of $62,894 and $0 at December 31, 2019 and 2018, respectively |
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| 192,799 |
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| 306,660 |
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| Receivable – related parties |
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| 149,653 |
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| 108,344 |
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| Prepaid and other current assets |
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| 133 |
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| 8,909 |
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| Total current assets |
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| 352,490 |
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| 474,045 |
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| Property and equipment, net |
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| 122,648 |
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| 134,120 |
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| Operating leases - right of use assets |
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| 18,506 |
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| Total assets |
| $ | 493,644 |
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| $ | 608,165 |
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| LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT) |
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| Current liabilities: |
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| Loans payable – related parties |
| $ | 168,420 |
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| $ | 168,419 |
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| Accounts payable and accrued liabilities |
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| 534,257 |
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| 403,378 |
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| Lease obligations - operating leases, current portion |
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| 8,635 |
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| — |
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| Total current liabilities |
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| 711,312 |
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| 571,798 |
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| Long-term liabilities: |
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| Lease obligations - operating leases, net of current portion |
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| 9,266 |
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| Total liabilities |
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| 720,578 |
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| 571,797 |
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| Commitments and contingencies (Note 5) |
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| — |
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| Stockholder’s equity: |
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| Common stock, $1.00 par value; 100 shares authorized, issued and outstanding as of December 31, 2019 and 2018 |
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| 100 |
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| 100 |
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| Class A Preference shares, no par value, no shares authorized, issued and outstanding as of December 31, 2019 and 2018 |
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| — |
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| — |
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| Class B Preference shares, no par value, no shares authorized, issued and outstanding as of December 31, 2019 and 2018 |
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| — |
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| — |
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| Special shares, no par value, no shares authorized, issued and outstanding as of December 31, 2019 and 2018 |
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| Additional paid-in capital |
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| — |
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| Retained earnings (accumulated deficit) |
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| (227,034 | ) |
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| 36,268 |
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| Total stockholder’s (deficiency) equity |
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| (226,934 | ) |
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| 36,368 |
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| Total liabilities and stockholder’s equity |
| $ | 493,644 |
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| $ | 608,165 |
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See accompanying notes to financial statements.
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| Table of Contents |
UNAUDITED STATEMENTS OF OPERATIONS
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| For the Years Ended December 31, |
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| 2018 |
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| REVENUE |
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| Services |
| $ | 2,404,321 |
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| $ | 2,392,575 |
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| Promotional |
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| 343,860 |
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| 306,714 |
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| Total revenue |
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| 2,748,182 |
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| 2,699,289 |
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| COSTS OF REVENUE AND OPERATING EXPENSES |
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| Costs of revenue, excluding depreciation and amortization |
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| 1,755,446 |
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| 1,461,549 |
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| Sales and marketing |
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| 300,584 |
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| 253,277 |
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| General and administrative |
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| 592,852 |
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| 724,303 |
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| Bad debt expense |
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| 266,484 |
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| 110,228 |
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| Depreciation and amortization |
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| 47,802 |
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| 30,196 |
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| Total costs of revenue and operating expenses |
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| 2,963,167 |
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| 2,579,553 |
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| (Loss) income from operations |
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| (214,986 | ) |
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| 119,736 |
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| Other (expense) |
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| Interest expense |
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| (44,169 | ) |
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| (31,803 | ) |
| Other expense |
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| (4,147 | ) |
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| Other (expense), net |
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| (48,316 | ) |
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| (31,803 | ) |
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| (Loss) income from operations before income taxes |
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| (263,302 | ) |
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| 87,933 |
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| Income tax (benefit) expense |
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| — |
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| — |
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| Net (loss) income |
| $ | (263,302 | ) |
| $ | 87,933 |
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| Basic (loss) income per common share - net (loss) income |
| $ | (2,633 | ) |
| $ | 879 |
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| Diluted (loss) income per common share - net (loss) income |
| $ | (2,633 | ) |
| $ | 879 |
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| Weighted average basic shares outstanding |
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| 100 |
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| 100 |
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| Weighted average diluted shares outstanding |
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| 100 |
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| 100 |
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See accompanying notes to financial statements.
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| Table of Contents |
STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY (DEFICIT)
Year Ended December 31, 2019
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| Common |
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| Retained Earnings (Accumulated |
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| Total Stockholder’s Equity |
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| Stock |
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| Deficit) | (Deficiency) |
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| Balance at January 1, 2019 |
| $ | 100 |
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| $ | 36,268 |
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| $ | 36,368 |
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| Net loss |
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| — |
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| (263,302 | ) |
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| (263,302 | ) |
| Balance at December 31, 2019 |
| $ | 100 |
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| $ | (227,034 | ) |
| $ | (226,934 | ) |
Year Ended December 31, 2018
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| Common |
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| Retained Earnings (Accumulated |
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| Total Stockholder’s Equity |
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| Stock |
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| Deficit) |
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| Balance at January 1, 2018 |
| $ | 100 |
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| $ | (51,665 | ) |
| $ | (51,565 | ) |
| Net income |
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| 87,933 |
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| 87,933 |
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| Balance at December 31, 2018 |
| $ | 100 |
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| $ | 36,268 |
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| $ | 36,368 |
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See accompanying notes to financial statements.
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| Table of Contents |
STATEMENTS OF CASH FLOWS
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| Year ended December 31, |
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| Cash flows from operating activities |
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| Net (loss) income |
| $ | (263,302 | ) |
| $ | 87,933 |
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| Adjustments to reconcile net (loss) income to net cash used in operating activities: |
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| Depreciation and amortization expense |
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| 47,802 |
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| 30,196 |
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| Bad debt expense |
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| 266,484 |
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| 110,228 |
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| Changes in operating assets and liabilities: |
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| Prepaid and other current assets |
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| 8,775 |
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| (5,000 | ) |
| Accounts receivable |
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| (152,622 | ) |
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| (118,029 | ) |
| Accounts payable and accrued liabilities |
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| 130,879 |
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| (179,273 | ) |
| Lease obligation – operating lease |
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| 17,901 |
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| Net cash provided by (used in) operating activities |
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| 55,917 |
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| (73,945 | ) |
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| Cash flows used in investing activities |
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| Purchases of property and equipment |
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| (54,834 | ) |
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| (43,977 | ) |
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| Cash flows from (used in) financing activities |
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| Advances to related parties |
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| (41,130 | ) |
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| (29,826 | ) |
| (Repayments of) proceeds from related party payables |
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| - |
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| 168,420 |
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| Net cash (used in) from financing activities |
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| (41,130 | ) |
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| 138,594 |
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| Net change in cash |
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| (40,227 | ) |
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| 20,671 |
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| Cash at beginning of period |
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| 50,132 |
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| 29,461 |
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| Cash at end of period |
| $ | 9,905 |
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| $ | 50,132 |
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| Supplemental cash flow information |
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| Cash paid for interest |
| $ | — |
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| $ | — |
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| Cash paid for income taxes |
| $ | — |
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| $ | — |
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See accompanying notes to financial statements.
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| Table of Contents |
Notes to Financial Statements
Note 1 - Organization and Business Operations
The Company was organized on October 24, 2011 under the Ontario Business Corporations Act of 1990 and is located in Woodbridge, Ontario, Canada. Effective June 4, 2018, the Company changed its name to Union Strategies Inc. (the “Company” or “Union”) from 1861094 Ontario Inc., its name upon incorporation. Union is focused on designing, installing and maintaining telephony, data, video, storage, and LAN/WAN networks. Union has clients encompassing 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 Union provides by deploying a variety of technologies to keep client networks up and running efficiently.
Note 2 - Significant Accounting Policies
Basis of Presentation
These calendar year financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles using Canadian dollars as the reporting currency. The Canadian dollar is Union’s functional currency.
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 and Cash Equivalents
All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents.
Allowance for Doubtful Accounts
We make judgments related to our ability to collect outstanding accounts receivable and unbilled work-in-progress. We provide allowances for receivables when their collection becomes doubtful by recording an expense. We determine the allowance based on our assessment of the realization of receivables using historical information and current economic trends, including assessing the probability of collection from customers. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments owed to us, an increase in the allowance for doubtful accounts would be required. We evaluate the adequacy of the allowance regularly and make adjustments accordingly. Adjustments to the allowance for doubtful accounts could materially affect our results of operations.
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of accounts receivables. We perform on-going evaluations of customers’ financial condition and, generally, require no collateral from customers.
As of December 31, 2019, two customers accounted for 12% and 15% of accounts receivables, respectively.
Property and Equipment
Property and equipment are stated at cost or estimated fair value if acquired in an acquisition, less accumulated depreciation, and are depreciated over their estimated useful lives, or the lease term, if shorter, using the straight-line method. Leasehold improvements are stated at cost, less accumulated amortization, and are amortized over the shorter of the lease term or estimated useful life of the asset. Maintenance and repair costs are expensed as incurred.
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We review our long-lived assets, such as property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. We evaluate the recoverability of an asset or asset group by comparing its carrying amount to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, we recognize an impairment charge as the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
Fair Value of Financial Instruments
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.
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.
Income taxes
We record deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating losses and tax credit carry-forwards. We measure deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. We reduce deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that these benefits will not be realized.
We use a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.
Going concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the year ended December 31, 2019, the Company had a net loss and had a working capital deficiency and accumulated deficit at December 31, 2019. These factors raise substantial doubt about its ability to continue as a going concern for one year from the issuance of these financial statements. Management’s plans are a merger and raising additional equity financing and borrowing funds under a private credit facility and/or other credit sources If the Company is unable to obtain additional funds when they are required or if the funds cannot be obtained on favorable terms, management may be required to restructure the Company or cease operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; and ASU 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statements of operations.
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We adopted the new standard on January 1, 2019, its effective date. We used the optional transition method approach with the effective date as the date of initial application. Consequently, prior periods will not be restated, and the disclosures required under ASC 840 will continue to be provided for dates and periods before January 1, 2019.
The new standard provides several optional practical expedients in transition. We elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs.
The new standard also provides practical expedients for an entity’s ongoing accounting. We currently have elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also have elected the practical expedient to not separate lease and non-lease components for all our leases and will not reassess whether initial direct costs qualify for capitalization (see Note 4).
The adoption of the standard resulted in the recognition of additional ROU assets and lease liabilities of $25,624 that did not change previously reported net income and did not result in a cumulative effect adjustment to accumulated deficit and did not impact cash flows.
In June 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 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. We have not yet completed the full assessment of the impact on our financial statements or related disclosures, however management does not believe there will be a significant impact.
In August 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. We have not yet completed the full assessment of the impact on our financial statements or related disclosures, however management does not believe there will be a significant impact.
Note 3 - Equity Shares
On June 4, 2018, Union’s Board of Directors and shareholder amended the Articles of Incorporation to add Class A and Class B Preference shares. Holders of Class A Preference shares are senior to holders of Class B Preference shares and Common shares with regard to the payment of dividends. At the discretion of Union’s Board of Directors, Union may declare a dividend that pays Class A holders from Union’s preceding year’s net income an amount equal to the Class A holder’s share capital multiplied by up to 120% of the Province of Ontario of the Corporation’s Bankers Prime Rate. In the event that Union is liquidated, Class A holders are have first priority among equity holders to receive their remaining share capital. Holders of Class A share are entitled to attend shareholder meetings and may vote in person or by proxy one vote for each Class A share held.
Holders of Class B Preference shares are senior to holders of Common shares with regard to the payment of dividends. At the discretion of Union’s Board of Directors, Union may declare a dividend that pays Class B holders from Union’s preceding year’s net income an amount equal to the Class B holder’s share capital multiplied by up to 120% of the Province of Ontario of the Corporation’s Bankers Prime Rate. In the event that Union is liquidated, Class B holders are have first priority after Class A holders to receive their remaining share capital. Holders of Class B share are not entitled to attend shareholder meetings or vote on any matters submitted to shareholders. Unless Union receives the written consent of Class B holders, no dividends may be declared and paid to holders of Special shares and Common shares.
| 10 |
| Table of Contents |
Subject to the rights of Class A and B Preference shareholders, holders of Special shares and Common shares have equal rights to dividends and any liquidating distributions. Special shares confer no rights to attend meetings or vote on shareholder matters.
For the years ended December 31, 2019 and 2018, no dividends were declared or paid. As of December 31, 2019 and 2018, 100 Common shares are issued and outstanding and no Class A, Class B or Special shares have been authorized by Union’s Board of Directors.
Note 4 - Related Parties
Union has relied on advances from and expenses paid by Company shareholders, officers and directors (“Related Parties”). As of December 31, 2019 and 2018, Union owed $168,420 and $157,105 to Related Parties. The loans are repayable on demand, bear no interest, have no equity conversion rights and are not secured by any Union assets.
In 2019, Union advanced funds to a related business entity. As of December 31, 2019, the entity owes Union $9,218. The advance is repayable upon Union’s demand, does not bear interest and is not collateralized. In 2018, Union advanced funds to an individual. As of December 31, 2019 and 2018, the individual owes Union $140,435. The advance is repayable upon Union’s demand, does not bear interest and is not collateralized.
Note 5 - Commitments and Contingencies
Leases Commitment
Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. Union 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 years ended December 31, 2019 and 2018. Union paid approximately $7,723 against the Lease obligation in the year ended December 31, 2019. Union paid approximately $38,850 in rent expense for the year ended December 31, 2018.
Our 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.
ROU lease asset and lease liability for our operating lease is recorded in the balance sheet as follows:
|
|
| As of |
| |
|
|
| December 31, 2019 |
| |
| Operating lease - right of use asset |
| $ | 18,506 |
|
|
|
|
|
|
|
| Lease obligations — operating leases, current portion |
| $ | 8,635 |
|
| Lease obligations — operating leases, net of current portion |
|
| 9,266 |
|
| Total lease liability |
| $ | 17,901 |
|
|
|
|
|
|
|
| Weighted average remaining lease term (in years) |
|
| 2.2 |
|
| Weighted average discount rate |
|
| 7.75 | % |
Future lease payments included in the measurement of lease liabilities on the unaudited balance sheet as of December 31, 2019, for the following five fiscal years and thereafter were as follows:
|
|
| For the year ending |
| |
|
|
| December 31, |
| |
| 2020 |
| $ | 9,600 |
|
| 2021 |
|
| 9,600 |
|
| 2022 |
|
| 9,600 |
|
| Total future minimum lease payments |
|
| 20,800 |
|
| Present value adjustment |
|
| 2,899 |
|
| Total |
| $ | 17,901 |
|
| 11 |
| Table of Contents |
Other Commitments
As permitted under Canadian Corporations Business Act, Union agrees to indemnify officers and directors for certain events or occurrences while the officer or director is, or was, serving at Union’s request in this capacity. The term of the indemnification period is indefinite. There is no limit on the amount of future payments Union could be required to make under these indemnification agreements; however, Union maintains insurance policy coverage that may enable Union to recover a portion of any amounts paid. As a result of Union’s insurance policy coverage, management believes the estimated fair value of these indemnifications is minimal. Accordingly, Union did not record any indemnification liabilities as of December 31, 2019 and 2018.
Litigation
From time to time, we are involved in various legal matters arising in the normal course of business. We do not expect the outcome of such proceedings, either individually or in the aggregate, to have a material effect on our financial position, cash flows or results of operations.
Note 6 - Subsequent Events
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, its stockholders and officers and DLT Resolution Inc. (OTC: DLTI), an information technology, cybersecurity, and telecommunications company. Under the Purchase Agreement, DLT Resolution, Inc. acquired all the issued and outstanding capital stock of Union for 1,500,000 shares of the DLT Resolution, Inc.’s restricted Common Stock (the “Closing Shares”). The acquisition resulted in Union becoming a wholly-owned subsidiary of DLT Resolution, Inc.
In the event that Union’s gross revenue for 2020 exceeds CAD $3,100,000 and it generates a minimum $75,000 in EBITDA (the “Performance Targets”), DLT Resolution, Inc. agreed to issue an additional 1,000,000 shares of its restricted Common Stock (“the Contingent Shares”) as additional purchase price consideration.
| 12 |
EXHIBIT 99.2
| DLT RESOLUTION, INC. PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2019 |
|
|
| DLT Resolution, Inc. |
|
| Union Strategies, Inc. |
|
| Adjustments |
|
| Combined |
| ||||
| Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Cash and cash equivalents |
| $ | 13,140 |
|
| $ | 14,927 |
|
| $ | - |
|
| $ | 28,067 |
|
| Accounts receivable, net |
|
| 34,631 |
|
|
| 133,780 |
|
|
| - |
|
|
| 168,411 |
|
| Receivable - related parties |
|
| - |
|
|
| 81,150 |
|
|
| (81,150 | )[B] |
|
| - |
|
| Total current assets |
|
| 47,771 |
|
|
| 229,858 |
|
|
| (81,150 | ) |
|
| 196,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
|
| - |
|
|
| 99,255 |
|
|
| - |
|
|
| 99,255 |
|
| Operating leases - right of use assets |
|
| - |
|
|
| 14,224 |
|
|
| - |
|
|
| 14,224 |
|
| Intangible assets, net of accumulated amortization |
|
| 376,460 |
|
|
| - |
|
|
| 1,393,184 | [B][C] |
|
| 1,769,644 |
|
| Goodwill |
|
| 165,022 |
|
|
| - |
|
|
| 922,297 | [B] |
|
| 1,087,319 |
|
| Total assets |
| $ | 589,253 |
|
| $ | 343,336 |
|
| $ | 2,234,331 |
|
| $ | 3,166,919 |
|
Notes
|
| [A] | To record the 1,500,000 shares of DLT Resolution, Inc. Common Stock issued to the shareholders of Union Strategies, Inc. and the contingent obligation to issue an additional 1,000,000 Common shares that are valued at $1.47 per share. |
|
| ||
|
| [B] | To record the adjustment to fair value of the acquired assets and and assumed liabilities of Union Strategies, Inc., including its customer list, developed technology, domain name and the non-compete agreements provided for in the Purchase Agreement. |
|
|
| |
|
| [C] | To record the amortization expense for intangible assets recognized upon acquisition of Union Strategies, Inc. and the related accumulated amortization as of the balance sheet date. |
|
| ||
|
| [D] | To record the consolidation of Union Strategies, Inc. as a wholly-owned subsidiary of DLT Resolution, Inc. and recognize other comprehensive income from translation of the Union Strategies, Inc. financial results that are based on the Canadian Dollar at its functional currency . |
| 1 |
| DLT RESOLUTION, INC. PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2019 |
|
|
| DLT Resolution, Inc. |
|
| Union Strategies, Inc. |
|
| Adjustments |
|
| Combined |
| ||||
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Bank overdraft |
| $ | 16,782 |
|
| $ | - |
|
| $ | - |
|
| $ | 16,782 |
|
| Accounts payable and accrued liabilities |
|
| 99,201 |
|
|
| 405,068 |
|
|
| - |
|
|
| 504,269 |
|
| Accounts payable, related party |
|
| 15,000 |
|
|
| - |
|
|
| - |
|
|
| 15,000 |
|
| Interest payable, related party |
|
| 34,190 |
|
|
| - |
|
|
| - |
|
|
| 34,190 |
|
| Related party payables |
|
| 20,880 |
|
|
| - |
|
|
| - |
|
|
| 20,880 |
|
| Current notes payable, related party |
|
| 81,500 |
|
|
| 30,771 |
|
|
| (30,771 | )[B] |
|
| 81,500 |
|
| Lease obligations - operating leases, current portion |
|
| - |
|
|
| 6,637 |
|
|
| - |
|
|
| 6,637 |
|
| Total current liabilities |
|
| 267,553 |
|
|
| 442,476 |
|
|
| (30,771 | ) |
|
| 679,258 |
|
| Lease obligations - operating leases, net of current portion |
|
| - |
|
|
| 7,122 |
|
|
| - |
|
|
| 7,122 |
|
| Notes payable, net of current portion |
|
| 5,000 |
|
|
| - |
|
|
| - |
|
|
| 5,000 |
|
| Other long-term liability |
|
| 685,000 |
|
|
| - |
|
|
| 1,470,000 | [A] |
|
| 2,155,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
| 957,553 |
|
|
| 449,598 |
|
|
| 1,439,229 |
|
|
| 2,846,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Series B convertible preferred stock |
|
| 64,000 |
|
|
| - |
|
|
| - |
|
|
| 64,000 |
|
| Common stock |
|
| 24,395 |
|
|
| 77 |
|
|
| 2,423 | [A][D] |
|
| 26,895 |
|
| Treasury stock |
|
| (5,300 | ) |
|
| - |
|
|
| - |
|
|
| (5,300 | ) |
| Additional paid-in capital |
|
| 4,236,265 |
|
|
| - |
|
|
| 1,091,622 | [A] |
|
| 5,327,887 |
|
| Other comprehensive income |
|
| (34,430 | ) |
|
| (22 | ) |
|
| 251,728 | [D] |
|
| 217,276 |
|
| Accumulated deficit |
|
| (4,653,230 | ) |
|
| (106,317 | ) |
|
| (550,672 | )[B][C][D] |
|
| (5,310,218 | ) |
| Total stockholders’ equity attributable to parent |
|
| (368,300 | ) |
|
| (106,262 | ) |
|
| 795,101 |
|
|
| 320,539 |
|
| Non-controlling interest |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Total stockholders’ equity |
|
| (368,300 | ) |
|
| (106,262 | ) |
|
| 795,101 |
|
|
| 320,539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities and stockholders’ equity |
| $ | 589,253 |
|
| $ | 343,336 |
|
| $ | 2,234,330 |
|
| $ | 3,166,920 |
|
| 2 |
| DLT RESOLUTION, INC. PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2019 |
|
|
| DLT Resolution, Inc. |
|
| Union Strategies, Inc. |
|
| Adjustments |
|
| Combined |
| ||||
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Services |
| $ | 463,325 |
|
| $ | 1,797,098 |
|
| $ | - |
|
| $ | 2,260,423 |
|
| Promotional |
|
| - |
|
|
| 259,126 |
|
|
| - |
|
|
| 259,126 |
|
| Total revenue |
|
| 463,325 |
|
|
| 2,056,224 |
|
|
| - |
|
|
| 2,519,549 |
|
| Cost of Sales |
|
| 154,874 |
|
|
| 1,323,454 |
|
|
| - |
|
|
| 1,478,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross Profit |
|
| 308,451 |
|
|
| 732,770 |
|
|
| - |
|
|
| 1,041,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| General and administrative |
|
| 546,541 |
|
|
| 475,787 |
|
|
| - |
|
|
| 1,022,328 |
|
| Bad debt expense |
|
| - |
|
|
| 128,856 |
|
|
| - |
|
|
| 128,856 |
|
| Depreciation and amortization |
|
| - |
|
|
| 31,166 |
|
|
| 259,026 | [C] |
|
| 290,192 |
|
| Sales and marketing |
|
| - |
|
|
| 197,618 |
|
|
| - |
|
|
| 197,618 |
|
| Total operating expenses |
|
| 546,541 |
|
|
| 833,427 |
|
|
| 259,026 |
|
|
| 1,638,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
| (238,090 | ) |
|
| (100,657 | ) |
|
| (259,026 | ) |
|
| (597,773 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expense |
|
| (7,315 | ) |
|
| (33,084 | ) |
|
| - |
|
|
| (40,399 | ) |
| Loss on stock-based liability |
|
| (467,487 | ) |
|
| - |
|
|
| - |
|
|
| (467,487 | ) |
| Foreign exchange gain |
|
| 5,362 |
|
|
| - |
|
|
| - |
|
|
| 5,362 |
|
| Loss on investment |
|
| (331,787 | ) |
|
| - |
|
|
| - |
|
|
| (331,787 | ) |
| Other income |
|
| - |
|
|
| 2,150 |
|
|
| - |
|
|
| 2,150 |
|
| Total other expense |
|
| (801,227 | ) |
|
| (30,934 | ) |
|
| - |
|
|
| (832,161 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss before income taxes |
|
| (1,039,317 | ) |
|
| (131,591 | ) |
|
| (259,026 | ) |
|
| (1,429,935 | ) |
| Provision for income taxes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
| $ | (1,039,317 | ) |
| $ | (131,591 | ) |
| $ | (259,026 | ) |
| $ | (1,429,935 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted loss per share |
| $ | (0.05 | ) |
|
|
|
|
|
|
|
|
| $ | (0.06 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average shares outstanding |
|
| 20,871,886 |
|
|
| - |
|
|
| 1,500,000 | [A] |
|
| 22,371,886 |
|
| 3 |
| DLT RESOLUTION, INC. PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2018 |
|
|
| DLT Resolution, Inc. |
|
| Union Strategies, Inc. |
|
| Adjustments |
|
| Combined |
| ||||
| Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Cash and cash equivalents |
| $ | 12,908 |
|
| $ | 36,837 |
|
| $ | - |
|
| $ | 49,745 |
|
| Accounts receivable |
|
| 12,217 |
|
|
| 225,334 |
|
|
| (219,999 | )[B] |
|
| 17,552 |
|
| Receivable - related parties |
|
| - |
|
|
| 71,298 |
|
|
| (71,298 | )[B] |
|
| - |
|
| Other prepaid expenses |
|
| - |
|
|
| 6,546 |
|
|
| (6,546 | )[B] |
|
| - |
|
| Assets held for sale |
|
| 656,735 |
|
|
| - |
|
|
| - |
|
|
| 656,735 |
|
| Total current assets |
|
| 681,860 |
|
|
| 340,015 |
|
|
| (297,843 | ) |
|
| 724,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
|
| - |
|
|
| 98,551 |
|
|
| - |
|
|
| 98,551 |
|
| Intangible assets, net of accumulated amortization |
|
| 460,491 |
|
|
| - |
|
|
| 1,652,210 | [B][C] |
|
| 2,112,701 |
|
| Goodwill |
|
| 156,774 |
|
|
| - |
|
|
| 922,297 | [B] |
|
| 1,079,071 |
|
| Total assets |
| $ | 1,299,125 |
|
| $ | 438,566 |
|
| $ | 2,276,664 |
|
| $ | 4,014,355 |
|
Notes
|
| [A] | To record the 1,500,000 shares of DLT Resolution, Inc. Common Stock issued to the shareholders of Union Strategies, Inc. and the contingent obligation to issue an additional 1,000,000 Common shares that are valued at $1.47 per share. |
|
|
|
|
|
| [B] | To record the adjustment to fair value of the acquired assets and and assumed liabilities of Union Strategies, Inc., including its customer list, developed technology, domain name and the non-compete agreements provided for in the Purchase Agreement. |
|
|
|
|
|
| [C] | To record the amortization expense for intangible assets recognized upon acquisition of Union Strategies, Inc. and the related accumulated amortization as of the balance sheet date. |
|
|
|
|
|
| [D] | To record the consolidation of Union Strategies, Inc. as a wholly-owned subsidiary of DLT Resolution, Inc. and recognize other comprehensive income from translation of the Union Strategies, Inc. financial results that are based on the Canadian Dollar at its functional currency. |
| 4 |
| DLT RESOLUTION, INC. PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2018 |
|
|
| DLT Resolution, Inc. |
|
| Union Strategies, Inc. |
|
| Adjustments |
|
| Combined |
| ||||
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Accounts payable and accrued expenses |
| $ | 48,920 |
|
| $ | 296,402 |
|
| $ | 4,283 | [B] |
| $ | 349,605 |
|
| Accounts payable – related party |
|
| 40,000 |
|
|
| - |
|
|
| - |
|
|
| 40,000 |
|
| Interest payable – related party |
|
| 26,875 |
|
|
| - |
|
|
| - |
|
|
| 26,875 |
|
| Related party payables |
|
| 17,713 |
|
|
| - |
|
|
| - |
|
|
| 17,713 |
|
| Current notes payable – related party |
|
| 81,500 |
|
|
| 115,441 |
|
|
| - |
|
|
| 196,941 |
|
| Liabilities held for sale |
|
| 146,127 |
|
|
| - |
|
|
| - |
|
|
| 146,127 |
|
| Total current liabilities |
|
| 361,135 |
|
|
| 411,843 |
|
|
| 4,283 |
|
|
| 777,261 |
|
| Notes payable, net of current portion |
|
| 5,000 |
|
|
| - |
|
|
| - |
|
|
| 5,000 |
|
| Other long-term liability |
|
| 196,142 |
|
|
| - |
|
|
| 1,470,000 | [A] |
|
| 1,666,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
| 562,277 |
|
|
| 411,843 |
|
|
| 1,474,283 |
|
|
| 2,448,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Series B convertible preferred stock |
|
| 64,000 |
|
|
| - |
|
|
| - |
|
|
| 64,000 |
|
| Common stock |
|
| 24,983 |
|
|
| 73 |
|
|
| 1,427 | [A][D] |
|
| 26,483 |
|
| Treasury stock |
|
| (5,300 | ) |
|
| - |
|
|
| - |
|
|
| (5,300 | ) |
| Additional paid-in capital |
|
| 4,192,678 |
|
|
| 0 |
|
|
| 1,092,622 | [A] |
|
| 5,285,300 |
|
| Other comprehensive income |
|
| (37,688 | ) |
|
| 22 |
|
|
| (22 | )[D] |
|
| (37,688 | ) |
| (Accumulated deficit) retained earnings |
|
| (3,595,912 | ) |
|
| 26,628 |
|
|
| (291,645 | )[B][C][D] |
|
| (3,860,930 | ) |
| Total stockholders’ equity attributable to parent |
|
| 642,761 |
|
|
| 26,723 |
|
|
| 802,381 |
|
|
| 1,471,865 |
|
| Non-controlling interest |
|
| 94,087 |
|
|
| - |
|
|
| - |
|
|
| 94,087 |
|
| Total stockholders’ equity |
|
| 736,848 |
|
|
| 26,723 |
|
|
| 802,381 |
|
|
| 1,565,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities and stockholders’ equity |
| $ | 1,299,125 |
|
| $ | 438,566 |
|
| $ | 2,276,664 |
|
| $ | 4,014,355 |
|
| 5 |
| DLT RESOLUTION, INC. PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2018 |
|
|
| DLT Resolution, Inc. |
|
| Union Strategies, Inc. |
|
| Adjustments |
|
| Combined |
| ||||
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Services |
| $ | 227,343 |
|
| $ | 1,844,699 |
|
| $ | - |
|
| $ | 2,072,042 |
|
| Promotional |
|
| - |
|
|
| 236,480 |
|
|
| - |
|
|
| 236,480 |
|
| Total revenue |
|
| 227,343 |
|
|
| 2,081,179 |
|
|
| - |
|
|
| 2,308,522 |
|
| Cost of Sales |
|
| (108,401 | ) |
|
| (1,126,869 | ) |
|
| - |
|
|
| (1,235,270 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross Profit |
|
| 118,942 |
|
|
| 954,310 |
|
|
| - |
|
|
| 1,073,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| General and administrative |
|
| 351,724 |
|
|
| 597,641 |
|
|
| - |
|
|
| 949,365 |
|
| Bad debt expense |
|
| - |
|
|
| 84,987 |
|
|
| - |
|
|
| 84,987 |
|
| Depreciation and amortization |
|
| - |
|
|
| 23,281 |
|
|
| 265,018 | [C] |
|
| 288,299 |
|
| Sales and marketing |
|
| - |
|
|
| 156,082 |
|
|
| - |
|
|
| 156,082 |
|
| Total operating expenses |
|
| 351,724 |
|
|
| 861,992 |
|
|
| 265,018 |
|
|
| 1,478,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Loss) income from operations |
|
| (232,782 | ) |
|
| 92,318 |
|
|
| (265,018 | ) |
|
| (405,482 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Income (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expense |
|
| (4,767 | ) |
|
| (24,520 | ) |
|
| - |
|
|
| (29,287 | ) |
| Loss on change in fair value of derivative liability |
|
| (2,427 | ) |
|
| - |
|
|
| - |
|
|
| (2,427 | ) |
| Foreign exchange loss |
|
| (3,992 | ) |
|
| - |
|
|
| - |
|
|
| (3,992 | ) |
| Other income |
|
| 31,834 |
|
|
| - |
|
|
| - |
|
|
| 31,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total other income (expense) |
|
| 20,648 |
|
|
| (24,520 | ) |
|
| - |
|
|
| (3,872 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss) income from continuing operations |
|
| (212,134 | ) |
|
| 67,798 |
|
|
| (265,018 | ) |
|
| (409,354 | ) |
| Loss from discontinued operations |
|
| (117,148 | ) |
|
| - |
|
|
| - |
|
|
| (117,148 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss) income attibutable to common stockholders |
| $ | (329,282 | ) |
| $ | 67,798 |
|
| $ | (265,018 | ) |
| $ | (526,502 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted loss from operations per share |
| $ | (0.02 | ) |
|
|
|
|
|
|
|
|
| $ | (0.03 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average shares outstanding |
|
| 19,263,408 |
|
|
| - |
|
|
| 1,500,000 | [A] |
|
| 20,763,408 |
|
| 6 |