DLTI 10-K
DLT Resolution Inc. (DLTI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
(FORMERLY HEMCARE HEALTH SERVICES, INC) |
(Exact name of registrant as specified in its charter) |
Commission File Number:
| ||
(State of Incorporation) |
| (I.R.S. Employer Identification No.) |
|
|
|
| ||
(Address of principal executive offices) |
| (Zip Code) |
(
(Registrant’s telephone number, including area code)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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 ☐
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 ☐
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).
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 | ☐ |
☐ | 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
The aggregate market value of voting and nonvoting common equity held by nonaffiliates of the registrant as of June 30, 2021 was approximately $
As of March 4, 2024,
INDEX
DLT RESOLUTION, INC.
(FORMERLY HEMCARE HEALTH SERVICES, INC.)
| 2 |
| Table of Contents |
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 2023. 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: Drew Reid. 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, the “Company”, “we” and “our”) operates in blockchain applications and telecommunications 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.
| 3 |
| Table of Contents |
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.
Employees
Currently there is one employee of the Company and its operations carried out using independent contractors. Management works at the pleasure of the board and for the foreseeable future, additional work on its development efforts are to be contracted out.
Research and Development Expenditures
During the year ended December 31, 2022, 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. 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.
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.
| 4 |
| Table of Contents |
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.
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.
None
ITEM 4 MINE SAFETY DISCLOSURES.
None
| 5 |
| Table of Contents |
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, 2022 and 2021.
Securities Authorized for Issuance under Equity Compensation Plans
There is no stock option plan in place for the company.
Recent Sales of Unregistered Securities
During the year ended December 31, 2022, the Company sold 388,274 shares of restricted Common stock to third parties and received $184,577 in proceeds.
| 6 |
| Table of Contents |
Securities issued in 2021
During the year ended December 31, 2021, the Company issued 1,000,000 shares of common stock to complete the acquisition of Union Strategies, Inc.
Securities issued in 2022
During the year ended December 31, 2022, the Company sold 388,274 shares of restricted Common stock to third parties and received $184,577 in proceeds.
ITEM 6 SELECTED FINANCIAL DATA.
Summary of Financial Data
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||
Revenues |
| $ | 218,707 |
|
| $ | 326,944 |
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
| $ | 391,959 |
|
| $ | 450,015 |
|
|
|
|
|
|
|
|
|
|
Loss |
| $ | (1,153,244 | ) |
| $ | (2,429,834 | ) |
|
|
|
|
|
|
|
|
|
Total Assets |
| $ | 325,716 |
|
| $ | 1,358,657 |
|
|
|
|
|
|
|
|
|
|
Liabilities |
| $ | 1,202,670 |
|
| $ | 1,228,181 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ (Deficit) Equity |
| $ | (876,954 | ) |
| $ | 130,476 |
|
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, 2022.
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, 2022.
| 7 |
| Table of Contents |
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 DLT Resolution, Inc. and its wholly owned subsidiaries, DLT Resolution Corp. and DLT Data Services, Inc. and Union Strategies, Inc. (“USI”), which are discontinued operations. All intercompany transactions and balances have been eliminated.
Plan of Operations
Liquidity and Capital Resources. As of December 31, 2022, we had $11,885 of cash on hand and total liabilities of $1,202,670. 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 will be required to secure additional financing to fund future filings. 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 $218,707 and $326,944 in 2022 and 2021, respectively, with the decrease attributable to a decrease in the number of customers. Total operating expenses were $391,959 for the year ended December 31, 2022 compared to $450,015 during the year ended December 31, 2021. The decrease in operating expenses relates to a reduction in headcount and volume of business.
Other Expense: Other Expense totaled ($12,495) during the year ended December 31, 2022 compared to ($2,378) during the year ended December 31, 202. Other Expense consists primarily of interest expense.
Loss from Discontinued Operations: In 2022, we suspended operations of USI and DLT Data and in 2023 we sold our 100% ownership of those discontinued subsidiaries. Loss from discontinued operations was ($967,497) for the year ended December 31, 2021 compared to( $2,304,385) for the year ended December 31, 2021. The decrease in loss is attributed to write-downs of USI and DLT Data intangible assets and its receivables in 2021.
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
| 8 |
| Table of Contents |
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.
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, 2022 and 2021, 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, 2022 and 2021, 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).
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.
| 9 |
| Table of Contents |
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.
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, 2022. In assessing the effectiveness of our internal control over financial reporting as of December 31, 2022, 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, 2022 was not effective in the specific areas described in the “Disclosure Controls and Procedures” section above and as specifically described in the paragraphs below.
| 10 |
| Table of Contents |
As of December 31, 2022 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, 2022, 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. |
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, 2022 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
ITEM 9B OTHER INFORMATION.
None.
| 11 |
| Table of Contents |
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The Company’s executive officer and director and his respective is as follows:
Director:
Name of Director |
|
| Age |
|
|
| |||
Drew Reid |
|
|
| 61 |
|
|
| ||
|
|
|
|
|
|
|
| ||
Executive Officer: |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
Name of Officer |
|
| Age |
|
| Office | |||
Drew Reid |
|
|
| 61 |
|
| 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.
Drew Reid
Mr. Ried, 56, was the Chief Executive Officer and a Director of Ciscom Corp since June 2020 and was appointed Executive Chairman in September 2021 where he served until departing in November 2023. Ciscom is an information technology services company that is listed on the Toronto Stock Exchange. Mr. Reid remains a Vice President and Director of Market Focus Direct Inc., a Canadian based subsidiary of Ciscom that is focused on data driven direct marketing.
Significant Employees
Drew Reid is an officer and Director of the Company.
| 12 |
| Table of Contents |
Corporate Governance
Nominating Committee. We have not established a Nominating Committee because of our limited operations; and because we have one director who is Drew Reid.
Audit Committee. We have not established an Audit Committee because of our limited operations; and because we have only one director.
Code of Ethics. We have not adopted a Code of Ethics.
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 Former Director |
| 2022 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
John Wilkes Former Director |
| 2021 |
|
| 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, 2021 and 2020. 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, 2022 and 2021.
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, 2022 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 |
|
|
| 23 | % |
John Wilkes |
|
| 4,003,000 |
|
|
| 19 | % |
Total |
|
| 9,003,000 |
|
|
| 42 | % |
| 13 |
| Table of Contents |
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
During the year ended December 31, 2022, there were no other material transactions between the Company and any Officer, Director or related party that has not been disclosed in footnote 6 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, 2022 and 2021, the Company incurred auditing expenses of approximately $50,000 and $40,000. There were no other audit related services or tax fees incurred.
| 14 |
| 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 |
|
| F-3 |
| |
| F-4 |
| |
| F-5 |
| |
| F-7 |
| |
| F-8 |
| |
| F-9 - F-17 |
|
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 |
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
101 |
| Interactive data files pursuant to Rule 405 of Regulation S-T. |
*Filed herewith
| 15 |
| 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/ Drew Reid |
| /s/ Drew Reid |
|
Drew Reid |
| Drew Reid |
|
President and Chief Executive Officer |
| Chief Financial Officer, Secretary and Treasurer |
|
(Principal Executive Officer) |
| (Principal Financial Officer) |
|
|
|
|
|
March 4, 2024 |
| March 4, 2024 |
|
| 16 |
| Table of Contents |
DLT RESOLUTION INC.
Consolidated Financial Statements
December 31, 2022 and 2021
| F-1 |
| Table of Contents |
DLT RESOLUTION INC.
Consolidated Financial Statements
December 31, 2022 and 2021
CONTENTS
|
| Page(s) |
|
Report of Independent Registered Accounting Firm (PCAOB ID # |
| F-3 |
|
|
|
|
|
| F-4 |
| |
|
|
|
|
| F-5 |
| |
|
|
|
|
| F-7 |
| |
|
|
|
|
| F-8 |
| |
|
|
|
|
| F-9 - F-17 |
|
| 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, 2022 and 2021, 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, 2022 and 2021, 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
We have served as the Company’s auditor since 2019
March 4, 2024
| F-3 |
| Table of Contents |
DLT RESOLUTION, INC |
| |||||||
Consolidated Balance Sheets As of December 31 |
| |||||||
|
| 2022 |
|
| 2021 |
| ||
ASSETS |
| |||||||
Current assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ |
|
| $ |
| ||
Accounts receivable |
|
|
|
|
|
| ||
Total current assets |
|
|
|
|
|
| ||
Assets from discontinued operations |
|
|
|
|
|
| ||
Intangible assets, net of accumulated amortization |
|
|
|
|
|
| ||
Total assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ |
|
| $ |
| ||
Accounts payable, related party |
|
|
|
|
|
| ||
Interest payable, related party |
|
|
|
|
|
| ||
Related party payables |
|
|
|
|
|
| ||
Notes payables, related party |
|
|
|
|
|
| ||
Notes payable, current portion |
|
|
|
|
|
| ||
Liabilities from discontinued operations |
|
|
|
|
|
| ||
Total current liabilities |
|
|
|
|
|
| ||
Notes payable, net of current portion |
|
|
|
|
|
| ||
Total liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Stockholders’ (deficit) equity |
|
|
|
|
|
|
|
|
Series A convertible preferred stock, $ |
|
|
|
|
|
| ||
Series B convertible preferred stock, $ |
|
|
|
|
|
| ||
Common stock, $ |
|
|
|
|
|
| ||
Common stock subscribed |
|
|
|
|
|
| ||
Additional paid in capital |
|
|
|
|
|
| ||
Other comprehensive income |
|
|
|
|
| ( | ) | |
Treasury stock, |
|
| ( | ) |
|
| ( | ) |
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Total stockholders’ (deficit) equity |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ (deficit) equity |
| $ |
|
| $ |
| ||
| ||||||||
See accompanying notes to consolidated financial statements. | ||||||||
| F-4 |
| Table of Contents |
DLT RESOLUTION, INC. | ||||||||
Consolidated Statements of Operations | ||||||||
|
|
|
|
| ||||
|
| Year ended December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Revenue |
| $ |
|
| $ |
| ||
Cost of revenue and operating expenses |
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
|
|
|
| ||
General and administrative |
|
|
|
|
|
| ||
Depreciation and amortization |
|
|
|
|
|
| ||
Professional fees |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
Foreign exchange gain/(loss) |
|
|
|
|
| ( | ) | |
Loss on investment |
|
|
|
|
|
| ||
Interest expense |
|
| ( | ) |
|
| ( | ) |
Total other expense |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net loss from continuing operations |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Loss from discontinued operations |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Net loss |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Loss per common share, basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
Weighted average basic shares outstanding |
|
|
|
|
|
| ||
Weighted average diluted shares outstanding |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements. | ||||||||
| F-5 |
| Table of Contents |
DLT RESOLUTION, INC. | ||||||||
Consolidated Statements of Comprehensive (Loss) Income | ||||||||
|
|
|
|
| ||||
|
| Year ended December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
Gain on valuation adjustment to other long-term liabilities |
|
|
|
|
|
| ||
Foreign currency translation adjustment |
|
|
|
|
| ( | ) | |
Total other comprehensive income |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
Comprehensive (loss) income |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements. | ||||||||
| F-6 |
| Table of Contents |
DLT RESOLUTION, INC
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
Year Ended December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
| 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, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
| $ |
| ||||||||
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
Issuance of common stock for acquisitions |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on investment in Union Strategies, Inc. |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2022 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
|
|
|
| $ | ( | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
|
|
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for acquisitions |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock subscription |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on adjusted value of other long-term liability |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ( | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
| $ |
| ||||||||
See accompanying notes to consolidated financial statements.
| F-7 |
| Table of Contents |
DLT RESOLUTION, INC | ||||||||
Consolidated Statements of Cash Flows | ||||||||
|
|
|
|
|
|
| ||
|
| December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net loss from continuing operations |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
Bad debt expense |
|
|
|
|
|
| ||
Depreciation and amortization expense |
|
|
|
|
|
| ||
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| ( | ) |
|
| ( | ) |
Interest payable, related party |
|
|
|
|
| ) | ||
Accounts payable and accrued liabilities |
|
|
|
|
|
| ||
Accounts payable, related party |
|
| ( | ) |
|
|
| |
Net cash used in operating activities |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceeds from sale of common stock |
|
|
|
|
|
| ||
Net cash provided by financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net change in cash from continuing operations |
|
| ( | ) |
|
|
| |
Effect of exchange rate on cash |
|
| ( | ) |
|
| ( | ) |
Cash and cash equivalents at beginning of year |
|
|
|
|
|
| ||
Cash and cash equivalents at end of year |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental cash flow information |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for income taxes |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Common shares issued for acquisition of Union Strategies, Inc. |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
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, 2021 and 2020
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.
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, 2022 and 2021, there were no uncertain tax positions that require accrual.
| F-9 |
| Table of Contents |
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.
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 definite-lived intangible assets on a straight-line basis over the life of the assets which range from five to seven years.
Impairment of Long-Lived Assets and Goodwill
The carrying value of long-lived assets is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis.
The Company tests goodwill for impairment annually as of December 31, or whenever events or changes in circumstances indicate that goodwill may be impaired. The Company initially assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company compares the reporting unit’s carrying amount to its fair value. If the reporting unit’s carrying amount exceeds its fair value, an impairment charge is recorded based on that difference.
There was no impairment of long-lived assets or goodwill during the periods presented.
| F-10 |
| Table of Contents |
Share Based Expenses
The Company complies with FASB ASC Topic 718 Compensation—Stock Compensation, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that is based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. FASB ASC Topic 718 primarily focuses on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This statement requires a public entity to expense the cost of employee services received in exchange for an award of equity instruments. This statement also provides guidance on valuing and expensing these awards, as well as disclosure requirements of these equity arrangements.
Net Income (Loss) Per Share
Net loss per share is calculated in accordance with FASB ASC topic 260. Basic earnings (loss) per share is computed by dividing net income, or loss, by the weighted average number of shares of common stock outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income, or loss, by the weighted average number of shares of common stock outstanding for the period, assuming conversion or exercise of all potentially dilutive securities outstanding during each reporting period presented. Potentially dilutive securities are not presented or used in the computation of diluted loss per share on the statement of operations for periods when the Company incurs net losses, as their effect would be anti-dilutive.
As of December 31, 2022 and 2021, the Company had
Principals of Consolidation
The consolidated financial statements represent the results of DLT Resolution, Inc. and its subsidiary, DLT Resolution Corp., as continuing operations and Union Strategies, Inc. and DLT Data Services, its subsidiaries as discontinued operations. 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
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.
| F-11 |
| Table of Contents |
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.
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.
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.
Recent Accounting Pronouncements
The Company adopts new pronouncements relating to generally accepted accounting principles applicable to the Company as they are issued, which may be in advance of their effective date.
On August 5, 2020, the Financial Accounting Standards Board (FASB) issued accounting standards update (ASU) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).
The amendments in the ASU remove certain separation models for convertible debt instruments and convertible preferred stock that require the separation of a convertible debt instrument into a debt component and an equity or derivative component. The ASU also amends the derivative scope exception guidance for contracts in an entity’s own equity. The amendments remove three settlement conditions that are required for equity contracts to qualify for the derivative scope exception.
| F-12 |
| Table of Contents |
In addition to the above, the ASU expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations that are impacted by the amendments.
The ASU is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021. Early adoption is permitted. The FASB noted that an entity should adopt the guidance as of the beginning of its annual fiscal year. The standard is effective for the Company beginning in fiscal year September 30, 2024.
Entities may elect to adopt the amendments through either a modified retrospective method of transition or a fully retrospective method of transition. If an entity has convertible instruments that include a down round feature, early adoption of the ASU is permitted for fiscal years beginning after December 15, 2020.
ASU 2016-13 Measurement of Credit Losses on Financial Instrument is effective for fiscal years beginning after December 15, 2022. This is not expected to apply to the Company as financial instruments giving rise to credit risk are not utilized by the Company.
Note 2 – Discontinued Operations
The Company suspended the operations of Union Strategies, Inc. in 2022and recognizes its activities as discontinued operations within the accompanying unaudited condensed consolidated financial statements. All assets are written off and included in the loss from discontinued operations. In 2023, the Company sold its
On March 15, 2023, the Company sold its 100% ownership of DLT Data Services Inc. to a third party for a nominal purchase price and has recognized its activities as discontinued operations within the accompanying unaudited condensed consolidated financial statements.
Note 3 – Intangible Assets
We amortize identifiable intangible assets on a straight-line basis over their estimated useful lives. As of December 31, 2022 and December 31, 2021, identifiable intangibles were as follows:
|
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||
|
|
|
|
|
|
| ||
Developed technology |
| $ |
|
| $ |
| ||
Customer relationships |
|
|
|
|
|
| ||
Domain and trade name |
|
|
|
|
|
| ||
Non-compete |
|
|
|
|
|
| ||
Accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Total intangible assets, net |
| $ |
|
| $ |
| ||
| F-13 |
| Table of Contents |
Expected future amortization expense related to identifiable intangibles based on our carrying amount as of December 31, 2022 for the following five years is as follows (in thousands):
For the Twelve Months ended December 31, |
|
|
| |
2023 |
| $ |
| |
2024 |
|
|
| |
2025 |
|
|
| |
2025 |
|
|
| |
2027 |
|
|
| |
Thereafter |
|
|
|
|
|
| $ |
| |
Note 4 – 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 $
Non – Related Party
On August 1, 2017, the Company entered into a $
The Government of Canada launched CEBA to assist businesses during the current challenges by providing interest-free unsecured loans.
Note 5 - Stockholders’ Equity
Series A Convertible Preferred Stock
The Company is authorized to issue up to
| F-14 |
| Table of Contents |
Series B Convertible Preferred Stock
The Company is authorized to issue up to
There were
Common Stock
On May 20, 2021, the Company issued
During the year ended December 31, 2022, the Company sold
Treasury Stock
There are
Note 6 - 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, 2022 or 2021. The Company has not filed its 2022 and 2021 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, 2022 |
|
| December 31, 2021 |
| ||
Net operating loss carry forward |
| $ |
|
| $ |
| ||
Applicable Canadian Federal and Provincial tax rates |
|
| % |
|
| % | ||
Deferred tax asset related to net operating losses |
|
|
|
|
|
| ||
Deferred tax asset relating to debt discounts and derivative liability (at 26.5%) |
|
|
|
|
|
| ||
Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Net deferred tax asset |
| $ |
|
| $ |
| ||
| F-15 |
| Table of Contents |
A reconciliation of income taxes computed at the United States federal statutory rate of
|
| December 31, 2022 (21%) |
|
| December 31, 2021 (21%) |
| ||
Tax benefit at United States Federal statutory rate |
| $ |
|
| $ |
| ||
Differences in U.S. and Canadian tax rates on provision |
|
|
|
|
|
| ||
Increase in valuation allowance |
|
| ( | ) |
|
| ( | ) |
Income tax provision |
| $ |
|
| $ |
| ||
The Company did not pay any income taxes during the years ended December 31, 2022 or 2021, or since inception.
The net federal operating loss carry forward will
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
Note 7 - Related Party Transactions
No compensation was incurred for the services of the Company’s directors or executives during the years ended December 31, 2022 and 2021.
As of December 31, 2022 and December 31, 2021, the Company had outstanding amounts payable to related parties of $
During the year ended December 31, 2019, the Company also made payments for services rendered by related parties totaling $
The Company has a note payable to a related party as settlement for consulting services. The note carries interest of
Note 8 – Concentrations
During the years ended December 31, 2022 and 2021, no single customer accounted for more than
| F-16 |
| Table of Contents |
Note 9 – Commitments and contingencies
A Canadian subsidiary of the Company incurs employer payroll taxes and withholds payroll taxes from employee compensation and is required to remit the funds to Canadian government authorities on a timely basis. The subsidiary has not remitted the payroll taxes and carries the obligation as a current liability. The subsidiary intends to remit the funds as soon as it has the financial ability. The government authorities may assess penalties and interest on the subsidiary. No provision on the balance sheet is carried for the possible assessment. Management estimates that the amount of a potential assessment would not be material to the financial statements as of September 30, 2022 and the nine months then ended.
The Company charges and collects Canadian federal and provincial sales taxes known as harmonized sales tax or HST and is required to remit the funds to Canadian government authorities on a timely basis. The subsidiary has not remitted the HST taxes and carries the obligation as a current liability. The subsidiary intends to remit the funds as soon as it has the financial ability. The government authorities may assess penalties and interest on the subsidiary. No provision on the balance sheet is carried for the possible assessment. Management estimates that the amount of a potential assessment would not be material to the financial statements as of September 30, 2022 and the nine months then ended.
Note 10 – Subsequent events
In 2022, the Company suspended the operations of USI and has recognized its activities as discontinued operations within the financial statements for 2022 and 2021. In 2023, the Company sold its
On March 15, 2023, the Company sold its
On August 16, 2023, John Wilkes resigned as our sole officer and director and we appointed Drew Reid as his successor.
| F-17 |