DLTI 10-Q
DLT Resolution Inc. (DLTI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number
(Exact name of registrant as specified in its charter) |
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(State of Incorporation) |
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(Address of principal executive offices) |
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(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 ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐
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 12b‑2 of the Exchange Act.
Large accelerated filer | ☐ | ☐ | |
Accelerated filer | ☐ | Smaller reporting company | |
(Do not check if a smaller reporting company) | Emerging growth company | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes
As of May 3, 2024,
TABLE OF CONTENTS
FORM 10-Q
QUARTER ENDED JUNE 30, 2023
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PART I FINANCIAL INFORMATION |
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| Condensed Consolidated Statements of Changes in Stockholders’ Deficit |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
Item 1: Financial Statements.
DLT RESOLUTION, INC
Condensed Consolidated Balance Sheets
(Unaudited)
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| June 30, 2023 |
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| December 31, 2022 |
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ASSETS | ||||||||
Current assets |
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Cash and cash equivalents |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Total current assets |
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Intangible assets, net of accumulated amortization |
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Assets from discontinued operations |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
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Current liabilities |
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Accounts payable and accrued liabilities |
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Accounts payable, related party |
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Interest payable, related party |
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Related party payables |
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Notes payables, related party |
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Notes payable, current portion |
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Liabilities from discontinued operations |
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Total current liabilities |
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Notes payable, net of current portion |
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Total liabilities |
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Stockholders’ deficit |
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Series A convertible preferred stock, $ |
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Series B convertible preferred stock, $ |
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Common stock, $ |
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Common stock subscribed |
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Additional paid-in capital |
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Other comprehensive income |
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Treasury stock, |
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Accumulated deficit |
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Total stockholders’ deficit |
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Total liabilities and stockholders’ deficit |
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See accompanying notes to unaudited condensed consolidated financial statements. | ||||||||
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| Table of Contents |
DLT RESOLUTION, INC. |
Unaudited Condensed Consolidated Statements of Operations |
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| Three Months Ended |
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| Six Months Ended |
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| June 30, 2023 |
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Revenues |
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Cost of revenue and operating expenses |
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Cost of revenue |
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General and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Loss from operations |
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Other income (expenses) |
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Foreign exchange gain (loss) |
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Loss on disposition of assets |
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Interest expense |
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Total other income (expense) |
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(Loss) income from continuing operations |
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Income (loss) from discontinued operations |
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Net (loss) income |
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Net (loss) income per share-basic and diluted |
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Average number of shares of common stock outstanding |
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See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
| Table of Contents |
DLT RESOLUTION, INC.
Unaudited Condensed Consolidated Statements of Comprehensive Loss
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| Three months ended June 30, |
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| Six months ended June 30, |
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| 2023 |
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| 2022 |
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| 2022 |
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Net (loss) income |
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Other comprehensive loss |
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Foreign currency translation adjustment |
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Total other comprehensive loss |
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Comprehensive loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
| Table of Contents |
DLT RESOLUTION, INC.
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit
Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
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| Series B Preferred Stock |
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| Common Stock |
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| Common Stock |
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| Additional Paid-in |
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| Treasury |
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| Other Comprehensive |
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| Accumulated |
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| Non-Controlling |
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| Shares |
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| Amount |
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| Subscribed |
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| Capital |
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| Stock |
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| Income |
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| Deficit |
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| Interest |
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| Total |
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Balance, January 1, 2023 |
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Foreign currency translation adjustment |
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Net income |
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Balance, June 30, 2023 |
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Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
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| Series B Preferred Stock |
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| Common Stock |
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| Common Stock |
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| Additional Paid-in |
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| Stock |
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| Deficit |
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| Interest |
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| Total |
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Balance, January 1, 2022 |
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Sales of Common Stock |
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Loss on investment in Union Strategies Inc. |
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Foreign currency translation adjustment |
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Net loss |
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Balance, June 30, 2022 |
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See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
| Table of Contents |
DLT RESOLUTION, INC. | ||||||||
Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||
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| Six Months Ended June 30, 2023 |
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| Six Months Ended June 30, 2022 |
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Cash flows from operating activities |
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Net income (loss) |
| $ |
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Adjustments to reconcile net loss to net cash used in operating activities |
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Depreciation and amortization expense |
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Bad debt expense |
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Changes in operating assets and liabilities |
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Accounts receivable |
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Interest payable, related party |
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Accounts payable and accrued liabilities |
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Repayments to related parties |
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Net cash used in operating activities |
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Net cash used in investing activities |
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Cash flows from financing activities |
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Proceeds from bank overdrafts |
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Proceeds from sales of common stock |
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Net cash provided by financing activities |
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Net change in cash |
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Effect of exchange rate on cash |
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Cash at beginning of period |
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Cash at end of period |
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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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See accompanying notes to unaudited condensed consolidated financial statements. | ||||||||
| 7 |
| Table of Contents |
DLT RESOLUTION, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2023
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 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.
In April 2023, the Company acquired DLT Telecom, Inc., a newly formed Canadian corporation, for a nominal amount. The Company uses DLT Telecom, Inc. as the successor entity for its operations that were conducted by DLT Resolution Corp.
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.
Interim Condensed Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and in conformity with the instructions to Form 10-Q and Article 8 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these condensed consolidated financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements, and in our opinion reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with US GAAP and SEC regulations for interim financial statements. The results for the six months ended June 30, 2023 are not necessarily indicative of the results that we will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2022 included in our Annual Report on Form 10-K as filed with the SEC on March 13, 2023.
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.
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Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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 June 30, 2023, there were no uncertain tax positions that require accrual.
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 June 30, 2023 and December 31, 2022, the Company had
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.
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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 non-performance, 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.
Note 2 – Discontinued Operations
The Company suspended the operations of Union Strategies, Inc. in 2022 and 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
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Note 3 – Intangible Assets
We amortize identifiable intangible assets on a straight-line basis over their estimated useful lives. As of June 30, 2023 and December, 2022, identifiable intangibles were as follows:
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Expected future amortization expense related to identifiable intangibles based on our carrying amount as of June 30, 2023 for the following five years is as follows (in thousands):
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Note 4 – Notes Payable
On August 1, 2017, the Company issued a non-interest bearing $
Note 5 – Stockholders’ Equity
Common stock subscribed
The Company sold a subscription to purchase
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Note 6 – Related Party Transactions
The Company paid $
As of June 30, 2023 and December 31, 2022, the Company had outstanding amounts payable to related parties of $
The Company has a note payable to a related party as settlement for consulting services. The note carries interest of
Note 7 – Concentrations
During the six-month periods ended June 30, 2023 and June 30, 2022, no single customer accounted for more than
Note 8 – 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 and has garnished amounts from the DLT Resolution Corp. bank account. No provision on the balance sheet is carried for the possible assessment of penalties and interest. Management estimates that the amount of a potential assessment would not be material to the financial statements as of June 30, 2023 and the six 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 June 30, 2023 and the six months then ended.
Note 9 – Subsequent events
From July 10, 2023 to February 28, 2024, the Company accepted private placement subscriptions from accredited investors to purchase
On August 15, 2023, the Company converted $
The Company issued
On February 14, 2024, the Company acquired
On March 11, 2024, the Company entered into a purchase agreement with Global Motor Trade LLC, Global Motor Trade International LLC, SJ Auto Trade LLC, WEC International LLC. and the beneficial owners of each entity, collectively referred to as GMTI. GMTI, based in the United States, specializes in international wholesale distribution and sale of vehicles, vehicle parts and equipment, and machinery and equipment, with a primary focus on United States, Canada, Mexico, Southeast Asia, China, Europe, Dubai, and Africa. The Company paid the purchase price by issuing
On March 13, 2024, the Company appointed Charles Brofman as Director, General Counsel and Secretary.
On April 9, 2024, the Company sold its
In April 2024, the Company issued
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation. Shareholders’ Equity General.
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, and projections about DLT Resolutions’ industry, management’s beliefs, and certain assumptions made by management. Forward-looking statements include our expectations regarding product, services, and maintenance revenue, annual savings associated with the organizational changes effected in prior years, and short- and long-term cash needs. In some cases, words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “estimates,” variations of these words, and similar expressions are intended to identify forward-looking statements. The statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any forward-looking statements. Risks and uncertainties of our business include those set forth in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 13, 2023, under “Item 1A. Risk Factors” as well as additional risks described in this Form 10-Q. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth in other reports or documents we file from time to time with the Securities and Exchange Commission, particularly the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.
Overview
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.
Recent Developments
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 100% ownership of USI to a third party for a nominal payment and the acquirer assumed all of USI’s liabilities on a nonrecourse basis. In connection with the sale, the Company received 2,000,000 shares of its Common Stock held by an individual who sold USI shares to the Company in January 2020. Following the receipt of the 2,000,000 shares, the Company has 24,926,287 shares outstanding.
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.
In April 2023, the Company formed DLT Telecom, Inc., a Canadian corporation. The Company is using DLT Telecom, Inc. as the successor entity for its operations that were conducted by DLT Resolution Corp.
From July 10, 2023 to February 28, 2024, the Company accepted private placement subscriptions from accredited investors to purchase 3,878,752 shares of restricted Common Stock.
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On August 15, 2023, the Company converted $73,000 in liabilities into 292,000 shares of restricted Common Stock at a conversion price of $0.25 per share.
The Company issued 2,500,000 shares of Common Stock for services in connection with an employment agreement dated November 1, 2023.
On February 14, 2024, the Company acquired 19.9% of the issued and outstanding capital of Ciscom Corp. (“Ciscom”), an Ontario Canada based holding company, in exchange for 10,261,214 newly issued shares of Company Common Stock. Ciscom manages two entities in the information and communication technology (“ICT”) sector and primarily focuses on acquiring substantial small and medium sized profitable enterprises. On March 2, 2024, the Company issued 11,421,401 shares of Common Stock to acquire an additional 22.15% of Ciscom and become its largest shareholder.
On March 11, 2024, the Company entered into a purchase agreement with Global Motor Trade LLC, Global Motor Trade International LLC, SJ Auto Trade LLC, WEC International LLC. and the beneficial owners of each entity, collectively referred to as GMTI. GMTI, based in the United States, specializes in international wholesale distribution and sale of vehicles, vehicle parts and equipment, and machinery and equipment, with a primary focus on United States, Canada, Mexico, Southeast Asia, China, Europe, Dubai, and Africa. The Company paid the purchase price by issuing 6,020,000 shares of Common Stock valued at the current market value at that time, transferring to GMTI all of the Company-owned shares of Ciscom and any pledge to transfer new shares issued to the Company’s Chief Executive Officer up through May 31, 2024, or by closing.
On March 13, 2024, the Company appointed Charles Brofman as Director, General Counsel and Secretary.
On April 9, 2024, the Company sold its 100% ownership of DLT Resolution Corp. to a third party for a nominal purchase price and the acquirer assumed all DLT Resolution Corp’s liabilities on a nonrecourse basis.
In April 2024, the Company issued 5,000,000 shares of its Common Stock as compensation for services performed by the Company’s chief executive officer.
Revenues
Revenues for the three months ended June 30, 2023 and 2022 were $26,381 and $50,418, respectively. The decrease resulted primarily from our operating company having fewer customers and less revenue per customer in the three months ended June 30, 2023.
Revenues for the six months ended June 30, 2023 and 2022 were $72,910 and $106,574, respectively. The decrease resulted primarily from our operating company having fewer customers and less revenue per customer in the six months ended June 30, 2023.
Cost of Revenue
Cost of revenue for the three months ended June 30, 2023 and 2022 were $11,601 and $37,883, respectively. The dollar decrease resulted primarily from the reduction in revenue and costs corresponding to that reduced revenue.
Cost of revenue for the six months ended June 30, 2023 and 2022 were $33,438 and $75,259, respectively. The dollar decrease resulted primarily from the reduction in revenue and costs corresponding to that reduced revenue.
General and Administrative
General and administrative expense was $9,874 and $99,349 for the three months ended June 30, 2023 and 2022, respectively. The decrease is primarily due to a $72,336 decrease in professional fees.
General and administrative expense was $25,410 and $153,752 for the six months ended June 30, 2023 and 2022, respectively. The decrease is primarily due to a $75,252 decrease in professional fees.
Depreciation and Amortization
Depreciation and amortization expense was $16,188 and $15,991 for the three months June 30, 2023 and 2022, respectively.
Depreciation and amortization expense was $31,688 and $32,721 for the six months June 30, 2023 and 2022, respectively.
Other Expense
The Company had net other expense of $1,949 and $5,221 for the three months ended June 30, 2023 and 2022.
The Company had net other income of $806,630 for the six months ended June 30, 2023 and other expense of $8,880 for the six months ended June 30, 2022. In the six months ended June 30, 2023, the Company sold Union Strategies, Inc. and DLT Data Services Inc. and recognized a $726,735 gain on the sales.
Discontinued Operations
The Company had a loss from discontinued operations of $0 and $23,389 for the three-month periods ended June 30, 2023 and 2022, respectively. USI and DLT Data did not operate in 2024 and incurred no losses.
The Company had a loss from discontinued operations of $0 and $959,909 for the six-month periods ended June 30, 2023 and 2022, respectively. USI and DLT Data did not operate in 2024 and incurred no losses.
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Net Loss
The Company had net losses for the three-month periods ended June 30, 2023 and 2022 of $13,321 and $131,415, respectively. The decrease is primarily due to a $72,336 decrease in professional fees and a $22,389 decrease in the loss from discontinued operations.
The Company had net income of $789,004 for the six months ended June 30, 2023, and a net loss of $1,123,947 for the six months ended June 30, 2022. The decrease in net loss in the current year primarily resulted from the $726,735 gain from sales of Union Strategies, Inc. and DLT Resolution Corp. loss and a $0 loss from discontinued operations in the six months ended June 30, 2023, as compared to $959,909 for the six months ended June 30, 2022.
Liquidity and Capital Resources
As of June 30, 2023, we had total current assets of $34,216 and current liabilities of $384,140 creating a working capital deficit of $349,924. As of December 31, 2022, we had $13,913 of cash on hand and total liabilities of $1,202,670. We must secure additional funds to continue our business.
Net cash used in operating activities was $218 during the six months ended June 30, 2023, compared to $170,346 for the same period in 2022 with the decrease primarily attributed to the decrease in the loss from continuing operations for the comparable six-month periods.
No cash was used in investing activities during the six-month periods ended June 30, 2023 and 2022.
During the six months ended June 30, 2023, the Company provided no cash from financing activities. During the six months ended June 30, 2022, the Company generated $184,577 of cash from financing activities by selling shares of Common Stock.
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.
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
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Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Management of DLT Resolution Inc. is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.
At the end of the period covered by this report, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was carried out under the supervision and with the participation of our Principal Executive Officer, Principal Financial and Accounting Officer. Based on his evaluation of our disclosure controls and procedures, he concluded that during the period covered by this report, such disclosure controls and procedures were not effective to detect the inappropriate application of US GAAP standards. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our disclosure controls and that may be considered to be “material weaknesses.”
The Company will continue to create and refine a structure in which critical accounting policies and estimates are identified, and together with other complex areas, are subject to multiple reviews by accounting personnel. In addition, the Company will enhance and test our year-end financial close process. Additionally, the Company’s management will increase its review of our disclosure controls and procedures. Finally, we plan to designate individuals responsible for identifying reportable developments. We believe these actions will remediate the material weakness by focusing additional attention and resources in our internal accounting functions. However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in 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.
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Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2023. 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 June 30, 2023 was not effective in the specific areas described in the “Disclosure Controls and Procedures” section above and as specifically described in the paragraphs below.
As of June 30, 2023, 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. |
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· | Representative with Financial Expertise — For the six months ending June 30, 2023, 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. |
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· | 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. |
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· | 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. |
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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: | |
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· | 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. |
There have been no changes in our internal control over financial reporting that occurred during the six months ended June 30, 2023 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Not required under Regulation S-K for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
None.
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Item 6. Exhibits.
The following exhibits are attached hereto:
Exhibit No. | Description of Exhibit | |
101 | Interactive data files pursuant to Rule 405 of Regulation S-T |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DLT Resolution, Inc. |
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By: | /s/ Drew Reid | /s/ Drew Reid |
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| Drew Reid | Drew Reid |
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| President and Chief Executive Officer | Chief Financial Officer, Secretary and Treasurer |
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| (Principal Executive Officer) | (Principal Financial Officer) |
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| May 3, 2024 | May 3, 2024 |
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