DLT Resolution Inc 10-Q for FY2022 Q3
DLT Resolution Inc. (DLTI)
About this 10-Q
DLT Resolution Inc filed this 10-Q on August 7, 2023, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $61.47K
- up 3.2% from $59.56K a year earlier
- Net loss
- $19.43K
- compared with a net loss of $135.37K a year earlier
- Diluted EPS
- $0.00
- compared with -$0.01 a year earlier
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) |
| (I.R.S. Employer Identification No.) |
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(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 ☐ 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 | ☐ | Non‑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 August 7, 2023, 25,314,561 shares of the registrant’s Common Stock, $0.001 par value, were issued and
TABLE OF CONTENTS
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2022
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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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| September 30, 2022 |
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| December 31, 2021 |
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ASSETS |
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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) equity |
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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 (loss) |
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Treasury stock, |
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Accumulated deficit |
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Total stockholders’ (deficit) equity |
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Total liabilities and stockholders’ (deficit) equity |
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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 September 30, |
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| Nine months ended September 30, |
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Revenue |
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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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Professional fees |
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Total operating expenses |
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(Loss) income from operations |
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Other expense |
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Foreign exchange gain (loss) |
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Interest expense |
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Total other expense |
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(Loss) income from continuing operations |
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Loss from discontinued operations |
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Net loss |
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Loss per common share, basic and diluted |
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Weighted average shares outstanding, basic and diluted |
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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 Comprehensive Income (Loss)
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| Three months ended September 30, |
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| Nine months ended September 30, |
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| 2021 |
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Net loss |
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Other comprehensive income (loss) |
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Gain on adjusted value of other long-term liability |
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Foreign currency translation adjustment |
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Total other comprehensive income (loss) |
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Comprehensive income (loss) |
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| $ | ( | ) | |
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
| Table of Contents |
DLT RESOLUTION, INC
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity
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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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| Shares |
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| Amount |
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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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| Total |
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Balance, December 31, 2021 |
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Sales of Common Stock |
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Foreign currency translation adjustment |
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Loss on investment in Union Strategies Inc. |
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Net loss |
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Balance, September 30, 2022 |
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Balance, December 31, 2020 |
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Issuance of common stock for acquisition |
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Foreign currency translation adjustment |
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Loss on adjusted value of other long-term liability |
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Net loss |
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Balance September 30, 2021 |
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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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| Nine Months Ended September 30, 2022 |
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| Nine Months Ended September 30, 2021 |
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Cash flows from operating activities |
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Net 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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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
September 30, 2022
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.
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 three and nine months ended September 30, 2022 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, 2021 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 September 30, 2022, 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 September 30, 2022 and December 31, 2021, 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 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 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
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.
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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 September 30, 2022 and December 31, 2021, identifiable intangibles were as follows:
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Expected future amortization expense related to identifiable intangibles based on our carrying amount as of September 30, 2022 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
During the nine months ended September 30, 2022, the Company sold
Common stock subscribed
The Company sold a subscription to purchase
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Note 6 – Related Party Transactions
No compensation was incurred for the services of the Company’s directors or executives during the periods ended September 30, 2022 and 2021.
As of September 30, 2022 and December 31, 2021, 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 three-month and nine-month periods ended September 30, 2022 and 2021, 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. 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 9 – 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 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
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.
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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, 2021, 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.
Revenues
Revenues for the three months ended September 30, 2022 and 2021 were $61,474 and $59,558, respectively.
Revenues for the nine months ended September 30, 2022 and 2021 were $168,048 and $220,497, respectively. The decrease resulted primarily from having our operating company having fewer customers and less revenue per customer in the nine months ended September 30, 2022, which was partially offset by increased revenue in the three months ended September 30 2022 as compared to the comparable period in 2021.
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Cost of Revenue
Cost of revenue for the three months ended September 30, 2022 and 2021 were $40,109 and $36,628, respectively. The dollar decrease resulted primarily from the reduction in revenue and costs corresponding to that reduced revenue.
Cost of revenue for the nine months ended September 30, 2022 and 2021 were $115,368 and $119,677, 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, excluding professional fees, was $14,828 and $13,898 for the three months ended September 30, 2022 and 2021, respectively.
General and administrative expense, excluding professional fees, was $82,479 and $55,203 for the nine months ended September 30, 2022 and 2021, respectively.
Professional Fees
Professional fees were $3,098 and $8,579 for the three months ended September 30, 2022 and 2021, respectively.
Professional fees were $89,199 and $31,277 for the nine months ended September 30, 2022 and 2021, respectively. The increase resulted primarily from the use of outside professionals to perform work previously done by employees.
Depreciation and Amortization
Depreciation and amortization expense was $16,052 and ($7,146) for the three months ended September 30, 2022 and 2021, respectively. The decrease resulted primarily from the elimination of excess depreciation expense in the three months ended September 30, 2021 that was recognized previously in 2021.
Depreciation and amortization expense was $48,773 and $46,772 for the nine months ended September 30, 2022 and 2021, respectively.
Other Expense
The Company had net other expense of $1,821 and $2,054 for the three months ended September 30, 2022 and 2021.
The Company had net other expense of $10,701 and $5,782 for the nine months ended September 30, 2022 and 2021. The increase is due to an increase in the outstanding balance of our interest-bearing obligations.
Net Loss
The Company had a net loss of $19,427 and $135,371 for the three months ended September 30, 2022 and 2021. The decrease in net loss in the current year primarily resulted from the $4,993 loss from discontinued operations in the three months ended September 30, 2022 as compared to $140,916 for the three months ended September 30, 2021.
The Company had a net loss of $1,143,374 and $501,080 for the nine months ended September 30, 2022 and 2021. The increase in net loss in the current year primarily resulted from the $964,902 loss from discontinued operations in the nine months ended September 30, 2022 as compared to $462,866 for the nine months ended September 30, 2021.
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Liquidity and Capital Resources
As of September 30, 2022, we had total current assets of $65,231 and current liabilities of $1,168,306 creating a working capital deficit of $1,103,075. As of December 31, 2021, we had $29,783 of cash, total current assets of $78,912 and current liabilities of $1,223,181 creating a working capital deficit of $1,144,269.
Net cash used in operating activities was $201,009 during the nine months ended September 30, 2022 compared to $9,327 for the same period in 2021 with the increase primarily attributed to the $140,258 increase in the loss from continuing operations for the comparable nine-month periods.
No cash was used in investing activities during the nine months ended September 30, 2022 and 2021.
During the nine months ended September 30, 2022, the Company provided $184,577 cash from financing activities. During the nine months ended September 30, 2021, the Company generated $6,958 of cash from financing activities by over drafting its bank account.
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.
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.
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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.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In assessing the effectiveness of our internal control over financial reporting as of December 31, 2021, 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, 2021 was not effective in the specific areas described in the “Disclosure Controls and Procedures” section above and as specifically described in the paragraphs below.
As of December 31, 2021, 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 year ending December 31, 2021, 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 nine months ended September 30, 2022 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.
On May 20, 2021, the Company issued 1,000,000 shares of its restricted Common Stock to the former shareholders of USI as additional compensation for acquiring all of USI’s issued and outstanding common shares.
During the nine months ended September 30, 2022, the Company sold 388,274 shares of restricted Common stock to third parties and received $184,577 in proceeds.
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. |
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| 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/ John Wilkes | /s/ John Wilkes |
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| John Wilkes | John Wilkes |
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| President and Chief Executive Officer | Chief Financial Officer, Secretary and Treasurer |
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| August 7, 2023 | August 7, 2023 |
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EXHIBIT 31.1
CERTIFICATION
I, John Wilkes, Chief Executive Officer, certify that:
| (1) | I have reviewed this report on Form 10-Q for the quarterly period ended September 30, 2022 of DLT Resolution, Inc.; |
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| (2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| (3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| (4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| (5) | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
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| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 7, 2023 | |
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| /s/ John Wilkes |
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| John Wilkes |
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| President and Chief Executive Officer |
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EXHIBIT 31.2
CERTIFICATION
I, John Wilkes, Chief Financial Officer, certify that:
| (1) | I have reviewed this report on Form 10-Q for the quarterly period ended September 30, 2022 of DLT Resolution, Inc.; |
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| (2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| (3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| (4) | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| (5) | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
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| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 7, 2023 |
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| /s/ John Wilkes |
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| John Wilkes |
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| Chief Financial Officer, Secretary and Treasurer |
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| (Principal Financial Officer) |
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EXHIBIT 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, John Wilkes, the Chief Executive Officer of DLT Resolution, Inc. hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to their knowledge, the report on Form 10-Q of DLT Resolution, Inc., for the quarterly period ended September 30, 2022, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that the information contained in the report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of DLT Resolution, Inc.
| Date: August 7, 2023 |
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| /s/ John Wilkes |
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| John Wilkes |
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| President and Chief Executive Officer |
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| (Principal Executive Officer) |
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EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, John Wilkes, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of DLT Resolution, Inc. on Form 10-Q for the quarterly period ended September 30, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of DLT Resolution, Inc.
| Date: August 7, 2023 |
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| /s/ John Wilkes |
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| John Wilkes |
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| President, Treasurer, Secretary and Chief Executive Officer (Principal Financial and Accounting Officer) |
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This certification is furnished with this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference.