Southern Its International, Inc 10-Q for FY2016 Q2
Southern Its International, Inc. (SITS)
About this 10-Q
Southern Its International, Inc filed this 10-Q on December 22, 2023, covering the quarter ended June 30, 2016 (FY2016 Q2).
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
Mark One
For the quarterly period ended
For the transition period from ______ to _______
Commission File No.
(Exact name of registrant as specified in its charter) |
| 7382 |
| EIN: | |
(State or Other Jurisdiction of Incorporation or Organization) |
| (Primary Standard Industrial Classification Number) |
| (IRS Employer Identification Number) |
(
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbols |
| Name of each exchange on which registered |
N/A | N/A | N/A |
Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. (Check one)
Large accelerated filer | ☐ | Smaller reporting company | |
Accelerated filer | ☐ | Emerging Growth Company | |
☐ |
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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 7(a)(2)(B) of the exchange act.
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
There were
TABLE OF CONTENTS
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Southern ITS International, Inc.
Consolidated Financial Statements
June 30, 2016 and December 31, 2015
(Unaudited)
SOUTHERN ITS INTERNATIONAL, INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
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| June 30, |
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| December 31, |
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| 2015 |
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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 |
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Advances to Non-Related Parties |
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Prepaid Items |
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Total Current Assets |
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Fixed Assets: |
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Furniture and Equipment |
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Accumulated Depreciation |
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Total Fixed Assets |
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Total Assets |
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Liabilities and Stockholders' Deficit: |
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Current Liabilities |
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Accounts Payable & Accrued Expenses |
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Accrued Interest |
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Convertible Notes Payable- Related Party |
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Convertible Notes Payable |
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Notes Payable- Related Party |
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Derivative Liability |
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Total Current Liabilities |
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Non-Current Liabilities: |
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Convertible Notes Payable- Related Party |
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Total Non-Current Liabilities |
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Total Liabilities |
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Stockholders' Equity: |
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Preferred Stock, Par value $ |
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Common Stock, Par value $ |
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Paid-In Capital |
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Deficit Accumulated During Development Stage |
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Total Stockholders' Equity |
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Total Liabilities and Stockholders' Equity |
| $ |
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| $ |
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The accompanying notes are an integral part of these financial statements.
Neither the financial statements nor the notes have been reviewed by our auditors.
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| Table of Contents |
SOUTHERN ITS INTERNATIONAL, INC. | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(Unaudited) | ||||||||
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| For the Six Months Ended |
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| June 30, 2016 |
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| June 30, 2015 |
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Revenues |
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| $ |
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Costs of Services |
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Gross Margin |
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Operating Expenses: |
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Consulting |
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Professional Fees |
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Wages |
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General and Administrative |
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Total Operating Expenses |
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Operating Income (Loss) |
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Other Income (Expense): |
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Interest Expense |
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Derivative Expense |
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Interest Income |
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Total Other Income (Expense) |
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Net Income (Loss) Before Taxes |
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Income Tax Provision |
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Net Income (Loss) |
| $ |
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Loss per Share, Basic & Diluted |
| $ |
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Weighted Average Shares Outstanding |
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The accompanying notes are an integral part of these financial statements.
Neither the financial statements nor the notes have been reviewed by our auditors.
| 4 |
| Table of Contents |
SOUTHERN ITS INTERNATIONAL, INC. |
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) |
(Unaudited) |
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| Common |
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| Additional |
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| Total Stockholders' |
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| Preferred |
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| Common |
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| Common |
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| Stock |
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| Paid in |
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| Accumulated |
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| Equity |
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| Shares |
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| Stock |
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| Shares |
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| Stock |
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| Issuable |
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| Capital |
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| Deficit |
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| (Deficit) |
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Net Loss Inception (March 26, 2008) to 12/31/2008 |
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Stock issued at inception |
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Net Loss for year ended December 31, 2009 |
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Balance December 31, 2009 |
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Stock issued for services |
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Stock issued for debt reduction |
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Net Loss for year ended December 31, 2010 |
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Balance December 31, 2010 |
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Stock issued for services |
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Stock issued for debt reduction |
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Net loss for year ended December 31, 2011 |
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Balance December 31, 2011 |
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Stock issued pursuant to share exchange- addendum was later executed on April 30, 2013 |
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Stock issuable pursuant to addendum to share exchange agreement |
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Stock issued for debt reduction |
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Stock issued for services |
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Net loss for year ended December 31, 2012 |
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Balance December 31, 2012 |
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Stock cancelled per addendum to share exchange agreement |
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Stock issued per addendum to share exchange agreement |
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Preferred stock for services |
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Stock for services |
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Net loss for year ended December 31, 2013 |
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Balance December 31, 2013 |
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Stock cancelled J. Bell per agreement |
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Reverse split (50 to 1) adjustment |
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Stock issued for debt reduction |
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Stock issued for services |
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Net loss for year ended December 31, 2014 |
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Balances December 31, 2014 |
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Adj. Prepaid Expenses |
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Stock issued during year |
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Net Loss for year ended Dec. 31, 2015 |
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Balances December 31, 2015 |
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Net Gain for Quarter Mar. 31, 2016 |
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Balances March 31, 2016 |
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Net Gain for Quarter June 30, 2016 |
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Balances June 30, 2016 |
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The accompanying notes are an integral part of these financial statements.
Neither the financial statements nor the notes have been reviewed by our auditors.
| 5 |
| Table of Contents |
SOUTHERN ITS INTERNATIONAL, INC. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
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| For the Period |
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| Ended |
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| June 30, 2016 |
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| June 30, 2015 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net Income (Loss) for the Period |
| $ |
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| $ | ( | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Stock issued for services |
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Bad Debts |
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Changes in Operating Assets and Liabilities |
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Increase in accounts payable & accrued expenses |
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Increase in Advance to Related Party |
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Increase in Note Receivable |
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Increase in Interest Receivable |
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Decrease in Prepaid Expenses |
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Increase in accrued interest |
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Accrued Expenses |
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Increase (decrease) in accounts receivable, net |
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Derivative expense |
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Net Cash Used in Operating Activities |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from convertible notes to related party |
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Payments on note payable to related party |
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Proceeds from note payable |
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Net Cash Provided by Financing Activities |
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Net (Decrease) Increase in Cash |
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Cash at Beginning of Period |
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Cash at End of Period |
| $ |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Cash paid during the year for: |
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Interest |
| $ |
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| $ |
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Franchise and Income Taxes |
| $ |
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| $ |
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SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Accounts Payable Satisfied through Contributed Capital and Property and Equipment |
| $ |
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| $ |
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The accompanying notes are an integral part of these financial statements.
Neither the financial statements nor the notes have been reviewed by our auditors.
| 6 |
| Table of Contents |
SOUTHERN ITS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 AND DECEMBER 31, 2015
(Unaudited)
NOTE 1 - NATURE AND DESCRIPTION OF BUSINESS
Southern ITS International, Inc. (formerly Alco Advanced Technologies, Inc.) (“Company”) was incorporated in the State of Nevada on September 27, 1984. On March 21, 2012, the Company changed its name from Alco Advanced Technologies, Inc. to Southern ITS International, Inc.
The Company executed a share exchange with Southern ITS Corporation (“the Subsidiary”) in which the result was Southern ITS becoming a wholly-owned subsidiary of the Company. Refer to Note 9 for more information.
The Company's operations consist of providing turnkey integration of electronic security systems for various types of industries, such as transportation, gaming and other secure operations in both government and private sectors. The integration includes surveillance, access control, network infrastructure, data communications and fire and burglar alarm systems. Today, security technologies are evolving rapidly and require remote access through various networks, firewalls, and internet security. Surveillance systems and access control are all network- dependent and work best for the end user when they are completely integrated. The Company's mission is to provide a complete integration of the various electronic security systems with the computer networks that they are dependent upon and ensuring that the systems will remain secure from potential cyber attack.
On July 17, 2014, the Company enacted a
On August 15, 2014, the Company amended its articles of incorporation to decrease its authorized shares of common stock from Two Hundred Fifty Million (
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.
It is management's opinion, however, that all material adjustments (consisting of normal and recurring adjustments) have been made, which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.
Restatement of Financial Statements
Certain amounts in the prior period financial statements have been adjusted to conform to the current period presentation pursuant to a 1 for 50 reverse stock split on, see Note 14.
Neither the financial statements nor the notes have been reviewed by our auditors.
| 7 |
| Table of Contents |
Basis of Consolidation
The accompanying consolidated financial statements include all of the accounts of the Company and Southern ITS as of June 30, 2016 and December 31, 2015 for the periods then ended. All intercompany balances and transactions have been eliminated.
Use of estimates
The preparation of financial statements in conformity with U.S. 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.
Such estimates and assumptions impact, among others, the valuation allowance for deferred tax assets, due to continuing and expected future losses, and share-based payments.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.
Cash and cash equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.
The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.
Allowance for Doubtful Accounts
The Company evaluates the collectability of its accounts receivable based on a combination of factors. In circumstances where it is aware of a specific customers ability to meet its financial obligations, it records a specific reserve to reduce the amounts recorded to what it believes will be collected. For all other customers, it recognizes reserves for bad debts based on historical experience. The company had an allowance for doubtful accounts balance of $
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10- 35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP) and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1 |
| Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
|
|
|
Level 2 |
| Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
|
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|
Level 3 |
| Pricing inputs that are generally observable inputs and not corroborated by market data. |
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments.
Neither the financial statements nor the notes have been reviewed by our auditors.
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The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at June 30, 2016 and December 31, 2015; no gains or losses are reported in the consolidated statements of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date ended June 30, 2016 and December 31, 2015.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation on a straight-line basis over the estimated useful lives of
Intangible Assets
Valuation of intangible assets include significant estimates and assumptions such as estimating future cash flows from product sales, developing appropriate discount rates, estimating probability rates for the successful completion of projects, continuation of customer relationships and renewal of customer contracts, and approximating the useful lives of the intangible assets acquired.
Long Lived Assets
The Company reviews the recoverability of the carrying value of identified intangibles and other long-lived assets, including fixed assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recover-ability of these assets is determined based upon the forecasted undiscounted future net cash flows expected to result from the use of such asset and its eventual disposition. The Company’s estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors. The actual cash flows realized from these assets may vary significantly from its estimates due to increased competition, changes in technology, fluctuations in demand, consolidation of its customers and reductions in average selling prices. If the carrying value of an asset is determined not to be recoverable from future operating cash flows, the asset is deemed impaired and an impairment loss is recognized to the extent the carrying value exceeds the estimated fair market value of the asset.
Revenue recognition
The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) the collectability is reasonably assured. There are no price incentives and the product can only be returned if defective. As the Company does not believe defective merchandise is likely an allowance has not been recognized. Revenue is recognized on a gross basis with corresponding costs of goods as a reduction to revenue in cost of sales. The Company’s subsidiary earned the majority of the Company’s revenues in 2012 from installing network surveillance systems. The Company applies the percentage-of-completion revenue recognition principles of accounting when recording revenues for ongoing projects.
Risks and uncertainties
The Company operates in an industry that is subject to rapid change. The Company's operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business failure. Also, see Note 3 regarding going concern matters.
Segment information
During 2015 & 2016, the Company only operated in one segment; therefore, segment information has not been presented.
Neither the financial statements nor the notes have been reviewed by our auditors.
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Share based payments
Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights, are measured at their fair value on the awards’ grant date, and based on the estimated number of awards that are ultimately expected to vest. Share-based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expenses resulting from share-based payments are recorded as a component of general and administrative expenses.
Earnings per share
In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” Basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. At June 30, 2016, there were
Income Taxes
The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC Topic 740, “Income Taxes,” which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.
Accounting guidance now codified as FASB ASC Topic 740-20, “Income Taxes – Intra-period Tax Allocation,” clarifies the accounting for uncertainties in income taxes recognized in accordance with FASB ASC Topic 740-20 by prescribing guidance for the recognition, de-recognition and measurement in financial statements of income tax positions taken in previously filed tax returns or tax positions expected to be taken in tax returns, including a decision whether to file or not to file in a Particular jurisdiction. FASB ASC Topic 740-20 requires that any liability created for unrecognized tax benefits is disclosed. The application of FASB ASC Topic 740-20 may also affect the tax bases of assets and liabilities and therefore may change or create deferred tax liabilities or assets.
Subsequent events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
Recent accounting pronouncements
On January 15, 2014—The Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-08, Intangibles—Accounting for Goodwill (Topic 350). The Update simplifies the accounting alternative, if elected, to goodwill existing as of the beginning of the period of adoption and any new goodwill recognized in annual periods beginning after December 15, 2014.
In April 2013, the FASB issued ASU No. 2010-17, "Revenue Recognition – Milestone Method (Topic 605): Milestone Method of Revenue Recognition" (codified within ASC 605 - Revenue Recognition). ASU 2013-45 provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for construction contracts.
Company management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
Neither the financial statements nor the notes have been reviewed by our auditors.
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NOTE 3 - GOING CONCERN
The Company’s financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As reflected in the accompanying financial statements, the Company has an accumulated deficit of $
The Company is in the development stage and anticipates that it will be able to have profitable operations in the near future. The Company believes its current available cash, along with anticipated revenues, will be sufficient to meet its cash needs for the near future. There can be no assurance that future financing will be available in amounts or terms acceptable to the Company, if at all.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue its operations is dependent on Management's plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.
The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence.
These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
In response to these problems, management has taken the following actions:
· | seeking additional debt and/or equity financing, |
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· | continue with development and implementation of the business plan, |
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· | assess business markets and related opportunities so that more significant revenues can be generated, and |
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· | allocation of sufficient resources to continue with service and product marketing efforts. |
NOTE 4 - REVERSE STOCK SPLIT
On August 4, 2014, the Company executed a reverse stock split whereby the holders of stock in the Company, Southern ITS International, Inc., received one (1)
Prior to the reverse stock split the Company had
NOTE 5 - PREPAIDS
The prepaid asset balance at June 30, 2016, is a prepaid office rent deposit of $
NOTE 6 - ACCOUNTS RECEIVABLE
The Company had the following accounts receivable balances as of June 30, 2016 and December 31, 2015:
|
| June 30, 2016 |
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| December 31, 2015 |
| ||
Accounts Receivable |
| $ |
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| $ |
| ||
Less: Allowance for Doubtful Accounts |
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| ||
Total |
| $ |
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| $ |
| ||
Neither the financial statements nor the notes have been reviewed by our auditors.
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In the year ended December 31, 2015, the Company recorded $-
NOTE 7 - FIXED ASSETS
At June 30, 2016 and December 31, 2015 the Company has the following fixed assets:
|
| June 30, 2016 |
|
| December 31, 2015 |
| ||
Furniture and Equipment |
| $ |
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| $ |
| ||
Less Accumulated Depreciation |
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| ( | ) |
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| ( | ) |
Fixed Assets, net |
| $ |
|
| $ |
| ||
Depreciation expense for the period ended June 30, 2016 was $
NOTE 8 - NOTES PAYABLE
The Company has unsecured notes payable and convertible notes payable to related parties and non-related parties at June 30, 2016 under the following general terms:
Convertible notes payable to related parties
Between May 12, 2008 and December 29, 2011, the Company entered into multiple convertible promissory notes, all of which have identical terms, with Bonavel Development, S.A. for a total amount of $
Between November 2, 2009 and December 21, 2012, the Company entered into multiple convertible promissory notes, all of which have identical terms, with Alco Scanning Services, Inc. for a total amount of $
Convertible notes payable to non-related parties
On April 20, 2009, the Company entered into a convertible promissory note with Katherine Loren Armagnac in the amount of $
On June 3, 2009, the Company entered into a convertible promissory note with Marflu S.A. for a total amount of $
On June 8, 2009, the Company entered into a convertible promissory note with Steven R. Hammond in the amount of $
Neither the financial statements nor the notes have been reviewed by our auditors.
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On December 12, 2014, the Company entered into a convertible promissory note with Erik Miller in the amount of $
On March 2, 2015, the Company entered into a convertible promissory note with Craig Plummer in the amount of $
On March 22, 2015, the Company entered into a convertible promissory note with Chip Spear in the amount of $
On April 20, 2015, the Company entered into a convertible promissory note with Casey Saunders in the amount of $
Notes payable to related parties
Beginning on December 31, 2008, Sylvain Desrosiers, CEO has loaned various sums to the company. These are recorded as a loan from related party. The note bears a
Notes payable to non-related parties
On August 29, 2014, the Company entered into a promissory note agreement with Infinity International Holdings, LLC in the amount of $
The following table summarized the Company’s notes payable and convertible notes payable balances as of June 30, 2016 and December 31, 2015:
|
| June 30, 2016 |
|
| December 31, 2015 |
| ||
1. Convertible notes payable to related parties bearing interest at 10% - in default |
| $ |
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| $ |
| ||
2. Convertible notes payable to non-related parties bearing interest at 10% |
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| ||
3. Notes payable to related parties bearing interest at 10% |
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| ||
Totals |
| $ |
|
| $ |
| ||
The Company had an accrued interest balance on the notes payable in the amount of $
The convertible note holders may convert at any time to common shares at a per share price stipulated in their agreement.
Neither the financial statements nor the notes have been reviewed by our auditors.
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Conversion of Notes Payable
There were no conversions of debt in the period ended June 30, 2016. In the year ended December 31, 2014, two non-related party note holders converted a total of $
NOTE 9 - SHARE EXCHANGE AGREEMENT
On April 17, 2012, the Company issued
Addendum to Share Exchange Agreement
On April 30, 2013, the Company entered into an addendum with Southern ITS to amend its previously executed share exchange agreement on April 17, 2012. The addendum includes a mutually agreed upon revaluation of the consideration paid to acquire SIC whereby the new valuation will be
On March 18, 2014, the company entered into an addendum with Southern ITS to amend its previous agreement and Southern ITS returned 400,000 post reverse-split shares of common stock to the treasury.
Goodwill
On April 17, 2012, Southern ITS had assets of $
NOTE 10 - IMPAIRMENT OF GOODWILL
The Company’s stock exchange with Southern ITS resulted in the recording a goodwill in the amount of $
NOTE 11 - OFFICER AND RELATED PARTY TRANSACTIONS
Employment agreements with CFO/Treasurer
On August 31, 2014, the Company executed an employment agreement with its CFO and Treasurer, William Noll whereby the Company issued Mr. Noll
Employment agreement with CEO
On August 31, 2014, the Company executed an employment agreement with its CEO, Sylvain Desrosiers, whereby the Company issued Mr. Desrosiers
Convertible Notes Payable- Related Parties
As of June 30, 2016 and December 31, 2015, the Company has convertible notes payable with one related party company which is
Neither the financial statements nor the notes have been reviewed by our auditors.
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Notes Payable to Related Parties
As of June 30, 2016 and December 31, 2015, the Company has a note payable with an officer of the Company. The note bears an interest rate of
Stock issued to Officers
In September of 2013, the Company issued
In September of 2014, the Company issued
Addendum to Share Exchange Agreement
On April 30, 2013, the Company entered into an addendum with Southern ITS to amend its previously executed share exchange agreement. The addendum includes a mutually agreed upon revaluation of the consideration paid to acquire Southern ITS,
Cancelled Shares
In the year ended December 31, 2014, the Company cancelled
NOTE 12 - STOCKHOLDERS’ EQUITY
Common and preferred stock authorized
On April 15, 2014, the Company amended its articles of incorporation to decrease its authorized shares of common stock from Five Hundred Million (
The Company remains to have Ten Million (10,000,000) preferred shares with a par value of $0.001 authorized. The Company designated
Common and preferred stock issued
On August 4, 2014, the Company enacted a
For the year ended December 31, 2013, the Company issued
Neither the financial statements nor the notes have been reviewed by our auditors.
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At December 31, 2013, the Company had
In the year ended December 31, 2014, the Company cancelled
On November 17, 2015, the company issued
Stock Warrants
Included in two of our outstanding convertible notes payable are warrants to purchase our stock. They are as follows,
Warrant 1:
Warrant 2:
Warrants Exercisable December 31, 2013 |
|
| Exercise Price ($) per Share |
| Weighted Average Remaining Contractual Life |
| Exercised Warrants |
|
| Warrants Exercisable December 31, 2014 |
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| ($ |
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| - |
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NOTE 13 - CONTINGENCIES
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business. Southern ITS International has no pending or threatened legal proceedings or administrative actions either by or against the issuer that could have a material effect on the issuer's business, financial condition, or operations and any current, past, or pending trading suspensions by a securities regulator.
NOTE 14 - SUBSEQUENT EVENTS
On June 16, 2015 Southern ITS signed a surveillance system installation contract with a privately owned Casino Resort, located in the state of Mississippi. The currently stipulated contract amount is $
Management is contesting certain trade accounts payable of approximately $
Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855 and has determined that no additional material subsequent events exist at the time of this report.
Neither the financial statements nor the notes have been reviewed by our auditors.
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FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
There is no historical financial information about us upon which to base an evaluation of our performance. We are in start-up stage operations and have not generated any revenues. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products.
We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.
Results of Operations
For three months ended June 30, 2016, compared to three months ended June 30, 2015.
The Company had revenues of $318,605 for the three months ended June 30, 2016, compared to $31,631 for the three months ended March 31, 2015. Our costs of services were $87,806 and $2,479, for periods ended June 30, 2016 and March 31, 2015, respectively.
Our operating expenses were $132,142 in the three months ended June 30, 2016, and consisted of wages of $47,905 and general and administrative expenses of $84,237. In the three months ended June 30, 2015, our operating expenses were $60,375, and consisted of wages of $15,300, consulting fees of $8,056, professional fees of $100, and general and administrative expenses of $36,8743.
Our interest expense was $23,658 for the three months ended June 30, 2016 compared to $7,716 in the three months ended June 30, 2015.
Our net profit for the three months ended June 30, 2016, was $157,301 compared to a net loss of $84,597 for three months ended June 30, 2015.
As of June 30, 2016 and December 31, 2015, the number of shares outstanding was 20,884,708.
For six months ended June 30, 2016, compared to six months ended June 30, 2015.
The Company had revenues of $400,907 for the six months ended June 30, 2016, compared to $53,104 for the six months ended June 30, 2015. Our costs of services were $87,806 and $19,455, for the six months ended June 30, 2016 and June 30, 2015, respectively.
Our operating expenses were $132,142 in the six months ended June 30, 2016, and consisted of wages of $47,905 and general and administrative expenses of $84,237. In the six months ended June 30, 2015, our operating expenses were $130,498, and consisted of wages of $24,535, consulting fees of $30,572 professional fees of $5,130, and general and administrative expenses of $70,261.
Our interest expense was $23,658 for the six months ended June 30, 2016 compared to $26,687 in the six months ended June 30, 2015.
Our net profit for the six months ended June 30, 2016, was $157,301 compared to a net loss of $123,536 for the six months ended June 30, 2015.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2016 and December 31, 2015, our total assets were $211,929 and $29,796, respectively.
As of June 30, 2016, and December 31, 2015, our total liabilities were $3,099,537 and $3,042,052, respectively.
Cash Flows from Operating Activities
We generated positive cash flows from operating activities of $182,549 for the six months ended June 30, 2016. Cash flows used in operating activities for the six months ended June 30, 2015 were $42,642.
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Cash Flows from Investing Activities
We have not generated cash flows from investing activities for the six months ended June 30, 2016, and 2015.
Cash Flows from Financing Activities
We have financed our operations primarily from either advancements or the issuance of equity and debt instruments. For the six months ended June 30, 2016, we had no cash flows from financing activities. For the six months ended June 30, 2015, net cash from financing activities was $25,000.
We had $15,178 in cash as of December 31, 2015 and $197,727 as of June 30, 2016 for an increase of $182,549 in cash for the six months ended June 30, 2016.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not required for smaller reporting companies.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures. Our management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.
Our management, with the participation of our CEO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Report. Based upon this evaluation, our CEO concluded that our disclosure controls and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting which is described below.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Rule 13a-15(f). Our 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 the financial statements for external purposes in accordance with U.S. GAAP.
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 the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2016. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Based on this evaluation, management concluded that that our internal control over financial reporting was not effective as of June 30, 2016. Our CEO concluded we have a material weakness due to lack of segregation of duties, a limited corporate governance structure, and a lack of a formal management review process over preparation of financial information. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our system of internal control. Therefore, while there are some compensating controls in place, it is difficult to ensure effective segregation of accounting and financial reporting duties. Management reported the following material weaknesses:
| · | Lack of segregation of duties in certain accounting and financial reporting processes including the initiation, processing, recording and approval of disbursements; |
| · | Our corporate governance responsibilities are performed by the Board of Directors, none of whom are independent under applicable standards; we do not have an audit committee or compensation committee. Our Board of Directors acts primarily by written consent without meetings which results in several of our corporate governance functions not being performed concurrent (or timely) with the underlying transactions, including evaluation of the application of accounting principles and disclosures relating to those transactions; and |
| · | Certain reports that we prepare and accounting and reporting conclusions reached in connection with the financial statement preparation process are not subjected to a formal review process that includes multiple levels of review and are not submitted timely to the Board of Directors for review or approval. |
While we strive to segregate duties as much as practicable, there is an insufficient volume of transactions at this point in time to justify additional full-time staff. We believe that this is typical in many development stage companies. We may not be able to fully remediate the material weakness until we commence mining operations at which time we would expect to hire more staff. We will continue to monitor and assess the costs and benefits of additional staffing.
This Quarterly does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to the SEC rules that permit us to provide only management's report in this Quarterly Report.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently a party to any legal proceedings, and we are not aware of any pending or potential legal actions.
Item 1A. Risk Factors.
Not required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the six months ended June 30, 2016, we had no sales of unregistered equity securities.
Item 3. Defaults Upon Senior Securities.
During the six months ended June 30, 2016, there were no defaults on our senior securities.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
EXHIBIT SCHEDULE | |||
Exhibit Number |
| Document Description | |
(1) |
| ||
(1) |
| ||
(1) |
| ||
(1) |
| ||
# |
| Certification of the Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002. | |
# |
| Certification of the Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002. | |
## |
| ||
# | 101 |
| The following financial information from the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Stockholders’ Equity; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements. |
(1) Incorporated by reference from the Company’s Registration Statement on Form 10 filed with the SEC on April 13, 2015.
# Filed herewith.
## Furnished, not filed.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on December 22, 2023.
SOUTHERN ITS INTERNATIONAL, INC. | ||
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By: | /s/ James E. Shipley | |
| James E. Shipley |
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| President and Chief Executive Officer |
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on December 22, 2023.
Signature |
| Title | |
| |||
/s/ James E. Shipley |
| President, Chief Executive Officer, Treasurer, Secretary, and Director (Principal Executive Officer and Principal Accounting Officer) | |
James E. Shipley |
| ||
| 22 |
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James E. Shipley, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Southern ITS International, Inc.; |
| 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; |
| 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; |
| 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: |
| (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; |
| (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; |
| (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 |
| (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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
| (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 |
| (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. |
December 22, 2023
| /s/ James E. Shipley |
|
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| James E. Shipley President and Chief Executive Officer |
|
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EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James E. Shipley, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Southern ITS International, Inc..; |
| 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; |
| 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; |
| 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: |
| (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; |
| (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; |
| (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 |
| (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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
| (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 |
| (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. |
December 22, 2023
| /s/ James E. Shipley |
|
|
James E. Shipley
Chief Financial Officer and
Principal Accounting Officer
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
In connection with the Quarterly Report of Southern ITS International, Inc. (the "Company") on Form 10-Q for the six months ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned officers of the Company, each certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| December 22, 2023 | /s/ James E. Shipley |
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| James E. Shipley |
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| President and Chief Executive Officer |
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| /s/ James E. Shipley |
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| James E. Shipley |
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| Chief Financial Officer |
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A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.