UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
FORM 10-K
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 20162018
Commission File Number: 333-148546
DLT RESOLUTION, INC (FORMERLY HEMCARE HEALTH SERVICES,
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Commission File Number:333-148546
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(State | (I.R.S. Employer Identification No.) | |
5940 S. Rainbow Blvd., Ste 400-32132, Las Vegas, NV | 89118 | |
(Address of principal executive offices) | (Zip Code) |
5940 S. Rainbow Blvd. Las Vegas NV. 400-32132(702) 796-6363
(Address of principal executive offices, including zip code)
(702) 796-6363
(Registrant'sRegistrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
Indicate by check mark if the registrant is a well-knownwell‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes x ☐ No ¨x
Indicate by check mark whether the registrant: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 x ☐ No ¨x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-KS‑K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant'sregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K10‑K or any amendment to this Form 10-K.10‑K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer,"” “smaller reporting company,” and "smaller reporting company"“emerging growth company” in Rule 12b-212b‑2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ | |
| ¨ | Smaller | x | |
(Do not check if a smaller reporting company) |
| Emerging growth company | x |
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. x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-212b‑2 of the Exchange Act). Yes ¨ ☐ No x
AsThe aggregate market value of May 15, 2017voting and non‑voting common equity held by non‑affiliates of the issuer had 273,332,211registrant as of June 29, 2018 was approximately $7,008,280 (based on a closing sale price of $0.49 per share as reported for the NASDAQ Global Select Market on June 29, 2018). For purposes of this calculation, shares of common stock issuedheld by officers, directors and 272,952,211their affiliated holders and shares of common stock held by persons who hold more than 10% of the outstanding common stock of the registrant have been excluded from this calculation because such persons may be deemed to be affiliates. This determination of executive officer or affiliate status is not necessarily a conclusive determination for other purposes.
As of September 04, 2019, 20,890,537 shares of the registrant’s Common Stock, $ 0.001 par value, were outstanding.
INDEX
DLT RESOLUTION, INC.
(FORMERLY HEMCARE HEALTH SERVICES, INC.(FORMERLY NSU RESOURCES INC))
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Cautionary Note
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are subject to a number of risks and uncertainties. All statements that are not historical facts are forward-looking statements, including statements about our business strategy, the effect of Generally Accepted Accounting Principles ("GAAP") pronouncements, uncertainty regarding our future operating results and our profitability, anticipated sources of funds and all plans, objectives, expectations and intentions and the statements regarding future potential revenue, gross margins and our prospects for fiscal 2009.2019. These statements appear in a number of places and can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "future," "intend," or "certain" or the negative of these terms or other variations or comparable terminology, or by discussions of strategy.
Actual results may vary materially from those in such forward-looking statements as a result of various factors that are identified in "Item 1A.—Risk Factors" and elsewhere in this document. No assurance can be given that the risk factors described in this Annual Report on Form 10-K are all of the factors that could cause actual results to vary materially from the forward-looking statements. References in this Annual Report on Form 10-K to (i) the "Company," the "Registrant," "Hemcare Health Services”"DLT” "we," "our," “HCRE,“DLTI,” and "us" refer toDLT Resolution Inc. (formerly HCRE, Hemcare Health Services Inc. (formerly NSU Resources, Inc.)...
Investors and security holders may obtain a free copy of the Annual Report on Form 10-K and other documents filed by Hemcare Health ServicesDLT Resolution Inc. with the Securities and Exchange Commission ("SEC") at the SEC's website at http://www.sec.gov. Free copies of the Annual Report on Form 10-K and other documents filed by Hemcare Health ServicesDLT Resolution Inc. with the SEC may also be obtained from Hemcare Health ServicesDLT Resolution Inc. by directing a request to Hemcare Health ServicesDLT Resolution Inc., Attention: John Wilkes. 5940 S. Rainbow Blvd, Ste 400-32132, Las Vegas, NV 89118 or tel. 1 (702) 796-6363
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General
DLT Resolution Inc. (formerly Hemcare Health Services Inc. (formerly NSU Resources Inc)) (“The Company”) was incorporated on January 17, 2007, under the laws of the State of Nevada. The principal offices are located at 5940 S. Rainbow Blvd, Ste 400-32132, Las Vegas, NV 89118. The telephone number is 1 (702) 796-6363. The Company has never declared bankruptcy and it has never been in receivership, and it has never been involved in any legal action or proceedings.receivership. Our fiscal year end is December 31.
Description of Business
HemCare HealthDLT Resolution Inc. (“DLT”) currently operates in three high-tech industry segments: Blockchain Applications; Telecommunications; and Data Services (“HHS”) iswhich includes Image Capture, Data Collection, Data Phone Center Services, and Payment Processing. Its clients represent some of the top businesses from a variety of sectors. Additionally, the Company formed a wholly-owned Canadian subsidiary to carry on business in Canada on effective November 23, 2017 and acquired A.J.D. Data Services on January 21, 2018. The Company offers secure data management, Information Technology (IT) and other telecommunications services in Canada and the United States. DLT Resolution helps organizations that have invoices, ledgers, statements, applications, surveys, employee and customer rewards programs and a wide range of other non-core functions benefit from data management. DLT Resolution also operates a Health Information Exchange company. HHS is creating a single unified platform enablingproviding the ability to request and retrieve medical information and& records while meeting all of today’stoday's Security & Compliance demands for HIPAA, PIPEDA and PHIPA.
Previously, the Company’s business plan and objective through late 2016 was to focus on hemorrhoid medical procedures for which it entered into a license agreement to open hemorrhoid treatment centers and promote the Ultroid Hemorrhoid System globally. However, Through RecordsBank.org, the Company ceased that planoffers an easy to use online gateway to its centralized system for patients, lawyers and insurers to retrieve and access medical records. The Company is currently redeveloping its future objectives in the Health Information Exchange sector. To this end management, working together with significant shareholders, have been developing strategies and alliancespreparing to fulfil this objective. At the closelaunch a Distributed Ledger Technology “Blockchain” version of the fiscal year management beganservice placing electronic health records on this secure platform. The Company has finished making the “Blockchain” but has yet to develop a platform and portal forlaunch the Information Exchange with aiminitiative yet. The Company expects to completion and market launch inthis initiative during the 2ndthird calendar quarter of 2017.2019.
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As a result of the business combination with 1922861 Ontario Inc. in the second quarter of 2018 i.e. April 12, 2018, our business now includes vital customers within the Resolution Telecom business. The Resolution Telecom business has been providing a wide range of innovative solutions that are reliable, scalable and flexible to hundreds of Canadian businesses for more than two decades. The Company’s infrastructure solutions are delivered as a monthly service with substantial flexibility in the packaging and the delivery to ensure the solution is one that best meets each business’s needs.
At the core of its offerings, Resolution Telecom Hosted PBX provides customers with cloud-based technology and infrastructure for IP voice communications at a significant savings over on premise solutions. Customers have the flexibility to utilize all the features such as voicemail to email, email transcription, call recording, CRM integration, remote workers, and mobile user apps without the capital expenditure of a traditional legacy system. By offering a truly supported hosted PBX platform, customers no longer require the expense of technicians making programming changes or deploying on site hardware.
Expansive Voice Portfolio - Traditional and Hosted IP. The Company’s feature-rich Hosted PBX platform eliminates the cost and complexity of owning and maintaining a traditional premise-based system.
Hosted PBX is an advanced, fully hosted, and managed service that is continually upgraded to support market leading business productivity features for all customers.
Additionally, the Company formed a wholly owned Ontario subsidiary DLT Data Services Ltd. to carry on business in December 2018. However, no operations have been conducted in this subsidiary during the year ended December 31, 2018.
DLT operates in Canada through its wholly owned subsidiary DLT Resolution Corp., its majority owned subsidiary A.J.D. Data Services Ltd. and a wholly owned subsidiary DLT Data Services Ltd. formed in December 2018.
Additionally, on January 14, 2019, the Company sold 70 of the 80 shares purchased in A.J.D. Data Services Ltd and the Company will continue to hold a 10% interest in AJD Data.
Employees
Currently there are no8 employees of the Company.Company through its wholly owned subsidiaries. Management works at the pleasure of the board and for the foreseeable future, additional work on its development efforts are to be contracted out.
Research and Development Expenditures
SinceDuring the time of our incorporation we haveyear ended December 31, 2018, the Company has not incurred any research or development expenditures. However with our new objective and plan to enter the Health Information Exchange marketplace this is expected to change in 2017.expenses.
Business Strategy
HemCareDLT Resolution’s strategy is to provide secure data management to organizations large and small across Canada and the USA. Included with data management are telecom and other IT solutions to assist organizations with offloading burdensome back office services and thus helping clients achieve operational efficiency.
Through the deployment of the Company’s Distributed Ledger Technology “Blockchain” solution, DLT aims to leverage our offerings adding benefits previously unattainable in the marketplace.
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Distributed Ledger Technology “Blockchain”
Our Distributed Ledger Technology “Blockchain” permits trust to be intrinsically embedded into a technological solution, enabling smooth partnerships and transactions dramatically reducing friction between stakeholders. Our solutions focus primarily within the Health Services is developingInformation Exchange and Telecommunications space.
Workflow Automation
Distributed Ledger Technology “Blockchain” enabled trust improves coordination between various partners, due to a shared view of transactions and liabilities. This in turn permits the elimination of third parties, resulting in cost savings
Audit Trail
Facilitates a single view of data instead of the need for consolidation across various disparate systems. Resulting in reliable audit trails due to the history of all transactions being available in the ledger.
Data Privacy
Provable privacy protects clients’ data from being visible to unauthorized parties in compliance with all of today's HIPPA requirements
Revenue Assurance
Implementation of smart contracts allows for near-instantaneous charging, thus leading to improved revenue assurance and fraud reduction.
Health Information Exchange
DLT Resolution owns RecordsBank.org, a Centralized System for Patients, Lawyers & Insurers to Retrieveretrieve and Accessaccess Medical Records. The centralized system and portal is a cloud-based PIPEDA & HIPAA compliant network of Providers and Record Requestors. Utilizing a secure platform, providers will be able to securely exchange records electronically with third-party requestors. Health care providers with proper authorization can also share records with each other. The system works on a fee per record basis with future plans of licensing medical data, stripped of identifiers for medical research.
Addressing a $7 Billion a Year Problem
In national terms, across the U.S., hospitals spend more than $7 billion annually on customer intake. More than $7 billion, before any sort of medical procedure is done; before a patient even steps out of a waiting room, representing an incredible amount of time and money spent on intake administration.
Despite the adoption of electronic health records (EHR) and health information exchanges (HIE), providers are still mailing and faxing paper records because they have no PIPEDA or HIPAA compliant method to exchange records electronically with these third-party requestors. A recent study found thatBased on our research, the Company estimates the current method of exchanging patient health information may cost a single clinician practice $17,160approximately $17,000 per year.
The Company aims to remove these substantial burdens both on an administrative and financial basis. People or firms simply use our secure online request form, pay a small service fee and the Company retrieves, digitizes and stores the records. At this point the requesting client can access the record globally 24 hours a day - 7 days a week to view it or transfer it securely. In fact clients can upload any new records to consolidate and keep all of their records securely in one place.
The Company aims to remove these substantial burdens both on an administrative and financial basis. People or firms simply use our secure online request form, pay a small service fee and the Company retrieves, digitizes and stores the records. At this point the requesting client can access the record globally 24 hours a day - 7 days a week to view it or transfer it securely. In fact clients can upload any new records to consolidate and keep all of their records securely in one place.
During the year ended December 31, 2015, the Company under previous management focused on hemorrhoid medical procedures and entered into a license agreement to open hemorrhoid treatment centers and promote the Ultroid Hemorrhoid System globally. In consideration for the transfer of these rights to the Company, it issued 100,000 shares of series A preferred convertible stock.
In late 2016, the Company ceased its operations related to rolling out hemorrhoid treatment centers and had a change of control. Following the change of control and focus, management is currently redeveloping its future objectives in the Health Information Exchange sector. To this end Management, working together with significant shareholders, have been developing strategies and alliances to fulfil this objective. At the close of the fiscal year management began to develop a platform and portal for the Information Exchange with aim to completion and market launch in the 2nd quarter of 2017.
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Reports to Security Holders
We file our quarterly and annual report with the Securities and Exchange Commission (SEC), which the public may view and copy at the Public Reference Room at 100 F Street, N.E. Washington D.C. 20549. SEC filings, including supplemental schedule and exhibits, can also be accessed free of charge through the SEC website www.sec.gov.
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Factors Affecting Future Operating ResultsNot Applicable
This Annual Report on Form 10-K contains forward-looking statements concerning our future programs, expenses, revenue, liquidity and cash needs as well as our plans and strategies. These forward-looking statements are based on current expectations and we assume no obligation to update this information, except as required by applicable laws and regulations. Numerous factors could cause actual results to differ significantly from the results described in these forward-looking statements, including the following risk factors.
Because our auditors have issued a going concern opinion, there is substantial uncertainty we will continue activities in which case you could lose your investment.
Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months. As such we may have to cease activities and you could lose your investment.
We currently do not have adequate funds to cover the costs associated with maintaining our status as a Reporting Company.
The Company currently has no cash available. This amount will not be enough to pay the legal, accounting, and filing fees that is required to maintain our status as a reporting company, which is currently estimated at $20,000 for fiscal year 2017. If we can no longer be a reporting company our common stock would no longer be eligible for quotation on the Over-the-Counter Bulletin Board. This would result in there being no public market for an investor to trade our common stock and any investment made would be lost in its entirety.
We lack an operating history and have losses which we expect to continue into the future. As a result, we may have to suspend or cease activities, which would result in a complete loss of any investment made into the Company.
We were incorporated on January 17, 2007 and we have not started our proposed business activities or realized any revenues. We have no operating history upon which an evaluation of our future success or failure can be made. As of December 31, 2016 our net loss since inception is $3,348,765 Based upon current plans, we expect to incur operating losses in future periods. Failure to generate revenues will cause us to suspend or cease activities.
If we are able to complete financing through the sale of additional shares of our common stock in the future, then shareholders will experience dilution.
The most likely source of future financing presently available to us is through the sale of shares of our common stock. Any sale of common stock will result in dilution of equity ownership to existing shareholders. This means that if we sell shares of our common stock, more shares will be outstanding and each existing shareholder will own a smaller percentage of the shares then outstanding. To raise additional capital we may have to issue additional shares, which may substantially dilute the interests of existing shareholders. Alternatively, we may have to borrow large sums, and assume debt obligations that require us to make substantial interest and capital payments.
Because there is currently a limited public trading market for our common stock, you may not be able to resell your stock.
Although our common stock is quoted on the Over-the-Counter Bulletin Board (OTCBB) the market is limited. If a market does not develop there would be no central place, such as stock exchange or electronic trading system to resell your shares.
Because our securities are subject to penny stock rules, you may have difficulty reselling your shares.
Our shares are penny stocks are covered by, and subject to, section 15(g) of the Securities Exchange Act of 1934 which imposes additional sales practice requirements on broker/dealers who sell the Company's securities including the delivery of a standardized disclosure document; disclosure and confirmation of quotation prices; disclosure of compensation the broker/dealer receives; and, furnishing monthly account statements. For sales of our securities, the broker/dealer must make a special suitability determination and receive from its customer a written agreement prior to making a sale. The imposition of the foregoing additional sales practices could adversely affect a shareholder's ability to dispose of his stock.
We are subject to the requirements of section 404 of the Sarbanes-Oxley Act. If we are unable to timely comply with section 404 or if the costs related to compliance are significant, our profitability, stock price and results of operations and financial condition could be materially adversely affected.
We are required to comply with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002, which require us to maintain an ongoing evaluation and integration of the internal controls of our business. We were required to document and test our internal controls and certify that we are responsible for maintaining an adequate system of internal control procedures for the year ended December 31, 2016.
We evaluated our existing controls for the year ended December 31, 2016. Our Chief Executive Officer identified material weaknesses, specifically a poor segregation of duties, in our internal control over financial reporting and determined that we did not maintain effective internal control over financial reporting as of December 31, 2016. The identified material weaknesses did not result in material audit adjustments to our 2016 financial statements; however, uncured material weaknesses could negatively impact our financial statements for subsequent years.
In addition, a material weakness in the effectiveness of our internal controls over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition.
Further, we believe that the out-of-pocket costs, the diversion of management’s attention from running the day-to-day operations and operational changes caused by the need to comply with the requirements of Section 404 of the Sarbanes-Oxley Act could be significant. If the time and costs associated with such compliance exceed our current expectations, our results of operations could be adversely affected.
There may be conflicts of interest between our management and our non-management stockholders.
Conflicts of interest create the risk that management may have an incentive to act adversely to the interests of other investors. A conflict of interest may arise between our management's personal financial interests and the fiduciary duty to our stockholders. Further, our Management's own financial interests may at some point compromise their fiduciary duty to our stockholders. John S. Wilkes, who is the Company’s sole officer and a majority of its directors, continues to be involved in businesses that operate and commercialize technologies that are similar or related to the Company’s, although those businesses exploit and seek to exploit different applications and opportunities. In addition, although it is anticipated that Management will spend significant time and effort developing our business, it is possible that they will be exposed to business or employment opportunities that would conflict with the interests of the Company, or cause them to reduce their efforts on the Company’s behalf or to entirely cease working with the Company. If we and any other businesses with which our officers are involved wish to take advantage of the same opportunity, then the officer and director that is affiliated with both companies would abstain from voting upon the opportunity.
Future success is highly dependent on the ability of management to further develop and implement a business plan, and secure customers.
The nature of our operations is highly speculative and there is a consequent risk of loss of your investment. The success of our activities will depend on the availability of finances, opportunities relating to health information exchange, the health care system in the United States and Canada, government regulations and economic conditions in the health care industry and cloud-based IT industry As we have no operating history or revenue and only minimal assets, there is a risk that we will be unable to consummate a business combination. The Company has had no recent operating history and no revenues or earnings from operations since inception. We have no significant assets or financial resources. We will, in all likelihood, sustain operating expenses without realizing significant revenues for the foreseeable future, at least until the market opportunities for the Company’s services and technology develops and the demand for our services becomes more proven and regular. This will likely result in our incurring net operating losses for the foreseeable future. We cannot assure that our business will develop as hoped, or that it will become profitable.
Our business may have no revenues for the foreseeable future.
We have had no revenues from operations. Although the technologies and our business strategies offer potential, we may not realize any revenues unless and until we successfully develop a revenue stream from the use of existing licenses and our new information exchange platform.
We may issue more shares to raise additional capital, and permit the development of the Company’s business.
As a result, the shareholdings of current shareholders may be diluted. Our Articles of Incorporation authorizes the issuance of a maximum of 275,000,000 shares of common stock. We may issue additional shares from time to time to raise the capital that we anticipate will be required to further develop our business. Any share issuance would be subject to compliance with applicable securities laws and subject to that limitation, unless our Articles of Incorporation are amended with approval of our stockholders. This may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. Moreover, the common stock issued from time to time may be valued on an arbitrary or non-arm’s-length basis by our management, resulting in an additional reduction in the percentage of common stock held by our then existing stockholders. Our Board of Directors has the power to issue any or all of such authorized but unissued shares without stockholder approval. To the extent that additional shares of common stock or preferred stock are issued, dilution to the interests of our stockholders will occur and the rights of the holders of common stock might be materially and adversely affected.
There is limited public market for our Common Stock, and we have never paid dividends on our Common Stock.
There is limited public trading market for our common stock which is listed on OTCQB: HCRE and none is expected to develop until our business develops further. Additionally, we have never paid dividends on our common stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment of dividends will be re-invested into the Company to further its business strategy. Moreover, a significant number of unregistered securities may not become traded. Pursuant to the Securities Act of 1933, as amended (the “Securities Act”) and any other applicable securities laws or regulations these restrictions will limit the ability of our stockholders to liquidate their investment.
Limited Operating History; Need for Additional Capital.
Although the Company draws on the expertise on the principals who have been operating private businesses in the renewable energy and technology sectors, there is no pertinent historical financial information for the Company upon which to base an evaluation of our performance. Our assets and business have not yet generated substantial or recurring 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. We will require additional financing to cover costs that we expect to incur over the next twelve months. We believe that debt financing will not be an alternative for funding our operations as we do not have tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock or other securities. However, we cannot provide any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our plan of operations. In the absence of such financing, we will not be able to continue and our business plan will fail.
Our common stock is subject to the "penny stock" rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The Securities and Exchange Commission has adopted certain rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are applicable to "penny stocks". For the purposes relevant to us, a “penny stock” is any equity security that has a market price of less than $5.00 per share or has an exercise or conversion price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
In order to approve a person's account for transactions involving penny stocks, the broker or dealer must:
(1) obtain financial information, investment experience and investment objectives of the person; and
(2) make a reasonable determination that the proposed transactions in penny stocks are suitable for that person and that the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form:
Following a transaction, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and depress the market value of our stock.
There are additional risks of investing in penny stocks whether in public offerings or in secondary trading, relating to commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.
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ITEM 1BUNRESOLVED STAFF COMMENTS
None
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We do not own any property; the principal offices are located at 5940 S. Rainbow Blvd, Ste 400-32132, Las Vegas, NV 89118. The telephone number is 1 (702) 796-6363.
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Hemcare Health Services, Inc. is not currentlyIn August 04, 2018, the Company was served with a partyStatement of Claim in Ontario Canada for breach of contract and wrongful dismissal. As at September 05, 2019, the parties to any legal proceedings. However it is seeking the returnlitigation have agreed to a settlement in principal. See Note 15. On March 29, 2019 the Company was served with a Statement of over 100,000,000 common shares that were issued byClaim from the previous chief executive officer. While management was successful in recovering more than 71,000,000owner of the shares after the close of fiscal 2016, (discussed further in Subsequent Events) if management is unable to reach an amicable settlement for the return of the balance of shares management may need to file claims against the individuals and or entities for damages and a court order seeking cancellation of these shares. Of course there can be no assurance in management’s ability to recover the shares in settlement or through court proceedings.property where AJD leased space. See subsequent events.
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Our common stock is quoted on the Over-the-Counter Bulletin Board (OTCBB) under the ticker symbol HCRE.DLTI. The stock trades are limited and sporadic; there is no established public trading market for our common stock.
Dividends
We declared $6,448$0 and $19,000$ 1,249 of dividends on preferred stock during the years ended December 31, 20162018 and 2015. We do not anticipate declaring dividends during the year ended December 31, 2017.
Securities Authorized for Issuance under Equity Compensation Plans
There is no stock option plan in place for the company.
Recent Sales of Unregistered Securities
There was no sale of unregistered securities during the year ended December 31, 2016.2018.
Securities issued in 20152017
During the year ended December 31, 2015,2017 the Company issued a total of 100,00025,000 shares of Series A Preferred Stockstock in exchange for 241,700 shares of common stock; 64,000 shares of Series B Preferred stock for services; 1,250,000 shares of common stock as repayment on a prepaid royalty,note payable; 345,350 shares of common stock as repayment of a related party payable and rescinded 7,114,000 shares of common stock.
Securities issued 26,211 common shares as rounding from our 1:50 stock split from March 2015, issued 138,830,000 common shares forin 2018
During the conversion of 138,830year ended December 31, 2018 the Company converted 25,000 shares of Series A Preferred Stock, rescinded 730,000stock in exchange for 25,000 shares of common stock; 745,778 shares andof common stock for $236,000 in cash; 2,575,000 shares of common stock issued 900,000for acquisitions of AJD & Ontario Inc. 63,888 common shares for cash proceedsrounding differences from the effect of $45,000.a reverse stock split effected during the year ended December 31, 2017.
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Securities issued in 2016
During the year ended December 31, 2016 the Company issued a total of 50,000 shares of Series A Preferred Stock as a partial repayment of an outstanding note payable and issued 131,170,000 shares of common stock in exchange for 131,170 shares of Series A Preferred Stock.
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ITEM 6SELECTED FINANCIAL DATA.
Summary of Financial Data
December 31, 2016 December 31, 2015 Revenues Operating Expenses Earnings (Loss) Total Assets Liabilities Stockholders’ Deficit $ - $ - $ 31,247 $ 399,261 $ (87,965 ) $ (630,108 ) $ - $ 22,964 $ 462,344 $ 497,395 $ (462,344 ) $ (474,431 )
December 31, 2018 December 31, 2017 Revenues Operating Expenses Earnings (Loss) Total Assets Liabilities Stockholders’ Equity (Deficit) $ 227,343 $ 2,423 $ 351,724 $ 38,720 $ (329,282 ) $ (44,687 ) $ 1,299,125 $ 124,553 $ 562,278 $ 284,071 $ 736,847 $ (159,518 )
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ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion is intended to assist in the understanding and assessment of significant changes and trends related to the results of operations and financial condition of Hemcare Health ServicesDLT Resolution Inc. This discussion and analysis should be read in conjunction with our financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2018.
Critical Accounting Policies
Use of Estimates
The preparation of our consolidated financial statements and notes thereto requires management to make estimates and assumptions that affect the amounts and disclosures reported within those financial statements. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, contingencies, litigation and income taxes. Management bases its estimates and judgments on historical experiences and on various other factors believed to be reasonable under the circumstances. Actual results under circumstances and conditions different than those assumed could result in differences from the estimated amounts in the financial statements. There have been no material changes to these policies during the year ended December 31, 2016.2018.
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Revenue Recognition
Revenue is recognized when persuasive evidence of an agreement exists, the price is fixed or determinable, goods are delivered, or services performed and collectability is reasonably assured.
Going concern
The Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company has limited cash, an accumulated deficit of $3,595,912 and is doubtful to recover $329,815 (CAD 450,000) of the note receivable received against the subsequent sale of its subsidiary. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan, or merge with an operating company. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The officers and directors have committed to advancing certain operating costs of the Company.
Principals of Consolidation
The consolidated financial statements represent the results of DLT Resolution, Inc.; its wholly owned subsidiary, DLT Resolution Corp.; its 80%-owned subsidiary, A.J.D. Data Services (see Note 9 – Acquisition of A.J.D. Data Services); and the assets, processes, and results therefrom of 1922861 Ontario Inc. Note 10 – Acquisition of 1922861 Ontario Inc.) All intercompany transactions and balances have been eliminated.
Plan of Operations
Liquidity and Capital Resources. As of December 31, 20162018, we had no$12,908 of cash on hand and we hadtotal liabilities of $462,344.$562,278. We must secure additional funds in order to continue our business. We were required to secure a loan to pay expenses relating to filing this report including legal, accounting and filing fees and may be required to secure additional financing to fund future filings. We believe that we will be able to obtain this loan from a current shareholder of the Company; however, we cannot provide any assurance that we will be able to raise additional proceeds or secure additional loans in the future to cover our expenses related to maintaining our reporting company status (estimated at $20,000$60,000 for the year ending December 31, 2017)2019). Furthermore, there is no guarantee we will receive the required financing to complete our business strategies; we cannot provide any assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. If we are unable to accomplish raising adequate funds then it would be likely that any investment made into the Company would be lost in its entirety.
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Results of Operations. Total operating expenses were $31,247$351,724 during the year ended December 31, 20162018 compared to $399,261$38,720 during the year ended December 31, 2015.2017. The decreaseincrease in operating expenses is fromrelates to the Company incurring increased professional fees associated with broker fees paid for securing the license agreement to distribute the Ultroid Hemorrhoid Systemadditional general office expenses during the year ended December 31, 2015 that did not occur duringcurrent period as it executed its business plan and acquired A.J.D. Data Services and 1922861 Ontario Inc, whereas the year ended December 31, 2016.Company was stagnant in the prior period.
Other Income (Expense): Other expensesIncome (Expenses) totaled $56,718$20,648 during the year ended December 31, 20162018 compared to $230,847($8,011) during the year ended December 31, 2015. The decrease in other expenses is mostly attributable to a decrease in excess cost of prepaid royalties over value of $199,607 that occurred during the year ended December 31, 2015 that did not occur during the year ended December 31, 2016.2017.
Off-Balance Sheet Arrangements. NoneWe have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Contractual Obligations. None
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ITEM 7AQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We do not currently hold any market risk sensitive instruments entered into for hedging transaction risks related to foreign currencies. In addition, we have not entered into any transactions with derivative financial instruments for trading purposes.
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ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our financial statements appear beginning on page F-1, immediately following the signature page of this report.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On January 25, 2018, the Company dismissed Pritchett, Siler & Hardy, PC (“PSH”) as its independent registered accounting firm and engaged Heaton & Company, PLLC, dba Pinnacle Accountancy Group of Utah, as its new independent registered accounting firm.
Since PSH’s appointment as our independent registered accounting firm on March 13, 2014 and through January 25, 2018, which included its audits of our financial statements for the years ended December 31, 2016 and 2015, there were (i) no disagreements between the Company and PSH on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement, if not resolved to the satisfaction of PSH, would have caused PSH to make reference thereto in their reports on the financial statements for such years, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
On January 24, 2019, Heaton & Company, PLLC, dba Pinnacle Accountancy Group of Utah resigned as its independent registered accounting firm and on January 24, 2019 the Company engaged AJSH & Co LLP as its new independent registered accounting firm.
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NoneSince the appointment of Heaton & Company as our independent registered accounting firm through present, which included the audit of our financial statements for the year ended December 31, 2017, there were (i) no disagreements between the Company and Heaton & Company on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement, if not resolved to the satisfaction of Heaton & Company, would have caused Heaton & Company to make reference thereto in their reports on the financial statements for such years, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
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During year ended December 31, 2017, and in the subsequent interim period through to present, the Company has not consulted with AJSH & Co LLP regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company that Heaton & Company concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
Disclaimer: This filing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These forward-looking statements are based largely on the expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond the control of management. Therefore, actual results could differ materially from the forward-looking statements contained in this press release. Additional information respecting the factors that could materially affect the Company and its operations are contained in its annual report on Form 10-K, Form 10-Q’s, 8-K’s and other periodic reporting as filed with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statement.
ITEM 9ACONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Management of Hemcare Health ServicesDLT Resolution Inc. is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.
At the end of the period covered by this report, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was carried out under the supervision and with the participation of our Principal Executive Officer, Principal Financial and Accounting Officer. Based on his evaluation of our disclosure controls and procedures, he concluded that during the period covered by this report, such disclosure controls and procedures were not effective to detect the inappropriate application of US GAAP standards. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our disclosure controls and that may be considered to be “material weaknesses.”
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The Company will continue to create and refine a structure in which critical accounting policies and estimates are identified, and together with other complex areas, are subject to multiple reviews by accounting personnel. In addition, the Company will enhance and test our year-end financial close process. Additionally, the Company’s management will increase its review of our disclosure controls and procedures. Finally, we plan to designate individuals responsible for identifying reportable developments. We believe these actions will remediate the material weakness by focusing additional attention and resources in our internal accounting functions. However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; (iii) provide reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and (iv) provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because changes in conditions may occur or the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. This assessment is based on2017. In assessing the effectiveness of our internal control over financial reporting as of December 31, 2018, our management used the criteria for effective internal control described in Internal Control — Integrated Framework issuedset forth by the Committee of Sponsoring Organizations of the Treadway Commission.Commission (2013 framework). Based on its assessment, management concluded that our internal control over financial reporting as of December 31, 20162018 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, 20162018 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, |
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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. |
In light of the foregoing, once we have the adequate funds, management plans to develop the following additional procedures to help address these material weaknesses:
| · | The Company will create and refine a structure in which critical accounting policies and estimates are identified, and together with other complex areas, are subject to multiple reviews by accounting personnel. In addition, we plan to enhance and test our month-end and year-end financial close process. Additionally, our audit committee will increase its review of our disclosure controls and procedures. We also intend to develop and implement policies and procedures for the financial close and reporting process, such as identifying the roles, responsibilities, methodologies, and review/approval process. We believe these actions will remediate the material weaknesses by focusing additional attention and resources in our internal accounting functions. However, the material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. |
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting that occurred during our fiscal year ended December 31, 20162018 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
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None.
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ITEM 10DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The Company’s executive officers and directors and their respective age as of December 31, 20162018 are as follows:
Director:
Name of Director | Age |
| ||
John Wilkes |
| 57 |
|
Executive Officer:
Name of Officer |
| Age |
| Office |
John Wilkes |
|
|
| President, CEO and CFO |
The term of office for each director is one year, or until the next annual meeting of the shareholders.
Biographical Information
Set forth below is a brief description of the background and business experience of our officers and director for the past year.
John Wilkes
Mr. Wilkes, M.B.A., C.P.A., C.A. (55)(57) earned his C.A. designation with Price Waterhouse in Toronto, Canada. Since 2005, Mr. Wilkes has been an Independent Investment Management Professional, making private investments in both private and public companies that, for the most part, have their core business in the environmental space.
Significant Employees
We do not employ any non-officersone non-officer, Steve Benham who are expectedmakes significant contributions to make a significant contribution to its business.the Company. John Wilkes is an officer and Director and Dan Cullen is the Chief Technology Officer (CTO) of the Company.
Corporate Governance
Nominating Committee. We have not established a Nominating Committee because of our limited operations; and because we have only two directorsofficers, as mentioned above which are John Wilkes and Dan Cullen and one officer,director who is John Wilkes, we believe that we are able to effectively manage the issues normally considered by a Nominating Committee.
Audit Committee. We have not established an Audit Committee because of our limited operations; and because we have only two directorsofficers and one officer,director, we believe that we are able to effectively manage the issues normally considered by aan Audit Committee.
Code of Ethics. We have not adopted a Code of Ethics for our principal executive and financial officers.
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ITEM 11EXECUTIVE COMPENSATION.
Summary Compensation Table
Name and principal position |
| Fiscal Year |
| Salary |
|
| Bonus |
|
| Other annual compensation |
|
| Restricted stock award(s) |
|
| Securities underlying options/ SARs |
|
| LTIP payouts |
|
| All other compensation |
|
| Fiscal Year |
| Salary |
|
| Bonus |
|
| Other annual compensation |
|
| Restricted stock award(s) |
|
| Securities underlying options/ SARs |
|
| LTIP payouts |
|
| All other compensation |
| ||||||||||||||
John Wilkes Director |
| 2016 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
|
| 2018 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| ||||||||||||||||||||||||||
John Wilkes Director |
| 2017 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
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There has been no cash payment outside of the amounts above paid to the individuals above for services rendered in all capacities to us for the year ended December 31, 2016.2018 and 2017. Minimal compensation is anticipated within the next six months to any officer or director of the Company.
Stock Option Grants
We did not grant any stock options to the executive officer during the year ended December 31, 2016.2018 and 2017.
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The following table provides the names and addresses of each person known to the Company to own more than 5% of the outstanding common stock as of December 31, 20162018 and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly.
Beneficial Owner |
| Number of Shares Owned |
|
| Percent Ownership |
| ||
Mind Tech Group |
|
| 5,000,000 |
|
|
| 24 | % |
John Wilkes |
|
| 4,003,000 |
|
|
| 19 | % |
Total |
|
| 9,003,000 |
|
|
| 43 | % |
Beneficial Owner Number of Shares Owned Percent Ownership Mind Tech Group John Wilkes Tom Krutulis Maria Gafter Woodthorpe Management Limited Total 50,000,000 18 % 40,030,000 15 % 22,832,000 8 % 21,170,000 8 % 20,000,000 7 % 154,032,000 57 %
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ITEM 13CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
During the year ended December 31, 2016,2018, there were no other material transactions between the Company and any Officer, Director or related party that has not been disclosed in footnote 54 to the financial statements. Additionally, there are no Officers, Directors or other related parties that since the date of incorporation had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
-Any person proposed as a nominee for election as a director; -Any other person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to the outstanding shares of common stock; -Any relative or spouse of any of the foregoing persons who have the same house as such person. |
Any future transactions between us and our Officers, Directors, and Affiliates will be on terms no less favorable to us than can be obtained from unaffiliated third parties. Such transactions with such persons will be subject to approval of our Board of Directors.
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ITEM 14PRINCIPAL ACCOUNTANT FEES AND SERVICES.
During the years ended December 31, 20162018 and 2015,2017, the Company incurred auditing expenses of approximately $9,625$16,000 and $10,375.$9,275. There were no other audit related services or tax fees incurred.
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ITEM 15EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
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1. Consolidated Financial Statements
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All schedules are omitted because they are not applicable or not required or because the required information is included in the Financial Statements or the Notes thereto.
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3. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Annual Report:
EXHIBIT
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| DESCRIPTION |
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| 31.1 | SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
/s/ 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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(Principal Executive Officer) | (Principal Financial Officer) |
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DLT RESOLUTION INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Consolidated Financial Statements
December 31, 20162018 and 20152017
| F-1 |
DLT RESOLUTION INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.
)
Consolidated Financial Statements
December 31, 20162018 and 20152017
| F-2 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Hemcare Health ServicesDLT Resolution Inc. (Formerly NSU Resources Inc.)
Las Vegas, Nevada
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Hemcare Health ServicesDLT Resolution Inc. (Formerly NSU Resources Inc.(the “Company”) as of December 31, 2016 and 2015 and2018, the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the yearsyear ended December 31, 2018, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2018, and the consolidated results of its operations and its cash flows for the year then ended. ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included considerationAs part of our audits, we are required to obtain an understanding of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An
Our audit also includesincluded performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion,Substantial Doubt about the financial statements referredCompany Ability to above present fairly, in all material respects, the financial position of Hemcare Health Services Inc. (Formerly NSU Resources Inc.)Continue as of December 31, 2016 and 2015 and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 23 to the consolidated financial statements, the Company has suffered recurring lossesthe limited cash, an accumulated deficit of $3,595,912 and has a net capital deficiency.is doubtful to recover $329,815 of the note receivable received against the subsequent sale of its subsidiary. These conditions raise substantial doubt about itsthe Company ability to continue as a going concern. Management'sFurther information and management’s plans in regard to these matters arethis uncertainty were also described in Note (2).3. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result shouldfrom the Company be unable to continue as a going concern.outcome of this uncertainty.
/s/ Pritchett, SilerAJSH & Hardy, P.C. Co LLP
Pritchett, Siler & Hardy, P.C.We have served as the Company’s Auditor since the year 2019.
Farmington, Utah 84025
May 15, 2017New Delhi, India
September 16, 2019
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HEMCARE HEALTH SERVICES INC.PINNACLE ACCOUNTACY GROUP OF UTAH
Balance SheetsA dba of HEATON AND COMPANY, PLLC
CERTIFIED PUBLIC ACCOUNTANTS
1438 N. HIGHWAY 89 STE. 120
FARMINGTON, UTAH 84025
__________________
(801) 447-9572 FAX (801) 447-9578
December 31, 2016 2015 ASSETS Current assets Cash Prepaid expenses Total current assets Total assets LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Bank overdraft Accounts payable and accrued liabilities Dividends payable Related party payables Current notes payables Convertible notes payable, net of discounts $6,916 and $12,835 Notes payable Related party convertible notes payable, net of discounts $0 and $10,249 Total current liabilities Stockholders' deficit Series A convertible preferred stock, $1.00 par value; 5,000,000 shares authorized, 0 and 81,170 shares issued and outstanding at December 31, 2016 and 2015 Common stock, $0.001 par value; 275,000,000 shares authorized; 273,332,211 and 142,162,211 issued; 272,952,211 and 141,782,211 outstanding at December 31, 2016 and 2015 Additional paid in capital Other comprehensive income Treasury stock, 380,000 shares Accumulated deficit Total stockholders' deficit Total liabilities and stockholders' deficit $ - $ 20,334 - 2,630 - 22,964 $ - $ 22,964 $ 7 $ - 38,772 86,896 25,448 19,000 39,599 37,249 331,500 350,000 23,784 3,865 600 - 2,634 385 462,344 497,395 - 81,170 273,332 142,162 2,613,165 2,556,665 24 24 (100 ) (100 ) (3,348,765 ) (3,254,352 ) (462,344 ) (474,431 ) $ - $ 22,964
See
To the Board of Directors and Stockholders
DLT Resolutions Inc. (formerly Hemcare Health Services Inc.)
Las Vegas, Nevada
Opinion on the Financial Statements
We have audited the accompanying balance sheet of DLT Resolutions Inc. (formerly Hemcare Health Services Inc.) (the Company) as of December 31 2017, and the related statements of operations, stockholders’ deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses and has minimal operations which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Pinnacle Accountancy Group of Utah
We have served as the Company’s auditor since January 2018.
Pinnacle Accountancy Group of Utah
Farmington, Utah
April 10, 2018
Farmington Office: | Members of the AICPA and UACPA | Ogden Office: |
1438 North Highway 89, Ste. 120 | www.pinncpas.com | 3590 Harrison Blvd. Ste. GL-2 |
Farmington, UT 84025 | (801) 399-1183 | |
(801) 447-9572 | Ogden, UT 84403 |
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(FORMERLY HEMCARE HEALTH SERVICES INC.)
Statements of OperationsConsolidated Balance Sheets
December 31, 2018 2017 ASSETS Current assets Cash and cash equivalents Accounts receivable Assets held for sale Total current assets Intangible assets, net of accumulated amortization Goodwill Total assets LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities Bank overdraft Accounts payable and accrued liabilities Accounts payable, related party Interest payable, related party Dividends payable Related party payables Current notes payables, related party Derivative liability Convertible notes payable, net of discounts of $0 and $6,916 Liabilities held for sale Total current liabilities Notes payable, net of current portion Other long term liability Total liabilities Stockholders' equity (deficit) Series A convertible preferred stock, $1.00 par value; 5,000,000 shares authorized; 0 and 25,000 issued and outstanding at December 31, 2018 and December 31, 2017 Series B convertible preferred stock, $1.00 par value; 500,000 shares authorized; 64,000 and 64,000 issued and outstanding at December 31, 2018 and December 31, 2017 Common stock, $0.001 par value; 275,000,000 shares authorized; 24,982,537 and 21,572,871 issued; 21,167,537 and 17,757,871 outstanding at December 31, 2018 and December 31, 2017 Additional paid in capital Other comprehensive income Treasury stock, 3,815,000 shares Accumulated deficit Total equity (deficit) attributable to parent Non-controlling interest Total stockholder’s equity (deficit) Total liabilities and stockholders' deficit $ 12,908 $ 8,609 12,217 - 656,735 - 681,860 8,609 460,491 115,944 156,774 - $ 1,299,125 $ 124,553 $ - $ 7 48,921 26,415 40,000 55,000 26,875 19,545 - 26,697 17,713 44,679 81,500 81,500 - 20,328 - 4,900 146,127 - 361,136 279,071 5,000 5,000 196,142 - 562,278 284,071 - 25,000 64,000 64,000 24,983 21,573 4,192,678 3,129,894 (37,688 ) 16 (5,300 ) (5,300 ) (3,595,912 ) (3,394,701 ) 642,760 (159,518 ) 94,087 - 736,847 (159,518 ) $ 1,299,125 $ 124,553
Year ended December 31, 2016 2015 Revenue Operating expenses General and administrative Professional fees Total operating expenses Other income (expense) Other income Interest expense Excess cost of prepaid royalties over value Total other income (expense) Net loss Preferred stock dividends declared Net loss attributable to common shareholders Basic and diluted loss per common share Weighted average shares outstanding $ - $ - 8,698 23,977 22,549 375,284 31,247 399,261 - 937 (56,718 ) (32,177 ) - (199,607 ) (56,718 ) (230,847 ) $ (87,965 ) $ (630,108 ) (6,448 ) (19,000 ) $ (94,413 ) $ (649,108 ) $ (0.00 ) $ (0.01 ) 187,062,814 87,783,992
See accompanying notes to consolidated financial statements.
| F-5 |
| Table of Contents |
(FORMERLY HEMCARE HEALTH SERVICES INC.)
StatementConsolidated Statements of Changes in Stockholders' DeficitOperations
Year ended December 31, 2018 2017 Revenue Cost of revenue Gross margin Operating expenses General and administrative Professional fees Total operating expenses Income (loss) from operations Other income (expense) Other income Gain/(loss) on change in fair market value of derivative liability Foreign exchange gain/(loss) Interest expense Total other income (expense) Net loss from continuing operations Loss from discontinued operations Net income (loss) Preferred stock dividends declared Net loss attributable to common stockholders Loss from continued operations per common share, basic and diluted Loss from discontinued operations per common share, basic and diluted Net loss from operations per common share, basic and diluted Weighted average basic shares outstanding Weighted average diluted shares outstanding $ 227,343 $ 2,423 108,401 379 118,942 2,044 205,109 14,369 146,615 24,351 351,724 38,720 (232,782 ) (36,676 ) 31,834 26,306 (2,427 ) (14,980 ) (3,992 ) - (4,767 ) (19,337 ) 20,648 (8,011 ) $ (212,134 ) $ (44,687 ) $ (117,148 ) $ - $ (329,282 ) $ (44,687 ) - (1,249 ) (329,282 ) (45,936 ) $ (0.01 ) $ (0.00 ) $ (0.01 ) $ (0.00 ) $ (0.02 ) $ (0.00 ) 19,263,408 18,571,882 19,263,408 18,571,882
Preferred Stock Common Stock Additional Paid-in Other comprehensive Treasury Accumulated Shares Amount Shares Amount Capital income Stock Deficit Total Balance, December 31, 2014 Preferred shares issued for prepayment of royalty Conversion of preferred shares to common shares Issuance of common shares for rounding in stock split Recession of common shares Common stock issued for cash Beneficial conversion features recorded as debt discounts Dividend declared on preferred stock Net loss, year ended December 31, 2015 Balance, December 31, 2015 Beneficial conversion features recorded as debt discounts Dividend declared on preferred stock Issuance of preferred shares for repayment of note payable Conversion of preferred shares to common Forgiveness of related party payable Net loss, year ended December 31, 2016 Balance, December 31, 2016 120,000 $ 120,000 3,136,000 $ 3,136 $ 2,377,270 $ 24 $ (100 ) $ (2,605,244 ) $ (104,914 ) 100,000 100,000 - - 99,607 - - - 199,607 (138,830 ) (138,830 ) 138,830,000 138,830 - - - - - - - 26,211 26 (26 ) - - - (730,000 ) (730 ) 730 - - - - - - 900,000 900 44,100 - - - 45,000 - - - - 34,984 - - - 34,984 - - - - - - - (19,000 ) (19,000 ) - - - - - - - (630,108 ) (630,108 ) 81,170 81,170 142,162,211 142,162 2,556,665 24 (100 ) (3,254,352 ) (474,431 ) - - - - 16,500 - - - 16,500 - - - - - - - (6,448 ) (6,448 ) 50,000 50,000 - - - - - - 50,000 (131,170 ) (131,170 ) 131,170,000 131,170 - - - - - - - - - 40,000 - - - 40,000 - - - - - - - (87,965 ) (87,965 ) - $ - 273,332,211 $ 273,332 $ 2,613,165 $ 24 $ (100 ) $ (3,348,765 ) $ (462,344 )
See accompanying notes to consolidated financial statements.
| F-6 |
| Table of Contents |
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Consolidated Statements of Cash FlowsComprehensive Loss
Year ended December 31, 2018 2017 Net income (loss) Other comprehensive loss Foreign currency translation adjustment Total other comprehensive loss Comprehensive income (loss) $ (329,282 ) $ (44,687 ) (35,425 ) (8 ) (35,425 ) (8 ) $ (364,707 ) $ (44,695 )
Year ended December 31, 2016 2015 Cash flows from operating activities Net loss from operations Adjustments to reconcile net loss to net cash used in operating activities Excess cost of prepaid royalties over value Note payable entered into for professional fees Amortization of debt discounts Expenses paid on behalf of the company by related parties Changes in operating assets and liabilities Prepaid expenses Accounts payable and accrued liabilities Net cash used in operating activities Net cash used in investing activities Cash flows from financing activities Proceeds from bank overdraft Repayments of related party convertible note payable Proceeds from notes payable Proceeds from convertible notes payable Repayments of convertible note payable Proceeds from sale of common stock Net cash used in financing activities Net change in cash Cash at beginning of period Cash at end of period Supplemental cash flow information Cash paid for interest Cash paid for income taxes Non-cash investing and financing activities Preferred stock issued for repayment of note payable Preferred stock issued for repayment of accrued interest payable Forgiveness of related party payables Preferred dividends accrued Preferred stock issued for prepaid royalties Convertible notes entered into in exchange for related party payable Note payable entered into for professional fees $ (87,965 ) $ (630,108 ) - 199,607 - 350,000 32,667 11,900 2,350 15,784 2,630 (2,630 ) 23,377 19,231 (26,941 ) (36,216 ) - - 7 - (8,000 ) (5,150 ) 600 16,500 19,700 (2,500 ) (3,000 ) - 45,000 6,607 56,550 (20,334 ) 20,334 20,334 - $ - $ 20,334 $ - $ - $ - $ - $ 18,500 $ - $ 31,500 $ - $ 40,000 $ - $ 6,448 $ 19,000 $ - $ 100,000 $ - $ 15,784 $ - $ 350,000
See accompanying notes to consolidated financial statements.
| F-7 |
| Table of Contents |
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Statement of Changes in Stockholders' Deficit
|
| Series A |
|
| Series B |
|
| Common Stock |
|
| Additional Paid-in |
|
| Other comprehensive |
|
| Treasury |
|
| Accumulated |
|
| Non-Controlling |
|
|
| ||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| income |
|
| Stock |
|
| Deficit |
|
| Interest |
|
| Total |
| ||||||||||||
Balance, December 31, 2016 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 27,333,221 |
|
|
| 27,333 |
|
|
| 2,859,164 |
|
|
| 24 |
|
|
| (100 | ) |
|
| (3,348,765 | ) |
|
| - |
|
|
| (462,344 | ) |
�� |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred stock issued in exchange for common stock |
|
| 25,000 |
|
|
| 25,000 |
|
|
| - |
|
|
| - |
|
|
| (241,700 | ) |
|
| (242 | ) |
|
| (24,758 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Series B preferred stock issued for intangible asset |
|
| - |
|
|
| - |
|
|
| 64,000 |
|
|
| 64,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 64,000 |
|
Common shares issued in exchange for note payable principal |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,250,000 |
|
|
| 1,250 |
|
|
| 248,750 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 250,000 |
|
Common shares issued in exchange for related party payable |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 345,350 |
|
|
| 346 |
|
|
| 34,190 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 34,536 |
|
Common shares rescinded |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (7,114,000 | ) |
|
| (7,114 | ) |
|
| 7,114 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Forgiveness of related party convertible note payable |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,634 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,634 |
|
Forgiveness of related party interest payable |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,300 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,300 |
|
Forgiveness of related party payable |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 500 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 500 |
|
Related party note payable entered into for purchase of treasury stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (100 | ) |
|
| - |
|
|
| - |
|
|
| (100 | ) |
Notes payable entered into for purchase of treasury stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (5,100 | ) |
|
| - |
|
|
| - |
|
|
| (5,100 | ) |
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (8 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (8 | ) |
Dividend declared on preferred stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,249 | ) |
|
| - |
|
|
| (1,249 | ) |
Net loss, year ended December 31, 2017 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (44,687 | ) |
|
| - |
|
|
| (44,687 | ) |
Balance, December 31, 2017 |
|
| 25,000 |
|
| $ | 25,000 |
|
|
| 64,000 |
|
| $ | 64,000 |
|
|
| 21,572,871 |
|
| $ | 21,573 |
|
| $ | 3,129,894 |
|
| $ | 16 |
|
| $ | (5,300 | ) |
| $ | (3,394,701 | ) |
|
| - |
|
|
| (159,518 | ) |
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash proceeds |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 745,778 |
|
|
| 746 |
|
|
| 235,254 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 236,000 |
|
Dividends payable written back for preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 26,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| 26,697 |
|
Issuance of common stock for acquisitions |
|
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 2,575,000 |
|
|
| 2,575 |
|
|
| 775,922 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 778,497 |
|
Stock split rounding |
|
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 63,888 |
|
|
| 64 |
|
|
| (64 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (37,704 | ) |
|
|
|
|
|
|
|
|
|
| 2,279 |
|
|
| (35,425 | ) |
Conversion of preferred stock to common stock |
|
| (25,000 | ) |
|
| (25,000 | ) |
|
| - |
|
|
| - |
|
|
| 25,000 |
|
|
| 25 |
|
|
| 24,975 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Non-controlling interest in acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| 219,877 |
|
|
| 219,877 |
|
Net income, year ended December 31, 2018 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (201,213 | ) |
|
| (128,069 | ) |
|
| (329,282 | ) |
Balance, December 31, 2018 |
|
| - |
|
| $ | - |
|
|
| 64,000 |
|
| $ | 64,000 |
|
|
| 24,982,537 |
|
| $ | 24,983 |
|
| $ | 4,192,678 |
|
| $ | (37,688 | ) |
| $ | (5,300 | ) |
| $ | (3,595,912 | ) |
| $ | 94,087 |
|
| $ | 736,847 |
|
See accompanying notes to consolidated financial statements.
| F-8 |
| Table of Contents |
Consolidated Statements of Cash Flows
December 31, 2018 2017 Cash flows from operating activities Net (loss) income from continuing operations Net (loss) from discontinued operations, net of income taxes Adjustments to reconcile net loss to net cash used in operating activities Gain on settlement of debt Derivative liability written back Amortization of debt discounts Depreciation and amortization expense Loss on change in fair market value of derivative liability Excess fair market value of derivative liability charged to interest Expenses paid on behalf of the company by related parties Changes in operating assets and liabilities Accounts receivable Interest payable, related party Accounts payable and accrued liabilities Accounts payable, related party Net cash provided/used in continuing operating activities Net cash provided/used by discontinued operating activities Net cash provided/used in operating activities Net cash used in investing activities Net cash paid for asset acquisition Net cash used in continuing investing activities Net cash provided/used in discontinued investing activities Net cash used in investing activities Cash flows from financing activities Proceeds from related party payables Payments to related party Repayments of convertible notes payable Proceeds from the sale of common stock Net cash provided by continuing financing activities Net cash provided/used in discontinued financing activities Net cash provided by financing activities Net change in cash Effect of exchange rate on cash Cash at beginning of period Cash and cash equivalents of discontinued operations Cash and cash equivalents of continued operations Supplemental cash flow information Cash paid for interest Cash paid for income taxes Non-cash investing and financing activities Common shares issued for acquisition of AJD Data Services Common shares issued in exchange for preferred shares Common shares issued for asset purchase Other long term payable for Ontario Inc. acquisition Forgiveness of related party convertible note payable Forgiveness of related party interest payable Forgiveness of related party payable Initial measurement of derivative liability Series A preferred stock issued in exchange for common stock Series B preferred stock issued for intangible asset Common shares issued in exchange for related party payable Common shares issued in exchange for note payable principal Accounts payable entered into for intangible asset Accounts payable paid by related party Accounts payable paid by convertible noteholder Related party note payable entered into for purchase of treasury stock Notes payable entered into for purchase of treasury stock Preferred dividend declared $ (212,134 ) $ (44,687 ) (220,263 ) - - (26,307 ) (22,755 ) - - 4,900 88,142 3,056 2,427 14,980 - 448 - 19,418 2,629 - 7,330 9,246 14,594 19,617 (15,000 ) - (134,767 ) 672 1,627 - (133,140 ) 672 (14,825 ) - (14,825 ) - (5,977 ) - (20,802 ) - - 7,924 (26,943 ) - (4,900 ) - 236,000 - 204,157 7,924 3,718 - 207,875 7,924 53,933 8,596 (18,972 ) 13 8,899 - $ 30,954 $ - $ 12,908 $ 8,609 $ - $ - $ - $ - $ 360,585 $ - $ 25,000 $ - $ 417,815 $ - $ 196,142 $ - $ - $ 2,634 $ - $ 2,300 $ - $ 500 $ - $ 4,900 $ - $ 25,000 $ - $ 64,000 $ - $ 34,536 $ - $ 250,000 $ - $ 55,000 $ - $ 12,569 $ - $ 4,900 $ - $ 200 $ - $ 5,000 $ - $ 1,249
See accompanying notes to consolidated financial statements.
| F-9 |
| Table of Contents |
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2016and 20152018 and 2017
Note 1 - Nature of Business
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 HemCare Health Services Inc.DLT Resolution Inc on March 2, 2015.December 4, 2017.
Under previousDLT Resolution Inc. (“DLT”) currently operates in three high-tech industry segments: Blockchain Applications; Telecommunications; and Data Services which includes Image Capture, Data Collection, Data Phone Center Services, and Payment Processing. The Company completed its acquisitions of A.J.D Data Services (“A.J.D”) as on January 21, 2018 and 1922861 Ontario Inc. (“Ontario”) as on April 12, 2018. See Note 9 – Acquisition of A.J.D. Data Services and Note 10 – Acquisition of 1922861 Ontario Inc. Both acquisitions were considered business combinations under ASC 805 “Business Combinations”.
The Company offers secure data management, Information Technology (IT) and other telecommunications services in Canada and the initial businessUnited States. Through its RecordsBank.org portal it operates a Health Information Exchange. DLT Resolution also 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 Company is preparing to launch a Distributed Ledger Technology “Blockchain” version of the service placing electronic health records on this secure platform. The Company has finished making the “Blockchain” but has yet to launch the initiative yet. The Company expects to launch this initiative during the third calendar quarter of 2019.
Previously, the Company’s business plan and objective through late 2016 was to provide personal care services to elderly, physically disabled or other home-bound individuals suffering infirmity. During the year ended December 31, 2009, the board of directors changed the Company's focus toward the manufacture and sale of fire retardant products. The Company then changed its focus to the licensing of certain technologies related to rare earth minerals then to having the exclusive rights to the use of Optimum Performance (a proprietary formulation of a highly potent all-in-one daily feed supplement for the Horse industry. The Company while still keeping within the health and wellness industries, narrowed its focus to haemorrhoidon hemorrhoid medical procedures andfor which it entered into a license agreement to open haemorrhoidhemorrhoid treatment centers and promote the Ultroid HaemorrhoidHemorrhoid System globally duringglobally. However, the year ended December 31, 2015 which wasCompany under new Management, ceased in late 2016 due to numerous issues and concerns with the Licensor’s business, technology and principals. With the business focus potentially shifting the board asked for the former chief executive officer's resignation and Mr. John Wilkes returned to his former role as chief executive. Under Mr. Wilkes leadership, the company has been developing a new business strategy and objective still within the health care space but now focusing on the information Exchange sector.
To this end management working together with significant shareholders, have been developing strategies and alliances to fulfil this objective. At the close of the fiscal year management began to develop a platform and portal for the Information Exchange with aim to completion and market launch in the 2nd quarter of 2017.
HemCare Health Services is developing a Centralized System for Patients, Lawyers & Insurers to Retrieve and Access Medical Records. The centralized system and portal is a cloud-based PIPEDA & HIPAA compliant network of Providers and Record Requestors. Utilizing a secure platform, providers will be able to securely exchange records electronically with third-party requestors. Health care providers with proper authorization can also share records with each other.
Addressing a $7 Billion a year problem
In national terms, across the U.S., hospitals spend more than $7 billion annually on customer intake. More than $7 billion, before any sort of medical procedure is done; before a patient even steps out of a waiting room, representing an incredible amount of time and money spent on intake administration.
Despite the adoption of electronic health records (EHR) and health information exchanges (HIE), providers are still mailing and faxing paper records because they have no PIPEDA or HIPAA compliant method to exchange records electronically with these third-party requestors. A recent study found that the current method of exchanging patient health information cost a single clinician practice $17,160 per year. plan.
The Company aimshas its distributed ledger technology architecture in place for electronic health records, it has opted to remove these substantial burdens bothdefer its plans for a utility token sale. A Utility Token allows a purchaser to exchange tokens for use of a utility, in this case using Records Bank in the capacity of any prospective stakeholder involved in the exchange of electronic heath records. Management’s decision to defer the sale is based on an administrativeits judgement of market conditions for said sale. This will be done further down the road when the funds are available to produce the utility token sale.
DLT operates in Canada through its wholly owned subsidiary DLT Resolution Corp., its majority owned subsidiary A.J.D. Data Services Ltd. and financial basis. People or firms simply use our secure online request form, pay a small service feewholly owned subsidiary DLT Data Services Ltd. formed in December 2018. Additionally, on January 14, 2019, the Company sold 70 of the 80 shares purchased in A.J.D. Data Services Ltd and the Company retrieves, digitizes and stores the records. At this point the requesting client can access the record globally 24 hourswill continue to hold a day - 7 days a week to view it or transfer it securely. In fact clients can upload any new records to consolidate and keep all of their records securely10% interest in one place.AJD Data.
Note 2 - Significant Accounting Policies
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash
For the Statements of Cash Flows, all highly liquid investments with maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of December 31, 2016 or 2015.
Income taxes
Income taxes are provided for using the liability method of accounting in accordance with FASB ASC Topic 740 (formally SFAS No. 109 “Accounting for Income Taxes”). A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
At December 31, 2018, there were no uncertain tax positions that require accrual.
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DLT RESOLUTION INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 2 - Significant Accounting Policies (continued)
Accounts Receivable
Accounts receivable balances are established for amounts owed to the Company from its customers from the sales of services and products. The Company closely monitors the collectability of outstanding accounts receivable and provide an allowance for doubtful accounts based on estimated collections of outstanding amounts.
Revenue Recognition
Revenue is recognized when persuasive evidence of an agreement exists, the price is fixed or determinable, goods are delivered or services performed and collectability is reasonably assured. The Company did not generate anyfollows 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. The Company will be performing a modified retrospective adoption of ASC 606 and this retrospective adoption will have no material impact to the prior year amounts recorded as revenue.
During the year ended December 31, 2018, the Company generated revenues from the sale of general information technology services focused on telephone system set up. The Company generated revenues of $227,343 and $2,423 during the years ended December 31, 20162018 and 2017, respectively. The increase in revenue is the result of the Company’s acquisitions of 1922861 Ontario Inc.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation. The Company provides for depreciation using the straight-line method over the estimated useful lives of the related assets, which range from three to five years. Maintenance and repair costs are expensed as they are incurred while renewals and improvements which extend the useful life of an asset are capitalized. At the time of retirement or 2015.disposal of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the consolidated results of operations.
Intangible Assets
Intangible assets primarily consist of customer relationships, software, non-compete agreements and domain names. The Company amortizes, to cost of revenue and operating expenses, these definite‑lived intangible assets on a straight‑line basis over the life of the assets which range from five to seven years.
Impairment of Long‑Lived Assets and Goodwill
The carrying value of long‑lived assets is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis.
The Company tests goodwill for impairment annually as of December 31, or whenever events or changes in circumstances indicate that goodwill may be impaired. The Company initially assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company compares the reporting unit’s carrying amount to its fair value. If the reporting unit’s carrying amount exceeds its fair value, an impairment charge is recorded based on that difference.
There was no impairment of long-lived assets or goodwill during the periods presented.
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DLT RESOLUTION INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 2 - Significant Accounting Policies (continued)
Convertible debt
The Company records a beneficial conversion featurefeatures related to the issuance of convertible debts that have conversion features at fixed or adjustable rates.rates that are less than the Company’s stock prices on the respective issuance dates. The beneficial conversion featurefeatures for the convertible instruments isare recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instrumentinstruments equal to the intrinsic value of the conversion features.features based on the difference between the effective conversion rates and the Company’s stock prices on the issuance dates. The beneficial conversion feature will befeatures are accreted by recording additional non-cash interest expense over the expected life of the convertible notes.
HEMCARE HEALTH SERVICES INC.
NotesThe Company capitalizes software development costs in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 985-20. Software development costs are capitalized after technological feasibility is established. Once the software products become available for general release to Financial Statements
December 31, 2016and 2015the public, the Company amortizes such costs over the related product’s estimated economic useful life to general and administrative expenses.
Note 2 - Significant Accounting Policies (continued)Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassification had no effect on the reported results of operation.
Share Based Expenses
The Company complies with FASB ASC Topic 718 Compensation—Stock Compensation, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that is based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. FASB ASC Topic 718 primarily focuses on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This statement requires a public entity to expense the cost of employee services received in exchange for an award of equity instruments. This statement also provides guidance on valuing and expensing these awards, as well as disclosure requirements of these equity arrangements. The Company adopted FASB ASC Topic 718 upon formation of the Company and expenses share based costs in the period incurred.
Going concernNet Income (Loss) Per Share
Net loss per share is calculated in accordance with FASB ASC topic 260.Basic earnings (loss) per share is computed by dividing net income, or loss, by the weighted average number of shares of common stock outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income, or loss, by the weighted average number of shares of common stock outstanding for the period, assuming conversion or exercise of all potentially dilutive securities outstanding during each reporting period presented. Potentially dilutive securities are not presented or used in the computation of diluted loss per share on the statement of operations for periods when the Company incurs net losses, as their effect would be anti-dilutive.
As of December 31, 2018, and December 31, 2017, the Company had 0 and 25,000 shares, respectively, of Series A Preferred Stock issued and outstanding, which were convertible into 0 and 25,000 shares, respectively, of the Company’s common stock. Also, as of December 31, 2018 and December 31, 2017, the Company had 64,000 shares of Series B Convertible Preferred Stock issued and outstanding, which were convertible into 12,800 shares of the Company’s common stock. As of December 31, 2018 there is a potential earn out of an additional 500,000 restricted common shares of stock from the acquisition of 1922861 Ontario Inc (see Note 10 – Acquisition of 1922861 Ontario Inc).
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DLT RESOLUTION INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 2 - Significant Accounting Policies (continued)
Principals of Consolidation
The consolidated financial statements represent the results of DLT Resolution, Inc.; its wholly owned subsidiary, DLT Resolution Corp.; its 80%-owned subsidiary, A.J.D. Data Services (see Note 9 – Acquisition of A.J.D. Data Services); and the assets, processes, and results therefrom of 1922861 Ontario Inc. Note 10 – Acquisition of 1922861 Ontario Inc.) All intercompany transactions and balances have been eliminated.
Foreign Currency Translation
The functional currency of the Company’s subsidiaries in Canada is the Canadian Dollar. The subsidiaries’ assets and liabilities have been translated to U.S. dollars using exchange rates of 0.732902 and 0.774954 in effect at the balance sheet dates of December 31, 2018 and December 31, 2017, respectively. Statements of operations amounts have been translated using the annual weighted average exchange rates of 0.772077 for the year ended December 31, 2018. Resulting gains or losses from translating foreign currency financial statements are recorded as other comprehensive income (loss). Foreign currency transaction gains and losses resulting from exchange rate fluctuations on transactions denominated in a currency other than the local currency are included in other income (expense). There was $3,992 currency transaction losses recognized during the periods presented.
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.
Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.
Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.
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DLT RESOLUTION INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 2 - Significant Accounting Policies (continued)
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.
Recently Issued Accounting Pronouncements
In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. This analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule was effective as of November 5, 2018. The adoption of this final rule did not have a material impact on the financial statements.
In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from non-employees. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company elected to early-adopt this standard in the current period; the adoption of this standard did not impact the financial statements.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which provides amendments to current guidance to address the classifications and presentation of changes in restricted cash in the statement of cash flows. The effective date for the standard is for fiscal years beginning after December 15, 2017. The Company adopted the standard effective January 1, 2018; the adoption of this standard did not have a material impact on the financial statements.
In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” The amendments in this update will require recognition of current and deferred income taxes resulting from an intra-entity transfer of an asset other than inventory when the transfer occurs. This update is effective for annual and interim periods beginning after December 15, 2017. The Company adopted the standard effective January 1, 2018; the adoption of this standard did not have a material impact on the financial statements.
In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02, Income Statement Reporting, Comprehensive Income (Topic 220). Effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this guidance by the Company is not expected to have a material impact on our condensed financial statements and related disclosures.
Management believes recently issued accounting pronouncements will have no impact on the financial statements of the Company.
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DLT RESOLUTION, INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 3 - Going concern
The Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company has nolimited cash, no material assets, accumulated losses of $3,348,765, a working capital deficit$3,595,912 and is doubtful to recover $329,815 (CAD 450,000) of $462,344, nor does it have operations or a sourcethe note receivable received against the subsequent sale of revenue sufficient to cover its operation costs and allow itsubsidiary. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan, or merge with an operating company. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The officers and directors have committed to advancing certain operating costs of the Company.
Valuation of Investments in Securities and Securities at fair value – Definition and Hierarchy
FASB ASC 820-10-15 defines fair value, thereby eliminating inconsistencies in guidance found in various prior accounting pronouncements, and increases disclosures surrounding fair value calculations. FASB ASC 820-10-15 establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:
Level 1 – unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company at the measurement date.
Level 2 – inputs that are observable in the marketplace other than those inputs classified as Level 1
Level 3 – inputs that are unobservable in the marketplace and significant to the valuation
The Company has no assets or liabilities that are required to be carried at fair value. Accounts payable and related party payables have fair values that approximate the carrying value due to the short term nature of these instruments.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future consolidated financial statements.
HEMCARE HEALTH SERVICES INC.
Notes to Financial Statements
December 31, 2016and 2015
Note 2 - Significant Accounting Policies (continued)
Net loss per common share
Net loss per share is calculated in accordance with FASB ASC Topic 260 (formerly SFAS No. 128, Earnings Per Share). The weighted-average number of common shares outstanding during each period is used to compute basic loss per share. Diluted loss per share is computed using the weighted average number of shares and dilutive potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised. Basic net loss per common share is based on the weighted average number of shares of common stock outstanding during the periods presented. The Company had 0 and 84,668,400 of common stock equivalents that were excluded from earnings per share due to the anti-dilutive nature during the years ended December 31, 2016 and 2015.
Note 3 - Stockholders’ Enquit
Series A Convertible Preferred Stock
As discussed in the 8K filed with the SEC on June 29, 2014, during the year ended December 31, 2014, the Company amended its articles of incorporation to designate the previously authorized series A preferred stock to series A convertible preferred stock. The preferred series A 12% convertible shares have a par value of $1, entitle holder to one vote and accrue dividends at 12% per year, paid quarterly. At the option of the holder, the stock can be converted into shares of the Company's common stock. The number of shares to be issued will be determined by dividing the amount of the Series A shares being converted by $0.001.
During the year ended December 31, 2014, the Company issued 120,000 shares of series A convertible preferred stock in exchange for a prepayment of royalties to a related party totaling $120,000. During year ended December 31, 2015, the Company issued 100,000 shares of series A convertible preferred stock in exchange for a prepayment of royalties with a deemed value of $0 due to the undeterminable nature of the true future usable value to the Company. The Company also accepted the conversion notices from certain series A convertible preferred shareholders to convert a total of 138,830 shares of series A preferred stock to 138,830,000 shares of $0.001 par value common stock.
The excess of the value of the preferred shares issued in excess of the value of the prepaid royalties has been expensed as a financing cost.
During the year ended December 31, 2016, the Company issued 50,000 shares of Series A Preferred Stock in exchange for a $50,000 reduction of outstanding notes payable. Additionally, the Company accepted the conversion of 131,170 shares of Series A Preferred Stock for the issuance of 131,170,000 shares of common stock.
There were 0 and 81,170 shares of series A convertible preferred stock issued and outstanding as of December 31, 2016 and 2015. Additionally, the Company had accrued dividends payable on series A convertible preferred stock totaling $25,448 and $19,000 at December 31, 2016 and 2015.
Common Stock
On March 2, 2015, the Company effected a 1:50 reverse stock split. The effects of the reverse split are shown retroactively in these financial statements.
The authorized common stock of the Company consists of 275,000,000 shares and carries a par value of $0.001. During the year ended December 31, 2014, the Company bought back 380,000 post-split shares of common stock into treasury from a former officer for $100. The shares are being carried as treasury shares as reflected on the balance sheet.
During the year ended December 31, 2015, the Company rescinded 730,000 common shares previously issued pursuant to certain agreements. The Company determined the holders did not have legal right to the shares as issued.
During the year ended December 31, 2015, the Company issued 138,830,000 common shares from the conversion of 138,830 shares of Series A Preferred Stock.
During the year ended December 31, 2015, the Company issued 900,000 shares of common stock for total cash proceeds of $45,000 and 26,211 shares to account for rounding in our 1:50 stock split as previously discussed.
During the year ended December 31, 2016, the Company issued 131,170,000 common shares for the conversion of 131,170 shares of Series A Preferred Stock. There was no gain or loss on this conversion.
There were 273,332,211 and 142,162,211 common shares issued and 272,952,211 and 141,782,211 outstanding at December 31, 2016 and 2015, respectively.
HEMCARE HEALTH SERVICES INC.
Notes to Financial Statements
December 31, 2016and 2015
Note 4 - Income Taxes
We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Pursuant to FASB ASC Topic 740, when it is more likely than not that a tax asset cannot be realized through future income, the Company must provide an allowance for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry-forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry-forward period.
The sources and tax effects of the temporary differences for the periods presented are as follows:
December 31, 2016 December 31, 2015 Net operating loss carry forward Applicable Canadian Federal and Provincial tax rates Deferred tax asset Valuation allowance Net deferred tax asset $ 836,605 $ 748,640 26.5 % 26.5 % 221,700 198,390 (221,700 ) (198,390 ) $ - $ -
This represents an increase in the net operating loss carry forward of $22,298 and $430,501 for the years ended December 31, 2016 and 2015. A reconciliation of income taxes computed at the United States federal statutory rate of 35% to the income tax recorded is as follows:
December 31, 2016 December 31, 2015 Tax benefit at United States Federal statutory rate (35%) Differences in U.S. and Canadian tax rates on provision Non-deductible losses-prepaids Increase in valuation allowance Income tax provision $ 19,354 $ 220,538 (4,700 ) (36,592 ) - (69,862 ) (14,654 ) (114,083 ) $ - $ -
This represents an increase in the valuation allowance of $14,654 and $114,083 for the years ended December 31, 2016 and 2015. The Company did not pay any income taxes during the years ended December 31, 2016 or 2015, or since inception.
The net federal operating loss carry forward will begin to expire in 2026. This carry forward may be limited upon the consummation of a business combination under IRC Section 381. Tax years commencing in 2012 remain open for examination by the IRS, where applicable.
HEMCARE HEALTH SERVICES INC.
Notes to Financial Statements
December 31, 2016and 2015
Note 54 - Related Party Transactions
No salaries were paid to directors or executives during the periods ended December 31, 2018 or 2017. All related party intercompany transactions have been eliminated.
Related party payables had a balance of $17,713 and $44,679 for the years ended December 31, 2018 and 2017 respectively. During the years ended December 31, 20162018 and 2015,2017, the Company received loans from related parties totaling $2,350$6,748 (including $3,496 from Gilles Trahan and $15,784$3,252 from Venecia Gafter) and $19,418 respectively to fund operations via expenses paid directly to vendors on behalf of the Company. Of this amount, $0 and $12,596 was paid towards outstanding payables and $6,748 and $6,849 towards current period expenses. These loans are non-interest bearing are due on demand and as such included in current liabilities. Imputed interest has been considered, but determined to be immaterial to the financial statements as a whole. Additionally, the Company’s wholly owned subsidiary, DLT resolution Corp had paid $33,691 to the related parties.
On August 8, 2015, the Company entered intoAccounts payable, related party had a convertible note payable for $15,784 in exchangebalance of $40,000 and $55,000 for the periods ended December 31, 2018 and 2017 respectively. The amounts used in accounts payable, related party payable incurred from expensesrelates to software development cost paid for on behalf of the Company.company by Gilles Trahan. During the year, $15,000 has been paid by DLT Resolution Corp to the related party.
Interest payable, related party had a balance of $26,875 and $19,545 for the years ended December 31, 2018 and 2017 respectively. The note carriesinterest payable relates to a current notes payable, related party and accrues interest at 9% per annum. $7,330 of interest expense was accrued for the year ended December 31, 2018.
Current notes payable, related party had a ratebalance of 6%$81,500 and $81,500 for the years ended December 31, 2018 and 2017 respectively. This balance consists of one note payable to one related company and accrues interest at 9% per annum,annum. No principal payments were made in 2018.
A related party receivable of CAD $45,337 from Peter Darbyson who is due on August 24, 2016a minority shareholder in its majority owned subsidiary A.J.D. Data Services Lt. has been written off.
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DLT RESOLUTION, INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2018 and may2017
Note 5 - Stockholders’ Equity
Series A Convertible Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock can be converted intoto common stock of the Companyshares at the option of the noteholderholder at a rate of $.01$1 per share. The beneficial conversion feature in the note created a debt discount of $15,784 of which $5,535 was recognized during the year ended December 31, 2015 and $10,249 during the year ended December 31, 2016 leaving an unamortized discount of $10,249 and $0 as of December 31, 2015 and December 31, 2016. There was $2,634 and $10,634 principal and $606 and $360 of interest due as of December 31, 2016 and 2015.
During the year ended December 31, 2016,2018, the Company identified $40,000accepted the conversion of liabilities25,000 shares of Series A Convertible Preferred Stock in exchange for services performed by former related parties for which25,000 shares of common stock.
There were 0 and 25,000 shares of series A convertible preferred stock issued and outstanding as of December 31, 2018 and December 31, 2017, respectively. Additionally, the original debtors no longer have a legal claimCompany had accrued dividends payable on series A convertible preferred stock totaling $ 0 and $26,697 at December 31, 2018 and December 31, 2017, respectively. As at December 31, 2018, the Company has written back all the dividends payable liability to collect based on statutes of limitations having expired in Ontario, Canada, the province in which the services were performed. As such, the amounts payable were written off and recorded toadditional paid in capital inwith the current year.consent of shareholders.
Note 6 – Excess CostSeries B Convertible Preferred Stock
The Company is authorized to issue up to 500,000 shares of Prepaid Royalties Over ValueSeries B Convertible Preferred Stock. The Series B Convertible Preferred Stock can be converted to common shares at the option of the holder at a rate of $0.20 per share.
There were 64,000 shares of series B convertible preferred stock issued and outstanding as of December 31, 2018 and December 31, 2017.
Common Stock
The authorized common stock of the Company consists of 275,000,000 shares and carries a par value of $0.001. During the year ended December 31, 2014, the Company bought back 38,000 post-split shares of common stock into treasury from a former officer for $100. The shares are being carried as treasury shares as reflected on the balance sheet.
During the year ended December 31, 2015,2017, the Company issued a $5,000 note payable and $200 related party payable for a total of 100,000 preferred3,777,000 outstanding common shares which are carried as treasury stock. There were 3,815,000 common shares held as treasury stock as of December 31, 2018 and December 31, 2017, respectively.
During the year ended December 31, 2018, the Company issued 745,778 common shares for cash proceeds of $236,000; 1,575,000 common shares valued at $360,729 for the acquisition of A.J.D. Data Services; 1,000,000 common shares valued at $417,815 for the acquisition of 1922861 Ontario Inc; 25,000 common shares for the conversion of 25,000 shares of $1 par value Series A convertible preferred stock. TheConvertible Preferred Stock and 63,888 common shares carriedfor rounding differences from the effect of a value of $199,607 resulting in an immediate excess payment over value of $199,607 based onreverse stock split effected during the Company’s determination that it may not realize value for the prepayment resulting in a full charge-offyear ended December 31, 2017.
There were 24,982,537 and 21,572,871 common shares issued and 21,167,537 and 17,757,871 outstanding at December 31, 2018 and December 31, 2017, respectively.
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DLT RESOLUTION, INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to operations for $199,607.Consolidated Financial Statements
December 31, 2018 and 2017
Note 76 – Notes Payable
Related Party
During the year ended December 31, 2015, the Company entered into a note payable with an unrelateda related party as a settlement for payment of consulting services provided valued at $350,000. The note carries interest of 9% compounded annually and iswas due on November 19, 2016. During the year ended December 31, 2016, the Company issued 50,000 shares of series A convertible preferred stock as repayment of $31,500 of accrued interest and $18,500 of outstanding principal. Additionally, on January 31, 2017, the Company issued 1,250,000 shares of common stock as repayment of $250,000 of principal. There was $331,500$81,500 and $350,000$81,500 of principal and $10,299$26,875 and $19,504$19,545 of accrued interest due as of December 31, 20162018 and 2015. Accrued interestDecember 31, 2017.
Non – Related Party
On August 1, 2017, the Company entered into a note payable with an unrelated party to purchase common stock held by the unrelated party. The note is included in “accounts payabledue on July 1, 2019 and accrued liabilities” on the balance sheet.bears no interest. There was $5,000 and $5,000 due as of December 31, 2018 and December 31, 2017.
Note 87 – Convertible Notes Payable
During the year ended December 31, 2015,On May 22, 2017, the Company entered into a convertible note payable with an unrelated party resulting in net cash proceedsfor $4,900 which was paid to a vendor on the Company totaling $19,700.Company’s behalf. The note iscarried interest at 10% per annum, was due on demand and was convertible at the option of the holder into common stock of the Company at a rate equal to the optionlesser of a 50% discount from the last trade price of the noteholderstock or $0.01 per share. There was $0 and $4,900 of principal and $0 and $3,048 of accrued interest due as of December 31, 2018 and December 31, 2017, respectively, which is included in “accounts payable and accrued liabilities” on the balance sheet. See Note 8 – Derivative Liability for explanation of related derivative liability derived from variable conversion rate. This note was settled in full in May 2018 against the payment of $5,390 which included an interest payment of $490 and $4,900 of principal payment. The outstanding liability of $2,679 including $120 of current year’s interest expense and $2,559 of accrued interest was forgiven by the holder.
Note 8 – Derivative Liability
As of December 31, 2018 and December 31, 2017, Company had a derivative liability balance of $0 and $20,328 on the balance sheets and recorded loss of $2,427 and $14,980 for the years ended December 31, 2018 and 2017, respectively. The derivative liability activity comes from convertible notes payable as follows:
As discussed in Note 7 – Convertible Notes Payable, on May 22, 2017 the Company issued a $4,900 Convertible Promissory Note to an unrelated party that is due on demand. The note bears interest at a rate of $0.0110% per share.annum and can be convertible into the Company’s common shares 90 days after issuance, at the holder’s option, at the conversion rate equal to the lesser of a 50% discount from the last trade prior to conversion or $0.01. The Company measuredanalyzed the valueconversion feature of the beneficialagreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. In accordance with ASC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The Company carries its derivative liability on the balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair-values the embedded derivative using the Black-Scholes option pricing model. The fair value of the derivative at the issuance date of this note was $5,348 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $4,900 which was equal to the face value of the convertible note, and immediately expensed $448. Although the note was due on demand, upon issuance the Company estimated a six-month repayment period, over which they amortized the debt discount in full. As such, the Company recorded $4,900 in amortization expense during the year ended December 31, 2017.
The convertible note was repaid in full on May 22, 2018, on which date the Company determined the derivative’s fair value to be $22,775, which was written back during the year and resulted in a $2,427 net loss from change in fair value for the six months ended June 30, 2018. The fair value of the embedded derivatives for the notes was determined using a Black Scholes valuation model based on the following assumptions: (1) expected volatility of 338%, (2) risk-free interest rate of 2.13%, and (3) expected life of 0.50 of a year.
There is no derivative liability outstanding as of December 31, 2018.
| F-17 |
| Table of Contents |
DLT RESOLUTION, INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 9 – Acquisition of A.J.D. Data Services
On January 21, 2018, the Company entered into and closed the transactions contemplated by the definitive stock purchase agreement and plan of re-organization by and among the Company, A.J.D. Data Services Ltd., a limited liability company organized under the laws of Ontario (“A.J.D.”), the stockholders of A.J.D. and other parties signatory thereto to acquire 80 shares, representing 80% of the issued and outstanding capital stock of A.J.D. for 525,000 restricted common shares of the Company valued at $120,195. The first milestone earnout was met on September 21, 2018 resulting in additional 1,050,000 restricted common shares of the Company valued at $240,390. A.J.D. is focused on document imaging, telemarketing, data entry, document management and all other back-end functions. The acquisition is intended to be part of a tax-free share-for-share exchange which will see DLT Resolution issuing restricted common shares on closing and an additional 2,625,000 restricted common shares upon meeting the following milestones:
· | 1,050,000 Shares upon A.J.D Data Services reaching $1,000,000 in cumulated gross sales | |
· | 525,000 Shares upon A.J.D Data Services reaching $1,500,000 in cumulated gross sales with $100,000 in pre-tax earnings | |
· | 525,000 Shares upon A.J.D Data Services reaching $2,000,000 in cumulated gross sales with $150,000 in pre-tax earnings | |
· | 525,000 Shares upon A.J.D Data Services reaching $2,500,000 in cumulated gross sales with $200,000 in pre-tax earnings |
The Company applied the acquisition method to the business combination and valued each of the assets acquired (cash, accounts receivable, equipment, customer relationships, software, domain names and non-compete agreements) and liabilities assumed (accounts payable and related party payable) at fair value as of the acquisition date. The carrying values of cash, accounts receivable, accounts payable and related party payable were deemed to be fair value as of the acquisition date. The Company determined the fair value of the equipment to be historical net book value. The preliminary allocation of the purchase price was based on estimates of the fair value of the assets and liabilities assumed based on provisional amounts. However, the allocation of the excess purchase price and the amounts allocated to intangible assets are now as per the valuation of assets and liabilities performed by an independent valuer. Under the purchase agreement, the Company issued 525,000 shares of common stock valued at $120,195 and committed to issue an additional 3,675,000 shares of common stock at certain milestones which was determined to have a fair value of $841,366 in exchange for 80% interest. The estimated fair value of the common stock to be issued of $600,880 was eliminated against the investment as assets and liabilities held for sale.
ASSETS ACQUIRED |
|
|
| |
Cash |
| $ | 302 |
|
Accounts receivable |
|
| 37,590 |
|
Equipment |
|
| 22,743 |
|
Customer relationships |
|
| 201,759 |
|
Software |
|
| 156,124 |
|
Non-compete agreement |
|
| 172,136 |
|
Domain name |
|
| 6,405 |
|
Goodwill |
|
| 654,389 |
|
TOTAL ASSETS ACQUIRED |
| $ | 1,251,448 |
|
|
|
|
|
|
LIABILITIES ASSUMED |
|
|
|
|
Accounts payable |
|
| 49,380 |
|
Related party payable |
|
| 317 |
|
TOTAL LIABILITIES ASSUMED |
|
| 49,697 |
|
|
|
|
|
|
Non-controlling interest |
|
| 240,190 |
|
NET ASSETS ACQUIRED |
| $ | 961,561 |
|
The intangible assets acquired will be amortized over 5 years.
The non-controlling interest was valued using an enterprise value approach whereby the total value of all net assets of A.J.D. were valued with the non-controlling interest representing the minority interest percentage of the net assets as of the date of issuance.acquisition. The discountnon-controlling interest was determined to have a fair value of $240,190 as of the date of acquisition.
From the period of acquisition on January 21, 2018 to December 31, 2018, A.J.D. generated total revenues of $554, 351. However, revenues of $37,085 earned were not correct and we had to accrue an allowance for bad debts on a large portion of these monies due to management of A.J.D. not being forthcoming in their accounting records. See note on discontinued operations for further information regarding the allowance for doubtful accounts.
| F-18 |
| Table of Contents |
DLT RESOLUTION, INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 10–Acquisition of 1922861 Ontario Inc
Acquisition of Operating Assets
On April 12, 2018, the Company entered into and closed the transactions contemplated by the definitive asset purchase agreement and plan of re-organization by and among the Company, 1922861 Ontario Inc. a corporation organized under the laws of Ontario (“ 1922861 Ontario Inc. ”), the stockholders of 1922861 Ontario Inc. and other parties signatory thereto to acquire all the operating assets of 1922861 Ontario Inc. for 500,000 restricted common shares of DLT Resolution valued at $212,520, and a payment of CAD $19,200 to 1922861 Ontario’s supplier. On September 21, 2018 the 1922861 Ontario Inc acquisition reached the first milestone and received another 500,000 restricted commons shares of DLT Resolution valued at $205,295. The acquisition is considered a business combination for accounting purposes under ASC 805, and resulted in the integration of 1922861 Ontario Inc.’s operating assets and processes into the Company’s Canadian subsidiary DLT Resolution Corp.
In addition to the consideration on closing, an additional 500,000 restricted common shares may potentially be issued upon meeting the following milestone:
· | 500,000 shares will be issued upon the acquired base generating CAD $500,000 in cumulated gross sales with a 10% pre-tax profit. |
The Company has allotted 24 months to achieve this milestone. There is full acceleration to allow for full vesting as quickly as the cumulative sales milestones are reached. Share issuances will be recognized ratably overissued under reliance of appropriate exemptions from registration with the lifeSecurities & Exchange Commission and will contain substantial resale restrictions.
The Company applied the acquisition method to the business combination and valued each of the assets acquired (cash, accounts receivable, equipment, customer relationships, software, domain names and non-compete agreements) and liabilities assumed (accounts payable and related party payable) at fair value as of the acquisition date. The carrying values of cash, accounts receivable, accounts payable and related party payable were deemed to be fair value as of the acquisition date. The Company determined the fair value of the equipment to be historical net book value. The preliminary allocation of the purchase price was based on estimates of the fair value of the assets and liabilities assumed based on provisional amounts. However, the allocation of excess purchase and the amounts allocated to intangible assets are now as per valuation of assets and liabilities performed by independent valuer. Under the purchase agreement, the Company issued 1,000,000 shares of common stock valued at $417,815 and committed to issue an additions 500,000 shares of common stock at certain milestones which was determined to have a fair value of $212,520 in exchange for all assets. The estimated fair value of the common stock to be issued of $196,142 is shown as an “other long-term liability” on the face of the balance sheet. The following table shows the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
ASSETS ACQUIRED |
|
|
| |
|
| $ |
| |
Accounts receivable |
|
| 18,663 |
|
Customer list |
|
| 103,255 |
|
Developed technology |
|
| 321,679 |
|
Domain and trade name |
|
| 3,971 |
|
Non-compete |
|
| 37,330 |
|
Goodwill |
|
| 169,896 |
|
TOTAL ASSETS ACQUIRED |
| $ | 654,794 |
|
|
|
|
|
|
LIABILITIES ASSUMED |
|
|
|
|
Accounts payable |
|
| 22,197 |
|
HST payable |
|
| 2,147 |
|
TOTAL LIABILITIES ASSUMED |
|
| 24,344 |
|
|
|
|
|
|
NET ASSETS ACQUIRED |
| $ | 630,450 |
|
| F-19 |
| Table of Contents |
DLT RESOLUTION, INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 11 – Pro-Forma Financials for Acquisitions in 2018 (combined 1922861 Ontario Inc and A.J.D. Data Services)
In accordance with ASC 805-10-50, the Company is providing the following unaudited pro-forma to present a summary of the combined results of the Company’s consolidated operations with all acquisitions. as if the acquisitions had been completed as of the beginning of the reporting period. Adjustments were made to eliminate any inter-company transactions in the periods presented.
DLT RESOLUTION, INC.
Unaudited Pro-Forma Consolidated Statements of Operations
Year ended December 31, 2018 2017 Revenue Cost of revenue Gross margin Operating expenses General and administrative Professional fees Total operating expenses Income (loss) from operations Other income (expense) Other income Gain/(loss) on change in fair market value of derivative liability Foreign exchange gain/(loss) Interest expense Total other income (expense) Net loss Preferred stock dividends declared Net income (loss) Net loss per common share, basic and diluted Weighted average basic shares outstanding Weighted average diluted shares outstanding $ 953,430 $ 2,423 144,210 379 809,220 2,044 968,845 14,369 235,328 24,351 1,204,172 38,720 (394,951 ) (36,676 ) 32,204 26,306 (2,427 ) (14,980 ) (3,992 ) - (4,767 ) (19,337 ) 21,018 (8,011 ) $ (373,933 ) $ (44,687 ) $ - $ (1,249 ) $ (373,933 ) $ (45,936 ) $ (0.02 ) $ (0.00 ) 19,263,408 18,571,882 19,263,408 18,571,882
See accompanying notes to consolidated financial statements.
| F-20 |
| Table of Contents |
DLT RESOLUTION, INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 12 - Income Taxes
We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Pursuant to FASB ASC Topic 740, when it is more likely than not that a tax asset cannot be realized through future income, the Company must provide an allowance for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry-forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry-forward period. The Company records estimated losses from interest and penalties arising from taxes remitted late as well as unrecognized tax benefits as they are incurred as general and administrative expenses. The Company did not have accrued interest or penalties related to income taxes as of December 31, 2018 or 2017. The Company has not filed the 2018 tax returns with the IRS as of the date of this filing.
The sources and tax effects of the temporary differences for the periods presented are as follows (rounded to the nearest thousand):
|
| December 31, 2018 |
|
| December 31, 2017 |
| ||
Net operating loss carry forward |
| $ | 1,172,000 |
|
| $ | 828,000 |
|
Applicable Canadian Federal and Provincial tax rates |
|
| 26.5 | % |
|
| 26.5 | % |
Deferred tax asset related to net operating losses |
|
| 317,000 |
|
|
| 219,000 |
|
Deferred tax asset relating to debt discounts and derivative liability (at 26.55) |
|
| (5,000 | ) |
|
| 5,000 |
|
Valuation allowance |
|
| (312,000 | ) |
|
| (224,000 | ) |
Net deferred tax asset |
| $ | - |
|
| $ | - |
|
A reconciliation of income taxes computed at the United States federal statutory rate of 21% and 35% to the income tax recorded is as follows:
|
| December 31, 2018 |
|
| December 31, 2017 |
| ||
Tax benefit at United States Federal statutory rate |
| $ | 27,000 |
|
| $ | 16,000 |
|
Differences in U.S. and Canadian tax rates on provision |
|
| 7,000 |
|
|
| (5,000 | ) |
Increase in valuation allowance |
|
| (34,000 | ) |
|
| (11,000 | ) |
Income tax provision |
| $ | - |
|
| $ | - |
|
The Company did not pay any income taxes during the years ended December 31, 2018 or 2017, or since inception.
The net federal operating loss carry forward will begin to expire in 2026. This carry forward may be limited upon the consummation of a business combination under IRC Section 381. Tax years commencing at inception remain open for examination by the IRS, where applicable.
Effective January 1, 2018, the U.S. Congress enacted the “Tax Jobs and Cuts Act” which, among other things, reduced the maximum corporate tax rate to 21%. There is no impact on deferred tax asset valuations related to this change due to the fact that the Company’s operations primarily reside in Canada.
| F-21 |
| Table of Contents |
DLT RESOLUTION, INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 13 – Discontinued Operations
Please see note through18 on the subsequent events regarding the items that happened after December 31, 2018. Due to the subsequent events the Company has completely phased out of A.J.D Data Services, Ltd. The assets and liabilities associated with the business are displayed as assets and liabilities held for sale as of December 31, 2018. They are listed as assets and liabilities held for sale due dateto the fact that the company divested itself of all investment in A.J.D. Data Services besides 10% interest on January 14, 2019 for a note receivable of $329,815 (CAD 450,000). As at December 31, 2018, value of the assets and liabilities has been presented at their net realizable value considering the value of note receivable. Additionally, the revenues and costs associated with this business are displayed as shown below.a loss from discontinued operations for the year ended December 31, 2018.
Total assets and liabilities included in discontinued operations were as follows:
Assets from Discontinued Operations: |
| December 31, |
| |
|
| 2018 |
| |
Cash |
|
| 30,954 |
|
Accounts receivable |
|
| 166,134 |
|
Allowance for doubtful accounts |
|
| (141,280 | ) |
Equipment, net of accumulated depreciation |
|
| 17,678 |
|
Intangible assets, net of accumulated amortization |
|
| 394,041 |
|
Goodwill |
|
| 189,208 |
|
Total assets from discontinued operations |
| $ | 656,735 |
|
|
|
|
|
|
Liabilities from Discontinued Operations: |
|
|
|
|
Accounts payable and accrued liabilities |
|
| 144,185 |
|
Related party payables |
|
| 1,942 |
|
Total liabilities from discontinued operations |
| $ | 146,127 |
|
The accounts payable and accrued liabilities of discontinued operations stated above include a HST / GST liability of $42,807 and payroll tax liability of $76,761 payable to Canada Revenue Agency. Further, the Company has not filed its HST / GST returns for the year ended December 31, 2018.
Net loss from discontinued operations for the year ended December 31, 2018 were comprised of the following components:
Net loss from discontinued operations |
| December 31, |
| |
|
| 2018 |
| |
Net sales |
| $ | 554,351 |
|
Cost of sales |
|
| - |
|
Gross profit |
|
| 554,351 |
|
|
|
|
|
|
Operating expenses |
|
|
|
|
General and administrative |
|
| 700,472 |
|
Professional fees |
|
| 74,494 |
|
Total operating expenses |
|
| 774,966 |
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
Interest expense |
|
| (20 | ) |
Interest income |
|
| 370 |
|
Loss on discontinued operations |
|
| 103,116 |
|
Total other income (expense) |
|
| 103,466 |
|
|
|
|
|
|
Net loss from discontinued operations |
| $ | (117,148 | ) |
| F-22 |
| Table of Contents |
DLT RESOLUTION INC.
(FORMERLY HEMCARE HEALTH SERVICES INC.)
Notes to Consolidated Financial Statements
December 31, 2018 and 2017
Note 14 – Concentrations of revenue
The Company receives more than 23% of its revenue from five major customers. The Company is endeavoring to acquire more customers and has been successful in the current year doing so.
Note 15 – Commitments and contingencies
On August 4, 2018 DLT Resolution Inc. (“DLT”) was served with a statement of claim from a minority shareholder and former officer of its subsidiary A.J.D. Data Services Ltd. (“AJD”). This is an action commenced by Peter Darbyson (“Peter”) and Beverly Darbyson (“Beverly”) as against DLT and AJD. The action may be broken down into two broad components: (a) an oppression action in which Peter and Beverly seek damages in an undisclosed amount for defamation, damages for mental anxiety and distress and damages for fraud, conspiracy, conversion and unjust enrichment together with aggravated in punitive damages, also in an undisclosed amount. In addition, Peter and Beverly seek certain relief pursuant to Business Corporations Acts of both Ontario and Canada; (b) a wrongful dismissal action in which Peter (but not Beverly) seeks $650,000 damages for wrongful termination breach of contract and related matters.
Peter made an assignment in bankruptcy in January 2019. Thus, any claim by him was automatically stayed. Also, the oppression action arises as a result of an Agreement and Plan of Reorganization between the parties which contain a jurisdiction clause whereby any issues arising out of the agreement are to be governed by and in the jurisdiction of the state of West Virginia, USA. DLT and AJD have advised Peter and Beverly that they intend to move to have the oppression action stayed as a result of the jurisdiction clause. In response, Peter and Beverly initially advised that they were prepared to abandon the oppression portions of the claim and proceed only on Peter’s wrongful dismissal portion of the claim. Unfortunately – for them – this was prior to the bankruptcy of Peter. In the end result, Peter’s action in its entirety was stayed and Beverly’s action very well be stayed should she wish to proceed further.
As at September 05, 2019, the parties to the litigation have agreed to a settlement in principal.
Note 16 – Intangible assets
The Company capitalizes software development costs in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 985-20. Non-compete, customer relationships, website and the domain and trade name are capitalized after useful lives based on prior experience in the telecom industry. Gross capitalized intangible assets totaled $549,226. Related amortization expense, included in general and administrative expenses, totaled $88,735 and $3,056 for the years ended December 31, 2018 and 2017, respectively.
Estimated future amortization expense totals as follows:
Year ended December 31, |
|
|
| |
2019 |
| $ | 104,418 |
|
2020 |
|
| 101,362 |
|
2021 |
|
| 64,751 |
|
2022 |
|
| 64,751 |
|
2023 |
|
| 64,751 |
|
2024 |
|
| 64,751 |
|
Thereafter |
|
| 16,275 |
|
Total |
| $ | 481,059 |
|
Note 17 – Accrued liabilities and payables
During the year ended December 31, 2016,2018, the Company entered into a convertible notehas written back the Accounts payable with an unrelated party resulting in net cash proceedsof $9,072 due to the Company totaling $16,500. The note is convertible into common stockstatute of limitation. Further, accrued liabilities of the Company at the option of the noteholder at a rate of $0.01 per share. The Company measured the value of the beneficial conversion feature of the note and recorded a discount equal to the face value of the note on the date of issuance. The discount will be recognized ratably over the life of the note through the due date as shown below.
During the year endedat December 31, 2016, the Company received2018 include a $600 loan from an unrelated party. The loan carries interest at 6% annually and is due on demand. There is not an executed agreement in place for the note.
A summaryHST / GST liability of the outstanding convertible and non-convertible notes payable as of December 31, follows:$10,402 relating to DLT Resolution Corp.
Due Date Principal Discount Net Value Noteholder 1 9/1/2016 Noteholder 1 6/2/2017 Noteholder 1 On Demand Total $ 14,200 $ - $ 14,200 16,500 (6,916 ) 9,584 600 - 600 $ 31,300 $ (6,916 ) $ 24,384
Note 918 – Subsequent Eventsevents
As reportedOn January 14, 2019 DLT Resolution Inc. (”The Company”) sold 70 of the 80 shares it purchased in A.J.D. Data Services Ltd. on January 21, 2018. On closing The Company received a $329,815 (CAD 450,000) 3 year note with monthly payments throughout the term of the note. The Company will continue to hold a 10% interest in AJD Data. Till date the Company has not received principal payment as per the agreed payment schedule of the said note receivable.
On March 29, 2019, DLT Resolution Corp. and DLT Resolution Inc. was served with a Statement of Claim ats 300-306 Town Centre Boulevard Limited Partnership/Court File No. CV-19-00617228-000 (Toronto) for unpaid rent and lost revenue related to the premises. In this action, the Plaintiff has claimed damages against the Defendants DLT Resolution Corp. and DLT Resolution Inc. in the Company’s 8-Kamount of $567,385.13 for an alleged breach of lease. The Plaintiff has claimed damages against the Defendant DLT Resolution Inc. in the amount of $567,385.13 for allegedly wrongfully inducing a breach of lease and tortious interference with contractual relations. The Plaintiff has further claimed damages against the Defendant DLT Resolution Inc. in the amount of $567,385.13 for allegedly oppressive conduct under the Ontario Business Corporations Act. The Plaintiff has further claimed compensation for its legal costs and for pre-judgment interest. The Company filed a statement of Defense citing, amongst other things, that it has never entered into any agreement with the landlord, nor guaranteed any such liability. The Defendants DLT Resolution Corp. and DLT Resolution Inc. intend to contest the claim vigorously. There is no intention to make a settlement offer nor have instructions been received to make a settlement offer at this juncture. Since the statement of defense was delivered on March 8, 2017, on January 31, 2017,16 May 2019, the Company reached a settlement agreementhad no further communication from counsel for the Plaintiff nor have any steps been taken to have 71,140,000 sharesmove the litigation forward. Although there can be no assurance of its common stock returned for cancellation and rescission. The agreement also cancelled approximately $30,000 in the Company’s debtability to dismiss the claim, management feels the claim is without merit and interest related to two alleged Convertible Promissory Notes signed by the Company's previous Chief Executive Officer. is confident it will receive a ruling in its favor.
Also on January 31, 2017,On February 28, 2019, the Company reached an agreement with its 9% Secured Promissory Note holder to retire $250,000 of outstanding principal and interest by way ofreceived a Subscription for 50,000 CDN. On March 29, 2019, the issuance of 12,500,000 common shares of the Company. As part of the agreement the note maturity date was extended to January 26, 2018Company received a loan from a shareholder for the approximate $50,000 balance.
25,000 USD
|
| F-23 |
| Table of Contents |