UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172020
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission file number: 001-35902
BLUE LINE PROTECTION GROUP, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 20-5543728 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
5765 Logan St. Denver, CO | 80216 | |
| (Address of principal executive offices) | (Zip Code) |
| (800) 844-5576 | |
( | |
| N/A | |
| (Former name, former address and former fiscal year, if changed since last report) | |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ [X] No ☐
Indicate by a checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date 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 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 definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer”, "smaller“smaller reporting company"company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer | |||
| Non-accelerated filer | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ [ ] No ☑
As of September 30, 2017,February 15, 2021, the registrant had 128,348,026822,357,428 outstanding shares of common stock.
1
The information in this report contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, ("(“the Exchange Act"Act”), which are subject to the "safe harbor"“safe harbor” created by those sections. The words "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "will," "should," "could," "predicts," "potential," "continue," "would"“anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “should,” “could,” “predicts,” “potential,” “continue,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. All forward-looking statements in this Form 10-Q are made based on our current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, you should specifically consider various factors, uncertainties and risks that could affect our future results or operations. These factors, uncertainties and risks may cause our actual results to differ materially from any forward-looking statement set forth in this Form 10-Q. You should carefully consider these risk and uncertainties described and other information contained in the reports we file with or furnish to the SEC before making any investment decision with respect to our securities. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.
| 2 |
TABLE OF CONTENTS
| 3 |
| BLUE LINE PROTECTION GROUP, INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (Unaudited) | ||||||||
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Accounts receivable, net | $ | 204,691 | $ | 133,698 | ||||
| Prepaid expenses and deposits | 61,171 | 85,888 | ||||||
| Total current assets | 265,862 | 219,586 | ||||||
| Fixed assets: | ||||||||
| Machinery and equipment, net | 98,698 | 132,887 | ||||||
| Fixed assets of discontinued operations | 2,782 | 2,782 | ||||||
| Total fixed assets | 101,480 | 135,669 | ||||||
| Total assets | 367,342 | $ | 355,255 | |||||
| Liabilities and Stockholders' Deficit | ||||||||
| Current liabilities: | ||||||||
| Cash overdraft | $ | 107,140 | $ | 30,462 | ||||
| Accounts payable and accrued liabilities | 544,001 | 416,573 | ||||||
| Notes payable, net of unamortized discount | 151,890 | 185,000 | ||||||
| Notes payable - related parties | 385,846 | 385,846 | ||||||
| Convertible notes payable, net of unamortized discount | 249,000 | - | ||||||
| Convertible notes payable - related parties, net of unamortized discount | 1,039,876 | 610,000 | ||||||
| Current portion of long-term debt | 4,215 | 4,137 | ||||||
| Current liabilities of discontinued operations | - | 1,335 | ||||||
| Total current liabilities | 2,481,968 | 1,633,353 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt | 6,518 | 8,664 | ||||||
| Total current liabilities | 6,518 | 8,664 | ||||||
| Total liabilities | 2,488,486 | 1,642,017 | ||||||
| Stockholders' deficit: | ||||||||
| Preferred Stock, $0.001 par value, 100,000,000 shares authorized, | ||||||||
| 20,000,000 shares issued and outstanding as of September 30, 2017 and | ||||||||
| December 31, 2016, respectively | 20,000 | 20,000 | ||||||
| Common Stock, $0.001 par value, 1,400,000,000 shares authorized, | ||||||||
| 128,348,026 and 127,348,026 issued and outstanding as of | ||||||||
| September 30, 2017 and December 31, 2016, respectively | 128,348 | 127,348 | ||||||
| Common Stock, owed but not issued, 12,923 shares and 12,923 shares | ||||||||
| as of September 30, 2017 and December 31, 2016, respectively | 13 | 13 | ||||||
| Additional paid-in capital | 5,685,092 | 5,537,667 | ||||||
| Accumulated deficit | (7,954,597 | ) | (6,971,790 | ) | ||||
| Total stockholders' deficit | (2,121,144 | ) | (1,286,762 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 367,342 | $ | 355,255 | ||||
CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| (unaudited) | (audited) | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and equivalents | $ | 308,258 | $ | 45,113 | ||||
| Accounts receivable | 341,000 | 336,840 | ||||||
| Prepaid expenses and deposits | 11,980 | 11,980 | ||||||
| Total current assets | 661,238 | 393,933 | ||||||
| Fixed assets: | ||||||||
| Right to use assets | 773,975 | 859,426 | ||||||
| Machinery and equipment, net et, net of accumulated depreciation of $418,184 and $325,285, respectively | 315,485 | 383,414 | ||||||
| Security Deposit | 32,158 | 32,158 | ||||||
| Fixed assets of discontinued operations | 2,782 | 2,782 | ||||||
| Total fixed assets | 1,124,400 | 1,277,780 | ||||||
| Total assets | 1,785,638 | 1,671,713 | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 1,017,986 | $ | 1,052,275 | ||||
| Financed lease liabilities | 60,914 | 88,712 | ||||||
| Notes payable | 145,000 | 185,000 | ||||||
| Notes payable - related parties | 773,273 | 726,847 | ||||||
| Convertible notes payable, net of unamortized discount | 169,218 | 172,198 | ||||||
| Convertible notes payable - related parties, net of unamortized discount | 1,830,217 | 1,821,507 | ||||||
| Current portion of operating lease obligation | 120,151 | 114,653 | ||||||
| Derivative liabilities | 1,555,892 | 1,170,060 | ||||||
| Total current liabilities | 5,672,651 | 5,331,252 | ||||||
| Long-term liabilities: | ||||||||
| Operating lease liability-long term | 698,228 | 785,802 | ||||||
| Total current liabilities | 698,228 | 785,802 | ||||||
| Total liabilities | 6,370,879 | 6,117,054 | ||||||
| Stockholders’ deficit: | ||||||||
| Preferred Stock, $0.001 par value, 100,000,000 shares authorized, 20,000,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively | 20,000 | 20,000 | ||||||
| Common Stock, $0.001 par value, 1,400,000,000 shares authorized, 822,357,428 and 793,357,428 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively | 822,360 | 793,360 | ||||||
| Common Stock, owed but not issued, 12,923 shares and 12,923 shares as of September 30, 2020 and December 31, 2019, respectively | 13 | 13 | ||||||
| Additional paid-in capital | 7,217,335 | 7,228,528 | ||||||
| Accumulated deficit | (12,644,949 | ) | (12,487,242 | ) | ||||
| Total stockholders’ deficit | (4,585,241 | ) | (4,445,341 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 1,785,638 | $ | 1,671,713 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-1 |
| BLUE LINE PROTECTION GROUP, INC. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| For the three months ended | For the nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenue, net | $ | 1,007,687 | $ | 728,238 | $ | 2,830,789 | $ | 2,099,019 | ||||||||
| Cost of revenue | (763,117 | ) | (620,259 | ) | (2,165,374 | ) | (1,793,254 | ) | ||||||||
| Gross profit | 244,570 | 107,979 | 665,415 | 305,765 | ||||||||||||
| Expenses: | ||||||||||||||||
| Advertising | 2,663 | 1,933 | 7,209 | 9,156 | ||||||||||||
| Depreciation | 11,801 | 24,724 | 35,779 | 51,105 | ||||||||||||
| General and administrative expenses | 511,206 | 403,826 | 1,442,065 | 1,286,468 | ||||||||||||
| Total expenses | 525,670 | 430,483 | 1,485,053 | 1,346,729 | ||||||||||||
| Operating loss | (281,100 | ) | (322,504 | ) | (819,638 | ) | (1,040,964 | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
| Other income | - | - | 72,890 | - | ||||||||||||
| Interest expense | (135,533 | ) | (123,254 | ) | (236,059 | ) | (336,015 | ) | ||||||||
| Total other income (expenses) | (135,533 | ) | (123,254 | ) | (163,169 | ) | (336,015 | ) | ||||||||
| Net loss | (416,633 | ) | (445,758 | ) | (982,807 | ) | (1,376,979 | ) | ||||||||
| Deemed dividend on Series A convertible preferred stock | - | - | - | (114,229 | ) | |||||||||||
| Net loss attributable to common stockholders | $ | (416,633 | ) | $ | (445,758 | ) | $ | (982,807 | ) | $ | (1,491,208 | ) | ||||
| Net loss per share, basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
| Weighted average number of | ||||||||||||||||
| common shares outstanding, basic and diluted | 128,011,069 | 126,348,026 | 127,571,469 | 126,231,238 | ||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the three months ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenue | $ | 1,087,997 | $ | 1,047,162 | $ | 3,087,004 | $ | 3,019,833 | ||||||||
| Cost of revenue | (286,120 | ) | (515,169 | ) | (908,918 | ) | (1,572,973 | ) | ||||||||
| Gross profit | 801,877 | 531,993 | 2,178,086 | 1,446,860 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | 524,671 | 590,770 | 1,613,748 | 1,745,828 | ||||||||||||
| Total expenses | 524,671 | 590,770 | 1,613,748 | 1,745,828 | ||||||||||||
| Operating Income (Loss) | 277,206 | (58,777 | ) | 564,338 | (298,968 | ) | ||||||||||
| Other income (expenses): | ||||||||||||||||
| - | - | |||||||||||||||
| Loss on conversion | - | (42,985 | ) | - | (95,447 | ) | ||||||||||
| Gain on settlement of accounts payable | - | - | 4,500 | - | ||||||||||||
| Interest expnese | (110,722 | ) | (81,875 | ) | (326,386 | ) | (744,677 | ) | ||||||||
| Income / (Loss) on derivative | (135,389 | ) | (267,204 | ) | (400,159 | ) | (244,513 | ) | ||||||||
| Total other expenses | (246,111 | ) | (392,064 | ) | (722,045 | ) | (1,084,637 | ) | ||||||||
| Net income / (loss) | $ | 31,095 | $ | (450,841 | ) | $ | (157,707 | ) | $ | (1,383,605 | ) | |||||
| Net loss per common share: Basic | $ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||||
| Diluted | $ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||||
| Weighted average number of common shares outstanding- Basic | 795,754,819 | 639,876,004 | 794,162,392 | 522,696,901 | ||||||||||||
| Weighted average number of common shares outstanding- Diluted | 4,746,113,704 | 639,876,004 | 794,162,392 | 522,696,901 | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
| BLUE LINE PROTECTION GROUP, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Unaudited) | ||||||||
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2017 | 2016 | |||||||
| Operating activities | ||||||||
| Net loss | $ | (982,807 | ) | $ | (1,376,979 | ) | ||
| Adjustments to reconcile net loss to | ||||||||
| net cash used in operating activities: | ||||||||
| Depreciation | 35,779 | 51,105 | ||||||
| Stock-based compensation expense | 77,025 | 85,006 | ||||||
| Amortization of discounts on note payable | 68,358 | 210,406 | ||||||
| Penalty interest | 38,750 | 71,684 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease / (increase) in accounts receivable | 381 | (40,681 | ) | |||||
| Increase in accrued accounts receivable | (71,374 | ) | ||||||
| Decrease in deposits and prepaid expenses | 24,717 | (49,517 | ) | |||||
| Increase in accounts payable and accrued liabilities | 127,428 | 19,473 | ||||||
| Discontined operations accounts payable and accrued liabilities | (1,335 | ) | - | |||||
| Net cash (used) in operating activities | (683,078 | ) | (1,029,503 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of fixed assets | (1,590 | ) | (502,702 | ) | ||||
| Net cash (used) in investing activities | (1,590 | ) | (502,702 | ) | ||||
| Financing activities | ||||||||
| Cash overdraft | 76,678 | 165,952 | ||||||
| Proceeds from notes payable - related party | 332,764 | 307,500 | ||||||
| Repayments from notes payable - related party | (332,764 | ) | (135,000 | ) | ||||
| Proceeds from convertible note - related party, net of original issue discount | 460,000 | 95,000 | ||||||
| Proceeds from notes payable | 113,700 | 532,360 | ||||||
| Repayment of notes payable | (164,278 | ) | (309,812 | ) | ||||
| Proceeds from convertible note, net of original issue discount | 365,500 | 157,750 | ||||||
| Repayment of convertible note | (125,000 | ) | (168,000 | ) | ||||
| Penalty payment | (38,750 | ) | (71,684 | ) | ||||
| Payments on auto loan | (3,182 | ) | (3,072 | ) | ||||
| Sale of preferred stock, net of issuance costs | - | 945,000 | ||||||
| Net cash provided by financing activities | 684,668 | 1,515,994 | ||||||
| Net increase in cash | - | (16,211 | ) | |||||
| Cash - beginning | - | 16,211 | ||||||
| Cash - ending | $ | - | $ | - | ||||
| Supplemental disclosures: | ||||||||
| Interest paid | $ | 54,477 | $ | 27,400 | ||||
| Income taxes paid | $ | - | $ | - | ||||
| Non-cash transactions: | ||||||||
| Debt discount due to beneficial conversion feature | $ | 71,400 | $ | 2,240 | ||||
| Interest capitalized as construction in progress | $ | - | $ | 24,243 | ||||
| Deemed dividend on Series A convertible preferred stock | $ | - | $ | 114,229 | ||||
BLUE LINE PROTECTION GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| For the Nine months ended | ||||||||
| September 30, | ||||||||
| 2020 | 2019 | |||||||
| Operating activities | ||||||||
Net loss | $ | (157,707 | ) | $ | (1,383,605 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 92,899 | 97,882 | ||||||
| Amortization of discounts on notes payable | 8,710 | 419,323 | ||||||
| Amortization of right to use | 85,451 | - | ||||||
| Loan fees | 10,665 | 75,000 | ||||||
| Noncash operating lease expense | - | 195,299 | ||||||
| Gain on settelement of accounts payable | (4,500 | ) | - | |||||
| Change in fair value of derivative liabilities | 400,159 | 244,513 | ||||||
| Excess derivative | - | 17,079 | ||||||
| Loss on conversion | 95,447 | |||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) / decrease in accounts receivable | (4,160 | ) | 8,682 | |||||
| Decrease in deposits and prepaid expenses | - | 9,851 | ||||||
| Increase in other assets | - | 6,800 | ||||||
| (Increase) / decrease in accounts payable and accrued liabilities | 32,711 | (4,498 | ) | |||||
| Decrease in lease obligations | (82,076 | ) | (155,549 | ) | ||||
| Net cash provided by / (used in) operating activities | 382,152 | (373,776 | ) | |||||
| Cash flows from investing activities | ||||||||
| Purchase of fixed assets | (24,970 | ) | (86,602 | ) | ||||
Net cash used in investing activities | (24,970 | ) | (86,602 | ) | ||||
| Financing activities | ||||||||
| Proceeds from notes payable - related party | 24,000 | 133,500 | ||||||
| Proceeds from notes payable | - | 200,317 | ||||||
| Repayments from notes payable - related party | (90,239 | ) | (64,500 | ) | ||||
| Repayments of convertible notes payable | - | (75,000 | ) | |||||
| Proceeds from convertible notes payable - related party | - | 300,000 | ||||||
| Payments on notes payable | (27,798 | ) | (30,383 | ) | ||||
Net cash provided by / (used in) financing activities | (94,037 | ) | 463,934 | |||||
| Net increase in cash | 263,145 | 3,556 | ||||||
| Cash - beginning | 45,113 | 15,862 | ||||||
| Cash - ending | $ | 308,258 | $ | 19,418 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Interest paid | $ | - | $ | 5,418 | ||||
| Income taxes paid | $ | - | $ | - | ||||
| Debt discount due to derivative liability | $ | - | $ | - | ||||
| Non-cash investing and financing activities: | ||||||||
| Debt discount due to derivative liability | $ | - | $ | 354,093 | ||||
| Common stock issued for conversion of debt and interest | $ | 3,480 | $ | 150,412 | ||||
| Derivative resolution | $ | 14,327 | $ | 264,588 | ||||
| Fixed assets purchased with notes payable | $ | - | $ | 34,354 | ||||
| Adoption of lease standard ASC 842 | $ | - | $ | 1,082,241 | ||||
| Accounts payable converted to notes payable –related party | $ | 62,000 | $ | - | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-3 |
| BLUE LINE PROTECTION GROUP, INC. |
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT |
| FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 |
| (unaudited) |
| Additional | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Stock | Accumulated | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Payable | Deficit | Deficit | |||||||||||||||||||||||||
| Balance, December 31, 2018 | 20,000,000 | $ | 20,000 | $ | 368,468,701 | $ | 368,469 | $ | 7,107,400 | $ | 13 | $ | (10,878,959 | ) | $ | (3,383,077 | ) | |||||||||||||||
| Common stock issued for services | - | - | - | - | - | |||||||||||||||||||||||||||
| Derivative resolution | - | - | - | - | 264,588 | - | - | 264,588 | ||||||||||||||||||||||||
| Common stock issued for conversion of debt and accrued interest | - | - | 352,992,838 | 352,995 | (107,136 | ) | - | - | 245,859 | |||||||||||||||||||||||
| Net loss for the six months ended June 30, 2019 | - | - | - | - | - | - | (1,383,605 | ) | (1,383,605 | ) | ||||||||||||||||||||||
| Balance, September 30, 2019 | 20,000,000 | $ | 20,000 | $ | 721,461,539 | $ | 721,464 | $ | 7,264,852 | $ | 13 | $ | (12,262,564 | ) | $ | (4,256,235 | ) | |||||||||||||||
| Balance, December 31, 2019 | 20,000,000 | $ | 20,000 | $ | 793,357,428 | $ | 793,360 | $ | 7,228,528 | $ | 13 | $ | (12,487,242 | ) | $ | (4,445,341 | ) | |||||||||||||||
| Common stock issued for conversion of debt and accrued interest | - | - | 29,000,000 | 29,000 | (25,520 | ) | - | - | 3,480 | |||||||||||||||||||||||
| Derivative resolution | - | - | - | - | 14,327 | - | - | 14,327 | ||||||||||||||||||||||||
| Net loss for the Nine months ended September 30, 2020 | - | - | - | - | - | - | (157,707 | ) | (157,707 | ) | ||||||||||||||||||||||
| Balance, September 30, 2020 | 20,000,000 | $ | 20,000 | $ | 822,357,428 | $ | 822,360 | $ | 7,217,335 | $ | 13 | $ | (12,644,949 | ) | $ | (4,585,241 | ) | |||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
Notes to Unaudited Consolidated Financial Statements
Note 1 – History and organization of the company
The Company was originally organized on September 11, 2006 (Date of Inception) under the laws of the State of Nevada, as The Engraving Masters, Inc. The Company was authorized to issue up to 100,000,000 shares of its common stock and 100,000,000 shares of preferred stock, each with a par value of $0.001 per share.
On March 14, 2014, the Company acquired Blue Line Protection Group, Inc., a Colorado corporation formed in February 2014 ("(“Blue Line Colorado"Colorado”), as a wholly-owned subsidiary of the Company. Blue Line Colorado provides protection, compliance, and financial services to the lawful cannabis industry.
On May 2, 2014, the Company changed its name from The Engraving Masters, Inc. to Blue Line Protection Group, Inc. ("BLPG"(“BLPG”)
On May 6, 2014, the Company effected a forward stock split and a pro-rata increase in its authorized common stock on a basis of 14-to-1, whereby each shareholder received 14 newly issued shares of common stock for each 1 share held. Additionally, the authorized capital of the Company concurrently increased to 1,400,000,000 shares of common stock. All references to share and per share amounts in the consolidated financial statements and accompanying notes thereto have been retroactively restated to reflect the forward stock split.
The Company provides armed protection, logistics, and compliance services for businesses engaged in the legal cannabis industry. The Company offers asset logistic services, such as armored transportation service; security services, including shipment protection, money escorts, security monitoring, asset vaulting, VIP and dignitary protection, financial services, such as handling transportation and storage of currency; training; and compliance services.
Note 2 – Accounting policies and procedures
Interim financial statements
The unaudited interim consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
In the opinion of management, these statements reflect all adjustments, consistingall of which are of a normal recurring adjustments,nature, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 20162019 and notes thereto included in the Company'sCompany’s annual report on Form 10-K. The Company follows the same accounting policies in the preparation of interim reports.
Results of operations for the interim periods are not indicative of annual results.
6
For the nine months ended September 30, 2020 and 2019, the consolidated financial statements include the accounts of Blue Line Protection Group, Inc. (formerly The Engraving Masters, Inc.), Blue Line Advisory Services, Inc. (a Nevada corporation; "BLAS"“BLAS”), Blue Line Capital, Inc. (a Colorado corporation; "Blue“Blue Line Capital"Capital”), Blue Line Protection Group (California), Inc. (a California corporation; "Blue“Blue Line California"California”), Blue Line Colorado, Blue Line Protection Group Illinois, Inc. (an Illinois corporation; "Blue“Blue Line Illinois"Illinois”), BLPG, Inc. (a Nevada corporation; "Blue“Blue Line Nevada"Nevada”), Blue Line Protection Group (Washington), Inc. (a Washington corporation; "Blue“Blue Line Washington"Washington”). All significant intercompany balances and transactions have been eliminated. BLPG and its subsidiaries are collectively referred herein to as the "Company."“Company.”
| F-5 |
Basis of presentation
The financial statements present the balance sheets, statements of operations, stockholder'sstockholder’s equity (deficit) and cash flows of the Company. The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.
The Company has adopted December 31 as its fiscal year end.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
The Company maintains a cash balance in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of September 30, 20172020 and December 31, 2016.
Accounts receivable
Accounts receivable are stated at the amount the Company expects to collect from outstanding balances and do not bear interest. The Company provides for probable uncollectible amounts through an allowance for doubtful accounts, if an allowance is deemed necessary. The allowance for doubtful accounts is the Company'sCompany’s best estimate of the amount of probable credit losses in the Company'sCompany’s existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. On a periodic basis, management evaluates its accounts receivable and determines the requirement for an allowance for doubtful accounts based on its assessment of the current and collectible status of individual accounts with past due balances over 90 days. Account balances are charged against the allowance after all collection efforts have been exhausted and the potential for recovery is considered remote.
Allowance for uncollectible accounts
The Company estimates losses on receivables based on known troubled accounts, if any, and historical experience of losses incurred. There was no allowance for doubtful customer receivables at September 30, 20172020 and December 31, 2016.
7
Property and equipment is recorded at cost and capitalized from the initial date of service. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:
| Automotive Vehicles | 5 years | |
| Furniture and Equipment | 7 years | |
| Buildings and Improvements | 15 years |
| F-6 |
The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment there was no impairment as September 30, 20172020 and December 31, 2016.
Impairment of long-lived assets
The Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, "Accounting“Accounting for the Impairment or Disposal of Long-Lived Assets."” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost or carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset'sasset’s carrying value and its fair value or disposable value. As of September 30, 20172020 and December 31, 2016,2019, the Company determined that none of its long-term assets were impaired.
Concentration of business and credit risk
The Company has no significant off-balance sheet riskrisks such as foreign exchange contracts, option contracts or other foreign hedging arrangements. The Company'sCompany’s financial instruments that are exposed to concentration of credit risks consist primarily of cash. The Company maintains its cash in bank accounts, which may at times, exceed federally insured limits.
The Company had 5two major customers which generated approximately 64% (25%31%, 14%, 9%, 8%(17% and 8%14%) of total revenue in the nine months ended September 30, 2017.
The Company had 5three major customers which generated approximately 63% (23%, 15%, 9%29% (13%, 9% and 7%) of total revenue in the nine months ended September 30, 2016.
Related party transactions
FASB ASC 850, "Related“Related Party Disclosures"Disclosures” requires companies to include in their financial statements disclosures of material related party transactions. The Company discloses all material related party transactions. Related parties are defined to include any principal owner, director or executive officer of the Company and any immediate family members of a principal owner, director or executive officer.
8
The carrying amounts reflected in the balance sheets for cash, accounts payable and related party payables approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.
As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The three levels of the fair value hierarchy are described below:
| Level 1: | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
| Level 2: | Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; |
| F-7 |
| Level 3: | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
The following table presents the derivative financial instruments, the Company’s only financial liabilities, measured and recorded at fair value on the Company’s consolidated balance sheet on a recurring basis, and their level within the fair value hierarchy as of September 30, 2020 and December 31, 2019:
September 30, 2020
| Amount | Level 1 | Level 2 | Level 3 | |||||||||||||
| Embedded conversion derivative liability | $ | 1,554,562 | $ | - | $ | - | $ | 1,554,562 | ||||||||
| Warrant derivative liabilities | $ | 1,330 | $ | - | $ | - | $ | 1,330 | ||||||||
| Total | $ | 1,555,892 | $ | - | $ | - | $ | 1,555,892 | ||||||||
December 31, 2019
| Amount | Level 1 | Level 2 | Level 3 | |||||||||||||
| Embedded conversion derivative liability | $ | 1,169,515 | $ | - | $ | - | $ | 1,169,515 | ||||||||
| Warrant derivative liabilities | $ | 545 | $ | - | $ | - | $ | 545 | ||||||||
| Total | $ | 1,170,060 | $ | - | $ | - | $ | 1,170,060 | ||||||||
The embedded conversion feature in the convertible debt instruments that the Company issued that became convertible qualified them as derivative instruments since the number of shares issuable under the notes are indeterminate based on guidance in FASB ASC 815, Derivatives and Hedging. These convertible notes tainted all other equity linked instruments including outstanding warrants and fixed rate convertible debt on the date that the instrument became convertible. The valuation of the derivative liability of the warrants was determined through the use of Black Scholes option-pricing model (See Note 8).
Revenue recognition
The Company recognizes revenue when alldelivery of the promised goods or services is transferred to its customers in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods or services. We determine revenue recognition through the following conditions are satisfied: (1) therefive steps:
| ● | Identify the contract with the customer; | |
| ● | Identify the performance obligations in the contract; | |
| ● | Determine the transaction price; | |
| ● | Allocate the transaction price to the performance obligations in the contract; and | |
| ● | Recognize revenue when, or as, the performance obligations are satisfied. | |
We generate substantially all our revenue from providing services to customers. The Company records revenue when the 5 steps above have been completed.
Effective January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Industry Topics of the Accounting Standards Codification. The updated guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers. The Company adopted the standard using the modified retrospective approach effective January 1, 2018.
| F-8 |
The Company adopted these standards at the beginning of the first quarter of fiscal 2018 using the modified retrospective method. The adoption of these standards did not have an impact on the Company’s Statements of Operations for the year ended December 31, 2018.
In general, the Company’s business segmentation is persuasive evidence of an arrangement; (2) the service has been providedaligned according to the customer; (3)nature and economic characteristics of each segment. Revenue is characterized by several lines of services and typically the amountpricing is fixed.
| Three months ended September 30, | ||||||||
| Revenue Breakdown By Streams | 2020 | 2019 | ||||||
| Service- Guards | $ | - | $ | 229,489 | ||||
| Services: Transport | 430,359 | 372,309 | ||||||
| Services: Currency Processing | 624,373 | 426,787 | ||||||
| Services: Compliance | 33,261 | 17,792 | ||||||
| Other | - | 785 | ||||||
| Total | $ | 1,087,997 | $ | 1,047,162 | ||||
| Nine months ended September 30, | ||||||||
| Revenue Breakdown By Streams | 2020 | 2019 | ||||||
| Service- Guards | $ | - | $ | 36,145 | ||||
| Services: Transport | 1,381,449 | 1,201,011 | ||||||
| Services: Currency Processing | 1,657,344 | 787,375 | ||||||
| Services: Compliance | 48,211 | 2,037 | ||||||
| Other | - | 993,265 | ||||||
| Total | $ | 3,087,004 | $ | 3,019,833 | ||||
As of fees to be paid byDecember 31, 2019 the customer is fixed or determinable; and (4) the collectionCompany discontinued its Service-Guards segment.
Gain on settlement of its fees is reasonably assured.
Represents a reimbursement$4,500 gain on settlement of $72,890 from its insurance company for damages caused by a hail storm during the nine months ended September 30, 2017.
Advertising costs
The Company expenses all costs of advertising as incurred. There were $2,663, $7,209 $1,933 and $9,156 in advertising costs for the three and nine months ended September 30, 2017 and 2016, respectively.
General and administrative expenses
The significant components of general and administrative expenses consist mainly of legalrent and professional feescompensation.
Share-Based Compensation
Share-based compensation expense is recorded as a result of stock options granted in return for services rendered. Previously, the share-based payment arrangements with employees were accounted for under ASC 718, while nonemployee share-based payments issued for goods and compensation.
| F-9 |
Cost of Revenue
The Company'sCompany’s cost of revenue primarily consists of labor, fuel costs and items purchased by the Company specifically purposed for the benefit of the Company's client.
Basic and Diluted Earnings per share
Net loss per share is provided in accordance with FASB ASC 260-10, "Earnings“Earnings per Share"Share”. Basic loss per share is computed by dividing losses available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
The following is a reconciliation of the numerator and denominator used in the basic and diluted earnings per share (“EPS”) calculations for the three and nine months September 30, 2020 and 2019.
| Three months September 30, | Three months September 30, | Nine months September 30, | Nine months September 30, | |||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net income (loss) | $ | 31,095 | $ | (450,841 | ) | $ | (175,707 | ) | $ | (1,383,605 | ) | |||||
| Denominator: | ||||||||||||||||
| Weighted-average shares of common stock | 795,754,819 | 639,876,004 | 794,162,392 | 522,696,901 | ||||||||||||
| Dilutive effect of stock warrants | 10,000,000 | - | - | - | ||||||||||||
| Dilutive effect of convertible instruments | 3,940,358,885 | - | - | - | ||||||||||||
| Diluted weighted-average of common stock | 4,746,113,704 | 639,876,004 | 794,162,392 | 522,696,901 | ||||||||||||
| Net loss per common share from: | ||||||||||||||||
| Basic | $ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||||
| Diluted | $ | 0.00 | $ | (0.000 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||||
Dividends
The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid or declared since inception.
Income Taxes
The Company follows FASB Codification Topic 740-10-25 (ASC 740-10-25) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
Recent Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee'slessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee'slessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will bewas effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently reviewingelected the provisionspractical expedient under ASU 2018-11 “Leases: Targeted Improvements” which allows the Company to apply the transition provision for Topic 842 at the Company’s adoption date instead of this ASUat the earliest comparative period presented in the financial statements. Therefore, the Company recognized and measured leases existing at January 1, 2019 but without retrospective application. Therefore, there was no impact recorded to determine if there will be any impact on our results of operations, cash flowsbeginning retained earnings or financial condition.
The Company evaluated all other recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations or cash flows of the Company.
Note 3 – Going concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has a net loss, of $982,807 for the nine months ended September30, 2017, accumulated deficit of $7,954,597 and had a working capital deficit of $2,216,106 as of September 30, 2017.2020. These conditions raise substantial doubt about the Company'sCompany’s ability to continue as a going concern.
| F-10 |
In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is significantly dependent upon its ability, and will continue to attempt, to secure additional equity and/or debt financing. There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These financial statements do not include any adjustments that might arise from this uncertainty.
Note 4 – Commitments and contingencies
Contingencies
On November 6, 2015, Daniel Sullivan sent a wage claim demand.demand to the Company. Mr. Sullivan purports to have had an Independent Contractor Agreement with the Company which provides he is entitled to certain compensation and to be reimbursed for Company expenses. The demand claims unpaid compensation in the amount of $8,055 and unreimbursed expenses in the amount of $154,409. The Company denies the agreement was ever signed. As of September 30, 2017 and December 31, 2016 the Company accrued a total of $88,968 contingent liabilities. If litigation is commenced the Company will attempt a reasonable out-of-court settlement and if such efforts are not successful, will defend the litigation.
Mile High Real Estate Group, an entity owned by Mr. Sullivan, sent correspondence to the Company stating the Mr. Sullivan and/or Mile High Real Estate loaned the Company either directly or directly to contractors, material suppliers or utilities for operating and building remodeling in the amount of $98,150. Counsel for Mr. Sullivan stated that he was still compiling information. The Company is investigating whether Mr. Sullivan and/or Mile High Real Estate Group ever made the alleged loans. If the alleged loan was actually made, theThe Company will seek an out-of-court settlement. Asdefend any claims of September 30, 2017 and December 31, 2016 the Company accrued a total of $98,150.
On April 14, 2016, the Company entered into an agreement with an unrelated third party to provide the Company with investor relations services. Upon signing the agreement, the Company paid the investor relations consultant $75,000 and agreed to issue the consultant 1,500,000 shares of its restricted common stock. The agreement requires the Company to pay the consultant an additional $75,000 prior to June 14, 2016. The Company cancelled the agreement and is of the opinion that the shares are not owed to the consultant. As of September 30, 20172020 and December 31, 20162019 there was no payable recorded.
During the nine months ended September 30, 2020 the Company entered intorecorded a sublease agreementgain of $4,500 for approximately 2,000 square feetsettlement of office space on a monthvendor payable.
Finance leases
On April 25, 2018, the Company recorded finance lease obligation for a leased a vehicle for $38,388. The Company made a down payment of $7,500 and agreed to month basis contingentmake 36 monthly payment of $1,015.78 including sales tax. The Company recognized this arrangement as a finance lease based on the lessor's masterdetermination that the lease exceeded 75% of the economic life of the underlying asset.
On August 16, 2018, the Company recorded finance lease obligation for a leased a vehicle for $58,476. The Company made a down payment of $20,000 and an additional $10,000 for delivery fees, taxes and its first month payment and agreed to make 36 monthly payments of $1,265.30, including sales tax. The Company recognized this arrangement as a finance lease based on the premises.determination that the lease exceeded 75% of the economic life of the underlying asset.
On August 16, 2018, the Company recorded finance lease obligation for a leased a vehicle for $58,476. The Company made a down payment of $20,000 and an additional $10,000 for delivery fees, taxes and its first month payment and agreed to make 36 monthly payments of $1,265.30, including sales tax. The Company recognized this arrangement as a finance lease amount adjusts yearlybased on the determination that the lease exceeded 75% of the economic life of the underlying asset.
| F-11 |
On March 1, 2019, the Company recorded finance lease obligation for a leased a vehicle for $64,354. The Company made a down payment of $30,000 which included delivery fees, taxes and its first month payment and agreed to make 36 monthly payments of $1,129.76, including sales tax. The Company recognized this arrangement as a finance lease based on the currentdetermination that the lease is $1,614 per month.
| Future minimum lease payments as of September 30, 2020: | ||||
| 2020 | $ | 28,316 | ||
| 2021 | 30,338 | |||
| 2022 and thereafter | 2,260 | |||
| Total minimum lease payments | $ | 60,914 | ||
Operating Leases
On October 27, 2016 the Company sold its building located at 5765 Logan Street Denver, Colorado to an unrelated third party for $1,400,000. The Company repaid the mortgage on the building in the amount of $677,681. After the sale, the Company leased the building from the purchaser of the property. The lease is for an initial term of ten years, with the Company having the option to extend the term of the lease for two additional five yearfive-year periods. The lease requires rental payments of $10,000 per month andwhich will increase 2% annually. The Company paid a $30,000 deposit at the inception of the lease
On May 29, 2018 the Company leased a building located at 4328 E. Magnolia Street, Phoenix, Arizona. The lease is for an initial term of one years, with the Company having the option to extend the term of the lease for additional four year periods. The lease requires rental payments of $3,880 per month which will increase 2% annually. The Company paid a $4,369 deposit at the inception of the lease.
On January 22, 2019 the Company leased a building located at 7490 Bridgewater Road, Huber Heights, Ohio the lease is for an initial term of 63 months. The lease requires rental payments of $3,200 per month and will increase to $3,400 between months 28 through 63. The Company paid a $3,200 deposit at the inception of the lease
The Company adopted ASC 842 and recorded right of use asset and operating lease liability of $1,082,241. The Company used 12% as incremental borrowing rate as is the average interest rate of the Company’s outstanding third party note. The lease agreement gives the Company the option to renew it for two additional 5 year terms but the Company did not consider it likely to exercise that option. Therefore, the Company did not include such amounts in its computations of the present value of remaining lease payment on the adoption date.
Supplemental balance sheet information related to leases is as follows:
September 30, 2020
| Operating Leases | Classification | September 30, 2020 | ||||
| Right-of-use assets | Operating right of use assets | $ | 773,975 | |||
| Current lease liabilities | Current operating lease liabilities | 120,151 | ||||
| Non-current lease liabilities | Long-term operating lease liabilities | 698,228 | ||||
| Total lease liabilities | $ | 818,379 | ||||
| F-12 |
Lease term and discount rate were as follows:
| September 30, 2020 | ||||
| Weighted average remaining lease term (years) | 4.50 | |||
| Weighted average discount rate | 12 | % | ||
The following summarizes lease expenses for the nine months ended September 30, 2020:
Finance lease expenses:
| Depreciation/amortization expense | $ | 87,423 | ||
| Interest on lease liabilities | 77,746 | |||
| Finance lease expense | $ | 165,169 |
Supplemental disclosures of cash flow information related to leases were as follows:
| September 30, 2020 | ||||
| Cash paid for operating lease liabilities | $ | 82,076 | ||
| Operating right of use assets obtained in exchange for operating lease liabilities | $ | - | ||
Maturities of lease liabilities were as follows as of September 30, 2020:
| Operating Leases | ||||
| 2020 | $ | 54,775 | ||
| 2021 | 222,067 | |||
| 2022 | 227,253 | |||
| 2023 | 199,098 | |||
| 2024 | 155,531 | |||
| 2025 | 141,302 | |||
| 2026 | 107,558 | |||
| Total | 1,107,584 | |||
| Less: Imputed interest | (289,205 | ) | ||
| Present value of lease liabilities | $ | 818,379 | ||
December 31, 2019
| Operating Leases | Classification | December 31, 2019 | ||||
| Right-of-use assets | Operating right of use assets | $ | 859,426 | |||
| Current lease liabilities | Current operating lease liabilities | 114,653 | ||||
| Non-current lease liabilities | Long-term operating lease liabilities | 785,802 | ||||
| Total lease liabilities | $ | 900,455 | ||||
Lease term and discount rate were as follows:
| December 31, 2019 | ||||
| Weighted average remaining lease term (years) | 5.26 | |||
| Weighted average discount rate | 12 | % | ||
| F-13 |
The following summarizes lease expenses for the year ended December 31, 2019:
Finance lease expenses:
| Depreciation/amortization expense | $ | 189,290 | ||
| Interest on lease liabilities | 6,009 | |||
| Finance lease expense | $ | 195,299 |
Supplemental disclosures of cash flow information related to leases were as follows:
| December 31, 2019 | ||||
| Cash paid for operating lease liabilities | $ | 155,549 | ||
| Operating right of use assets obtained in exchange for operating lease liabilities | $ | 1,082,241 | ||
Maturities of lease liabilities were as follows as of December 31, 2019:
| Operating Leases | ||||
| 2020 | $ | 216,587 | ||
| 2021 | 222,067 | |||
| 2022 | 227,253 | |||
| 2023 | 199,098 | |||
| 2024 | 155,531 | |||
| 2025 | 141,302 | |||
| 2026 | 107,558 | |||
| Total | 1,269,396 | |||
| Less: Imputed interest | (368,941 | ) | ||
| Present value of lease liabilities | $ | 900,455 | ||
12
Future minimum lease payments: | ||||
| 2017 | $ | 30,050 | ||
| 2018 | 122,604 | |||
| 2019 | 125,056 | |||
| 2020 | 127,557 | |||
| 2021 | 130,108 | |||
| 2022 and thereafter | 654,539 | |||
| Total minimum lease payments | $ | 1,189,914 | ||
Machinery and equipment consisted of the following at:
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Automotive vehicles | $ | 194,882 | $ | 194,882 | ||||
| Furniture and equipment | 54,904 | 53,314 | ||||||
| Fixed assets, total | 249,786 | 248,196 | ||||||
| Total : accumulated depreciation | (151,088 | ) | (115,309 | ) | ||||
| Fixed assets, net | $ | 98,698 | $ | 132,887 | ||||
| September 30, 2020 | December 31, 2019 | |||||||
| Automotive vehicles | $ | 398,614 | $ | 381,844 | ||||
| Furniture and equipment | 85,435 | 85,435 | ||||||
| Machinery and Equipment | 135,706 | 135,706 | ||||||
| Leasehold improvements | 113,914 | 105,714 | ||||||
| Fixed assets, total | 733,669 | 708,699 | ||||||
| Total : accumulated depreciation | (418,184 | ) | (325,285 | ) | ||||
| Fixed assets, net | $ | 315,485 | $ | 383,414 | ||||
Depreciation expense for the three and nine months ended September 30, 20172020 and 2016 totaled $11,801, $35,779, $24,7242019 were $32,359, $92,899, $33,400 and $51,105,$97,882, respectively.
Note 6 – Notes payable
Notes payable to non-related parties
During February 2015, the Company borrowed $50,000 from a non-affiliated person.non-related party. The loan iswas due and payable on April 6, 2015 and is now payable on demand with interest at 10% per annum. As of September 30, 20172020 and December 31, 2016,2019, the principal balance owed on this loan was $50,000 and $50,000, respectively. The note is currently past due.
| F-14 |
During April 2015, the Company borrowed $25,000 from a non-affiliated person.non-related party. The loan is due and payable May 1, 2015 with interest at 6% per year and has a 5% per month penalty upon default. As of September 30, 20172020 and December 31, 2016,2019, the principal balance owed on this loan was $25,000 and $25,000, respectively. The note is currently past due.
On January 5, 2016, the Company borrowed $10,000 from a non-affiliated person.non-related party. The loan was due and payable on January 5, 2017 and bore interest at 5% per annum.annum and has a 5% per month penalty upon default. The principal balance owed on this loan at September 30, 20172020 and December 31, 20162019 was $10,000 and $10,000, respectively. The note is currently past due.
On September 21, 2016,May 15, 2019 the Company borrowed $100,000 fromentered in a non-affiliated person.12% promissory loan with Helix Funding, LLC for the principle amount of $100,000. The loan was due and payablenote matures on December 21, 2016 and bore interest at 60% per year.November 1, 2019. The lender extended the loan and waived the default fee of 120%. The loan was repaid on February 15, 2017. The Company paid $5,000 in fees in connection with this loan in 2016. As of September 30, 2017 and December 31, 2016, the principal balance owed on this loan was $0 and $100,000, respectively.
Convertible notes payable to non-related party
On January 4,October 18, 2017, the Company borrowed $125,000$150,000 from an unrelated third party. The Company paid $15,250 of fees associated with the loan, which was recorded as discount and to be amortized over the term of the debt and was fully amortized as of December 31, 2018. The loan bears interest at a rate of 10% (default interest 24%) and has a maturity date of October 28, 2017July 16, 2018. The Holder has the option to convert the outstanding principal and bearsaccrued interest atinto common stock of the rateCompany. The conversion price is the lesser of 8% per year.(1) lowest trading price during the previous 25 days prior to the note agreement or (2) 50% lowest trading price during the 25 days prior to conversion. Covenants: The Borrower shall not, without the Holder’s consent, sell, lease or dispose of any significant portion of its assets outside the ordinary course of business. During the year ended December 31, 2018 the Company paid $150,000 to extend the maturity date until May 11, 2019. During the year ended December 31, 2019, the Company paid $75,000 in extension fees. The note was discounted for a derivative (see note 8 for details) and the discount of $134,750 is being amortized over the life of the note using the effective interest method which was fully amortized as of December 31, 2018. During the year ended December 31, 2019 the holder converted $39,478 of accrued interest into 217,882,455 shares of common stock resulting in a loss of $61,624. As of September 30, 2020 and December 31, 2019 the balance outstanding on the loan is $150,000.
On January 2, 2018 the Company borrowed $30,000 from an unrelated third party. The Company paid $2,000 of fees associated with the loan which was fullyand the Company amortized during the nine months ended September 30, 2017. If the$1,989 as of December 31, 2018. The loan is not paid when due, any unpaid amount will bearhas a maturity date of January 2, 2019 and bears interest at 22% per year.the rate of 12% (default interest lesser of 15% or maximum permitted by law). The Lender is entitled, at itsconversion Feature Convertible immediately after the issuance, the Holder has the option at any time after July 3, 2017, (180 days from date of the note) to convert all or any part of the outstanding and unpaid principal and accrued interest into common stock of the Company. The Conversion price is 55% of the lowest trading price during the 25 Trading Day periods prior to the Conversion. The note was discounted for a derivative (see note 8 for details) and the discount of $28,000 is being amortized over the life of the note using the effective interest method resulting in $27,847 of interest expense for the year ended December 31, 2018. On February 24, 2019, the remaining balance of the note payable in the amount of $9,373, fees of $500 and accrued interest of $2,625 were converted into 18,380,000 shares of common stock. During the Company's common stock at a price per share equal to 58% of the average of the five lowest trading prices for the 25 trading days immediately preceding the conversion date.
On April 13, 2017January 25, 2018 the Company borrowed $65,500$150,000 from an unrelated third party. The Company paid $7,500 of fees associated with the loan, which was recorded as discount and to be amortized over the term of the debt the Company amortized $6,986 as of December 31, 2018. The loan has a maturity date of January 25, 20182019 and bears interest at the rate of 8% per year. The Company paid $3,500 of fees associate with the loan, which was fully amortized during the nine months ended September 30, 2017. If the loan is not paid when due, any unpaid amount will bear interest at 21% per year. The Lender is entitled, at its option, at any time after October 10, 2017 to convert all or any part of the outstanding and unpaid principal and accrued interest into shares of the Company's common stock at a price per share equal to 58% of the average of the five lowest trading prices for the 25 trading days immediately preceding the conversion date. The note is not convertible as of September 30, 2017, therefore no derivatives were recorded. The balance outstanding on the note at September 30, 2017 is $65,500.
| F-15 |
On March 21, 2018, the Company borrowed $45,000 from an unrelated third party. The Company paid $4,500 of fees associated with the loan and had amortized $3,514 of the costs as of December 31, 2018. The note bears an interest rate: 12% (default interest lesser of 15% or maximum permitted by law) and matures on March 21, 2019. The conversion Feature Convertible immediately after the issuance, the Holder has the option to convert the outstanding principal and accrued interest into common stock of the Company. The Conversion price is 55% of the lowest trading price during the 25 Trading Day periods prior to the Conversion. Covenants: The Borrower shall not, convertible aswithout the Holder’s consent, sell, lease or dispose of any significant portion of its assets outside the ordinary course of business. The note was discounted for a derivative (see note 8 for details) and the discount of $40,500 is being amortized over the life of the note using the effective interest method resulting in $31,623 of interest expense for the year ended December 31, 2018. During the year ended December 31, 2019 $23,223 of principle and interest were converted into 84,160,250 shares of common stock resulting in a loss of $32,858. During the year ended December 31, 2019 the Company recorded amortization expense of $9,863. On September 18, 2020 Crown Bridge Partners, LLC converted notes payable in the principal amount of $2,980 and $500 of fees into 29,000,000 shares of common stock. Conversions were made per the terms of agreement. As of September 30, 2017, therefore no derivatives were recorded. The2020 and December 31, 2019 there was a balance outstandingremaining on the note atloan of $19,218.
During the nine months ended September 30, 2017 is $58,500.
During the nine months ended September 30, 2019, the Company recognized amortization expense of $1,511 from deferred financing cost and amortization expense of $18,790 of discount from derivative liabilities.
14
On July 31, 2014, the Company borrowed $98,150 from an entity controlled by an officer and shareholder of the Company. The loan is due and payable on demand and bears no interest. As of September 30, 20172020 and December 31, 2016,2019, the principal balance owed on this loan is $98,150 and $98,150, respectively.
As of December 31, 2014, a related party loaned the Company $10,000, in the form of cash and expenses paid on behalf of the Company. The loan is due and payable on demand and bears no interest. During the year ended December 31, 2015 the Company borrowed an additional $20,000. During the nine months ended September 30, 2017 the Company borrowed and additional $158,863 and repaid $158,863. As of September 30, 20172020 and December 31, 2016,2019, the principal balance owed on this loan was $30,000 and $30,000, respectively.
As of December 31, 2014, a related party loaned the Company $180,121, in the form of cash and expenses paid on behalf of the Company. The loan is due and payable on demand and bears no interest. The Company repaid $125,500 towards this note during 2015 and as of September 30, 20172020 and December 31, 2016;2019; the principal balance owed on this loan was $54,621 and $54,621, respectively.
During the year ended December 31, 2016,2018 the Company repaid $135,000$121,500 and borrowed an additional $135,000$184,500 from the same related party. During year ended December 31, 2019 the Company borrowed an additional $22,500 and repaid a total of $49,500. During the nine months ended September 30, 2020 the Company repaid $49,664 and borrowed an additional $24,000 from the same related party and reclassed $65,000 from accounts payable to a note payable. The Company recorded a loan of $10,665 on the transaction. As of September 30, 20172020 and December 31, 2016,2019, the principal balance owed on this loan was $30,000$77,001 and $30,000, respectively.
On July 7, 2016, the Company borrowed $73,000 from a related party. The loan was due and payable on July 7, 2017 and bore interest at 5% per annum. The principal balance owed on this loan at September 30, 2017 and December 31, 2016 was $73,000 and $73,000, respectively. The holder of the note has agreed to extend the default date of the note to MarchSeptember 30, 2018.
On August 8, 2016, the Company entered into ana promissory note with Hypur Inc., a Nevada Corporation, which is a related party, pursuant to which the Company to borrowborrowed $52,000. If an Event of Default remains uncured after 30 days Holder has the option to convert the outstanding principal balance and any accrued but unpaid interest, into unrestricted $0.001 par value common stock of the Borrower The loan was due and payable on August 10, 2017 and bore interest at 18% per annum. The principal balance owed on this loan at September 30, 201720120 and December 31, 20162019 was $52,000 and $52,000, respectively. The Note is currently in default at bears a default rate of interest of 24% per annum
| F-16 |
On September 20, 2016, the Company borrowed $47,500 from Hypur Inc., which is a related party. The loan is due and payable on December 20, 2016 and bears interest at 18% per annum. If an Event of Default remains uncured after 30 days Holder has the option to convert the outstanding principal balance and any accrued but unpaid interest, into unrestricted $0.001 par value common stock of the BorrowerBorrower. The principal balance owed on this loan at September 30, 20172020 and December 31, 20162019 was $47,500 and $47,500, respectively. The loan is currently past due and in default. The Note is currently in default at bears a default rate of interest of 24% per annum
On October 1, 2017 and so no derivative is required.
On November 21, 2018, the Company borrowed $70,000 from Hypur Inc., which is a related party. The loan is due and payable on February 19, 2019 and bears interest at 18% per annum. If an Event of Default remains uncured after 30 days Holder has the option to convert the outstanding principal balance and any accrued but unpaid interest, into unrestricted $0.001 par value common stock of the Borrower. Upon default the note bears a default rate of interest of 24% per annum as part of the default terms of this note. The principal balance owed on this loan at September 30, 2020 and December 31, 2019 was $70,000 and $70,000, respectively. The note was discounted for a derivative (see note 8 for details) and the discount of $55,830 is being amortized over the life of the note using the effective interest method resulting in $55,830 of interest expense for the year ended December 31, 2019. As of September 30, 2020 and December 31, 2019 the note is currently in default.
On November 26, 2018, the Company borrowed $75,000 from Hypur Inc., which is a related party. The loan is zero.due and payable on February 24, 2019 and bears interest at 18% per annum. If an Event of Default remains uncured after 30 days Holder has the option to convert the outstanding principal balance and any accrued but unpaid interest, into unrestricted $0.001 par value common stock of the Borrower. Upon default the note bears a default rate of interest of 24% per annum as part of the default terms of this note. The principal balance owed on this loan at September 30, 2020 and December 31, 2019 was $75,000 and $75.000, respectively. The note was discounted for a derivative (see note 8 for details) and the discount of $58,913 is being amortized over the life of the note using the effective interest method resulting in $58,913 of interest expense for the year ended December 31, 2019. As of September 30, 2020 and December 31, 2019 the Note is currently in default.
On May 10, 2019, the Company borrowed $75,000 from Hypur Inc., which is a related party. The loan is due and payable on May 12, 2020 and bears interest at 18% per annum. If an Event of Default remains uncured after 30 days Holder has the option to convert the outstanding principal balance and any accrued but unpaid interest, into unrestricted $0.001 par value common stock of the Borrower. Upon default the note bears a default rate of interest of 24% per annum as part of the default terms of this note. The principal balance owed on this loan at September 30, 2020 and December 31, 2019 was $75,000.
On September 3, 2019, the Company borrowed $21,000 from Hypur Inc., which is a related party. The loan is due and payable on December 3, 2019 and bears interest at 18% per annum. If an Event of Default remains uncured after 30 days Holder has the option to convert the outstanding principal balance and any accrued but unpaid interest, into unrestricted $0.001 par value common stock of the Borrower. Upon default the note bears a default rate of interest of 24% per annum as part of the default terms of this note. The principal balance owed on this loan at September 30, 2020 and December 31, 2019 was $21,000.
During the nine months ended September 30, 2020, the Company repaid Patrick Deparini $575.
| F-17 |
15
In November 2015, the Company entered into an arrangement with a related party, whereby the Company borrowed $25,000 in Convertible Notes. The Convertible Note bears interest at a rate of 5% per annum and payable quarterly in arrears and matures twelve months from the date of issuance, and is convertible into shares of the Company'sCompany’s common stock at a per share conversion price equal to $0.025 the$0.025. The note was due on November 4, 2016. In December 2015 the lender loaned the Company an additional $20,000 with same terms except that it is payable upon demand. As of September 30, 20172020 and December 31, 2016,2019, the Company owed a total of $45,000 and $45,000, respectively. The holder of the note has agreed to extend the default date of the note to MarchSeptember 30, 2018.
In July 2015, the Company entered into an arrangement with a related party, whereby the Company could borrow up to $500,000 in Convertible Notes. The Convertible Note bears interest at a rate of 5% per annum and payable quarterly in arrears and matures twelve months from the date of issuance, and is convertible into shares of the Company'sCompany’s common stock at a per share conversion price equal to $0.025. Upon the occurrence and during the continuation of an event of default, the holder may require the Company to redeem all or any portion of this Note in cash at a price equal to 150% of the principal amount. During the nine monthsyear ended September 30,December 31, 2017, the Company borrowed an additional $110,000. As of September 30, 20172020 and December 31, 2016,2019, the Company owed a total of $500,000 and $390,000, respectively. As of September 30, 2017 and December 31, 2016 there is a total of $390,000 and $390,000 of the notes are past due,$500,000, respectively. Since the debt holder has not elect the right to require the Company to redeem the note at a price equal to 150% of the principal amount, the terms stated prior to maturity are still in effect. The holder has waived the default term and the note is not considered to be in default as of September30, 2017.
On September 1, 2016, the Company entered into, an convertible promissory note with Hypur Ventures, L.P., a Delaware limited partnership (the "Hypur Ventures"“Hypur Ventures”) which is a related party pursuant to which the Company to borrow $75,000. The loan was due 180 days from the date of issuance and bears interest at 10% per annum. The note is convertible into common stock at a price of $.05 per share. The note is mandatory redeemable into common stock if the price per share is over $.50 per share during a 10 day period. The principal balance owed on this loan at September 30, 20172020 and December 31, 20162019 was $75,000 and $75,000, respectively. Upon default, the note bears a default rate of interest of 24%15% per annum, and if the default has not been remedied within 30 days, the redemption price would be 150% of the principal amount. The holderAs of September 30, 2020, Hyper has waived the default term and agreed to extend the default date to March 31, 2018.
On October 14, 2016, the Company entered into ana convertible promissory note with Hypur Ventures, L.P., a Delaware limited partnership (the "Hypur Ventures"“Hypur Ventures”) which isand a related party, pursuant to which the Company to borrowborrowed $100,000. The loan was due 180 days from the date of issuance and bears interest at 10% per annum. The note is convertible into common stock at a price of $.05 per share. The note is mandatory redeemable into common stock if the price per share is over $.50 per share during a 10 day period. The principal balance owed on this loan at September 30, 20172020 and December 31, 20162019 was $100,000 and $100,000, respectively. Upon default, the note bears a default rate of interest of 24%15% per annum,
On March 7, 2017, the Company borrowed $100,000 from Hypur Ventures, L.P., a related party. The loan is due 180 days from March 7, 2017 and bears interest at 10% per annum. The loan is convertible into shares of the Company'sCompany’s common stock at a price of $.05 per share. The loan will automatically convert into shares of the Company'sCompany’s common stock if the price of the Company'sCompany’s common stock is over $.50 per share during any ten-day period. The principal balance owed on this loan at September 30, 20172020 and December 31, 2019 was $100,000.$100,000 and $100,000 respectively. Upon default, the note bears a default rate of interest of 24%15% per annum, and if the default has not been remedied within 30 days, the redemption price would be 150% of the principal amount. The holderAs of September 30, 2020, Hyper has waived the default term and agreed to extend the default date to March 31, 2018.
On May 26, 2017, the Company borrowed $100,000 from CGDK, a related party. The loan is due 360 days from May 26, 2017 and bears interest at 5% per annum. The loan is convertible into shares of the Company'sCompany’s common stock at a price of $.025 per share. The loan will automatically convert into shares of the Company'sCompany’s common stock if the price of the Company'sCompany’s common stock is over $.25 per share during any ten-day period. The principal balance owed on this loan at September 30, 20172020 and December 31, 2019 was $100,000.
On July 13, 2017, the Company borrowed $150,000 from CGDK, a related party. The loan is due 360 days from July 13, 2017, and bears interest at 5% per annum. The loan is convertible into shares of the Company'sCompany’s common stock at a price of $.05 per share. The loan will automatically convert into shares of the Company'sCompany’s common stock if the price of the Company'sCompany’s common stock is over $.25 per share during any ten-day period. The principal balance owed on this loan at September 30, 20172020 and December 31, 2019 was $150,000. The conversion feature has been waved through October 15, 2019. As of September 30, 2020 and December 31, 2019, the note is currently in default.
| F-18 |
On April 13, 2018, the Company borrowed $130,000 from CGDK, a related party. The loan is due 360 days from April 13, 2018, bears interest at 12% per annum. The loan is convertible into shares of the Company’s common stock at a price of $.05 per share. The loan will automatically convert into shares of the Company’s common stock if the price of the Company’s common stock is over $.25 per share during any ten-day period. The Company evaluated the convertible note for possible embedded derivatives and concluded that none exist. However, the Company concluded a portion of the note should be allocated to additional paid-in capital as a beneficial conversion feature at the issuance date, since the conversion price on that date was lower than the fair market value of the underlying stock. Resultantly,recorded a discount of $249,440, of which $71,400 was recorded$101,272 due to derivative. The Company amortized $72,694 in debt discounts during the year ended December 31, 2018. The Company amortized $27,560 in debt discounts during the nine months ended September 30, 2017,2019. The principal balance owed on this loan at September 30, 2020 and December 31, 2019 is $130,000 and $130,000, respectively. On November 5, 2019 CGDK waived the default provision until April 13, 2020.
On June 14, 2018, the Company issued a $30,217 to CGDK, a related party, for previous expenses paid on behalf of the Company. The loan is due 360 days from June 18, 2018, bears interest at 12% per annum. The loan is convertible into shares of the Company’s common stock at a price of $.05 per share. The loan will automatically convert into shares of the Company’s common stock if the price of the Company’s common stock is over $.25 per share during any ten-day period. The Company recorded a debt discount of $10,292 due to derivative. During the year ended December 31, 2018 the Company amortized $5,639 of the discount. The Company amortized $3,697 in debt discounts during the nine months ended December 31, 2019. The principal balance owed on this loan at September 30, 2020 and December 31, 2019 is $30,217 and $30,217, respectively. On November 5, 2019 CGDK waived the default provision until June 14, 2020. On December 22, 2020 the Company received a waiver from CGDL, LLC extending until June 14, 2021.
On July 2, 2018, the Company borrowed $150,000 from CGDK, a related party. The loan is due July 2, 2019 and bears interest at 12% per annum. The loan is convertible into shares of the Company’s common stock at a price of $.05 per share. The loan will automatically convert into shares of the Company’s common stock if the price of the Company’s common stock is over $.10 per share during any ten-day period or the trading volume of the Company’s common stock during these ten trading days was attributedat least 2,500,000 shares. The Company recorded a debt discount of $19,779 due to derivative. During the beneficial conversion featureyear ended December 31, 2018 the Company amortized $9,862 of the discount. The Company amortized $7,390 in debt discounts during the year ended December 31, 2019. The principal balance owed on this loan at September 30, 2020 and December 31, 2019 is $150,000 and $150,000, respectively. On November 5, 2019 CGDK waived the default provision until July 2, 2020. On December 22, 2020 the Company received a waiver from CGDL, LLC extending until June 14, 2021.
On August 6, 2018, the Company borrowed $150,000 from CGDK, a related party. The loan is due July 2, 2019 and bears interest at 12% per annum. The loan is convertible into shares of the Company’s common stock at a price of $.05 per share. The loan will automatically convert into shares of the Company’s common stock if the price of the Company’s common stock is over $.10 per share during any ten-day period or the trading volume of the Company’s common stock during these ten trading days was at least 2,500,000 shares. The Company recorded a debt discount of $20,095 due to derivative. During the year ended December 31, 2018 the Company amortized $8,093 of the discount. The Company amortized $7,793 in debt discounts during the year ended December 31, 2019. The principal balance owed on this loan at September 30, 2020 and December 31, 2019 is $150,000 and $150,000, respectively. On November 5, 2019 CGDK waived the default provision until August 6, 2020. On December 22, 2020 the Company received a waiver from CGDL, LLC extending until June 14, 2021.
On January 18, 2019, the Company entered into, a convertible promissory note with Hypur Ventures, L.P., a Delaware limited partnership (the “Hypur Ventures”) which is a related party pursuant to which the Company to borrow $250,000. The loan was due 10 days from the date of issuance and bears interest at 18% per annum. The note is convertible into common stock at a price at the lower of $.0002 per share or 60% of the closing price of the common stock prior to conversion. Upon default, the note bears a default rate of interest of 24% per annum. The note was discounted for a derivative (see note 8 for details) and the discount of $167,079 is being amortized over the life of the note which amount is being amortized throughusing the maturity dateeffective interest method resulting in $167,079 of interest expense for the note.year ended December 31, 2019. As of September 30, 20172020 and 2016,December 31, 2019 the note is currently in default.
On March 5, 2019, the Company entered into, an convertible promissory note with Hypur Ventures, L.P., a totalDelaware limited partnership (the “Hypur Ventures”) which is a related party pursuant to which the Company to borrow $50,000. The loan was due 10 days from the date of $41,276issuance and $124,667, respectively has been amortizedbears interest at 18% per annum. The note is convertible into common stock at a price at the lower of $.0002 per share or 60% of the closing price of the common stock prior to conversion. Upon default, the note bears a default rate of interest of 24% per annum. As of September 30, 2020 and recorded as interest expense, leaving a balance of $30,124 and $9,178December 31, 2019 the note is currently in discounts related to the beneficial conversion feature of this note. default.
| F-19 |
The carrying amount of the convertible note, net of the unamortized debt discount, was $1,038,876 and $610,000 as ofat September 30, 20172020 and December 31, 2016,2019 is $1,830,217 and $1,821,507, respectively.
On October 1, 2017, these notes were tainted by the total principal balancevariable conversion price notes and remained tainted as of December 31, 2019. The Company re-measured the fair value of derivative liabilities on September 30, 2020 and December 31, 2019. See Note 8.
NOTE 8 – Derivative Liability
The Company analyzed the conversion options for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined that the instrument should be classified as a liability when the conversion option becomes effective.
The derivative liability in connection with the conversion feature of the noteconvertible debt is $10,733 and $12,801, respectively,measured using level 3 inputs.
The change in the fair value of which $6,518 and $8,664derivative liabilities is considered a long-termas follows:
| Balance - December 31, 2018 | $ | 727,332 | ||
| Addition of new derivative as a derivative loss | ||||
| Settlement of derivatives upon conversion | (292,611 | ) | ||
| Debt discount from derivative liability | 383,265 | |||
| Loss on change in fair value of the derivative | 352,074 | |||
| Balance - December 31, 2019 | $ | 1,170,060 | ||
| Settlement of derivatives upon conversion | (14,327 | ) | ||
| Loss on change in fair value of the derivative | 400,159 | |||
| Balance – September 30, 2020 | $ | 1,555,892 |
The table below shows the Black-Scholes option-pricing model inputs used by the Company to value the derivative liability and $4,215 and $4,137 is considered a current liability.
Nine Months ended | Year ended | |||||||
| Expected term | 0.01 – 1.01 years | 0.01 – 1.67 years | ||||||
| Expected average volatility | 333.17% – 358.74 | % | 24.93% – 270.08 | % | ||||
| Expected dividend yield | - | - | ||||||
| Risk-free interest rate | 0.10% – 0.12 | % | 1.55% – 1.60 | % |
Note 9 – Stockholders'Stockholders’ equity
The Company was originally authorized to issue 100,000,000 shares of common stock and 100,000,000 shares of preferred stock. On May 6, 2014, the Company effected a forward stock split and a pro-rata increase in its authorized common stock on a basis of 14-to-1, whereby each shareholder received 14 newly issued shares of common stock for each 1 share held. Additionally, the number of authorized shares increased to 1,400,000,000 shares of common stock. All references to share and per share amounts in the consolidated financial statements and these notes thereto have been retroactively restated to reflect the forward stock split.
Common stock
During the year ended December 31, 2016, the Company entered two consulting agreements for business advisory services. During the year ended December 31, 20162019 the Company issued a total of 2,000,000424,888,727 shares of common stock tofor the consultant for business advisory services valued at $88,000. The certificate for these shares was issued subsequent to December 31, 2016.
On September 18, 2020 Crown Bridge Partners, LLC converted notes payable in the principal amount of $2,980 and $500 of fees into 29,000,000 shares of common stock to the consultant for business advisory services valued at $17,500. The certificate for these shares was issued subsequent to September 30, 2017.stock.
| F-20 |
17
Preferred stock
On May 3, 2016, the Company entered into, an agreement with Hypur Ventures, L.P., a Delaware limited partnership (the "Hypur Ventures"“Hypur Ventures”) which is a related party pursuant to which the Company sold to Hypur Ventures, in a private placement, 10,000,000 shares of the Company'sCompany’s preferred stock and 5,000,000 common stock warrants with a five year term and an exercise price of $0.10, at a purchase price of $0.05 per share for gross proceeds of $500,000. The shares of preferred stock are convertible into shares of the Company'sCompany’s common stock. The preferred stock shall have such other rights, preferences and privileges to be set forth in a certificate of designation to be filed with the Nevada Secretary of State. The Company evaluated the convertible preferred stock under FASB ASC 470-20-30 and determined it contained a beneficial conversion feature. The intrinsic value of the beneficial conversion feature was determined to be $114,229. The beneficial conversion feature was fully amortized and recorded as a deemed dividend.
Between July and August of 2016 Hypur Ventures purchased an additional 10,000,000 shares of the Company'sCompany’s preferred stock and 5,000,000 common stock warrants with a five year term and an exercise price of $0.10, at a purchase price of $0.05 per share for net proceeds of $445,000, net of legal fees of $55,000. The shares of preferred stock are convertible into shares of the Company'sCompany’s common stock. The preferred stock shall have such other rights, preferences and privileges to be set forth in a certificate of designation to be filed with the Nevada Secretary of State. The Company evaluated the convertible preferred stock under FASB ASC 470-20-30 and determined it does not contain a beneficial conversion feature. The intrinsic value of the beneficial conversion feature was determined to be $0.The$0. The preferred stock is convertible at any time at the election of Hypur Ventures. The preferred stock shall automatically convert to common stock if the closing price of the Company'sCompany’s common stock equals or exceeds $.50 per share over any consecutive twenty day trading period. The preferred stock terms include a one-time purchase price preference. No preferential dividends apply to the preferred stock. The preferred stock attributes include weighted average anti-dilution protection, rights to appoint one director, pre-emptive rights to purchase future offerings of securities by the Company, demand and piggy-back registration rights.
The preferred stock is convertible at any time at the election of Hypur Ventures. The preferred stock shall automatically convert to common stock if the closing price of the Company'sCompany’s common stock equals or exceeds $.50 per share over any consecutive twenty day trading period. The preferred stock terms include a one-time purchase price preference. No preferential dividends apply to the preferred stock. The preferred stock attributes include weighted average anti-dilution protection, rights to appoint one director, pre-emptive rights to purchase future offerings of securities by the Company, demand and piggy-back registration rights.
The Company has reserved thirty million shares of common stock that may be issued upon the conversion and/or exercise of the preferred stock and the warrants. The preferred stock sold to Hypur Ventures will be subject to the terms and conditions of the Certificate of Designation, as well as further documentation to be drafted in accordance with the terms and conditions agreed upon between the Company and Hypur Ventures.
Note 10 – Options and warrants
Options
All stock options have an exercise price equal to the fair market value of the common stock on the date of grant. The fair value of each option award is estimated using a Black-Scholes-Merton option valuation model. The Company has not paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes-Merton option valuation model. Volatility is an estimate based on the calculated historical volatility of similar entities in industry, in size and in financial leverage, whose share prices are publicly available. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company has no historical experience with which to establish a basis for determining an expected life of these awards. Therefore, the Company only gave consideration to the contractual terms and did not consider the vesting schedules, exercise patterns and pre-vesting and post-vesting forfeitures significant to the expected life of the option award. The Company bases the risk-free interest rate used in the Black-Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term equal to the expected life of the award.
| F-21 |
All of the nine months endedoptions granted by the Company have expired as of September 30, 2017 a total of 26,666 stock options were forfeited by various employees of the Company.
The following is a summary of the Company'sCompany’s stock option activity for the nine months ended September 30, 2017:
NumberOf Shares | Weighted-Average Exercise Price | |||||||
| Outstanding at December 31, 2016 | 24,753,405 | $ | 0.11 | |||||
| Granted | - | - | ||||||
| Exercised | - | - | ||||||
| Expired | (146,667 | ) | $ | 0.17 | ||||
| Forfeited | (26,666 | ) | $ | 0.15 | ||||
| Outstanding at September 30, 2017 | 24,580,072 | $ | 0.11 | |||||
| Options exercisable at December 31, 2016 | 20,000,484 | $ | 0.11 | |||||
| Options exercisable at September 30, 2017 | 23,706,008 | $ | 0.11 | |||||
| Number Of Options | Weighted-Average Exercise Price | |||||||
| Outstanding at December 31, 2018 | 24,011,738 | $ | 0.11 | |||||
| Granted | - | $ | - | |||||
| Expired | - | $ | - | |||||
| Cancelled | - | $ | - | |||||
| Outstanding at December 31, 2019 | 24,011,738 | $ | 0.11 | |||||
| Granted | - | $ | - | |||||
| Expired | (24,011,738 | ) | $ | 0.11 | ||||
| Cancelled | - | $ | - | |||||
| Outstanding at September 30. 2020 | - | $ | - | |||||
| Options exercisable at December 31, 2019 | 24,011,738 | $ | 0.11 | |||||
| Options exercisable at September 30, 2020 | - | $ | - | |||||
The following tables summarize information about stock options outstanding and exercisable at September 30, 2017:
| OPTIONS OUTSTANDING AND EXERCISABLE AT September 30, 2017 | |||||||||||||||||||||||
Range of Exercise Prices | Number of Options Outstanding | Weighted-Average Remaining Contractual Life in Years | Weighted- Average Exercise Price | Number Exercisable | Weighted- Average Exercise Price | ||||||||||||||||||
| 0.035 – 1.00 | 24,580,072 | 2.55 | $ | 0.11 | 23,706,008 | $ | 0.11 | ||||||||||||||||
| OPTIONS OUTSTANDING AND EXERCISABLE AT SEPTEMBER 30, 2020 | ||||||||||||||||||||||
| Range of Exercise Prices | Number of Options Outstanding | Weighted- Average Remaining Contractual Life in Years | Weighted- Average Exercise Price | Number | Weighted- Average Exercise Price | |||||||||||||||||
| $ | - | - | - | $ | - | - | $ | - | ||||||||||||||
| OPTIONS OUTSTANDING AND EXERCISABLE AT DECEMBER 31, 2019 | ||||||||||||||||||||||
| Range of Exercise Prices | Number of Options Outstanding | Weighted- Average Remaining Contractual Life in Years | Weighted- Average Exercise Price | Number Exercisable | Weighted- Average Exercise Price | |||||||||||||||||
| $ | 0.034 – 1.00 | 24,011,738 | .30 | $ | 0.11 | 24,011,738 | $ | 0.11 | ||||||||||||||
Total stock-based compensation expense in connection with options and modified awards recognized in the consolidated statement of operations for nine months ended September 30, 20172020 and 2016 was $59,525 and $57,006, respectively. The intrinsic value of stock options issued to related parties2019 was $0 at September 30, 2017.and $0 respectively.
| F-22 |
Warrants
The following is a summary of the Company'sCompany’s warrant activity for the periodnine months ended September 30, 2017:
| Number Of Shares | Weighted-Average Exercise Price | |||||||
| Outstanding at December 31, 2016 | 10,000,000 | $ | 0.10 | |||||
| Granted | - | $ | - | |||||
| Exercised | - | $ | - | |||||
| Cancelled | - | $ | - | |||||
| Outstanding at September 30, 2017 | 10,000,000 | $ | 0.10 | |||||
| Options exercisable at September 30, 2017 | 10,000,000 | $ | 0.10 | |||||
| Number Of Warrants | Weighted-Average Exercise Price | |||||||
| Outstanding at December 31, 2019 | 10,000,000 | $ | 0.10 | |||||
| Granted | - | $ | - | |||||
| Exercised | - | $ | - | |||||
| Cancelled | - | $ | - | |||||
| Outstanding at September 30, 2020 | 10,000,000 | $ | 0.10 | |||||
| Warrants exercisable at December 31, 2019 | 10,000,000 | $ | 0.10 | |||||
| Warrants exercisable at September 30, 2020 | 10,000,000 | $ | 0.10 | |||||
’
The following tables summarize information about warrants outstanding and exercisable at September 30, 20172020 and December 31, 2016:
| WARRANTS OUTSTANDING AND EXERCISABLE AT SEPTEMBER 30, 2017 | |||||||||||||||||||||||
Range of Exercise Prices | Number of Options Outstanding | Weighted-Average Remaining Contractual Life in Years | Weighted- Average Exercise Price | Number Exercisable | Weighted- Average Exercise Price | ||||||||||||||||||
| $ | 0.10 | 10,000,000 | 3.74 | $ | 0.10 | 10,000,000 | $ | 0.10 | |||||||||||||||
| WARRANTS OUTSTANDING AND EXERCISABLE AT SEPTEMBER 30, 2020 | ||||||||||||||||||||||
| Range of Exercise Prices | Number of Warrants Outstanding | Weighted- Average Remaining Contractual Life in Years | Weighted- Average Exercise Price | Number Exercisable | Weighted- Average Exercise Price | |||||||||||||||||
| $ | 0.10 | 10,000,000 | .82 | $ | 0.10 | 10,000,000 | $ | 0.10 | ||||||||||||||
| WARRANTS OUTSTANDING AND EXERCISABLE AT DECEMBER 31, 2019 | ||||||||||||||||||||||
| Range of Exercise Prices | Number of Warrants Outstanding | Weighted- Average Remaining Contractual Life in Years | Weighted- Average Exercise Price | Number Exercisable | Weighted- Average Exercise Price | |||||||||||||||||
| $ | 0.10 | 10,000,000 | 1.52 | $ | 0.10 | 10,000,000 | $ | 0.10 | ||||||||||||||
Note 1112 – Subsequent Events
On October 16, 2017 TheDecember 22, 2020 the Company issued convertible promissoryreceived the following waivers from CGDK, LLC extending a note to AUCTUS FUND LLCdated June 14, 2018 in the amount of$31,217 until June 14, 2021, a note dated June 2, 2018 in the amount $150,000 until July 2, 2021 and a note dated August 6, 2018 in the note bears Interest at a rate: 10% (default interest 24%)amount $150,000 until August 6, 2021.
The Company has evaluated all other subsequent events from the balance sheet date through the date the financial statements were issued and has a maturity date of July 16, 2018. the Holder has the optiondetermined there are no additional events required to convert the outstanding principal and accrued interest into common stock of the Company. The Conversion Price is 50% of the lowest trading prices during the 25 Trading Day period prior to the Conversion. Covenants: The Borrower shall not, without the Holder's consent, sell, lease or dispose of any significant portion of its assets outside the ordinary course of business.be disclosed.
| F-23 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION |
You should read the following discussion and analysis of financial condition and results of operations in conjunction with the consolidated financial statements and related notes appearing elsewhere in this Report.
We were originally incorporated in Nevada on September 11, 2006, under the name The Engraving Masters, Inc. (the "Company"“Company”).
On May 2, 2014, we changed our name to Blue Line Protection Group, Inc.
We provide armed protection and transportation, banking, compliance and training services for businesses engaged in the legal cannabis industry. During the nine months ended September 30,, 2017, a majority 2020 substantially all of our revenue was derived from armed protectiontransportation and transportationcurrency processing services.
It is estimated that the total market for marijuana, legal or otherwise, will exceed the economic value of corn and wheat combined. Marijuana is widely considered the largest cash crop in the United States. Businesses have been positioning themselves for years, each trying to establish a leadership position in the legal marijuana industry.
Cultivation facilities are the producers of legal cannabis that eventually make its way to consumers. Growers'Growers’ operations typically span a large geographic footprint, making them susceptible to theft, as are shipments from the growers to testing laboratories or to retail dispensaries. Additionally, due to current federal marijuana legislation and banking environment, growers are finding it increasingly difficult to secure their cash, purchase equipment and obtain financing for expansion.
Dispensaries are the retail face of the legal cannabis industry. All legal sales of cannabis products are transacted through dispensaries that are state-licensed. To maintain their licenses, dispensaries must comply with a variety of state-mandated reporting requirements, including reporting every gram of cannabis passing in and out of the store. Dispensaries also face financing and banking challenges similar to those that growers encounter.
We do not grow, test, transport or sell marijuana.
Armed Protection and Transportation
Fundamental to the legal cannabis industry is the protection of product and cash throughout the distribution channel. Growers ship product from their cultivation facilities to independent laboratories where it is tested for compliance with state-mandated parameters. From the labs, the product is then delivered to the retail dispensaries, where it is sold to the public.
Due to the current banking and regulatory environments, payments between each step in the distribution network are made in cash: from the customer back to the grower. Therefore, these businesses are forced into having to transport bags of money between growers and dispensaries and their own vaults or storage facilities.
The risk of theft of cash and product is present at every stage, even when they are not in transit. Accordingly, all cannabis businesses require security measures to prevent theft, mitigate risk to employees and maintain regulatory compliance.
We began our security and protection operations in Colorado in February 2014. Since then, we have become the largest legal cannabis protection services company in the state. We offer a fully integrated approach to managing the movement of cannabis and cash from growers through dispensaries via armed and armored transport, money processing, vaulting and related credit. Money processing services generally include counting, sorting and wrapping currency.
As of all the licensees in Colorado. We are focused on encompassing all compliance needs on behalf ofDecember 31, 2019 we discontinued our clients, as mandated by the State and Federal authorities for the protection, transport and sale of cannabis.
We also offer security monitoring, asset vaulting, and VIP and dignitary protection.
| 4 |
Results of Operations
Material changes in line items in our Statement of Operations for the three months ended September 30, 20172020 as compared to the same period last year, are discussed below:
| Increase (I) or | ||||
| Item | Decrease (D) | Reason | ||
| Revenue | I | Increase in | ||
| Gross profit, as a % of revenue | I | |||
| D | Reduction of staff and | |||
| Interest expense | I | |||
| Loss on change in | D | Decrease in the price of our common stock |
Material changes in line items in our Statement of Operations for the nine months ended September 30, 20172020 as compared to the same period last year, are discussed below:
| Increase (I) or | ||||
| Item | Decrease (D) | Reason | ||
| Revenue | I | Increase in | ||
| Gross profit, as a % of revenue | I | |||
| D | Reduction of staff and | |||
| Interest expense | D | Reduction of debt | ||
| Loss on change in fair value of derivative securities | I |
Capital Resources and Liquidity
Our material sources and <uses> of cash during the nine months ended September 30, 20172020 and 20162019 were:
2017 | 2016 | |||||||
| Cash used by operations | $ | (683,078 | ) | $ | (1,029,503 | ) | ||
| Purchase of equipment | (1,590 | ) | (502,702 | ) | ||||
| Loan Proceeds | 1,271,964 | 1,092,610 | ||||||
| Loan Payments | (663,974 | ) | (687,568 | ) | ||||
| Sale of preferred stock | -- | 945,000 | ||||||
| Other | 76,678 | 165,952 | ||||||
| 2020 | 2019 | |||||||
| Cash provided (used) by operations | $ | 382,152 | $ | <373,776 | > | |||
| Purchase of fixed assets | <24,970 | > | <86,602 | > | ||||
| Loan proceeds | 24,000 | 633,817 | ||||||
| Loan payments | <118,037 | > | <169,883 | > | ||||
As of September 30, 2017February 15, 2021 we did not have any material capital commitments other than loan payments.
Other than as disclosed above, we do not anticipate any material capital requirements for the twelve months ending September 30, 2018.
Other than as disclosed above, we do not know of any:
| ● | trends, demands, commitments, events or uncertainties that will result in, or that are reasonable likely to result in, our liquidity increasing or decreasing in any material way; or |
| ● | any significant changes in our expected sources and uses of cash. |
We do not have any commitments or arrangements from any person to provide us with any equity capital.
During the next twelve months, we anticipate that we will incur approximately $1,900,000$1,200,000 of general and administrative expenses in order to execute our current business plan. We also plan to incur significant sales, marketing, research and development expenses during the next 12 months. We must obtain additional financing to continue our operations. We may not be able to obtain additional funding on terms that are favorable to us or at all. We may not be able to obtain sufficient funding to continue our operations, or if we do receive funding, to generate adequate revenues in the future or to operate profitably in the future. These conditions raise substantial doubt about our ability to continue as a going concern.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Critical Accounting Policies
Management considers the following policies critical because they are both important to the portrayal of our financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters.
| 5 |
Accounts receivable. Accounts receivable are stated at the amount we expect to collect from outstanding balances and do not bear interest. We provide for probable uncollectible amounts through an allowance for doubtful accounts, if an allowance is deemed necessary. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. On a periodic basis, management evaluates our accounts receivable and determines the requirement for an allowance for doubtful accounts based on its assessment of the current and collectible status of individual accounts with past due balances over 90 days. Account balances are charged against the allowance after all collection efforts have been exhausted and the potential for recovery is considered remote.
Revenue recognition. As allIn May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in Accounting Standards Codification 605, “Revenue Recognition.” This ASU is based on the principle that revenue is recognized to depict the transfer of our Revenuegoods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASC 606-10-50-5 requires that entities disclose disaggregated revenue information in categories (such as type of good or service, geography, market, type of contract, etc.) that depict how the nature, amount, timing, and uncertainty of revenue and cash flow are affected by economic factors. ASC 606-10-55-89 explains that the extent to which an entity’s revenue is generated from services offerings. Revenue recognition isdisaggregated depends on the samefacts and circumstances that pertain to the entity’s contracts with customers and that some entities may need to use more than one type of category to meet the objective for each of our revenue streams. We recognize revenue when alldisaggregating revenue. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of the following conditionsnew revenue standard by one year, and allowed entities the option to early adopt the new revenue standard as of the original effective date. There have been multiple standards updates amending this guidance or providing corrections or improvements on issues in the guidance. The requirements for these standards relating to Topic 606 are satisfied: (1) there is persuasive evidenceeffective for interim and annual periods beginning after December 15, 2017. This standard permitted adoption using one of two transition methods, either the retrospective or modified retrospective transition method.
We adopted these standards at the beginning of the first quarter of fiscal 2018 using the modified retrospective method. The adoption of these standards did not have an arrangement; (2)impact on our Statements of Operations for the service has been provided to the customer; (3) the amount of fees to be paid by the customer is fixedthree or determinable; and (4) the collection of its fees is reasonably assured.
Stock-based compensation. We record stock based compensation in accordance with the guidance in ASC Topic 505 and 718, which requires us to recognize expenses related to the fair value of our employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. We recognize the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
Equity Instruments. We account for equity instruments issued in exchange for the receipt of goods or services from non-employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measureable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.
| ITEM 4. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of our management, including our Principal Financial Officer and Principal Executive Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission'sCommission’s rules and forms, and that such information is accumulated and is communicated to our management, including our Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our management concluded that, as of September 30,, 2017 2020 our disclosure controls and procedures were not effective due to the material weaknesses identified atduring the audit.audit of our financial statements for the year ended December 31, 2019.
| 6 |
Change in Internal Control over Financial Reporting
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
Exhibit | Description of Exhibit | |
| 31.1 | Rule 13a-14(a) Certifications | |
| 7 |
24SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
| BLUE LINE PROTECTION GROUP, INC. | |||
| February 16, 2021 | By: | /s/ Evan DeVoe | |
| Accounting Officer | |||
| 8 |