UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2019

[ ]	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: 000-55053

Blow & Drive Interlock Corporation

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

46-3590850

(I.R.S. Employer

Identification No.)

~~5503 Cahuenga Blvd, #203~~1427 S. Robertson Blvd.

Los Angeles, CA

(Address of principal executive offices)

~~91601~~90035

(Zip Code)

(877) 238-4492

Registrant’s telephone number, including area code

~~(Former address, if changed since last report)~~

~~(Former fiscal year, if changed since last report)~~

(Former address, if changed since last report)

(Former fiscal year, if changed since last report)

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 check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ].

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer [ ]	Accelerated filer [ ]

	Non-accelerated filer [ ]	Smaller reporting company [X]
(Do not check if a smaller reporting company)

	Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X].

Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] ~~No [~~No[ ]

Applicable only to corporate issuers:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of ~~January 31, 2018,~~August 9, 2019, there were ~~25,201,266~~31,350,683 shares of common stock, $0.0001 par value, issued and outstanding.

CAUTIONARY STATEMENT

All statements included or incorporated by reference in this Quarterly Report on Form 10-Q (this “Form 10-Q”), other than statements or characterizations of historical fact, are “forward-looking statements” within the meaning of the Securities Exchange Act of 1934 as amended (the “Exchange Act”). Examples of forward-looking statements include, but are not limited to, statements concerning projected sales, costs, expenses and gross margins; our accounting estimates, assumptions and judgments; the prospective demand for our products; the projected growth in our industry; the competitive nature of and anticipated growth in our industry; and our prospective needs for, and the availability of, additional capital. These forward-looking statements are based on our current expectations, estimates, approximations and projections about our industry and business, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by such words as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions and variations or negatives of these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors, some of which are set forth in the “Risk Factors” section of our Report on Form 10-K for the year ended December 31, 2018, filed on ~~April 7, 2017, as updated through our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 and our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017~~July 19, 2019, and this Report, which could cause our financial results, including our net income or loss or growth in net income or loss to differ materially from prior results, which in turn could, among other things, cause the price of our common stock to fluctuate substantially. These forward-looking statements speak only as of the date of this report. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.

BLOW & DRIVE INTERLOCK CORPORATION

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION		43

ITEM 1	Financial Statements	43

ITEM 2	Management’s Discussion and Analysis of Financial Conditionand Results of Operations	2825

ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	3734

ITEM 4	Controls and Procedures	3734

PART II – OTHER INFORMATION		3835

ITEM 1	Legal Proceedings	3835

ITEM 1A	Risk Factors	3836

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	3836

ITEM 3	Defaults Upon Senior Securities	3936

ITEM 4	Mine Safety Disclosures	3936

ITEM 5	Other Information	3936

ITEM 6	Exhibits	4037

PART I – FINANCIAL INFORMATION

ITEM 1 Financial Statements

The consolidated balance sheets as of ~~September~~June 30, ~~2017~~2019 (unaudited) and December 31, ~~2016,~~2018, the consolidated statements of operations for the three months and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, the consolidated statement of stockholders equity (deficit) for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, and the consolidated statements of cash flows for the ~~nine~~six months ending ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, follow. The unaudited interim condensed financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. All such adjustments are of a normal and recurring nature.

BLOW & DRIVE INTERLOCK CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2017
December 31, 2016
(unaudited)
ASSETS

Current Assets
Cash $ 84,370 $ 116,309
Accounts receivable, net of allowance for doubtful accounts of $5,412 and $0 at September 30, 2017 and December 31, 2016, respectively 39,069 51,241
Prepaid expenses 1,569 2,361
Inventory 10,650 10,650
Total current assets 135,658 180,561

Property and equipment, net 925,728 356,346
Deposits 5,131 256,254

Total assets $ 1,066,517 $ 793,161

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current Liabilities
Accounts payable $ 102,791 $ 28,250
Accrued expenses 235,398 68,795
Accrued royalty payable 145,317 -
Accrued interest 41,078 10,110
Income taxes payable 5,929 5,700
Deferred revenue 91,057 106,331
Derivative liability 62,537 73,556
Notes payable, net of debt discount of $22,431 and $15,018 at September 30, 2017 and December 31, 2016, respectively 154,069 125,351
Notes payable – related party - 49,396
Convertible notes payable, net of debt discount of $3,115 and $23,724 at September 30, 2017 and December 31, 2016, respectively 54,385 33,775
Royalty notes payable, net of debt discount of $29,393 and $574,294 at September 30, 2017 and December 31, 2016, respectively 892 29,742
Total current liabilities 893,453 531,006

Notes payable, net of debt discount of $46,750 and $32,292 at September 30, 2017 and December 31, 2016, respectively 148,250 17,708
Notes payable – related party - 48,353
Royalty notes payable, net of debt discount of $353,894 and $574,294 at September 30, 2017 and December 31, 2016, respectively 163,106 8,778
Accrued royalty payable 1,786 121,967

Total Liabilities 1,206,595 727,812

Stockholders’ Equity (Deficit)
Preferred stock, par value $0.001, 20,000,000 shares authorized, 1,000,000 and 0 shares issued or issuable and outstanding as of September 30, 2017 and December 31, 2016, respectively 1,000 –
Common stock, par value $0.0001, 100,000,000 shares authorized, 24,057,961 and 19,575,605 shares issued or issuable and outstanding as of September 30, 2017 and December 31, 2016, respectively 2,406 1,958
Additional paid-in capital 2,696,281 1,594,721
Accumulated (deficit) (2,839,765 ) (1,531,330 )
Total stockholders’ equity (deficit) (140,078 ) 65,349

Total liabilities and stockholders’ equity (deficit) $ 1,066,517 $ 793,161

	(Unaudited)
	June 30, 2019			December 31, 2018

ASSETS

Current Assets:
Cash	$	12,426		$	775
Accounts receivable		11,785			5,355
Prepaid expenses		1,198			1,016
Total current assets		25,409			7,146
Deposits		6,481			6,481

Total assets	$	31,890		$	13,627

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities:
Accrued expenses	$	26,734		$	65,988
Accrued royalty payable		56,635			26,885
Accrued interest		184,286			17,155
Accrued interest – related parties		342,118			190,618
Deferred revenue		17,182			92,162
Derivative liability		29,907			22,517
Notes payable, net of debt discount of $0 and $7,549 at June 30, 2019 and December 31, 2018, respectively		67,159			117,776
Notes payable to related parties		29,000			29,000
Convertible notes payable, net of $5,124 and $5,124 at June 30, 2019 and December 31, 2018, respectively		2,376			2,376
Total current liabilities		755,397			564,477

Non-current Liabilities:
Notes payable, less current portion and net of debt discount of $0 and $6,925 at June 30, 2019 and December 31, 2018, respectively		-			18,069
Notes payable to related parties, less current portion		2,246,200			2,020,000
Convertible notes, less current portion and net of $3,841 and $5,122 at June 30, 2019 and December 31, 2018, respectively		16,159			13,597
Total non-current liabilities		2,262,359			2,051,666

Total Liabilities		3,017,756			2,616,143

Commitments and Contingencies

Stockholders’ Deficit
Preferred stock, par value $0.001, 20,000,000 shares authorized, 1,000,000 and 1,000,000 shares issued or issuable and outstanding as of June 30, 2019 and December 31, 2018, respectively		1,000			1,000
Common stock, par value $0.0001, 100,000,000 shares authorized, 30,566,920 and 31,073,529 shares issued or issuable and outstanding as of June 30, 2019 and December 31, 2018, respectively		3,057			3,107
Additional paid-in capital		3,514,249			3,489,699
Accumulated deficit		(6,504,172	)		(6,096,322	)
Total stockholders’ deficit		(2,985,866	)		(2,602,516	)

Total liabilities and stockholders’ deficit	$	31,890		$	13,627

~~The~~See accompanying notes ~~are an integral part of these~~to unaudited condensed consolidated financial statements.

BLOW & DRIVE INTERLOCK CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~(Unaudited)~~

	Three Months Ended September 30,						Nine Months Ended September 30,						Six Months Ended June 30,						Three Months Ended June 30,
	2017			2016			2017			2016			2019			2018			2019			2018

Revenues:
Monitoring revenues	$	394,139		$	65,533		$	674,197		$	200,188		$	363,243		$	443,231		$	149,556		$	264,744
Distributorship revenues		42,276			78,225			237,729			78,225			36,681			39,265			18,990			16,095
Total revenues		436,415			143,758			911,926			278,413			399,924			482,496			168,546			280,839

Cost of revenues:
Monitoring cost of revenue		57,817			8,899			111,884			26,617			25,233			76,681			3,598			29,068
Distributorship cost of revenue		1,000			-			7,739			-			-			-			-			-
Total cost of revenue		58,817			8,899			119,623			26,617
Total cost of revenues														25,233			76,681			3,598			29,068

Gross profit		377,598			134,859			792,303			251,796			374,691			405,815			164,948			251,771

Operating Expenses
Operating expenses:
Payroll		272,900			32,391			457,288			103,666			210,718			466,149			112,678			229,737
Professional fees		16,603			4,266			93,505			65,887			147,297			88,055			105,751			50,963
General and administrative		269,039			114,217			579,172			332,547			131,492			469,095			71,418			219,539
Depreciation		90,512			16,041			234,654			32,971
Total operating expenses		649,054			166,914			1,364,619			535,071			489,507			1,023,299			289,847			500,239

Loss from Operations		(271,456	)		(32,055	)		(572,316	)		(283,275	)
Loss from operations														(114,816	)		(617,484	)		(124,899	)		(248,468	)

Other Income (Expense)
Other Income (Expense):
Interest expense, net		(145,740	)		(41,789	)		(440,538	)		(111,714	)		(338,808	)		(210,558	)		(161,984	)		(108,237	)
Change in fair value of derivative liability		(6,474	)		16,814			11,018			(2,798	)		(7,390	)		4,293			(5,558	)		11,579
Gain (loss) on extinguishment of debt		-			(116,541	)		(305,000	)		(116,541	)		54,764						-			-
Total other income (expenses)		(152,214	)		(141,516	)		(734,520	)		(231,053	)
Total other income (expense)														(291,434	)		(206,265	)		(167,542	)		(96,658	)

Loss before provision for income taxes		(423,670	)		(173,571	)		(1,306,836	)		(514,328	)		(406,250	)		(823,749	)		(292,441	)		(345,126	)

Provision for income taxes		-			-			1,600			1,600			1,600			800			-			800

Net loss	$	(423,670	)	$	(173,571	)	$	(1,308,436	)	$	(515,928	)	$	(407,850	)	$	(824,549	)	$	(292,441	)	$	(345,926	)

Basic and Diluted Loss Per Common Share	$	(0.02	)	$	(0.01	)	$	(0.06	)	$	(0.03	)
Earnings (loss) per share:
Basic and diluted													$	(0.01	)	$	(0.03	)	$	(0.01	)	$	(0.01	)

Basic and Diluted Weighted-Average Common Shares Outstanding		22,856,861			16,333,870			21,922,340			15,646,423
Weighted-average shares of common stock outstanding:
Basic and diluted														30,447,549			28,108,346			30,447,549			29,388,261

~~The~~See accompanying notes ~~are an integral part of these~~to unaudited condensed consolidated financial statements.

BLOW & DRIVE INTERLOCK CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS' EQUITY (DEFICIT)~~STOCKHOLDERS’ DEFICIT

											Additional					Total
	Preferred Stock - Sries A				Common Stock						Paid-in		Accumulated			Stockholders’
	Shares		Amount		Shares			Amount			Capital		Deficit			Deficit

Balance at December 31, 2018		1,000,000	$	1,000		31,073,529		$	3,107		$	3,489,699	$	(6,096,322	)	$	(2,602,516	)

Shares issued for services		-		-		250,000			25			24,475		-			24,500
Shares returned related to anti-dilution		-		-		(756,609	)		(75	)		75		-			-
Net loss		-		-		-			-			-		(115,409	)		(115,409	)

Balance at March 31, 2019		1,000,000		1,000		30,566,920			3,057			3,514,249		(6,211,731	)		(2,693,425	)

Net loss		-		-		-			-			-		(292,441	)		(292,441	)

Balance at June 30, 2019		1,000,000	$	1,000		30,566,920		$	3,057		$	3,514,249	$	(6,504,172	)	$	(2,985,866	)

Preferred Stock - Series A Common Stock Additional Paid-In Accumulated Total
Stockholders’ Equity
Shares Amount Shares Amount Capital (Deficit) (Deficit)
Balance December 31, 2016 - $ - 19,575,605 $ 1,958 $ 1,594,720 $ (1,531,329 ) $ 65,349
Shares issued for services 27,180 3 13,910 13,913
Warrants issued for services 278 278
Shares issued related to debt 1,000,000 1,000 195,400 19 434,700 435,719
Shares issued for cash 3,736,894 374 652,725 653,099
Shares issued related to anti-dilution 522,882 52 (52 ) 0
Net loss (1,308,436 ) (1,308,436 )
Balance September 30, 2017 (unaudited) 1,000,000 $ 1,000 24,057,961 $ 2,406 $ 2,696,281 $ (2,839,765 ) $ (140,078 )

									Additional						Total
	Preferred Stock - Sries A				Common Stock				Paid-in			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Deficit

Balance at December 31, 2017		1,000,000	$	1,000		26,223,834	$	2,622	$	2,911,753		$	(4,296,645	)	$	(1,381,270	)

Shares issued for services		-		-		450,000		45		104,955			-			105,000
Shares issued for cash		-		-		1,450,000		145		156,355			-			156,500
Shares returned related to anti-dilution		-		-		210,876		21		(21	)		-			-
Net loss		-		-		-		-		-			(478,623	)		(478,623	)

Balance at March 31, 2018		1,000,000		1,000		28,334,710		2,833		3,173,042			(4,775,268	)		(1,598,393	)

Shares issued for services		-		-		26,000		3		5,197			-			5,200
Shares issued for cash		-		-		1,653,383		165		204,040			-			204,205
Shares returned related to anti-dilution		-		-		190,033		19		(19	)		-			-
Conversion of debt to common stock		-		-		32,812		3		5,080			-			5,083
Net loss		-		-		-		-		-			(345,926	)		(345,926	)

Balance at June 30, 2018		1,000,000	$	1,000		30,236,938	$	3,023	$	3,387,340		$	(5,121,194	)	$	(1,729,831	)

~~The~~See accompanying notes ~~are an integral part of these~~to unaudited condensed consolidated financial statements.

BLOW & DRIVE INTERLOCK CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(unaudited)~~

Nine Months Ended September 30,
2017 2016

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,308,436 ) $ (515,928 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 234,654 32,971
Loss on fixed assets disposals 12,989 -
Shares issued for services 14,188 166,883
Allowance for doubtful accounts 5,412 -
Loss on extinguishments of debt 305,000 116,541
Amortization of debt discount 275,465 89,109
Change in fair value of derivative liability (11,019 ) 2,798
Changes in operating assets and liabilities:
Accounts receivable 6,760 (47,898 )
Prepaid expenses 792 (327 )
Deposits 1,123 (12,000 )
Accounts payable 74,541 10,767
Accrued expenses 193,409 (8,397 )
Accrued interest 30,968 1,452
Deferred revenue (15,274 ) (18,121 )
Net cash used in operating activities (179,428 ) (182,150 )

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (817,026 ) (176,433 )
Deposits on units 250,000
Net cash used in investing activities (567,026 ) (176,433 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuances of notes payable 195,400 471,199
Principal payments of notes payable (14,268 ) (66,259 )
Principal payments of royalty notes payable (65,529 ) (13,749 )
Principal payments of related party note payable (54,187 ) (19,340 )
Proceeds from issuance of common stock 653,099 172,500
Net cash provided by financing activities 714,515 544,351

NET INCREASE (DECREASE) IN CASH (31,939 ) 185,768

CASH – beginning of period 116,309 9,103

CASH – end of period $ 84,370 $ 194,871

ADDITIONAL CASH FLOW INFORMATION
Interest paid $ 134,105 $ 21,288
Income taxes paid $ - $ -

	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(407,850	)	$	(824,549	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock or warrants issued for services		24,500			110,200
Allowance for doubtful accounts		-			(26,541	)
Amortization of debt discount		17,035			24,536
Increase in derivative liabilities		-			(15,370	)
Change in fair value of derivative liability		7,390			11,078
Debt converted to common shares		-			5,083
(Gain)/loss on extinguishment of debt		(54,764	)		-
Changes in operating assets and liabilities
Accounts receivable		(6,430	)		55,457
Prepaid expenses		(182	)		1,506
Accounts payable		-			(29,250	)
Accrued expenses		(39,254	)		8,795
Accrued royalties payable		29,750			60,866
Accrued interest		170,325			54,561
Accrued interest related party		151,500			-
Deferred revenue		(74,980	)		(56,676	)
Net cash used in operating activities		(182,960	)		(620,304	)

Cash flows from financing activities:
Proceeds from issuance of common stock		-			360,705
Proceeds from issuance of notes payable		-			21,600
Principal payments on notes payable		(31,589	)		(31,588	)
Proceeds from issuance of convertible notes payable		-			20,000
Principal payments on convertible notes payable		-			(5,000	)
Proceeds from issuance of notes payable related party		226,200			600,127
Payments on note payable related party		-			(96,050	)
Net cash provided by financing activities		194,611			869,794

Net increase in cash		11,651			249,490

Cash at beginning of period		775			31,874

Cash at end of period	$	12,426		$	281,364

Supplemental discolsures of cash flow information
Cash paid during the period for:
Interest paid	$	-		$	91,634
Income taxes paid	$	800		$	-

Supplemental disclosure of non-cash investing and financing activities
Common stock and warrants issued for services	$	24,500		$	110,200

~~The~~See accompanying notes ~~are an integral part of these~~to unaudited condensed consolidated financial statements.

~~SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES~~

Nine Months Ended September 30,
2017 2016

Common stock and warrants issued for services $ 14,188 $ 166,883
Establishment of debt discount for accrued royalties payable $ - $ 120,000
Preferred stock issued for debt reduction and services $ 350,000 $ -

~~The accompanying notes are an integral part of these financial statements.~~

BLOW AND DRIVE INTERLOCK CORPORATION

NOTES TO UNAUDITED FINANCIAL STATEMENTS

~~September 30, 2017~~

~~Note~~NOTE 1 ~~- Organization and Nature of Business~~– ORGANIZATION AND NATURE OF BUSINESS

Blow & Drive Interlock (“the Company”) was incorporated on July 2, 2013 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company ~~makes,~~ markets and rents alcohol ignition interlock devices to DUI/DWI offenders as part of their mandatory court or motor vehicle department programs.As of June 30, 2019, the BDI-747/1 device was only approved in Arizona and Texas. The ~~Company~~number of states where our BDI-747/1 device is approved has ~~approval for its device in the following states: California, Colorado, Kansas, New York, Tennessee, Arizona, Oregon, Kentucky, Oklahoma, Pennsylvania, and Texas.~~decreased primarily as a result of new state certification rules that require increased capital investment that we are not able to afford.

In 2015, ~~The~~the Company formed BDI Manufacturing, Inc., an Arizona corporation which is a 100% wholly owned subsidiary of Blow & Drive Interlock Corporation.

The Company ~~makes,~~ markets, installs and monitors a breath alcohol ignition interlock device (BAIID) called the BDI-747/1, which is a mechanism that is installed on the steering column of an automobile and into which a driver exhales. The device in turn provides a blood-alcohol concentration analysis. If the driver’s blood-alcohol content is higher than a certain pre-programmed limit, the device prevents the ignition from engaging and the automobile from starting. These devices are often required for use by DUI or DWI (“driving under the influence” or “driving while intoxicated”) offenders as part of a mandatory court or motor vehicle department program.

The Company licenses the rights to third party distributors to promote the BDI-747/1 and provide services related to the device. The distributorships are for specific geographical areas (either entire states or certain counties within states). The Company currently has entered into ~~six~~two distributorship agreements. Under the distribution agreements the Company typically receives a onetime fee, and then is entitled to receive a per unit registration fee and a per unit monthly fee for each BDI-747/1 unit the distributor has in inventory or on the road beginning thirty (30) days after the distributor receives the unit.

On December 31, 2018, Laurence Wainer, CEO of the Company, and The Doheny Group, a major note holder of the Company, reached an agreement in which Laurence Wainer sold 8,924,000 shares of common stock and 1,000,000 shares of preferred stock for a total of $30,000. Upon completion of the sale, David Haridim, managing member of The Doheny Group, assumed the position of CEO of Blow and Drive.

~~Note~~NOTE 2 – ~~Basis of Presentation and Summary of Significant Accounting Policies~~BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the results of operations of BDI Manufacturing (the Subsidiary). All material intercompany accounts and transactions between the Company and the Subsidiary have been eliminated in consolidation.

The consolidated financial statements included herein have been prepared by the Company ~~in accordance with generally accepted accounting principles in the United States of America, and~~ pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and ~~reflect~~footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to such rules and regulations. These consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The unaudited information contained herein has been prepared on the same basis as the Company’s audited consolidated financial statements, and, in the opinion of the Company’s management, includes all adjustments ~~consisting~~(consisting of only normal recurring ~~adjustments, which management believes~~adjustments) necessary for a fair presentation of the information for the periods presented. The interim results presented herein are ~~necessary to fairly present~~not necessarily indicative of the ~~financial position,~~ results of operations ~~and cash flows~~that may be expected for the full fiscal year ending December 31, 2019 or any future period.

Use of Estimates in the Preparation of Financial Statements

The preparation of the ~~Company.~~unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. These estimates and assumptions may affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. As a result, actual results could differ from these estimates.

Going Concern

The Company’s unaudited condensed consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. As of ~~September~~June 30 ~~2017,~~2019, the Company had an accumulated deficit of ~~$2,839,765.~~$6,504,172 and net loss of $407,850 for the six months ended June 30, 2019. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease or reduce its operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company will continue to raise funds through the sale of its equity securities or issuance of notes payable to obtain additional operating capital. The Company is dependent upon its ability to, and will continue to attempt to, secure additional equity and/or debt financing until the Company can earn revenue and realize positive cash flow from its operations. There are no assurances that the Company will be successful in earning revenue and realizing positive cash flow from its operations. Without sufficient financing it would be unlikely that the Company will continue as a going concern.

Based on the Company’s current rate of cash outflows, cash on hand and proceeds from the prior sale of equity securities and issuance of notes payable, management believes that itscurrent cash will not be sufficient to meet the anticipated cash needs for working capital for the next 12 months. The Company’s plans with respect to its liquidity issues include, but are not limited to, the following:

	1)	Continue to issue restricted stock for compensation due to consultants and for its legacy accounts payable in lieu of cash payments; and

	2)	Seek additional capital to continue its operations as it rolls out its current products. The Company is currently evaluating additional debt or equity financing opportunities and may execute them when appropriate. However, there can be no assurances that the Company can consummate such a transaction or consummate a transaction at favorable pricing.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and achieve profitable operations. These condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

Reclassifications

Certain reclassifications have been made to amounts in prior periods to conform to the current period presentation. All reclassifications have been applied consistently to the periods presented.

~~Use~~Revenue Recognition

On January 1, 2019, the Company adopted FASB Accounting Standards Codification (“ASC”) Topic 606,Revenue from Contracts with Customers(“ASC 606”).The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of ~~Estimates~~revenue recognition guidance that have historically existed in U.S. GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance.

The Company’s principal activity from which it generates revenue is a service which is the use of its interlock units. Revenue is measured based on considerations specified in a contract with a customer. A contract exists when it becomes a legally enforceable agreement with a customer. These contracts define each party’s rights, payment terms and other contractual terms and conditions of the sale. Consideration is typically paid at time of sale via credit card, check, or cash when the interlock units are installed on customers’ vehicles

A performance obligation is a promise in a contract to provide a distinct service to the customer, which for the Company is transfer of a service to customers. Performance obligations promised in a contract are identified based on the services that will be provided to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the service is separately identifiable from other promises in the contract. The Company has concluded the services accounted for as the single performance obligation.

The ~~preparation~~transaction price of ~~financial statements in conformity with U.S. generally accepted accounting principles requires management~~a contract is allocated to ~~make estimates~~each distinct performance obligation and ~~assumptions that affect~~recognized as revenue when or as the ~~reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at~~customer receives the ~~date~~benefit of the ~~financial statements and~~performance obligation. The transaction price is determined based on the ~~reported amounts of revenue and expenses during~~consideration to which the ~~reporting periods. Actual results could differ from those estimates.~~Company will be entitled to receive in exchange for transferring goods to the customer. The Company does not issue refunds.

~~Revenue Recognition~~

The Company recognizes revenue when ~~earned~~it satisfies a performance obligation in a contract by providing a service to a customer when the Company installs the interlock units on the customers’ vehicles. Taxes assessed by a governmental authority that are both imposed on and ~~related costs of sales and expenses when incurred. The~~concurrent with a specific revenue-producing transaction, that are collected by the Company ~~recognizes~~from a customer, are excluded from revenue.

Deferred revenue ~~in accordance with FASB ASC Topic 605-10-S99,~~~~Revenue Recognition, Overall, SEC Materials~~ (“Section 605-10-S74”). Section 605-10-S99 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. Cost of

Deferred revenue consists of ~~the cost~~customer orders paid in advance of the ~~purchased goods and labor related~~delivery of the order. Deferred revenue is classified as short-term as the typical order ships within approximately three weeks of placing the order. Deferred revenue is recognized as revenue when the product is shipped to the ~~corresponding sales transaction. When a right of return exists, the Company defers revenues until the right of return expires. The Company recognizes~~customer and all other revenue ~~from services at the time the services are completed.~~recognition criteria have been met.

~~Monthly per unit fee revenue is earned~~Advertising and recognized over the term of the contract as support services are provided. Revenues from territory exclusivity are earned when there is persuasive evidence of an arrangement, delivery has occurred, the sales price has been determined and collectability has been reasonably assured.Marketing Costs

Advertising and marketing costs are recorded as general and administrative expenses when they are incurred. Advertising and marketing expenses were $267 and $61,915 for the six months ended June 30, 2019 and 2018, respectively. Advertising and marketing expenses were $267 and $45,054 for the three months ended June 30, 2019 and 2018, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

The Company’s accounts receivable primarily consist of trade receivables. The Company records an allowance for doubtful accounts that is based on historical trends, customer knowledge, any known disputes, and the aging of the accounts receivable balances combined with management’s estimate of future potential recoverability. Receivables are written off against the allowance after all attempts to collect a receivable have failed. The Company believes its allowance for doubtful accounts as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 is adequate, but actual write-offs could exceed the recorded allowance.

~~Inventories~~Royalty Accrual

~~Inventories are valued~~The Company entered into royalty agreement to be paid out in perpetuity based on number of units sold for specified product model in years 2018, 2017 and 2016 in connection with notes payable as discussed in Note 11. These estimates were performed at the ~~first-in first-out method~~inception for the notes to reflect the associated debt discount. The Company accruals royalties and ~~at September 30, 2017 and~~is reduced by payments. The Company wrote off $255,030 in accrued royalties to gain on extinguishment of debt in December 2018 due to the December 31, ~~2016 consists~~2018 settlement with two royalty noteholders in which they relinquished all claims to accrued royalties.

Derivative Liability

The Company applies the provisions of ~~spare parts~~ASC Topic 815-40, Contracts in Entity’s Own Equity (“ASC Topic 815-40”), under which convertible instruments, which contain terms that protect holders from declines in the stock price, may not be exempt from derivative accounting treatment. As a result, embedded conversion options (whose exercise price is not fixed and determinable) in convertible debt (which is not conventionally convertible due to the exercise price not being fixed and determinable) are initially recorded as a liability and are revalued at fair value at each reporting date using the Black Sholes Model. The Company revalues these derivatives each quarter using the Black Sholes Model. The change in valuation is accounted for ~~the BDI 747 monitoring units.~~as a gain or loss in derivative liability.

Convertible Debt and Warrants Issued with Convertible Debt

Convertible debt is accounted for under the guidelines established by ASC 470,Debt with Conversion and Other Options and ASC 740,Beneficial Conversion Features. The Company records a beneficial conversion feature (“BCF”) when convertible debt is issued with conversion features at fixed or adjustable rates that are below market value when issued. If, however, the conversion feature is dependent upon a condition being met or the occurrence of a specific event, the BCF will be recorded when the related contingency is met or occurs. The BCF for the convertible instrument is recorded as a reduction, or discount, to the carrying amount of the convertible instrument equal to the fair value of the conversion feature. The discount is then amortized to interest over the life of the underlying debt using the effective interest method.

The Company calculates the fair value of warrants issued with the convertible instruments using the Black-Scholes valuation method, using the same assumptions used for valuing employee options for purposes of ASC 718,Compensation – Stock Compensation, except that the contractual life of the warrant is used. Under these guidelines, the Company allocates the value of the proceeds received from a convertible debt transaction between the conversion feature and any other detachable instruments (such as warrants) on a relative fair value basis. The allocated fair value is recorded as a debt discount or premium and is amortized over the expected term of the convertible debt to interest expense.

For modifications of convertible debt, the Company records a modification that changes the fair value of an embedded conversion feature, including a BCF, as a debt discount which is then amortized to interest expense over the remaining life of the debt. If modification is considered substantial (i.e. greater than 10% of the carrying value of the debt), an extinguishment of debt is deemed to have occurred, resulting in the recognition of an extinguishment gain or loss.

Fair Value of Financial Instruments

The Company utilizes ASC 820-10, Fair Value Measurement and Disclosure, for valuing financial assets and liabilities measured on a recurring basis. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

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 table below describes the Company’s valuation of financial instruments using guidance from ASC 820-10:

Fair Value Measurements Using
Level 1 Level 2 Level 3
Balance December 31, 2016 $ - $ 73,556 $ -
Change in fair value of derivative liability - (11,019 ) -
Balance September 30, 2017 (unaudited) $ - $ 62,537 $ -
Description Level 1 Level 2 Level 3

Balance December 31, 2018 $ - $ 22,517 $ -
Change in fair value of derivative liability - 7,390 -

Balance June 30, 2019 $ - $ 29,907 $ -
Net Income (Loss) Per Share
Basic earnings per share is calculated by dividing income available to common stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share is computed using the weighted average number of common and dilutive common share equivalents outstanding during the period.

~~Stock Based Compensation~~Related Parties

~~The Company recognizes stock-based compensation in accordance with FASB ASC Topic 718~~~~Stock Compensation~~~~, which requires~~Related parties are any entities or individuals that, through employment, ownership or other means, possess the ~~measurement~~ability to direct or cause the direction of the management and ~~recognition~~policies of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to an employee stock purchase plan based on the ~~estimated fair values.~~Company.

~~For non-employee stock-based compensation, the Company applies FASB ASC Topic 505~~~~Equity-Based Payments to Non-Employees~~Concentrations, which requires stock-based compensation related to non-employees to be accounted for based on the fair value of the related stock or options or the fair value of the services on the grant date, whichever is more readily determinable in accordance with FASB ASC Topic 718.
12
~~Concentrations~~

All of ~~the parts for~~ the Company’s ignition interlock devices are purchased from one supplier in China. The loss of this supplier could have a material impact on the Company’s ability to timely obtain additional units.

The Company has multiple distributors as of September 30, 2017, and is actively engaging more in new markets. However, for the three and nine months ended September 30, 2017, one distributor, licensed in four states, makes up approximately 100% and 91% percent of all revenues from distributors, respectively, and 100% of accounts receivable at September 30, 2017. The loss of this distributer would have a material impact on the Company’s revenues. Per an agreement dated January 21, 2018 that memorialized a September 30, 2017 oral agreement, the Company and its largest distributor cancelled their distributorship agreement dated September 5, 2015. See Note 15 below.
Income Taxes

The Company accounts for its income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

The Company also follows ASC 740-10-25, which provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements in accordance with ASC Topic 740, “Accounting for Income Taxes”. ASC 740-10-25 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Derivative Liabilities

The Company assessed the classification of its derivative financial instruments as of ~~September~~June 30, ~~2017,~~2019, which consist of convertible instruments and rights to shares of the Company’s common stock and determined that such derivatives meet the criteria for liability classification under ASC 815.
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as defined.

13
Convertible Instruments

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting for Derivative Instruments and Hedging Activities”.

ASC 815-40 provides that, among other things, generally, if an event is not within the entity’s control or could require net cash settlement, then the contract shall be classified as an asset or a liability.
Recently Issued Accounting Pronouncements

Pronouncements Not Yet Effective
● Fair Value Measurements
In ~~September 2017,~~August 2018, the ~~Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-13,~~~~Revenue Recognition, Revenue from Contracts with Customers, Leases.~~FASB amended “Fair Value Measurements” to modify the disclosure requirements related to fair value. The ~~ASU adds SEC paragraphs~~amendment removes requirements to disclose (1) the amount of and reasons for transfers between levels 1 and 2 of the fair value hierarchy, (2) our policy related to the ~~new revenue~~timing of transfers between levels, and ~~leases sections~~(3) the valuation processes used in level 3 measurements. It clarifies that, for investments measured at net asset value, disclosure of liquidation timing is only required if the investee has communicated the timing either to us or publicly. It also clarifies that the narrative disclosure of the ~~Accounting Standards Codification (ASC or Codification)~~effect of changes in level 3 inputs should be based on changes that could occur at the reporting date. The amendment adds a requirement to disclose the range and weighted average of significant unobservable inputs used in level 3 measurements. The guidance is effective for the Company with the Company’s quarterly filing for the period ended March 31, 2020 and the Company will make the required disclosure changes in that filing. Adoption will not have an impact on the ~~announcement~~Company’s consolidated results of operations, consolidated financial position, and cash flows.
● Retirement Plans
In August 2018, the ~~SEC Observer made at~~FASB amended “Retirement Plans” to modify the ~~20 July 2017 EITF meeting.~~disclosure requirements for defined benefit plans. For the Company, the amendment requires the disclosure of the weighted average interest crediting rate used for cash balance plans and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. It removes the requirement to disclose the approximate amount of future benefits covered by insurance contracts. The ~~SEC Observer said~~guidance is effective for the Company with the Company’s annual filing for the year ended December 31, 2020 and the Company will make the required disclosure changes in that filing. Adoption will not have an impact on the ~~SEC staff would~~Company’s consolidated results of operations, consolidated financial position, and cash flows.
● Intangibles – Goodwill and other – Internal-Use Software
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company’s accounting for the service element of a hosting arrangement that is a service contract is not ~~object if entities~~affected by the proposed amendments and will continue to be expensed as incurred in accordance with existing guidance. This standard does not expand on existing disclosure requirements except to require a description of the nature of hosting arrangements that are ~~considered public business entities only because their~~service contracts. This standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued. Entities can choose to adopt the new guidance prospectively or ~~financial information is required~~retrospectively. The Company plans to adopt the updated disclosure requirements of ASU No. 2018-15 prospectively in the first quarter of fiscal 2020, coinciding with the standard’s effective date, and expects the impact from this standard to be ~~included in another entity’s SEC filing use~~immaterial.
● Improvements to Nonemployee Share-based Payment Accounting
In June 2018, the FASB issued ASU No. 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”). ASU 2018-07 aligns the accounting for share-based payment awards to employees and non-employees. Under ASU 2018-07 the existing employee guidance will apply to nonemployee share-based transactions, except for specific guidance related to the attribution of compensation cost. ASU 2018-07 should be applied to all new awards granted after the date of adoption. ASU 2018-07 is effective ~~dates~~ for ~~private companies when they adopt ASC 606, Revenue from Contracts with Customers,~~annual and ASC 842, Leases. This would include entities whose financial statements are included in another entity’s SEC filing because they are significant acquirees under Rule 3-05 of Regulation S-X, significant equity method investees under Rule 3-09 of Regulation S-Xinterim periods beginning after December 15, 2018, and ~~equity method investees whose summarized financial information~~early adoption is ~~included in a registrant’s financial statement notes under Rule 4-08(g) of Regulation S-X.~~permitted. The Company ~~is currently evaluating~~adopted ASU 2018-07 effective January 1, 2019; such adoption had no material impact on the ~~impact of adopting this guidance.~~Company’s consolidated financial statements.
● Income Statement – Reporting Comprehensive Income

In ~~July 2017,~~February 2018, the FASB issued Accounting Standards Update ~~(ASU)~~ No. ~~2017-11,~~~~Earnings Per Share; Distinguishing Liabilities~~2018-02, Income Statement-Reporting Comprehensive Income (Topic 220) (ASU 2018-02), which amends existing standards for income statement-reporting comprehensive income to allow a reclassification from ~~Equity; Derivatives~~accumulated other comprehensive income to retained earnings for stranded tax effects resulting from Tax Cuts and ~~Hedging; Accounting~~Jobs Act and improve the usefulness of information reported to financial statements users. ASU 2018-02 will be effective for ~~Certain Financial Instruments with Down Round Features; Replacement~~beginning after December 15, 2018, and early adoption is permitted. The Company adopted ASU 2018-02 effective January 1, 2019; such adoption had no material impact on the Company’s consolidated financial statements.
● Goodwill
In January 2017, the FASB amended “Goodwill” to simplify the subsequent measurement of goodwill. The amended guidance eliminates Step 2 from the goodwill impairment test. Instead, impairment is defined as the amount by which the carrying value of the ~~Indefinite Deferral for Mandatorily Redeemable Financial Instruments~~reporting unit exceeds its fair value, up to the total amount of ~~Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.~~ ~~An entity will no longer have to consider “down round” features (i.e., a provision in an equity-linked financial instrument or an embedded feature that reduces~~goodwill of the exercise price if the entity sells stock for a lower price or issues an equity-linked instrument with a lower exercise price) when determining whether certain equity-linked financial instruments or embedded features are indexed to its own stock. An entity that presents earnings per share (EPS) under ASC 260 will recognize the effect of a down round feature in a freestanding equity-classified financial instrument only when it is triggered. The effect of triggering such a feature will be recognized as a dividend and a reduction to income available to common shareholders in basic EPS.reporting unit. The new guidance ~~will require new disclosures~~is effective for the Company on January 1, 2020 and is not expected to have an impact on our consolidated results of operations, consolidated financial ~~instruments~~position, and cash flows.
● Financial Instruments
In June 2016, the FASB amended “Financial Instruments” to provide financial statement users with ~~down round features~~more decision-useful information about the expected credit losses on debt instruments and other ~~terms~~commitments to extend credit held by a reporting entity at each reporting date. During November 2018 and April 2019, the FASB made amendments to the new standard that ~~change conversion or exercise prices.~~clarified guidance on several matters, including accrued interest, recoveries, and various codification improvements. The ~~ASU also~~new standard, as amended, replaces ~~today’s indefinite deferral~~the incurred loss impairment methodology in the current standard with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to support credit loss estimates. The new guidance is effective for us on January 1, 2020, and in the first half of 2019, we established an implementation team and began analyzing the impact on our current policies and procedures to identify potential differences that would result from applying the requirements of the ~~guidance in ASC 480-10 for certain mandatorily redeemable financial instruments~~new standard. The implementation team reports findings and progress of ~~certain nonpublic entities~~the project to management on a frequent basis. Through this process, we have identified appropriate changes to our processes, systems, and ~~certain mandatorily redeemable noncontrolling interests with a scope exception. This change does not require any transition guidance because it does not have an accounting effect.~~controls to support recognition and disclosure under the new standard. The Company is ~~currently~~still evaluating the impact of ~~adopting this guidance.~~the new standard on the Company’s consolidated results of operations, consolidated financial position, and cash flows.
Other recently issued accounting updates are not expected to have a material impact on the Company’s Interim Financial Statements.

~~In October 2016, the FASB issued~~Recently Adopted Accounting ~~Standards Update (ASU) No. 2016-16,~~~~Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory.~~Pronouncements The ASU eliminates the deferral of the tax effects of intra-entity asset transfers other than inventory. As a result, the tax expense from the intercompany sale of assets, other than inventory, and associated changes to deferred taxes will be recognized when the sale occurs even though the pre-tax effects of the transaction have not been recognized. The effect of the adoption of the standard will depend on the nature and amount of any future transactions.

14● Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued ASU No. 2016-15,Statement of Cash ~~Flows;~~Flows: Classification of Certain Cash Receipts and Cash ~~Payments.~~~~The new standard addresses eight specific cash flow issues with the objective of reducing the existing~~Payments (“ASU 2016-15”), to address diversity in ~~practice.~~practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. For public entities, the standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities, the standard is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The ~~eight issues are: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant~~Company adopted ASU 2016-15 effective January 1, 2018; such adoption had no material impact on the Company’s consolidated financial statements.
● Leases (ASU 2019-01)
In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842) Codification Improvements, which removed the requirement for an entity to disclose in ~~relation to~~ the ~~effective interest rate~~interim periods after adoption, the effect of the ~~borrowing; contingent consideration payments made after~~change on income from continuing operations, net income, any other affected financial statement line item, and any affected per share amount. For lessors, the new leasing standard requires leases to be classified as a ~~business combination; proceeds from~~sales-type, direct financing or operating leases. These criteria focus on the ~~settlement~~transfer of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned insurance policies; distribution received from equity method investees; beneficial interests in securitization transactions; separately identifiable cash flows and applicationcontrol of the ~~predominance principle.~~underlying lease asset. This standard and related update was effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The ~~new standard~~Company adopted ASU 2016-02 effective January 1, 2019; such adoption had no material impact on the Company’s financial statements, given that the noncancelable term of the Company’s current lease is less than 12 months.
● Leases (ASU 2016-02)
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities on the balance sheet by lessees for those leases currently classified as operating leases under ASC 840 “Leases.” These amendments also require qualitative disclosures along with specific quantitative disclosures. These amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal ~~periods beginning after December 15, 2019.~~years. Early application is permitted. The Company can elect to record a cumulative-effect adjustment as of the beginning of the year of adoption or apply a modified retrospective transition approach. The Company expects that substantially all of its operating lease commitments will be subject to the new guidance and will be recognized as operating lease liabilities and right-of-use assets upon adoption. The Company adopted ASU 2016-02 effective January 1, 2019; such adoption had no material impact on the Company’s financial statements, given that the noncancelable term of the Company’s current lease is ~~currently evaluating the impact of adopting this guidance.~~less than 12 months.
● Revenue from Contracts with Customers

~~In March 2016,~~On January 1, 2019, the Company adopted FASB ~~issued ASU No. 2016-08,~~~~Revenue from Contracts with Customers.~~ ~~The new standard clarifies the implementation guidance on principal versus agent considerations in~~Accounting Standards Codification (“ASC”) Topic 606,Revenue from Contracts with ~~Customers.~~Customers ~~Topic 606 addresses~~(“ASC 606”).The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that ~~an entity should~~have historically existed in U.S. GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance.
The Company’s principal activity from which it generates revenue is a service which is the use of its interlock units. Revenue is measured based on considerations specified in a contract with a customer. A contract exists when it becomes a legally enforceable agreement with a customer. These contracts define each party’s rights, payment terms and other contractual terms and conditions of the sale. Consideration is typically paid at time of sale via credit card, check, or cash when the interlock units are installed on customers’ vehicles
A performance obligation is a promise in a contract to provide a distinct service to the customer, which for the Company is transfer of a service to customers. Performance obligations promised in a contract are identified based on the services that will be provided to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the service is separately identifiable from other promises in the contract. The Company has concluded the services accounted for as the single performance obligation.
The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which the ~~entity expects~~Company will be entitled to ~~be entitled~~receive in exchange for ~~those~~transferring goods ~~or services. When an entity is a principal (that is, if~~to the customer. The Company does not issue refunds.
The Company recognizes revenue when it ~~controls the specific good or service before that good or service is transferred to a customer) and~~ satisfies a performance obligation ~~the entity recognizes revenue~~ in ~~the gross amount of consideration to which it expects to be entitled in exchange for the specific good or service transferred to the customer. When an entity is an agent and satisfies~~ a ~~performance obligation, the entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specific good or~~contract by providing a service to ~~be provided~~a customer when the Company installs the interlock units on the customers’ vehicles. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the ~~other party. The new standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The~~ Company ~~is currently evaluating the impact of adopting this guidance.~~
~~In February 2016, the FASB issued ASU No. 2016-2,~~~~Leases.~~ ~~The new standard establishes~~from a right-of-use (ROU) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. Similarly, lessors will be required to classify leases as sales-type, finance or operating, with classification affecting the pattern of income recognition. Classification for both lessees and lessors will be based on an assessment of whether risks and rewards as well as substantive control have been transferred through a lease contract. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. A modified retrospective transition approach is required for leases for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of adopting this guidance.customer, are excluded from revenue.
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~~Note~~NOTE 3 – ~~Segment Reporting~~SEGMENT REPORTING

The Company has two reportable segments: (1) Monitoring and (2) Distributorships.

Monitoring fees on Company installed units

The Company rents units directly to customers and installs the units in the customer’s vehicles. The rental periods range from a few months to 2 years and include a combination of down payments made by the customer and monthly payments paid under the agreements with the Company. Revenue is recognized from these companies on the straight-line basis over the term of the agreement. Amounts collected in excess of those earned are classified as deferred revenue in the balance sheet, and amounts earned in excess of amounts collected are reflected in accounts receivable in the balance sheet at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016.~~2018.

Distributorships

The Company enters into arrangements that include multiple deliverables, which typically consist of the sale of exclusive distributorship territory rights, startup supplies package, promotional material, three weeks of onsite training and ongoing monthly support services. The Company accounts for each material element within an arrangement with multiple deliverables as separate units of accounting. Revenue is allocated to each unit of accounting under the guidance of ASC Topic 605-25, Multiple-Element Revenue Arrangements, which provides criteria for separating consideration in multiple-deliverable arrangements by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable is based on vendor-specific objective evidence (“VSOE”) if available, third-party evidence if VSOE is not available, or estimated selling price if neither VSOE nor third-party evidence is available. The Company is required to determine the best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. The Company generally does not separately sell distributorships or training on a standalone basis. Therefore, the Company does not have VSOE for the selling price of these units nor is third party evidence available and thus management uses its best estimate of selling prices in their allocation of revenue to each deliverable in the multiple element arrangement.
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Thefollowing table summarizes net sales andidentifiable operating income by segment:

Three Months Ended September 30, Nine Months Ended September 30, Six Months Ended June 30, Three Months Ended June 30,
2017 2016 2017 2016 2019 2018 2019 2018

Segment gross profit (a)
Segment gross profit (a):
Monitoring $ 336,322 $ 56,634 $ 562,313 $ 173,571 $ 338,010 $ 366,550 $ 145,958 $ 235,676
Distributorships 41,276 78,225 229,990 78,225 36,681 39,265 18,990 16,095
Gross profit 377,598 134,859 792,303 251,796 374,691 405,815 164,948 251,771

Identifiable segment operating expenses (b)
Identifiable segment operating expenses (b):
Monitoring - - - -
Distributorships - - - -
Total operating expenses - - - -

Identifiable segment operating income (c):
Monitoring 86,543 5,911 143,955 21,468 338,010 366,550 145,958 235,676
Distributorships 3,552 9,810 89,642 9,810 36,681 39,265 18,990 16,095
90,095 15,721 233,597 31,278 374,691 405,815 164,948 251,771

Identifiable segment operating income (c)
Monitoring 249,779 50,723 418,358 152,103
Distributorships 37,724 68,415 140,348 68,415
287,503 119,138 558,706 220,518

Reconciliation of identifiable segment income to corporate income (d)
Reconciliation of identifiable segment income to corporate income (d):
Payroll 288,512 32,391 457,288 103,666 210,718 466,149 112,678 229,737
Professional fees 16,603 4,266 93,505 65,887 147,297 88,055 105,751 50,963
General and administrative expenses 253,427 114,216 579,172 332,547 131,492 469,095 71,418 219,539
Depreciation 417 320 1,057 1,693
Interest expense 145,740 41,790 440,538 111,715 338,808 210,558 161,984 108,237
Change in fair value of derivative liability 6,474 (16,814 ) (11,018 ) 2,798 7,390 (4,293 ) 5,558 (11,579 )
Loss on extinguishment of debt - 116,541 305,000 116,541
Gain on extinguishment of debt (54,764 ) - - -
780,941 1,229,564 457,389 596,897

Loss before provision for income taxes (423,670 ) (173,572 ) (1,306,836 ) (514,329 ) (406,250 ) (823,749 ) (292,441 ) (345,126 )

Provision for income taxes - - 1,600 1,600 1,600 800 - 800

Net loss $ (423,670 ) $ (173,572 ) $ (1,308,436 ) $ (515,929 ) $ (407,850 ) $ (824,549 ) $ (292,441 ) $ (345,926 )

Total net property, plant, and equipment assets
Monitoring $ 562,542 $ 127,815 $ - $ - $ - $ -
Distributorships 350,298 58,410 - - - -
Corporate 12,889 2,599 - - - -
$ 925,729 $ 188,824 $ - $ - $ - $ -

(a) Segment gross profit includes segment net sales less segment cost of sales
(b) Identifiable segment operating expenses consists of identifiable depreciation expense
(c) Identifiable segment operating ~~income~~incomes consists of segment gross profit less identifiable operating expense
(d) General corporate expense consists of all other non-identifiable expenses

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~~Note 4 – Furniture and Equipment~~
~~Furniture and equipment consist of the following:~~
September 30, 2017 December 31, 2016
Monitoring Units $ 1,198,057 $ 419,898
Furniture, Fixtures, and Equipment 4,798 4,798
Software 11,667 -
Total Assets 1,214,522 424,696
Less: Accumulated Depreciation (288,794 ) (68,350 )
Furniture and Equipment, net $ 925,728 $ 356,346
Depreciation expense for the three and nine months ended September 30, 2017 and 2016 were $90,512 and $16,041, and $234,654 and $32,971, respectively. $27,200 in monitoring units and $14,211 in related accumulated depreciation were disposed of in the three months ended September 30, 2017.
~~Note 5 – Deposits~~
~~Deposits consist of the following:~~
September 30, 2017 December 31, 2016
Deposit for BDI-747 units $ - $ 250,000
Other 5,131 6,254
Total $ 5,131 $ 256,254

~~Note 6~~NOTE 4 – ~~Accrued Expenses~~ACCRUED EXPENSES

Accrued Expenses consist of the following:

Description June 30, 2019 December 31, 2018
September 30, 2017 December 31, 2016
Accrued payroll and payroll taxes $ 218,975 $ 65,292 $ 20,004 $ 17,616
Miscellaneous 16,423 3,503
Deferred rent - 5,317
Income tax payable 6,730 5,930
Other accrued expenses - 37,125

Total $ 235,398 $ 68,795 $ 26,734 $ 65,988

~~Note 7 - Deferred revenue~~
The Company classifies income as deferred until the terms of the contract or time frame have been met within the Company’s revenue recognition policy. As of September 30, 2017 and December 31, 2016, deferred revenue consist of the following:
September 30, 2017 December 31, 2016
Monitoring deferred revenues $ 91,057 $ 103,831
Distributorship deferred revenues - 2,500
Total $ 91,057 $ 106,331
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~~Note 8~~NOTE 5 – ~~Notes Payable~~NOTES PAYABLE

Notes payable consist of the following:

September 30, 3017 December 31, 2016
Principal Accrued interest Principal Accrued interest
Convertible notes
Convertible note #1 $ 7,500 $ 208 $ 7,500 $ 31
Debt discount - - (3,104 ) -
Convertible note #2 50,000 2,034 50,000 1,617
Debt discount (3,115 ) - (20,620 ) -
Subtotal convertible notes net 54,385 2,242 33,776 1,648

Promissory notes
Promissory note #1 - - 990 -
Promissory note #2 - - 13,278 -
Debt discount - - (3,510 ) -
Promissory note #3 50,000 1,500 50,000 -
Debt discount (13,542 ) - (32,292 ) -
Promissory note #4 10,000 2,200 10,000 400
Debt discount (384 ) - (7,308 ) -
Promissory note #5 36,100 1,504 36,100 3,581
Promissory note #6 5,040 - 5,040 106
Debt discount (420 ) - (4,200 ) -
Promissory note #7 24,960 2,629 24,960 -
Promissory note #8 50,000 2,083 50,000 -
Promissory note #9 50,400 1,050 - -
Debt discount (8,085 ) - - -
Promissory note #10 70,000 2,917 - -
Debt discount (22,166 ) - - -
Promissory note #11 75,000 3,411 - -
Debt discount (24,583 ) - - -
Subtotal promissory notes net 302,320 17,294 143,058 4,087

Royalty notes
Royalty note #1 15,107 - 46,876 -
Debt discount (14,549 ) - (45,903 ) -
Royalty note #2 15,178 - 48,938 -
Debt discount (14,844 ) - (41,133 ) -
Royalty note #3 192,000 8,000 192,000 -
Debt discount (128,000 ) - (176,000 ) -
Royalty note #4 325,000 13,542 325,000 4,375
Debt discount (225,894 ) - (311,258 ) -
Subtotal royalty notes net 163,997 21,542 38,520 4,375

Related party promissory note
Related party promissory note - - 97,749 -
Total notes $ 520,702 $ 41,078 $ 313,103 $ 10,110

Current portion $ 209,346 $ 41,078 $ 238,264 $ 10,110
Long-term portion $ 311,356 - $ 74,839 $ -
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As of June 30, 2019 As of December 31, 2018
Terms Amount Discount Net Balance Amount Discount Net Balance

December 2017 ($50,000) -15% interest due in December 2020 including issuance of 100,000 shares of common stock with exercise price at $0.25 per share.
$ - $     - $ - $ 40,736 $ (14,474 ) $ 26,262
October 2018 ($60,000) - $561 daily principal and interest until paid in full
- - - 42,424 - 42,424
October 2018 ($72,800) - $11,527 monthly principal and interest for first six months, $9,975 monthly principal and interest last six months
67,159         - 67,159 67,159 - 67,159

Total notes payable 67,159 - 67,159 150,319 (14,474 ) 135,845

Less: non-current portion - - - (24,994 ) 6,925 (18,069 )

Notes payable, current portion $ 67,159 $ - $ 67,159 $ 125,325 $ (7,549 ) $ 117,776

December 2017 - $50,000
On December 1, 2017, the Company provided an agreement to a third party to obtain a $50,000 promissory note in exchange for $50,000 in cash. The promissory note had a maturity date of December 1, 2020 and bears interest at 15% per annum. The note required total payments of $1,733 per month. The Company recorded a debt discount of $22,650 related to the value of the issued shares associated with the process of obtaining the note to be amortized over the life of the note. In January 2019, the note was settled with no additional payment and $43,930 was recognized as a gain on settlement. Total interest expense was $0 and $1,706 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $3,539 for the six months ended June 30, 2019 and 2018, respectively.
October 2018 - $60,000
On October 11, 2018, the Company provided an agreement to a third party to obtain a $60,000 promissory note in exchange for $59,105 in cash ($895 in processing fee was deducted from cash). The promissory note had a maturity date of May 5, 2019 and bears interest at 55% per annum. The note required total payments of $561.43 each business day. The note was settled on January 16, 2019 for $30,806, and a gain on settlement was recorded for $10,834. Total interest expense was $0 and $0 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $0 for the six months ended June 30, 2019 and 2018, respectively.
October 2018 - $72,800
On October 4, 2018, the Company provided an agreement to a third party to obtain a $72,800 promissory note in exchange for $72,800 in cash. The promissory note had a maturity date of October 4, 2019 and bears interest at 51% per annum. The note required total payments of $11,526.67 per month for the first six months and $6,794.67 per month for the last six months. Total interest expense was $8,536 and $0 for the three months ended June 30, 2019 and 2018, respectively, and $17,126 and $0 for the six months ended June 30, 2019 and 2018, respectively.
NOTE 6 – NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties consist of the following:
Terms June 30,
2019 December 31,
2018

August 2018 ($1,365,000) – Replaced August 2018 note ($1,365,000) that replaced November 2017 note ($765,000 balance at August 1, 2018), February 2018 note ($100,000) and March 2018 note ($500,000). Includes $635,000 penalty on default of August 2018 ($1,365,000) note and $20,000 for missed payment on August 2018 note. Interest only monthly payment of $50,500 for life of note. Entire principal due December 1, 2023. $ 2,020,000 $ 2,020,000
December 2018 ($6,000) – No interest with principal due on December 17, 2019. 6,000 6,000
December 2018 ($23,000) – No interest with principal due on December 13, 2019. 23,000 23,000
January 2019 ($32,700) – No interest with principal due on January 3, 2020. 32,700 -
January 2019 ($40,000) – No interest with principal due on January 11, 2020. 40,000 -
January 2019 ($14,500) – No interest with principal due on January 15, 2020. 14,500 -
February 2019 ($15,000) – No interest with principal due on February 1, 2020. 15,000 -
February 2019 ($5,000) – No interest with principal due on February 19, 2020. 5,000 -
March 2019 ($10,000) – No interest with principal due on March 4, 2020. 10,000 -
May 2019 ($20,000) – No interest with principal due on May 1, 2020 20,000 -
June 2019 ($89,000) – No interest with principal due on June 3, 2020 89,000 -

Total notes payable to related parties 2,275,200 2,049,000

Less: non-current portion (2,246,200 ) (2,020,000 )

Notes payable to related parties, current portion $ 29,000 $ 29,000
December 2018 - $2,222,000
On December 1, 2018, the Company entered into an agreement with a related third party to replace the August 2018 note of $1,365,000 with a new note for $2,020,000. The new note also includes a default penalty of $635,000 on the August 2018 note and $20,000 for a missed payment on the August 2018 note. The note calls for interest only payments of $50,500 per month for the life of the note. The entire principal is due on December 1, 2023. Accrued interest payments totaling $202,000 were not made by the Company. Per the note agreement, this amount was added to the principal, thus increasing the principal amount to $2,222,000.
Total interest expense was $303,000 and $0 for the six months ended June 30, 2019 and 2018, respectively. Total interest expense was $151,500 and $0 for the three months ended June 30, 2019 and 2018, respectively.
December 2018 - $6,000
On December 17, 2018, the Company entered into an agreement with a related party, Doheny Group, to obtain a $6,000 loan. The note bears no interest and is due in full on December 17, 2019.
December 2018 - $23,000
On December 31, 2018, the Company entered into an agreement with a related party, Doheny Group, to obtain a $23,000 loan. The note bears no interest and is due in full on December 31, 2019.
January 2019 - $32,700
On January 3, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $32,700 loan. The note bears no interest and is due in full on January 3, 2020.
January 2019 - $40,000
On January 11, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $40,000 loan. The note bears no interest and is due in full on January 11, 2020.
January 2019 - $14,500
On January 15, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $14,500 loan. The note bears no interest and is due in full on January 15, 2020.
February 2019 - $15,000
On February 1, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $15,000 loan. The note bears no interest and is due in full on February 1, 2020.
February 2019 - $5,000
On February 19, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $5,000 loan. The note bears no interest and is due in full on February 19, 2020.
March 2019 - $10,000
On March 4, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $10,000 loan. The note bears no interest and is due in full on March 4, 2020.
May 2019 - $20,000
On May 1, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $20,000 loan. The note bears no interest and is due in full on May 1, 2020.
June 2019 - $89,000
On June 3, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $89,000 loan. The note bears no interest and is due in full on June 3, 2020.
NOTE 7 – CONVERTIBLE NOTES PAYABLE
Convertible ~~note #1:~~notes payable consists of the following:
As of June 30, 2019 As of December 31, 2018
Terms Amount Discount Net
Balance Amount Discount Net
Balance

August 2015 ($15,000) - 7.5% interest bearing convertible debenture due on August 7, 2017 with interest only payments and due upon maturity. 7,500 - 7,500 7,500 - 7,500
March 2018 ($20,000) – 10% interest bearing convertible debenture due on March 9, 2021, with interest paid in cash for the first six months, and either in cash or shares of common stock thereafter. Principal is due March 9, 2021, paid either in cash or common stock, at the Company’s discretion 20,000 (8,965 ) 11,035 20,000 (11,527 ) 8,473

Total convertible notes payable 27,500 (8,965 ) 18,535 27,500 (11,527 ) 15,973

Less: non-current portion (20,000 ) 3,841 (16,159 ) (20,000 ) 6,403 (13,597 )

Convertible notes payable, current portion $ 7,500 $ (5,124 ) $ 2,376 $ 7,500 $ (5,124 ) $ 2,376
August 2015 - $15,000
On August 7, 2015, the Company entered into an agreement with a third party non-affiliate and issued a 7.5% interest bearing convertible debenture for $15,000 due on August 7, 2017, with conversion features commencing after 180 days following the date of the note. Payments of interest only were due monthly beginning September 2015. The loan is convertible at 70% of the average of the closing prices for the common stock during the five trading days prior to the conversion date. In connection with this Convertible note payable, the Company recorded a $5,770 discount on debt, related to the beneficial conversion feature of the note to be amortized over the life of the note or until the note is converted or repaid. This note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value (See Note 9). On May 6, 2016 the note holder elected to convert $7,500 in principal into 30,000 shares of common stock. The note is currently in default.

In connection with the issuance of the August Convertible Note Payable, the Company issued a warrant on August 7, 2015 to purchase 30,000 shares of the Company’s common stock at a purchase price of $0.50 per share. The Black Scholes model was used in valuing the warrants in determining the relative fair value of the warrants issued in connection with the convertible note payable using the following inputs: Expected Term – 3 years, Expected Dividend Rate – 0%, Volatility – 100%, Risk Free Interest Rate -1.08%. The Company recorded an additional $4,873 discount on debt, related to the relative fair value of the warrants issued associated with the note to be amortized over the life of the note.

Total interest expense was $141 and $141 for the three months ended June 30, 2019 and 2018, respectively, and $282 and $282 for the six months ended June 30, 2019.
~~Convertible note #2~~March 2018 - $20,000
On ~~November 24, 2015,~~March 9, 2018, the Company entered into an agreement with ~~an existing~~a non-affiliated shareholder and issued a 10% interest bearing convertible debenture for ~~$50,000~~$20,000 due on ~~November 19, 2017.~~March 9, 2021. Payments of interest ~~only are due monthly beginning December 2015.~~is in cash for the first six months, thereafter, interest may be paid either in cash or common stock of the Company. The loan is convertible at ~~70%~~61% of the average of the closing prices for the common stock during the five trading days prior to the conversion date but may not be converted if such conversion would cause the holder to own more than ~~9.9%~~4.9% of outstanding common stock after giving effect to the ~~conversion (which limitation may be removed by the holder upon 61 days advanced notice to the company).~~conversion. In connection with this Convertible Note Payable, the Company recorded a ~~$32,897~~$20,000 discount on debt (the total discount was $47,768, of which $27,768 was expensed), related to the beneficial conversion feature of the note to be amortized over the life of the note or until the note is converted or repaid. This note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value. ~~As of September~~During the six months ended June 30, ~~2017,~~2019, this note has not been converted.

~~In connection with~~Total interest expense was $500 and $313 for the ~~issuance of~~three months ended June 30, 2019 and 2018, respectively, and $1,000 and $626 for the November convertible note payable, the Company issued a warrant to purchase 80,000 shares of common stock at an exercise price of $0.80 per share. The warrant has an exercise period of two years from the date of issuance. The Black Scholes model was used in valuing the warrants in determining the relative fair value of the warrants issued in connection with the convertible note payable using the following inputs: Expected Term – 2 years, Expected Dividend Rate – 0%, Volatility – 100%, Risk Free Interest Rate -.61%. The Company recorded an additional $13,783 discount on debt, related to the relative fair value of the warrants issued associated with the note to be amortized over the life of the note.six months ended June 30, 2019 and 2018, respectively.

~~Promissory note #1:~~
On December 18, 2015, the Company entered into a borrowing facility with a third party. The initial note value was for a principal balance of $10,200. The Company is allowed to draw limited additional funds at any time. During 2016 the Company drew an additional $13,100 in connection with this borrowing facility. The interest due is dependent on a cost schedule that is tied to the date of repayment of the principle. This borrowing facility was paid back in January 2017.
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~~Promissory note #2:~~
On January 29, 2016, the Company entered into a note payable agreement with a third party. The note was for a principal balance of $44,850 in exchange for $29,505 in cash. The initial borrowing was paid back in August 2016. Subsequent to this initial repayment, the Company borrowed an additional $28,600 in September of 2016. The subsequent borrowing was paid back in April 2017.
~~Promissory note #3:~~
On March 30, 2016, the Company entered into a borrowing agreement with a third party. The note was for a principal balance of $50,000 and included 50,000 restricted common shares. The promissory note has a maturity date of June 30, 2018, and bears interest at 18% per annum. The purchaser did not sign the agreement nor deliver the proper consideration prior to March 31, 2016. The exchange of the $50,000 in cash consideration by the purchaser and the issuance of the 50,000 restricted common shares by the Company was made in conjunction with delivery of the signed purchase agreement and promissory note on April 5, 2016. The Company recorded a debt discount of $50,000 related to the relative fair value of the issued shares associated with the note to be amortized over the life of the note.
~~Promissory note #4:~~
On September 23, 2016, the Company provided an agreement to a third party to obtain a $10,000 promissory note in exchange for 100,000 restricted common shares and $10,000 in cash. The promissory note had a maturity date of October 31, 2017 and bears interest at 24% per annum. On October 31, 2017, the note was amended to extend the maturity date to October 31, 2018. There are no other changes to the note. The Company recorded a debt discount of $10,000 related to the relative fair value of the issued shares associated with the note to be amortized over the life of the note.
~~Promissory note #5:~~
On September 30, 2016, the Company provided an agreement to a third party to obtain a $36,100 promissory note in exchange for $36,100 in cash. The promissory note had a maturity date of October 1, 2017 and bears interest at 25% per annum. The note required interest only payments of $752 per month and a balloon payment of $36,100 for principle upon maturity. The note, along with promissory notes #7, #8, #9, #10, and #11(collectively “The Notes” and all to the same note holder), were amended November 1, 2017 and principal payments on The Notes is to be in sixty monthly payments of $15,000 principal and $10,000 monthly fee to commence December 1, 2018.
~~Promissory note #6:~~
On November 1, 2016, the Company provided an agreement to a third party to obtain a $5,040 promissory note in exchange for $5,040 in cash. The promissory note had a maturity date of November 1, 2017 and bears interest at 25% per annum. On November 1, 2017, the note was amended to extend the maturity date to November 1, 2018. There are no other changes to the note. The note requires interest only payments of $105 per month. In connection with the issuance of the note payable, the Company issued a warrant to purchase 50,000 shares of common stock at an exercise price of $0.10 per share. The warrant has an exercise period of four years from the date of issuance. The Black Scholes model was used in valuing the warrants in determining the relative fair value of the warrant using the following inputs: Expected TermNOTE 8 – 4 years, Expected Dividend Rate – 0%, Volatility – 329%, Risk Free Interest Rate -1.56%. The Company recorded a discount of $5,040, related to the relative fair value of the warrants issued associated with the note to be amortized over the life of the note.
~~Promissory note #7:~~
On November 1, 2016, the Company provided an agreement to a third party to obtain a $24,960 promissory note in exchange for $24,960 in cash. The promissory note had a maturity date of November 1, 2017 and bears interest at 25% per annum. The note required total payments of $520 per month and a balloon payment of $24,960 for principle upon maturity. The note, along with promissory notes #5, #8, #9, #10, and #11(collectively “The Notes” and all to the same note holder), were amended November 1, 2017 and principal payments on The Notes is to be in sixty monthly payments of $15,000 principal and $10,000 monthly fee to commence December 1, 2018.
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~~Promissory note #8:~~
On November 1, 2016, the Company provided an agreement to a third party to obtain a $50,000 promissory note in exchange for $50,000 in cash. The promissory note had a maturity date of November 1, 2019 and bears interest at 25% per annum. The note required total payments of $1,042 per month and a balloon payment of $50,000 for principle upon maturity. The note, along with promissory notes #5, #7, #9, #10, and #11(collectively “The Notes” and all to the same note holder), were amended November 1, 2017 and principal payments on The Notes is to be in sixty monthly payments of $15,000 principal and $10,000 monthly fee to commence December 1, 2018.
~~Promissory note #9:~~
On January 15, 2017, the Company provided an agreement to a third party to obtain a $50,400 promissory note in exchange for $50,400 in cash. The promissory note had a maturity date of January 15, 2018 and bears interest at 25% per annum. The note required total payments of $1,042 per month and a balloon payment of $50,000 for principle upon maturity. The Company recorded a debt discount of $27,720 related to the value of the issued shares associated with the process of obtaining the note to be amortized over the life of the note. The note, along with promissory notes #5, #7, #8, #10, and #11 (collectively “The Notes” and all to the same note holder), were amended November 1, 2017 and principal payments on The Notes is to be in sixty monthly payments of $15,000 principal and $10,000 monthly fee to commence December 1, 2018.
~~Promissory note #10:~~
On February 27, 2017, the Company provided an agreement to a third party to obtain a $70,000 promissory note in exchange for $70,000 in cash. The promissory note had a maturity date of February 27, 2020 and bears interest at 25% per annum. The note required total payments of $1,458 per month and a balloon payment of $70,000 for principle upon maturity. The Company recorded a debt discount of $28,000 related to the value of the issued shares associated with the process of obtaining the note to be amortized over the life of the note. The note, along with promissory notes #5, #7, #8, #9, and #11 (collectively “The Notes” and all to the same note holder), were amended November 1, 2017 and principal payments on The Notes is to be in sixty monthly payments of $15,000 principal and $10,000 monthly fee to commence December 1, 2018.
~~Promissory note #11:~~
On March 16, 2017, the Company provided an agreement to a third party to obtain a $75,000 promissory note in exchange for $75,000 in cash. The promissory note had a maturity date of March 16, 2020 and bears interest at 25% per annum. The note required total payments of $1,563 per month and a balloon payment of $75,000 for principle upon maturity. The Company recorded a debt discount of $30,000 related to the value of the issued shares associated with the process of obtaining the note to be amortized over the life of the note. The note, along with promissory notes #5, #7, #8, #9, and #11 (collectively “The Notes” and all to the same note holder), were amended November 1, 2017 and principal payments on The Notes is to be in sixty monthly payments of $15,000 principal and $10,000 monthly fee to commence December 1, 2018.
~~Royalty note #1:~~
On January 20, 2016, the company entered into a non-interest bearing note payable and royalty agreement with a third party. Under the note, the Company borrowed $65,000 and began to repay the principal amount at a rate of approximately $937 per month with escalations to approximately $3,531 per month as of February 2017 until the note is paid in full. In addition, starting in February 2018, the Company will pay the lender a royalty fee of five ($5) dollars per month for every ignition interlock devise that the Company has on the road in customers’ vehicles up to eight hundred (800) in perpetuity, and for every unit over 800, the Company will owe the lender $1 per month per device in perpetuity. In connection with this note, the Company recorded a debt discount of $65,000 relating to the future royalty payments, to be amortized over the life of the note.
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On September 30, 2016, the Company entered into Amendment No. 1 to Royalty note #1 in order to remove a security interest in the Company’s assets to secure repayment of the original note and amend the royalty provisions of the original note to be $1 for each Device on the road beginning in the 25^th month after the date of the original note. In connection with this amendment, the Company issued 425,000 shares of restricted common stock. Pursuant to ASC 470 this amendment is a deemed extinguishment of the debt and the resulting revised debt is set up as a new note. In connection therewith, the Company recorded a loss on extinguishment of $116,541 during the year ended December 31, 2016.DERIVATIVE LIABILITIES

~~Royalty note #2:~~
~~On March 29, 2016, the company consummated a non-interest bearing note payable and royalty agreement with a relative~~Derivative liabilities consisted of the CEO with terms almost identical to the note referenced above. Under the note, the Company borrowed $55,000 and began to repay the principal amount at a rate of approximately $937 per month with escalations to approximately $3,531 per month as of April 2017 until the note is paid in full. In addition, starting in February 2018, the Company will pay the lender a royalty fee of five ($5) dollars per month for every ignition interlock devise that the Company has on the road in customers’ vehicles up to eight hundred (800) in perpetuity, and for every unit over 800, the Company will owe the lender $1 per month per device in perpetuity. In connection with this note, the Company recorded a debt discount of $55,000 relating to the future royalty payments, to be amortized over the life of the note.following:

~~On September 30, 2016, the Company entered into Amendment No. 1 to Royalty note #2 to amend the royalty provisions of the original note to be $1 for each Device on the road beginning in the 25~~^th month after the date of the Royalty note #2. In connection with this amendment, the Company issued 50,000 shares of restricted common stock and recorded an additional debt discount of $8,959. This amendment was accounted for as a debt modification pursuant to ASC 470.
~~Royalty note #3:~~
On September 30, 2016, the Company entered into a Loan and Security Agreement (the “LSA”) with Doheny Group, LLC, a Delaware limited liability company (“Doheny”), under which Doheny agreed to loan up to $542,400 in two phases, to be used to acquire additional parts and supplies to manufacture the Company’s proprietary breath alcohol ignition interlock devices. Under the terms of the LSA, the first phase will be a loan of up to $192,000 to acquire parts and supplies to manufacture 600 Devices; and the second phase will be a loan of up to $350,400 to acquire parts and supplies to manufacture 1,000 Devices.
The Phase 1 Loan was funded in the amount of $192,000 by Doheny on September 30, 2016, upon which the Company forwarded the funds to its supplier on or about October 5, 2016, in order to acquire parts and supplies to manufacture 600 Devices. Both the Phase 1 Loan and the Phase 2 Loan mature three years from the date of funding, and are at an interest rate of 25% per annum. The note requires interest only payments of $4,000 per month. The Company can prepay the Phase 1 Loan and the Phase 2 Loan (if applicable) at any time without penalty. In exchange for Doheny funding the Phase 1 Loan, the Company issued Doheny a promissory note for $192,000 and also issued Doheny shares of common stock equal to 4.99% of the then-outstanding common stock, pursuant to the terms of a stock purchase agreement. As a result, on or about October 7, 2016, the Company issued Doheny 845,913 shares of common stock. In addition, upon funding of any portion of the Phase 2 loan (Royalty Note #4 below) then the Company is obligated to issue Doheny that number of additional shares of common stock that equals 5% of the then-outstanding common stock. Until the Company repays the Phase 1 Loan and the Phase 2 Loan, as applicable, Doheny has anti-dilution rights for the percentage of stock Doheny owns in the event the Company issues additional shares of common stock during that period. The Company also entered into a Royalty Agreement with Doheny, under which Doheny was granted perpetual royalty rights on all Devices when the Company has 500 or more Devices in service whether rented to end users or distributors. The royalty amounts vary between $1 and $2 per Device depending on a variety of factors. The Company recorded a debt discount of $192,000 related to the relative fair value of the issued shares associated with the Phase 1 note to be amortized over the life of the note.
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On August 3, 2017, the Company entered into an amendment (“Amendment No. 1 to Royalty Agreement”) with Doheny Group, LLC. The amendment amends the calculation of royalty amounts to a monthly calculation of $1.30 per unit (whether retail or wholesale unit) on the total number of units each month in perpetuity. The amendment also amends the payment of royalties to commence from and after the effective date of the amendment on all units at customers, beginning with the first unit.
~~Royalty note #4:~~
On November 4, 2016, the Company agreed to fund an initial portion of the Phase 2 loan as described in “Royalty note #3” above. In connection with this funding the common stock ownership percentage of Doheny Group was increased to 9.95%. As also described in “Royalty note #3” above Doheny has anti-dilution privileges to maintain 9.95% of common stock ownership at no additional cost until both Royalty note #3 and Royalty note #4 are paid in full. As of September 30, 2017, the Company has drawn $325,000 out of the maximum allowance of $350,400 in connection with Royalty note #4.
~~Related party promissory note~~
On February 16, 2014, the Company entered into a note payable agreement with Laurence Wainer, the director, President and sole officer of the Company. The note was for a principal balance of $160,000 and bears interest at 7.75% per annum. Principal and interest payments are due in 60 equal monthly installments beginning in March 2014 of $3,205. The Company and Laurence Wainer entered into an additional agreement effective April 2014 suspending loan repayments until January 2015. As of January 2015, the payments have resumed. On March 31, 2017 the Company entered into an agreement with Mr. Wainer to issue to him 1,000,000 Series A Preferred Shares in exchange $25,537 in accrued salary. On May 19^,2017, the Company amended the March 31, 2017 agreement to forgive $45,000 in debt owed by Company to Mr. Wainer instead of the forgiveness of $25,537 in accrued salary. The Company paid back the remaining amounts due under this note in June 2017.
~~Note 9 – Derivative Financial Instruments~~
June 30, 2019 December 31, 2018

August 2015 - $15,000 convertible debt $ 6,359 $ 6,523
March 2018 - $20,000 convertible debt 23,549 15,994

Total derivative liabilities $ 29,907 $ 22,517

The Company applies the provisions of ASC Topic 815-40, Contracts in Entity’s Own Equity (“ASC Topic 815-40”), under which convertible instruments, which contain terms that protect holders from declines in the stock price, may not be exempt from derivative accounting treatment. As a result, embedded conversion options (whose exercise price is not fixed and determinable) in convertible debt (which is not conventionally convertible due to the exercise price not being fixed and determinable) are initially recorded as a liability and are revalued at fair value at each reporting date using the Black Sholes Model.

~~The~~August 2015 Convertible Debt - $15,000
In August 2015, the Company ~~has~~entered into a ~~$7,500 and a $50,000~~$15,000 convertible note with variable conversion ~~pricing outstanding at September 30, 2017.~~pricing. The following inputs were used within the Black Sholes Model to determine the initial relative fair ~~value: Expected Term – .85~~values of the $15,000 convertible note with expected term of 1.58 years, expected dividend rate of 0%, volatility of 100% and ~~1.11 years, Expected Dividend Rate – 0%, Volatility – 312%, Risk Free Interest Rate~~risk-free interest rate 0.61%.
March 2018 Convertible Debt - ~~0.55%.~~$20,000

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In March 2018, the Company entered into a $20,000 convertible note with variable conversion pricing. The following inputs were used within the Black Sholes Model to determine the initial relative fair values of the $20,000 convertible note with expected term of 3.35 years, expected dividend rate of 0%, volatility of 413% and risk free interest rate 2.90%.

The Company revalues these derivatives each quarter using the Black Sholes Model. The change in valuation is accounted for as a gain or loss in derivative liability. The following table describes the ~~Derivative~~derivative liability as of ~~September 30, 2017 and~~ December 31, ~~2016.~~2018 and June 30, 2019.

Balance December 31, 2016 $ 73,556
Change in fair market value of derivatives (11,019 )
Balance September 30, 2017 (unaudited) $ 62,537
December 31, 2018 Additions Changes June 30, 2019

August 2015 - $15,000 convertible debt $ 6,523 $         - $ (165 ) $ 6,358

March 2018 - $20,000 convertible debt 15,994 - 7,555 23,549

Total $ 22,517 $ - $ 7,390 $ 29,907

~~Note 10~~NOTE 9 – ~~Accrued Royalties Payable~~ACCRUED ROYALTY PAYABLE

~~In connection with the Royalty Notes number 1-4 as discussed in Note 8 above the~~The Company has estimated the royalties to be paid out in ~~perpetuity. These estimates were performed at~~perpetuity under royalty agreements. The Company entered into royalty agreement as follows:
● November 2017 Royalty Agreement – The Company entered into a royalty agreement with a related party on November 1, 2017 in relation to a note payable of $900,000. This note replaced the September and November 2016 Royalty Agreements. Under the royalty agreement, the Company is required to pay a royalty fee of from $1.50 to $3.00 per month for every ignition interlock devise that the Company has on the road in customers’ vehicles, the amount depending on how many devices are installed.
● August 2018 Royalty Agreement – the Company entered into a royalty agreement with a related party on August 1, 2018 in relation to a note payable of $1,365,000. This note replaced the November 2017 Royalty Agreement as well as other, non-royalty notes payable. Under the royalty agreement, the Company is required to pay $1.50 and accrue an additional $3.50 for every ignition interlock devise for the first nine months of the note payable. After the first nine months, the Company is required to pay $1.50 per devise and the amount accrued during the first nine months will be paid monthly through the next twelve months. After the note payable is paid in full, the Company is required to pay $3.00 per devise in perpetuity.
● December 2018 royalty Agreement – the Company entered into a royalty agreement with a related party on December 1, 2018 in relation to a note payable of $2,020,000. This note replaced the August 2018 Royalty Agreement. Under the royalty agreement, the Company is required to pay a royalty fee of $5.00 per month for every ignition interlock device that the Company has on the road in customers’ vehicles.
Based on the ~~inception~~royalty agreement, the Company had the following royalty accruals:
June 30, 2019 December 31, 2018
November 2017 royalty agreement $ 3,327 $ 3,327
August 2018 royalty agreement 18,058 18,058
December 2018 royalty agreement 35,250 5,500

Total accrued royalties $ 56,635 $ 26,885
Royalty expense was $13,251 and $47,416 for the ~~notes to reflect~~three months ended June 30, 2019 and 2018, respectively, and $29,751 and $89,945 for the ~~associated debt discount. Payments on such royalty notes became due in October 2016 upon the Company hitting certain sales milestones as set forth in the royalty agreements.~~six months ended June 30, 2019 and 2018, respectively.
~~Note 11~~NOTE 10 – ~~Stockholders’ Equity~~STOCKHOLDERS’ EQUITY

Preferred Stock

The Company’s articles of incorporation authorize the Company to issue up to 20,000,000 preferred shares of $0.001 par value.

Series A Preferred Stock

The Company has been authorized to issue 1,000,000 shares of Series A Preferred Stock. The Series A shares have the following preferences:no dividend rights; no liquidation preference over the Company’s common stock; no conversion rights; no redemption rights; no call rights by the Company; each share of Series A Preferred stock will have one hundred (100) votes on all matters validly brought to the Company’s common stockholders.

During the three months ended March 31, 2017, the Company entered into a material definitive agreement to issue 1,000,000 shares of series A preferred stock to an officer and director of the Company with a preliminary estimated value of $350,000. As of ~~September~~June 30, ~~2017,~~2019, the total number of preferred shares issued or issuable was 1,000,000.

Common Stock

The Company has authorized 100,000,000 shares of $.0001.Holders of common stock are entitled to one vote for each share held. There are no restrictions that limit the Company’s ability to pay dividends on its common stock, subject to the requirements of the Delaware Revised Statutes. The Company has not declared any dividends since incorporation.

During the ~~nine~~three and six months ended ~~September~~June 30, ~~2017,~~2019, theCompany issued ~~27,180~~no additional shares ~~of $0.001 par value common stock for services with a value of $13,913. The Company also issued 195,400 shares, valued at $85,720, to a related party in connection with obtaining debt financing.Additionally, the Company issued~~ and ~~sold 3,737,154~~250,000 additional shares of its common stock ~~to several investors~~ for ~~an aggregate purchase price of $653,098. In addition, the Company issued 447,914 common shares in accordance with the anti-dilution provisions of Royalty notes #3 and #4 (see Note 8).~~services valued at $24,500, respectively. The total number of shares issued or issuable as of ~~September~~June 30, ~~2017~~2019 was ~~24,057,961.~~
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~~Note 12 – Warrants~~30,659,244.

The Company issued warrants in individual sales and in connection with common stock purchase agreements. The warrants have expiration dates ranging from three to four years from the date of grant and exercise prices ranging from $0.10 to $.35.
The Company issued 1,000 warrants for services rendered. The warrants have expiration dates of four years from the date of grant and an exercise price of $1.00. The Black Scholes model was used in valuing the warrants in determining the relative fair value of the warrant using the following inputs: Expected TermNOTE 12 – ~~4 years, Expected Dividend Rate – 0%, Volatility – 286%, Risk Free Interest Rate -1.54%.~~
~~A summary of warrant activity for the periods presented is as follows:~~
Weighted Average
Warrants for Common Shares Weighted Average
Exercise Price Remaining
Contractual Term Aggregate
Intrinsic Value
Outstanding and exercisable as of December 31, 2014 - $ - $ - $ -
Granted 110,000 0.72 2.27 -
Exercised - - - -
Forfeited, cancelled, expired - - - -
Outstanding as of December 31, 2015 110,000 $ 0.72 $ 2.10 -
Granted 50,000 0.10 4.00
Exercised - - - -
Forfeited, cancelled, expired - - - -
Outstanding as of December 31, 2016 160,000 $ 0.53 $ 1.97 5,250
Granted 4,977,298 0.46 4.00 407,614
Exercised - - -
Forfeited, cancelled, expired - - -
Outstanding as of Septemner 30, 2017 5,137,298 $ 0.46 $ 3.38 412,864
~~Note 13 – Income (Loss) Per Share~~INCOME (LOSS) PER SHARE

Net income (loss) per share is provided in accordance with FASB ASC 260-10,“Earnings per Share”. Basic net income (loss) per common share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive.

The following shares are not included in the computation of diluted income (loss) per share, because their inclusion would be anti-dilutive:
Six Months Ended June 30, Three Months Ended June 30,
2019 2018 2019 2018
Preferred shares - - -
Convertible notes 434,058 58,299 434,058 58,299
Warrants 6,537,586 5,597,586 6,537,586 5,597,586
Options - - - -
Total anti-dilutive weighted average shares 6,971,644 5,655,885 6,971,644 5,655,885
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Preferred shares - - -
Convertible notes 375,082 194,008 375,082 205,737
Warrants 5,137,298 110,000 5,137,298 110,000
Options - - - -
Total anti-dilutive weighted average shares 5,512,380 304,008 5,512,380 315,737
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If all dilutive securities had been exercised at ~~September~~June 30, ~~2017~~2019, the total number of common shares outstanding would be as follows:

Common Shares ~~24,057,961~~30,566,920
Preferred Shares -
Convertible notes ~~375,082~~434,058
Warrants ~~5,137,298~~6,537,586
Options -
Total potential shares ~~29,570,341~~37,538,564
~~Note 14~~NOTE 13 – ~~Commitments and Contingencies~~COMMITMENTS AND CONTINGENCIES

On December 1, 2016, the Company entered into a four-year lease with Cahuenga Management LLC for a storefront location at 15503 Cahuenga Blvd., North Hollywood, California 91601. Base rent under the lease is $2,200 per month, with an escalating provision up to $2,404 throughout the lease term. The rental agreement includes operating expenses such as common area maintenance, property taxes and insurance. The Company moved into the offices of David Haridim effective January 1, 2019. David Haridim is not charging the Company rent.

On August 28, 2017, the Company entered into a one-year lease with B3 Investments, LLC for a storefront location at Suites D104 and D105, 2406 24^th Street, South Phoenix, Arizona. Base rent under the lease is $1,350 per month plus 2% ($27) rental tax. The rental agreement includes operating expenses such as common area maintenance, property taxes and insurance.
Total rent expense was $21,672 and $16,053 for the three months ended June 30, 2019 and 2018, respectively, and $32,902 and $30,691 for the six months ended June 30, 2019 and 2018, respectively.

Legal Proceedings

In the ordinary course of business, the Company from time to time is involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon the Company’s financial condition and/or results of operations. However, in the opinion of management, other than as set forth herein, matters currently pending or threatened against the Company are not expected to have a material adverse effect on the Company’s financial position or results of operations.

~~Note 15~~NOTE 14 – ~~Settlement with Distributor~~RELATED PARTY TRANSACTIONS

On January 21, 2018, the Company and its major distributor memorialized a September 30, 2017 oral agreement that terminated their September 5, 2015 distributorship agreement. The distributor had failed to timely make required monthly payments. The Company agreed to not pursue amounts due it from the distributor under the distributorship agreement. However, in the settlement agreement, the parties agreed Lopez would pay the Company the amounts it would have been entitled to under the distributorship agreement if Lopez is paid any amounts from customers or sub-distributors for periods prior to the termination of the distributorship agreement. The Company agreed to assist the distributor in attempting to collect from any sub-distributors that have not paid the distributor amounts owed. The Company has sent letters to all customers of the distributor and believes that it will retain most, if not all, customers. If customers are not retained, the customers will need to have the interlock device removed and returned to the Company. The Company had ~~approximately 900 interlock units rented to~~ the ~~distributor. As of September 30, 2017, $35,979 in distributor revenue and accounts receivable were reversed out.~~following related party transactions:
● Notes payable of $2,275,200 to the Doheny Group at June 30, 2019 (refer to notes payable related party section)
● 2,669,761 shares of common stock, of which 1,863,152 were granted to the Doheny Group in relation to notes payable.

~~Note 16~~NOTE 15 – ~~Subsequent Events~~SUBSEQUENT EVENTS

The Company follows the guidance in FASB ASC Topic 855,Subsequent Events (“ASC 855”), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before the consolidated financial statements are issued or are available to be issued. ASC 855 sets forth (i) the period after the balance sheet date during which management of a reporting entity evaluates events or transactions that may occur for potential recognition or disclosure in the consolidated financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its consolidated financial statements, and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.

~~Subsequent to September 30, 2017, and through the date of this filing,~~On July 10, 2019, the Company entered into a loan agreement with The Doheny Group for $13,000. The loan has ~~issued~~no interest (0%), no monthly payments, and a ~~total~~balloon payment of ~~1,072,536 common shares for an aggregate cash purchase price of $142,300. In connection with these sales of common shares the Company has also issued warrants for 284,600 common shares.~~$13,000 on July 10, 2020.

On ~~November 1, 2017,~~July 18, 2019, the Company ~~and the~~entered into a loan agreement with The Doheny Group ~~entered into an amendment to their November 1, 2016~~for $8,000. The loan ~~agreement. The new loan agreement extends the term of the loan for sixty months and is to be paid back in sixty equal~~has no interest (0%), no monthly payments, ~~of $25,000 consisting of $15,000 principal payment~~ and a ~~monthly fee~~balloon payment of ~~$10,000 to commence~~$8,000 on ~~December 1, 2018.~~July 18, 2020.

On ~~November 1, 2017,~~July 26, 2019, the Company ~~and Joseph Haridim~~ entered into ~~an amendment to their October 31, 2016 loan agreement. The new~~a loan agreement ~~extends the term~~with The Doheny Group for $25,000. The loan has no interest (0%), no monthly payments, and a balloon payment of ~~the loan for twelve months and the loan is now due in full~~$25,000 on ~~November 1, 2018.~~July 26, 2020.
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ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Disclaimer Regarding Forward Looking Statements

Our Management’s Discussion and Analysis or Plan of Operations contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

Overview

We are a previous development stage company that was incorporated in the State of Delaware in July 2013. In the year ending December 31, ~~2016,~~2018, we generated total revenues of ~~$359,765,~~$942,160, compared to ~~$30,569~~$1,235,433 in the year ending December 31, 2015. From July 2, 2013 (inception) to December 31, 2016, we experienced a net loss and accumulated deficit of $1,531,330 and total liabilities of $727,812 including $97,749 in notes payable to our president, Laurence Wainer.2017. For the three ~~and nine~~ months ended ~~September~~June 30, ~~2017,~~2019 and 2018, we had total revenues of ~~$436,414~~$399,924 and ~~$911,926,~~$482,495, respectively, and a net loss of ~~$423,670~~$407,850 and ~~$1,308,436,~~$824,551, respectively.

We ~~are in the business of renting~~market distributorships and lease a breath alcohol ignition interlock device called the BDI-747/1, which is a mechanism that is installed on the steering column of an automobile and into which a driver exhales. The device in turn provides a blood-alcohol concentration analysis. If the driver’s blood-alcohol content is higher than a certain pre-programmed limit, the device prevents the ignition from engaging and the automobile from starting. ~~We also have the option of in-car camera technology, which some states require for state approval. The in-car camera feature is just one of several anti-circumvention features found on the BDI-747.~~ These devices are often required for use by DUI or DWI (“driving under the influence” or “driving while intoxicated”) offenders as part of a mandatory court or motor vehicle department program.

~~On June 17,~~We paid Well Electric, a company located in China with experience in design and manufacture of ignition interlock devices, $30,000 to design and manufacture the prototype ignition interlock device for us. Well Electric produced six prototype devices for us which we received in November 2014.
At July 27, 2015 ~~our BDI-747 Breath Alcohol Ignition Interlock Device, together with~~we began production of our patent pending BDI Model #1 power line filter ~~were certified by the National Highway Traffic Safety Administration (NHTSA) as meeting or exceeding the 2013 NHSTA guidelines. As a result, on July 27, 2015 we began production of~~to attach to our BDI-747 Breath Alcohol Ignition Interlock Device ~~with the attached BDI Model #1 power line filter.~~which together were certified by NHSTA on June 17, 2015 to work to together to meet or exceed 2013 NHSTA guidelines.

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Since receiving our NHSTA Certification we have submitted applications to a number of states to be considered as a state-certified breath alcohol ignition interlock manufacturer and provider for all Ignition Interlock Mandated DUI/DWI offenders throughout each state. The process to get the device approved varies greatly state-to-state. As of ~~September 30,~~December 31, 2017, the BDI-747/1 was approved for use in ~~eleven~~five states, namely ~~California, Colorado,~~ Oregon, Texas, Arizona, Kentucky, ~~Oklahoma, Tennessee, Pennsylvania, New York,~~ and ~~Kansas. Our plan for~~Tennessee. As of December 31, 2018, ~~is to build our infrastructure in the states where we have approval to ensure we can service all areas of those states, as well as to gain approval in an additional 3-5 states.~~
~~In states where~~ the BDI-747/1 isdevice was approved ~~as a BAIID, we rent~~in Oregon, Texas, Arizona, and Kentucky. As of June 30, 2019, the BDI-747/1 ~~devices to offenders, typically for twelve months, but the time could differ on a case-by-case basis depending on the sentence received by the offender. In most~~device was only approved in Arizona and Texas. The states where our BDI-747/1 device is approved has decreased primarily as a result of new state certification rules that require increased capital investment that we ~~market, rent,~~are not able to afford.
We have a storefront location in Phoenix, Arizona and contract with four qualified contractors to install, ~~and support the devices directly and in other states we may sell distributorships to authorized distributors allowing them to rent, install, service,~~calibrate, remove and ~~support~~monitor the ~~BDI-747/1~~ devices. Currently, we rent the devices directly in eight states and areas – California, Oregon, Colorado, Oklahoma, Tennessee, New York, Kansas, Arizona, Kentucky and Pennsylvania and parts of Texas - and license the device to distributors in one area – Lubbock County, Texas–. WeOur business plan ~~to rent and support our devices directly in most states, but will utilize distributors in states and territories where we believe it will be beneficial to us.~~
~~In states where we rent the devices directly to consumers, we typically charge between $159-$198 in upfront fees for the user (which covers two months~~includes growth of the ~~rent payment),~~company by continuing to complete and ~~then between $59-$99/month for the remainder of the rental period, which differs depending on the~~submit more state applications and ~~the individual consumer. After the upfront payments the rent~~to build up our service infrastructure by utilizing our own retail infrastructure, distributors and payments are month-to-month. The payments cover the installation of the device in the consumer’s vehicle, the rental of the device, recalibration of the device as required by each state (typically every 30 to 60 days) and the monitoring services for the device, which are then reported to the state in accordance with each state’s requirements. In states and areas where we do not have a direct presence, which we have in Los Angeles, California and Phoenix, Arizona, we contract with independent service centers, such as car alarm installation companies or other auto services companies, to perform the installations of our BDI-747/1 device, which centers must be approved by the states in which the perform the installations. Because our devices are installed in consumers’ vehicles are part of a judicially-mandated program, and since the use of the device controls the individual’s driving privileges, collection rates of the monthly leasing fees are close to 100%. The failure to make the payment could be a violation of the consumer’s sentence or probation and could cause them to lose the device and their driving privileges.
In areas where we have a distributor, in our typical distributorship arrangement, we charge the distributor a flat fee distributorship territory fee up front (which fee varies based on the size and location of the distributorship), a $150 per unit registration fee, and then a $35 monthly fee for each device the distributor has in its inventory. These fees may vary on a case-by-case basis. The relationship with our distributors may either be on an exclusive or non-exclusive basis depending upon the location of the distributorship and the fees charged.franchisees.

As of ~~January 16, 2018,~~December 31, 2017, we had approximately ~~2,947~~1,558 units on the road, with approximately ~~2,872~~1,451 devices being ~~rented~~leased directly from us and approximately 75107 devices ~~rented~~leased through our distributors. ~~We plan to refine~~As of December 31, 2018, we had approximately 1,100 units on the road, with approximately 885 devices being leased directly from us and approximately 215 devices leased through our ~~manufacturing processes and increase our marketing~~distributors. The decrease in the total number of ~~the device, and more aggressively pursue sales and distributors once~~devices we have ~~funds~~on the road is primarily due to ~~manufacture additional units.~~the fact the BDI-747/1 devices was approved in fewer states in 2018 compared to 2017. As of June 30, 2019, we had approximately 895 units on the road, with approximately 717 devices being leased directly from us and approximately 178 devices leased through our distributors.
Due to the decrease in the number of states where our BDI-747/1 device is approved, and the resulting decrease in the number of devices we have on the road, our management is currently exploring all options related to our business, including, but not limited to: (i) taking out loans or selling our stock in order to raise money to continue, and try to expand, our current business; (ii) trying to acquire a synergistic business and grow our current business; or (iii) selling our current business and trying to find another business to, in or out of our current business segment, to take over the public corporation.

Our website iswww.blowanddrive.com.

2926

Results of Operations

Three Months Ended ~~September~~June 30, ~~2017~~2019 (Unaudited) Compared to Three Months Ended ~~September~~June 30, ~~2016~~2018 (Unaudited)

For the three months ended September 30, Three Months Ended
2017 2016 June 30, 2019 June 30, 2018 Changes
Revenue
Monitoring revenue $ 394,139 $ 65,533
Distributorship revenue 42,276 78,225
Total revenue 436,415 143,758
Amount % of
Revenue Amount % of
Revenue Amount %

Revenues:
Monitoring revenues $ 149,556 88.7 % $ 264,744 94.3 % $ (115,188 ) -43.5 %
Distributorship revenues 18,990 11.3 % 16,095 5.7 % 2,895 18.0 %
Total revenues 168,546 100.0 % 280,839 100.0 % (112,293 ) -40.0 %

Cost of revenues:
Monitoring cost of revenue 57,817 8,899 3,598 2.1 % 29,068 10.4 % (25,470 ) -87.6 %
Distributorship cost of revenue 1,000 - - 0.0 % - 0.0 % - n/a
Total cost of revenue 58,817 8,899
Total cost of revenues 3,598 2.1 % 29,068 10.4 % (25,470 ) -87.6 %

Gross profit 377,598 134,859 164,948 97.9 % 251,771 89.6 % (86,823 ) -34.5 %

Operating expenses
Operating expenses:
Payroll 272,900 32,391 112,678 66.9 % 229,737 81.8 % (117,059 ) -51.0 %
Professional fees 16,603 4,266 105,751 62.7 % 50,963 18.1 % 54,788 107.5 %
General and administrative expenses 269,039 114,217
Depreciation 90,512 16,040
General and administrative 71,418 42.4 % 219,539 78.2 % (148,121 ) -67.5 %
Total operating expenses 649,054 166,914 289,847 172.0 % 500,239 178.1 % (210,392 ) -42.1 %

Loss from operations (271,456 ) (32,055 ) (124,899 ) -74.1 % (248,468 ) -88.5 % 123,569 -49.7 %

Other income (expense)
Interest expense (145,740 ) (41,789 )
Other Income (Expense):
Interest expense, net (161,984 ) -96.1 % (108,237 ) -38.5 % (53,747 ) 49.7 %
Change in fair value of derivative liability (6,474 ) 16,814 (5,558 ) -3.3 % 11,579 4.1 % (17,137 ) -148.0 %
Gain (loss) on extinguishment of debt - (116,541 ) - 0.0 % - 0.0 % - n/a
Total other income (expense) (152,214 ) (141,516 ) (167,542 ) -99.4 % (96,658 ) -34.4 % (70,884 ) 73.3 %

Loss before provision for income taxes (292,441 ) -173.5 % (345,126 ) -122.9 % 52,685 -15.3 %

Provision for income taxes - 0.0 % 800 0.3 % (800 ) n/a

Net loss $ (423,670 ) $ (173,571 ) $ (292,441 ) -173.5 % $ (345,926 ) -123.2 % $ 53,485 -15.5 %
Operating Loss; Net Loss

Our net loss ~~increased~~decreased by ~~$250,099,~~$53,485, from ($~~173,571)~~345,926) for the three months ended ~~September~~June 30, ~~2016~~2018 to ($~~423,670)~~292,441) for the three months ended ~~September~~June 30, ~~2017.~~2019. Our operating loss ~~increased~~decreased by ~~$239,401,~~$123,569, from ($~~32,055)~~248,468) to ($~~271,456)~~124,899) for the same periods. The ~~increase~~decrease in our net loss for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to the three months ended ~~September~~June 30, ~~2016,~~2018, is primarily the result of ~~an increase in our payroll expenses~~lower cost of ~~$240,509, our~~revenues, lower general and administrative expenses, ~~of $154,822, our depreciation expense of $74,472, our~~lower payroll, partially offset by decreased revenues and increases professional fees ~~of $12,337, our~~and interest expense, of $103,951, and our change in fair value of derivative liability of $23,288, offset by an increase in our gross profit of $242,739 for the period and a decrease in loss on debt extinguishment of $116,541.net. These changes are detailed below.
30
Revenue

~~During~~Monitoring Revenues.Monitoring revenues decreased by $115,188, or 43.5%, to $149,556 in the ~~three months ended September 30, 2017 we had $436,415~~second quarter of fiscal 2019 from $264,744 in ~~revenues, with $394,139 coming from revenue from~~ the second quarter last year. The decrease is due to a decrease in the number of monthly recurring payments we received from our customers that rent our BDI-747/1 breathalyzer device for the ongoing monitoring services related to the devices ~~and $42,276 coming from revenues received from our distributors,~~in the second quarter of fiscal 2019 compared to ~~$65,533 and $78,225 from these revenue sources for~~second quarter of last year. This decrease is primarily related to the fact our device is authorized in less states than it was during the same period ~~one~~in fiscal year ~~ago, respectively. We expect~~2018.
Distributorship Revenues. Distributorship revenues increased by $2,895, or 18.0%, to $18,990 in the ~~revenue we receive~~second quarter of fiscal 2019 from ~~monitoring our devices on~~$16,095 in the ~~road will continue~~second quarter last year. The increase is due to an increase ~~as we have more~~in number of units ~~on the road. In September 2017, we terminated our agreement dated September 5, 2015~~ with ~~our major distributor. We sent letters to all~~ customers ~~of the distributor and believe that we will retain most, if not all, of the distributor’s customers.~~through distributors.

Cost of Revenue

Our cost of revenue for the three months ended ~~September~~June 30, ~~2017~~2019 was ~~$58,817,~~$3,598, compared to ~~$8,899~~$29,068 for the three months ended ~~September~~June 30, ~~2016.~~2018. Our cost of revenue for the three months ended ~~September~~June 30, ~~2017 was attributed as $57,817 to monitoring cost of revenue~~2019 and ~~$1,000 to distributorship cost of revenue. For the three months ended September~~June 30, ~~2016, our cost of revenue~~2018, was completely related to our monthly monitoring services we provide to our customers. The decrease in our cost of revenue was due to the fact we ordered more parts and supplies from our supplier in the period in 2018 compared to the period in 2019.

Payroll

Payroll expense decreased by $117,059, or 51.0%, to $112,678 in the second quarter of fiscal 2019 from $229,737 in the second quarter last year. The decrease in payroll is due to controlling overhead expenses and decreasing personnel in the second quarter of fiscal 2019 compared to second quarter of last year. Our ~~payroll increased by $240,509 from $32,391 for the three months ended September 30, 2016 to $272,900 for the three months ended September 30, 2017. This increase was~~decrease in personnel is related to ~~hiring additional personnel as we put more units on the road and to a large increase in estimated payroll taxes. If we expand our operations, especially by renting units to individuals directly from~~ us ~~(as opposed to through distributors), we expect our payroll will continue to increase as we put additional~~having less units on the road.

Professional Fees

~~Our professional~~Professional fees increased by ~~$12,337~~$54,788, or 107.5%, to $105,751 in the second quarter of fiscal 2019 from ~~$4,266 for~~$50,963 in the ~~three months ended September 30, 2016 to $16,603 for the three months ended September 30, 2017.~~second quarter last year. These fees are largely related to fees paid for legal, accounting and audit services. We expect these fees to continue grow steadily asif our business expands. In the event we undertake an unusual transaction, such as an acquisition, securities offering, or file a registration statement, we would expect these fees to substantially increase during that period.

General and Administrative Expenses

General and administrative expenses ~~increased~~decreased by ~~$154,822~~$148,121, or 67.5%, to $71,418 in the second quarter of fiscal 2019 from ~~$114,217 for~~$219,539 in the ~~three months ended September 30, 2016~~second quarter last year. The decrease is due to ~~$269,039 for~~ the three months ended September 30, 2017. Increases were $73,757 for advertising, $32,241 for royalties, $27,349 for investor relations, $22,020 for bad debt expense, $13,964 for commissions, $12,989 for fixed assets disposed of, $9,688 for travel and related expenses, $8,180 for telephone, and $25,191 miscellaneous expenses, offset by decreases of $11,037 for dues & subscriptions and $59,520 for stock compensation expense for a former employee in 2016.
following:

31● Decrease of approximately $27,000 in royalty expense in the second quarter of fiscal 2019 compared to second quarter last year.
● Decrease of approximately $121,000 in software expense as we did not have any software services in the second quarter of fiscal 2019 compared to second quarter of last year.
● Decrease of approximately $31,000 in investor relations.
~~Depreciation~~
Our depreciation increased by $74,472 from $16,040 for the three months ended September 30, 2016 to $90,512 for the three months ended September 30, 2017. Our depreciation expenses in both periods were primarily related to the depreciation of the BDI-747/1 device. We anticipate our depreciation expense will continue to increase as we manufacture more devices.
Interest Expense

Interest expense increased by ~~$103,951~~$53,747, or 49.7%, to $161,984 in the second quarter of fiscal 2019 from ~~$41,789 for~~$108,237 in the ~~three months ended September 30, 2016 to $145,740 for the three months ended September 30, 2017.~~second quarter last year. The ~~interest expense significantly increased for the period ended September 30, 2017, compared to the same period one year ago,~~increase is due to ~~our~~ increase in ~~outstanding debt compared to one year ago, primarily~~loans from related ~~to the loans we received from Doheny Group, LLC.~~parties.

Change in Fair Value of Derivative Liability

During the three months ended ~~September~~June 30, ~~2017,~~2019, we had a change in fair value of derivative liability of ~~$(6,474)~~($5,558) compared to ~~$16,814~~$11,579 for the three months ended ~~September~~June 30, ~~2016.~~2018. The change in fair value of derivative liability in the three months ended ~~September~~June 30, ~~2017,~~2019, relates to the conversion feature of a promissory note we had outstanding during this period. Change in fair value of derivative liability results from changes in valuation at end of the reporting period. Since the conversion price on the promissory note is calculated based on a discount to the closing price of our common stock, as our closing price fluctuates it changes the fair value of the derivative liability.

~~Loss on Extinguishment of Debt~~
During the three months ended September 30, 2017, we had loss on extinguishment of debt of $0 compared to ($116,541) for the three months ended September 30, 2016. The loss on extinguishment of debt in the three months ended September 30, 2016 relates the deemed extinguishment of royalty note #1.
32
~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019 (Unaudited) Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2018 (Unaudited)

For the nine months ended September 30,
2017 2016
Revenue
Monitoring revenue $ 674,197 $ 200,188
Distributorship revenue 237,729 78,225
Total revenue 911,926 278,413

Monitoring cost of revenue 111,884 26,617
Distributorship cost of revenue 7,739 -
Total cost of revenue 119,623 26,617
Gross profit 792,303 251,796

Operating expenses
Payroll 457,288 103,666
Professional fees 93,505 65,887
General and administrative expenses 579,172 332,547
Depreciation 234,654 32,971
Total operating expenses 1,364,619 535,071

Loss from operations (572,316 ) (283,275 )

Other income (expense)
Interest expense (440,538 ) (111,714 )
Change in fair value of derivative liability 11,018 (2,798 )
Gain (loss) on extinguishment of debt (305,000 ) (116,541 )
Total other income (expense) (734,520 ) (231,053 )

Loss before provision for income taxes (1,306,836 ) (514,328)

Provision for income taxes 1,600 1,600
Net loss $ (1,308,436 ) $ (515,928 )
Six Months Ended
June 30, 2019 June 30, 2018 Changes
Amount % of
Revenue Amount % of
Revenue Amount %

Revenues:
Monitoring revenues $ 363,243 90.8 % $ 443,231 91.9 % $ (79,988 ) -18.0 %
Distributorship revenues 36,681 9.2 % 39,265 8.1 % (2,584 ) -6.6 %
Total revenues 399,924 100.0 % 482,496 100.0 % (82,572 ) -17.1 %

Cost of revenues:
Monitoring cost of revenue 25,233 6.3 % 76,681 15.9 % (51,448 ) -67.1 %
Distributorship cost of revenue - 0.0 % - 0.0 % - n/a
Total cost of revenues 25,233 6.3 % 76,681 15.9 % (51,448 ) -67.1 %

Gross profit 374,691 93.7 % 405,815 84.1 % (31,124 ) -7.7 %

Operating expenses:
Payroll 210,718 52.7 % 466,149 96.6 % (255,431 ) -54.8 %
Professional fees 147,297 36.8 % 88,055 18.2 % 59,242 67.3 %
General and administrative 131,492 32.9 % 469,095 97.2 % (337,603 ) -72.0 %
Total operating expenses 489,507 122.4 % 1,023,299 212.1 % (533,792 ) -52.2 %

Loss from operations (114,816 ) -28.7 % (617,484 ) -128.0 % 502,668 -81.4 %

Other Income (Expense):
Interest expense, net (338,808 ) -84.7 % (210,558 ) -43.6 % (128,250 ) 60.9 %
Change in fair value of derivative liability (7,390 ) -1.8 % 4,293 0.9 % (11,683 ) -272.1 %
Gain (loss) on extinguishment of debt 54,764 13.7 % - 0.0 % 54,764 n/a
Total other income (expense) (291,434 ) -72.9 % (206,265 ) -42.7 % (85,169 ) 41.3 %

Loss before provision for income taxes (406,250 ) -101.6 % (823,749 ) -170.7 % 417,499 -50.7 %

Provision for income taxes 1,600 0.4 % 800 0.2 % 800 n/a

Net loss $ (407,850 ) -102.0 % $ (824,549 ) -170.9 % $ 416,699 -50.5 %
Operating Loss; Net Loss

Our net loss ~~increased~~decreased by ~~$792,508,~~$416,699, from ($~~515,928)~~824,549) for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2018 to ($~~1,308,436)~~407,850) for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019. Our operating loss ~~increased~~decreased by ~~$289,041,~~$502,668, from ($~~283,275)~~617,484) to ($~~572,316)~~114,816) for the same periods. The ~~increase~~decrease in our net loss for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2018, is primarily the result of ~~an increase in our payroll expenses~~lower cost of ~~$353,622, our~~revenues, lower general and administrative expenses, ~~of $246,625, our depreciation expense of $201,683, our~~lower payroll, partially offset by decreased revenues and increases professional fees ~~of $27,618, our~~and interest expense, ~~of $328,824, and our loss on extinguishment of debt of $188,459, offset by an increase in our gross profit of $540,507 for the period and a change in fair value of derivative liability of $13,816.~~net. These changes are detailed below.
33

Revenue

~~During~~Monitoring Revenues.Monitoring revenues decreased by $79,988, or 18.0%, to $363,243 in the ~~nine~~six months ended ~~September~~June 30, ~~2017 we had $911,926~~2019 from $443,231 in ~~revenues, with $674,197 coming from revenue from~~ the six months ended June 30, 2018. The decrease is due to decrease in number of monthly recurring payments we received from our customers that rent our BDI-747/1 breathalyzer device for the ongoing monitoring services related to the devices ~~and $237,729 coming from revenues paid to us from our distributors,~~in the first six months of fiscal 2019 compared to ~~$278,413 total revenues~~first six months of last year. This decrease is primarily related to the fact our device is authorized in less states than it was during ~~the nine months ended September 30, 2016, and $200,188 and $78,225 from these revenue sources for~~ the same period ~~one~~in fiscal year ago, respectively. We expect the revenue we receive from monitoring our devices on the road will continue to increase as we have more units on the road. In September 2017, the company and its major distributor terminated their agreement dated September 5, 2015. The Company has sent letters to all customers of the distributor and believes that it will retain most, if not all, customers.2018.

Distributorship Revenues. Distributorship revenues decreased by $2,584, or 6.6%, to $36,681 in the second quarter of fiscal 2019 from $39,265 in the second quarter last year. The decrease is due to a decrease in number of units with customers through distributors.
Cost of Revenue

~~Our total cost of revenue for the nine months ended September 30, 2017 was $119,623, compared to $26,617 for the nine months ended September 30, 2016.~~ Our cost of revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 was ~~attributed as $111,884~~$25,233, compared to ~~monitoring~~$76,681 for the six months ended June 30, 2018. Our cost of revenue ~~and $7,739 to distributorship cost of revenue. For~~for the ~~nine~~six months ended ~~September~~June 30, ~~2016, our cost of revenue of $26,617~~2019 and 2018 was completely related to our monthly monitoring services we provide to our customers.
The decrease in our cost of revenue was due to the fact we ordered more parts and supplies from our supplier in the period in 2018 compared to the period in 2019.
Payroll

~~Our~~Payroll expense decreased by $255,431, or 54.8%, to $210,718 in the first six months of fiscal 2019 from $466,149 in the first six months of last year. The decrease in payroll ~~increased by $353,622, from $103,666 for~~is due to controlling overhead expenses and decreasing personnel due to the ~~nine months ended September 30, 2016 to $457,288, for~~decrease in the ~~nine months ended September 30, 2017. This increase was related to hiring additional personnel as~~number of units we put more units on the road and to a large increase in estimated payroll taxes. If we expand our operations, especially by renting units to individuals directly from us (as opposed to through distributors), we expect our payroll will continue to increase as we put additional unitshave on the road.

Professional Fees

~~Our professional~~Professional fees increased ~~$27,618,~~by $59,242, or 67.3%, to $147,297 in the first six months of fiscal 2019 from ~~$65,887 for~~$88,055 in the ~~nine~~first six months ~~ended September 30, 2016 to $93,505 for the nine months ended September 30, 2017.~~of last year. These fees are largely related to fees paid for legal, accounting and audit services. We expect these fees to continue grow steadily asif our business expands. In the event we undertake an unusual transaction, such as an acquisition, securities offering, or file a registration statement, we would expect these fees to substantially increase during that period.
General and Administrative Expenses
General and administrative expenses ~~increased $246,625,~~decreased by $337,603, or 72.0%, to $131,492 in the first six months of fiscal 2019 from ~~$332,547 for~~$469,095 in the ~~nine~~first six months ~~ended September 30, 2016~~of last year. The decrease is due to ~~$579,172 for~~ the nine months ended September 30, 2017. Increases were $73,266 for advertising, $53,013 for investor relations, $44,400 for a settlement with a former employee (total settlement was $50,000, of which $5,600 was applied to accrued payroll), $40,593 for royalties, $22,020 for bad debt expenses, $21,794 was for postage, $12,989 for fixed assets disposed of, $12,833 for travel relate expenses, $12,569 for commission, $11,641 for telephone, $8,233 for office supplies, $7,198 for software expense, and $31,041 miscellaneous expense, offset by $93,520 stock compensation in 2016, and $11,445 less dues and subscriptions.following:

34● Decrease of approximately $60,000 in royalty expense in the first six months of fiscal 2019 compared to first six months last year.
● Decrease of approximately $132,000 in software expense as we did not have any software services in the first six months of fiscal 2019 compared to first six months of last year.
● Decrease of approximately $61,000 in marketing and advertising expenses due to reduction in working capital.
● Decrease of approximately $72,000 in investor relations expenses.

~~Depreciation~~
Our depreciation increased by $201,683 from $32,971 for the nine months ended September 30, 2016 to $234,654 for the nine months ended September 30, 2017. Our depreciation expenses in both periods were primarily related to the depreciation of the BDI-747/1 device. We anticipate our depreciation expense will continue to increase as we manufacture more devices.
Interest Expense

Interest expense increased by ~~$328,824~~$128,250, or 60.9%, to $338,808 in the first six months of fiscal 2019 from ~~$111,714 for~~$210,558 in the ~~nine~~first six months ~~ended September 30, 2016 to $440,538 for the nine months ended September 30, 2017.~~of last year. The ~~interest expense significantly increased for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016,~~increase is due to ~~our~~ increase in ~~outstanding debt, primarily~~loans from related ~~to the loans we received from Doheny Group, LLC.~~parties.

Change in Fair Value of Derivative Liability

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, we had a change in fair value of derivative liability of ~~$11,018~~($7,390) compared to ~~($2,798)~~$4,293 for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2018. The change in fair value of derivative liability in the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, relates to the conversion feature of a promissory note we had outstanding during this period. Change in fair value of derivative liability results from changes in valuation at end of the reporting period. Since the conversion price on the promissory note is calculated based on a discount to the closing price of our common stock, as our closing price fluctuates it changes the fair value of the derivative liability.

~~Loss~~Gain on Extinguishment of Debt

~~During the nine months ended September 30, 2017, we had loss on extinguishment of ($305,000) compared to ($116,541) for the nine months ended September 30, 2016. The loss~~Gain on extinguishment of debt of $54,764 resulted from forgiveness and settlement of debt in the ~~nine months ended September 30, 2017, relates to debt we retired through the issuance~~first quarter of ~~preferred stock to Laurence Wainer.~~
fiscal 2019.
Liquidity and Capital Resources for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2018

Introduction

Our cash on hand as of ~~September~~June 30, ~~2017~~2019 was ~~$84,370.~~$12,426, compared to $775 at December 31, 2018. During the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, because of our operating losses, we did not generate positive operating cash flows. As a result, we have short term cash needs. These needs are being satisfied through proceeds from the sales of our securities and loans from both related parties and third parties. We currently do not believe we will be able to satisfy our cash needs from our revenues for some time.

Our cash, current assets, total assets, current liabilities, and total liabilities as of ~~September~~June 30, ~~2017~~2019 and as of December 31, ~~2016,~~2018, respectively, are as follows:

September 30, 2017 December 31, 2016 Change
Cash $ 84,370 $ 116,309 $ (31,939 )
Total current assets $ 135,658 $ 180,561 $ (17,494 )
Total assets $ 1,066,517 $ 793,161 $ 313,754
Total current liabilities $ 893.453 $ 531,006 $ 362,447
Total liabilities $ 1,206,595 $ 727,812 $ 593,435
35
June 30, 2019 December 31, 2018 Change

Cash $ 12,426 $ 775 $ 11,651
Total current assets $ 25,409 $ 7,146 $ 18,263
Total assets $ 31,890 $ 13,627 $ 18,263
Total current liabilities $ 755,397 $ 564,477 $ 190,920
Total liabilities $ 3,017,756 $ 2,616,143 $ 401,613

Our current assets ~~decreased~~increased as of ~~September 2017~~June 30, 2019 as compared to December 31, ~~2016,~~2018, primarily due to us having ~~less~~more cash on hand and ~~less~~ accounts ~~receivable.~~receivable at June 30, 2019. The increase in our total assets between the two periods was also primarily related to ~~the increase in property~~us having more cash on hand and ~~equipment, offset by decrease in cash.~~accounts receivable at June 30, 2019.

Our current liabilities increased slightly as of ~~September~~June 30, ~~2017~~2019 as compared to December 31, ~~2016.~~2018. This increase was primarily due to increases in our ~~accounts~~accrued royalty payable, accrued ~~expenses,~~interest, accrued ~~payroll~~interest-related party, and ~~related expenses, and accrued interest,~~derivative liability, offset by decreases in accrued expenses, deferred revenue, and ~~a note~~accounts payable, ~~to a related party.~~net of debt discount.

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.

Sources and Uses of Cash

Our cash flows from operating, investing and financing activities are summarized as follows:
Operations

We had net cash used in operating activities of ~~$179,428~~$182,960 for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, as compared to ~~$182,150~~$620,304 for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2018. For the period in ~~2017,~~2019, the net cash used in operating activities consisted primarily of our net ~~loss~~income (loss) of ~~$1,308,436, a decrease in deferred revenue of $15,274, and~~($407,850), adjusted primarily by a non-cash change in fair value of derivative liability of ~~$11,019, offset by a decrease in accounts receivable~~$7,390, shares issued for services of $6,760, an increase in accounts payable of $74,541, an increase in accrued expenses of $193,409, an increase in accrued interest of $30,968, a decrease in deposits of $1,123, a decrease in prepaid expenses of $792, and changes in non-cash loss$24,500, gain on extinguishment of debt of ~~$305,000,~~($54,764), and amortization of debt discount of ~~$275,465, depreciation~~$17,035, as well as changes in, accrued expenses of ~~$234,654,~~($39,254), accounts receivable ($6,430), prepaid expenses of ($182), deferred revenue of ($74,980), accrued royalties payable of $29,750, accrued interest, related party of $151,500, and accrued interest of $170,325. For the period in 2018, the net cash used in operating activities consisted primarily of our net income (loss) of ($824,549), increase in derivative liabilities of ($15,370), an allowance for doubtful accounts of ($26,541), adjusted primarily by a non-cash change in fair value of derivative liability of $11,078, shares issued for services of ~~$14,188, fixed assets disposed~~$110,200, and amortization of ~~$12,989,~~debt discount of $24,536, as well as changes in, accrued expenses of $8,795, accounts receivable of $55,457, prepaid expenses of $1,506, accounts payable of ($29,250), deferred revenue of ($56,676), accrued royalties payable of $60,866, and ~~allowance for doubtful accounts~~accrued interest of ~~$5,412. $182,150 in cash was used in operating activities for the nine months ended September 30, 2016.~~
$54,561.
Investments
We ~~had~~did not have any cash provided by/used in investing activities in the ~~nine~~six months ended ~~September~~June 30, ~~2017 of $567,026 compared to $176,433 for September~~2019 or June 30, 2016. For the nine months ended September 30, 2017, cash used in investing activities related to purchases of furniture and equipment of ($817,026), partially offset by deposits on units of $250,000. For the nine months ended September 30, 2016, $176,433 in cash was used to purchases of furniture and equipment.2018.

Financing

We had net cash provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 of ~~$714,515,~~$194,611, compared to ~~$544,351~~$869,794 for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2018. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, our net cash from financing activities consisted of proceeds from related party notes payable of ~~$195,400~~$226,200, partially offset by repayments of notes payable of $31,589. For the six months ended June 30, 2018, our net cash from financing activities consisted of proceeds from convertible notes payable of $20,000, proceeds from related party notes payable of $600,127, proceeds of notes payable of $21,600, and proceeds from issuance of common stock of ~~$653,099,~~$360,705, partially offset by repayments of notes payable of ~~$14,268,~~$31,588, repayments of ~~royalty~~convertible notes payable of ~~$65,529,~~$5,000, and repayments ~~relate~~of related party ~~note~~notes payable of ~~$54,187. For~~$96,050.
Critical Accounting Estimates
As discussed in Part II, Item 7,Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the ~~nine~~fiscal year ended December 30, 2018, we consider our estimates on inventory valuation, long-lived assets and self-insurance liabilities to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements. There have been no significant changes to these estimates in the six months ended ~~September~~June 30, ~~2016, net cash~~2019.
Our adoption of ~~$544,351 was provided by financing activities.~~ASC 606, Revenue Recognition, did not change the way the Company recognized revenue for the first six months of fiscal year 2019 compared to same period last year.
Recently Issued Accounting Updates
See Note 2 to the Interim Financial Statements included in Part I, Item 1,Financial Statements, of this Quarterly Report on Form 10-Q.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements.

Commitments and Contingent Liabilities

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. As of ~~September~~June 30, ~~2017,~~2019, we have no contingent liability that is required to be recorded nor disclosed.
36

ITEM 3Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4Controls and Procedures

Evaluation of Disclosure Controls and Procedures
Pursuant to rules adopted by the Securities and Exchange Commission we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to rules promulgated under the Securities Exchange Act of 1934. This evaluation was done as of the end of ~~September~~June 30, ~~2017~~2019 under the supervision and with the participation of our principal executive officer and our principal financial officer.

Based upon our evaluation, our principal executive and financial officer concluded that, as of ~~September~~June 30, ~~2017,~~2019, our existing disclosure controls and procedures were not effective. Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management, including the principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. With only two officers in charge of such reporting controls, there is no backup to the oversight of such individual and thus such disclosure controls and procedures may not be considered effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our first quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Internal Control over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting in accordance with Rule 13a-15 of the Securities Exchange Act of 1934. Our president conducted an evaluation of the effectiveness of our internal control over financial reporting as of ~~September~~June 30, ~~2017,~~2019, based on the criteria establish in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was ineffective as of ~~September~~June 30, ~~2017,~~2019, based on those criteria. A control system can provide only reasonably, not absolute, assurance that the objectives of the control system are met and no evaluation of controls can provide absolute assurance that all control issues have been detected.
Management assessed the effectiveness of our internal control over financial reporting as of ~~September~~June 30, ~~2017~~2019 and identified the following material weaknesses, which are outlined further in our Annual Report on Form 10-K for the year ended December 31, ~~2016:~~2018:
37

Inadequate segregation of duties: We have an inadequate number of personnel to properly implement control procedures.

We have not documented our internal controls: We have limited policies and procedures that cover the recording and reporting of financial transactions and accounting provisions. As a result we may be delayed in our ability to calculate certain accounting provisions.

We do not have effective controls over the control environment. A formally adopted written code of business conduct and ethics that governs our employees, officers, and directors was not in place. Additionally, management has not developed and effectively communicated to our employees its accounting policies and procedures. This has resulted in inconsistent practices. We also do not have independent members on our Board of Directors.

We have not been able to timely and accurately record convertible debt transactions, deferred revenue, and derivative liabilities in the financial statements. As a result, we have needed additional time, beyond the filing deadlines, to file our periodic reports.

PART II – OTHER INFORMATION

ITEM 1Legal Proceedings
On February 21, 2018, we filed a Complaint in the Superior Court of the State of Arizona, County of Maricopa against EZ Interlock, LLC (Blow & Drive Interlock Corp. v. EZ Interlock, LLC (Case No. CV2018-051689, Superior Court of the State of Arizona, Maricopa County) for Conversion, Implied/Quasi Contract and Quantum Meruit, Unjust Enrichment, Tortious Interference with Business Expectancy/Prospective Business Relations, and Lost Profits. The basis for our lawsuit was that EZ Interlock an authorized installer of ours in the State of Arizona, was a customer of BDI Interlock, LLC, one of our distributors, and EZ Interlock was installing our BDI-747/1 devices for customers in Arizona and collecting fees from such customers, but stopped remitting payment to BDI Interlock, LLC, which, in turn, was unable to remit funds to us. We filed the lawsuit to have EZ Interlock stop installing our devices, return our devices in its possession, and pay the amounts owed to BDI Interlock and us for the customers paying EZ Interlock for our devices. EZ Interlock filed an Answer and Counterclaim on July 23, 2018. Shortly after filing our Complaint, the Court granted our request for a Temporary Restraining Order and Preliminary Injunction from continuing to install devices and return the devices in its possession. On February 7, 2019, our new management elected to dismiss the lawsuit, without prejudice, based on their opinion that our chances of recovering money from EZ Interlock was slim compared to amount that would be necessary to fund the litigation. We received most of our devices back from EZ Interlock. No discovery was conducted during the litigation.

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
ITEM 1ARisk Factors

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 2Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended ~~September~~June 30, ~~2017,~~2019, we ~~issued the following~~did not issue any unregistered ~~securities:~~securities.
During the quarter ended September 30, 2017, we issued an aggregate of 1,425,936 shares of our common stock to twenty-five non-affiliated investors in exchange for $236,988. These shares were issued pursuant to stock purchase agreements and were issued with a standard restrictive legend. In connection with these share issuances we also issued warrants to acquire an aggregate of 3,031,872 shares of our common stock, with exercise prices ranging from $0.25 to $1.00 per share and that expire either three or four years from the date of grant. The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, due to the fact the investors are sophisticated investors, known to our management and familiar with our operations.
As of September 30, 2017, we were obligated to issue an aggregate of 158,233 shares of our common stock to Doheny Group, LLC, pursuant to the anti-dilution rights they have under separate agreements with us, but have not yet issued the shares. These shares will be issued with a standard restrictive legend. The issuances will be exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, due to the fact the purchasers are sophisticated investors, known to our management and familiar with our operations.
38

ITEM 3Defaults Upon Senior Securities

There have been no events which are required to be reported under this Item.

ITEM 4Mine Safety Disclosures

There have been no events which are required to be reported under this Item.

ITEM 5Other Information

~~Termination of Distributorship Agreement~~
On September 30, 2017, we orally agreed with J C Lopez/BDI Interlock, LLC, our primary distributor, to settle a dispute regarding Lopez’s failure to pay the required monthly payments owed by Lopez to us under that certain Exclusive Distribution Agreement entered into between the parties on September 5, 2015 (the “Distributorship Agreement”), with such settlement being that the parties agreed to cancel Lopez’s distributor territory and the Distributorship Agreement, and that we would be granted the rights to pursue directly any amounts owed to Lopez by either sub-distributors of Lopez or users of our products from Lopez, in exchange for our agreement not to pursue Lopez directly for any amounts Lopez owed us under the Distributorship Agreement up through termination of the Distributorship Agreement. However, in the settlement agreement, the parties agreed Lopez would pay us the amounts we wouldThere have been ~~entitled~~no events which are required to be reported under the Distributorship Agreement if Lopez is paid any amounts from customers or sub-distributors for periods prior to the termination of the Distributorship Agreement. On January 21, 2018, we entered into a written Settlement Agreement with Lopez to memorialize our oral agreement from September 30, 2017.this Item.
39
ITEM 6 Exhibits

Item No. Description

3.1 (1) Certificate of Incorporation of Jam Run Acquisition Corporation dated June 28, 2013

3.2 (17) Articles of Amendment to Articles of Incorporation to Jam Run Acquisition Corporation dated February 6, 2014 (changing corporate name to Blow & Drive Interlock Corporation)

3.3 (1) Bylaws of Jam Run Acquisition Corporation (now Blow & Drive Interlock Corporation) dated June 2013

10.1 (2) Agreement between Tiber Creek Corporation and Laurence Wainer dated January 25, 2014

10.2 (2) Promissory Note between the Company and Laurence Wainer dated February 16, 2014

10.3 (3) Lease Agreement by and between Marsel Plaza LLC and Laurence Wainer and Blow and Drive Interlock Corporation dated January 21, 2015

10.4 (4) Exclusive Distributorship Agreement with Theenk Inc. dated August 21, 2015

10.5 (4) Exclusive Distributorship Agreement with Jay Lopez dated July 24, 2015

10.6 (4) Independent Contractor Agreement with Laurence Wainer dated September 11, 2015

10.7 (5) Exclusive Distributorship Agreement with Stephen Ferraro dated November 9, 2015

10.4 (6) Supply Agreement by and between BDI Manufacturing, Inc., an Arizona corporation, and C4 Development Ltd. dated June 29, 2015

10.5 (7) Securities Purchase Agreement with David Stuart Petlak entered into on November 19, 2015

10.6 (7) Convertible Promissory Note issued to David Stuart Petlak dated November 19, 2015

10.7 (7) Common Stock Warrant issued to David Stuart Petlak dated November 19, 2015

10.8 (8) Exclusive Distributorship Agreement with dba Blow & Drive Houston dated January 11, 2016

10.9 (9) Secured Promissory Note and Agreement with Ira Silver dated January 20, 2016

10.10 (9) Secured Promissory Note and Agreement with Chaim K. Wainer dated October 29, 2015

10.11 (10) Securities Purchase Agreement with Dr. Oren Azulay dated March 30, 2016

10.12 (10) Common Stock Purchase Agreement with Gustavo Arceo dated April 2016

10.13 (10) Common Stock Purchase Agreement with LGL LLC dated May 6, 2016

10.14 (11) Loan and Security Agreement with Doheny Group, LLC dated June 30, 2019 September 30, ~~2017~~2016

10.15 (11) Phase 1 Loan Agreement with Doheny Group, LLC dated September 30, ~~2017~~2016 June 30, 2019

10.16 (11) Royalty Agreement with Doheny Group, LLC dated September 30, ~~2017~~2016 June 30, 2019

10.17 (11) Common Stock Purchase Agreement with Doheny Group, LLC dated September 30, ~~2017~~2016 June 30, 2019
40
10.18 (11) Agreement with Abraham Summers and Gnossis International, LLC

10.19 (12) Termination of Services Agreement by and between Blow & Drive Interlock Corporation, Abraham Summers and Gnosiis International, LLC dated June 19, 2017

10.20 (13) Amendment No. 1 to Debt Conversion and Series A Preferred Stock Purchase Agreement dated May 17, 2017

10.21 (13) Amendment No. 1 to Loan and Security Agreement with Doheny Group, LLC dated June 3, 2017

10.22 (13) Amendment No. 1 to Royalty Agreement with Doheny Group, LLC dated June 3, 2017

10.23*10.23 (14) Form of Securities Purchase Agreement

10.24*10.24 (14) Settlement Agreement by and between Blow & Drive Interlock Corporation and J C Lopez/BDI Interlock, LLC dated January 21, 2018 (memorializing oral agreement between the parties dated ~~September~~June 30, ~~2017)~~2019)
10.25 (15) Agreement to Purchase Common Stock and Preferred Stock dated December 31, 2018
10.26 (16) Debt Conversion and Series A Preferred Stock Purchase Agreement by and between Blow & Drive Interlock Corporation and Laurence Wainer dated March 7, 2017

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith).

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Accounting Officer (filed herewith).

32.1 Section 1350 Certification of Chief Executive Officer (filed herewith).

32.2 Section 1350 Certification of Chief Accounting Officer (filed herewith).
101.INS ** XBRL Instance Document

101.SCH ** XBRL Taxonomy Extension Schema Document

101.CAL ** XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF ** XBRL Taxonomy Extension Definition Linkbase Document

101.LAB ** XBRL Taxonomy Extension Label Linkbase Document

101.PRE ** XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

(1) Incorporated by reference from our Registration Statement on Form 10, filed with the Commission on September 30, 2013.

(2) Incorporated by reference from our Registration Statement on Form S-1, filed with the Commission on July 24, 2014.
(3) Incorporated by reference from our Annual Report on Form 10-K, filed with the Commission on March 30, 2015.
41
(4) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on September 11, 2015.

(5) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on November 12, 2015.

(6) Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Commission on August 13, 2015.

(7) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on September 11, 2015.

(8) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on February 22, 2016.

(9)
Incorporated by reference from our Current Report on Form 8-K filed with the Commission on March 17, 2016.

(10) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on August 22, 2016.

(11)
Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on ~~February 7, 2018.~~
November 21, 2016.

(12) Incorporated by reference from our Current Report on Form 10-Q filed with the Commission on July 3, 2017.

(13)
Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on August 21, 2017.
(14) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on February 7,9, 2018.
42
(15) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on January 11, 2019.
(16) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on March 15, 2017.
(17) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on June 27, 2019.
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Blow & Drive Interlock Corporation

Dated: ~~February 9, 2018~~August 14, 2019 /s/ ~~Laurence Wainer~~David Haridim
By: ~~Laurence Wainer~~David Haridim
~~Chief~~President (Principal Executive ~~Officer~~
Officer)
43

	September 30, 2017			December 31, 2016
	(unaudited)
ASSETS

Current Assets
Cash	$	84,370		$	116,309
Accounts receivable, net of allowance for doubtful accounts of $5,412 and $0 at September 30, 2017 and December 31, 2016, respectively		39,069			51,241
Prepaid expenses		1,569			2,361
Inventory		10,650			10,650
Total current assets		135,658			180,561

Property and equipment, net		925,728			356,346
Deposits		5,131			256,254

Total assets	$	1,066,517		$	793,161

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current Liabilities
Accounts payable	$	102,791		$	28,250
Accrued expenses		235,398			68,795
Accrued royalty payable		145,317			-
Accrued interest		41,078			10,110
Income taxes payable		5,929			5,700
Deferred revenue		91,057			106,331
Derivative liability		62,537			73,556
Notes payable, net of debt discount of $22,431 and $15,018 at September 30, 2017 and December 31, 2016, respectively		154,069			125,351
Notes payable – related party		-			49,396
Convertible notes payable, net of debt discount of $3,115 and $23,724 at September 30, 2017 and December 31, 2016, respectively		54,385			33,775
Royalty notes payable, net of debt discount of $29,393 and $574,294 at September 30, 2017 and December 31, 2016, respectively		892			29,742
Total current liabilities		893,453			531,006

Notes payable, net of debt discount of $46,750 and $32,292 at September 30, 2017 and December 31, 2016, respectively		148,250			17,708
Notes payable – related party		-			48,353
Royalty notes payable, net of debt discount of $353,894 and $574,294 at September 30, 2017 and December 31, 2016, respectively		163,106			8,778
Accrued royalty payable		1,786			121,967

Total Liabilities		1,206,595			727,812

Stockholders’ Equity (Deficit)
Preferred stock, par value $0.001, 20,000,000 shares authorized, 1,000,000 and 0 shares issued or issuable and outstanding as of September 30, 2017 and December 31, 2016, respectively		1,000			–
Common stock, par value $0.0001, 100,000,000 shares authorized, 24,057,961 and 19,575,605 shares issued or issuable and outstanding as of September 30, 2017 and December 31, 2016, respectively		2,406			1,958
Additional paid-in capital		2,696,281			1,594,721
Accumulated (deficit)		(2,839,765	)		(1,531,330	)
Total stockholders’ equity (deficit)		(140,078	)		65,349

Total liabilities and stockholders’ equity (deficit)	$	1,066,517		$	793,161

	Preferred Stock - Series A				Common Stock				Additional Paid-In			Accumulated			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Capital			(Deficit)			(Deficit)
Balance December 31, 2016		-	$	-		19,575,605	$	1,958	$	1,594,720		$	(1,531,329	)	$	65,349
Shares issued for services						27,180		3		13,910						13,913
Warrants issued for services										278						278
Shares issued related to debt		1,000,000		1,000		195,400		19		434,700						435,719
Shares issued for cash						3,736,894		374		652,725						653,099
Shares issued related to anti-dilution						522,882		52		(52	)					0
Net loss													(1,308,436	)		(1,308,436	)
Balance September 30, 2017 (unaudited)		1,000,000	$	1,000		24,057,961	$	2,406	$	2,696,281		$	(2,839,765	)	$	(140,078	)

	Fair Value Measurements Using
	Level 1		Level 2			Level 3
Balance December 31, 2016	$	-	$	73,556		$	-
Change in fair value of derivative liability		-		(11,019	)		-
Balance September 30, 2017 (unaudited)	$	-	$	62,537		$	-

Description	Level 1		Level 2		Level 3

Balance December 31, 2018	$	-	$	22,517	$	-
Change in fair value of derivative liability		-		7,390		-

Balance June 30, 2019	$	-	$	29,907	$	-

	(a)	Segment gross profit includes segment net sales less segment cost of sales
	(b)	Identifiable segment operating expenses consists of identifiable depreciation expense
	(c)	Identifiable segment operating ~~income~~incomes consists of segment gross profit less identifiable operating expense
	(d)	General corporate expense consists of all other non-identifiable expenses

	September 30, 2017			December 31, 2016
Monitoring Units	$	1,198,057		$	419,898
Furniture, Fixtures, and Equipment		4,798			4,798
Software		11,667			-
Total Assets		1,214,522			424,696
Less: Accumulated Depreciation		(288,794	)		(68,350	)
Furniture and Equipment, net	$	925,728		$	356,346

	September 30, 2017		December 31, 2016
Deposit for BDI-747 units	$	-	$	250,000
Other		5,131		6,254
Total	$	5,131	$	256,254

	September 30, 2017		December 31, 2016
Monitoring deferred revenues	$	91,057	$	103,831
Distributorship deferred revenues		-		2,500
Total	$	91,057	$	106,331

	September 30, 3017					December 31, 2016
	Principal			Accrued interest		Principal			Accrued interest
Convertible notes
Convertible note #1	$	7,500		$	208	$	7,500		$	31
Debt discount		-			-		(3,104	)		-
Convertible note #2		50,000			2,034		50,000			1,617
Debt discount		(3,115	)		-		(20,620	)		-
Subtotal convertible notes net		54,385			2,242		33,776			1,648

Promissory notes
Promissory note #1		-			-		990			-
Promissory note #2		-			-		13,278			-
Debt discount		-			-		(3,510	)		-
Promissory note #3		50,000			1,500		50,000			-
Debt discount		(13,542	)		-		(32,292	)		-
Promissory note #4		10,000			2,200		10,000			400
Debt discount		(384	)		-		(7,308	)		-
Promissory note #5		36,100			1,504		36,100			3,581
Promissory note #6		5,040			-		5,040			106
Debt discount		(420	)		-		(4,200	)		-
Promissory note #7		24,960			2,629		24,960			-
Promissory note #8		50,000			2,083		50,000			-
Promissory note #9		50,400			1,050		-			-
Debt discount		(8,085	)		-		-			-
Promissory note #10		70,000			2,917		-			-
Debt discount		(22,166	)		-		-			-
Promissory note #11		75,000			3,411		-			-
Debt discount		(24,583	)		-		-			-
Subtotal promissory notes net		302,320			17,294		143,058			4,087

Royalty notes
Royalty note #1		15,107			-		46,876			-
Debt discount		(14,549	)		-		(45,903	)		-
Royalty note #2		15,178			-		48,938			-
Debt discount		(14,844	)		-		(41,133	)		-
Royalty note #3		192,000			8,000		192,000			-
Debt discount		(128,000	)		-		(176,000	)		-
Royalty note #4		325,000			13,542		325,000			4,375
Debt discount		(225,894	)		-		(311,258	)		-
Subtotal royalty notes net		163,997			21,542		38,520			4,375

Related party promissory note
Related party promissory note		-			-		97,749			-
Total notes	$	520,702		$	41,078	$	313,103		$	10,110

Current portion	$	209,346		$	41,078	$	238,264		$	10,110
Long-term portion	$	311,356			-	$	74,839		$	-

	As of June 30, 2019						As of December 31, 2018
Terms	Amount		Discount		Net Balance		Amount			Discount			Net Balance

*December 2017 ($50,000*) -15% interest due in December 2020 including issuance of 100,000 shares of common stock with exercise price at $0.25 per share.	$	-	$	-	$	-	$	40,736		$	(14,474	)	$	26,262
*October 2018 ($60,000)* - $561 daily principal and interest until paid in full		-		-		-		42,424			-			42,424
*October 2018 ($72,800)* - $11,527 monthly principal and interest for first six months, $9,975 monthly principal and interest last six months		67,159		-		67,159		67,159			-			67,159

Total notes payable		67,159		-		67,159		150,319			(14,474	)		135,845

Less: non-current portion		-		-		-		(24,994	)		6,925			(18,069	)

Notes payable, current portion	$	67,159	$	-	$	67,159	$	125,325		$	(7,549	)	$	117,776

Terms	June 30, 2019			December 31, 2018

*August 2018 ($1,365,000)* – Replaced August 2018 note ($1,365,000) that replaced November 2017 note ($765,000 balance at August 1, 2018), February 2018 note ($100,000) and March 2018 note ($500,000). Includes $635,000 penalty on default of August 2018 ($1,365,000) note and $20,000 for missed payment on August 2018 note. Interest only monthly payment of $50,500 for life of note. Entire principal due December 1, 2023.	$	2,020,000		$	2,020,000
*December 2018 ($6,000)* – No interest with principal due on December 17, 2019.		6,000			6,000
*December 2018 ($23,000)* – No interest with principal due on December 13, 2019.		23,000			23,000
*January 2019 ($32,700)* – No interest with principal due on January 3, 2020.		32,700			-
*January 2019 ($40,000)* – No interest with principal due on January 11, 2020.		40,000			-
*January 2019 ($14,500)* – No interest with principal due on January 15, 2020.		14,500			-
*February 2019 ($15,000)* – No interest with principal due on February 1, 2020.		15,000			-
*February 2019 ($5,000)* – No interest with principal due on February 19, 2020.		5,000			-
*March 2019 ($10,000)* – No interest with principal due on March 4, 2020.		10,000			-
*May 2019 ($20,000)* – No interest with principal due on May 1, 2020		20,000			-
*June 2019 ($89,000)* – No interest with principal due on June 3, 2020		89,000			-

Total notes payable to related parties		2,275,200			2,049,000

Less: non-current portion		(2,246,200	)		(2,020,000	)

Notes payable to related parties, current portion	$	29,000		$	29,000

	June 30, 2019		December 31, 2018

August 2015 - $15,000 convertible debt	$	6,359	$	6,523
March 2018 - $20,000 convertible debt		23,549		15,994

Total derivative liabilities	$	29,907	$	22,517

Balance December 31, 2016	$	73,556
Change in fair market value of derivatives		(11,019	)
Balance September 30, 2017 (unaudited)	$	62,537

	December 31, 2018		Additions		Changes			June 30, 2019

August 2015 - $15,000 convertible debt	$	6,523	$	-	$	(165	)	$	6,358

March 2018 - $20,000 convertible debt		15,994		-		7,555			23,549

Total	$	22,517	$	-	$	7,390		$	29,907

	●	*November 2017 Royalty Agreement* – The Company entered into a royalty agreement with a related party on November 1, 2017 in relation to a note payable of $900,000. This note replaced the September and November 2016 Royalty Agreements. Under the royalty agreement, the Company is required to pay a royalty fee of from $1.50 to $3.00 per month for every ignition interlock devise that the Company has on the road in customers’ vehicles, the amount depending on how many devices are installed.

	●	*August 2018 Royalty Agreement* – the Company entered into a royalty agreement with a related party on August 1, 2018 in relation to a note payable of $1,365,000. This note replaced the November 2017 Royalty Agreement as well as other, non-royalty notes payable. Under the royalty agreement, the Company is required to pay $1.50 and accrue an additional $3.50 for every ignition interlock devise for the first nine months of the note payable. After the first nine months, the Company is required to pay $1.50 per devise and the amount accrued during the first nine months will be paid monthly through the next twelve months. After the note payable is paid in full, the Company is required to pay $3.00 per devise in perpetuity.

	●	*December 2018 royalty Agreement* – the Company entered into a royalty agreement with a related party on December 1, 2018 in relation to a note payable of $2,020,000. This note replaced the August 2018 Royalty Agreement. Under the royalty agreement, the Company is required to pay a royalty fee of $5.00 per month for every ignition interlock device that the Company has on the road in customers’ vehicles.

	June 30, 2019		December 31, 2018
November 2017 royalty agreement	$	3,327	$	3,327
August 2018 royalty agreement		18,058		18,058
December 2018 royalty agreement		35,250		5,500

Total accrued royalties	$	56,635	$	26,885

			Weighted Average
	Warrants for Common Shares		Weighted Average Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding and exercisable as of December 31, 2014		-	$	-	$	-	$	-
Granted		110,000		0.72		2.27		-
Exercised		-		-		-		-
Forfeited, cancelled, expired		-		-		-		-
Outstanding as of December 31, 2015		110,000	$	0.72	$	2.10		-
Granted		50,000		0.10		4.00
Exercised		-		-		-		-
Forfeited, cancelled, expired		-		-		-		-
Outstanding as of December 31, 2016		160,000	$	0.53	$	1.97		5,250
Granted		4,977,298		0.46		4.00		407,614
Exercised		-		-		-
Forfeited, cancelled, expired		-		-		-
Outstanding as of Septemner 30, 2017		5,137,298	$	0.46	$	3.38		412,864

Common Shares			~~24,057,961~~30,566,920
Preferred Shares			-
Convertible notes			~~375,082~~434,058
Warrants			~~5,137,298~~6,537,586
Options			-
Total potential shares			~~29,570,341~~37,538,564

	●	Notes payable of $2,275,200 to the Doheny Group at June 30, 2019 (refer to notes payable related party section)

	●	2,669,761 shares of common stock, of which 1,863,152 were granted to the Doheny Group in relation to notes payable.

	For the three months ended September 30,						Three Months Ended
	2017			2016			June 30, 2019						June 30, 2018						Changes
Revenue
Monitoring revenue	$	394,139		$	65,533
Distributorship revenue		42,276			78,225
Total revenue		436,415			143,758
							Amount			% of Revenue			Amount			% of Revenue			Amount			%

Revenues:
Monitoring revenues							$	149,556			88.7	%	$	264,744			94.3	%	$	(115,188	)		-43.5	%
Distributorship revenues								18,990			11.3	%		16,095			5.7	%		2,895			18.0	%
Total revenues								168,546			100.0	%		280,839			100.0	%		(112,293	)		-40.0	%

Cost of revenues:
Monitoring cost of revenue		57,817			8,899			3,598			2.1	%		29,068			10.4	%		(25,470	)		-87.6	%
Distributorship cost of revenue		1,000			-			-			0.0	%		-			0.0	%		-			n/a
Total cost of revenue		58,817			8,899
Total cost of revenues								3,598			2.1	%		29,068			10.4	%		(25,470	)		-87.6	%

Gross profit		377,598			134,859			164,948			97.9	%		251,771			89.6	%		(86,823	)		-34.5	%

Operating expenses
Operating expenses:
Payroll		272,900			32,391			112,678			66.9	%		229,737			81.8	%		(117,059	)		-51.0	%
Professional fees		16,603			4,266			105,751			62.7	%		50,963			18.1	%		54,788			107.5	%
General and administrative expenses		269,039			114,217
Depreciation		90,512			16,040
General and administrative								71,418			42.4	%		219,539			78.2	%		(148,121	)		-67.5	%
Total operating expenses		649,054			166,914			289,847			172.0	%		500,239			178.1	%		(210,392	)		-42.1	%

Loss from operations		(271,456	)		(32,055	)		(124,899	)		-74.1	%		(248,468	)		-88.5	%		123,569			-49.7	%

Other income (expense)
Interest expense		(145,740	)		(41,789	)
Other Income (Expense):
Interest expense, net								(161,984	)		-96.1	%		(108,237	)		-38.5	%		(53,747	)		49.7	%
Change in fair value of derivative liability		(6,474	)		16,814			(5,558	)		-3.3	%		11,579			4.1	%		(17,137	)		-148.0	%
Gain (loss) on extinguishment of debt		-			(116,541	)		-			0.0	%		-			0.0	%		-			n/a
Total other income (expense)		(152,214	)		(141,516	)		(167,542	)		-99.4	%		(96,658	)		-34.4	%		(70,884	)		73.3	%

Loss before provision for income taxes								(292,441	)		-173.5	%		(345,126	)		-122.9	%		52,685			-15.3	%

Provision for income taxes								-			0.0	%		800			0.3	%		(800	)		n/a

Net loss	$	(423,670	)	$	(173,571	)	$	(292,441	)		-173.5	%	$	(345,926	)		-123.2	%	$	53,485			-15.5	%

	31●	Decrease of approximately $27,000 in royalty expense in the second quarter of fiscal 2019 compared to second quarter last year.
	●	Decrease of approximately $121,000 in software expense as we did not have any software services in the second quarter of fiscal 2019 compared to second quarter of last year.
	●	Decrease of approximately $31,000 in investor relations.

	For the nine months ended September 30,
	2017			2016
Revenue
Monitoring revenue	$	674,197		$	200,188
Distributorship revenue		237,729			78,225
Total revenue		911,926			278,413

Monitoring cost of revenue		111,884			26,617
Distributorship cost of revenue		7,739			-
Total cost of revenue		119,623			26,617
Gross profit		792,303			251,796

Operating expenses
Payroll		457,288			103,666
Professional fees		93,505			65,887
General and administrative expenses		579,172			332,547
Depreciation		234,654			32,971
Total operating expenses		1,364,619			535,071

Loss from operations		(572,316	)		(283,275	)

Other income (expense)
Interest expense		(440,538	)		(111,714	)
Change in fair value of derivative liability		11,018			(2,798	)
Gain (loss) on extinguishment of debt		(305,000	)		(116,541	)
Total other income (expense)		(734,520	)		(231,053	)

Loss before provision for income taxes		(1,306,836	)		(514,328)

Provision for income taxes		1,600			1,600
Net loss	$	(1,308,436	)	$	(515,928	)

	Six Months Ended
	June 30, 2019						June 30, 2018						Changes
	Amount			% of Revenue			Amount			% of Revenue			Amount			%

Revenues:
Monitoring revenues	$	363,243			90.8	%	$	443,231			91.9	%	$	(79,988	)		-18.0	%
Distributorship revenues		36,681			9.2	%		39,265			8.1	%		(2,584	)		-6.6	%
Total revenues		399,924			100.0	%		482,496			100.0	%		(82,572	)		-17.1	%

Cost of revenues:
Monitoring cost of revenue		25,233			6.3	%		76,681			15.9	%		(51,448	)		-67.1	%
Distributorship cost of revenue		-			0.0	%		-			0.0	%		-			n/a
Total cost of revenues		25,233			6.3	%		76,681			15.9	%		(51,448	)		-67.1	%

Gross profit		374,691			93.7	%		405,815			84.1	%		(31,124	)		-7.7	%

Operating expenses:
Payroll		210,718			52.7	%		466,149			96.6	%		(255,431	)		-54.8	%
Professional fees		147,297			36.8	%		88,055			18.2	%		59,242			67.3	%
General and administrative		131,492			32.9	%		469,095			97.2	%		(337,603	)		-72.0	%
Total operating expenses		489,507			122.4	%		1,023,299			212.1	%		(533,792	)		-52.2	%

Loss from operations		(114,816	)		-28.7	%		(617,484	)		-128.0	%		502,668			-81.4	%

Other Income (Expense):
Interest expense, net		(338,808	)		-84.7	%		(210,558	)		-43.6	%		(128,250	)		60.9	%
Change in fair value of derivative liability		(7,390	)		-1.8	%		4,293			0.9	%		(11,683	)		-272.1	%
Gain (loss) on extinguishment of debt		54,764			13.7	%		-			0.0	%		54,764			n/a
Total other income (expense)		(291,434	)		-72.9	%		(206,265	)		-42.7	%		(85,169	)		41.3	%

Loss before provision for income taxes		(406,250	)		-101.6	%		(823,749	)		-170.7	%		417,499			-50.7	%

Provision for income taxes		1,600			0.4	%		800			0.2	%		800			n/a

Net loss	$	(407,850	)		-102.0	%	$	(824,549	)		-170.9	%	$	416,699			-50.5	%

	34●	Decrease of approximately $60,000 in royalty expense in the first six months of fiscal 2019 compared to first six months last year.
	●	Decrease of approximately $132,000 in software expense as we did not have any software services in the first six months of fiscal 2019 compared to first six months of last year.
	●	Decrease of approximately $61,000 in marketing and advertising expenses due to reduction in working capital.
	●	Decrease of approximately $72,000 in investor relations expenses.

	September 30, 2017		December 31, 2016		Change
Cash	$	84,370	$	116,309	$	(31,939	)
Total current assets	$	135,658	$	180,561	$	(17,494	)
Total assets	$	1,066,517	$	793,161	$	313,754
Total current liabilities	$	893.453	$	531,006	$	362,447
Total liabilities	$	1,206,595	$	727,812	$	593,435

Item No.		Description

3.1 (1)		Certificate of Incorporation of Jam Run Acquisition Corporation dated June 28, 2013

3.2 (17)		Articles of Amendment to Articles of Incorporation to Jam Run Acquisition Corporation dated February 6, 2014 (changing corporate name to Blow & Drive Interlock Corporation)

3.3 (1)		Bylaws of Jam Run Acquisition Corporation (now Blow & Drive Interlock Corporation) dated June 2013

10.1 (2)		Agreement between Tiber Creek Corporation and Laurence Wainer dated January 25, 2014

10.2 (2)		Promissory Note between the Company and Laurence Wainer dated February 16, 2014

10.3 (3)		Lease Agreement by and between Marsel Plaza LLC and Laurence Wainer and Blow and Drive Interlock Corporation dated January 21, 2015

10.4 (4)		Exclusive Distributorship Agreement with Theenk Inc. dated August 21, 2015

10.5 (4)		Exclusive Distributorship Agreement with Jay Lopez dated July 24, 2015

10.6 (4)		Independent Contractor Agreement with Laurence Wainer dated September 11, 2015

10.7 (5)		Exclusive Distributorship Agreement with Stephen Ferraro dated November 9, 2015

10.4 (6)		Supply Agreement by and between BDI Manufacturing, Inc., an Arizona corporation, and C4 Development Ltd. dated June 29, 2015

10.5 (7)		Securities Purchase Agreement with David Stuart Petlak entered into on November 19, 2015

10.6 (7)		Convertible Promissory Note issued to David Stuart Petlak dated November 19, 2015

10.7 (7)		Common Stock Warrant issued to David Stuart Petlak dated November 19, 2015

10.8 (8)		Exclusive Distributorship Agreement with dba Blow & Drive Houston dated January 11, 2016

10.9 (9)		Secured Promissory Note and Agreement with Ira Silver dated January 20, 2016

10.10 (9)		Secured Promissory Note and Agreement with Chaim K. Wainer dated October 29, 2015

10.11 (10)		Securities Purchase Agreement with Dr. Oren Azulay dated March 30, 2016

10.12 (10)		Common Stock Purchase Agreement with Gustavo Arceo dated April 2016

10.13 (10)		Common Stock Purchase Agreement with LGL LLC dated May 6, 2016

10.14 (11)		Loan and Security Agreement with Doheny Group, LLC dated June 30, 2019 September 30, ~~2017~~2016

10.15 (11)		Phase 1 Loan Agreement with Doheny Group, LLC dated September 30, ~~2017~~2016 June 30, 2019

10.16 (11)		Royalty Agreement with Doheny Group, LLC dated September 30, ~~2017~~2016 June 30, 2019

10.17 (11)		Common Stock Purchase Agreement with Doheny Group, LLC dated September 30, ~~2017~~2016 June 30, 2019

10.18 (11)		Agreement with Abraham Summers and Gnossis International, LLC

10.19 (12)		Termination of Services Agreement by and between Blow & Drive Interlock Corporation, Abraham Summers and Gnosiis International, LLC dated June 19, 2017

10.20 (13)		Amendment No. 1 to Debt Conversion and Series A Preferred Stock Purchase Agreement dated May 17, 2017

10.21 (13)		Amendment No. 1 to Loan and Security Agreement with Doheny Group, LLC dated June 3, 2017

10.22 (13)		Amendment No. 1 to Royalty Agreement with Doheny Group, LLC dated June 3, 2017

10.23*10.23 (14)		Form of Securities Purchase Agreement

10.24*10.24 (14)		Settlement Agreement by and between Blow & Drive Interlock Corporation and J C Lopez/BDI Interlock, LLC dated January 21, 2018 (memorializing oral agreement between the parties dated ~~September~~June 30, ~~2017)~~2019)

10.25 (15)		Agreement to Purchase Common Stock and Preferred Stock dated December 31, 2018

10.26 (16)		Debt Conversion and Series A Preferred Stock Purchase Agreement by and between Blow & Drive Interlock Corporation and Laurence Wainer dated March 7, 2017

31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith).

31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Accounting Officer (filed herewith).

32.1		Section 1350 Certification of Chief Executive Officer (filed herewith).

32.2		Section 1350 Certification of Chief Accounting Officer (filed herewith).


101.INS **		XBRL Instance Document

101.SCH **		XBRL Taxonomy Extension Schema Document

101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB **		XBRL Taxonomy Extension Label Linkbase Document

101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

	(1)	Incorporated by reference from our Registration Statement on Form 10, filed with the Commission on September 30, 2013.

	(2)	Incorporated by reference from our Registration Statement on Form S-1, filed with the Commission on July 24, 2014.

	(4)	Incorporated by reference from our Current Report on Form 8-K filed with the Commission on September 11, 2015.

	(5)	Incorporated by reference from our Current Report on Form 8-K filed with the Commission on November 12, 2015.

	(6)	Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Commission on August 13, 2015.

	(7)	Incorporated by reference from our Current Report on Form 8-K filed with the Commission on September 11, 2015.

	(8)	Incorporated by reference from our Current Report on Form 8-K filed with the Commission on February 22, 2016.

	(9)	Incorporated by reference from our Current Report on Form 8-K filed with the Commission on March 17, 2016.

	(10)	Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on August 22, 2016.

	(11)	Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on ~~February 7, 2018.~~ November 21, 2016.

	(12)	Incorporated by reference from our Current Report on Form 10-Q filed with the Commission on July 3, 2017.

	(13)	Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on August 21, 2017.

	(14)	Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on February 7,9, 2018.