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 SeptemberJune 30, 20182019
[ ] | 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.) | |
1427 S. Robertson Blvd. Los Angeles, CA (Address of principal executive offices) | 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 [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ].
Indicate by check mark 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 | |||
(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 July 1,August 9, 2019, there were 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, 2017,2018, filed on June 7,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
The consolidated balance sheets as of SeptemberJune 30, 20182019 (unaudited) and December 31, 2017 (restated),2018, the consolidated statements of operations for the three months and ninesix months ended SeptemberJune 30, 20182019 and 2017 (restated),2018, the consolidated statement of stockholders equity (deficit) for the threesix months ended SeptemberJune 30, 2018,2019, and the consolidated statements of cash flows for the ninesix months ending SeptemberJune 30, 20182019 and 2017 (restated),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.
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BLOW & DRIVE INTERLOCK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2018 | December 31, 2017 | (Unaudited) | ||||||||||||||
(unaudited) | June 30, 2019 | December 31, 2018 | ||||||||||||||
ASSETS | ||||||||||||||||
Current Assets | ||||||||||||||||
Current Assets: | ||||||||||||||||
Cash | $ | 42,124 | $ | 31,874 | $ | 12,426 | $ | 775 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of $0 and $0 at September 30, 2018 and December 31, 2017, respectively | 5,355 | 28,916 | ||||||||||||||
Prepaid Expenses | 2,648 | 2,655 | ||||||||||||||
Accounts receivable | 11,785 | 5,355 | ||||||||||||||
Prepaid expenses | 1,198 | 1,016 | ||||||||||||||
Total current assets | 50,127 | 63,445 | 25,409 | 7,146 | ||||||||||||
Deposits | 5,131 | 5,131 | 6,481 | 6,481 | ||||||||||||
Total assets | $ | 55,258 | $ | 68,576 | $ | 31,890 | $ | 13,627 | ||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Accounts payable | $ | - | $ | 39,695 | ||||||||||||
Current Liabilities: | ||||||||||||||||
Accrued expenses | 20,547 | 15,685 | $ | 26,734 | $ | 65,988 | ||||||||||
Accrued royalty payable | 254,711 | 179,993 | 56,635 | 26,885 | ||||||||||||
Accrued interest | 135,233 | 35,460 | 184,286 | 17,155 | ||||||||||||
Income taxes payable | 5,930 | 5,930 | ||||||||||||||
Accrued interest – related parties | 342,118 | 190,618 | ||||||||||||||
Deferred revenue | 115,551 | 184,378 | 17,182 | 92,162 | ||||||||||||
Derivative liability | 18,287 | 12,302 | 29,907 | 22,517 | ||||||||||||
Notes payable, net of debt discount of $7,548 and $18,729 at September 30, 2018 and December 31, 2017, respectively | 69,134 | 60,006 | ||||||||||||||
Notes payable – related party | 113,750 | 45,328 | ||||||||||||||
Convertible notes payable, net of debt discount of $5,124 and $0 at September 30, 2018 and December 31, 2017, respectively | 2,376 | 6,972 | ||||||||||||||
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 | 735,519 | 585,749 | 755,397 | 564,477 | ||||||||||||
Non-current Liabilities | ||||||||||||||||
Notes payable, net of debt discount of $8,812 and $14,473 at September 30, 2018 and December 31, 2017, respectively | 16,182 | 21,274 | ||||||||||||||
Notes payable – related party | 1,251,250 | 839,306 | ||||||||||||||
Convertible notes payable, net of debt discount of $7,684 and $2,011 at September 30, 2018 and December 31, 2017, respectively | 12,316 | 3,517 | ||||||||||||||
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 | 1,279,748 | 864,097 | 2,262,359 | 2,051,666 | ||||||||||||
Total Liabilities | 2,015,267 | 1,449,846 | 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 September 30, 2018 and December 31, 2017, respectively | 1,000 | 1,000 | ||||||||||||||
Common stock, par value $0.0001, 100,000,000 shares authorized, 31,611,785 and 26,223,834 shares issued or issuable and outstanding as of September 30, 2018 and December 31, 2017, respectively | 3,161 | 2,622 | ||||||||||||||
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 | 3,485,203 | 2,911,753 | 3,514,249 | 3,489,699 | ||||||||||||
Accumulated deficit | (5,449,373 | ) | (4,296,645 | ) | (6,504,172 | ) | (6,096,322 | ) | ||||||||
Total stockholders’ deficit | (1,960,009 | ) | (1,381,270 | ) | (2,985,866 | ) | (2,602,516 | ) | ||||||||
Total liabilities and stockholders’ equity (deficit) | $ | 55,258 | $ | 68,576 | ||||||||||||
Total liabilities and stockholders’ deficit | $ | 31,890 | $ | 13,627 |
TheSee accompanying notes are an integral part of theseto unaudited condensed consolidated financial statements.
BLOW & DRIVE INTERLOCK CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues: | ||||||||||||||||
Monitoring revenues | $ | 363,243 | $ | 443,231 | $ | 149,556 | $ | 264,744 | ||||||||
Distributorship revenues | 36,681 | 39,265 | 18,990 | 16,095 | ||||||||||||
Total revenues | 399,924 | 482,496 | 168,546 | 280,839 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Monitoring cost of revenue | 25,233 | 76,681 | 3,598 | 29,068 | ||||||||||||
Distributorship cost of revenue | - | - | - | - | ||||||||||||
Total cost of revenues | 25,233 | 76,681 | 3,598 | 29,068 | ||||||||||||
Gross profit | 374,691 | 405,815 | 164,948 | 251,771 | ||||||||||||
Operating expenses: | ||||||||||||||||
Payroll | 210,718 | 466,149 | 112,678 | 229,737 | ||||||||||||
Professional fees | 147,297 | 88,055 | 105,751 | 50,963 | ||||||||||||
General and administrative | 131,492 | 469,095 | 71,418 | 219,539 | ||||||||||||
Total operating expenses | 489,507 | 1,023,299 | 289,847 | 500,239 | ||||||||||||
Loss from operations | (114,816 | ) | (617,484 | ) | (124,899 | ) | (248,468 | ) | ||||||||
Other Income (Expense): | ||||||||||||||||
Interest expense, net | (338,808 | ) | (210,558 | ) | (161,984 | ) | (108,237 | ) | ||||||||
Change in fair value of derivative liability | (7,390 | ) | 4,293 | (5,558 | ) | 11,579 | ||||||||||
Gain (loss) on extinguishment of debt | 54,764 | - | - | |||||||||||||
Total other income (expense) | (291,434 | ) | (206,265 | ) | (167,542 | ) | (96,658 | ) | ||||||||
Loss before provision for income taxes | (406,250 | ) | (823,749 | ) | (292,441 | ) | (345,126 | ) | ||||||||
Provision for income taxes | 1,600 | 800 | - | 800 | ||||||||||||
Net loss | $ | (407,850 | ) | $ | (824,549 | ) | $ | (292,441 | ) | $ | (345,926 | ) | ||||
Earnings (loss) per share: | ||||||||||||||||
Basic and diluted | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
Weighted-average shares of common stock outstanding: | ||||||||||||||||
Basic and diluted | 30,447,549 | 28,108,346 | 30,447,549 | 29,388,261 |
See accompanying notes to unaudited condensed consolidated financial statements.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 (restated) | 2018 | 2017 (restated) | |||||||||||||
Monitoring revenues | $ | 221,418 | $ | 394,139 | $ | 664,649 | $ | 674,197 | ||||||||
Distributorship revenues | 20,240 | 85,286 | 59,505 | 286,729 | ||||||||||||
Total revenues | 241,658 | 479,415 | 724,154 | 960,926 | ||||||||||||
Monitoring cost of revenue | 18,724 | 57,817 | 95,405 | 111,884 | ||||||||||||
Distributorship cost of revenue | - | 1,000 | - | 7,739 | ||||||||||||
Total cost of revenue | 18,724 | 58,817 | 95,405 | 119,623 | ||||||||||||
Gross profit | 222,934 | 420,598 | 628,749 | 841,303 | ||||||||||||
Operating expenses | ||||||||||||||||
Payroll | 240,499 | 272,900 | 706,648 | 457,288 | ||||||||||||
Professional fees | 26,175 | 16,603 | 114,230 | 93,505 | ||||||||||||
General and administrative | 170,504 | 269,039 | 639,598 | 579,172 | ||||||||||||
Depreciation | - | 90,512 | - | 234,654 | ||||||||||||
Total operating expenses | 437,178 | 649,054 | 1,460,476 | 1,364,619 | ||||||||||||
Loss from operations | (214,244 | ) | (228,456 | ) | (831,727 | ) | (523,316 | ) | ||||||||
Other income (expense) | ||||||||||||||||
Interest expense, net | (119,028 | ) | (145,740 | ) | (329,586 | ) | (440,538 | ) | ||||||||
Change in fair value of derivative liability | 5,093 | (6,474 | ) | 9,385 | 11,018 | |||||||||||
Gain (loss) on extinguishment of debt | - | - | - | (305,000 | ) | |||||||||||
Total other income (expenses) | (113,935 | ) | (152,214 | ) | (320,201 | ) | (734,520 | ) | ||||||||
Loss before provision for income taxes | (328,179 | ) | (380,670 | ) | (1,151,928 | ) | (1,257,836 | ) | ||||||||
Provision for income taxes | - | - | 800 | 1,600 | ||||||||||||
Net loss | $ | (328,179 | ) | $ | (380,760 | ) | $ | (1,152,728 | ) | $ | (1,259,436 | ) | ||||
Basic and Diluted Loss Per Common Share | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.04 | ) | $ | (0.06 | ) | ||||
Basic and Diluted Weighted-Average Common Shares Outstanding | 31,205,429 | 22,856,861 | 29,152,045 | 21,922,340 |
5 |
The accompanying notes are an integral part of these financial statements.
BLOW & DRIVE INTERLOCK CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)DEFICIT
Preferred Stock - Series A | Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
Balance December 31, 2016 (restated) | - | $ | - | 19,575,605 | $ | 1,958 | $ | 1,594,721 | $ | (1,587,330 | ) | $ | 9,349 | |||||||||||||||
Shares issued for services | 27,180 | 3 | 13,910 | - | 13,913 | |||||||||||||||||||||||
Warrants issued for services | 278 | 278 | ||||||||||||||||||||||||||
Shares issued for cash | - | - | 5,686,656 | 569 | 848,468 | - | 849,037 | |||||||||||||||||||||
Shares issued related to debt | 1,000,000 | 1,000 | 195,400 | 18 | 454,450 | 455,468 | ||||||||||||||||||||||
Shares issued related to anti-dilution | - | - | 739,253 | 74 | (74 | ) | - | - | ||||||||||||||||||||
Other | - | - | (260 | ) | - | - | - | - | ||||||||||||||||||||
Net loss | - | - | - | - | - | (2,709,315 | ) | (2,709,315 | ) | |||||||||||||||||||
Balance 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 | - | - | 476,000 | 48 | 110,153 | - | 110,201 | |||||||||||||||||||||
Shares issued for cash | - | - | 4,340,883 | 434 | 458,271 | - | 458,705 | |||||||||||||||||||||
Shares issued related to anti-dilution | - | - | 538,256 | 54 | (54 | ) | - | - | ||||||||||||||||||||
Conversion of debt to common stock | - | - | 32,812 | 3 | 5,080 | 5,083 | ||||||||||||||||||||||
Net loss | - | - | - | - | - | (1,152,728 | ) | (1,152,728 | ) | |||||||||||||||||||
Balance September 30, 2018 | 1,000,000 | $ | 1,000 | 31,611,785 | $ | 3,161 | $ | 3,485,203 | $ | (5,449,373 | ) | $ | (1,960,009 | ) |
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 | ) |
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 | ) |
TheSee accompanying notes are an integral part of theseto unaudited condensed consolidated financial statements.
6 |
BLOW & DRIVE INTERLOCK CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended September 30, | ||||||||
2018 | 2017 (restated) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (1,152,728 | ) | $ | (1,259,436 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | - | 234,654 | ||||||
Loss on fixed assets disposals | - | 12,989 | ||||||
Shares issued for services | 110,200 | 14,188 | ||||||
Allowance for doubtful accounts | (26,541 | ) | 5,412 | |||||
Loss on extinguishments of debt | - | 305,000 | ||||||
Debt converted to common shares | 5,083 | - | ||||||
Amortization of debt discount | 27,704 | 275,465 | ||||||
Change in fair value of derivative liability | (9,385 | ) | (11,019 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 50,102 | 6,760 | ||||||
Prepaid expenses | 6 | 792 | ||||||
Deposits | - | 1,123 | ||||||
Accounts payable | (39,695 | ) | 74,541 | |||||
Accrued expenses | 4,863 | 168,273 | ||||||
Accrued interest | 99,773 | 30,968 | ||||||
Deferred revenue | (68,827 | ) | (64,274 | ) | ||||
Accrued royalties payable | 74,718 | 25,136 | ||||||
Net cash used in operating activities | (924,727 | ) | (179,428 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of property and equipment | - | (817,026 | ) | |||||
Deposits on units | - | 250,000 | ||||||
Net cash used in investing activities | - | (567,026 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from issuances of notes payable | 21,600 | - | ||||||
Principal payments of notes payable | (34,405 | ) | (46,037 | ) | ||||
Proceeds from issuance of convertible notes payable | 20,000 | - | ||||||
Principal payments of convertible notes payable | (5,000 | ) | - | |||||
Proceeds from issuances of related party notes payable | 600,127 | 195,400 | ||||||
Principal payments of related party note payable | (126,050 | ) | (87,947 | ) | ||||
Proceeds from issuance of common stock | 458,705 | 653,099 | ||||||
Net cash provided by financing activities | 934,977 | 714,515 | ||||||
NET INCREASE (DECREASE) IN CASH | 10,250 | (31,939 | ) | |||||
CASH – beginning of period | 31,874 | 116,309 | ||||||
CASH – end of period | $ | 42,124 | $ | 84,570 | ||||
ADDITIONAL CASH FLOW INFORMATION | ||||||||
Interest paid | $ | 91,634 | $ | 134,105 | ||||
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 |
TheSee accompanying notes are an integral part of these financial statements.
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Nine Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
Common stock and warrants issued for services | $ | 110,200 | $ | 14,188 | ||||
Preferred stock issued for debt reduction and services | $ | - | $ | 350,000 |
The accompanying notes are an integral part of theseto unaudited condensed consolidated financial statements.
7 |
BLOW AND DRIVE INTERLOCK CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NoteNOTE 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 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 Companynumber 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 Company formed BDI Manufacturing, Inc., an Arizona corporation which is a 100% wholly owned subsidiary of Blow & Drive Interlock Corporation. The Company 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 sixtwo 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.
NoteNOTE 2 – Basis of Presentation and Summary of Significant Accounting PoliciesBASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements 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 and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company.
Consolidation
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 pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and 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 of only normal recurring adjustments) necessary for a fair presentation of the information for the periods presented. The interim results presented herein are not necessarily indicative of the results of operations 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 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 SeptemberJune 30 2018,2019, the Company had an accumulated deficit of $5,449,373.$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.
Restatements
The Company has restated its September 30, 2017 financial statements. The original September 30, 2017 financial statements erroneously recognized the entire upfront fees from two of its independent distributors in revenue at the time the Company delivered the exclusive license to the distributors rather than over the term of the agreements (5 years). To correct that error, the Company has shown the portion of the upfront fees attributable to that period only.
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.
UseRevenue 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 Estimatesrevenue 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 preparationtransaction price of financial statements in conformity with U.S. generally accepted accounting principles requires managementa contract is allocated to make estimateseach distinct performance obligation and assumptions that affectrecognized as revenue when or as the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atcustomer receives the datebenefit of the financial statements andperformance obligation. The transaction price is determined based on the reported amounts of revenue and expenses duringconsideration 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 and related costs of sales and expensesit satisfies a performance obligation in a contract by providing a service to a customer when incurred. The Company recognizes 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 revenue consists of the cost of the purchased goods and labor related to the corresponding sales transaction. When a right of return exists, the Company defers revenues untilinstalls the right of return expires. Theinterlock 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 Company recognizes revenue from services at the time the servicesa customer, are completed.Monthly per unit fee revenue is earned and recognized over the term of the contract as support services are provided. Revenuesexcluded 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.revenue.
Deferred revenue
Deferred revenue consists of customer orders paid in advance of the 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 customer and all other revenue recognition criteria have been met.
Advertising and Marketing Costs
Advertising and marketing costs are recorded as general and administrative expenses when they are incurred. Advertising and marketing expenses were $81,652$267 and $139,811$61,915 for the ninesix months ended SeptemberJune 30, 2019 and 2018, respectively. Advertising and 2017, respectivelymarketing 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 SeptemberJune 30, 20182019 and December 31, 20172018 is adequate, but actual write-offs could exceed the recorded allowance.
Royalty Accrual
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 12.11. These estimates were performed at the inception for the notes to reflect the associated debt discount. The Company accruals royalties 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, 2018 settlement with two royalty noteholders in which they relinquished all claims to accrued royalties.
Derivative Liability
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 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.
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, 2017 | $ | - | $ | 12,302 | $ | - | ||||||
Additions to fair value of derivative liability | - | 15,370 | - | |||||||||
Change in fair value of derivative liability | - | (9,385 | ) | - | ||||||||
Balance September 30, 2018 (unaudited) | $ | - | $ | 18,287 | $ | - |
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
The Company recognizes stock-based compensation in accordance with FASB ASC Topic 718Stock Compensation, which requires the measurement and recognition 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.
For non-employee stock-based compensation, the Company applies FASB ASC Topic 505Equity-Based Payments to Non-Employees, 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.
Related Parties
Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company.
Concentrations
All of 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.
For the nine months ended September 30, 2018, one distributor, licensed in four states, makes up approximately 89% percent of all revenues from distributors at September 30, 2018. 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 18 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 March 31, 2018,June 30, 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.
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 MarchAugust 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-05,Income Taxes (Topic 740).FASB amended “Fair Value Measurements” to modify the disclosure requirements related to fair value. The Tax Cutamendment removes requirements to disclose (1) the amount of and Jobs Actreasons for transfers between levels 1 and 2 of 2017the fair value hierarchy, (2) our policy related to the timing of transfers between levels, and (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 effect of changes existing tax lawin 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 includes numerous provisions that will affect businesses. Thisweighted average of significant unobservable inputs used in level 3 measurements. The guidance addresses the recognition of taxes payable or refundableis effective for the current yearCompany with the Company’s quarterly filing for the period ended March 31, 2020 and the recognition of deferred tax liabilities and deferred tax assets forCompany will make the future tax consequences of eventsrequired disclosure changes in that have been recognized in an entity’s financial statements or tax returns. The Company doesfiling. Adoption will not believe that this guidance will have an impact ason the Company’s consolidated results of operations, consolidated financial position, and cash flows.
● | Retirement Plans |
In August 2018, the FASB amended “Retirement Plans” to modify the disclosure requirements for defined benefit plans. For the Company, has beenthe 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 a lossthe benefit obligation for the period. It removes the requirement to disclose the approximate amount of future benefits covered by insurance contracts. The 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 Company’s consolidated results of operations, consolidated financial position, and has not recognized federal taxes payable or refundable or deferred tax liabilities or deferred tax assets.cash flows.
● | Intangibles – Goodwill and other – Internal-Use Software |
In November 2017,August 2018, the FASB issued ASU No. 2017-14,2018-15, 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 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 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 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 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 for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. The Company adopted ASU 2018-07 effective January 1, 2019; such adoption had no material impact on the Company’s consolidated financial statements.
● | Income Statement – Reporting Comprehensive Income |
In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220) (ASU 2018-02), Revenue Recognition (Topic 605),which amends existing standards for income statement-reporting comprehensive income to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from Tax Cuts and RevenueJobs Act and improve the usefulness of information reported to financial statements users. ASU 2018-02 will be effective for 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 Contractsthe goodwill impairment test. Instead, impairment is defined as the amount by which the carrying value of the reporting unit exceeds its fair value, up to the total amount of goodwill of the reporting unit. The new guidance 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 position, and cash flows.
● | Financial Instruments |
In June 2016, the FASB amended “Financial Instruments” to provide financial statement users with Customers (Topic 606).more decision-useful information about the expected credit losses on debt instruments and other 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 clarified guidance on several matters, including accrued interest, recoveries, and various codification improvements. The ASU modified Topic 220 such that an operating-differential subsidy must be set forthnew standard, as a separate line itemamended, replaces the incurred loss impairment methodology in the statementcurrent standard with a methodology that reflects expected credit losses and requires consideration of comprehensive income either under a revenue caption presented separately from revenue from contracts with customers accountedbroader range of reasonable and supportable information to support credit loss estimates. The new guidance is effective for under ASC Topic 606 or as creditus on January 1, 2020, and in the costsfirst half of 2019, we established an implementation team and expenses section. The ASU essentially deleted Topic 605began analyzing the impact on our current policies and notedprocedures to identify potential differences that it was superseded by Topic 606. The ASU modified Topic 606 for vaccine manufacturers to recognize revenue when vaccines are placed into Federal Governmental stockpile programs because controlwould result from applying the requirements of the enumerated vaccines willnew standard. The implementation team reports findings and progress of the project to management on a frequent basis. Through this process, we have been transferredidentified appropriate changes to our processes, systems, and controls to support recognition and disclosure under the customer and the criteria to recognize revenue in a bill-and-hold arrangement under ASC Topic 606 will have been met.new standard. The Company is currentlystill 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 September 2017, the FASB issued ASU No. 2017-13,Revenue Recognition, Revenue from Contracts with Customers, Leases. The ASU adds SEC paragraphs to the new revenue and leases sections of theRecently Adopted Accounting Standards Codification (ASC or Codification) on the announcement the SEC Observer made at the 20 July 2017 EITF meeting. The SEC Observer said that the SEC staff would not object if entities that are considered public business entities only because their financial statements or financial information is required to be included in another entity’s SEC filing use the effective dates for private companies when they adopt ASC 606, Revenue from Contracts with Customers, 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-X and equity method investees whose summarized financial information is included in a registrant’s financial statement notes under Rule 4-08(g) of Regulation S-X. The Company is currently evaluating the impact of adopting this guidance.
In July 2017, the FASB issued ASU No. 2017-11,Earnings Per Share; Distinguishing Liabilities from Equity; Derivatives and Hedging; Accounting for Certain Financial Instruments with Down Round Features; Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.Pronouncements 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 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. The new guidance will require new disclosures for financial instruments with down round features and other terms that change conversion or exercise prices. The ASU also replaces today’s indefinite deferral of the guidance in ASC 480-10 for certain mandatorily redeemable financial instruments of certain nonpublic entities 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. The Company is currently evaluating the impact of adopting this guidance.
In October 2016, the FASB issued ASU No. 2016-16,Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. 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.
● | 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 existingPayments (“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 insignificantCompany 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 rateinterim periods after adoption, the effect of the borrowing; contingent consideration payments made afterchange 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 fromsales-type, direct financing or operating leases. These criteria focus on the settlementtransfer 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 standardCompany 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 inAccounting 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 shouldhave 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 expectsCompany will be entitled to be entitledreceive in exchange for thosetransferring goods or services. When an entity is a principal (that is, ifto 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 orcontract by providing a service to be provideda 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 establishesfrom 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.
Note 3 - Restatements
Belowcustomer, are the restated September 30, 2017 financial statements. The original June 30, 2018 financial statements erroneously recognized the entire upfront feesexcluded from two of its independent distributors in revenue at the time the Company delivered the exclusive license to the distributors rather than over the term of the agreements (5 years). To correct that error, the Company has shown the portion of the upfront fees attributable to that period only.revenue.
Blow & Drive Interlock Corporation
Consolidated Balance Sheet
September 30, 2017 as filed | adjustment | revised September 30, 2017 | ||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||
Assets | ||||||||||||
Current Assets | ||||||||||||
Cash | $ | 84,370 | $ | 84,370 | ||||||||
Accounts receivable, net | 39,069 | 39,069 | ||||||||||
Prepaid Expenses | 1,569 | 1,569 | ||||||||||
Inventories | 10,650 | 10,650 | ||||||||||
Total Current Assets | 135,658 | - | 135,658 | |||||||||
Other Assets | ||||||||||||
Deposits | 5,131 | 5,131 | ||||||||||
Furniture and equipment | 925,728 | 925,728 | ||||||||||
Total Assets | $ | 1,066,517 | $ | - | $ | 1,066,517 | ||||||
Liabilities and Stockholders’ Deficit | ||||||||||||
Current Liabilities | ||||||||||||
Accounts payable | $ | 102,791 | $ | 102,791 | ||||||||
Accrued expenses | 235,398 | 235,398 | ||||||||||
Accrued royalty payable | 145,317 | 145,317 | ||||||||||
Accrued interest | 41,078 | 41,078 | ||||||||||
Income taxes payable | 5,929 | 5,929 | ||||||||||
Deferred revenue | 91,057 | 7,000 | 98,057 | |||||||||
Derivative liability | 62,537 | 62,537 | ||||||||||
Notes payable, net of debt discount of $22,431 | 154,069 | 154,069 | ||||||||||
Notes payable - related party, current portion | - | - | ||||||||||
Convertible notes payable, net of debt discount of $3,115 | 54,385 | 54,385 | ||||||||||
Royalty notes payable, net of debt discount of $29,393 | 892 | 892 | ||||||||||
Total Current Liabilities | 893,453 | 7,000 | 900,453 | |||||||||
Long term liabilities | ||||||||||||
Notes payable, net of debt discount of $46,750 | 148,250 | 148,250 | ||||||||||
Notes payable - related party | - | - | ||||||||||
Royalty notes payable, net of debt discount of $353,894 | 163,106 | 163,106 | ||||||||||
Accrued royalties payable | 1,786 | 1,786 | ||||||||||
Total Liabilities | 1,206,595 | 7,000 | 1,213,595 | |||||||||
Stockholders’ Equity (Deficit) | ||||||||||||
Preferred stock, $0.001 par value, 20,000,000 shares authorized, 1,000,000 issued | 1,000 | 1,000 | ||||||||||
Common stock, $0.0001 par value, 100,000,000 shares authorized, 24,057,961 outstanding | 2,406 | 2,406 | ||||||||||
Additional paid-in capital | 2,696,281 | 2,696,281 | ||||||||||
Accumulated deficit | (2,839,765 | ) | (7,000 | ) | (2,846,765 | ) | ||||||
Total Stockholder’s Equity (Deficit) | (140,078 | ) | (7,000 | ) | (147,078 | ) | ||||||
Total Liabilities and Stockholders’ Equity (Deficit) | $ | 1,066,517 | $ | - | $ | 1,066,517 |
The accompanying notes are an integral part of these financial statements.
Blow & Drive Interlock Corporation
Consolidated Statements of Operations
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||
2017 as filed | adjustment | revised 2017 | 2017 as filed | adjustment | revised 2017 | |||||||||||||||||||
Monitoring revenue | $ | 394,139 | $ | 394,139 | $ | 674,197 | $ | 674,197 | ||||||||||||||||
Distributorship revenue | 42,276 | 43,000 | 85,276 | 237,729 | 49,000 | 286,729 | ||||||||||||||||||
Total revenue | 436,415 | 43,000 | 479,415 | 911,926 | 49,000 | 960,926 | ||||||||||||||||||
Monitoring cost of revenue | 57,817 | 57,817 | 111,884 | 111,884 | ||||||||||||||||||||
Distributorship cost of revenue | 1,000 | 1,000 | 7,739 | 7,739 | ||||||||||||||||||||
Total cost of revenue | 58,817 | - | 58,817 | 119,623 | - | 119,623 | ||||||||||||||||||
Gross profit | 377,598 | 43,000 | 420,598 | 792,303 | 49,000 | 841,303 | ||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Payroll | 272,900 | 272,900 | 457,288 | 457,288 | ||||||||||||||||||||
Professional fees | 16,603 | 16,603 | 93,505 | 93,505 | ||||||||||||||||||||
General and administrative expenses | 269,039 | 269,039 | 579,172 | 579,172 | ||||||||||||||||||||
Depreciation | 90,512 | 90,512 | 234,654 | 234,654 | ||||||||||||||||||||
Total operating expenses | 649,054 | - | 649,054 | 1,364,619 | - | 1,364,619 | ||||||||||||||||||
Loss from operations | (271,456 | ) | 43,000 | (228,456 | ) | (572,316 | ) | 49,000 | (523,316 | ) | ||||||||||||||
Other income (expense) | ||||||||||||||||||||||||
Interest expense | (145,740 | ) | (145,740 | ) | (440,538 | ) | (440,538 | ) | ||||||||||||||||
Change in fair value of derivative liability | (6,474 | ) | (6,474 | ) | 11,018 | 11,018 | ||||||||||||||||||
Loss on extinguishment of debt | - | - | (305,000 | ) | (305,000 | ) | ||||||||||||||||||
Total other income (expense) | (152,214 | ) | - | (152,214 | ) | (734,520 | ) | - | (734,520 | ) | ||||||||||||||
Loss before provision for income taxes | (423,670 | ) | 43,000 | (380,670 | ) | (1,306,836 | ) | 49,000 | (1,257,836 | ) | ||||||||||||||
Provision for income taxes | - | - | 1,600 | 1,600 | ||||||||||||||||||||
Net loss | $ | (423,670 | ) | $ | 43,000 | $ | (380,670 | ) | $ | (1,308,436 | ) | $ | 49,000 | $ | (1,259,436 | ) | ||||||||
Basic and diluted loss per common share | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.06 | ) | $ | (0.06 | ) | ||||||||||||
Weighted average number of common shares outstanding - basic and diluted | 22,856,861 | 22,856,861 | 21,922,340 | 21,922,340 |
The accompanying notes are an integral part of these financial statements.
Blow & Drive Interlock Corporation
Consolidated Statement of Cash Flows
(unaudited)
Nine Months Ended September 30, | ||||||||||||
2017 as filed | adjustment | revised 2017 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | $ | (1,308,436 | ) | $ | 49,000 | $ | (1,259,436 | ) | ||||
Adjustments to reconcile from net loss to net cash used in operating activities | ||||||||||||
Depreciation and amortization | 234,654 | 234,654 | ||||||||||
Loss on fixed assets disposals | 12,989 | 12,989 | ||||||||||
Shares issued for services | 14,188 | 14,188 | ||||||||||
Allowance for doubtful accounts | 5,412 | 5,412 | ||||||||||
Loss on extinguishment of debt | 305,000 | 305,000 | ||||||||||
Amortization of debt discount | 275,465 | 275,465 | ||||||||||
Change in fair value of derivative liability | (11,019 | ) | (11,019 | ) | ||||||||
Changes in operating assets and liabilities | ||||||||||||
Accounts receivable | 6,760 | 6,760 | ||||||||||
Prepaid expenses | 792 | 792 | ||||||||||
Deposits | 1,123 | 1,123 | ||||||||||
Accounts payable | 74,541 | 74,541 | ||||||||||
Accrued expenses | 193,409 | 193,409 | ||||||||||
Accrued interest | 30,968 | 30,968 | ||||||||||
Deferred revenue | (15,274 | ) | (49,000 | ) | (64,274 | ) | ||||||
Net cash used in operating activities | (179,428 | ) | - | (179,428 | ) | |||||||
Cash flows from investing activities: | ||||||||||||
Purchase of property and equipment | (817,026 | ) | (817,026 | ) | ||||||||
Deposits on units | 250,000 | 250,000 | ||||||||||
Net cash used in investing activities | (567,026 | ) | - | (567,026 | ) | |||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from notes payable | 195,400 | 195,400 | ||||||||||
Repayments of notes payable | (14,268 | ) | (14,268 | ) | ||||||||
Repayments of royalty notes payable | (65,529 | ) | (65,529 | ) | ||||||||
Repayment of related party notes payable | (54,187 | ) | (54,187 | ) | ||||||||
Proceeds from issuance of common stock | 653,099 | 653,099 | ||||||||||
Net cash provided by financing activities | 714,515 | - | 714,515 | |||||||||
Net increase (decrease) in cash | (31,939 | ) | - | (31,939 | ) | |||||||
Cash, beginning of period | 116,309 | 116,309 | ||||||||||
Cash, end of period | $ | 84,370 | $ | - | $ | 84,370 | ||||||
Supplemental disclosure of cash information: | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | 134,105 | $ | 134,105 | ||||||||
Income taxes | $ | - | $ | - | ||||||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||||
Common stock and warrants issued for services | $ | 14,188 | $ | 14,188 | ||||||||
Establishment of debt discount for royalty notes | $ | - | $ | - | ||||||||
Preferred stock issued for debt reduction and services | $ | 350,000 | $ | 350,000 |
The accompanying notes are an integral part of these financial statements.
Blow & Drive Interlock Corporation
Consolidated Statement of Shareholders’ Equity (Deficit)
(unaudited)
Preferred Stock | Common Stock | Additional Paid-in | Accumulated | revised Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | adjustment | Deficit | (Deficit) | ||||||||||||||||||||||||||||
Balance December 31, 2016 | - | $ | - | 19,575,605 | $ | 1,958 | $ | 1,594,721 | $ | (1,531,330 | ) | $ | (56,000 | ) | $ | (1,587,330 | ) | $ | 9,349 | |||||||||||||||||
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 | ) | - | |||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | (1,308,436 | ) | 49,000 | (1,259,436 | ) | (1,259,436 | ) | ||||||||||||||||||||||||
Balance September 30, 2017 | 1,000,000 | $ | 1,000 | 24,057,961 | $ | 2,406 | $ | 2,696,282 | $ | (2,839,766 | ) | $ | (7,000 | ) | $ | (2,846,766 | ) | $ | (147,078 | ) |
The accompanying notes are an integral part of these financial statements.
Note 4NOTE 3 – Segment ReportingSEGMENT 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 SeptemberJune 30, 20182019 and December 31, 2017.2018.
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.
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, | |||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||
Segment gross profit (a): | ||||||||||||||||||||||||||||||||
Monitoring | $ | 202,694 | $ | 336,322 | $ | 569,244 | $ | 562,313 | $ | 338,010 | $ | 366,550 | $ | 145,958 | $ | 235,676 | ||||||||||||||||
Distributorships | 20,240 | 84,276 | 59,505 | 278,990 | 36,681 | 39,265 | 18,990 | 16,095 | ||||||||||||||||||||||||
Gross profit | 222,934 | 420,598 | 628,749 | 841,303 | 374,691 | 405,815 | 164,948 | 251,771 | ||||||||||||||||||||||||
Identifiable segment operating expenses (b): | ||||||||||||||||||||||||||||||||
Monitoring | - | 86,543 | - | 143,955 | - | - | - | - | ||||||||||||||||||||||||
Distributorships | - | 3,552 | - | 89,642 | - | - | - | - | ||||||||||||||||||||||||
- | 90,095 | - | 233,597 | |||||||||||||||||||||||||||||
Total operating expenses | - | - | - | - | ||||||||||||||||||||||||||||
Identifiable segment operating income (c): | ||||||||||||||||||||||||||||||||
Monitoring | 202,694 | 249,779 | 569,244 | 418,358 | 338,010 | 366,550 | 145,958 | 235,676 | ||||||||||||||||||||||||
Distributorships | 20,240 | 80,724 | 59,505 | 189,348 | 36,681 | 39,265 | 18,990 | 16,095 | ||||||||||||||||||||||||
222,934 | 330,503 | 628,749 | 607,706 | 374,691 | 405,815 | 164,948 | 251,771 | |||||||||||||||||||||||||
Reconciliation of identifiable segment income to corporate income (d): | ||||||||||||||||||||||||||||||||
Payroll | 240,499 | 272,900 | 706,648 | 457,288 | 210,718 | 466,149 | 112,678 | 229,737 | ||||||||||||||||||||||||
Professional fees | 26,175 | 16,603 | 114,230 | 93,505 | 147,297 | 88,055 | 105,751 | 50,963 | ||||||||||||||||||||||||
General and administrative expenses | 170,504 | 269,039 | 639,598 | 579,172 | 131,492 | 469,095 | 71,418 | 219,539 | ||||||||||||||||||||||||
Depreciation | - | 417 | - | 1,057 | ||||||||||||||||||||||||||||
Interest expense | 119,028 | 145,740 | 329,586 | 440,538 | 338,808 | 210,558 | 161,984 | 108,237 | ||||||||||||||||||||||||
Change in fair value of derivative liability | (5,093 | ) | 6,474 | (9,385 | ) | (11,018 | ) | 7,390 | (4,293 | ) | 5,558 | (11,579 | ) | |||||||||||||||||||
Loss on extinguishment of debt | - | - | - | 305,000 | ||||||||||||||||||||||||||||
Gain on extinguishment of debt | (54,764 | ) | - | - | - | |||||||||||||||||||||||||||
780,941 | 1,229,564 | 457,389 | 596,897 | |||||||||||||||||||||||||||||
Loss before provision for income taxes | (328,179 | ) | (380,670 | ) | (1,151,928 | ) | (1,257,836 | ) | (406,250 | ) | (823,749 | ) | (292,441 | ) | (345,126 | ) | ||||||||||||||||
Provision for income taxes | - | - | 800 | 1,600 | 1,600 | 800 | - | 800 | ||||||||||||||||||||||||
Net loss | $ | (328,179 | ) | $ | (380,670 | ) | $ | (1,152,728 | ) | $ | (1,259,436 | ) | $ | (407,850 | ) | $ | (824,549 | ) | $ | (292,441 | ) | $ | (345,926 | ) | ||||||||
Total net property, plant, and equipment assets | ||||||||||||||||||||||||||||||||
Monitoring | $ | - | $ | 562,542 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||
Distributorships | - | 350,298 | - | - | - | - | ||||||||||||||||||||||||||
Corporate | - | 12,889 | - | - | - | - | ||||||||||||||||||||||||||
$ | - | $ | 925,729 | $ | - | $ | - | $ | - | $ | - |
(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 incomes consists of segment gross profit less identifiable operating expense
(d) General corporate expense consists of all other non-identifiable expenses
(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 incomes consists of segment gross profit less identifiable operating expense |
(d) General corporate expense consists of all other non-identifiable expenses |
17 |
Note 5 – Deposits
Deposits consist of the following:
September 30, 2018 | December 31, 2017 | |||||||
Lease Deposits | $ | 5,131 | $ | 5,131 |
Note 6NOTE 4 – Accrued ExpensesACCRUED EXPENSES
Accrued Expenses consist of the following:
Description | June 30, 2019 | December 31, 2018 | ||||||||||||||
September 30, 2018 | December 31, 2017 | |||||||||||||||
Accrued payroll and payroll taxes | $ | 6,141 | $ | 6,141 | $ | 20,004 | $ | 17,616 | ||||||||
Deferred rent | 5,306 | 4,945 | - | 5,317 | ||||||||||||
Income tax payable | 6,730 | 5,930 | ||||||||||||||
Other accrued expenses | 9,100 | 5,000 | - | 37,125 | ||||||||||||
Total | $ | 20,547 | $ | 15,685 | $ | 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, 2018 and December 31, 2017, deferred revenue consists of the following:
September 30, 2018 | December 31, 2017 | |||||||
Monitoring deferred revenues | $ | 115,551 | $ | 177,878 | ||||
Distributorship deferred revenues | - | 6,500 | ||||||
Total | $ | 115,551 | $ | 184,378 |
Note 8NOTE 5 – Notes PayableNOTES PAYABLE
Notes payable consist of the following:
As of September 30, 2018 | As of December 31, 2017 | |||||||||||||||||||||||
Amount | Discount | Net Balance | Amount | Discount | Net Balance | |||||||||||||||||||
January 2016 ($65,000) - 0% interest with payment of $937 per month for 4 months, $1,250 per month for 8 months, and $3,531 per month until fully paid. | $ | 940 | $ | - | $ | 940 | $ | 4,482 | $ | (3,889 | ) | $ | 593 | |||||||||||
April 2016 ($50,000) - 18% interest at payment of $750 per month with unpaid balance due at March 31, 2018 including issuance of 50,000 common shares. | 50,000 | - | 50,000 | 50,000 | (7,292 | ) | 42,708 | |||||||||||||||||
September 2016 ($10,000) - 24% interest with outstanding balance with accrued interest due at October 31, 2018 with an option of accrued interest to be converted to common stock with 25% discount of trading price | 10,000 | - | 10,000 | 10,000 | - | 10,000 | ||||||||||||||||||
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 | (16,360 | ) | 24,376 | 50,000 | (22,021 | ) | 27,979 | ||||||||||||||||
Total notes payable | 101,676 | (16,360 | ) | 85,316 | 114,482 | (33,202 | ) | 81,280 | ||||||||||||||||
Less: non-current portion | (24,994 | ) | 8,812 | (16,182 | ) | (35,747 | ) | 14,473 | (21,274 | ) | ||||||||||||||
Notes payable, current portion | $ | 76,682 | $ | (7,548 | ) | $ | 69,134 | $ | 78,735 | $ | (18,729 | ) | $ | 60,006 |
January 2016 - $65,000
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.
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 25th 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.
Total interest expense was $0 and $0 for the nine months ended September 30, 2018 and 2017, respectively.
April 2016 - $50,000
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.
Total interest expense was $6,750 and $6,750 for the nine months ended September 30, 2018 and 2017, respectively.
September 2016 - $10,000
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.
Total interest expense was $1,800 and $1,800 for the nine months ended September 30, 2018 and 2017, respectively.
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 $5,111$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 ninethree months ended SeptemberJune 30, 2019 and 2018, respectively, and 2017,$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 9NOTE 6 – Notes Payable – Related PartiesNOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties consist of the following:
As of September 30, 2018 | As of December 31, 2017 | |||||||||||||||||||||||||||
Amount | Discount | Replacement | Net Balance | Amount | Discount | Net Balance | ||||||||||||||||||||||
January 2016 ($55,000)– Payment of $937 per month for 4 months, $1,250 per month 5 months, and $3,531 per month until fully paid | $ | - | $ | - | $ | - | $ | 5,923 | $ | (6,289 | ) | $ | (366 | ) | ||||||||||||||
November 2017 ($900,000)- 60 months of payments of $25,000 per month with $15,000 in principal payment and $10,000 in interest payment, first payment due on December 1, 2017 and the final payment on November 1, 2022. | 765,000 | - | (765,000 | ) | - | 885,000 | - | 885,000 | ||||||||||||||||||||
February 2018 ($100,000) – Fee payment of $2,500 per month, principal due February 1, 2019. | 100,000 | - | (100,000 | ) | - | - | - | - | ||||||||||||||||||||
March 2018 ($500,000) – Fee payment of $12,500 per month first year, $12,000 per month second year, $11,500 per month third year, $11,000 per month fourth year, $105,00 per month fifth year, principal due March 1, 2020. | 500,000 | - | (500,000 | ) | - | - | - | - | ||||||||||||||||||||
August 2018 ($1,365,000) – Replaced November 2017 note ($765,000 balance at August 1, 2018), February 2018 note ($100,000) and March 2018 note ($500,000). Interest only payment of $20,000 per month first nine months, then payment of $53,500 per month of principal and interest for forty-eight months after which principal will be fully paid | - | - | 1,365,000 | 1,365,000 | - | - | - | |||||||||||||||||||||
Total related party notes payable | 1,365,000 | - | - | 1,365,000 | 890,923 | (6,289 | ) | 884,634 | ||||||||||||||||||||
Less: non-current portion | (1,115,000 | ) | - | (136,250 | ) | (1,251,250 | ) | (839,306 | ) | - | (839,306 | ) | ||||||||||||||||
Related party notes payable, current portion | $ | 250,000 | $ | - | (136,250 | ) | $ | 113,750 | $ | 51,617 | $ | (6,289 | ) | $ | 45,328 |
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 |
January 2016December 2018 - $55,000$2,222,000
On March 29, 2016, the Company consummated a non-interest bearing note payable and royalty agreement with a relative 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.
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 25th 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.
Total interest expense was $0 and $0 for the nine months ended September 30, 2018 and 2017, respectively.
November 2017 - $900,000
On November 1, 2017, the Company entered into an agreement with a related third party to exchange the September 2016 $36,100 note, the September 2016 $192,000 note, the October 2016 $24,960 note, the November 2016 $5,040 note, the November 2016 $50,000 note, the November 2016 $325,000 note, the January 2017 $50,400 note, the February 2017 $70,000 note, and the March 2017 $75,000 note for a new promissory note for $900,000. The new promissory note also included accrued interest payable and payment of Company expenses. The term of the loan is sixty months and payments are to be $25,000 per month with $15,000 in principal payment and $10,000 in interest payment. The first payment is to be on December 1, 2017 and the final payment on November 1, 2022. On August 1, 2018, the Company entered into an agreement with a related party to replace the balance ($765,000) on the note, the February 2018 note, and the March 2018 note with a new note for $1,365,000.
Total interest expense was $126,229 and $0 for the nine months ended September 30, 2018 and 2017, respectively.
February 2018 - $100,000
On February 1, 2018, the Company entered into an agreement with a related third party to obtain a $100,000 promissory note in exchange for $100,000 cash. The note calls for a monthly fee of $2,500 and the principal is due February 1, 2019. On August 1, 2018, the Company entered into an agreement with a related party to replace the note, the March 2018 note, and the balance ($765,000) on the November 2017 note with a new note for $1,365,000.
Total interest expense was $15,000 and $0 for the nine months ended September 30, 2018 and 2017, respectively.
March 2018 - $500,000
On March 1, 2018, the Company entered into an agreement with a related third party to obtain a $500,000 promissory note in exchange for $500,000 cash. The note calls for a monthly fee of $12,500 per month for the first year, $12,000 per month for the second year, $11,500 for the third year, $11,000 for the fourth year, and $10,500 for the fifth year, and the principal is due March 1, 2023. On August 1, 2018, the Company entered into an agreement with a related party to replace the note, the February 2018 note, and the balance ($765,000) on the November 2017 note with a new note for $1,365,000.
Total interest expense was $58,475 and $0 for the nine months ended September 30, 2018 and 2017, respectively.
August 2018 - $1,365,000
On August 1, 2018, the Company entered into an agreement with a related third party to replace the balance ($765,000) on the November 2017 note, the FebruaryAugust 2018 note ($100,000), and the March 2018 note ($500,000)of $1,365,000 with a new note for $1,365,000.$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 $20,000$50,500 per month for the first nine months, and thenlife of the note. The entire principal is due on December 1, 2023. Accrued interest payments of $53,500 per month for principal and interest. Aftertotaling $202,000 were not made by the forty-eight months,Company. Per the note agreement, this amount was added to the principal, will be paid in full.thus increasing the principal amount to $2,222,000.
Total interest expense was $78,448$303,000 and $0 for the ninesix months ended SeptemberJune 30, 2019 and 2018, respectively. Total interest expense was $151,500 and 2017,$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 10NOTE 7 – Convertible Notes PayableCONVERTIBLE NOTES PAYABLE
Convertible notes payable consists of the following:
As of September 30, 2018 | As of December 31, 2017 | |||||||||||||||||||||||
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 | ||||||||||||
November 2017 ($5,000) - 10% interest bearing convertible debenture due on October 27, 2020 with interest only payments and due upon maturity. | - | - | - | 5,000 | (2,011 | ) | 2,989 | |||||||||||||||||
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 | (12,808 | ) | 7,192 | - | - | - | |||||||||||||||||
Total convertible notes payable | 27,500 | (12,808 | ) | 14,692 | 12,500 | (2,011 | ) | 10,489 | ||||||||||||||||
Less: non-current portion | (20,000 | ) | 7,684 | (12,316 | ) | (5,000 | ) | 1,483 | (3,517 | ) | ||||||||||||||
Convertible notes payable, current portion | $ | 7,500 | $ | (5,124 | ) | $ | 2,376 | $ | 7,500 | $ | (528 | ) | $ | 6,972 |
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 $422$141 and $422$141 for the ninethree months ended SeptemberJune 30, 2019 and 2018, respectively, and 2017, respectively.
November 2017 - $5,000
On November 1, 2017, the Company entered into an agreement with a non-affiliated shareholder$282 and issued a 10% interest bearing convertible debenture for $5,000 due on October 27, 2020. Payments of interest only are due monthly beginning December 2017. The loan is convertible at 61% of the average of the closing prices$282 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 4.9% of outstanding common stock after giving effect to the conversion. In connection with this Convertible Note Payable, the Company recorded a $5,000 discount on debt (the total discount was $6,825, of which $1,825 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. In June 2018, the note and related accrued interest were converted to 32,812 shares of common stock.
In connection with the issuance of the November convertible note payable, the Company issued a warrant to purchase 10,000 shares of common stock at an exercise price of $1.00 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 warrants issued in connection with the convertible note payable using the following inputs: Expected Term – 4 years, Expected Dividend Rate – 0%, Volatility – 373%, Risk Free Interest Rate – 2.37%. The Company recorded an additional $2,099 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 $250 and $0 for the ninesix months ended SeptemberJune 30, 2018 and 2017, respectively.2019.
March 2018 - $20,000
On March 9, 2018, the Company entered into an agreement with a non-affiliated shareholder and issued a 10% interest bearing convertible debenture for $20,000 due on March 9, 2021. Payments of interest 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 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 4.9% of outstanding common stock after giving effect to the conversion. In connection with this Convertible Note Payable, the Company recorded a $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 SeptemberDuring the six months ended June 30, 2018,2019, this note has not been converted.
Total interest expense was $1,126$500 and $0$313 for the ninethree months ended SeptemberJune 30, 2019 and 2018, respectively, and 2017,$1,000 and $626 for the six months ended June 30, 2019 and 2018, respectively.
Note 11NOTE 8 – Derivative LiabilitiesDERIVATIVE LIABILITIES
Derivative liabilities consisted of the following:
September 30, 2018 | December 31, 2017 | June 30, 2019 | December 31, 2018 | |||||||||||||
August 2015 - $15,000 convertible debt | $ | 3,599 | $ | 7,310 | $ | 6,359 | $ | 6,523 | ||||||||
November 2017 - $5,000 convertible debt | - | 4,992 | ||||||||||||||
March 2018 - $20,000 convertible debt | 14,688 | - | 23,549 | 15,994 | ||||||||||||
Total derivative liabilities | $ | 18,287 | $ | 12,302 | $ | 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.
August 2015 Convertible Debt - $15,000
In August 2015, the Company entered into a $15,000 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 $15,000 convertible note with expected term of 1.58 years, expected dividend rate of 0%, volatility of 100% and risk freerisk-free interest rate 0.61%.
November 2017 Convertible Debt - $5,000
In November 2017, the Company entered into a $5,000 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 $5,000 convertible note with expected term of 3.00 years, expected dividend rate of 0%, volatility of 312% and risk free interest rate 2.37%. This note was paid in June 2018.
March 2018 Convertible Debt - $20,000
In March 2018, the Company entered into a $20,000 convertible note with variable conversion pricing. The following inputs were used within a binomial modelthe Black Sholes Model to determine the initial relative fair values of the $20,000 convertible note with expected term of 2.443.35 years, expected dividend rate of 0%, volatility of 160%413% and risk free interest rate 2.49%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 Derivativederivative liability as of December 31, 20172018 and SeptemberJune 30, 2018.2019.
Balance | Balance | |||||||||||||||||||||||||||||||
at 12/31/17 | Additions | Changes | at 09/30/18 | December 31, 2018 | Additions | Changes | June 30, 2019 | |||||||||||||||||||||||||
August 2015 - $15,000 convertible debt | $ | 7,310 | $ | - | $ | (3,711 | ) | $ | 3,599 | $ | 6,523 | $ | - | $ | (165 | ) | $ | 6,358 | ||||||||||||||
November 2017 - $5,000 convertible debt | 4,992 | (4,992 | ) | - | ||||||||||||||||||||||||||||
March 2018 - $20,000 convertible debt | - | 15,370 | (682 | ) | 14,688 | 15,994 | - | 7,555 | 23,549 | |||||||||||||||||||||||
Total | $ | 12,302 | $ | 15,370 | $ | (9,385 | ) | $ | 18,287 | $ | 22,517 | $ | - | $ | 7,390 | $ | 29,907 |
Note 12NOTE 9 – Accrued Royalties PayableACCRUED ROYALTY PAYABLE
The Company has estimated the royalties to be paid out in 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 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 |
September 30, 2018 | December 31, 2017 | |||||||
January 2016 royalty agreement | $ | 113,941 | $ | 86,230 | ||||
March 2016 royalty agreement | 126,318 | 88,010 | ||||||
September and November 2016 royalty agreements | (5,203 | ) | 5,753 | |||||
November 2017 royalty agreement | 8,530 | - | ||||||
August 2018 royalty agreement | 11,125 | - | ||||||
Total accrued royalties | $ | 254,711 | $ | 179,993 |
Royalty expense was $13,251 and $47,416 for the three months ended June 30, 2019 and 2018, respectively, and $29,751 and $89,945 for the six months ended June 30, 2019 and 2018, respectively.
Note 13NOTE 10 – Stockholders’ EquitySTOCKHOLDERS’ 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 SeptemberJune 30, 2018,2019, 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 ninethree and six months ended SeptemberJune 30, 2018,2019, theCompany issued 476,000no additional shares and 250,000 additional shares of its common stock for services valued at $110,200. In addition , the Company and sold 4,340,883 shares of its common stock to several investors for an aggregate purchase price of $458,705. In addition, the Company issued 538,256 common shares in accordance with the anti-dilution provisions of Royalty notes #3 and #4. In addition, the Company issued 32,812 common shares in the conversion of $5,083 of notes payable.$24,500, respectively. The total number of shares issued or issuable as of SeptemberJune 30, 20182019 was 31,611,785.30,659,244.
Note 14NOTE 12 – Warrants
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 $1.00.
A summary of warrant activity for the periods presented is as follows:
Weighted Average | ||||||||||||||||
Warrants for | Weighted Average | Remaining | Aggregate | |||||||||||||
Common Shares | Exercise Price | Contractual Term | Intrinsic Value | |||||||||||||
Outstanding as of December 31, 2016 | 160,000 | $ | 0.53 | 1.97 | - | |||||||||||
Granted | 4,697,176 | 0.51 | 4.00 | |||||||||||||
Exercised | - | - | - | - | ||||||||||||
Forfeited, cancelled, expired | - | - | - | - | ||||||||||||
Outstanding as of December 31, 2017 | 4,857,176 | $ | 0.51 | 3.19 | 412,864 | |||||||||||
Granted | 930,410 | 1.35 | 4.00 | - | ||||||||||||
Exercised | - | - | - | - | ||||||||||||
Forfeited, cancelled, expired | - | - | - | - | ||||||||||||
Outstanding as of September 30, 2018 | 5,787,586 | $ | 0.60 | 2.59 | - |
Note 15 – Income (Loss) Per ShareINCOME (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:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Preferred shares | - | - | - | - | ||||||||||||
Convertible notes | 155,190 | 375,082 | 155,190 | 375,082 | ||||||||||||
Warrants | 5,787,586 | 5,137,298 | 5,787,586 | 5,137,298 | ||||||||||||
Options | - | - | - | - | ||||||||||||
Total anti-dilutive weighted average shares | 5,942,776 | 5,512,380 | 5,942,776 | 5,512,380 |
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 |
If all dilutive securities had been exercised at SeptemberJune 30, 2018,2019, the total number of common shares outstanding would be as follows:
Common Shares | ||||
Preferred Shares | - | |||
Convertible notes | ||||
Warrants | ||||
Options | - | |||
Total potential shares |
Note 16NOTE 13 – Commitments and ContingenciesCOMMITMENTS 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 24th 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 17NOTE 14 – Related Party TransactionsRELATED PARTY TRANSACTIONS
The Company had the following related party transactions:
Notes payable of $1,365,000 to the Doheny Group.
3,208,017 shares of common stock, of which 1,863,152 were granted to the Doheny Group in relation to notes payable and 1,294,865 were granted to the Doheny Group as anti-dilution shares.
50,000 warrants were granted to David Haridim.
Note 18 – Settlement with Distributor
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. 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 December 31, 2017, $35,979 in distributor revenue and accounts receivable were reversed out. As of October 1, 2017, the distributor became an employee of the Company and was to service the area that he had been a distributor of.
● | 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 19NOTE 15 – Subsequent EventsSUBSEQUENT 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.
On October 4, 2018, Michael Wainer entered into a personal loan agreement with Kabbage for $72.800. Michael Wainer then lent $72,800 to the Company. The loan was for twelve months and loan fees and interest were $37,128. Payments were $11,527 per month for the first six months and $6,795 per month for the final six months. Payments were to be paid by the Company to Kabbage. An initial payment of $11,527 was made in December 2018. On December 31, 2018, Michael Wainer released the Company from payment of the loan.
On October 11, 2018, the Company entered into a loan agreement with Forward Financing for $60,000. Total interest and fees on the loan were $18,600. Payments of $561.43 were automatically paid each business day starting October 15, 2018 and were to be for 140 days business days. On January 11,July 10, 2019, Forward Financing agreed to settle an outstanding balance of $49,580.64 for $30,805.64,
On December 1, 2018, an addendum (addendum #4) was made to the November 1, 2016 loan agreement with The Doheny Group. A December 1, 2018 payment by the Company was not made and thus the Company was in default to the Doheny Group. Therefore, the royalty will become $5.00 per unit on all units in perpetuity, the loan amount has increased to $2,000,000, as of December 1, 2018 payment of $20,000 was not made and the loan amount became $2,020,000, a new monthly payment of $50,500 interest only will be due as of January 1, 2019, if the full $50,500 cannot be paid, then a partial payment will be made with the unpaid amount added to the principal, and a balloon payment of the balance of principal owed shall be made on December 1, 2023.
On December 17, 2018, the Company entered into a loan agreement with The Doheny Group for $6,000.$13,000. The loan has no interest (0%), no monthly payments, and a balloon payment of $6,000$13,000 on December 17, 2019.July 10, 2020.
On December 31, 2018,July 18, 2019, the Company entered into a loan agreement with The Doheny Group for $23,000.$8,000. The loan has no interest (0%), no monthly payments, and a balloon payment of $23,000$8,000 on December 31, 2019.
On December 31, 2018, the Company reached a settlement with note holder Rafael Mavashev in which a $10,000 promissory note and accrued interest were settled for payment of $1,000.
On December 31, 2018, the Company reached a settlement with note holder Edris Consulting in which a $65,000 royalty note and royalties owed were settled for payment of $3,000.
On December 31, 2018, the Company reached a settlement with note holder Oren Azulay in which a $50,000 promissory note and accrued interest payable were settled for payment of $13,000.
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.
On January 3, 2019, the Company entered into a loan agreement with the Doheny Group for $32,700. The note has no interest (0%), no monthly payments, and a balloon payment of $32,700 on January 3,July 18, 2020.
On January 11, 2019, the Company entered into a loan agreement with the Doheny Group for $40,000. The note has no interest (0%), no monthly payments, and a balloon payment of $40,000 on January 11, 2020.
On January 15, 2019, the Company entered into a loan agreement with the Doheny Group for $14,500. The note has no interest (0%), no monthly payments, and a balloon payment of $14,500 on January 15, 2020.
On January 30, 2019, the Company reached a release of all claims with note holder Lucky Draw, LLC. The Company owed Lucky Draw a promissory note payable of $50,000 and accrued interest.
On February 1, 2019, the Company entered into a loan agreement with the Doheny Group for $15,000. The note has no interest (0%), no monthly payments, and a balloon payment of $15,000 on February 1, 2020.
On February 19,July 26, 2019, the Company entered into a loan agreement with The Doheny Group for $5,000.$25,000. The loan has no interest (0%), no monthly payments, and a balloon payment of $5,000$25,000 on February 19,July 26, 2020.
On March 4, 2019, the Company entered into a loan agreement with The Doheny Group for $10,000. The loan has no interest (0%), no monthly payments, and a balloon payment of $10,000 on March 4, 2020.
On May 1, 2019, the Company entered into a loan agreement with The Doheny Group for $20,000. The loan has no interest (0%), no monthly payments, and a balloon payment of $20,000 on May 1, 2020.
On June 3, 2019, the Company entered into a loan agreement with The Doheny Group for $89,000. The loan has no interest (0%), no monthly payments, and a balloon payment of $89,000 on June 3, 2020.
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, 2017,2018, we generated total revenues of $1,235,433,$942,160, compared to $303,765$1,235,433 in the year ending December 31, 2016.2017. For the three months ended SeptemberJune 30, 20182019 and 2017,2018, we had total revenues of $241,658$399,924 and $479,415,$482,495, respectively, and a net loss of $328,179$407,850 and $380,760,$824,551, respectively.
We 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. 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.
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 we began production of our patent pending BDI Model #1 power line filter to attach to our BDI-747 Breath Alcohol Ignition Interlock Device which together were certified by NHSTA on June 17, 2015 to work to together to meet or exceed 2013 NHSTA guidelines.
As of December 31, 2017, the BDI-747/1 was approved for use in five states, namely Oregon, Texas, Arizona, Kentucky, and Tennessee. As of December 31, 2018, the BDI-747/1 device was approved in Oregon, Texas, Arizona, and Kentucky. As of March 31,June 30, 2019, the BDI-747/1 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 are not able to afford.
We have a storefront location in Phoenix, Arizona and contract with four qualified contractors to install, calibrate, remove and monitor the devices. Our business plan includes growth of the company by continuing to complete and submit more state applications and to build up our service infrastructure by utilizing our own retail infrastructure, distributors and franchisees.
As of December 31, 2017, we had approximately 1,558 units on the road, with approximately 1,451 devices being leased directly from us and approximately 107 devices leased through our distributors. As of September 30, 2018, we had approximately 1,081 units on the road, with approximately 892 devices being leased directly from us and approximately 186 devices leased through our distributors. 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 distributors. The decrease in the total number of devices we have on the road is primarily due to 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.
26 |
Results of Operations
Three Months Ended SeptemberJune 30, 20182019 (Unaudited) Compared to Three Months Ended SeptemberJune 30, 20172018 (Unaudited)
For the three months ended September 30, | Three Months Ended | |||||||||||||||||||||||||||||||
2018 | 2017 | June 30, 2019 | June 30, 2018 | Changes | ||||||||||||||||||||||||||||
(restated) | Amount | % of Revenue | Amount | % of Revenue | Amount | % | ||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||
Monitoring revenue | $ | 221,418 | $ | 394,139 | ||||||||||||||||||||||||||||
Distributorship revenue | 20,240 | 85,276 | ||||||||||||||||||||||||||||||
Total revenue | 241,658 | 479,415 | ||||||||||||||||||||||||||||||
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 | 18,724 | 57,817 | 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 | 18,724 | 58,817 | ||||||||||||||||||||||||||||||
Total cost of revenues | 3,598 | 2.1 | % | 29,068 | 10.4 | % | (25,470 | ) | -87.6 | % | ||||||||||||||||||||||
Gross profit | $ | 222,934 | $ | 420,598 | 164,948 | 97.9 | % | 251,771 | 89.6 | % | (86,823 | ) | -34.5 | % | ||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Payroll | 240,499 | 272,900 | 112,678 | 66.9 | % | 229,737 | 81.8 | % | (117,059 | ) | -51.0 | % | ||||||||||||||||||||
Professional fees | 26,175 | 16,603 | 105,751 | 62.7 | % | 50,963 | 18.1 | % | 54,788 | 107.5 | % | |||||||||||||||||||||
General and administrative expenses | 170,504 | 269,039 | ||||||||||||||||||||||||||||||
Depreciation | - | 90,512 | ||||||||||||||||||||||||||||||
General and administrative | 71,418 | 42.4 | % | 219,539 | 78.2 | % | (148,121 | ) | -67.5 | % | ||||||||||||||||||||||
Total operating expenses | 437,178 | 649,054 | 289,847 | 172.0 | % | 500,239 | 178.1 | % | (210,392 | ) | -42.1 | % | ||||||||||||||||||||
Loss from operations | (214,244 | ) | (228,456 | ) | (124,899 | ) | -74.1 | % | (248,468 | ) | -88.5 | % | 123,569 | -49.7 | % | |||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||
Other Income (Expense): | ||||||||||||||||||||||||||||||||
Interest expense, net | (119,028 | ) | (145,740 | ) | (161,984 | ) | -96.1 | % | (108,237 | ) | -38.5 | % | (53,747 | ) | 49.7 | % | ||||||||||||||||
Change in fair value of derivative liability | 5,093 | (6,474 | ) | (5,558 | ) | -3.3 | % | 11,579 | 4.1 | % | (17,137 | ) | -148.0 | % | ||||||||||||||||||
Gain (loss) on extinguishment of debt | - | - | - | 0.0 | % | - | 0.0 | % | - | n/a | ||||||||||||||||||||||
Total other income (expense) | (113,935 | ) | (152,214 | ) | (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 | $ | (328,179 | ) | $ | (380,760 | ) | $ | (292,441 | ) | -173.5 | % | $ | (345,926 | ) | -123.2 | % | $ | 53,485 | -15.5 | % |
Operating Loss; Net Loss
Our net loss decreased by $52,581,$53,485, from ($380,760)345,926) for the three months ended SeptemberJune 30, 20172018 to ($328,179)292,441) for the three months ended SeptemberJune 30, 2018.2019. Our operating loss decreased by $14,212,$123,569, from ($228,456)248,468) to ($214,233)124,899) for the same periods. The decrease in our net loss for the three months ended SeptemberJune 30, 2018,2019, compared to the three months ended SeptemberJune 30, 2017,2018, is primarily the result of decreases in ourlower cost of revenues, lower general and administrative expenses, lower payroll, and depreciation, partially offset by a slight increase in ourdecreased revenues and increases professional fees.fees and interest expense, net. These changes are detailed below.
Revenue
DuringMonitoring Revenues.Monitoring revenues decreased by $115,188, or 43.5%, to $149,556 in the three months ended September 30, 2018 we had $241,658second quarter of fiscal 2019 from $264,744 in revenues, with $221,418 coming from revenue from the monthly recurring payments we received from our customers that rent our BDI-747/1 breathalyzer device forsecond quarter last year. The decrease is due to a decrease in the ongoing monitoring services related to the devices, and $20,240 coming from revenues received from our distributors, compared to $394,139 and $85,276 from these revenue sources for the same period one year ago, respectively. Notably, the sourcenumber of our revenue continued to shift from revenue received our distributors to the revenue we receive from the 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 in the period ended September 30, 2018,second quarter of fiscal 2019 compared to September 30, 2017. We expect the majoritysecond quarter of our revenue in the future to come from the monthly recurring payments we receive from our customers that rent our BDI-747/1 breathalyzer device for the ongoing monitoring serviceslast year. This decrease is primarily related to the devices and notfact our device is authorized in less states than it was during the same period in fiscal year 2018.
Distributorship Revenues. Distributorship revenues increased by $2,895, or 18.0%, to $18,990 in the second quarter of fiscal 2019 from distributors as we shift away from using distributors and more towards direct retail$16,095 in the second quarter last year. The increase is due to an increase in number of our devices.units with customers through distributors.
Cost of Revenue
Our cost of revenue for the three months ended SeptemberJune 30, 20182019 was $18,724,$3,598, compared to $58,817$29,068 for the three months ended SeptemberJune 30, 2017.2018. Our cost of revenue for the three months ended SeptemberJune 30, 2019 and June 30, 2018, was completely related to our monthly monitoring services we provide to our customers. For the three months ended September 30, 2017,The decrease in our cost of revenue was attributed as $57,817due to monitoring cost of revenuethe fact we ordered more parts and $1,000supplies from our supplier in the period in 2018 compared to distributorship cost of revenue. Again, we expect this shiftthe period in our cost of revenue to monitoring cost of revenue to continue as we move away from using distributors and more towards direct retail of our devices.2019.
Payroll
Our payroll decreased by $32,401 from $272,900 for the three months ended September 30, 2017 to $240,499 for the three months ended September 30, 2018. This decrease was related to needing fewer personnel as we have fewer units on the road, which relates to a decrease in estimated payroll taxes. If we continue to decrease the number of units we have on the road we expect our payroll will continue to decrease.
Professional Fees
Our professional fees increased by $9,572 from $16,603 for the three months ended September 30, 2017 to $26,175 for the three months ended September 30, 2018. These fees are largely related to fees paid for legal, accounting and audit services. We expect these fees to grow steadily if 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 decreased by $98,535 from $269,039 for the three months ended September 30, 2017 to $170,504 for the three months ended September 30, 2018. Decreases were $54,738 for advertising, $23,433 for fixed assets adjustment, $22,020 for bad debt expense, $14,275 for commissions, $13,446 for investor relations, and $30,072 miscellaneous small expenses, offset by increases of $29,866 for software expense, $17,167 for special parts, and $12,416 for rent expense.
Depreciation
Our depreciation decreased from $90,512 for the three months ended September 30, 2017 to $0 for the three months ended September 30, 2018. Our depreciation expense in the period ended September 30, 2017 was primarily related to the depreciation of the BDI-747/1 device. Since we fully impaired our remaining BDI-747/1 devices for the period ended September 30, 2018, due to the uncertainty with the direction of our business going forward, we did not have a depreciation expense for the three months ended September 30, 2018.
Interest Expense
InterestPayroll expense decreased by $26,712$117,059, or 51.0%, to $112,678 in the second quarter of fiscal 2019 from $145,740 for$229,737 in the three months ended September 30, 2017second quarter last year. The decrease in payroll is due to $119,028 forcontrolling overhead expenses and decreasing personnel in the three months ended September 30, 2018. The interest expense decreased for the period ended September 30, 2018,second quarter of fiscal 2019 compared to the same period one year ago, due to asecond quarter of last year. Our decrease in our outstanding debt compared to one year ago, which primarily relate to the loans we received from Doheny Group, LLC.
Change in Fair Value of Derivative Liability
During the three months ended September 30, 2018, we had a change in fair value of derivative liability of $5,093 compared to ($6,474) for the three months ended September 30, 2017. The change in fair value of derivative liability for both periods relates to the conversion feature of a promissory note we had outstanding during these periods. Since the conversion price on the promissory notepersonnel 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.
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Nine Months Ended September 30, 2018 (Unaudited) Compared to Nine Months Ended September 30, 2017 (Unaudited)
For the Nine Months ended September 30, | ||||||||
2018 | 2017 | |||||||
(restated) | ||||||||
Revenue | ||||||||
Monitoring revenue | $ | 664,649 | $ | 674,197 | ||||
Distributorship revenue | 59,505 | 286,729 | ||||||
Total revenue | 724,154 | 960,926 | ||||||
Monitoring cost of revenue | 95,405 | 111,884 | ||||||
Distributorship cost of revenue | - | 7,739 | ||||||
Total cost of revenue | 95,405 | 119,623 | ||||||
Gross profit | $ | 628,749 | $ | 841,303 | ||||
Operating expenses | ||||||||
Payroll | 706,648 | 457,288 | ||||||
Professional fees | 114,230 | 93,505 | ||||||
General and administrative expenses | 639,598 | 579,172 | ||||||
Depreciation | - | 234,654 | ||||||
Total operating expenses | 1,460,476 | 1,364,619 | ||||||
Loss from operations | (831,727 | ) | (523,316 | ) | ||||
Other income (expense) | ||||||||
Interest expense, net | (329,586 | ) | (440,538 | ) | ||||
Change in fair value of derivative liability | 9,385 | 11,018 | ||||||
Gain (loss) on extinguishment of debt | - | (305,000 | ) | |||||
Total other income (expense) | (320,201 | ) | (734,520 | ) | ||||
Provision for income taxes | 800 | 1,600 | ||||||
Net loss | $ | (1,152,728 | ) | $ | (1,259,436 | ) |
Operating Loss; Net Loss
Our net loss decreased by $106,708, from ($1,259,436) for the nine months ended September 30, 2017 to ($1,152,728) for the nine months ended September 30, 2018. Our operating loss increased by $308,411, from ($523,316) to ($831,727) for the same periods. We only had a slight decrease in our net loss for the nine months ended September 30, 2018, compared to the nine months ended September 30, 2017, despite the fact we had less revenue and higher operating expenses, primarily due to the fact we did not have the one-time loss on extinguishment of debt in 2018 that we had in 2017. These changes are detailed below.
Revenue
During the nine months ended September 30, 2018 we had $724,154 in revenues, with $664,649 coming from revenue from the 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 $59,505 coming from revenues received from our distributors, compared to $674,197 and $286,729 from these revenue sources for the same period one year ago, respectively. Notably, the source of our revenue continued to shift significantly from revenue received our distributors in the period ended September 30, 2017, to the revenue we receive from the 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 in the period ended September 30, 2018. We expect the majority of our revenue in the future to come from the monthly recurring payments we receive from our customers that rent our BDI-747/1 breathalyzer device for the ongoing monitoring services related to the devices and not from distributors as we shift away from using distributors and more towards direct retail of our devices.
Cost of Revenue
Our cost of revenue for the nine months ended September 30, 2018 was $95,405, compared to $119,623 for the nine months ended September 30, 2017. Our cost of revenue for the nine months ended September 30, 2018 was completely related to our monthly monitoring services we provide to our customers. For the nine months ended September 30, 2017, our cost of revenue was attributed as $111,884 to monitoring cost of revenue and $7,739 to distributorship cost of revenue. Again, we expect this shift in our cost of revenue to monitoring cost of revenue to continue as we move away from using distributors and more towards direct retail of our devices.
Payroll
Our payroll increased by $249,360 from $457,288 for the nine months ended September 30, 2017 to $706,648 for the nine months ended September 30, 2018. This increase was 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 additionalhaving less units on the road.
Professional Fees
Our professionalProfessional fees increased by $20,725$54,788, or 107.5%, to $105,751 in the second quarter of fiscal 2019 from $93,505 for$50,963 in the nine months ended September 30, 2017 to $114,230 for the nine months ended September 30, 2018.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 if 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 increaseddecreased by $60,426 from $579,172 for the nine months ended September 30, 2017$148,121, or 67.5%, to $639,598 for the nine months ended September 30, 2018. Increases were $166,579 for software expense, $70,079 for royalty expense, $41,200 for special parts expense, $34,836 for telephone expense, $34,462 for investor relations, $29,836 and for rent expense, offset by decreases of $58,159 for advertising expense, $52,683 for fixed assets adjustment, $44,000 for settlement with former officer, $40,858 for commissions, $27,593 for postage and delivery, $22,020 for bad debt expense, and $71,253 for small miscellaneous expenses. Notably,$71,418 in the nine months ended September 30, 2017, we paid a settlementsecond quarter of $50,000 to an ex-employee and removed the higher amount we had accrued for that employee, and we amended our preferred stock purchase agreement with Mr. Laurence Wainer such that his payment for the shares was full satisfaction of approximately $45,000 of debt owed to him rather than $25,500 of accrued salary, which was the original payment. We did not have these types of one-time transactionsfiscal 2019 from $219,539 in the nine months ended September 30, 2018. In quarters that we do not have similar one-time transactions we expect our general and administrative expenses to be around $125,000 to $150,000 persecond quarter for the foreseeable future.
Depreciation
Our depreciation decreased from $234,654 for the nine months ended September 30, 2017 to $0 for the nine months ended September 30, 2018. Our depreciation expense in the period ended September 30, 2017 was primarily related to the depreciation of the BDI-747/1 device. Since we fully impaired our remaining BDI-747/1 devices for the period ended September 30, 2018,last year. The decrease is due to the uncertainty with the direction of our business going forward, we did not have a depreciation expense for the nine months ended September 30, 2018.following:
● | 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. |
Interest Expense
Interest expense decreasedincreased by $110,952$53,747, or 49.7%, to $161,984 in the second quarter of fiscal 2019 from $440,538 for$108,237 in the nine months ended September 30, 2017 to $329,586 for the nine months ended September 30, 2018.second quarter last year. The interest expense decreased for the period ended September 30, 2018, compared to the same period one year ago,increase is due to a decreaseincrease in our outstanding debt compared to one year ago, which primarily relates to the loans we received from Doheny Group, LLC.related parties.
Change in Fair Value of Derivative Liability
During the ninethree months ended SeptemberJune 30, 2018,2019, we had a change in fair value of derivative liability of $9,385($5,558) compared to $11,018$11,579 for the ninethree months ended SeptemberJune 30, 2017.2018. The change in fair value of derivative liability for both periodsin the three months ended June 30, 2019, relates to the conversion feature of a promissory note we had outstanding during these periods.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.
Six Months Ended June 30, 2019 (Unaudited) Compared to Six Months Ended June 30, 2018 (Unaudited)
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 decreased by $416,699, from ($824,549) for the six months ended June 30, 2018 to ($407,850) for the six months ended June 30, 2019. Our operating loss decreased by $502,668, from ($617,484) to ($114,816) for the same periods. The decrease in our net loss for the six months ended June 30, 2019, compared to the six months ended June 30, 2018, is primarily the result of lower cost of revenues, lower general and administrative expenses, lower payroll, partially offset by decreased revenues and increases professional fees and interest expense, net. These changes are detailed below.
Revenue
Monitoring Revenues.Monitoring revenues decreased by $79,988, or 18.0%, to $363,243 in the six months ended June 30, 2019 from $443,231 in 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 in the first six months of fiscal 2019 compared to 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 same period in fiscal year 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 cost of revenue for the six months ended June 30, 2019 was $25,233, compared to $76,681 for the six months ended June 30, 2018. Our cost of revenue for the six months ended June 30, 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
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 is due to controlling overhead expenses and decreasing personnel due to the decrease in the number of units we have on Extinguishmentthe road.
Professional Fees
Professional fees increased by $59,242, or 67.3%, to $147,297 in the first six months of Debtfiscal 2019 from $88,055 in the first six months 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 if 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 decreased by $337,603, or 72.0%, to $131,492 in the first six months of fiscal 2019 from $469,095 in the first six months of last year. The decrease is due to the following:
● | 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. |
Interest Expense
Interest expense increased by $128,250, or 60.9%, to $338,808 in the first six months of fiscal 2019 from $210,558 in the first six months of last year. The increase is due to increase in loans from related parties.
Change in Fair Value of Derivative Liability
During the ninesix months ended SeptemberJune 30, 2018,2019, we had lossa change in fair value of derivative liability of ($7,390) compared to $4,293 for the six months ended June 30, 2018. The change in fair value of derivative liability in the six months ended June 30, 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.
Gain on Extinguishment of Debt
Gain on extinguishment of debt of $0, compared to $305,000 during the same period in 2017. The loss on extinguishment$54,764 resulted from forgiveness and settlement of debt duringin the period in 2017 related to debt retired through the issuancefirst quarter of preferred stock to Laurence Wainer.
fiscal 2019.
Liquidity and Capital Resources for the NineSix Months Ended SeptemberJune 30, 20182019 Compared to NineSix Months Ended SeptemberJune 30, 20172018
Introduction
Our cash on hand as of SeptemberJune 30, 20182019 was $42,124,$12,426, compared to $31,874$775 at December 31, 2017.2018. During the ninethree months ended SeptemberJune 30, 20182019 and 2017,2018, 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 SeptemberJune 30, 20182019 and as of December 31, 2017,2018, respectively, are as follows:
September 30, 2018 | December 31, 2017 | Change | June 30, 2019 | December 31, 2018 | Change | |||||||||||||||||||
Cash | $ | 42,124 | $ | 31,874 | $ | 10,250 | $ | 12,426 | $ | 775 | $ | 11,651 | ||||||||||||
Total current assets | $ | 50,127 | $ | 63,445 | $ | (13,318 | ) | $ | 25,409 | $ | 7,146 | $ | 18,263 | |||||||||||
Total assets | $ | 55,258 | $ | 68,576 | $ | (13,318 | ) | $ | 31,890 | $ | 13,627 | $ | 18,263 | |||||||||||
Total current liabilities | $ | 735,519 | $ | 585,749 | $ | 149,770 | $ | 755,397 | $ | 564,477 | $ | 190,920 | ||||||||||||
Total liabilities | $ | 2,015,267 | $ | 1,449,846 | $ | 565,421 | $ | 3,017,756 | $ | 2,616,143 | $ | 401,613 |
Our current assets decreasedincreased as of SeptemberJune 30, 20182019 as compared to December 31, 2017,2018, primarily due to us having less accounts receivable, net, partially offset by more cash on hand.hand and accounts receivable at June 30, 2019. The decreaseincrease in our total assets between the two periods was also primarily related to us having less accounts receivable, net, partially offset by more cash on hand.hand and accounts receivable at June 30, 2019.
Our current liabilities increased slightly as of SeptemberJune 30, 20182019 as compared to December 31, 2017.2018. This increase was primarily due to increases in our accrued expenses, accrued royalty payable, accrued interest, accrued interest-related party, and derivative liability, notes payable, and notes payable-related party, offset by decreases in accrued expenses, deferred revenue, and accounts payable, and deferred revenue.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 $924,727$182,960 for the ninesix months ended SeptemberJune 30, 2018,2019, as compared to $179,428$620,304 for the ninesix months ended SeptemberJune 30, 2017.2018. For the period in 2019, the net cash used in operating activities consisted primarily of our net income (loss) of ($407,850), adjusted primarily by a non-cash change in fair value of derivative liability of $7,390, shares issued for services of $24,500, gain on extinguishment of debt of ($54,764), and amortization of debt discount of $17,035, as well as changes in, accrued expenses of ($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 ($1,152,728)824,549), increase in derivative liabilities of ($15,370), an allowance for doubtful accounts of ($26,541), adjusted primarily by non-cash change in fair value of derivative liability of $9,385, shares issued for services of $110,200, debt converted to common shares of $5,083 and amortization of debt discount of $27,704, as well as changes in, accrued expenses of $4,863, accounts receivable of $50,102, prepaid expenses of $7, deferred revenue of ($68,827), accounts payable of ($36,695), accrued royalties payable of $74,718, and accrued interest of $99,773. For the period in 2017, the net cash used in operating activities consisted primarily of our net loss of $1,259,436 (restated), a decrease in deferred revenue of $64,274 (restated), and a non-cash change in fair value of derivative liability of $11,019, offset by a decrease in accounts receivable$11,078, 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,$110,200, and changes in non-cash loss on extinguishment of debt of $305,000, amortization of debt discount of $275,465, depreciation$24,536, as well as changes in, accrued expenses of $234,654, shares issued for services$8,795, accounts receivable of $14,188, fixed assets disposed$55,457, prepaid expenses of $12,989,$1,506, accounts payable of ($29,250), deferred revenue of ($56,676), accrued royalties payable of $60,866, and allowance for doubtful accountsaccrued interest of $5,412.
$54,561.
Investments
We did not have any cash provided by/used in investing activities in the ninesix months ended SeptemberJune 30, 2018, compared to cash used in investing activities of $567,026 for the nine months ended September2019 or June 30, 2017. For the nine months ended September 30, 2017, the cash used in investing activities was related to purchases of furniture and equipment of ($817,026), partially offset by deposits on units of $250,000.2018.
Financing
We had net cash provided by financing activities for the ninesix months ended SeptemberJune 30, 20182019 of $934,977,$194,611, compared to $714,515$869,794 for the ninesix months ended SeptemberJune 30, 2017.2018. For the ninesix months ended SeptemberJune 30, 2019, our net cash from financing activities consisted of proceeds from related party notes payable of $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 $458,705,$360,705, partially offset by repayments of notes payable of $34,405,$31,588, repayments of convertible notes payable of $5,000, and repayments of related party notes payable of $126,050. 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 ninefiscal 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 SeptemberJune 30, 2017, our net cash from financing activities consisted2019.
Our adoption of proceeds from notes payableASC 606, Revenue Recognition, did not change the way the Company recognized revenue for the first six months of $195,400 and proceeds from issuancefiscal 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 common stock of $653,099, partially offset by repayments of notes payable of $46,037, and repayments relate party note payable of $87,947.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 SeptemberJune 30, 2018,2019, we have no contingent liability that is required to be recorded nor disclosed.
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 4 Controls 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 SeptemberJune 30, 20182019 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 SeptemberJune 30, 2018,2019, 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 SeptemberJune 30, 2018,2019, 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 SeptemberJune 30, 2018,2019, 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 SeptemberJune 30, 20182019 and identified the following material weaknesses, which are outlined further in our Annual Report on Form 10-K for the year ended December 31, 2017:2018:
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.
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.
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended SeptemberJune 30, 2018,2019, we issued the followingdid not issue any unregistered securities:securities.
During the quarter ended September 30, 2018, we issued an aggregate of 1,237,500 shares of our common stock to 11 non-affiliated investors in exchange for $98,000. 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 515,000 shares of our common stock, with exercise prices ranging from $0.10 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.
During the quarter ended September 30, 2018, we issued 137,349 shares of our common stock to The Doheny Group, LLC, under the anti-dilution provisions of certain royalty agreements we have with The Doheny Group, LLC. These shares were issued with a standard restrictive legend. As of September 30, 2018, we were obligated to issue an additional 511,102 shares of our common stock to Doheny Group, LLC, pursuant to the anti-dilution rights they have with us, but have not yet issued the shares. These shares will be issued with a standard restrictive legend. The issuances of the shares to The Doheny Group, LLC, were and will be exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, due to the fact the purchaser is a sophisticated investor, known to our management and familiar with our operations.
ITEM 3 Defaults Upon Senior Securities
There have been no events which are required to be reported under this Item.
ITEM 4 Mine Safety Disclosures
There have been no events which are required to be reported under this Item.
There have been no events which are required to be reported under this Item.
* 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. | |
(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 | |
(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 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 9, 2018. | |
(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, | |
(17) | Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on June 27, |
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: | /s/ David Haridim | |
By: | David Haridim | |
President (Principal Executive Officer) |