UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended:
or
For the transition period from _________to ________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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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.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
Large accelerated filer | [ ] | 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.
Shares registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
As of August 20, 2019, the issuer had
EXPLANATORY NOTE
This amendment to the Form 10-Q, as filed on August 19, 2019, is being filed solely to correctly add the XBRL documentation and make minor corrections. No other changes have been made to the document.
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TABLE OF CONTENTS
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PART I |
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Item 1. Financial Statements | 3 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
Item 3 Quantitative and Qualitative Disclosures About Market Risk | 19 |
Item 4 Controls and Procedures | 20 |
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PART II |
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Item 1. Legal Proceedings | 21 |
Item IA. Risk Factors | 21 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 21 |
Item 3. Defaults Upon Senior Securities | 21 |
Item 4. Mine Safety Disclosures | 21 |
Item 5. Other Information | 21 |
Item 6. Exhibits | 21 |
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SIGNATURES | 22 |
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BRIGHTLANE CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| June 30, 2019 | December 31, 2018 |
ASSETS |
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Current Assets |
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Cash and cash equivalents | $ | $ |
Loans receivable | ||
Accounts receivable | ||
Accounts receivable – related party | ||
Notes receivable - current portion | ||
Total Current Assets | ||
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Notes receivable - long term portion | ||
Intangible asset, net | ||
Investment in real estate, net | ||
Total Assets | $ | $ |
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LIABILITIES AND STOCKHOLDERS' EQUITY | ||
LIABILITIES |
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Current Liabilities |
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Accounts payable | $ | $ |
Accrued expenses | ||
Accrued interest | ||
Line of credit | ||
Line of credit – related party | ||
Current portion of convertible note payable | ||
Current portion of convertible note payable – related party | ||
Total Current Liabilities | ||
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Convertible note payable | ||
Convertible note payable – related party | ||
Total Liabilities | ||
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STOCKHOLDERS' EQUITY (DEFICIT) | ||
Series A Preferred Voting Stock, $ and December 31, 2018 respectively | ||
Series B Preferred Voting Stock, $ 2018 respectively | ||
Common stock, $ 2019 and December 31, 2018 respectively | ||
Additional paid in capital | ||
Treasury stock | ||
Accumulated deficit | ( | ( |
Accumulated other comprehensive income |
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Total Stockholders’ Equity | ( | |
Total Liabilities and Stockholders’ Equity | $ | $ |
The accompanying notes are an integral part of these financial statements.
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BRIGHTLANE CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||
| 2019 | 2018 | 2019 | 2018 |
REVENUE |
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Interest income | $ | $ | $ | $ |
Fees | ||||
Sale of real estate | ||||
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Cost of property sold | ( | ( | ||
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Gross Profit | ||||
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OPERATING EXPENSES |
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Selling, general and administrative | ||||
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OPERATING LOSS | ( | ( | ( | ( |
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OTHER EXPENSE |
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Interest expense - related party | ||||
Interest expense - other | ||||
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LOSS BEFORE INCOME TAXES | ( | ( | ( | ( |
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PROVISION FOR INCOME TAXES | ||||
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NET LOSS | $( | $( | $( | $( |
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OTHER COMPREHENSIVE INCOME |
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Currency translation adjustments | $ | $ | ||
Total Comprehensive Income | $( | ( | $( | ( |
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Net Loss Per Share: Basic and Diluted | $( | $( | $( | $( |
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Weighted Average Number of Shares Outstanding: Basic and Diluted | ||||
The accompanying notes are an integral part of these financial statements.
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BRIGHTLANE CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
| Common Stock | Series A Preferred Voting Stock | Series B Preferred Voting Stock | Additional Paid-In | Accumulated | Treasury | Accumulated Comprehensive | Stockholders' Equity | |||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Income | (Deficit) |
Balance at December 31, 2018 | $ | $ | $ | $ | $( | $ | $ | $( | |||
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Cancellation of preferred stock | - | - | |||||||||
Net Loss | ( | ( | |||||||||
Balance at March 31, 2019 | ( | ( | |||||||||
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Shares issued for acquisition | |||||||||||
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Foreign currency translation adjustment | |||||||||||
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Net Loss | ( | ( | |||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | $( | $ | $ | $ | |||
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| Common Stock | Series A Preferred Voting Stock | Series B Preferred Voting Stock | Additional Paid-In | Accumulated | Treasury | Accumulated Comprehensive | Stockholders' Equity | |||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Income | (Deficit) |
Balance at December 31, 2017 | $ | $ | $ | $( | $( | $ | $( | ||||
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Net Loss | ( | ( | |||||||||
Balance at March 31, 2018 | ( | ( | ( | ||||||||
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Return of common stock | ( | ( | ( | ||||||||
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Issuance of common stock for conversion of notes payable | |||||||||||
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Net Loss | ( | ( | |||||||||
Balance at June 30, 2018 | $ | $ | $ | $( | $ | $ | $( | ||||
The accompanying notes are an integral part of these financial statements.
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BRIGHTLANE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended June 30, | |
| 2019 | 2018 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss | $( | $( |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation | ||
Accrued interest added to notes | ||
Changes in Assets and Liabilities |
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Accounts receivable | ||
Accounts payable | ( | ( |
Investment in real estate | ( | |
Accrued expenses | ( | |
Accrued interest | ||
NET CASH USED IN OPERATING ACTIVIES | ( | ( |
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INVESTING ACTIVITIES |
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Cash acquired in acquisition | ||
Principal payments of notes receivable | ||
NET CASH PROVIDED BY INVESTING ACTIVIES | ||
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from advances of line of credit | ||
Proceeds from convertible note payable | ||
Proceeds from short term loan from related party | ||
NET CASH PROVIDED BY FINANCING ACTIVITIES | ||
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Effect of exchange rate on cash and cash equivalents | ||
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NET CHANGE IN CASH | $ | $( |
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Cash and Cash Equivalents – Beginning of Period | $ | $ |
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Cash and Cash Equivalents – End of Period | $ | $ |
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Non cash financing activities: |
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Acquisition of VAT Bridge Limited | ||
The accompanying notes are an integral part of these financial statements.
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BRIGHTLANE CORP.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 1 – ORGANIZATION AND BUSINESS
Brightlane Corp. (“we”, “our”, “us”, the “Company” or the “Registrant”) was initially incorporated under the laws of the State of Delaware in December 2006 under the name “Cold Gin Corporation.” On December 27, 2010, in connection with an Agreement and Plan of Reorganization we changed our domicile from Delaware to Nevada, our name to Bonanza Gold Corp. In the third quarter of 2015, Brightlane Acquisition Corp. acquired a controlling interest in the Company from existing shareholders. This change of control began the transitioning to a lease-to-own real estate company. In connection with this transition, effective September 22, 2015 we changed our name to Brightlane Corp.
Brightlane Corp. provides non-traditional methods of specialty financing on an international scale with fully underwritten solutions in a variety of industries. Brightlane is building a diversified, low-volatility and current yield portfolio of services for middle market companies. The company has distinctive abilities to execute the acquisition and effective management of right-priced, real property via its experienced management and strategic partners in the multi-tenant, single-family and commercial market sectors through various rental, lease and right-to-purchase options. Additionally, Brightlane is further developing its lending platform and proprietary deal flow to include direct lending tools and payment technologies to expand value creation.
The recent acquisition of VAT Bridge Limited (see Note 4 below) provides specialty bridge financing in the UK which caters predominantly to facilitate the VAT, Value Added Tax, element payable on commercial property purchases. VAT is a general, broadly based consumption tax in the European Union assessed on the value added to goods and services. Other specialty areas include the funding of VAT payable on property development costs, the VAT payable on high-value assets and occasionally, other property related services in the area of high-end sourcing and income earnings. Since the VAT cannot be financed as a part of tradition lending practices, VAT Bridge provides bridge loans to commercial property acquires, charging them a fee, and subsequently recapturing the VAT from the respective government and taxation bodies.
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has only generated minimal revenues since inception, has sustained operating losses since inception, and has an accumulated deficit of $(3,592,200) and a working capital deficit of $928,177 at June 30, 2019. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon, among other things, its ability to generate revenues and its ability to obtain capital from third parties. No assurance can be given that the Company will be successful in these efforts.
Management plans to identify adequate sources of funding to provide operating capital for continued growth. The Company intends to continue accessing the $5 million credit facility obtained by its Brightlane – CLOC Acquisitions, LLC subsidiary in order to acquire additional homes that will provide a profitable revenue stream for the Company.
On May 17, 2019, the registrant entered into a loan agreement with Corporate Commercial Collections Limited (“CCC”). Pursuant to this agreement, CCC provides the Company with a 24 month loan facility, up to £8,000,000, for the financing of working and capital expenditures. This loan facility is available to the Company to draw upon in multiple advances as required.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
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NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the SEC. The Financial Statements have been prepared under accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a December 31 fiscal year end.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents
The Company accounts for cash and cash equivalents under FASB ASC 305, “Cash and Cash Equivalents”, and considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Cash Flows Reporting
The Company follows ASC 230, “Statement of Cash Flows,” for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230 to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The 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 other GAAP 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.
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
Revenue Recognition
Effective January 1, 2018, the Company adopted guidance issued by the FASB regarding recognizing revenue from contracts with customers. The revenue recognition policies as enumerated below reflect the Company's accounting policies effective January 1, 2018, which did not have a materially different financial statement result than what the results would have been under the previous accounting policies for revenue recognition.
Brightlane Corp.’s revenue results from four sources related to the acquisition/disposal and renting/leasing of real estate properties:
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(1)Short-term bridge financing (for Value Added Tax in the UK). We collect professional fees comprised of legal fees, administrative fees, loan facility fees and interest. Rates are agreed with the customer in advance with interest accruing daily and each contract is tailored to the customer’s individual requirements. Performance obligations under the contract are deemed to be met once the advance of funds has been repaid in full. Where an amount is advanced before the period end but not repaid until the following accounting period revenue is recognized by apportioning total revenue due under the contract based on the length of the loan.
(2)Fees related to the management of properties. We collect a monthly management fee for each home that we manage on a third-party basis for our portfolio clients. In many instances we also collect late fees.
(3)Interest income on notes receivable. We carry principle balances on notes receivable and in return for carrying these notes we receive monthly principal and interest payments on these notes receivable. We apportion the payments as received to reducing the principle balance and book the balance to fees due us as well as interest income.
(4)Rental income on properties we own. We own properties and rent or lease them to our tenants and book this as rental income.
(5)Sale of real estate. Periodically, as market conditions allow, we dispose of a property. Once sold, book the net proceeds after customary closing costs as sale of real estate.
The following table disaggregates revenue by major source for the six months ended June 30, 2019:
Year Ended June 30, 2019 |
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Fees Income |
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Interest Income – VAT Lending |
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Total Revenue |
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Deferred Income Taxes and Valuation Allowance
The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. 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 income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized at June 30, 2019 and December 31, 2018. The Company has provided a full valuation allowance for its deferred tax asset resulting from net operating losses.
Earnings (Loss) Per Share
The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, “Earnings per Share.” Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.
Financial Instruments
The Company’s balance sheet includes certain financial instruments: primarily accounts payable, accruals and debt obligations. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
ASC 820, “Fair Value Measurements and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
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Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Inputs that are both significant to the fair value measurement and unobservable.
The estimated fair value of certain financial instruments, including cash, loans receivables, loans and accounts payable and accrued liabilities are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
The Company does not have any assets or liabilities measured at fair value on a recurring basis.
Investments in non-consolidated subsidiaries
Investments in non-consolidated entities are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company's ability to exercise significant influence over the operating and financial policies of the investee. When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company's proportionate share of the investees' net income or losses after the date of investment. When net losses from an investment accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company's share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.
Long-lived Assets
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any periods presented.
Property and Equipment
The Company follows ASC 360, Property, Plant, and Equipment, for its fixed assets. Equipment is stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets (
Related Parties
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
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Restricted Stock
The Company issues restricted stock to consultants for various services. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is measurable more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.
Stock-Based Compensation
FASB ASC 718 “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, may be classified as either equity or liabilities. The Company determines if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity’s past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50 “Equity – Based Payments to Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Recently Issued Accounting Pronouncements
We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
Loans Receivable
Loans receivable are stated at current unpaid principal balances, net of the allowance for loan losses and deferred loan origination fees and costs. Management has the ability and intent to hold its loans receivable for the foreseeable future or until maturity or pay-off. Interest income is accrued on the unpaid principal balance. Deferred loan origination fees and costs are amortized using the effective interest method without anticipating prepayments.
Interest income on loans is discontinued and placed on non-accrual status at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not received for loans placed on non-accrual status is reversed against interest income. Interest received on such loans is accounted for on the cost-recovery method until qualifying for return to accrual status. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Allowance for Loan Losses
The allowance for loan losses is a reserve for probable incurred credit losses. Loan losses are charged against the allowance when management believes a loan has become uncollectable. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.
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The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk.
Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payments shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on case-by-case basis, taking into consideration all circumstance surrounding the loan and the borrower, including the length of delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
NOTE 4 – ACQUISITION
On April 4, 2019, we acquired 100% of the outstanding shares of VAT Bridge Ltd. (“VAT Bridge”), a United Kingdom based entity. Pursuant to this agreement, Brightlane issued 21,000,000 common shares to the shareholders of VAT Bridge in return for all outstanding shares of VAT Bridge. These shares were issued to VAT Bridge shareholders proportionately to their current ownership interest in VAT Bridge. As a result of this agreement, VAT Bridge became a wholly owned subsidiary of Brightlane. On April 4, 2019, the Company's stock was valued at $0.17 a share, making the purchase valued at $3,570,000
This acquisition facilitated the development of our specialty lending platform. Specifically, VAT Bridge currently provides bridge lending for the VAT, Value Added Tax, element payable on commercial property purchases. VAT is a general, broadly based consumption tax in the European Union assessed on the value added to goods and services.
In accordance with the acquisition method of accounting, the Company allocated the consideration to the net tangible and identifiable intangible assets based on their estimated fair values. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets and will be tested for impairment on an annual basis.
The assets acquired and liabilities assumed as part of the acquisition were recognized at their fair values as of the effective acquisition date, April 4, 2019. The following table summarizes the preliminary allocation of the fair values assigned to the assets acquired and liabilities assumed.
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Net Assets Acquired |
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Acquisition costs of $
The following table provides unaudited pro forma results of operations for the quarter ended June 30, 2019 as if the acquisition had been consummated as of the beginning of that period presented. The pro forma results include the effect of certain purchase accounting adjustments, such as the estimated changes in depreciation and amortization expense on the acquired intangible assets. However, pro forma results do not include any anticipated cost savings or other effects of the planned integration of the companies. Accordingly, such amounts are not necessarily indicative of the results if the acquisition has occurred on the dates indicated, or which may occur in the future.
12
|
| (Unaudited) | (Unaudited) |
|
|
|
|
Revenues | $ | ||
Income before income taxes | $ | ||
|
|
|
|
Basic and fully diluted earnings (loss) per share | $ |
NOTE 5 – LINE OF CREDIT FACILITIES
On
On
Our VAT Bridge Limited subsidiary maintains a revolving credit facility with a related party in the United Kingdom entered into on
NOTE 6 – ACCOUNTS RECEIVABLE RELATED PARTIES
As part of the acquisition of VAT Bridge on April 4, 2019, there were outstanding accounts receivables due from related parties. These receivables are associated with real estate transactions conducted by VAT Bridge as part of their prior business model. The Company understands and is committed to the necessity of retiring these related party receivables. They are due to be fully received during the balance of the 2019 fiscal year. The current portion of these receivables is $
NOTE 7 – NOTES RECEIVABLE
The Company has nine notes receivable totaling $243,264. These notes are secured by residential properties. The terms associated with these notes range from 11 years to 30 years, with interest rates ranging from 9.3% to 10%. During the six and three months ended June 30, 2019, principal payments towards notes receivables totaled $
13
NOTE 8 – LOANS RECEIVABLE
VAT Bridge Limited carries net loans receivable due to VAT Bridge Limited which are the aggregate of bridge funding, professional services fees, and interest. The terms associated with these loans receivable include a loan origination fee, legal fees, daily interest accrual ranging from 0.04% and 0.055%, and repayment terms ranging from 90 to 120 day based on the size of the loan. The majority of these loans receivables are recovered by VAT Bridge directly from Her Majesty’s Revenue and Customs (HMRC) in the United Kingdom as part of the bridge lending and recovery process. The current portion of these loans receivables is $
NOTE 9 – NOTES PAYABLE
On
On
NOTE 10 – RELATED PARTY TRANSACTIONS
On
On
On
14
current $0.20 per share. Interest expense for this note for the three and six months ended June 30, 2019 was $
Mr. Steve Helm sits on the board of directors and also serves as the Company’s Chief Executive Officer. As compensation for his services we were accruing annual compensation of $25,000 as of January 1, 2016. On
See Note 5 for notes regarding line of credit facilities with related parties.
See Note 6 for notes regarding accounts receivables from related parties.
NOTE 11 – SHAREHOLDERS’ EQUITY
Common Stock
The Company has
The
On
On
There were
Preferred Stock
On
At June 30, 2019, there is
Warrants issued in connection with sale of common shares
At June 30, 2019 there are
15
NOTE 12 – SUBSEQUENT EVENTS
On
On
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following analysis of our financial condition and results of operations for the period January 1, 2019 through June 30, 2019 should be read in conjunction with the financial statements, including footnotes, and other information presented elsewhere in this Report on Form 10-Q and the risk factors and the financial statements for the year ended December 31, 2018 and the other information set forth in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on April 16, 2019. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Where possible, we have tried to identify these forward looking statements by using words such as “anticipate,” “believe,” “intends,” or similar expressions. Our actual results could differ materially from those anticipated by the forward-looking statements due to important factors and risks including, but not limited to, those set forth under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 16, 2019.
Historically, Brightlane Corp. has concentrated on being a real estate operator providing opportunities in the affordable housing market including reasonable rents and leases plus an opportunity to participate in a right-to-purchase program upon meeting certain criteria. Within this business model, Brightlane acquires single-family homes and portfolios of single-family homes and actively pursues the acquisition of these types of homes through one-off purchases, the purchase of portfolios, and other methods of acquisition. We service a market that is historically underserved – those seeking living arrangements in the sub $150,000 home market. We continually seek out and make the appropriate investments in ancillary services.
In an effort to augment our service offering, we continue to evolve positioning ourselves in the specialty lending marketplace. We now provide non-traditional methods of specialty financing on an international scale. Brightlane is building a diversified, low-volatility and current yield portfolio of services for middle market companies.
The VAT Bridge Limited Acquisition
On April 4, 2019, Brightlane enter into a share exchange agreement with the shareholders of VAT Bridge. Pursuant to the acquisition and share exchange agreement, Brightlane issued 21,000,000 common shares to the shareholders of VAT Bridge in return for all of their ownership interests in VAT Bridge, whereby VAT Bridge became a wholly-owned subsidiary of Brightlane.
The Board of Directors believes that this acquisition significantly enhances the value of Brightlane as a result of the integration of a more substantial revenue stream as well as the integration of a symbiotic business into Brightlane’s business plan. The Board of Directors believes that the acquisition of VAT Bridge was necessary and advisable in order to increase Brightlane’s financial performance and future performance. In addition, the Board of Director’s believes that the acquisition of VAT Bridge will better position Brightlane to attract opportunities and to provide the shareholders a greater potential return.
Specifically, the acquisition of VAT Bridge Limited provides specialty bridge financing in the UK which caters predominantly to facilitate the VAT, Value Added Tax, element payable on commercial property purchases. VAT is a general, broadly based consumption tax in the European Union assessed on the value added to goods and services. Other specialty areas include the funding of VAT payable on property development costs, the VAT payable on high-value assets and occasionally, other property related services in the area of high-end sourcing and income earnings. Since the VAT cannot be financed as a part of tradition lending practices, VAT Bridge provides bridge loans to commercial property acquirors.
We seek to provide better, faster and broader services which make our services more marketable. We are already the UK’s largest commercial property VAT funder with loan amount ranging from £50,000 to £20,000,000. The key factors involved in offering a superior service platform include: (1) A total managed solution for the funding and recovery of VAT, (2) Advances of up to 100% of the VAT due,(3) A simple application process with same-day offers and fast completion times, and (4) Rapid VAT recovery management to reduce interest costs.
17
Working Capital
|
| June 30, 2019 |
|
| December 31, 2018 |
| ||
Current Assets |
| $ | 2,162,011 |
|
| $ | 52,222 |
|
Current Liabilities |
| $ | 3,090,187 |
|
| $ | 812,345 |
|
Working Capital |
| $ | (928,176 | ) |
| $ | (760,123 | ) |
Cash Flows
|
| Six Months Ended June 30, |
| ||||||
|
| 2019 |
|
| 2018 |
| |||
Cash Flows Provided by (Used In) Operating Activities |
| $ | (494,295 | ) |
| $ | (111,194 | ) | |
Cash Flows used in Investing Activities |
| $ | 434,954 |
|
| $ | (459,527) |
| |
Cash Flows Provided by Financing Activities |
| $ | 411,625 |
|
| $ | 512,,600 |
| |
Net change in Cash During Period |
| $ | 354,364 |
|
| $ | (58,121 | ) | |
Results of Operations for the three months ended June 30, 2019 and 2018
For the three months ended June 30, 2019 and 2018, total revenues were $226,492 and $63,954, respectively; and net losses were $86.931 and $110,053 respectively.
Total revenue for the three months ended June 30, 2019 were primarily attributable fee income generated by our VAT Bridge subsidiary and the rental and management fee income recognized from the operations of our Brightlife Management subsidiary. For the three months ended June 30, 2019 VAT Bridge provided bridge loans to various entities in the UK for fee income generated of $206,922 and we generated an additional $19,570 in proceeds from the operations of our Brightlife Management subsidiary that were comprised of management fees and tenant income. During the three months ended June 30, 2019 and 2018, we had selling, general and administrative expenses of $239,523 and $127,771 respectively. During the three months ended June 30, 2019 and 2018 we incurred interest expenses of $50,579 and $25,736 respectively.
The net losses were attributable to operating expenses and other expenses that primarily consisted of expenses related to the cost of sales associated with our VAT Bridge subsidiary’s bridge lending process as well as the implementation of the Company’s business model of a lease-to-own real estate business in addition to payroll, employee benefits, the acquisition and management of real estate, rent expenses for our facilities, and accrued interest on our notes payable. The operating expenses for the three months ended June 30, 2019 and 2018 were primarily general and administrative in nature and included legal fees, management and consulting fees, and audit and accounting fees.
Results of Operations for the six months ended June 30, 2019 and 2018
For the six months ended June 30, 2019 and 2018, total revenues were $248,318 and $170,851, respectively; and net losses were $256,509 and $162,950 respectively.
Total revenue for the six months ended June 30, 2019 were primarily attributable fee income generated by our VAT Bridge subsidiary and the rental and management fee income recognized from the operations of our Brightlife Management subsidiary. For the six months ended June 30, 2019 VAT Bridge provided bridge loans to various entities in the UK for fee income generated of $176,300 and we generated an additional $29,783 in proceeds from the operations of our Brightlife Management subsidiary that were comprised of management fees and tenant income. During the six months ended June 30, 2019 and 2018, we had selling, general and administrative expenses of $405,031 and $243,034 respectively. During the six months ended June 30, 2019 and 2018 we incurred interest expenses of $76,475 and $43,267 respectively.
The net losses were attributable to operating expenses and other expenses that primarily consisted of expenses related to the cost of sales associated with our VAT Bridge subsidiaries bridge lending process as well as the implementation of the Company’s business model of a lease-to-own real estate business in addition to payroll, employee benefits, the acquisition and management of real estate, rent expenses for our facilities, and accrued interest on our notes payable. The operating expenses for the six months ended June 30, 2019 and 2018 were primarily general and administrative in nature and included legal fees, management and consulting fees, and audit and accounting fees.
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Liquidity and Capital Resources
Liquidity
At June 30, 2019, we had cash and cash equivalents of $374,942. We have incurred negative cash flows from operations since we started our business. We have spent and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our acquisitions and building out our lending platform in the United States and internationally.
For the six months ended June 30, 2019, we recorded a net loss of $256,509. We had a positive change in accumulated depreciation of $10,065, a positive change in accounts receivable of $92,513, a negative change in accounts payable of $278,924, a negative change in accrued expenses of $64,594 and a positive change in accrued interest of $3,154. As a resulted, we had net cash used in operating activities of $455,651 for the six months ended June 30, 2019.
For the six months ended June 30, 2018, we recorded a net loss of $162,950. We had a positive change in accumulated depreciation of $7,833, a negative change in accounts payable of $6,646, a positive change in accrued expenses of $20,308 and a positive change in accrued interest of $30,261. As a resulted, we had net cash used in operating activities of $111,194 for the six months ended June 30, 2018.
For the six months ended June 30, 2019 and 2018, we recorded a positive change in payments on notes receivable of $3,919 and $2,223, respectively. In addition, we had a negative change in investment in real estate of $0 and $461,750, for the six months ended June 30, 2019 and 2018, respectively. We had a positive change of $431,035 related to the acquisition of VAT Bridget Limited during the six months ended June 30, 2019. As a result, for the period ending June 30, 2019 and 2018, we had net cash provided and used by investing activities of $434,954 and $2,223, respectively.
For the six months ended June 30, 2019 and 2018, we drew on our line of credit in the amount of $372,981 and $373,850, respectively, for the acquisition of multiple real estate assets and for operating expenses, and, accordingly, for the six months ended June 30, 2019 and 2018, we received proceeds from issuance of a convertible note in the amount of $0 and $63,750, respectively, to one of the parties from whom we acquired certain real estate assets for the balance remaining on the homes acquired. We also received $75,000 on a short-term loan from an officer of the Company which later became part of a larger investment into the Company for the six months ended June 30, 2018. As a result, we had net cash provided by financing activities of $372,981 and $512,600 for the six months ended June 30, 2019 and 2018, respectively.
The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. We have based our estimate on assumptions that may prove to be wrong. We may need to obtain additional funds sooner or in greater amounts than we currently anticipate. Potential sources of financing include strategic relationships, public or private sales of our shares or debt and other sources. We may seek to access the public or private equity markets when conditions are favorable due to our long-term capital requirements. While we have a best efforts commitment from the aforementioned accredited investor it is uncertain when such additional funding will be available and whether the terms will be acceptable to us. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain financing when needed, we may be unable to carry out our business plan. As a result, we may have to significantly limit our operations and our business, financial condition and results of operations would be materially harmed.
We have no known demands or commitments and are not aware of any events or uncertainties as of June 30, 2019, other than the work commitment previously mentioned, that will result in or that are reasonably likely to materially increase or decrease our current liquidity.
Capital Resources
We had no material commitments for capital expenditures as of June 30, 2019.
Off Balance Sheet Arrangements
There are no off balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable because the Company is a smaller reporting company.
Item 4. Controls and Procedures.
19
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our Principal Executive Officer who is also our Principal Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer who is also our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer who is also our Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2019, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements.
Changes in Internal Control over Financial Reporting
Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.
The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.
20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently a party to any legal proceedings, and we are not aware of any proceeding pending or threatened against us by any governmental authority or other party.
Item 1A. Risk Factors.
Not applicable because the Company is a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
1. Quarterly Issuances:
On April 4, 2019, the Company entered into a share exchange agreement with VAT Bridge Ltd., a United Kingdom based entity. Pursuant to this agreement, on April 11, 2019, Brightlane issues 21,000,000 common shares to the owners of VAT Bridge in return for all outstanding shares of VAT Bridge. These shares were issued to VAT Bridge shareholders proportionately to their ownership interest in VAT Bridge. As a result of this agreement, VAT Bridge became a wholly owned subsidiary of Brightlane. These shares are exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
2. Subsequent Issuances:
Subsequent to the quarter, we did not issue any unregistered securities other than as previously disclosed.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
31.1Certification pursuant to Rule 13a-14(a)/15d-14(a) (1)
32.1Certification pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 (1)
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBR Taxonomy Extension Presentation Linkbase Document
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned.
BRIGHTLANE CORP.
Date: August 20, 2019
By:/s/ Steve Helm
Steve Helm
President and Chief Executive Officer
(Principal Executive Officer, Principal Accounting Officer
and Principal Financial Officer)
/s/Steve Helm
Director
/s/David Hill II
Director
/s/Simon W. Holden
Director
22