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EX-32 - EXHIBIT 32 - BRIGHTLANE CORP.exhibit32.htm
EX-31 - EXHIBIT 31 - BRIGHTLANE CORP.exhibit31.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K



[X]  Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016.

OR


[  ]   Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from  to  .


Commission File Number: 000-54027


BRIGHTLANE CORP.

(Name of registrant as specified in in its charter)


Nevada

30-0782905

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification Number)



3270 Sul Ross

Houston, Texas 77098

(Address of principal executive offices)


(888) 468-2856

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:

 None


Securities registered pursuant to Section 12(g) of the Act:

Common Stock $.001 par value



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES [   ]     NO [X]


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

YES [   ]     NO [ X ]


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES [ X ]     NO [  ]


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES [X]     NO [  ]


Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained in this herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [  ]




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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “larger accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ]     Accelerated filer [  ]     Non- accelerated filer [  ]     Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES [   ]  NO [X]


The aggregate market value of the issuer’s common stock held by non-affiliates of the registrant as of the last day of the registrant’s most recently completed second quarter was $535,065 based on $.62, the price at which the registrant’s common stock was last sold on June 11, 2012.


As of April 17, 2017, the issuer had 18,923,005 shares of common stock outstanding.


Documents incorporated by reference: None






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BRIGHTLANE CORP.


TABLE OF CONTENTS

 

 

Page

PART I

 

4

Item 1.  Business

 

4

  Item 1A.  Risk Factors

 

9

Item 2.  Properties

 

9

Item 3.  Legal Proceedings

 

9

Item 4.  Mine Safety Disclosures

 

9

 

 

 

PART II

 

10

Item 5.  Market for Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

 

10

Item 6.  Selected Financial Data

 

12

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

 

12

  Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

 

14

Item 8.  Financial Statements and Supplementary Data

 

15

Item 9.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosures

 

30

  Item 9A.  Controls and Procedures

 

30

  Item 9B.  Other Information

 

31

 

 

 

PART III

 

32

Item 10.  Directors and Executive Officers, Promoters, Control Persons, and Corporate Governance

 

32

Item 11.  Executive Compensation

 

34

Item 12.  Security Ownership of Certain Beneficial Owners and Management

 

34

Item 13.  Certain Relationships and Related Transactions, and Director Independence

 

34

Item 14.  Principal Accountant Fees and Services

 

35

 

 

 

PART IV

 

36

Item 15.  Exhibits, Financial Statement Schedules

 

36

Signatures

 

37







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PART I


Note about Forward-Looking Statements


Most of the matters discussed within this report include forward-looking statements on our current expectations and projections about future events. In some cases you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements. Such risks and uncertainties include the risks noted under “Item 1A Risk Factors.” We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.


ITEM 1. BUSINESS


General


Brigthlane Corp. (“we”, the “Company”, “us” or the “Registrant”) was incorporated under the laws of the State of Delaware in December 2006 under the name “Cold Gin Corporation.” On December 27, 2010, we entered into an Agreement and Plan of Reorganization with Bonanza Gold Corp., a wholly-owned subsidiary of the Company, pursuant to which we merged with and into Bonanza Gold Corp, with Bonanza Gold Corp. being the surviving corporation. In connection with the reincorporation merger we changed our domicile from Delaware to Nevada, our name to Bonanza Gold Corp. and each outstanding share of our common stock was exchanged for one hundred fifty shares of the common stock of the Nevada entity. Thereafter, our trading market experienced some unusual activity. In an effort to stabilize the market, we effectuated a 150:1 reverse stock split on March 4, 2011.


We were initially established to become a developer of Internet media content for mixed martial arts fans and consumers. Effective December 10, 2010, we transitioned our business focus from that of a developer of Internet media for martial arts to a company engaged in the exploration and mining of minerals.


On December 1, 2014, the Board of Directors of the Company decreased the size of the Board of Directors to one through the appointment of Steve Helm as the Chief Executive Officer and the sole director of the company.  Concurrent with Steve Helm’s appointment were the resignations of Craig Russell and Stephen Buxton.  We decided to leverage Steve Helm’s knowledge of the real estate market and seek a take-over candidate in an attempt to enhance shareholder value.  In the third quarter of 2015, Brightlane Acquisition Corp. acquired a controlling interest in the Company from existing shareholders.


In connection with the change of control, our business transitioned to a lease-to-own real estate model.  This business model is oriented around the acquisition of single family homes and portfolios of single family homes and then lease-to-own the properties whereby the lessees will eventually own the home.  Once the tenants fulfill their obligations under the contract, we will deliver the deed to the lessees.  We actively pursue the acquisition of these types of homes through the purchase of bank REOs, portfolios and other methods of acquisition. 


In conjunction with this transition, effective September 22, 2015, we changed our name to Brightlane Corp.


On December 21, 2015, we completed the agreement to acquire all of the outstanding shares of Brightlane Homes, Inc. which through its wholly owned subsidiary acquired a 99.9% interest in Brightlane RECA LP which is the beneficiary of the Brightlane RECA Trust which owns a portfolio of assets here in referred to as the Brightlane RECA portfolio.  Consideration for this acquisition consisted of the issuance of 12,000,000 shares of our Common Stock in exchange for all of the issued and outstanding shares of Brightlane Homes, Inc.




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The Brightlane RECA portfolio now consists of approximately 276 single-family homes related to 261 income-producing owner-financed and purchase money notes and 15 real estate properties owned.  The underlying homes are geographically dispersed across the Great Lakes, Upper Midwest, Ohio Valley, Midwest and Southeast regions of the U.S. and are held in a statutory trust known as Brightlane RECA Trust. The largest concentrations are in the Southeast, particularly in South Carolina and North Carolina.  In addition to these income-producing owner-financed and purchase money notes, there are additional REO (real estate owned) properties in the portfolio.  The portfolio was originally acquired by Brightlane Homes, Inc. for the net of an initial Defined Debt of $6,055,788 at January 1, 2015, which has been reduced to $3,492,205 at December 31, 2016.  Upon extinguishment of the Defined Debt, the Company, through its subsidiaries, will receive a 90% general partnership interest in Brightlane RECA LP.


Brightlane # 1 LLC, a wholly owned single member limited liability company is a subsidiary of Brightlane Homes, Inc., and owns a 99.99% limited partner interest in the Brightlane RECA LP.  The General Partner, National Asset Advisors LLC (NAA), owns 0.01% of the Brightlane RECA Trust.  


In May 2016, we incorporated a wholly-owned subsidiary BrightLife Management.  This operation is handling the management of newly acquired homes and begin the process of vertically integrating property management services.  In the long-term this will allow us to:  (1) manage our own assets; and (2) transition assets currently managed by third parties into our integrated operations.  Both of these scenarios will have a positive impact on profitability.  We have begun investing in the appropriate software assets and personnel to effectively operate this new addition and enhancement to our operations, and have begun generating income during this fiscal year.


The corporate structure of Brightlane Corp. is illustrated below.


[brightlaneform10k16v4002.gif]


Operations


We are focused on the acquisition, renovation, leasing, and managing of low priced single-family homes throughout the United States utilizing a lease-to-own structure.  The scope of the lease-to-own business opportunity is very large, as growing numbers of families now lease-to-own because they cannot obtain a mortgage.  Rental vacancy rates are declining thus increasing rental rates across the nation.  In fact, rental vacancy rates are at their lowest level since 2000, and on average, inflation-adjusted rents in the U.S. have returned to the peak levels reached in 2000.



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Single-family home values in the U.S. are expected to rise as the housing market continues to recover.  Over the next 18 months, we intend to acquire, renovate if necessary, and then lease-to-own up to 2,000 low priced single-family homes.


The Brightlane Homes, Inc. acquisition furthers the Company’s objective to proffer a unique and innovative business model that generates attractive risk-adjusted returns for our shareholders through the reinvestment of earnings and capital appreciation.  We intend to become the “new pathway to homeownership” for the millions of Americans who were displaced from their homes by the economic crisis or whose buying power has been negatively affected by new banking rules and regulations that essentially put homeownership out of the reach of ordinary Americans.


Our business model will focus on its lessees and will assist the “Future Owner” in establishing and managing credit needed to ultimately own the home they will be leasing.  We intend to provide technological and green energy features in our homes that are not usually associated with low priced single-family homes.  In addition, our ultimate goal is to make available other financial and lifestyle services and products to improve the quality of life for our “Future Owners”.


We intend to eventually take advantage of the continuing dislocation in the U.S. single-family housing market and the macroeconomic trends in favor of leasing homes.  One of the key elements of our business model is the ability to acquire low priced single-family homes at significant discounts to their most recent broker price opinion (“BPO”).  BPO is defined as “the estimated value of a property as determined by a real estate broker or other qualified individual or firm.  A broker price opinion is based on the characteristics of the property being considered.” (source:  Freddie Mac September 2014 U.S. Economic and Housing Market Outlook)


We have access to discounted low priced single-family homes through our relationship with Mr. James Odell Barnes, Jr., and Carolina Acquisition Corp. (“CAC”).  In addition to Mr. Barnes’ well-established channels, we are pursuing bulk acquisitions of single-family homes from banks, mortgage servicers, competitors, government sponsored enterprises, private investors, and other financial institutions.


Mr. James Odell Barnes, Jr. is nationally known as the “Foreclosure King” and is one of the largest buyers of REO foreclosed homes in the United States.  Mr. Barnes has over 35 years of experience in buying and selling bank-owned and REO properties.  Mr. Barnes has a reputation as one of the most successful and knowledgeable real estate professionals in the U.S. bank-owned and REO property market.  Despite published concerns regarding shrinking home inventory, Mr. Barnes has assured us that he expects the availability of and his access to bulk low priced single-family homes to remain constant.


Brightlane Homes, Inc. maintains an exclusive contract with Carolina Acquisition Corp. for Mr. Barnes’ services in the identification, evaluation, acquisition, and oversight of the renovation of the properties that Brightlane will ultimately purchase.  We will pay CAC an acquisition and renovation fee of about 5% of all costs and expenses that incurred in connection with the initial acquisition, repair, and renovation of single-family properties acquired.  The acquisition and renovation fee is based upon an industry standard fee paid by a publicly traded REIT that owns and rents single-family residential homes.


Brightlane Homes, Inc. also maintains a national property management arrangement (the “Strategic Alliance Agreement”) with NAA, LLC.  NAA is an experienced property management firm that has managed numerous property portfolios for more than 15 years. NAA currently manages approximately 4,000 single-family homes nationwide.  NAA has experience in pre-acquisition due diligence, advertising, marketing and leasing single-family homes, including collecting rents.


We may renovate acquired homes to the extent necessary and lease them to qualified residents.  We will utilize third party companies to perform our renovation functions.  We have been in discussions with a full service nationwide property preservation company that has many years of experience in REO & Pre-REO property preservation, restoration, maintenance and repair services.  The standard renovation process normally includes paint, flooring, appliances, landscaping, cleaning, and general repairs.  We will establish guidelines that will be applied across all of our markets to ensure uniformity in renovation



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and maintenance standards.  Upon completion of the renovation process, houses will be (if required) inspected to ensure compliance with specifications for paint, carpet and service-ready appliances.  Once renovation specifications are confirmed, then a final safety and occupancy inspection occurs and the home is ready to be leased.  Most single-family residential operators will agree that every $1.00 USD spent on single-family home renovations usually results in increased value of the property.


Industry Overview


Companies in this industry acquire, develop, operate, lease, dispose, sell, and market real estate.  Real estate agencies and brokerages, Real Estate Operating Companies (REOCs), commercial and single-family or multifamily residential real estate developers, commercial and residential property management companies, and REITs (real estate investment trusts) are included in this industry.  Real estate investing is a part of the industry and it involves the purchase, ownership, management, rehabilitation, rental and/or sale of real estate for profit.


Market Analysis


Residential housing is the largest real estate asset class in the United States with a total value of $20+ trillion USD, according to the Federal Reserve Flow of Funds release.  According to the U.S. Census Bureau, since 1965, approximately one-third of this asset class has been rentals and single-family homes comprising roughly one-third of all residential rental housing.  Estimated market value for low priced homes (homes each with a value of less than $100,000) is approximately $90 billion (according to Corelogic and Realty Trac estimates).  As of March 2016, there are approximately 9.5 million homeowners who were considerably under-equitied with over 2.7 million homes that are at least 30 days past due or in foreclosure according to Mortgage Monitor (April 2016).  In total, there are over $1 billion in single-family investment properties that are owned by a fragmented investor base.


Within the overall rental market, the single-family rental segment has continued to grow its relative market share compared to other types of housing rentals.  The primary factors driving the increase in demand for single-family rental properties are:  (1) constraints on home mortgage financing; and, (2) the displacement of homeowners.  While the affordability of homes has risen, the restrictions on home mortgage financing have made purchasing for would-be home purchasers very difficult, if not impossible.


In many markets, rental vacancies have fallen and rents have risen, even in areas hardest hit during the housing and economic downturn.  With an increasing trend towards a mobile workforce, America is undergoing a shift in demographics.  Baby boomer households are becoming empty nesters, and the number of 25 to 34 year-olds is growing at an accelerated rate, as members of ‘Generation Y’ reach the stage of their life when they would typically consider buying a home.  With higher unemployment, labor insecurity and a desire to maintain mobility, ‘Generation Y’, defined as those born between 1980 and 1999, represents more than 80 million people and has a higher propensity to rent rather than own homes.  Also, the rising cost of college education and the corresponding burden of student loans leave the younger generations with burdensome debt and less willing or able to take on mortgage debt.


Often, homeowners who are displaced from their homes by a personal financial crisis or an economic downturn, such as the one in 2008, “look to live in a home with similar characteristics and amenities to their former home and, for this population, single-family rentals may present the best available option.”  Due to the relatively recent, devastating economic events, restrictions on home mortgage financing, and mobile nature of “Generation Y”, renting has become a more attractive and even necessary means of housing.


The single-family rental space is in the early stages of a consolidation phase.  “Mom and pop businesses” currently dominate the market, and their properties are managed in-house or by small servicing companies.  The paradigm of the single-family home market is shifting to larger institutional buyers.  These buyers, regional and national, have started to consolidate the more expensive segements in the single-family home marketplace.  




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The strategies utilized by institutional buyers have been to acquire homes through porfolio purchases, at auction, and at the court house steps.  These purchases are at distressed prices, and the companies add value to their homes through efficient rennovations.  Efficently purchased homes and rennovations bring high rental yields and the potential for rental price, as well as purchase price appriciation.  We intend to utilize these profitable strategies, as well as others, in the low-income segment of the market, which large institutional buyers have not yet entered.  The reason we are the first to attack this segement of the single-family home market, is due to the expertise and high-touch servicing needed to manage the properties.  While the low-income segment brings challenges, it also has the ability to bring higher returns.


The aforementioned conditions have primed the market for our innovative business plan.  The ability to acquire single-family homes at discounted prices and rehabilitate the homes, as well as the recent increase in the number of renters makes this plan very dynamic and, potentially, very profitable.


Target Market


Our Target Market is the affordable low cost single-family residential lease-to-own market segment.  This segment is comprised of many people that have been displaced, or are unable to own due to bad credit.


SWOT Analysis


Our Competitive Strengths

Access to Inventory - James Odell Barnes, Jr. has purchased foreclosed homes for over 35 years, and NAA has serviced low cost single-family homes industry for more than 15 years.  Through the experience and connections of James Odell Barnes, Jr. and NAA, one of our strengths is access to inventory.

The Ability to Purchase Superior Value - The knowledge and experience of James Odell Barnes, Jr. and Steve Helm (our President) allows us to purchase properties in the strongest markets, at the best prices.

High-Touch Management - The Strategic Alliance Agreement between us and NAA, provides the experienced management necessary to make the single-family homes purchased profitable.  Experience and an efficient management system are needed to manage low-income single-family homes.  NAA has the necessary experience and infrastructure in place to maximize the value of the homes purchased by us.  NAA has managed low-cost, single-family homes for more than 20 years.

Strong Direction and Management – Steve Helm has approximately 25 years experience in real estate industry, and James Odell Barnes, Jr. is one of the most experienced buyers of foreclosed homes in the United States.

Early Market Mover - We will be an early market mover in the low-priced, single-family lease-to-own market segment.  Currently, the consolidation of single-family homes is taking place in higher income segments and with more expensive houses than we plan to purchase.


Experienced Management Team


Steve Helm is our Chief Executive Officer and Director.  In addition, on December 10, 2015 the Board of Directors approved the addition of James Odell Barnes, Jr. to the Board.  A brief synopsis of Mr. Helm’s and Mr. Barnes’ credentials follows:


Steve Helm, Chairman, President, Chief Executive Officer and Director


Mr. Helm is a seasoned real estate executive specializing in the areas of finance, development/acquisition and property management for over 25 years. Mr. Helm is also currently the CFO of New Regional Planning, a real estate strategy and consulting firm.  From 2004 to 2009 he served as Regional Director for Imperial Capital Bank/Bancorp (NYSE), launching the Texas/Rocky Mountain real estate lending platform as part of the firm’s national expansion.  In that capacity, he opened and managed four real estate loan production offices (Dallas, Austin, Denver & Kansas City) covering the Texas, New Mexico, Oklahoma, Arkansas, Colorado and Kansas markets and funded in excess of $500 million of structured debt and portfolio permanent credit facilities from $500,000 to $20 million for a broad range of real estate development activities.



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Prior to Imperial, he was President of the family business, The Helm Companies, directing the ground up development, re-development, financing and management of small retail and Class A, B & C multifamily properties.  During his tenure with the family enterprise, Mr. Helm secured over $60 million of FHA (221 D-4 & 223F) and conventional bank debt as well as LIHTC, private and mezzanine equity financing and supervised the management of a multifamily portfolio of 6 properties comprising over 900 units.  Mr. Helm earned the National Apartment Association CAPS Designation and is a CPM Candidate.  Mr. Helm holds an MBA from the Cox School of Business, Southern Methodist University, and a BBA in Finance from the University of Texas at Austin.


James Odell Barnes, Jr., Director


Mr. Barnes, the “Foreclosure King,” is one of the largest buyers of real estate owned foreclosed homes in the United States. He has been in the owner-financing business since 1979, and during his career he has bought and sold more than 50,000 properties. Mr. Barnes’ success, knowledge, and experience have brought him great publicity. He has been featured in the Wall Street Journal, NPR, and twice on ABC’s award winning series Nightline.


Mr. Barnes has amassed many connections, due to his success, in governmental institutions, the banking industry, and the investor community. His many connections allow him the ability to purchase more than 1,000 single-family homes a month. Mr. Barnes’ many years of experience brings with it the knowledge of which areas around the country will provide the most profit per acquisition.


Employees


As of April 17, 2017, in addition to Steve Helm and the guidance of James Odell Barnes, Jr. we had three full-time employees.


ITEM 1A.  RISK FACTORS


Not applicable to smaller reporting companies.


ITEM 1B.  UNRESOLVED STAFF COMMENTS


Not applicable.


ITEM 2. PROPERTIES


The Company co-locates its corporate headquarters with one of Mr. Helm’s business endeavors at 3270 Sul Ross, Houston, Texas 77098.  We benefit from this co-location by having no rent at this facility throughout 2016.


In January of 2016, we established an office consisting of 1,250 square feet for operations in Atlanta, Georgia at 4140 Roswell Road NE.  The lease term was 12 months, expiring on January 15, 2016 and automatically renew annually for an additional 12 months.  Our monthly rent is $1,800.  We plan on increasing the size of this office as required, and are considering eventually making Atlanta, Georgia the location of our executive offices.


ITEM 3.  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 4.  MINE SAFETY DISCLOSURES


Not applicable.




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PART II


ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES


Market Information


Our common stock has been listed on the OTCMarkets under the symbol “BLTN” since September 22, 2015.  Prior to this, our common stock was listed on the OTCMarkets under the symbol “BNZA” since January 5, 2011, and prior to that on the Bulletin Board under the symbol “CLGC”.  There has been limited trading activity for our common stock for each quarter since September 1, 2008 as reported on the OTCMarkets.


YEAR ENDED DECEMBER 31, 2016

 

 

Fourth Quarter

$1.10

$0.50

Third Quarter

$1.00

$1.50

Second Quarter

$0.62

$0.62

First Quarter

$0.62

$0.62

YEAR ENDED DECEMBER 31, 2015

 

 

Fourth Quarter

$0.62

$0.62

Third Quarter

$0.62

$0.62

Second Quarter

$0.62

$0.62

First Quarter

$0.62

$0.62


Holders


Common Stock

As of the date of this report, there were approximately 11 shareholders of record of our common stock and 18,923,005 shares of common stock deemed outstanding.


The beneficial owners of our common stock holding in excess of 5% are as follows:


Beneficial Owner of Securities

Number of Common Shares Owned

Percentage of Common Stock Outstanding

Brightlane Acquisition Corp.

6,060,000

32.0%

David Hill II

4,800,640

25.4%

Lloyd G. Dominick

2,965,729

15.7%

James Odell Barnes, Jr. Irrevocable Trust

2,133,618

11.3%

Jeanne M. Reaves Revocable Trust

1,050,017

5.5%

David W. Campbell

1,049,996

5.5%


Preferred Stock

Currently we have two types of Preferred Stock:  (1) Series A Preferred Voting Stock, and (2) Series B Preferred Voting Stock.  There is one (1) share of Series A Preferred Voting Stock, and one (1) share of Series B Preferred Voting Stock issued and outstanding as of the date of this report.  The series designations of rights and preferences are synopsized below.


Series A Preferred Voting Stock.  With respect to all meetings of the shareholders of the Company at which the holders of the Company’s Common Stock, par value $0.001 per share, are entitled to vote and with respect to any written consents sought by the Company from the holders of the Common Stock, the holder of the share of Series A Preferred Voting Stock shall vote together with all the holders of the Common Stock and any other voting preferred stock issued and outstanding, and holders of the issued Series A Preferred Voting Stock shall be entitled to cast on such matters a number of votes equal to 20,000,000 common shares.




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Series B Preferred Voting Stock  With respect to all meetings of the shareholders of the Company at which the holders of the Company’s Common Stock, par value $0.001 per share, are entitled to vote and with respect to any written consents sought by the Company from the holders of the Common Stock, the holder of the share of Series B Preferred Voting Stock shall vote together with all the holders of the Common Stock and any other voting preferred stock issued and outstanding, and holders of the issued Series B Preferred Voting Stock shall be entitled to cast on such matters a number of votes equal to 20,000,000 common shares.


The original holder, Brightlane Acquisition Corp, of the Series A Preferred Voting Stock and Series B Preferred Voting Stock have commitments to the Company to include a loan to the Company on a convertible promissory note dated December 9, 2015 in the amount of $250,000 and to facilitate on a best efforts basis the injection of additional monies to be utilized by the Company in an amount of not less than $3 million prior to January 1, 2017 (extended to January 1, 2018), and the Series A Preferred Voting Stock share be automatically cancelled under the following provisions:


i)

Upon conversion of the $250,000 convertible promissory note dated December 9, 2015.

ii)

Upon repayment of the $250,000 convertible promissory note dated December 9, 2015.

iii)

If the Company is not in receipt of a capital injection of $3 million provided by or facilitated by the holder, or its assignee, of the Series A Preferred Voting Stock or the Series B Preferred Voting Stock on or before January 1, 2017 (extended to January 1, 2018).


Dividends and Share Repurchases


We have not paid any dividends to our shareholders.  There are no restrictions which would limit our ability to pay dividends on common equity or that are likely to do so in the future.


Unregistered Sales of Equity Securities


On December 21, 2015 we issued 12,000,000 million shares of our common stock as consideration for the acquisition of Brightlane Home Inc. via a share exchange agreement.


Warrants


On July 14, 2015, the Company’s Board of Directors, not subject to stockholder approval, approved the Amendment and Restatement of Outstanding Warrants.  The amendments extended the expiry date for a period of one year and added a provision for cashless exercise.


The following table shows the Company's warrants that are outstanding:

 

Issue Date

Expiration Date

Number of Warrant*

Remaining Life

(in Years)*

5/13/2013

5/12/2017

 

175,000

 

0.36

5/14/2013

5/13/2017

 

225,000

 

0.36

7/25/2013

7/24/2017

 

225,000

 

0.56

1/9/2014

1/8/2018

 

175,000

 

1.02

 

 

 

800,000

 

 

 

* As of December 31, 2016, the Company had issued 800,000 warrants that are exercisable at $1.25 per warrant for one share of common stock and remain outstanding, with an average remaining life of 0.58 years.  The Holder of any warrant may not exercise any portion of the Warrant if such exercise will cause it to own more than 4.99 percent of the Company’s issued and outstanding common stock.


The Company has no other potentially dilutive securities as of the date of this report.




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ITEM 6.  SELECTED FINANCIAL DATA

Not applicable because the Company is a smaller reporting company.


 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


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.


Off Balance Sheet Arrangements


There are no off balance sheet arrangements.


Results of Operations for the years ended December 31, 2016 and 2015


For the year ended December 31, 2016, as compared to the year ended December 31, 2015, total revenues were $168,059 and $0, respectively; and net operating losses were $417,493 and $47,305 respectively.


Total revenue for the year ended December 31, 2016 were attributable to sale of real estate holdings as well as the initial revenue recognized from the operations of our Brightlife Management subsidiary. For the year ended December 31, 2016 we sold four real estate properties for proceeds of  $160,509 (after typical closing costs) and generated an additional $7,550 in proceeds from the initial months of operations of our Brightlife Management subsidiary that were comprised of management fees and tenant income.  The properties sold had an initial cost basis of $99,205 resulting in gross profit to the Company of $61,303.  During the year ended December 31, 2016, we had selling, general and administrative expenses of $453,766 compared to $74,240 during the year ended December 31, 2015.  During the year ended December 31, 2016, we paid interest expenses of $32,581, and during the year ended December 31, 2015, we received a gain on the settlement of accounts payable of $26,935.


The net losses were attributable to operating expenses and other expenses that primarily consisted of expenses related to the implementation of the Company’s business model of a lease-to-own real estate business.  The operating expenses for the years ended December 31, 2016 and 2015 were primarily general and administrative in nature and included legal fees, management and consulting fees, and audit and accounting fees.  However, for the year ended December 31, 2016, our operating expenses specifically increased due to increased expenses related to payroll, accrual in management fees, employee benefits, the acquisition and management of real estate, rent expenses for our facilities, and an increase in accrued interest on our notes payable.


Liquidity


At December 31, 2016, we had cash and cash equivalents of $14,615. 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 planned real estate acquisitions.


For the year ended December 31, 2016, we recorded a net loss of $417,493.  We had an adjustment of $896 due to depreciation.  We had a negative change of $36,309 due to accounts receivable and $62,965 due to the investment in real estate.  We recorded a positive change of $14,000 from accounts payable, $34,253 from accrued expenses and $28,306 from accrued expenses, resulting in net cash used in operating activities of $439,312 for the year ended December 31, 2016.




12




For the year ended December 31, 2015, we recorded a net loss of $47,305.  We recorded income of $26,935 due to a gain on the settlement of accounts payable and a positive adjustment of $484 due to depreciation.  We had a negative change of $30,204 due to accounts payable, and a positive change of $7,000 due to accrued expenses and $2,118 due to accrued interest.  As a result, we had net cash used in operating activities of $94,842 for the year ended December 31, 2015.


We did not pursue any investing activities during the years ended December 31, 2016 and 2015.


For the year ended December 31, 2016, we received $609,200 as proceeds from a related party convertible note payable.  We spent $360,000 on the repayment of a related party convertible note payable, $10,723 on the repayment of a demand note payable, and $431 on the purchase of equipment.  As a result, we had net cash provided by financing activities of $238,046 for the year ended December 31, 2016.


For the year ended December 31, 2015, we received $250,000 from a related party convertible note payable and $60,723 from a demand note payable.  As a result, we had net cash provided by financing activities of $310,723 for the period.


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 December 31, 2016, 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 December 31, 2016 and 2015.


Critical Accounting Policies


We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared and actual results could differ from our estimates and such differences could be material. We have identified below the critical accounting policies which are assumptions made by management about matters that are highly uncertain and that are of critical importance in the presentation of our financial position, results of operations and cash flows. On a regular basis, we review our accounting policies and how they are applied and disclosed in our financial statements.


Use of Estimates


The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Estimates are based on historical experience, management expectations for future performance, and other assumptions as appropriate. Key areas affected by estimates include the assessment of the recoverability of long-lived assets, which is based on such factors as estimated future cash flows. We re-evaluate estimates on an ongoing basis; therefore, actual results may vary from those estimates.


Fair Values of Financial Instruments


The carrying values of cash, accounts receivable, accounts payable and accrued expenses approximate the fair values of these instruments due to their short-term nature. The carrying amount for borrowings under the financing agreement approximates fair value because of the variable market interest rates charged for these borrowings.




13




Trends and Uncertainties


We may be subject to liability for failure to comply with the requirements of Regulation 14C under the Securities Exchange Act of 1934 (the “Exchange Act”).  On September 25, 2015 we filed a Form 8-K announcing an amendment to the articles of incorporation which included changing our name to Brightlane Corp., the increase in our authorized capitalization to 350,000,000 shares, and the creation of a preferred class of stock effective on September 22, 2015. We inadvertently did not timely comply with the requirements of Regulation 14C under the Exchange Act.  This would have required us to circulate an information statement describing the corporate action taken by the written consent of a majority of our shareholders at least 20 days prior to the effective date of the corporate action. We did however have super majority shareholder consent as required for amending the articles of incorporation and complied with Rule 10b-17 of the Exchange Act as we timely filed the amendment to the articles of incorporation with the Financial Industry Regulatory Authority (“FINRA”) on September 11, 2015, for this action to be recognized in the market for trading purposes. Previously we viewed filing a Preliminary 14C Information Statement as duplicative of prior filings and the Corporate Action Notification filed with FINRA on September 11, 2015 which did not give rise to appraisal rights to our shareholders.  We have since acknowledged our inadvertent mistake, and in order to cure the error and to comply with Regulation 14C, we filed a Preliminary Information Statement with the SEC on November 23, 2015. The SEC has as part of its comments to the Preliminary Information Statement asked that we include this stated risk factor for the near foreseeable future. The failure to initially comply with Regulation 14C in a timely manner was inadvertent, and while not probable, could cause the SEC to bring an enforcement action or commence litigation against us for failure to comply with Regulation 14C. Such enforcement could subject us to penalties including the payment of fines or damages. Any such claims or actions could cause us to expend financial resources to defend ourselves, and could divert the attention of our management from our core business.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Not applicable because the Company is a smaller reporting company.




14




ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


BRIGHTLANE CORP.

INDEX TO AUDITED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015


 

 

Page

Report of Independent Registered Public Accounting Firm

 

16

 

 

 

Audited Balance Sheets of December 31, 2016 and 2015

 

17

 

 

 

Audited Statements of Operations for the Years ended December 31, 2016 and 2015

 

18

 

 

 

Audited Statement of Changes in Shareholders' Equity

 

19

 

 

 

Audited Statements of Cash Flows for the Years ended December 31, 2016 and 2015

 

20

 

 

 

Notes to Audited Financial Statements

 

21








15





 

Paritz



& Company, P.A

   15 Warren Street, Suite 25

Hackensack, New Jersey 07601

                 (201) 342-7753

        Fax:  (201) 342-7598

       E-Mail:  PARITZ@paritz.com

 

 

 

 

 

Certified Public Accountants




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders’

Brightlane Corp.


We have audited the accompanying consolidated balance sheets of Brightlane Corp.as of December 31, 2016 and 2015 and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years ended December 31, 2016 and 2015.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.   Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.


In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Brightlane Corp .as of December 31, 2016 and 2015, and the results of its operations and cash flows for the years ended December 31, 2016 and 2015 in conformity with accounting principles generally accepted in the United States of America.


The accompanying consolidated 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.  As discussed in Note 2 the Company has only generated minimal revenue since inception and has an accumulated deficit of $1,696,281 at December 31, 2015. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern.  Management plans are also discussed in Note 2.The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/S/Paritz & Company, P.A.


Hackensack, New Jersey

April 17, 2017








16




BRIGHTLANE CORP.

CONSOLIDATED BALANCE SHEET


 

December 31,

 

December 31,

 

 

2016

 

2015

ASSETS

 

 

 

 

Current Assets

 

 

 

 

Cash and cash equivalents

$

14,615

$

215,881

Accounts receivable

 

33,687

 

 

Accounts receivable – related party

 

2,622

 

 

Total Current Assets

 

50,924

 

215,881

 

 

 

 

 

Investment in non-consolidated subsidiary

 

3,085,521

 

3,085,521

Investment in real estate, net

 

61,799

 

-

Equipment, net

 

884

 

183

 

 

 

 

 

          TOTAL ASSETS

$

3,199,128

$

3,301,585

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

Current Liabilities

 

 

 

 

Accounts payable

$

23,518

$

9,518

Accrued expenses

 

49,253

 

15,000

Accrued interest

 

30,424

 

2,118

Demand note payable

 

50,000

 

60,723

Total Current Liabilities

 

153,195

 

87,359

 

 

 

 

 

Convertible note payable - related party

 

499,200

 

250,000

 

 

 

 

 

          TOTAL LIABILITIES

 

652,395

 

337,359

 

 

 

 

 

STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

Series A Preferred Voting Stock, $0.001 par value, 1 share

 

 

 

 

authorized, 1 share issued and outstanding

 

-

 

-

Series B Preferred Voting Stock, $0.001 par value, 1 share

 

 

 

 

authorized, 1 share issued and outstanding

 

-

 

-

Common stock, $0.001 par value, 250,000,000 shares authorized,

 

 

 

 

18,923,005 shares issued and outstanding at December 31, 2016

 

 

 

 

and 2015

 

18,923

 

18,923

Additional paid in capital

 

4,224,091

 

4,224,091

Accumulated deficit

 

(1,696,281)

 

(1,278,788)

TOTAL STOCKHOLDERS' EQUITY

 

2,546,733

 

2,964,226

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

3,199,128

$

3,301,585


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




17




BRIGHTLANE CORP.


CONSOLIDATED STATEMENTS OF OPERATIONS


 

Year Ended December 31,

 

 

2016

 

2015

 

 

 

 

 

REVENUE

 

 

 

 

Revenue

$

168,059

$

-

Cost of property sold

 

(99,205)

 

-

Gross Profit

 

68,854

 

-

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

Selling, general and administrative

 

453,766

 

74,240

 

 

 

 

 

NET OPERATING LOSS

 

(384,912)

 

(74,240)

 

 

 

 

 

Gain on settlement of accounts payable

 

-

 

26,935

Interest expense – related party

 

(32,581)

 

 

 

 

 

 

 

LOSS BEFORE PROVISION (BENEFIT) OF INCOME TAXES

 

(417,493)

 

(47,305)

 

 

 

 

 

PROVISION (BENEFIT) FOR INCOME TAXES

 

-

 

-

 

 

 

 

 

NET LOSS

$

(417,493)

$

(47,305)

 

 

 

 

 

Net Loss Per Share: Basic and Diluted

$

(0.01)

$

(0.01)

 

 

 

 

 

Weighted Average Number of Shares

 

 

 

 

Outstanding: Basic and Diluted

 

18,923,005

 

7,201,961












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



18




BRIGHTLANE CORP.


CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY


For the years ended December 31, 2016 and 2015


 

Common Stock

Series A Preferred

Voting Stock

Series B Preferred

Voting Stock

Additional Paid-in

Accumulated

Stockholders' Equity

 

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

(Deficit)

Balances at December 31, 2014

6,923,005

$6,923

-

$      -

-

$     -

$1,150,570

$(1,231,483)

$(73,990)

 

 

 

 

 

 

 

 

 

 

Acquisition of Brightlane Homes, Inc.

12,000,000

12,000

-

-

-

-

3,073,521

-

3,085,521

 

 

 

 

 

 

 

 

 

 

Preferred stock issued

-

-

1

-

1

-

-

-

-

 

 

 

 

 

 

 

 

 

 

Net loss

-

-

-

-

-

-

-

(47,305)

(47,305)

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2015

18,923,005

18,923

1

-

1

-

4,224,091

(1,278,788)

2,964,226

 

 

 

 

 

 

 

 

 

 

Net loss

-

-

-

-

-

-

-

(417,493)

(417,493)

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2016

18,923,005

$18,923

1

$     -

1

$     -

$4,224,091

$(1,696,281)

$2,546,733




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



19




BRIGHTLANE CORP.


CONSOLIDATED STATEMENTS OF CASH FLOWS


 

Year Ended December 31,

 

 

2016

 

2015

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net loss

$

(417,493)

$

(47,305)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

Gain on settlement of accounts payable

 

-

 

(26,935)

Depreciation

 

896

 

484

Changes in Assets and Liabilities

 

 

 

 

Accounts receivable

 

(36,309)

 

 

Investment in real estate

 

(62,965)

 

 

Accounts payable

 

14,000

 

(30,204)

Accrued expenses

 

34,253

 

7,000

Accrued interest

 

28,306

 

2,118

NET CASH USED IN OPERATING ACTIVITIES

 

(439,312)

 

(94,842)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Proceeds from convertible note payable - related party

 

609,200

 

-

Repayment on convertible note payable – related party

 

(360,000)

 

250,000

Repayment on demand note payable

 

(10,723)

 

60,723

Other

 

(431)

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

238,046

 

310,723

 

 

 

 

 

NET CHANGE IN CASH

 

(201,266)

 

215,881

 

 

 

 

 

CASH

 

 

 

 

Beginning of Year

 

215,881

 

-

 

 

 

 

 

End of Year

$

14,615

$

215,881

 

 

 

 

 

Non Cash Financial and Investing Activities:

 

 

 

 

Issuance of common stock for investment in non-consolidated subsidiary

$

-

$

3,085,521



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




20




BRIGHTLANE CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015


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.


Our business model is oriented around acquiring single family homes and portfolios of single family homes and then lease-to-own the properties whereby the lessees will eventually own the home if they so choose.  Once the tenants fulfill their obligations under the contract, we will deliver the deed to the lessees.  We will actively pursue the acquisition of these types of homes through the purchase of bank REOs, portfolios and other methods of acquisition.  


On December 21, 2015, we completed the agreement to acquire all of the outstanding shares of Brightlane Homes, Inc. which through its wholly owned subsidiary acquired a 99.9% limited partner interest in Brightlane RECA LP which is the beneficiary of the Brightlane RECA Trust which owns a portfolio of assets here in referred to as the Brightlane RECA portfolio.  The Brightlane RECA portfolio now consists of approximately 276 single-family homes related to 261 income-producing owner-financed and purchase money notes and 15 real estate properties owned.  The underlying homes are geographically dispersed across the Great Lakes, Upper Midwest, Ohio Valley, Midwest and Southeast regions of the U.S. and are held in a statutory trust known as Brightlane RECA Trust for which Brightlane RECA LP is the sole beneficiary. The largest concentrations are in the Southeast, particularly in South Carolina and North Carolina.  In addition to these income-producing owner-financed and purchase money notes, there are additional REO properties in the portfolio.


In May 2016, we incorporated a wholly-owned subsidiary BrightLife Management.  This operation is handling the management of newly acquired homes and begin the process of vertically integrating property management services.  In the long-term this will allow us to:  (1) manage our own assets; and (2) transition assets currently managed by third parties into our integrated operations.


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 and has an accumulated deficit of $1,696,281 at December 31, 2016. 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 acquire incoming producing homes in addition to refinancing the debt associated with the investment in non-consolidated subsidiary.  Either of these situations (or both) cause immediate positive cash flow to be generated.


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.




21




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 using the accrual basis of accounting and 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.


Principals 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.


Commitments and Contingencies


The Company follows ASC 450-20, “Loss Contingencies,” to report accounting for contingencies.  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 of the assessment can be reasonably estimated.  There were no commitments or contingencies at December 31, 2016 and 2015.


Convertible Instruments


The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.




22




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.


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 December 31, 2016 or 2015.


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:


Level 1 -

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.




23




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.

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to 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 (3 years).


Related Parties


The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.  

 



24




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.


NOTE 4 – INVESTMENT IN NON-CONSOLIDATED SUBSIDIARY


On December 21, 2015, we completed an agreement to acquire all of the outstanding shares of Brightlane Homes, Inc. which through its wholly owned subsidiary had previously acquired a 99.9% limited partner interest in Brightlane RECA LP which is the beneficiary of the Brightlane RECA Trust which owns a portfolio of assets here in referred to as the Brightlane RECA portfolio.  The Brightlane RECA portfolio now consists of approximately 276 single-family homes related to 261 income-producing owner-financed and purchase money notes and 15 real estate properties owned.  The Company is accounting for its investment under the equity method of accounting due to the Company not maintaining control of Brightlane RECA, LP, which full control remains with the general partner, but having significant influence through its 99.99% limited partner interest. The consideration for the acquisition was 12,000,000 shares of common stock. The cost of the acquisition was determined according to ASC 845 Nonmonetary Transactions, whereby the cost of a nonmonetary asset acquired in exchange for another nonmonetary assets is the fair value of the asset surrendered or received, whichever is more clearly evident. The Company has determined that due to the inactive trading market of its common stock surrendered, the fair value of the assets received were more clearly evident. The transaction was valued at the underlying value of the assets in the Brightlane RECA portfolio, net of the associated debt.




25




The Company determined the value to be the fair value of the unpaid principal balance of the individual purchase money notes and the fair value of the real estate owned, net of an underlying “defined” debt (which is defined in the original contribution agreement).  The fair value of the purchase money notes and real estate owned was $8,885,152 and the balance of the defined debt was $5,799,631 (resulting in a net value of $3,085,521) at the acquisition date of December 21, 2015. According to the limited partner agreement, the general partner will recognize all income and receive all net cash flow from the Brightlane portfolio. Upon the company investing additional capital into Brightlane RECA LP, which will be used to pay the defined debt, the general partner will transfer 90% of its general partner interest to the Company.


NOTE 5 – PROPERTY AND EQUIPMENT


Capitalized property and equipment, net of accumulated depreciation, consisted of the following as of December 31, 2016 and 2015:

 

 

December 31,

2016

December 31,

2015

Useful

Life

Office Equipment

   $            3,606

   $          2,906

3 years

Investment in Real Estate

62,965

-

25 years

Less:  Accumulated Depreciation

          (3,619)

           (2,723)

 

Property, Plant, and Equipment, Net

   $               62,952

   $            183    

 

 

Property and equipment are depreciated using the straight-line method. Depreciation expense was $896 and $484 for the years ended December 31, 2016 and 2015, respectively.

 

NOTE 6 – NOTES PAYABLE


On September 30, 2015 the Company borrowed $60,723 from a third party.  The note bears interest at 8% and is payable on demand. Interest is paid quarterly. The note is convertible into common stock of the Company at $0.50 per share.  During the year ended December 31, 2016, we repaid a total of $10,723 to the third party toward this note payable, leaving a remaining principal balance of $50,000.  Interest expense incurred during the years ended December 31, 2016 and 2015 was $4,061 and $1,214 respectively.


NOTE 7 – RELATED PARTY TRANSACTIONS


On December 9, 2015, we entered into a subscription agreement to sell one unit consisting of a $250,000 promissory note, one share of Series A Preferred Voting Stock and one share of Series B Preferred Voting Stock to a related-party in exchange for $250,000 and the investor’s agreement to utilize its best efforts to cause a capital injection of up to $3,000,000 into the Company on or before January 1, 2017 (extended to January 1, 2018).  The promissory note carries an interest rate of 6% per annum with a maturity date of December 9, 2018.  The lender may convert into shares of our common stock after one year, at $0.50 per share.  The lender has the option of accruing interest or receiving interest only payment annually. Interest expense for this note for the years ended December 31, 2016 and 2015 was $15,000 and $904 respectively.


On March 24, 2016, we received an additional $110,000 in capital from the aforementioned related party as an advance on the commitments this related party has to us.  The promissory note carries an interest rate of 6% per annum with a maturity date of March 24, 2019.  The lender may convert into shares of our common stock after one year, at $0.50 per share.  The lender has the option of accruing interest or receiving interest only payment annually.  Interest expense for this note for years ended December 31, 2016 and 2015 was $5,077 and $0 respectively.


On July 27, 2016, we received an additional $499,200 in capital from the aforementioned related party as an advance on the commitments this related party has to us.  The promissory note carries an interest rate of 6% per annum with a maturity date of July 27, 2019.  The lender may convert into shares of our common stock after one year, at $0.50 per share.  The lender has the option of accruing interest or receiving interest only payment annually.  During the year ended December 31, 2016, we repaid a total of $360,000 to the related party toward this promissory note.  Interest expense for



26



this note for years ended December 31, 2016 and 2015 was $8,443 and $0 respectively.  At December 31, 2016, the outstanding principal balance of the above loans aggregated $499,200.


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 are accruing annual compensation of $25,000 as of January 1, 2016.  We will continue to accrue his compensation at a quarterly rate of $6,250 going forward. Accrued compensation for years ended December 31, 2016 and 2015 was $25,000 and $0 respectively.


NOTE 8– SHAREHOLDERS’ EQUITY


Common Stock


On December 21, 2015, the Company issued 12,000,000 shares of common stock for the acquisition of Brightlane Homes, Inc.


No issuance of the Company’s common stock occurred during the year ended December 31, 2016.


Preferred Stock


Currently we have two types of Preferred Stock:  (1) Series A Preferred Voting Stock, and (2) Series B Preferred Voting Stock.  There is one (1) share of Series A Preferred Voting Stock, and one (1) share of Series B Preferred Voting Stock issued and outstanding as of the date of this report.  The series designations of rights and preferences are synopsized below.


Series A Preferred Voting Stock.  With respect to all meetings of the shareholders of the Company at which the holders of the Company’s Common Stock, par value $0.001 per share, are entitled to vote and with respect to any written consents sought by the Company from the holders of the Common Stock, the holder of the share of Series A Preferred Voting Stock shall vote together with all the holders of the Common Stock and any other voting preferred stock issued and outstanding, and holders of the issued Series A Preferred Voting Stock shall be entitled to cast on such matters a number of votes equal to 20,000,000 common shares.


Series B Preferred Voting Stock  With respect to all meetings of the shareholders of the Company at which the holders of the Company’s Common Stock, par value $0.001 per share, are entitled to vote and with respect to any written consents sought by the Company from the holders of the Common Stock, the holder of the share of Series B Preferred Voting Stock shall vote together with all the holders of the Common Stock and any other voting preferred stock issued and outstanding, and holders of the issued Series B Preferred Voting Stock shall be entitled to cast on such matters a number of votes equal to 20,000,000 common shares.


The original holder, Brightlane Acquisition Corp, of the Series A Preferred Voting Stock and Series B Preferred Voting Stock have commitments to the Company to include a loan to the Company on a convertible promissory note dated December 9, 2015 in the amount of $250,000 and to facilitate on a best efforts basis the injection of additional monies to be utilized by the Company in an amount of not less than $3 million prior to January 1, 2017 (extended to January 1, 2018), and the Series A Preferred Voting Stock share be automatically cancelled under the following provisions:

(i)

Upon conversion of the $250,000 convertible promissory note dated December 9, 2015.

(ii)

Upon repayment of the $250,000 convertible promissory note dated December 9, 2015.

(iii)

If the Company is not in receipt of a capital injection of $3 million provided by or facilitated by the holder, or its assignee, of the Series A Preferred Voting Stock or the Series B Preferred Voting Stock on or before January 1, 2017 (extended to January 1, 2018).

Warrants issued in connection with sale of common shares


On July 14, 2015, the Company’s Board of Directors, not subject to stockholder approval, approved the Amendment and Restatement of Outstanding Warrants.  The amendments extended the expiry date for a period of one year and added a provision for cashless exercise.




27




The following table shows the Company's warrants that have been amended and remain outstanding:


 

Issue Date

Expiration Date

 

Number of Warrant

 

Remaining Life
(in Years)

Amended and restated warrant certificate No. 1006

5/13/2013

5/12/2017

 

 

175,000

 

 

0.36

Amended and restated warrant certificate No. 1006

5/14/2013

5/13/2017

 

 

225,000

 

 

0.36

Amended and restated warrant certificate No. 1006

7/25/2013

7/24/2017

 

 

225,000

 

 

0.56

Amended and restated warrant certificate No. 1105

1/9/2014

1/8/2018

 

 

175,000

 

 

1.02

 

 

 

 

 

800,000

 

 

 

 


As of December 31, 2016, the Company had issued 800,000 warrants that are exercisable at $1.25 per warrant for one share of common stock and remain outstanding, with an average remaining life of 0.58 years.  The Holder of any warrant may not exercise any portion of the Warrant if such exercise will cause it to own more than 4.99 percent of the Company’s issued and outstanding common stock.


Summary of warrant activities


The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2015:


 

 

 

 

 

 

 

 

Warrants Outstanding

Warrants Exercisable

Range of exercise prices

Number outstanding

Average remaining life (in years)

Exercise price

Number outstanding

Average remaining life (in years)

Weighted average exercise price

 

 

 

 

 

 

 

$1.25

800,000

0.58

$1.25

800,000

0.58

$1.25


NOTE 9 – INCOME TAXES


The components of deferred tax assets consist of:

 

 

December 31,

 

 

2016

 

2015

Net operating loss

 

$

177,000

 

$

     10,000

Valuation allowance

 

 

(177,000)

 

 

(10,000)

 

 

$

-

 

$

-




28




The reconciliation of the effective income tax rate to the federal statutory rate is as follows:

 

 

December 31, 2016

December 31, 2015

US Federal statutory rate

(35%)

(35%)

State income tax, net of federal benefit

(5%)

(5%)

Write-off of NOL's

0%

19%

Change in valuation allowance

40%

21%

 

-%

-%


The Company has approximately $442,000 net operating loss carryforwards that are available to reduce future taxable income. These NOLs begin to expire in 2036.    In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax assets for every period because it is more likely than not that all of the deferred tax assets will not be realized.


The Company files U.S. federal and several state tax returns that are subject to audit by tax authorities beginning with the year ended December 31, 2012. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense.


NOTE 10 – SUBSEQUENT EVENTS


Management has evaluated subsequent events through the date the financial statements were issued. Based on our evaluation there were no material events or transactions that would require adjustment or disclosure to the financial statements.




29




ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


There were no disagreements with accountants on accounting and financial disclosure for the year ended December 31, 2016 and 2015.


ITEM 9A.  CONTROLS AND PROCEDURES


Disclosure Controls and Procedures


The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this annual report, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the SEC. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act Rule 13a-15, the Company’s management, including the Chief Executive Officer who also serves as our Principal Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Office who also serves as our Principal Financial Officer concluded that the disclosure controls and procedures are ineffective.


The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: domination of management by a single individual without adequate compensating controls, lack of a majority of outside directors on board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; inadequate segregation of duties consistent with control objectives, and lack of an audit committee. These material weaknesses were identified by our Chief Executive Officer who also serves as our Principal Financial Officer in connection with the above annual evaluation.


Management believes that the material weaknesses did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and inadequate segregation of duties results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.


Management recognizes that its controls and procedures would be substantially improved if we had an audit committee and two individuals serving as officers and as such is actively seeking to remediate this issue.


Management’s Report on Internal Control over Financial Reporting


The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements. Management conducted an assessment of the Company’s internal control over financial reporting based on the framework and criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework. Based on the assessment, management concluded that, as of December 31, 2016, the Company’s internal control over financial reporting is ineffective based on those criteria.


The Company’s management, including its Chief Executive Officer who also serves as our Principal Financial Officer, does not expect that the Company’s disclosure controls and procedures and its internal control processes will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of error or fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that the breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time,



30




controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.


Management’s Remediation Initiatives


In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:


We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. And, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.


Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.


We will work as quickly as possible to implement these initiatives; however, the lack of adequate working capital and positive cash flow from operations will likely slow this implementation.


Changes in Internal Control


There have been no changes in internal controls over the financial reporting that occurred during the period covered by this report, fourth quarter of the fiscal year ended December 31, 2016, that has materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.


This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.


ITEM 9B.  OTHER INFORMATION


None.



31




PART III


ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


Steve Helm is our Chief Executive Officer and Director.  In addition, on December 10, 2015 the Board of Directors approved the addition of James Odell Barnes, Jr. to the Board.  A brief synopsis of Mr. Helm’s and Mr. Barnes’ credentials follows:


Steve Helm, Age 55, Chairman, President, Chief Executive Officer, and Director


Mr. Helm is a seasoned real estate executive specializing in the areas of finance, development/acquisition and property management for over 25 years. Mr. Helm is also currently the CFO of New Regional Planning, a real estate strategy and consulting firm.  From 2004 to 2009 he served as Regional Director for Imperial Capital Bank/Bancorp (NYSE), launching the Texas/Rocky Mountain real estate lending platform as part of the firm’s national expansion.  In that capacity, he opened and managed four real estate loan production offices (Dallas, Austin, Denver & Kansas City) covering the Texas, New Mexico, Oklahoma, Arkansas, Colorado and Kansas markets and funded in excess of $500 million of structured debt and portfolio permanent credit facilities from $500,000 to $20 million for a broad range of real estate development activities.


Prior to Imperial, he was President of the family business, The Helm Companies, directing the ground up development, re-development, financing and management of small retail and Class A, B & C multifamily properties.  During his tenure with the family enterprise, Mr. Helm secured over $60 million of FHA (221 D-4 & 223F) and conventional bank debt as well as LIHTC, private and mezzanine equity financing and supervised the management of a multifamily portfolio of 6 properties comprising over 900 units.  Mr. Helm earned the National Apartment Association CAPS Designation and is a CPM Candidate.  Mr. Helm holds an MBA from the Cox School of Business, Southern Methodist University, and a BBA in Finance from the University of Texas at Austin.


James Odell Barnes, Jr., Age 65, Director


Mr. Barnes, the “Foreclosure King,” is one of the largest buyers of real estate owned foreclosed homes in the United States. He has been in the owner-financing business since 1979, and during his career he has bought and sold more than 50,000 properties. Mr. Barnes’ success, knowledge, and experience have brought him great publicity. He has been featured in the Wall Street Journal, NPR, and twice on ABC’s award winning series Nightline.


Mr. Barnes has amassed many connections, due to his success, in governmental institutions, the banking industry, and the investor community. His many connections allow him the ability to purchase more than 1,000 single-family homes a month. Mr. Barnes’ many years of experience brings with it the knowledge of which areas around the country will provide the most profit per acquisition.


Directors’ Term of Office


Directors will hold office until the next annual meeting of stockholders and the election and qualification of their successors. Officers are elected annually by our board of directors and serve at the discretion of the board of directors.


Director Independence


Although our securities do not trade on any national securities exchange, for purposes of independence we use the NASDAQ definition of independence. Our director, Steven Helm, is not independent because of his position as an executive officer of the Company. James Odell Barnes, Jr. is independent in accordance with the NASDAQ definition for independence.




32




Audit Committee and Audit Committee Financial Expert


Our board of directors acts as our audit committee and compensation committee. We do not have an “audit committee financial expert,” as that term is defined in Item 407(d) of Regulation S-K promulgated under the Securities Act. The board of directors believes that its members are financially literate and experienced in business matters and are capable of (1) understanding generally accepted accounting principles (“GAAP”) and financial statements, (2) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (3) analyzing and evaluating our financial statements, (4) understanding our internal controls and procedures for financial reporting, and (5) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that no audit committee member has obtained these attributes through the experience specified in the SEC's definition of “audit committee financial expert.” Further, as is the case with many small companies, it would be difficult for us to attract and retain board members who qualify as “audit committee financial experts,” and competition for such individuals is significant. The board of directors believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated “audit committee financial expert.”


Section 16(a) Beneficial Ownership Reporting Compliance


Section 16(a) of the Exchange Act requires the Company’s executive officers, directors and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock. Such officers, directors and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC.


Based solely on a review of the copies of such forms that were received by the Company, or written representations from certain reporting persons, the Company is not aware of any failures to file reports or report transactions in a timely manner during the Company’s fiscal year ended December 31, 2016.  The appropriate filing of Form 3s during fiscal year ended December 31, 2015 occurred by Brightlane Acquisition Corp., David Hill II, James Odell Barnes Jr. Irrevocable Trust and Lloyd G. Dominick upon their respective acquisition of beneficial ownership of in excess of 10% of our common stock, as well as a Form 3 by James Odell Barnes Jr. upon being appointed to the Board of Directors.  The appropriate subsequent Form 4 was filed by James Odell Barnes Jr., being the beneficial owner of the James Odell Barnes Jr. Irrevocable Trust upon it receiving beneficial ownership of our common stock.  Also, Brightlane Acquisition Corp. filed the appropriate subsequent Form 4 upon it receiving 1 share of our Series A Preferred Voting Stock and 1 share of our Series B Preferred Voting Stock.


Code of Ethics


We have adopted a Code of Ethics applicable to our officers and directors, which is filed as an exhibit to this Annual Report on Form 10-K.  We will provide any person without charge, upon written or oral request to our corporate headquarters, a copy of our Code of Ethics.


Procedure for Nominating Directors


We have not made any material changes to the procedures by which security holders may recommend nominees to our Board of Directors.


Family Relationships


There are no family relationships among our directors, executive officers or persons nominated to become executive officers or directors.


Involvement in Certain Legal Proceedings


During the past ten (10) years, none of our directors, persons nominated to become directors, executive officers, promoters or control persons was involved in any of the legal proceedings listed in Item 401 (f) of Regulation S-K.


Arrangements


There are no arrangements or understandings between an executive officer, director or nominee and any other person pursuant to which he was or is to be selected as an executive officer or director.




33




ITEM 11.  EXECUTIVE COMPENSATION


There was no compensation paid in cash or in stock to our Chief Executive Officer for services rendered for each of the years ending December 31, 2016 and 2015.  However, we are accruing an annual compensation for our Chief Executive Office at a rate of $6,250 per quarter for an annual total of $25,000.


Option/SAR Grants in Last Fiscal Year


None.


Outstanding Equity Awards at Fiscal Year-End

None.


Compensation of Directors

None of the Company’s directors received any compensation for services as directors during the last fiscal year other than as stated above for our Chief Executive Officer.


Equity Compensation Plan Information

Not applicable.


Employment Agreements

None.


ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


The following table sets forth certain information regarding beneficial ownership of our common stock as of December 31, 2016 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent of the outstanding shares of our common stock, (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group.  As of December 31, 2016, there were 18,923,005 shares of common stock outstanding.


Beneficial Owner of Securities

Number of Common Shares Owned

Percentage of Common Stock Outstanding

Brightlane Acquisition Corp.

6,060,000

32.0%

David Hill II

4,800,640

25.4%

Lloyd G. Dominick

2,965,729

15.7%

James Odell Barnes, Jr. Irrevocable Trust

2,133,618

11.3%

Jeanne M. Reaves Revocable Trust

1,050,017

5.5%

David W. Campbell

1,049,996

5.5%


Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. The principal address of each of the stockholders listed below is c/o 3270 Sul Ross, Houston, TX  77098. We believe that all persons named in the table have sole voting and investment power with respect to shares beneficially owned by them.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


None.




34




ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES


Aggregate fees including expenses billed to us for the years ended December 31, 2016 and 2015 for professional services performed:


 

2016

2015

Paritz & Company

$23,500

$22,500

 

 

 

Tax Fees

-

-

All Other Fees

-

-

Total

$23,500

$22,500


Board of Directors Pre-Approval Process, Policies and Procedures


Our principal auditors have performed their audit procedures in accordance with pre-approved policies and procedures established by our Board of Directors. Our principal auditors have informed our Board of Directors of the scope and nature of each service provided. With respect to the provisions of services other than audit, review, or attest services, our principal accountants brought such services to the attention of our Board of Directors prior to commencing such services.




 

 

 

 

 

 

 

 

 

 


 

35




PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1) The following financial statements are included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2016:


1.

Reports of Independent Registered Public Accounting Firms

2.

Balance Sheets as of December 31, 2016 and 2015

3.

Statements of Operations for the years ended December 31, 2016 and 2015

4.

Statement of Changes in Stockholders’ Equity (Deficit) as of December 31, 2016

5.

Statements of Cash Flows for the years ended December 31, 2016 and 2015

6.

Notes to the Financial Statements


(a)(2) All financial statement schedules have been omitted as the required information is either inapplicable or included in the Consolidated Financial Statements or related notes.


(a)(3) The following exhibits are either filed as part of this report or are incorporated herein by reference:


3.1      Certificate of Incorporation of Cold Gin Corporation, as amended (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.2     Articles of Incorporation of Bonanza Gold Corp., as amended (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.3     Articles of Merger (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.4     Certificate of Merger (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.5     By-Laws of Bonanza Gold Corp. (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.6 Certificate of Amendment to the Articles of Incorporation of Bonanza Gold Corp. (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on February 9, 2011)


31.1 Certification pursuant to Rule 13a-14(a)/15d-14(a) (1)


1.1

Certification pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 (1)



**+101.INS XBRL Instance Document

**+101.SCH XBRL Taxonomy Extension Schema Document

**+101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

**+101.DEF XBRL Taxonomy Extension Definition Linkbase Document

**+101.LAB XBRL Taxonomy Extension Label Linkbase Document

**+101.PRE XBRL Taxonomy Extension Presentation Linkbase Document


* Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this report

** As provided in Rule 406T of Regulation S-T, this information is deemed furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934, as amended.


(1)

Filed herewith.






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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:  April 17, 2016

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/James Odell Barnes, Jr.

Director




 

 

 

 

 

 

 

 

 

 


 

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