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EX-32.2 - BRIDGEWAY NATIONAL CORP.ex32-2.htm
EX-32.1 - BRIDGEWAY NATIONAL CORP.ex32-1.htm
EX-31.2 - BRIDGEWAY NATIONAL CORP.ex31-2.htm
EX-31.1 - BRIDGEWAY NATIONAL CORP.ex31-1.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2020

 

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: 000-55505

 

BRIDGEWAY NATIONAL CORP.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware   45-5523835
(State or Other Jurisdiction of   (I.R.S. Employer
Incorporation or Organization)   Identification No.)

 

1015 15th Street NW, Suite 1030, Washington, DC   20005
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number including area code: 1-202-846-7869

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

 

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

 

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

 

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

 

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

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Class A Common Stock   BDGY   OTC Pink

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

Class   Outstanding as of September 25, 2020
Class A Common Stock, $0.001 par value   9,640,915

 

 

 

 

 

 

BRIDGEWAY NATIONAL CORP.

 

TABLE OF CONTENTS

 

  Page
   
PART I - FINANCIAL INFORMATION  
   
Item 1. Consolidated Financial Statements (Unaudited)  
   
Consolidated Balance Sheets as of March 31, 2020 (Unaudited) and December 31, 2019 F-1
   
Consolidated Statements of Operations for the three months period ended March 31, 2020 and March 31, 2019 (Unaudited) F-2
   
Consolidated Statements of Changes in Stockholders’ Deficiency for the three months period ended March 31, 2020 and March 31, 2019 (Unaudited) F-3
   
Consolidated Statements of Cash Flows for the three months period ended March 31, 2020 and March 31, 2019 (Unaudited) F-4
   
Notes to the Consolidated Financial Statements (Unaudited) F-5
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 3
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 7
   
Item 4. Controls and Procedures 7
   
PART II - OTHER INFORMATION 7
   
Item 1. Legal Proceedings 7
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 7
   
Item 3. Defaults Upon Senior Securities 7
   
Item 4. Mine Safety Disclosure 8
   
Item 5. Other Information 8
   
Item 6. Exhibits 8
   
SIGNATURES 9

 

-2-

 

 

BRIDGEWAY NATIONAL CORP.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

   As at 
   March 31, 2020   December 31, 2019 
         
ASSETS          
Current Assets:          
Cash  $313,648   $- 
Security deposits   66,155    - 
Prepaid expenses   17,244    - 
Deferred financing fees   400,000    - 
Due from related parties   -    84,997 
Total Current Assets   797,047    84,997 
Property and equipment, net   68,403    3,983 
Right-of-use assets   840,248    - 
Total Assets  $1,705,698   $88,980 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY          
Current Liabilities:          
Accounts payable   66,595    87,746 
Accrued Interest expenses on convertible notes payable   50,700    - 
Dividend payable   21,304    11,318 
Convertible notes payable, net of unamortized discount $745,670 (2019 - $nil)   99,330    - 
Derivative liability – Notes and warrants   2,401,004    - 
Right of use liabilities – operating leases, current   111,147    - 
Total Current Liabilities   2,750,080    99,064 
Right of use liabilities – operating leases, long term   743,006    - 
Total Liabilities   3,493,086    99,064 
           
Stockholders’ Deficiency:          
Series A preferred stock, $0.001 par value, 62,374,819 shares authorized, 1,000 shares issued and outstanding (December 31, 2019 – 1,000), respectively   1    1 
Series B preferred stock, $0.001 par value, 125,181 authorized, 125,001 shares issued and outstanding (December 31, 2019 – 96,429 shares issued and outstanding), respectively   125    96 
Class B common stock, $0.001 par value, 18,750,000 shares authorized, nil shares issued and outstanding (Note 9)   -    - 
Class A common stock, $0.001 par value, 168,750,000 shares authorized, 9,640,915 and 9,640,915 issued and outstanding (December 31, 2019 – 9,640,915 and 9,640,915 issued and outstanding), respectively   9,642    9,642 
Additional paid-in capital   7,120,235    6,885,944 
           
Accumulated deficit   (8,917,391)   (6,905,767)
Total Stockholders’ Deficiency   (1,787,388)   (10,084)
           
Total Liabilities and Stockholders’ Deficiency  $1,705,698   $88,980 

 

See accompanying notes to the unaudited consolidated financial statements.

 

F-1

 

 

BRIDGEWAY NATIONAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

   For the Three Months Ended 
   March 31, 2020   March 31, 2019 
         
Operating Expenses:          
Professional fees   32,210    59,593 
General and administrative   176,422    134,650 
Amortization expense   1,958    78 
Total Operating Expenses   210,590    194,321 
           
Loss from operations   210,590    194,321 
           
Other income (expenses)          
Change in fair value of derivative liabilities   37,994    - 

Loss on derivative liabilities

   

(1,739,698

)   - 
Interest expense   (99,330)   (12,606)
Total other expenses   (1,801,034)   (12,606)
           
Loss before income tax provision   (2,011,624)   (206,927)
Income tax provision   -    - 
           
Net loss   (2,011,624)   (206,927)
Series B preferred stock dividend   (9,986)   - 
Deemed dividend on Series B convertible preferred stock   -    (2,397,248)
Net loss attributable to common stockholders   (2,021,610)   (2,604,175)
Net loss Per Common Share:          
- Basic and Diluted   (0.21)   (1.91)
           
Weighted Average Commons Shares Outstanding:          
- Basic and Diluted   9,640,915    1,365,527 

 

See accompanying notes to the unaudited consolidated financial statements.

 

F-2

 

 

BRIDGEWAY NATIONAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)

 

  

Preferred stock

Par value $0.001

  

Common stock

Par value $0.001

   Additional Paid-In   Accumulated   Total
Stockholders’
 
   Number of Shares   Amount $   Number   Amount   Capital   Deficit   Deficiency 
   Series A   Series B   Series A   Series B   of Shares   $   $   $   $ 
                                     
Balance, December 31, 2018   1,000    -   $     1    -    9,640,915   $9,642   $4,066,644   $(7,128,606)  $    (3,052,319)
                                              
Preferred stock issued on conversion of convertible notes payable   -    96,429    -    96    -    -    2,397,152    -    2,397,248 
Elimination of derivative liability due to debt settlement   -    -    -    -    -    -    461,539    -    461,539 
Beneficial conversion feature on convertible preferred stock   -    -    -    -    -    -    2,397,248    -    2,397,248 
Deemed dividend on convertible preferred stock   -    -    -    -    -    -    (2,397,248)   -    (2,397,248)
Net loss   -    -    -    -    -    -    -   $(206,927)  $(206,927)
                                              
Balance, March 31, 2019   1,000    96,429   $1   $96    9,640,915   $9,642   $6,925,335   $(7,335,533)  $(400,459)
                                              
Balance, December 31, 2019   1,000    96,429   $1   $96    9,640,915   $9,642   $6,885,944   $(6,905,767)  $(10,084)
                                              
Preferred stock issued as compensation for deferred financing fees   -    28,572    -    29    -    -    399,971    -    400,000 
Series B Preferred stock dividend   -    -    -    -    -    -    (9,986)   -    (9,986)
Deemed distribution to CEO   -    -    -    -    -    -    (155,694)   -   (155,694)
Net loss   -    -    -    -    -    -    -    (2,011,624)   (2,011,624)
                                              
Balance, March 31, 2020   1,000    125,001   $1   $125      9,640,915   $9,642   $7,120,235   $(8,917,391)  $(1,787,388)

 

See accompanying notes to the unaudited consolidated financial statements.

 

F-3

 

 

BRIDGEWAY NATIONAL CORP.

CONSOLIDATED STATEMENTS OF CASHFLOWS (UNAUDITED)

 

   For the Three Months Ended 
   March 31, 2020   March 31, 2019 
Cash flows from Operating Activities:          
Net loss  $(2,011,624)  $(206,927)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation expense   1,958    78 
Interest accretion on convertible notes   -    12,606 

Initial recognition of loss of derivative liabilities

   1,739,698    - 
Interest expense accretion of convertible notes discount   99,330    - 
Change in fair value of derivative liabilities   (37,994)   - 
Non cash operating lease expense   39,387    - 
           
Changes in Operating Assets and Liabilities:          
Security deposits   (66,155)   - 
Prepaid expense   (17,244)   (70,000)
Due from related parties   (70,697)    268,929 
Accounts payable and accrued expenses   (21,151)   - 
Right of use liabilities   (25,482)   - 
Net Cash Provided by (Used in) Operating Activities   (369,974)   4,686
           
Cash flows from Investing Activities:          
Purchases of property and equipment   (66,378)   (4,686) 
Net Cash Used in Investing Activities   (66,378)   (4,686)
           
Cash flows from Financing Activities:          
Proceeds from convertible notes   750,000    - 
Net Cash Provided by Financing Activities   750,000    - 
           
Net Change in Cash   313,648    - 
           
Cash - Beginning of Reporting Period   -    - 
           
Cash - End of Reporting Period  $313,648   $- 
           
Supplemental Disclosure of Cash Flow Information          
Interest paid   -    - 
Income tax paid   -    - 
Issuance of Series B preferred stock as compensation for deferred financing fees   400,000    - 
Issuance of Series B preferred stock on conversion of convertible notes payable   -    2,397,248 
Elimination of derivative liability due to debt settlement   -    461,539 
Dividends declared on series B preferred stock   9,986    - 

Right of use assets and right of use liabilities recognized

   

879,635

    - 

Initial recognition of debt discount

   

845,000

    - 

Deemed distribution to CEO

   

155,694

    - 

 

See accompanying notes to the unaudited consolidated financial statements.

 

F-4

 

 

BRIDGEWAY NATIONAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTER ENDED MARCH 31, 2020

 

Note 1 - Organization and Operations

 

Bridgeway National Corp., which we refer to as “the Company,” “our Company,” “we,” “us” or “our,”‎ was originally incorporated under the laws of the State of Nevada as Snap Online Marketing Inc. on June 4, 2012 and subsequently changed its name to LifeLogger Technologies Corp., which we were referred to as “LifeLogger.” On April 10, 2019, we reincorporated as a Delaware corporation and changed our name to Capital Park Holdings Corp. On December 19, 2019, we changed our name to Bridgeway National Corp. Our principal business address is 1015 15th Street NW Suite 1030, Washington, DC 20005, 202-846-7869. We registered as a reporting company under the Securities Exchange Act of 1934, as amended on April 26, 2013. We are currently listed for trading on the OTC Pink under the trading symbol “BDGY.”

 

Corporate Structure

 

The Company is structured as a Delaware corporation that we expect to be treated as a corporation for U.S. federal income tax purposes. Your rights as a holder of shares, and the fiduciary duties of the Company’s Board of Directors and executive officers, and any limitations relating thereto are set forth in the documents governing the Company and may differ from those applying to a Delaware corporation. However, the documents governing the Company specify that the duties of its directors and officers will be generally consistent with the duties of a director of a Delaware corporation. The Company’s Board of Directors will oversee the management of the Company and our businesses. Initially, the Company’s Board of Directors will be comprised of five (5) directors, with three (3) of those directors appointed by holders of the Company’s Class A common stock and two (2) of those directors appointed by holders of the Company’s Class B common stock, and at least three (3) of whom will be the Company’s independent directors.

 

Prior to the transactions that took place on January 9, 2019, we were a lifelogging software company that developed and hosted a proprietary cloud-based software solution ‎accessible on iOS and Android devices that offers an enhanced media experience for consumers by augmenting ‎videos, livestreams and photos with additional context information and providing a platform that makes it easy to ‎find and use that data when viewing or sharing media. Subsequent to transactions that took place on January 9, 2019, in addition to its lifelogging software business, the Company has been structured as a holding company ‎with a business strategy focused on owning subsidiaries engaged in a number of diverse business activities.‎

 

F-5

 

 

Note 2 - Summary of Significant Accounting Policies

 

Reclassification

 

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net loss.

 

Liquidity and Basis of Presentation

 

The accompanying unaudited consolidated financial statements are expressed in United States dollars (“USD”) and related Notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited consolidated financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2019 and Notes thereto contained in the information as part of the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on September 21, 2020.

 

The unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

As reflected in the unaudited consolidated financial statements, the Company had an accumulated deficit of $8,917,391 at March 31, 2020, and a net loss of $2,011,624 for the three-month ended March 31, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

Although the Company has recently broadened its business and operating model in an effort to generate more sufficient and stable sources of revenues and cash flows, its cash position is not sufficient to support its daily operations. While the Company believes that its new business and operating model presents a viable strategy to generate sufficient revenue and believes in its ability to raise additional funds by way of a public or private offering, there can be no assurances to that effect.

 

The unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

 

Leases

 

On January 1, 2019, the Company adopted Accounting Standards Codification Topic 842, “Leases” (“ASC 842”) to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to previous accounting guidance. The Company adopted ASC 842 utilizing the transition practical expedient added by the Financial Accounting Standards Board (“FASB”), which eliminates the requirement that entities apply the new lease standard to the comparative periods presented in the year of adoption.

 

The Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in the line items right-of-use asset, right of use liabilities – operating leases, current, and right of use liabilities – operating leases, long-term in the balance sheet.

 

Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and right of use liabilities represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the balance sheet and are expensed on a straight-line basis over the lease term in our consolidated statements of operations. The Company determines the lease term by agreement with lessor. As our lease do not provide an implicit interest rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Refer to Note 10 for further discussion.

 

Convertible Notes Payable and Derivative Instruments

 

The Company has adopted the provisions of ASU 2017-11 to account for the down round features of warrants issued with private placements effective as of April 1, 2017. In doing so, warrants with a down round feature previously treated as derivative liabilities in the balance sheet and measured at fair value are henceforth treated as equity, with no adjustment for changes in fair value at each reporting period. Previously, the Company accounted for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free-standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40. The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options 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.

 

If the conversion feature and other features embed within convertible note meets the requirements to be treated as a derivative, we estimate the fair value of the convertible debt derivative using the valuation technique upon the date of issuance. If the fair value of the convertible debt derivative is higher than the face value of the convertible note, the excess is immediately recognized as interest expense. Otherwise, the fair value of the convertible note derivative is recorded as a liability with an offsetting amount which offsets the carrying amount of the note. The convertible debt derivative is revalued at the end of each reporting period on a recurring basis and any change in fair value is recorded as a gain or loss in the consolidated statements of operations. The note discount is amortized through interest expense over the life of the note.

 

F-6

 

 

Note 2 - Summary of Significant Accounting Policies (continued)

 

Recently issued accounting pronouncements

 

In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections. This ASU amends various SEC paragraphs pursuant to the issuance of SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization. One of the changes in the ASU requires a presentation of changes in stockholders’ equity in the form of a reconciliation, either as a separate financial statement or in the notes to the financial statements, for the current and comparative year-to-date interim periods. The Company presented changes in stockholders’ equity as separate financial statements for the current and comparative year-to-date interim periods beginning on January 1, 2020. The additional elements of the ASU did not have a material impact on the Company’s consolidated financial statements.

 

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impacts of the provisions of ASU 2019-12 on its financial condition, results of operations, and cash flows.

 

In March 2020, the FASB issued ASU No. 2030-20 Codification Improvements to Financial Instruments, An Amendment of the FASB Accounting Standards Codification: a)in ASU No. 2016-01, b) in Subtopic 820-10, c) for depository and lending institutions clarification in disclosure requirements, d) in Subtopic 470-50, e) in Subtopic 820-10, f) Interaction of Topic 842 and Topic 326, g) Interaction of the guidance in Topic 326 and Subtopic 860-20.The amendments in this Update represent changes to clarify or improve the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. For public business entities updates under the following paragraphs: a), b), d) and e) are effective upon issuance of this final update. The effective date for c) is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect that the new guidance will significantly impact its consolidated financial statements.

 

The Company continues to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business processes, controls and systems.

 

F-7

 

 

Note 3 – Property and Equipment

 

Property and equipment as at March 31, 2020 consisted of the following:

 

   March 31, 2020
$
   December 31, 2019
$
 
Computer and equipment   4,686    4,686 
Office equipment   66,378    - 
    71,064    4,686 
Accumulated depreciation   (2,661)   (703)
Total   68,403    3,983 

 

Note 4 – Convertible Notes Payable

 

 On March 2, 2020 (the “Issue Date”), the Company entered into a promissory note purchase agreement (the “Purchase Agreement”) with SBI Investments LLC, 2014-1, a statutory series of Delaware limited liability company (the “Purchaser” or “SBI”), on behalf of itself and the other note purchasers (collectively, the “Purchasers”), pursuant to which the Purchasers purchased from the Company (i) 12% unsecured convertible promissory notes of the Company in an aggregate principal amount of $845,000 of which $75,000 were related to original issuance discount and $20,000 were related to deferred finance costs (with the understanding that the initial six months of such interest shall be guaranteed) (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Notes”, and each, a “Note”), convertible into shares (the “Conversion Shares”) of common stock of the Company (the “Common Stock”) and (ii) warrants (each a “Warrant” and together, the “Warrants”) to acquire up to 4,447,368 shares of Common Stock (the “Warrant Shares”). The maturity date of the notes is December 2, 2020 (the “Maturity Date”).

 

Under the terms of the Notes, the Purchasers shall have the right at any time on or after the Issue Date, to convert (a “Conversion”) all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the Notes, and any other amounts owed under the Notes, into shares of Common Stock at the Conversion Price (as defined below). However, in no event shall any Purchaser be entitled to convert any portion of any of the Notes in excess of the amount that upon conversion would result in the number of shares of Common Stock beneficially owned by the Purchaser and its affiliates to exceed 4.99% of the outstanding shares of Common Stock (the “Maximum Share Amount”). The “Conversion Price” per share is the lower of (i) $0.095 or (ii) the Variable Conversion Price (as defined below). The “Variable Conversion Price” shall mean 70% multiplied by the Market Price (as defined below). “Market Price” means the lowest trading price for the Common Stock during the fifteen (15) day period ending on the last complete trading day prior to the Conversion Date.

 

Under the terms of the Warrants, the exercise price per share of the Common Stock under each Warrant shall be equal to $0.095 per share, subject to adjustment (the “Exercise Price”) and each Warrant contains a cashless exercise option. Each Warrant has a term of five (5) years from the Issue Date.

 

The Notes and Warrants included embedded derivative features that were accounted for as derivative liabilities due to the variable conversion prices upon default and forced conversion; full reset provisions; and redemption features based on FASB guidance in ASC 815 and EITF 07–05. The Warrants were treated as derivative liabilities due to the tainted equity environment based on the notes that are convertible into an indeterminate number of shares. As at March 2, 2020, the Company recorded an initial recognition loss of derivative liabilities of $1,739,698, $750,000 discount on the notes payable of which $50,700 is 6-months guaranteed interest and $95,000 original issuance discount amortized over the term of the convertible notes. The amount of amortization recognized on the discount for the three-month period ended was $99,330.

 

As at March 31, 2020 the Company owed $845,000 in principal and the accrued interest was $50,700, which consisted of the guaranteed interest accrued of $50,700 and was recorded in accrued expenses on the convertible notes.

 

F-8

 

 

Note 5 – Derivative Liability

 

In connection with the sale of debt or equity instruments, the Company may sell warrants to purchase the Company’s common stock. In certain circumstances, these warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as embedded derivative features which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

 

The Company’s derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occur. For warrants and bifurcated embedded derivative features that are accounted for as derivative instrument liabilities, the Company estimates fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates of return, the Company’s current common stock price and expected dividend yield, and the expected volatility of the Company’s common stock price over the life of the instrument. 

 

The following table summarizes the derivative liabilities on the warrants and convertible notes activity for the three months ended March 31, 2020:

 

   Derivative Liabilities 
Derivative liabilities as at December 31, 2019   - 

Initial recognition of loss of derivative liabilities

  $1,739,698 
Convertible notes discount   699,300 
Change in fair value of notes and warrants   (37,994)
Derivative liabilities as at March 31, 2020  $2,401,004 

 

The Monte Carlo methodology was used to value the derivative components, using the following assumptions:

 

   Warrants   Notes 
Dividend yield   -    12%
Risk-free rate for term   1.05% to 0.38%   0.23% - 0. 97%
Volatility   288.6% to 292.1%   301.8% to 286.5%
Remaining term (Years)   4.92 years    0.67 
Stock Price   $0.095 to $0.110    $0.095 to $0.110 

 

F-9

 

 

Note 6 – Fair Value of Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued expenses, derivative liabilities and convertible debt. The estimated fair value of the financial instruments approximate their carrying amounts due to the short-term nature of these instruments.

 

The Company utilizes various types of financing to fund its business needs, including convertible debt with warrants attached. The Company reviews its warrants and conversion features of securities issued as to whether they are freestanding or contain an embedded derivative and, if so, whether they are classified as a liability at each reporting period until the amount is settled and reclassified into equity with changes in fair value recognized in current earnings. The fair value of the warrants and the embedded conversion feature of the convertible debt is classified as a liability. Some of these units have embedded conversion features that are treated as a discount on the convertible notes. Such financial instruments are initially recorded at fair value and amortized to interest expense over the life of the debt using the effective interest method.

 

Inputs used in the valuation to derive fair value are classified based on a fair value hierarchy which distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

 

Level one - Quoted market prices in active markets for identical assets or liabilities;

 

Level two - Inputs other than level one inputs that are either directly or indirectly observable; and

 

Level three - Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

 

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The Company’s derivative liability is measured at fair value on a recurring basis. The Company classifies the fair value of these convertible notes and warrants derivative liability under level three. The Company’s settlement payable is measured at fair value on a recurring basis based on the most recent settlement offer. The Company classifies the fair value of the settlement payable under level three. The Company’s rescission liability is measured at fair value on a recurring basis based on the most recent stock price. The Company classifies the fair value of the rescission liability under level one.

 

Based on ASC Topic 815 and related guidance, the Company concluded the common stock purchase warrants are required to be accounted for as derivatives as of the issue date due to a reset feature on the exercise price. At the date of issuance warrant derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The Company records the fair value of these derivatives on its balance sheet at fair value with changes in the values of these derivatives reflected in the consolidated statements of operations as “Change in fair value of derivative liabilities.” These derivative instruments are not designated as hedging instruments under ASC 815-10 and are disclosed on the balance sheet under Derivative Liabilities.

 

The following table presents liabilities that are measured and recognized at fair value on a recurring and non-recurring basis:

 

Description  Level 1   Level 2   Level 3  

Gains

 
Derivatives  $-   $-   $-   $- 
Fair Value at December 31, 2019  $-   $-   $-   $- 
                     
Derivatives  $-   $-   $2,401,004   $37,994 
Fair Value at March 31, 2020  $-   $-   $2,401,004   $37,994 

 

Note 7 – Warrants:

 

As at March 31, 2020, the Company had the following warrant securities outstanding:

 

  

Common Stock

Warrants

 
January 1, 2020   - 
Less: Exercised   - 
Less: Expired/Cancelled   - 
Add: Granted   4,447,368 
March 31, 2020   4,447,368 

 

The fair value of the warrants at issuance was $577,868, with an expiration of March 3, 2025 and exercise price of $0.095. The fair value of the warrants as at March 31, 2020 was $648,760.

 

F-10

 

 

Note 8 – Related Party Transactions

 

Related Parties

 

Related parties with whom the Company had transactions are:

 

Related Parties   Relationship
     
Stew Garner   Chairman, CEO, CFO and director (resigned effective January 9, 2019)
Eric Blue   Chairman, CEO, CFO and director (effective January 9, 2019)

 

Consulting services from Officer

 

Consulting services provided by the officer for the three months ended March 31, 2020 and 2019

 

    March 31, 2020    March 31, 2019   
           
President, Chief Executive Officer and Chief Financial Officer  $nil   $nil 

 

A balance of $155,694 were deemed distribution to CEO as at March 31, 2020. An amount of $113,070 (December 31, 2019 - $113,070) were payments made on behalf of a related company by virtue of same management during the year ended December 31, 2019. Included in the amount were $28,073 in dividends paid by the related party on behalf of the Company during the year ended December 31, 2019 and $70,697 of advances to the CEO during the three months ended March 31, 2020.

 

Note 9- Stockholders’ Deficiency

 

Shares Authorized

 

The Company’s authorized capital stock consists of 168,750,000 shares of Class A common stock, par value $0.001 per share, 18,750,000 Class B common stock, par value $0.001per share and 62,500,000 shares of preferred stock, par value $0.001 per share of which 1,000 shares are designated “Series A Preferred Stock” and of which one hundred twenty-five thousand and one hundred eighty-one (125,181) shares are designated “Series B Preferred Stock”.

 

Common Stock

 

Common Shares Issued for Cash

 

No common shares were issued for cash during the three months ended March 31, 2020.

 

Common Shares Issued for Non- Cash

 

No common shares were issued for non-cash during the three months ended March 31, 2020.

 

Preferred Stock

 

During the three month period ended March 31, 2020, the Company declared $9,986 in dividends on the Series B Preferred Stock, of which $9,986 was accrued as Dividend Payable.

 

On October 24, 2019, the Company entered into an equity purchase agreement (the “Purchase Agreement”) with SBI and Oasis Capital, LLC, a Puerto Rico limited liability company (“Oasis” and together with SBI, the “Investors”, and each, an “Investor”), pursuant to which the Investors agreed to, in the aggregate between the Investors, purchase from the Company up to Ten Million Dollars ($10,000,000.00)(the “Maximum Commitment Amount”) of the Common Stock.

 

Under the terms of the Purchase Agreement, the Company shall have the right, but not the obligation, to direct an Investor, by its delivery to the Investor of a put notice (the “Put Notice”) from time to time beginning on the execution date of the Purchase Agreement and ending on the earlier to occur of: (i) the date on which the Investors shall have purchased Put Shares equal to the Maximum Commitment Amount, (ii) October 24, 2021, or (iii) written notice of termination by the Company to the Investors (together, the “Commitment Period”), to purchase Put Shares.

 

Notwithstanding any other terms of the Purchase Agreement, in each instance, (i) the amount that is the subject of a Put Notice (the “Investment Amount”) is not more than the Maximum Put Amount (as defined below), (ii) the aggregate Investment Amount of all Put Notices shall not exceed the Maximum Commitment Amount and (iii) the Company cannot deliver consecutive Put Notices and/or consummate closings to the same Investor, meaning for the avoidance of doubt, that Put Notices delivered by the Company must alternate between Oasis and SBI. “Maximum Put Amount” means the lesser of (i) such amount that equals two hundred fifty percent (250%) of the average daily trading volume of the Common Stock and (ii) One Million Dollars ($1,000,000.00). The price paid for each share of Common Stock (the “Purchase Price”) subject to a Put Notice (each, a “Put Share”) shall be 85% of the Market Price (as defined below) on the date upon which the Purchase Price is calculated in accordance with the terms and conditions of the Purchase Agreement. “Market Price” means the one (1) lowest traded price of the Common Stock on the principal market for any trading day during the Valuation Period (as defined below), as reported by Bloomberg Finance L.P. or other reputable source. “Valuation Period” means the period of five (5) consecutive trading days immediately following the Clearing Date (as defined below) associated with the applicable Put Notice during which the Purchase Price of the Common Stock is valued, provided, however, that the Valuation Period shall instead begin on the Clearing Date if the respective Put Shares are received as DWAC Shares in the applicable Investor’s brokerage account prior to 11:00 a.m. EST on the respective Clearing Date. “Clearing Date” means the date on which an Investor receives the Put Shares as DWAC Shares in its brokerage account.

 

F-11

 

 

Note 9- Stockholders’ Deficiency (continued)

 

Concurrently with the execution of the Purchase Agreement, the Company, SBI and Oasis entered into a Registration Rights Agreement, dated as of October 24, 2019 (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company shall by December 8, 2019, file with the SEC an initial registration statement on Form S-1 covering the maximum number of Registrable Securities (as defined below) as shall be permitted to be included in accordance with applicable SEC rules, regulations and interpretations so as to permit the resale of such Registrable Securities by the Investors, including but not limited to under Rule 415 under the Securities Act at then prevailing market prices (and not fixed prices), as mutually determined by both the Company and the Investors in consultation with their respective legal counsel. “Registrable Securities” means all of the Put Shares which have been, or which may, from time to time be issued, including without limitation all of the shares of Common Stock which have been issued or will be issued to an Investor under the Purchase Agreement (without regard to any limitation or restriction on purchases), and any and all shares of capital stock issued or issuable with respect to Put Shares (as such terms are defined in the Purchase Agreement) issued or issuable to an Investor, and shares of Common Stock issued to an Investor with respect to the Put Shares and the Purchase Agreement as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitation on purchases under the Purchase Agreement.

 

As compensation for the commitments made under the Purchase Agreement, the Company paid to the Investors a commitment fee equal to four percent (4%) of the Maximum Commitment Amount (the “Commitment Fee”). The Commitment Fee was paid by the Company by issuing to the Investors 28,572 shares of the Company’s Series B Preferred Stock, authorized on February 25, 2020 and issued as on February 25, 2020 with the amount of $400,000 recorded to deferred financing costs. The fair value was determined based on the issuance price mutually agreed upon between the parties as at the date of issuance.

 

F-12

 

 

Note 10- Lease

 

The Company entered into an operating lease agreement with a scheduled commencement date on January 15, 2020 for a sixty-seven-month term, with an option to renew for a five-year term.

 

The Company adopted ASC 842 – Leases using the modified retrospective cumulative catch-up approach beginning on January 1, 2019. Under this approach, the Company did not restate its comparative amounts and recognized a right-of-use asset equal to the present value of the future lease payments. The Company elected to apply the practical expedient to only transition contracts which were previously identified as leases and elected to not recognize right-of-use assets and right of use liabilities for leases of low value assets.

 

When measuring the right of use liabilities, the Company discounted lease payments using its incremental borrowing rate at January 15, 2020. The weighted-average-rate applied is 12%.

 

   $ 
Operating lease right-of-use asset – initial recognition   879,635 
Amortization   (39,387)
Balance at March 31, 2020   840,248 
      
Right of use liabilities – operating leases – initial recognition   879,635 
Repayment and interest accretion   (25,482)
Balance at March 31, 2020   854,153 
      
Current portion of right of use liabilities – operating leases   111,147 
Noncurrent portion of right of use liabilities – operating leases   743,006 

 

The operating lease expense was $65,396 for the three months ended March 31, 2020 and included in the general and administrative expense.

 

The following table represents the contractual undiscounted cash flows for right of use liabilities – operating leases due within twelve months of March 31,

 

   $ 
2020   207,252 
2021   212,434 
2022   217,744 
2023   223,188 
2024   228,768 
thereafter   77,677 
Total minimum lease payments   1,167,063 
Less: effect of discounting   (312,910)
Present value of future minimum lease payments   854,153 

Less: current portion of right of use liabilities – operating leases

   111,147 

Noncurrent portion of right of use liabilities – operating leases

   743,006 

 

F-13

 

 

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

 

FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements. The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results.

 

We caution that the factors described herein, and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The Company

 

Prior to the transactions that took place on January 9, 2019, we were a lifelogging software company that developed and hosted a proprietary cloud-based software solution ‎accessible on iOS and Android devices that offers an enhanced media experience for consumers by augmenting ‎videos, livestreams and photos with additional context information and providing a platform that makes it easy to ‎find and use that data when viewing or sharing media. Subsequent to transactions that took place on January 9, 2019, in addition to its lifelogging software business, the Company has been structured as a holding company ‎with a business strategy focused on owning subsidiaries engaged in a number of diverse business activities.‎

 

RESULTS OF OPERATIONS

 

Three months ended March 31, 2020, as compared to three months ended March 31,2019

 

The following comparative analysis on results of operations was based primarily on the comparative financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. The results discussed below are for the three months ended March 31, 2020 and 2019. For comparative purposes, we are comparing the three months ended March 31, 2020, to the three months ended March 31, 2020. The following discussion should be read in conjunction with the Company’s financial statements and the related notes included in this quarterly report.

 

Revenue

 

Total revenue was $0 for the three-month periods ended March 31, 2020 and March 31, 2019, respectively.

 

-3-

 

 

Cost of Revenue

 

We had no cost of revenues for the period ended March 31, 2020 or the period ended March 31, 2019 as we had no revenues.

 

Operating Expenses

 

Total operating expenses were $210,590 and $194,321 for the three months ended March 31, 2020 and March 31, 2019, respectively. The increase is operating expenses can also be attributed to the general and administrative expenses incurred by the Company during the period.

 

Other Income (Expenses)

 

Other expenses for the three-month period ended March 31, 2020 increased by $1,788,428 compared to the three-month period ended March 31, 2019, as a result of the increase in the interest expense on convertible notes and also due to loss on derivatives.

 

Net Loss

 

The net loss was $2,011,624 and $206,927 for the three months ended March 31, 2020 and March 31, 2019, respectively. This increase is a result of the increase in operating expenses and other expenses discussed above.

 

Liquidity

 

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of March 31, 2020, our working capital deficit amounted to $1,953,033 an increase of $1,938,966 as compared to $14,067 as of December 31, 2019. This increase is primarily a result of the Company entering into its operating lease for administrative operations.

 

Net cash used in operating activities was ($369,974) during the three-month period ended March 31, 2020 compared to cash provided by operating activities of $4,686 in the three-month period ended March 31, 2019. The increase in cash used in operating activities is primarily attributable to our net loss increasing from $206,927 in the three-month period ended March 31, 2019 compared to $2,011,624 in the three-month period ended March 31, 2020.

 

Capital Resources

 

The Company is a holding company and its liquidity needs are primarily for fixed and recurring operational expenses.

 

As of March 31, 2020, the Company had $313,648 of cash and cash equivalents compared to $nil as of December 31, 2019. On a stand-alone basis, as of March 31, 2020, the Company had cash and cash equivalents of $313,648 compared to $nil at December 31, 2019.

 

Our subsidiaries’ principal liquidity requirements arise from cash used in operating activities, debt service, R&D expenditures, development of back-office systems, operating costs and expenses, and income taxes.

 

We expect to finance our future growth and operations, through public offerings and private placements of debt and equity securities, credit facilities, vendor financing, capital lease financing and other financing arrangements, as well as cash generated from the operations of our subsidiaries. In the future, we may also choose to sell assets or certain investments to generate cash.

 

At this time, we believe that we will be able to continue to meet our liquidity requirements and fund our fixed obligations and other cash needs for our operations for at least the next twelve months through a combination of distributions from our subsidiaries and from raising of debt or equity, refinancing of certain of our indebtedness or preferred stock, other financing arrangements and/or the sale of assets and certain investments. We anticipate that as we continue to scale our operations, we will reinvest cash and receivables into the growth of our various businesses, and therefore do not anticipate keeping a large amount of cash on hand at the holding company level. The ability of our subsidiaries to make distributions to the Company is and will be in the future subject to numerous factors, including restrictions contained in each subsidiary’s financing agreements, regulatory requirements and the availability of sufficient funds at each subsidiary. Although the Company believes that it will be able to raise equity capital, refinance indebtedness or preferred stock, enter into other financing arrangements or engage in asset sales and sales of certain investments sufficient to fund any cash needs that we are not able to satisfy with the funds expected to be provided by our subsidiaries, there can be no assurance that it will be able to do so on terms satisfactory to the Company if at all. Such financing options, if pursued, may also ultimately have the effect of negatively impacting our liquidity profile and prospects over the long-term. In addition, the sale of assets or the Company’s investments may also make the Company less attractive to potential investors or future financing partners.

 

-4-

 

 

Current and Future Financings

 

Promissory Note Purchase Agreement

 

On March 2, 2020 (the “Issue Date”), the Company entered into a promissory note purchase agreement (the “Purchase Agreement”) with SBI Investments LLC, 2014-1, a statutory series of Delaware limited liability company (the “Purchaser” or “SBI”), on behalf of itself and the other note purchasers (collectively, the “Purchasers”), pursuant to which the Purchasers purchased from the Company (i) 12% convertible promissory notes of the Company in an aggregate principal amount of $845,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Notes”, and each, a “Note”), convertible into shares (the “Conversion Shares”) of Class A common stock of the Company (the “Class A Common Stock”) and (ii) warrants (each a “Warrant” and together, the “Warrants”) to acquire up to 4,447,368 shares of Class A Common Stock (the “Warrant Shares”). The maturity date of the Notes shall be on that day that is nine (9) months after the Issue Date (the “Maturity Date”), and is the date upon which the principal amount of the Notes, as well as all accrued and unpaid interest and other fees, shall be due and payable.

 

-5-

 

 

Under the terms of the Notes, the Purchasers shall have the right at any time on or after the Issue Date, to convert (a “Conversion”) all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the Notes, and any other amounts owed under the Notes, into fully paid and non-assessable shares of Class A Common Stock, or any shares of capital stock or other securities of the Company into which such Class A Common Stock shall hereafter be changed or reclassified at the Conversion Price (as defined below); provided, however, that in no event shall any Purchaser be entitled to convert any portion of any of the Notes in excess of that portion of any Note upon conversion of which the sum of (1) the number of shares of Class A Common Stock beneficially owned by the Purchaser and its affiliates (other than shares of Class A Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Class A Common Stock issuable upon the conversion of the portion of any Note with respect to which the determination of this provision is being made, would result in beneficial ownership by any Purchaser and its affiliates of more than 4.99% of the outstanding shares of Class A Common Stock (the “Maximum Share Amount”). The “Conversion Price” per share shall be the lower of (i) $0.095 or (ii) the Variable Conversion Price (as defined below) (subject to adjustment). The “Variable Conversion Price” shall mean 70% multiplied by the Market Price (as defined below). “Market Price” means the lowest Trading Price (as defined below) for the Class A Common Stock during the fifteen (15) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. “Trading Price” or “Trading Prices” means, for any security as of any date, the lowest VWAP price on the Over-the-Counter Pink Marketplace, OTCQB, or applicable trading market (the “Trading Market”) as reported by a reliable reporting service designated by a Purchaser (i.e. www.Nasdaq.com) or, if the Trading Market is not the principal trading market for such security, on the principal securities exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is not available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quoted on the OTC Markets.

 

Under the terms of the Warrants, the exercise price per share of the Class A Common Stock under each Warrant shall be equal to $0.095 per share, subject to adjustment (the “Exercise Price”) and each Warrant contains a cashless exercise option. Each Warrant has a term of five (5) years from the Issue Date. 

 

Subsequent Events

 

The Company’s management has evaluated subsequent events up to the date the unaudited consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined there were no material subsequent events.

 

Inflation

 

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

 

Off-Balance Sheet Arrangements

 

Under SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. As of March 31, 2020, we have no off-balance sheet arrangements.

 

-6-

 

 

CRITICAL ACCOUNTING POLICIES

 

Our significant accounting policies are disclosed in Note 2 of our Unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item 3.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported as specified in the SEC’s rules and forms and that such information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, and our Chief Financial Officer, CFO, to allow timely decisions regarding required disclosure.

 

As previously reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, we identified material weaknesses in internal controls over financial reporting. We have continued to address and mitigate these material weaknesses through the implementation and testing of controls, including taking the following actions:

 

  Ensure that controls that are properly designed are adequately performed to appropriately address risk related to critical functionality.
     
  Further rationalize documented controls to ensure adequacy of risk mediation.
     
  Embed a specific and precise journal entry review and approval process at the subsidiary locations, utilizing systematic workflow approval wherever feasible.
     
  Finalize and implement a company-wide formal delegation of authority policy with defined authorization levels and integrate these approval limits with our enterprise resource planning system or other invoice approval software as appropriate.
     
  Continue the process of the identification of qualified accounting personnel, including the hiring of a corporate controller and other accounting personnel over the next several months.

 

While management believes that it has identified the initiatives that need to be undertaken, the controls as described above are in the process of being implemented and have not had sufficient time for management to conclude that they are operating effectively. Therefore, the material weaknesses reported will continue to exist until the aforementioned controls have had sufficient time for management to conclude that they are operating effectively.

 

Notwithstanding the assessment that our internal control over financial reporting is not effective and that there were material weaknesses as identified in this report, based on our reliance on third parties to provide us with accounting consulting services, ongoing testing and procedures performed, management and our principal executive officers, believe the financial statements included in this Quarterly Report on Form 10-Q fairly represent in all material respects our financial position, results of operations and cash flows at and for the periods covered thereby in all material respects.

 

Changes in Internal Control

 

Other than as disclosed above, there have not been any changes identified in connection with our internal control over financial reporting, as such term is defined in Rules 13(a)-15(f) and 15d-15(f) under the Exchange Act, during the period of this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us that may materially affect us.

 

ITEM 1A. RISK FACTORS

 

Not applicable to smaller reporting companies.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

-7-

 

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

Exhibit No.   Description
     
31.1*   Section 302 Certification of Principal Executive Officer.
     
31.2*   Section 302 Certification of Principal Financial Officer.
     
32.1*   Section 906 Certification of Principal Executive Officer.
     
32.2*   Section 906 Certification of Principal Financial Officer.
     
101.INS*   XBRL Instance Document
     
101.SCH*   XBRL Taxonomy Extension Schema Document
     
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF*   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB*   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith.

 

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SIGNATURES

 

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

 

  BRIDGEWAY NATIONAL CORP.
     
Dated: September 25, 2020 By: /s/ Eric C. Blue
    Eric C. Blue
    Chairman of the Board, Chief Executive Officer and Chief Investment Officer
    (Principal Executive Officer)

 

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