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Blow Drive Interlock Corp (BDIC) SEC Filing 10-Q Quarterly report for the period ending Sunday, June 30, 2019

Blow Drive Interlock Corp

CIK: 1586495 Ticker: BDIC
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2019
Aug. 09, 2019
Document And Entity Information  
Entity Registrant NameBlow & Drive Interlock Corp 
Entity Central Index Key0001586495 
Document Type10-Q 
Document Period End DateJun. 30, 2019 
Amendment Flagfalse 
Current Fiscal Year End Date--12-31 
Entity Current Reporting StatusYes 
Entity Interactive Data CurrentYes 
Entity Filer CategoryNon-accelerated Filer 
Entity Small Business Flagtrue 
Entity Emerging Growth Companyfalse 
Entity Ex Transition Periodfalse 
Entity Shell Companyfalse 
Entity Common Stock, Shares Outstanding 31,350,683
Document Fiscal Period FocusQ2 
Document Fiscal Year Focus2019 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2019

 

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

 

For the transition period from _______________ to _______________.

 

Commission file number: 000-55053

 

Blow & Drive Interlock Corporation

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

46-3590850

(I.R.S. Employer

Identification No.)

 

1427 S. Robertson Blvd.

Los Angeles, CA

(Address of principal executive offices)

 

90035

(Zip Code)

 

(877) 238-4492

Registrant’s telephone number, including area code

 

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]       No [  ]

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Applicable only to corporate issuers:

 

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

 

 

 

 
 

 

CAUTIONARY STATEMENT

 

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

 

  
 

 

BLOW & DRIVE INTERLOCK CORPORATION

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION 3
     
ITEM 1 Financial Statements 3
     
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 25
     
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 34
     
ITEM 4 Controls and Procedures 34
     
PART II – OTHER INFORMATION 35
     
ITEM 1 Legal Proceedings 35
     
ITEM 1A Risk Factors 36
     
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds 36
     
ITEM 3 Defaults Upon Senior Securities 36
     
ITEM 4 Mine Safety Disclosures 36
     
ITEM 5 Other Information 36
     
ITEM 6 Exhibits 37

 

 2 
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1 Financial Statements

 

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

 

 3 
 

 

BLOW & DRIVE INTERLOCK CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   (Unaudited)   
   June 30, 2019  December 31, 2018
       
ASSETS          
           
Current Assets:          
Cash  $12,426   $775 
Accounts receivable   11,785    5,355 
Prepaid expenses   1,198    1,016 
Total current assets   25,409    7,146 
Deposits   6,481    6,481 
           
Total assets  $31,890   $13,627 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current Liabilities:          
Accrued expenses  $26,734   $65,988 
Accrued royalty payable   56,635    26,885 
Accrued interest   184,286    17,155 
Accrued interest – related parties   342,118    190,618 
Deferred revenue   17,182    92,162 
Derivative liability   29,907    22,517 
Notes payable, net of debt discount of $0 and $7,549 at
June 30, 2019 and December 31, 2018, respectively
   67,159    117,776 
Notes payable to related parties   29,000    29,000 
Convertible notes payable, net of $5,124 and $5,124 at
June 30, 2019 and December 31, 2018, respectively
   2,376    2,376 
Total current liabilities   755,397    564,477 
           
Non-current Liabilities:          
Notes payable, less current portion and net of debt discount of $0 and $6,925 at June 30, 2019 and December 31, 2018, respectively   -    18,069 
Notes payable to related parties, less current portion   2,246,200    2,020,000 
Convertible notes, less current portion and net of $3,841 and $5,122 at
June 30, 2019 and December 31, 2018, respectively
   16,159    13,597 
Total non-current liabilities   2,262,359    2,051,666 
           
Total Liabilities   3,017,756    2,616,143 
           
Commitments and Contingencies          
           
Stockholders’ Deficit          
Preferred stock, par value $0.001, 20,000,000 shares authorized, 1,000,000 and 1,000,000 shares issued or issuable and outstanding as of June 30, 2019 and December 31, 2018, respectively   1,000    1,000 
Common stock, par value $0.0001, 100,000,000 shares authorized, 30,566,920 and 31,073,529 shares issued or issuable and outstanding as of June 30, 2019 and December 31, 2018, respectively   3,057    3,107 
Additional paid-in capital   3,514,249    3,489,699 
Accumulated deficit   (6,504,172)   (6,096,322)
Total stockholders’ deficit   (2,985,866)   (2,602,516)
           
Total liabilities and stockholders’ deficit  $31,890   $13,627 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 4 
 

 

BLOW & DRIVE INTERLOCK CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

   Six Months Ended June 30,  Three Months Ended June 30,
   2019  2018  2019  2018
             
Revenues:                    
Monitoring revenues  $363,243   $443,231   $149,556   $264,744 
Distributorship revenues   36,681    39,265    18,990    16,095 
Total revenues   399,924    482,496    168,546    280,839 
                     
Cost of revenues:                    
Monitoring cost of revenue   25,233    76,681    3,598    29,068 
Distributorship cost of revenue   -    -    -    - 
Total cost of revenues   25,233    76,681    3,598    29,068 
                     
Gross profit   374,691    405,815    164,948    251,771 
                     
Operating expenses:                    
Payroll   210,718    466,149    112,678    229,737 
Professional fees   147,297    88,055    105,751    50,963 
General and administrative   131,492    469,095    71,418    219,539 
Total operating expenses   489,507    1,023,299    289,847    500,239 
                     
Loss from operations   (114,816)   (617,484)   (124,899)   (248,468)
                     
Other Income (Expense):                    
Interest expense, net   (338,808)   (210,558)   (161,984)   (108,237)
Change in fair value of derivative liability   (7,390)   4,293    (5,558)   11,579 
Gain (loss) on extinguishment of debt   54,764         -    - 
Total other income (expense)   (291,434)   (206,265)   (167,542)   (96,658)
                     
Loss before provision for income taxes   (406,250)   (823,749)   (292,441)   (345,126)
                     
Provision for income taxes   1,600    800    -    800 
                     
Net loss  $(407,850)  $(824,549)  $(292,441)  $(345,926)
                     
Earnings (loss) per share:                    
Basic and diluted  $(0.01)  $(0.03)  $(0.01)  $(0.01)
                     
Weighted-average shares of common stock outstanding:                    
Basic and diluted   30,447,549    28,108,346    30,447,549    29,388,261 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 5 
 

 

BLOW & DRIVE INTERLOCK CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

 

               Additional     Total
   Preferred Stock - Sries A  Common Stock  Paid-in  Accumulated  Stockholders’
   Shares  Amount  Shares  Amount  Capital  Deficit  Deficit
                      
Balance at December 31, 2018   1,000,000   $1,000    31,073,529   $3,107   $3,489,699   $(6,096,322)  $(2,602,516)
                                    
Shares issued for services   -    -    250,000    25    24,475    -    24,500 
Shares returned related to anti-dilution   -    -    (756,609)   (75)   75    -    - 
Net loss   -    -    -    -    -    (115,409)   (115,409)
                                    
Balance at March 31, 2019   1,000,000    1,000    30,566,920    3,057    3,514,249    (6,211,731)   (2,693,425)
                                    
Net loss   -    -    -    -    -    (292,441)   (292,441)
                                    
Balance at June 30, 2019   1,000,000   $1,000    30,566,920   $3,057   $3,514,249   $(6,504,172)  $(2,985,866)

 

               Additional     Total
   Preferred Stock - Sries A  Common Stock  Paid-in  Accumulated  Stockholders’
   Shares  Amount  Shares  Amount  Capital  Deficit  Deficit
                      
Balance at December 31, 2017   1,000,000   $1,000    26,223,834   $2,622   $2,911,753   $(4,296,645)  $(1,381,270)
                                    
Shares issued for services   -    -    450,000    45    104,955    -    105,000 
Shares issued for cash   -    -    1,450,000    145    156,355    -    156,500 
Shares returned related to anti-dilution   -    -    210,876    21    (21)   -    - 
Net loss   -    -    -    -    -    (478,623)   (478,623)
                                    
Balance at March 31, 2018   1,000,000    1,000    28,334,710    2,833    3,173,042    (4,775,268)   (1,598,393)
                                    
Shares issued for services   -    -    26,000    3    5,197    -    5,200 
Shares issued for cash   -    -    1,653,383    165    204,040    -    204,205 
Shares returned related to anti-dilution   -    -    190,033    19    (19)   -    - 
Conversion of debt to common stock   -    -    32,812    3    5,080    -    5,083 
Net loss   -    -    -    -    -    (345,926)   (345,926)
                                    
Balance at June 30, 2018   1,000,000   $1,000    30,236,938   $3,023   $3,387,340   $(5,121,194)  $(1,729,831)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 6 
 

 

BLOW & DRIVE INTERLOCK CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   Six Months Ended June 30,
   2019  2018
Cash flows from operating activities:          
Net loss  $(407,850)  $(824,549)
Adjustments to reconcile net loss to net cash used in operating activities          
Stock or warrants issued for services   24,500    110,200 
Allowance for doubtful accounts   -    (26,541)
Amortization of debt discount   17,035    24,536 
Increase in derivative liabilities   -    (15,370)
Change in fair value of derivative liability   7,390    11,078 
Debt converted to common shares   -    5,083 
(Gain)/loss on extinguishment of debt   (54,764)   - 
Changes in operating assets and liabilities          
Accounts receivable   (6,430)   55,457 
Prepaid expenses   (182)   1,506 
Accounts payable   -    (29,250)
Accrued expenses   (39,254)   8,795 
Accrued royalties payable   29,750    60,866 
Accrued interest   170,325    54,561 
Accrued interest related party   151,500    - 
Deferred revenue   (74,980)   (56,676)
Net cash used in operating activities   (182,960)   (620,304)
           
Cash flows from financing activities:          
Proceeds from issuance of common stock   -    360,705 
Proceeds from issuance of notes payable   -    21,600 
Principal payments on notes payable   (31,589)   (31,588)
Proceeds from issuance of convertible notes payable   -    20,000 
Principal payments on convertible notes payable   -    (5,000)
Proceeds from issuance of notes payable related party   226,200    600,127 
Payments on note payable related party   -    (96,050)
Net cash provided by financing activities   194,611    869,794 
           
Net increase in cash   11,651    249,490 
           
Cash at beginning of period   775    31,874 
           
Cash at end of period  $12,426   $281,364 
           
Supplemental discolsures of cash flow information          
Cash paid during the period for:          
Interest paid  $-   $91,634 
Income taxes paid  $800   $- 
           
Supplemental disclosure of non-cash investing and financing activities          
Common stock and warrants issued for services  $24,500   $110,200 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 7 
 

 

BLOW AND DRIVE INTERLOCK CORPORATION

NOTES TO UNAUDITED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

 

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

 

In 2015, the Company formed BDI Manufacturing, Inc., an Arizona corporation which is a 100% wholly owned subsidiary of Blow & Drive Interlock Corporation. The Company markets, installs and monitors a breath alcohol ignition interlock device (BAIID) called the BDI-747/1, which is a mechanism that is installed on the steering column of an automobile and into which a driver exhales. The device in turn provides a blood-alcohol concentration analysis. If the driver’s blood-alcohol content is higher than a certain pre-programmed limit, the device prevents the ignition from engaging and the automobile from starting. These devices are often required for use by DUI or DWI (“driving under the influence” or “driving while intoxicated”) offenders as part of a mandatory court or motor vehicle department program.

 

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

 

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

 

NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation and Basis of Presentation

 

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

 

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

 

 8 
 

 

Use of Estimates in the Preparation of Financial Statements

 

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

 

Going Concern

 

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

 

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

 

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

 

  1) Continue to issue restricted stock for compensation due to consultants and for its legacy accounts payable in lieu of cash payments; and
     
  2) Seek additional capital to continue its operations as it rolls out its current products. The Company is currently evaluating additional debt or equity financing opportunities and may execute them when appropriate. However, there can be no assurances that the Company can consummate such a transaction or consummate a transaction at favorable pricing.

 

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

 

Reclassifications

 

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

 

Revenue Recognition

 

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

 

 9 
 

 

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

 

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

 

The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which the Company will be entitled to receive in exchange for transferring goods to the customer. The Company does not issue refunds.

 

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

 

Deferred revenue

 

Deferred revenue consists of customer orders paid in advance of the delivery of the order. Deferred revenue is classified as short-term as the typical order ships within approximately three weeks of placing the order. Deferred revenue is recognized as revenue when the product is shipped to the customer and all other revenue recognition criteria have been met.

 

Advertising and Marketing Costs

 

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

 

Accounts Receivable and Allowance for Doubtful Accounts

 

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

 

Royalty Accrual

 

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

 

 10 
 

 

Derivative Liability

 

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

 

Convertible Debt and Warrants Issued with Convertible Debt

 

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

 

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

 

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

 

Fair Value of Financial Instruments

 

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

 

Level 1. Observable inputs such as quoted prices in active markets;

 

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

 

Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

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

 

Description  Level 1  Level 2  Level 3
          
Balance December 31, 2018  $-   $22,517   $- 
Change in fair value of derivative liability   -    7,390    - 
                
Balance June 30, 2019  $-   $29,907   $- 

 

 11 
 

 

Net Income (Loss) Per Share

 

Basic earnings per share is calculated by dividing income available to common stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share is computed using the weighted average number of common and dilutive common share equivalents outstanding during the period.

 

Related Parties

 

Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company.

 

Concentrations

 

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

 

Income Taxes

 

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

 

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

 

Derivative Liabilities

 

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

 

Convertible Instruments

 

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

 

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

 

 12 
 

 

Recently Issued Accounting Pronouncements

 

Pronouncements Not Yet Effective

 

  Fair Value Measurements

 

In August 2018, the FASB amended “Fair Value Measurements” to modify the disclosure requirements related to fair value. The amendment removes requirements to disclose (1) the amount of and reasons for transfers between levels 1 and 2 of the fair value hierarchy, (2) our policy related to the timing of transfers between levels, and (3) the valuation processes used in level 3 measurements. It clarifies that, for investments measured at net asset value, disclosure of liquidation timing is only required if the investee has communicated the timing either to us or publicly. It also clarifies that the narrative disclosure of the effect of changes in level 3 inputs should be based on changes that could occur at the reporting date. The amendment adds a requirement to disclose the range and weighted average of significant unobservable inputs used in level 3 measurements. The guidance is effective for the Company with the Company’s quarterly filing for the period ended March 31, 2020 and the Company will make the required disclosure changes in that filing. Adoption will not have an impact on the Company’s consolidated results of operations, consolidated financial position, and cash flows.

 

  Retirement Plans

 

In August 2018, the FASB amended “Retirement Plans” to modify the disclosure requirements for defined benefit plans. For the Company, the amendment requires the disclosure of the weighted average interest crediting rate used for cash balance plans and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. It removes the requirement to disclose the approximate amount of future benefits covered by insurance contracts. The guidance is effective for the Company with the Company’s annual filing for the year ended December 31, 2020 and the Company will make the required disclosure changes in that filing. Adoption will not have an impact on the Company’s consolidated results of operations, consolidated financial position, and cash flows.

 

  Intangibles – Goodwill and other – Internal-Use Software

 

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company’s accounting for the service element of a hosting arrangement that is a service contract is not affected by the proposed amendments and will continue to be expensed as incurred in accordance with existing guidance. This standard does not expand on existing disclosure requirements except to require a description of the nature of hosting arrangements that are service contracts. This standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued. Entities can choose to adopt the new guidance prospectively or retrospectively. The Company plans to adopt the updated disclosure requirements of ASU No. 2018-15 prospectively in the first quarter of fiscal 2020, coinciding with the standard’s effective date, and expects the impact from this standard to be immaterial.

 

  Improvements to Nonemployee Share-based Payment Accounting

 

In June 2018, the FASB issued ASU No. 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”). ASU 2018-07 aligns the accounting for share-based payment awards to employees and non-employees. Under ASU 2018-07 the existing employee guidance will apply to nonemployee share-based transactions, except for specific guidance related to the attribution of compensation cost. ASU 2018-07 should be applied to all new awards granted after the date of adoption. ASU 2018-07 is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. The Company adopted ASU 2018-07 effective January 1, 2019; such adoption had no material impact on the Company’s consolidated financial statements.

 

 13 
 

 

  Income Statement – Reporting Comprehensive Income

 

In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220) (ASU 2018-02), which amends existing standards for income statement-reporting comprehensive income to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from Tax Cuts and Jobs Act and improve the usefulness of information reported to financial statements users. ASU 2018-02 will be effective for beginning after December 15, 2018, and early adoption is permitted. The Company adopted ASU 2018-02 effective January 1, 2019; such adoption had no material impact on the Company’s consolidated financial statements.

 

  Goodwill

 

In January 2017, the FASB amended “Goodwill” to simplify the subsequent measurement of goodwill. The amended guidance eliminates Step 2 from the goodwill impairment test. Instead, impairment is defined as the amount by which the carrying value of the reporting unit exceeds its fair value, up to the total amount of goodwill of the reporting unit. The new guidance is effective for the Company on January 1, 2020 and is not expected to have an impact on our consolidated results of operations, consolidated financial position, and cash flows.

 

  Financial Instruments

 

In June 2016, the FASB amended “Financial Instruments” to provide financial statement users with more decision-useful information about the expected credit losses on debt instruments and other commitments to extend credit held by a reporting entity at each reporting date. During November 2018 and April 2019, the FASB made amendments to the new standard that clarified guidance on several matters, including accrued interest, recoveries, and various codification improvements. The new standard, as amended, replaces the incurred loss impairment methodology in the current standard with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to support credit loss estimates. The new guidance is effective for us on January 1, 2020, and in the first half of 2019, we established an implementation team and began analyzing the impact on our current policies and procedures to identify potential differences that would result from applying the requirements of the new standard. The implementation team reports findings and progress of the project to management on a frequent basis. Through this process, we have identified appropriate changes to our processes, systems, and controls to support recognition and disclosure under the new standard. The Company is still evaluating the impact of the new standard on the Company’s consolidated results of operations, consolidated financial position, and cash flows.

 

Other recently issued accounting updates are not expected to have a material impact on the Company’s Interim Financial Statements.

 

Recently Adopted Accounting Pronouncements

 

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

 

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), to address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. For public entities, the standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities, the standard is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Company adopted ASU 2016-15 effective January 1, 2018; such adoption had no material impact on the Company’s consolidated financial statements.

 

 14 
 

 

  Leases (ASU 2019-01)

 

In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842) Codification Improvements, which removed the requirement for an entity to disclose in the interim periods after adoption, the effect of the change on income from continuing operations, net income, any other affected financial statement line item, and any affected per share amount. For lessors, the new leasing standard requires leases to be classified as a sales-type, direct financing or operating leases. These criteria focus on the transfer of control of the underlying lease asset. This standard and related update was effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2016-02 effective January 1, 2019; such adoption had no material impact on the Company’s financial statements, given that the noncancelable term of the Company’s current lease is less than 12 months.

 

Leases (ASU 2016-02)

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities on the balance sheet by lessees for those leases currently classified as operating leases under ASC 840 “Leases.” These amendments also require qualitative disclosures along with specific quantitative disclosures. These amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company can elect to record a cumulative-effect adjustment as of the beginning of the year of adoption or apply a modified retrospective transition approach. The Company expects that substantially all of its operating lease commitments will be subject to the new guidance and will be recognized as operating lease liabilities and right-of-use assets upon adoption. The Company adopted ASU 2016-02 effective January 1, 2019; such adoption had no material impact on the Company’s financial statements, given that the noncancelable term of the Company’s current lease is less than 12 months.

 

  Revenue from Contracts with Customers

 

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

 

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

 

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

 

The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which the Company will be entitled to receive in exchange for transferring goods to the customer. The Company does not issue refunds.

 

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

 

 15 
 

 

NOTE 3 – SEGMENT REPORTING

 

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

 

Monitoring fees on Company installed units

 

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

 

Distributorships

 

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

 

 16 
 

 

The following table summarizes net sales and identifiable operating income by segment:

 

   Six Months Ended June 30,  Three Months Ended June 30,
   2019  2018  2019  2018
Segment gross profit (a):                    
Monitoring  $338,010   $366,550   $145,958   $235,676 
Distributorships   36,681    39,265    18,990    16,095 
Gross profit   374,691    405,815    164,948    251,771 
                     
Identifiable segment operating expenses (b):                    
Monitoring   -    -    -    - 
Distributorships   -    -    -    - 
Total operating expenses   -    -    -    - 
                     
Identifiable segment operating income (c):                    
Monitoring   338,010    366,550    145,958    235,676 
Distributorships   36,681    39,265    18,990    16,095 
    374,691    405,815    164,948    251,771 
                     
Reconciliation of identifiable segment income to corporate income (d):                    
Payroll   210,718    466,149    112,678    229,737 
Professional fees   147,297    88,055    105,751    50,963 
General and administrative expenses   131,492    469,095    71,418    219,539 
Interest expense   338,808    210,558    161,984    108,237 
Change in fair value of derivative liability   7,390    (4,293)   5,558    (11,579)
Gain on extinguishment of debt   (54,764)   -    -    - 
    780,941    1,229,564    457,389    596,897 
                     
Loss before provision for income taxes   (406,250)   (823,749)   (292,441)   (345,126)
                     
Provision for income taxes   1,600    800    -    800 
                     
Net loss  $(407,850)  $(824,549)  $(292,441)  $(345,926)
                     
Total net property, plant, and equipment assets                    
Monitoring  $-   $-   $-   $- 
Distributorships   -    -    -    - 
Corporate   -    -    -    - 
   $-   $-   $-   $- 

 

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

 

 17 
 

 

NOTE 4 – ACCRUED EXPENSES

 

Accrued Expenses consist of the following:

 

Description  June 30, 2019  December 31, 2018
       
Accrued payroll and payroll taxes  $20,004   $17,616 
Deferred rent   -    5,317 
Income tax payable   6,730    5,930 
Other accrued expenses   -    37,125 
           
Total  $26,734   $65,988 

 

NOTE 5 – NOTES PAYABLE

 

Notes payable consist of the following:

 

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

December 2017 ($50,000) -15% interest due in December 2020 including issuance of 100,000 shares of common stock with exercise price at $0.25 per share.

  $-   $    -   $-   $40,736   $(14,474)  $26,262 

October 2018 ($60,000) - $561 daily principal and interest until paid in full

   -    -    -    42,424    -    42,424 

October 2018 ($72,800) - $11,527 monthly principal and interest for first six months, $9,975 monthly principal and interest last six months

   67,159            -    67,159    67,159    -    67,159 
                               
Total notes payable   67,159    -    67,159    150,319    (14,474)   135,845 
                               
Less: non-current portion   -    -    -    (24,994)   6,925    (18,069)
                               
Notes payable, current portion  $67,159   $-   $67,159   $125,325   $(7,549)  $117,776 

 

December 2017 - $50,000

 

On December 1, 2017, the Company provided an agreement to a third party to obtain a $50,000 promissory note in exchange for $50,000 in cash. The promissory note had a maturity date of December 1, 2020 and bears interest at 15% per annum. The note required total payments of $1,733 per month. The Company recorded a debt discount of $22,650 related to the value of the issued shares associated with the process of obtaining the note to be amortized over the life of the note. In January 2019, the note was settled with no additional payment and $43,930 was recognized as a gain on settlement. Total interest expense was $0 and $1,706 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $3,539 for the six months ended June 30, 2019 and 2018, respectively.

 

October 2018 - $60,000

 

On October 11, 2018, the Company provided an agreement to a third party to obtain a $60,000 promissory note in exchange for $59,105 in cash ($895 in processing fee was deducted from cash). The promissory note had a maturity date of May 5, 2019 and bears interest at 55% per annum. The note required total payments of $561.43 each business day. The note was settled on January 16, 2019 for $30,806, and a gain on settlement was recorded for $10,834. Total interest expense was $0 and $0 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $0 for the six months ended June 30, 2019 and 2018, respectively.

 

October 2018 - $72,800

 

On October 4, 2018, the Company provided an agreement to a third party to obtain a $72,800 promissory note in exchange for $72,800 in cash. The promissory note had a maturity date of October 4, 2019 and bears interest at 51% per annum. The note required total payments of $11,526.67 per month for the first six months and $6,794.67 per month for the last six months. Total interest expense was $8,536 and $0 for the three months ended June 30, 2019 and 2018, respectively, and $17,126 and $0 for the six months ended June 30, 2019 and 2018, respectively.

 

 18 
 

 

NOTE 6 – NOTES PAYABLE TO RELATED PARTIES

 

Notes payable to related parties consist of the following:

 

Terms  June 30,
2019
   December 31,
2018
 
         
August 2018 ($1,365,000) – Replaced August 2018 note ($1,365,000) that replaced November 2017 note ($765,000 balance at August 1, 2018), February 2018 note ($100,000) and March 2018 note ($500,000). Includes $635,000 penalty on default of August 2018 ($1,365,000) note and $20,000 for missed payment on August 2018 note. Interest only monthly payment of $50,500 for life of note. Entire principal due December 1, 2023.  $2,020,000   $2,020,000 
December 2018 ($6,000) – No interest with principal due on December 17, 2019.   6,000    6,000 
December 2018 ($23,000) – No interest with principal due on December 13, 2019.   23,000    23,000 
January 2019 ($32,700) – No interest with principal due on January 3, 2020.   32,700    - 
January 2019 ($40,000) – No interest with principal due on January 11, 2020.   40,000    - 
January 2019 ($14,500) – No interest with principal due on January 15, 2020.   14,500    - 
February 2019 ($15,000) – No interest with principal due on February 1, 2020.   15,000    - 
February 2019 ($5,000) – No interest with principal due on February 19, 2020.   5,000    - 
March 2019 ($10,000) – No interest with principal due on March 4, 2020.   10,000    - 
May 2019 ($20,000) – No interest with principal due on May 1, 2020   20,000    - 
June 2019 ($89,000) – No interest with principal due on June 3, 2020   89,000    - 
           
Total notes payable to related parties   2,275,200    2,049,000 
           
Less: non-current portion   (2,246,200)   (2,020,000)
           
Notes payable to related parties, current portion  $29,000   $29,000 

 

December 2018 - $2,222,000

 

On December 1, 2018, the Company entered into an agreement with a related third party to replace the August 2018 note of $1,365,000 with a new note for $2,020,000. The new note also includes a default penalty of $635,000 on the August 2018 note and $20,000 for a missed payment on the August 2018 note. The note calls for interest only payments of $50,500 per month for the life of the note. The entire principal is due on December 1, 2023. Accrued interest payments totaling $202,000 were not made by the Company. Per the note agreement, this amount was added to the principal, thus increasing the principal amount to $2,222,000.

 

Total interest expense was $303,000 and $0 for the six months ended June 30, 2019 and 2018, respectively. Total interest expense was $151,500 and $0 for the three months ended June 30, 2019 and 2018, respectively.

 

December 2018 - $6,000

 

On December 17, 2018, the Company entered into an agreement with a related party, Doheny Group, to obtain a $6,000 loan. The note bears no interest and is due in full on December 17, 2019.

 

December 2018 - $23,000

 

On December 31, 2018, the Company entered into an agreement with a related party, Doheny Group, to obtain a $23,000 loan. The note bears no interest and is due in full on December 31, 2019.

 

January 2019 - $32,700

 

On January 3, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $32,700 loan. The note bears no interest and is due in full on January 3, 2020.

 

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January 2019 - $40,000

 

On January 11, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $40,000 loan. The note bears no interest and is due in full on January 11, 2020.

 

January 2019 - $14,500

 

On January 15, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $14,500 loan. The note bears no interest and is due in full on January 15, 2020.

 

February 2019 - $15,000

 

On February 1, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $15,000 loan. The note bears no interest and is due in full on February 1, 2020.

 

February 2019 - $5,000

 

On February 19, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $5,000 loan. The note bears no interest and is due in full on February 19, 2020.

 

March 2019 - $10,000

 

On March 4, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $10,000 loan. The note bears no interest and is due in full on March 4, 2020.

 

May 2019 - $20,000

 

On May 1, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $20,000 loan. The note bears no interest and is due in full on May 1, 2020.

 

June 2019 - $89,000

 

On June 3, 2019, the Company entered into an agreement with a related party, Doheny Group, to obtain a $89,000 loan. The note bears no interest and is due in full on June 3, 2020.

 

NOTE 7 – CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable consists of the following:

 

   As of June 30, 2019   As of December 31, 2018 
Terms  Amount   Discount   Net
Balance
   Amount   Discount   Net
Balance
 
                         
August 2015 ($15,000) - 7.5% interest bearing convertible debenture due on August 7, 2017 with interest only payments and due upon maturity.   7,500    -    7,500    7,500    -    7,500 
March 2018 ($20,000) – 10% interest bearing convertible debenture due on March 9, 2021, with interest paid in cash for the first six months, and either in cash or shares of common stock thereafter. Principal is due March 9, 2021, paid either in cash or common stock, at the Company’s discretion   20,000    (8,965)   11,035    20,000    (11,527)   8,473 
                               
Total convertible notes payable   27,500    (8,965)   18,535    27,500    (11,527)   15,973 
                               
Less: non-current portion   (20,000)   3,841    (16,159)   (20,000)   6,403    (13,597)
                               
Convertible notes payable, current portion  $7,500   $(5,124)  $2,376   $7,500   $(5,124)  $2,376 

 

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August 2015 - $15,000

 

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

 

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

 

Total interest expense was $141 and $141 for the three months ended June 30, 2019 and 2018, respectively, and $282 and $282 for the six months ended June 30, 2019.

 

March 2018 - $20,000

 

On March 9, 2018, the Company entered into an agreement with a non-affiliated shareholder and issued a 10% interest bearing convertible debenture for $20,000 due on March 9, 2021. Payments of interest is in cash for the first six months, thereafter, interest may be paid either in cash or common stock of the Company. The loan is convertible at 61% of the average of the closing prices for the common stock during the five trading days prior to the conversion date but may not be converted if such conversion would cause the holder to own more than 4.9% of outstanding common stock after giving effect to the conversion. In connection with this Convertible Note Payable, the Company recorded a $20,000 discount on debt (the total discount was $47,768, of which $27,768 was expensed), related to the beneficial conversion feature of the note to be amortized over the life of the note or until the note is converted or repaid. This note was bifurcated with the embedded conversion option recorded as a derivative liability at fair value. During the six months ended June 30, 2019, this note has not been converted.

 

Total interest expense was $500 and $313 for the three months ended June 30, 2019 and 2018, respectively, and $1,000 and $626 for the six months ended June 30, 2019 and 2018, respectively.

 

NOTE 8 – DERIVATIVE LIABILITIES

 

Derivative liabilities consisted of the following:

 

   June 30, 2019   December 31, 2018 
         
August 2015 - $15,000 convertible debt  $6,359   $6,523 
March 2018 - $20,000 convertible debt   23,549    15,994 
           
Total derivative liabilities  $29,907   $22,517 

 

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

 

August 2015 Convertible Debt - $15,000

 

In August 2015, the Company entered into a $15,000 convertible note with variable conversion pricing. The following inputs were used within the Black Sholes Model to determine the initial relative fair values of the $15,000 convertible note with expected term of 1.58 years, expected dividend rate of 0%, volatility of 100% and risk-free interest rate 0.61%.

 

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March 2018 Convertible Debt - $20,000

 

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

 

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

 

   December 31, 2018   Additions   Changes   June 30, 2019 
                 
August 2015 - $15,000 convertible debt  $6,523   $        -   $(165)  $6,358 
                     
March 2018 - $20,000 convertible debt   15,994    -    7,555    23,549 
                     
Total  $22,517   $-   $7,390   $29,907 

 

NOTE 9 – ACCRUED ROYALTY PAYABLE

 

The Company has estimated the royalties to be paid out in perpetuity under royalty agreements. The Company entered into royalty agreement as follows:

 

  November 2017 Royalty Agreement – The Company entered into a royalty agreement with a related party on November 1, 2017 in relation to a note payable of $900,000. This note replaced the September and November 2016 Royalty Agreements. Under the royalty agreement, the Company is required to pay a royalty fee of from $1.50 to $3.00 per month for every ignition interlock devise that the Company has on the road in customers’ vehicles, the amount depending on how many devices are installed.
     
  August 2018 Royalty Agreement – the Company entered into a royalty agreement with a related party on August 1, 2018 in relation to a note payable of $1,365,000. This note replaced the November 2017 Royalty Agreement as well as other, non-royalty notes payable. Under the royalty agreement, the Company is required to pay $1.50 and accrue an additional $3.50 for every ignition interlock devise for the first nine months of the note payable. After the first nine months, the Company is required to pay $1.50 per devise and the amount accrued during the first nine months will be paid monthly through the next twelve months. After the note payable is paid in full, the Company is required to pay $3.00 per devise in perpetuity.
     
  December 2018 royalty Agreement – the Company entered into a royalty agreement with a related party on December 1, 2018 in relation to a note payable of $2,020,000. This note replaced the August 2018 Royalty Agreement. Under the royalty agreement, the Company is required to pay a royalty fee of $5.00 per month for every ignition interlock device that the Company has on the road in customers’ vehicles.

 

Based on the royalty agreement, the Company had the following royalty accruals:

 

   June 30, 2019   December 31, 2018 
November 2017 royalty agreement  $3,327   $3,327 
August 2018 royalty agreement   18,058    18,058 
December 2018 royalty agreement   35,250    5,500 
           
Total accrued royalties  $56,635   $26,885 

 

Royalty expense was $13,251 and $47,416 for the three months ended June 30, 2019 and 2018, respectively, and $29,751 and $89,945 for the six months ended June 30, 2019 and 2018, respectively.

 

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NOTE 10 – STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

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

 

Series A Preferred Stock

 

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

 

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

 

Common Stock

 

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

 

During the three and six months ended June 30, 2019, the Company issued no additional shares and 250,000 additional shares of its common stock for services valued at $24,500, respectively. The total number of shares issued or issuable as of June 30, 2019 was 30,659,244.

 

NOTE 12 – INCOME (LOSS) PER SHARE

 

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

 

The following shares are not included in the computation of diluted income (loss) per share, because their inclusion would be anti-dilutive:

 

   Six Months Ended June 30,   Three Months Ended June 30, 
   2019   2018   2019   2018 
Preferred shares   -    -    -      
Convertible notes   434,058    58,299    434,058    58,299 
Warrants   6,537,586    5,597,586    6,537,586    5,597,586 
Options   -    -    -    - 
Total anti-dilutive weighted average shares   6,971,644    5,655,885    6,971,644    5,655,885 

 

If all dilutive securities had been exercised at June 30, 2019, the total number of common shares outstanding would be as follows:

 

Common Shares   30,566,920 
Preferred Shares   - 
Convertible notes   434,058 
Warrants   6,537,586 
Options   - 
Total potential shares   37,538,564 

 

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NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

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

 

On August 28, 2017, the Company entered into a one-year lease with B3 Investments, LLC for a storefront location at Suites D104 and D105, 2406 24th Street, South Phoenix, Arizona. Base rent under the lease is $1,350 per month plus 2% ($27) rental tax. The rental agreement includes operating expenses such as common area maintenance, property taxes and insurance.

 

Total rent expense was $21,672 and $16,053 for the three months ended June 30, 2019 and 2018, respectively, and $32,902 and $30,691 for the six months ended June 30, 2019 and 2018, respectively.

 

Legal Proceedings

 

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

 

NOTE 14 – RELATED PARTY TRANSACTIONS

 

The Company had the following related party transactions:

 

  Notes payable of $2,275,200 to the Doheny Group at June 30, 2019 (refer to notes payable related party section)
     
  2,669,761 shares of common stock, of which 1,863,152 were granted to the Doheny Group in relation to notes payable.

 

NOTE 15 – SUBSEQUENT EVENTS

 

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

 

On July 10, 2019, the Company entered into a loan agreement with The Doheny Group for $13,000. The loan has no interest (0%), no monthly payments, and a balloon payment of $13,000 on July 10, 2020.

 

On July 18, 2019, the Company entered into a loan agreement with The Doheny Group for $8,000. The loan has no interest (0%), no monthly payments, and a balloon payment of $8,000 on July 18, 2020.

 

On July 26, 2019, the Company entered into a loan agreement with The Doheny Group for $25,000. The loan has no interest (0%), no monthly payments, and a balloon payment of $25,000 on July 26, 2020.

 

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

 

Disclaimer Regarding Forward Looking Statements

 

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

 

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

 

Overview

 

We are a previous development stage company that was incorporated in the State of Delaware in July 2013. In the year ending December 31, 2018, we generated total revenues of $942,160, compared to $1,235,433 in the year ending December 31, 2017. For the three months ended June 30, 2019 and 2018, we had total revenues of $399,924 and $482,495, respectively, and a net loss of $407,850 and $824,551, respectively.

 

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

 

We paid Well Electric, a company located in China with experience in design and manufacture of ignition interlock devices, $30,000 to design and manufacture the prototype ignition interlock device for us. Well Electric produced six prototype devices for us which we received in November 2014.

 

At July 27, 2015 we began production of our patent pending BDI Model #1 power line filter to attach to our BDI-747 Breath Alcohol Ignition Interlock Device which together were certified by NHSTA on June 17, 2015 to work to together to meet or exceed 2013 NHSTA guidelines.

 

As of December 31, 2017, the BDI-747/1 was approved for use in five states, namely Oregon, Texas, Arizona, Kentucky, and Tennessee. As of December 31, 2018, the BDI-747/1 device was approved in Oregon, Texas, Arizona, and Kentucky. As of June 30, 2019, the BDI-747/1 device was only approved in Arizona and Texas. The states where our BDI-747/1 device is approved has decreased primarily as a result of new state certification rules that require increased capital investment that we are not able to afford.

 

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We have a storefront location in Phoenix, Arizona and contract with four qualified contractors to install, calibrate, remove and monitor the devices. Our business plan includes growth of the company by continuing to complete and submit more state applications and to build up our service infrastructure by utilizing our own retail infrastructure, distributors and franchisees.

 

As of December 31, 2017, we had approximately 1,558 units on the road, with approximately 1,451 devices being leased directly from us and approximately 107 devices leased through our distributors. As of December 31, 2018, we had approximately 1,100 units on the road, with approximately 885 devices being leased directly from us and approximately 215 devices leased through our distributors. The decrease in the total number of devices we have on the road is primarily due to the fact the BDI-747/1 devices was approved in fewer states in 2018 compared to 2017. As of June 30, 2019, we had approximately 895 units on the road, with approximately 717 devices being leased directly from us and approximately 178 devices leased through our distributors.

 

Due to the decrease in the number of states where our BDI-747/1 device is approved, and the resulting decrease in the number of devices we have on the road, our management is currently exploring all options related to our business, including, but not limited to: (i) taking out loans or selling our stock in order to raise money to continue, and try to expand, our current business; (ii) trying to acquire a synergistic business and grow our current business; or (iii) selling our current business and trying to find another business to, in or out of our current business segment, to take over the public corporation.

 

Our website is www.blowanddrive.com.

 

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Results of Operations

 

Three Months Ended June 30, 2019 (Unaudited) Compared to Three Months Ended June 30, 2018 (Unaudited)

 

   Three Months Ended         
   June 30, 2019   June 30, 2018   Changes 
   Amount   % of
Revenue
   Amount   % of
Revenue
   Amount   % 
                         
Revenues:                              
Monitoring revenues  $149,556    88.7%  $264,744    94.3%  $(115,188)   -43.5%
Distributorship revenues   18,990    11.3%   16,095    5.7%   2,895    18.0%
Total revenues   168,546    100.0%   280,839    100.0%   (112,293)   -40.0%
                               
Cost of revenues:                              
Monitoring cost of revenue   3,598    2.1%   29,068    10.4%   (25,470)   -87.6%
Distributorship cost of revenue   -    0.0%   -    0.0%   -    n/a 
Total cost of revenues   3,598    2.1%   29,068    10.4%   (25,470)   -87.6%
                               
Gross profit   164,948    97.9%   251,771    89.6%   (86,823)   -34.5%
                               
Operating expenses:                              
Payroll   112,678    66.9%   229,737    81.8%   (117,059)   -51.0%
Professional fees   105,751    62.7%   50,963    18.1%   54,788    107.5%
General and administrative   71,418    42.4%   219,539    78.2%   (148,121)   -67.5%
Total operating expenses   289,847    172.0%   500,239    178.1%   (210,392)   -42.1%
                               
Loss from operations   (124,899)   -74.1%   (248,468)   -88.5%   123,569    -49.7%
                               
Other Income (Expense):                              
Interest expense, net   (161,984)   -96.1%   (108,237)   -38.5%   (53,747)   49.7%
Change in fair value of derivative liability   (5,558)   -3.3%   11,579    4.1%   (17,137)   -148.0%
Gain (loss) on extinguishment of debt   -    0.0%   -    0.0%   -    n/a 
Total other income (expense)   (167,542)   -99.4%   (96,658)   -34.4%   (70,884)   73.3%
                               
Loss before provision for income taxes   (292,441)   -173.5%   (345,126)   -122.9%   52,685    -15.3%
                               
Provision for income taxes   -    0.0%   800    0.3%   (800)   n/a 
                               
Net loss  $(292,441)   -173.5%  $(345,926)   -123.2%  $53,485    -15.5%

 

Operating Loss; Net Loss

 

Our net loss decreased by $53,485, from ($345,926) for the three months ended June 30, 2018 to ($292,441) for the three months ended June 30, 2019. Our operating loss decreased by $123,569, from ($248,468) to ($124,899) for the same periods. The decrease in our net loss for the three months ended June 30, 2019, compared to the three months ended June 30, 2018, is primarily the result of lower cost of revenues, lower general and administrative expenses, lower payroll, partially offset by decreased revenues and increases professional fees and interest expense, net. These changes are detailed below.

 

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Revenue

 

Monitoring Revenues. Monitoring revenues decreased by $115,188, or 43.5%, to $149,556 in the second quarter of fiscal 2019 from $264,744 in the second quarter last year. The decrease is due to a decrease in the number of monthly recurring payments we received from our customers that rent our BDI-747/1 breathalyzer device for the ongoing monitoring services related to the devices in the second quarter of fiscal 2019 compared to second quarter of last year. This decrease is primarily related to the fact our device is authorized in less states than it was during the same period in fiscal year 2018.

 

Distributorship Revenues. Distributorship revenues increased by $2,895, or 18.0%, to $18,990 in the second quarter of fiscal 2019 from $16,095 in the second quarter last year. The increase is due to an increase in number of units with customers through distributors.

 

Cost of Revenue

 

Our cost of revenue for the three months ended June 30, 2019 was $3,598, compared to $29,068 for the three months ended June 30, 2018. Our cost of revenue for the three months ended June 30, 2019 and June 30, 2018, was completely related to our monthly monitoring services we provide to our customers. The decrease in our cost of revenue was due to the fact we ordered more parts and supplies from our supplier in the period in 2018 compared to the period in 2019.

 

Payroll

 

Payroll expense decreased by $117,059, or 51.0%, to $112,678 in the second quarter of fiscal 2019 from $229,737 in the second quarter last year. The decrease in payroll is due to controlling overhead expenses and decreasing personnel in the second quarter of fiscal 2019 compared to second quarter of last year. Our decrease in personnel is related to us having less units on the road.

 

Professional Fees

 

Professional fees increased by $54,788, or 107.5%, to $105,751 in the second quarter of fiscal 2019 from $50,963 in the second quarter last year. These fees are largely related to fees paid for legal, accounting and audit services. We expect these fees to continue grow steadily if our business expands. In the event we undertake an unusual transaction, such as an acquisition, securities offering, or file a registration statement, we would expect these fees to substantially increase during that period.

 

General and Administrative Expenses

 

General and administrative expenses decreased by $148,121, or 67.5%, to $71,418 in the second quarter of fiscal 2019 from $219,539 in the second quarter last year. The decrease is due to the following:

 

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

 

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Interest Expense

 

Interest expense increased by $53,747, or 49.7%, to $161,984 in the second quarter of fiscal 2019 from $108,237 in the second quarter last year. The increase is due to increase in loans from related parties.

 

Change in Fair Value of Derivative Liability

 

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

 

Six Months Ended June 30, 2019 (Unaudited) Compared to Six Months Ended June 30, 2018 (Unaudited)

 

   Six Months Ended         
   June 30, 2019   June 30, 2018   Changes 
   Amount   % of
Revenue
   Amount   % of
Revenue
   Amount   % 
                         
Revenues:                              
Monitoring revenues  $363,243    90.8%  $443,231    91.9%  $(79,988)   -18.0%
Distributorship revenues   36,681    9.2%   39,265    8.1%   (2,584)   -6.6%
Total revenues   399,924    100.0%   482,496    100.0%   (82,572)   -17.1%
                               
Cost of revenues:                              
Monitoring cost of revenue   25,233    6.3%   76,681    15.9%   (51,448)   -67.1%
Distributorship cost of revenue   -    0.0%   -    0.0%   -    n/a 
Total cost of revenues   25,233    6.3%   76,681    15.9%   (51,448)   -67.1%
                               
Gross profit   374,691    93.7%   405,815    84.1%   (31,124)   -7.7%
                               
Operating expenses:                              
Payroll   210,718    52.7%   466,149    96.6%   (255,431)   -54.8%
Professional fees   147,297    36.8%   88,055    18.2%   59,242    67.3%
General and administrative   131,492    32.9%   469,095    97.2%   (337,603)   -72.0%
Total operating expenses   489,507    122.4%   1,023,299    212.1%   (533,792)   -52.2%
                               
Loss from operations   (114,816)   -28.7%   (617,484)   -128.0%   502,668    -81.4%
                               
Other Income (Expense):                              
Interest expense, net   (338,808)   -84.7%   (210,558)   -43.6%   (128,250)   60.9%
Change in fair value of derivative liability   (7,390)   -1.8%   4,293    0.9%   (11,683)   -272.1%
Gain (loss) on extinguishment of debt   54,764    13.7%   -    0.0%   54,764    n/a 
Total other income (expense)   (291,434)   -72.9%   (206,265)   -42.7%   (85,169)   41.3%
                               
Loss before provision for income taxes   (406,250)   -101.6%   (823,749)   -170.7%   417,499    -50.7%
                               
Provision for income taxes   1,600    0.4%   800    0.2%   800    n/a 
                               
Net loss  $(407,850)   -102.0%  $(824,549)   -170.9%  $416,699    -50.5%

 

 29 
 

 

Operating Loss; Net Loss

 

Our net loss decreased by $416,699, from ($824,549) for the six months ended June 30, 2018 to ($407,850) for the six months ended June 30, 2019. Our operating loss decreased by $502,668, from ($617,484) to ($114,816) for the same periods. The decrease in our net loss for the six months ended June 30, 2019, compared to the six months ended June 30, 2018, is primarily the result of lower cost of revenues, lower general and administrative expenses, lower payroll, partially offset by decreased revenues and increases professional fees and interest expense, net. These changes are detailed below.

 

Revenue

 

Monitoring Revenues. Monitoring revenues decreased by $79,988, or 18.0%, to $363,243 in the six months ended June 30, 2019 from $443,231 in the six months ended June 30, 2018. The decrease is due to decrease in number of monthly recurring payments we received from our customers that rent our BDI-747/1 breathalyzer device for the ongoing monitoring services related to the devices in the first six months of fiscal 2019 compared to first six months of last year. This decrease is primarily related to the fact our device is authorized in less states than it was during the same period in fiscal year 2018.

 

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

 

Cost of Revenue

 

Our cost of revenue for the six months ended June 30, 2019 was $25,233, compared to $76,681 for the six months ended June 30, 2018. Our cost of revenue for the six months ended June 30, 2019 and 2018 was completely related to our monthly monitoring services we provide to our customers. The decrease in our cost of revenue was due to the fact we ordered more parts and supplies from our supplier in the period in 2018 compared to the period in 2019.

 

Payroll

 

Payroll expense decreased by $255,431, or 54.8%, to $210,718 in the first six months of fiscal 2019 from $466,149 in the first six months of last year. The decrease in payroll is due to controlling overhead expenses and decreasing personnel due to the decrease in the number of units we have on the road.

 

Professional Fees

 

Professional fees increased by $59,242, or 67.3%, to $147,297 in the first six months of fiscal 2019 from $88,055 in the first six months of last year. These fees are largely related to fees paid for legal, accounting and audit services. We expect these fees to continue grow steadily if our business expands. In the event we undertake an unusual transaction, such as an acquisition, securities offering, or file a registration statement, we would expect these fees to substantially increase during that period.

 

 30 
 

 

General and Administrative Expenses

 

General and administrative expenses decreased by $337,603, or 72.0%, to $131,492 in the first six months of fiscal 2019 from $469,095 in the first six months of last year. The decrease is due to the following:

 

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

 

Interest Expense

 

Interest expense increased by $128,250, or 60.9%, to $338,808 in the first six months of fiscal 2019 from $210,558 in the first six months of last year. The increase is due to increase in loans from related parties.

 

Change in Fair Value of Derivative Liability

 

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

 

Gain on Extinguishment of Debt

 

Gain on extinguishment of debt of $54,764 resulted from forgiveness and settlement of debt in the first quarter of fiscal 2019.

 

 31 
 

 

Liquidity and Capital Resources for the Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

 

Introduction

 

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

 

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

 

   June 30, 2019   December 31, 2018   Change 
             
Cash  $12,426   $775   $11,651 
Total current assets  $25,409   $7,146   $18,263 
Total assets  $31,890   $13,627   $18,263 
Total current liabilities  $755,397   $564,477   $190,920 
Total liabilities  $3,017,756   $2,616,143   $401,613 

 

Our current assets increased as of June 30, 2019 as compared to December 31, 2018, primarily due to us having more cash on hand and accounts receivable at June 30, 2019. The increase in our total assets between the two periods was also primarily related to us having more cash on hand and accounts receivable at June 30, 2019.

 

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

 

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

 

Sources and Uses of Cash

 

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

 

Operations

 

We had net cash used in operating activities of $182,960 for the six months ended June 30, 2019, as compared to $620,304 for the six months ended June 30, 2018. For the period in 2019, the net cash used in operating activities consisted primarily of our net income (loss) of ($407,850), adjusted primarily by a non-cash change in fair value of derivative liability of $7,390, shares issued for services of $24,500, gain on extinguishment of debt of ($54,764), and amortization of debt discount of $17,035, as well as changes in, accrued expenses of ($39,254), accounts receivable ($6,430), prepaid expenses of ($182), deferred revenue of ($74,980), accrued royalties payable of $29,750, accrued interest, related party of $151,500, and accrued interest of $170,325. For the period in 2018, the net cash used in operating activities consisted primarily of our net income (loss) of ($824,549), increase in derivative liabilities of ($15,370), an allowance for doubtful accounts of ($26,541), adjusted primarily by a non-cash change in fair value of derivative liability of $11,078, shares issued for services of $110,200, and amortization of debt discount of $24,536, as well as changes in, accrued expenses of $8,795, accounts receivable of $55,457, prepaid expenses of $1,506, accounts payable of ($29,250), deferred revenue of ($56,676), accrued royalties payable of $60,866, and accrued interest of $54,561.

 

 32 
 

 

Investments

 

We did not have any cash provided by/used in investing activities in the six months ended June 30, 2019 or June 30, 2018.

 

Financing

 

We had net cash provided by financing activities for the six months ended June 30, 2019 of $194,611, compared to $869,794 for the six months ended June 30, 2018. For the six months ended June 30, 2019, our net cash from financing activities consisted of proceeds from related party notes payable of $226,200, partially offset by repayments of notes payable of $31,589. For the six months ended June 30, 2018, our net cash from financing activities consisted of proceeds from convertible notes payable of $20,000, proceeds from related party notes payable of $600,127, proceeds of notes payable of $21,600, and proceeds from issuance of common stock of $360,705, partially offset by repayments of notes payable of $31,588, repayments of convertible notes payable of $5,000, and repayments of related party notes payable of $96,050.

 

Critical Accounting Estimates

 

As discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 30, 2018, we consider our estimates on inventory valuation, long-lived assets and self-insurance liabilities to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements. There have been no significant changes to these estimates in the six months ended June 30, 2019.

 

Our adoption of ASC 606, Revenue Recognition, did not change the way the Company recognized revenue for the first six months of fiscal year 2019 compared to same period last year.

 

Recently Issued Accounting Updates

 

See Note 2 to the Interim Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

 

Off Balance Sheet Arrangements

 

We have no off balance sheet arrangements.

 

Commitments and Contingent Liabilities

 

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

 

 33 
 

 

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk

 

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

 

ITEM 4 Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

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

 

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

 

Changes in Internal Control over Financial Reporting

 

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

 

Internal Control over Financial Reporting

 

We are responsible for establishing and maintaining adequate internal control over financial reporting in accordance with Rule 13a-15 of the Securities Exchange Act of 1934. Our president conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2019, based on the criteria establish in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was ineffective as of June 30, 2019, based on those criteria. A control system can provide only reasonably, not absolute, assurance that the objectives of the control system are met and no evaluation of controls can provide absolute assurance that all control issues have been detected.

 

 34 
 

 

Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2019 and identified the following material weaknesses, which are outlined further in our Annual Report on Form 10-K for the year ended December 31, 2018:

 

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

 

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

 

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

 

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

 

PART II – OTHER INFORMATION

 

ITEM 1 Legal Proceedings

 

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

 

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

 

 35 
 

 

ITEM 1A Risk Factors

 

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

 

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

 

During the three months ended June 30, 2019, we did not issue any unregistered securities.

 

ITEM 3 Defaults Upon Senior Securities

 

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

 

ITEM 4 Mine Safety Disclosures

 

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

 

ITEM 5 Other Information

 

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

 

 36 
 

 

ITEM 6 Exhibits

 

Item No.   Description
     
3.1 (1)   Certificate of Incorporation of Jam Run Acquisition Corporation dated June 28, 2013
     
3.2 (17)   Articles of Amendment to Articles of Incorporation to Jam Run Acquisition Corporation dated February 6, 2014 (changing corporate name to Blow & Drive Interlock Corporation)
     
3.3 (1)   Bylaws of Jam Run Acquisition Corporation (now Blow & Drive Interlock Corporation) dated June 2013
     
10.1 (2)   Agreement between Tiber Creek Corporation and Laurence Wainer dated January 25, 2014
     
10.2 (2)   Promissory Note between the Company and Laurence Wainer dated February 16, 2014
     
10.3 (3)   Lease Agreement by and between Marsel Plaza LLC and Laurence Wainer and Blow and Drive Interlock Corporation dated January 21, 2015
     
10.4 (4)   Exclusive Distributorship Agreement with Theenk Inc. dated August 21, 2015
     
10.5 (4)   Exclusive Distributorship Agreement with Jay Lopez dated July 24, 2015
     
10.6 (4)   Independent Contractor Agreement with Laurence Wainer dated September 11, 2015
     
10.7 (5)   Exclusive Distributorship Agreement with Stephen Ferraro dated November 9, 2015
     
10.4 (6)   Supply Agreement by and between BDI Manufacturing, Inc., an Arizona corporation, and C4 Development Ltd. dated June 29, 2015
     
10.5 (7)   Securities Purchase Agreement with David Stuart Petlak entered into on November 19, 2015
     
10.6 (7)   Convertible Promissory Note issued to David Stuart Petlak dated November 19, 2015
     
10.7 (7)   Common Stock Warrant issued to David Stuart Petlak dated November 19, 2015
     
10.8 (8)   Exclusive Distributorship Agreement with dba Blow & Drive Houston dated January 11, 2016
     
10.9 (9)   Secured Promissory Note and Agreement with Ira Silver dated January 20, 2016
     
10.10 (9)   Secured Promissory Note and Agreement with Chaim K. Wainer dated October 29, 2015
     
10.11 (10)   Securities Purchase Agreement with Dr. Oren Azulay dated March 30, 2016
     
10.12 (10)   Common Stock Purchase Agreement with Gustavo Arceo dated April 2016
     
10.13 (10)   Common Stock Purchase Agreement with LGL LLC dated May 6, 2016
     
10.14 (11)   Loan and Security Agreement with Doheny Group, LLC dated June 30, 2019 September 30, 2016
     
10.15 (11)   Phase 1 Loan Agreement with Doheny Group, LLC dated September 30, 2016 June 30, 2019
     
10.16 (11)   Royalty Agreement with Doheny Group, LLC dated September 30, 2016 June 30, 2019
     
10.17 (11)   Common Stock Purchase Agreement with Doheny Group, LLC dated September 30, 2016 June 30, 2019

 

 37 
 

 

10.18 (11)   Agreement with Abraham Summers and Gnossis International, LLC
     
10.19 (12)   Termination of Services Agreement by and between Blow & Drive Interlock Corporation, Abraham Summers and Gnosiis International, LLC dated June 19, 2017
     
10.20 (13)   Amendment No. 1 to Debt Conversion and Series A Preferred Stock Purchase Agreement dated May 17, 2017
     
10.21 (13)   Amendment No. 1 to Loan and Security Agreement with Doheny Group, LLC dated June 3, 2017
     
10.22 (13)   Amendment No. 1 to Royalty Agreement with Doheny Group, LLC dated June 3, 2017
     
10.23 (14)   Form of Securities Purchase Agreement
     
10.24 (14)   Settlement Agreement by and between Blow & Drive Interlock Corporation and J C Lopez/BDI Interlock, LLC dated January 21, 2018 (memorializing oral agreement between the parties dated June 30, 2019)
     
10.25 (15)   Agreement to Purchase Common Stock and Preferred Stock dated December 31, 2018
     
10.26 (16)   Debt Conversion and Series A Preferred Stock Purchase Agreement by and between Blow & Drive Interlock Corporation and Laurence Wainer dated March 7, 2017
     
31.1   Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith).
     
31.2   Rule 13a-14(a)/15d-14(a) Certification of Chief Accounting Officer (filed herewith).
     
32.1   Section 1350 Certification of Chief Executive Officer (filed herewith).
     
32.2   Section 1350 Certification of Chief Accounting Officer (filed herewith).
     
101.INS **   XBRL Instance Document
     
101.SCH **   XBRL Taxonomy Extension Schema Document
     
101.CAL **   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF **   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB **   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE **   XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith

 

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

 

  (1) Incorporated by reference from our Registration Statement on Form 10, filed with the Commission on September 30, 2013.
     
  (2) Incorporated by reference from our Registration Statement on Form S-1, filed with the Commission on July 24, 2014.

 

 38 
 

 

  (3) Incorporated by reference from our Annual Report on Form 10-K, filed with the Commission on March 30, 2015.
     
  (4) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on September 11, 2015.
     
  (5) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on November 12, 2015.
     
  (6) Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the Commission on August 13, 2015.
     
  (7) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on September 11, 2015.
     
  (8) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on February 22, 2016.
     
  (9) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on March 17, 2016.
     
  (10) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on August 22, 2016.
     
  (11) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on November 21, 2016.
     
  (12) Incorporated by reference from our Current Report on Form 10-Q filed with the Commission on July 3, 2017.
     
  (13) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on August 21, 2017.
     
  (14) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on February 9, 2018.
     
  (15) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on January 11, 2019.
     
  (16) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on March 15, 2017.
     
  (17) Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on June 27, 2019.

 

 39 
 

 

SIGNATURES

 

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

 

  Blow & Drive Interlock Corporation
     
Dated: August 14, 2019   /s/ David Haridim
  By: David Haridim
    President (Principal Executive Officer)

 

 40 
 

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Notes Payable (Details Narrative)
Notes Payable (Tables)
Notes Payable - Schedule Of Notes Payable (Details)
Notes Payable - Schedule Of Notes Payable (Details) (Parenthetical)
Notes Payable To Related Parties
Notes Payable To Related Parties (Details Narrative)
Notes Payable To Related Parties (Tables)
Notes Payable To Related Parties - Schedule Of Notes Payable Related Parties (Details)
Notes Payable To Related Parties - Schedule Of Notes Payable Related Parties (Details) (Parenthetical)
Organization And Nature Of Business
Organization And Nature Of Business (Details Narrative)
Related Party Transactions
Related Party Transactions (Details Narrative)
Segment Reporting
Segment Reporting (Details Narrative)
Segment Reporting (Tables)
Segment Reporting - Schedule Of Net Sales And Identifiable Operating Income By Segment (Details)
Stockholders' Equity
Stockholders' Equity (Details Narrative)
Subsequent Events
Subsequent Events (Details Narrative)

Material Contracts, Statements, Certifications & more

Blow Drive Interlock Corp provided additional information to their SEC Filing as exhibits

Ticker: BDIC
CIK: 1586495
Form Type: 10-Q Quarterly Report
Accession Number: 0001493152-19-012558
Submitted to the SEC: Wed Aug 14 2019 4:27:01 PM EST
Accepted by the SEC: Wed Aug 14 2019
Period: Sunday, June 30, 2019
Industry: Motor Vehicle Parts And Accessories

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