UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
EXCHANGE ACT OF 1934
For the quarterly period ended:
or
For the transition period from__________ to _________
Commission File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) | (Zip Code) |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days. | Yes ☐ |
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) | Yes ☐ |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a | |
Large accelerated filer | □ |
| Accelerated filer | □ |
Non-accelerated filer | □ |
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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). | |
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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
1
PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The Company’s unaudited interim consolidated financial statements for the three months ended March 31, 2019, form part of this quarterly report. They are stated in United States Dollars (US$), and are prepared in accordance with United States generally accepted accounting principles.
These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included thereto for the year ended December 31, 2018, on Form 10-K, as filed with the Securities and Exchange Commission on June 8, 2023.
2
ENIGMA-BULWARK, LTD.
CONSOLIDATED BALANCE SHEETS
March 31, 2019 |
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ASSETS |
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Investment in securities | $ |
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Property and equipment, net |
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Intangible assets, net |
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Other assets |
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TOTAL ASSETS | $ |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities |
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Accounts payable and accrued expenses | $ |
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Notes and loans payable |
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Notes payable, convertible |
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Notes payable, convertible, related party |
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Related party payables |
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Total current liabilities |
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Long-term liabilities |
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Notes and convertible notes payable, related party, net of unamortized discount |
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Total long-term liabilities |
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Total liabilities |
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Stockholders’ deficit |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid in capital |
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Subscriptions receivable |
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Accumulated deficit |
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Accumulated comprehensive income |
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Total stockholders' deficit |
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ |
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The accompanying notes are an integral part of these quarterly consolidated financial statements.
3
ENIGMA-BULWARK, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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March 31, 2019 |
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General and administrative expenses |
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Operating loss |
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Other expenses |
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Interest expense |
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Discount amortization |
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Total other expenses |
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Net loss |
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Comprehensive loss |
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Unrealized loss on securities |
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Net comprehensive loss |
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Net loss and comprehensive loss | $ | ( | ) | $ | ( | ) |
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Net loss per share - basic and diluted | $ | ( | ) | $ | ( | ) |
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Weighted average common shares outstanding - basic and diluted |
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The accompanying notes are an integral part of these quarterly consolidated financial statements.
4
ENIGMA-BULWARK, LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(UNAUDITED)
| For the three months ended March 31, 2018 |
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Equity Balance, December 31, 2017 |
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Net loss |
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Equity Balance, March 31, 2018 |
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Shares |
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Equity Balance, December 31, 2018 |
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Amortization of restricted stock award |
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Net loss |
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Equity Balance, March 31, 2019 |
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The accompanying notes are an integral part of these quarterly consolidated financial statements.
5
ENIGMA-BULWARK, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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March 31, 2019 |
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Cash flow from operating activities: |
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Net loss and comprehensive loss | $ | ( | ) | $ | ( | ) |
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Net loss |
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Adjustments to reconcile net loss to net cash used by operating activities: |
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Stock compensation/amortization of deferred compensation |
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Accruals converted to related party loans |
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Depreciation and amortization |
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Discount amortization |
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Changes in operating assets and liabilities: |
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Cash - end of period | $ |
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NONCASH ACTIVITIES |
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Conversion of related party payable to related party convertible promissory note | $ |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
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Interest paid | $ |
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Income taxes paid | $ |
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The accompanying notes are an integral part of these quarterly consolidated financial statements.
6
ENIGMA-BULWARK, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019, AND DECEMBER 31, 2018
NOTE 1. OVERVIEW AND NATURE OF BUSINESS
The accompanying unaudited consolidated financial statements of Enigma-Bulwark, Ltd., (the “Company” or “Enigma”) have been prepared in accordance with generally accepted accounting principles. The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and that effect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2018. Notes to the consolidated financial statements that would substantially duplicate the disclosures contained in the audited consolidated financial statements have been omitted.
The Company was incorporated in Nevada on September 30, 2005, and is headquartered in Los Angeles, California. Formerly PearTrack Security Systems, Inc., the Company’s name was changed to Enigma-Bulwark, Ltd., on October 9, 2019, pursuant to a majority of the Company’s shareholders and unanimous resolution of the board of directors.
Enigma-Bulwark, Ltd. (“Enigma” or “Company”) is a security and risk management company that provides physical security, technology-systems integration, and risk management advisory services. Services offered to assess and mitigate risk include security guards, risk management analysis, and proprietary and third-party technology and software. Target markets include corporations, governments and individuals across the globe.
As of March 31, 2019, the Company was structured with three wholly-owned subsidiaries: PearTrack Systems Group, Ltd. (“PTSG”), Ecologic Products, Inc. (“EPI”), and Ecologic Car Rentals, Inc. (“ECR”), all Nevada corporations. The Company’s current business activities are diversified into two specific markets: security and risk management, and remote/mobile asset tracking products.
The Company intends to provide a unique solution to security issues in the intermodal shipping container marketplace, with its patented container tracking and locking system, EnigmaLok (formerly PearLoxx), the rights of which were licensed to the Company in perpetuity in 2015.
Through the subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc., the Company continues its pursuits for strategic opportunities for its shareholders, as management believes that the brands have value for companies with environmentally-friendly consumer-related products and services.
Going Concern
The Company has incurred losses since inception resulting in a current period net loss of $
The consolidated financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue as a going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This summary of significant accounting policies is presented to assist in understanding the Company’s consolidated financial statements. These accounting policies conform to accounting principles, generally accepted in the United States of America, and have been consistently applied in the preparation of the consolidated financial statements.
The Company’s fiscal year end is December 31.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.
7
ENIGMA-BULWARK, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019, AND DECEMBER 31, 2018
Use of Estimates
The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying consolidated financial statements include the estimates related to asset impairments of long-lived assets and investments, classification of expenditures as either an asset or an expense, valuation of deferred tax assets, and the likelihood of loss contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions are revised periodically, and the effects of revisions are reflected in the consolidated financial statements in the period it is determined to be necessary. Actual results could differ from these estimates.
Fair Value Hierarchy
The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following:
Level 1: Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2: Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument.
Level 3: Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions about risk.
The Company’s investment in securities are classified as Level 1 assets, and were valued using the quoted prices in the active market (Note 3).
Fair Value of Financial Instruments
As of March 31, 2019, and December 31, 2018, respectively, the carrying values of Company’s Level 1 financial instruments including cash and cash equivalents, investments in securities, accounts receivable, accounts payable, and short-term debt approximate fair value. The fair value of Level 3 instruments is calculated as the net present value of expected cash flows based on externally provided or obtained inputs. Certain Level 3 instruments may also be based on sales prices of similar assets. The Company’s fair value calculations take into consideration the credit risk of both the Company and its counterparties as of the date of valuation.
Cash and Cash Equivalents
The Company considers cash in banks, deposits in transit, and highly-liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents. As of March 31, 2019, and December 31, 2018, the Company had no cash equivalents.
Investments in Securities
Investments in securities are accounted for using the equity method if the investment provides the Company the ability to exercise significant influence, but not control, over an investee. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee between 20% and 50%, although other factors, such as representation on the investee's board of directors, are considered in determining whether the equity method is appropriate. All other equity investments, which consist of investments for which the Company does not possess the ability to exercise significant influence, are accounted for under the mark to market method. Under the mark to market method of accounting, investments are marked to market, with unrealized gains and losses being excluded from earnings and reflected as a component of other comprehensive income.
Property and Equipment
Property and equipment is carried at the cost of acquisition or construction and depreciated over the estimated useful lives of the assets. Costs associated with repairs and maintenance are expensed as incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of the Company’s property and equipment are capitalized and depreciated over the remaining life of the related asset. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are
Intangible Assets
Product processes, patents and customer lists are amortized on a straight-line basis over their estimated useful lives between
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ENIGMA-BULWARK, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019, AND DECEMBER 31, 2018
Impairment of Long-Lived Assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.
Due to the Company’s recurring losses and lack of revenue from its intellectual properties, its intellectual properties were evaluated for impairment, and it was determined that expected future cash flows were sufficient for recoverability of the assets at March 31, 2019, and December 31, 2018.
Convertible Debt
The Company recognizes the advantageous value of conversion rights attached to convertible debt. Such rights give the debt holder the ability to convert debt into common stock at a price per share that is less than the trading price to the public on the date of the debt. The beneficial value is calculated as the intrinsic value (the market price of the stock at the commitment date in excess of the conversion rate) of the beneficial conversion feature of the debt, and is recorded as a discount to the related debt and an addition to additional paid in capital. The discount is amortized over the remaining outstanding period of related debt using the interest method.
Revenue Recognition
Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured.
As of March 31, 2019, the Company has not commenced its principal operations, generating limited test sales of its security product line in prior years.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.
The Company has net operating loss carryforwards available to reduce future taxable income. Future tax benefits for these net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. To the extent that the Company will not realize a future tax benefit, a valuation allowance is established.
As of March 31, 2019, the Company had not yet filed its 2013 through 2018 annual corporate income tax returns, which were filed in April 2022. Due to the Company’s recurring losses, no corporate income taxes are due for these periods.
Net Income (Loss) Per Common Share
Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods when anti-dilutive, common stock equivalents, if any, are not considered in the computation.
Other Comprehensive Income (Loss)
Other comprehensive income includes unrealized gains and losses on securities available for sale, and unrealized gains and losses resulting from foreign exchange differences. During the three months ended March 31, 2019 and 2018, respectively, other comprehensive losses of $
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Balance, December 31, 2017 | $ |
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Gain (loss) |
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Balance, March 31, 2018 | $ |
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Balance, December 31, 2018 | $ |
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Gain (loss) |
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Balance, March 31, 2019 | $ |
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9
ENIGMA-BULWARK, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019, AND DECEMBER 31, 2018
Stock Based Compensation
The Company records stock-based compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Recent Accounting Pronouncements
The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (“FASB”), the US Securities and Exchange Commission (“SEC”), and the Emerging Issues Task Force (“EITF”), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:
Adopted:
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10: Recognition and Measurement of Financial Assets and Financial Liabilities). The new guidance is intended to improve the recognition, measurement, presentation and disclosure of financial instruments. Among other changes, there will no longer be an available-for-sale classification for which changes in fair value are currently reported in other comprehensive income for equity securities with readily determinable fair values. Equity investments with readily determinable fair values will be measured at fair value with changes in fair value recognized in net income. ASU 2016-01 is effective for the Company beginning January 1, 2018, with early adoption not permitted.
In February 2016, the FASB issued ASU No. 2016-02, Leases. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The ASU is effective for the Company beginning January 1, 2019, with early adoption permitted.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance on eight specific cash flow issues, for which specific guidance had not previously been provided, with the objective of reducing the existing diversity in practice. The amendments in this update are effective for the Company for fiscal years beginning after December 15, 2017, and interim periods. Early adoption is permitted.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory. ASU 2016-16 improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. As part of the Board’s initiative to reduce complexity in accounting standards. The amendments in this update are effective for the Company for annual reporting periods beginning after December 15, 2017, and interim periods. Early adoption is permitted for interim or annual reporting periods for which financial statements have not been issued or made available for issuance.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business. ASU 2017-01 assists entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments in this update are effective for the Company for annual periods beginning after December 15, 2017, and interim periods. Early adoption is permitted under certain conditions.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test, which should reduce the cost and complexity of evaluating goodwill for impairment. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for the Company for annual periods beginning after December 15, 2019, and interim periods. Early adoption is permitted for testing performed after January 1, 2017.
In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. ASU 2017-09 clarifies and reduces both the (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. ASU 2017-09 is effective for the Company for annual periods beginning after December 15, 2017, and interim periods. Early adoption is permitted.
10
ENIGMA-BULWARK, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019, AND DECEMBER 31, 2018
In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). ASU 2017-11 addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. ASU 2017-11 also addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification®. ASU 2017-11 is effective for the Company for annual periods beginning after December 15, 2018, and interim periods. Early adoption is permitted.
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 is effective for the Company for annual periods beginning after December 15, 2018, and interim periods. Early adoption is permitted.
In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements. ASU 2018-11 addresses certain issues in implementing ASU 2016-02, Leases, which was issued to increase transparency ad comparability by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing transaction. ASU 2018-11 clarifies 1) comparative reporting requirements for initial adoption; and 2) for lessors only, separating lease and non-lease components in a contract and allocating the consideration in the contract to the separate components. The amendments in this Update related to separating components of a contract affect the amendments in Update 2016-02, which is effective for the Company for annual periods beginning after December 15, 2018, and interim periods. Early adoption is permitted.
Not Yet Adopted:
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. ASU 2018-13 is effective for the Company for annual periods beginning after December 15, 2019, and interim periods. Early adoption is permitted. The Company is currently evaluating the impact of the application of this accounting standard update on its consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other Internal-Use Software (Subtopic 350-40). ASU 2018-15 was issued to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. ASU 2018-15 is effective for the Company for annual periods beginning after December 15, 2019, and interim periods. Early adoption is permitted. The Company is currently evaluating the impact of the application of this accounting standard update on its consolidated financial statements and related disclosures.
Recently Issued Accounting Standards Updates:
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.
NOTE 3. INVESTMENT IN SECURITIES
As of March 31, 2019, and December 31, 2018, the Company held
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
March 31, 2019 |
| December 31, 2018 |
| |||
Office equipment | $ |
| $ |
| ||
Accumulated depreciation |
| ( | ) |
| ( | ) |
Property and equipment, net | $ |
| $ |
| ||
During the three months ended March 31, 2019 and 2018, respectively, $
11
ENIGMA-BULWARK, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019, AND DECEMBER 31, 2018
NOTE 5. INTANGIBLE ASSETS
Intangible assets consists of the following:
March 31, 2019 |
| December 31, 2018 |
| |||
Intellectual property | $ |
| $ |
| ||
Accumulated amortization |
| ( | ) |
| ( | ) |
Intellectual property, net | $ |
| $ |
| ||
During the three months ended March 31, 2019 and 2018, respectively, $
NOTE 6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of:
March 31, 2019 |
| December 31, 2018 |
| |||
Accounts payable-vendors | $ |
| $ |
| ||
Accrued payroll and taxes |
|
|
|
| ||
Accrued interest |
|
|
|
| ||
Other liabilities |
|
|
|
| ||
|
|
|
|
|
|
|
Total accounts payable and accrued expenses | $ |
| $ |
| ||
NOTE 7. NOTES AND LOANS PAYABLE
Notes and loans payable consists of the following:
March 31, 2019 |
| December 31, 2018 |
| |||
Loans payable | $ |
| $ |
| ||
Notes payable, short term |
|
|
|
| ||
Total notes and loans payable |
|
|
|
| ||
|
|
|
|
|
|
|
Notes payable, short-term, convertible |
|
|
|
| ||
Total | $ |
| $ |
| ||
Notes payable includes the following convertible promissory notes at March 31, 2019, and December 31, 2018:
Description | Principal |
| Interest Rate (%) | Conversion Rate | Maturity Date |
| |
|
|
| |||||
Matrix Advisors, Inc. | $ |
| $ | [1] | |||
|
|
|
|
|
|
|
|
Total convertible notes payable | $ | 500,000 |
|
|
|
|
|
[1] No change in terms of promissory note due to breach. The debt was converted in November 2021.
During the three months ended March 31, 2019, and the year ended December 31, 2018, respectively, interest in the amount of $
NOTE 8. RELATED PARTY TRANSACTIONS
Related party transactions consists of the following:
March 31, 2019 |
| December 31, 2018 |
| |||
|
|
|
|
|
|
|
Notes payable, convertible, short-term | $ |
| $ |
| ||
|
|
|
|
|
|
|
Notes payable, convertible, long-term |
|
|
|
| ||
Total notes payable |
|
|
|
| ||
|
|
|
|
|
|
|
Accrued compensation |
|
|
|
| ||
Reimbursable expenses/cash advances payable |
|
|
|
| ||
Total related party payable |
|
|
|
| ||
|
|
|
|
|
|
|
Total related party transactions | $ |
| $ |
| ||
12
ENIGMA-BULWARK, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019, AND DECEMBER 31, 2018
Related party notes payable consists of the following convertible notes payable at March 31, 2019, and December 31, 2018:
Description | Principal |
| Interest Rate (%) | Conversion Rate | Maturity Date |
| |
|
|
| |||||
Short-term: |
|
|
|
|
|
|
|
Huntington Chase Financial Group | $ |
| $ | [1] | |||
Huntington Chase LLC |
|
| $ |
| |||
William Nesbitt |
|
| $ | [2] | |||
Kasper Group, Ltd. |
|
| $ | [1] | |||
Total short-term |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Long-term: |
|
|
|
|
|
|
|
Huntington Chase Financial Group |
|
| $ |
| |||
E. William Withrow Jr. |
|
| $ |
| |||
John Macey |
|
| $ |
| |||
Total long-term |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Total convertible notes payable | $ |
|
|
|
|
| |
[1] No demand has been made
[2] The requisite funding goals for repayment have not been met.
All outstanding promissory notes to related parties bear interest at a rate of
As of March 31, 2019, and December 31, 2018, respectively, affiliates and related parties are due a total of $
During the three months ended March 31, 2019, and the year ended December 31, 2018, respectively, promissory notes to related parties, net of unamortized discounts, increased (decreased) by $
During the three months ended March 31, 2019, and the year ended December 31, 2018, respectively, $
During the three months ended March 31, 2019, and the year ended December 31, 2018, respectively, $
NOTE 9. CAPITAL STOCK
The total number of authorized shares of common stock that may be issued by the Company is
As of March 31, 2019, and December 31, 2018, the Company had
13
ENIGMA-BULWARK, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019, AND DECEMBER 31, 2018
NOTE 10. STOCK OPTIONS AND AWARDS
Stock Options
As of March 31, 2019 and December 31, 2018, the Company had
Outstanding and Exercisable Options |
|
|
|
|
| ||||||
|
|
|
| Remaining |
| Exercise Price |
|
|
| ||
|
| Number of |
| Contractual Life |
| times Number |
| Weighted Average |
| ||
Exercise Price |
| Shares |
| (in years) |
| of Shares |
| Exercise Price |
| ||
|
|
|
|
|
|
| |||||
$0.10 |
|
|
| $ |
|
| $ |
| |||
$3.20 |
|
|
|
|
|
| $ |
| |||
|
| 602,500 |
|
|
| $ | 378,000 |
|
| $2.34 |
|
Options Activity | Number |
| Weighted Average |
| |
of Shares |
| Exercise Price |
| ||
|
|
|
|
|
|
Outstanding at December 31, 2018 |
|
| $ |
| |
Granted |
|
|
| ||
Exercised |
|
|
| ||
Expired / Cancelled |
|
|
| ||
Outstanding at March 31, 2019 |
|
| $ |
| |
During the three months ended March 31, 2019, and the year ended December 31, 2018, the Company expensed no stock option compensation. There remained no deferred stock option compensation at March 31, 2019 and December 31, 2018.
Restricted Stock Awards
During the three months ended March 31, 2019, and the year ended December 31, 2018, respectively,
Restricted Stock Awards Activity | Number |
| Deferred |
| |
of Shares |
| Compensation |
| ||
Outstanding at December 31, 2018 |
| $ |
| ||
Granted |
|
|
| ||
Vested | ( | ) |
| ( | ) |
Forfeited/Canceled |
|
|
| ||
Outstanding at March 31, 2019 |
| $ |
| ||
NOTE 11. SUBSEQUENT EVENTS
The Company has evaluated the events and transactions for recognition or disclosure subsequent to March 31, 2019, and has determined that there have been no events that would require disclosure, with the exception of the following:
During the period
On
14
ENIGMA-BULWARK, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019, AND DECEMBER 31, 2018
On
On
On
On
On
On
On
On
On
On
On
15
ENIGMA-BULWARK, LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019, AND DECEMBER 31, 2018
On
On
On
On
On
On
Management Changes:
On September 20, 2019, during a meeting of the board of directors, Mr. John D. Macy was not re-elected to the board of directors.
On October 4, 2019, Mr. Clive Oosthuizen, Mr. David M. Rocke and Ms. Calli R. Bucci were appointed to the Board, to serve until the next annual meeting of the shareholders.
On October 8, 2019, Ms. Calli R. Bucci resigned as Corporate Secretary. This resignation did not involve any disagreement with the Company. Ms. Yinuo “Rachel” Jiang succeeded her to serve as Corporate Secretary until the next annual meeting of the shareholders and/or until she, or her successor is duly appointed.
On January 12, 2021, Mr. John L. Ogden resigned as a Board member. This resignation did not involve any disagreement with the Company. Mr. Kyle W. Withrow, the Company’s President and Chief Executive Officer, succeeded him as a director until the next annual meeting of the shareholders and/or until he, or his successor is duly appointed.
On April 6, 2021, Mr. E. William Withrow Jr. resigned as Executive Chairman of the Board. His resignation did not involve any disagreement with the Company. Mr. Clive Oosthuizen, a Board member, and the President of the Company’s subsidiary, Enigma-Bulwark Risk Management, Inc., succeeded him.
On April 6, 2021, Mr. Kyle W. Withrow resigned as the Company President and Chief Executive Officer, and as a Board member. His resignation did not involve any disagreement with the Company. Mr. Oosthuizen succeeded him as President and Chief Executive Officer until the next annual meeting of the shareholders and/or until he, or his successor, is duly appointed. The vacant Board member seat resulting from Mr. Withrow’s resignation will remain open until a new member is elected at the next annual meeting of the shareholders, or is duly appointed by the Board.
On April 12, 2021, Mr. David Rocke resigned as a Board member and consultant. His resignation was preceded by the Company’s inquiry into Mr. Rocke’s performance in connection with his Consulting Agreement dated May 1, 2019. The vacant Board member seat resulting from Mr. Rocke’s resignation will remain open until a new member is elected at the next annual meeting of the shareholders, or is duly appointed by the Board.
On April 12, 2021, Mr. Michael Gabriele resigned as President of Enigma-Bulwark Risk Management, Inc. and its subsidiaries. His resignation did not involve any disagreement with the Company.
* * * * *
16
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This quarterly report contains forward-looking statements. These statements relate to future events or the Company’s future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause the Company’s or the Company’s industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
The Company’s unaudited consolidated financial statements are stated in United States Dollars (US$), and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with the Company’s unaudited consolidated financial statements and the related notes that appear elsewhere in this quarterly report.
As used in this quarterly report and unless otherwise indicated, the terms “we”, “us”, “our”, “our company” and “Enigma” refer to Enigma-Bulwark, Ltd., and its subsidiaries, unless otherwise indicated.
Corporate History
The Company was incorporated in Nevada on September 30, 2005, and is headquartered in Los Angeles, California. Formerly PearTrack Security Systems, Inc., the Company’s name was changed to Enigma-Bulwark, Ltd., on October 9, 2019, pursuant to a majority of the Company’s shareholders and unanimous resolution of the board of directors.
Enigma-Bulwark, Ltd. (“Enigma” or “Company”) is a security and risk management company that provides physical security, technology-systems integration, and risk management advisory services. Services offered to assess and mitigate risk include security guards, risk management analysis, and proprietary and third-party technology and software. Target markets include corporations, governments and individuals across the globe.
During 2016 through 2018, the Company sought financing for the finalization of the PearLoxx container locking and tracking prototype. In addition, strategic acquisitions were pursued to expand the Company’s intellectual property portfolio.
Due to the Company’s inability to successfully commercialize the PearTrack IP tracking platform acquired in 2013, all rights, title and interest in the PearTrack IP reverted to the former licensees on December 31, 2018, and, pursuant to the terms of the collateralized agreement, the related Note issued to the licensors (the “Note Holders”) was canceled. In addition, all rights to future royalties collectible under any sub-license previously issued by the Company for the PearTrack IP reverted to the Note Holders. As a result, in 2018, the Company recognized a gain on the extinguishment of debt of $2,000,000.
Although the PearTrack IP commercialization was unsuccessful, the Company continued to focus on security and risk management, and acquired intellectual property that is based on a patent-pending 2 interactive spontaneous video security technology (the “Safer IP”). On October 11, 2018, the Company executed an Intellectual Property Purchase Agreement (the “Safer Agreement”) with Safer, Inc., a Florida corporation (the “Seller”), for the acquisition of the Safer IP. Pursuant to the Safer Agreement, in exchange for all rights, title and interest in the Safer IP, among other things, the Company delivered to Seller:
1.Common Stock Purchase Agreement providing for the Seller the right to purchase 3,500,000 shares of the Company’s restricted common stock at a price of $0.001 per share, for $3,500 cash; and
2.Revenue Sharing Agreement providing for a cash earn-out of 3% to be paid to the Seller, up to $1,000,000 paid to Seller, derived from the Adjusted Gross Revenue generated by the Company in connection with the Safer IP; and
3.Royalty Agreement providing for a royalty of 1.5% of the Adjusted Gross Revenue generated by the Company in connection with the Safer IP.
In 2019, the Company was presented with an opportunity to start a security and risk management business headquartered in Cape Town, South Africa, and identified key management to operate the business unit. On August 30, 2019, the Company formed Enigma-Bulwark Risk Management, Inc., a Delaware corporation and wholly-owned subsidiary (“EBRM”), to maintain the Company’s security and risk management operations and assets.
2 On July 21, 2021, the Company received a Notice of Allowance from the United States Patent and Trademark Office that its Patent Application 16/618,038 “Network Based Video Surveillance and Logistics for Multiple Users” was granted and would be issued to the Company.
17
In addition, EBRM acquired 100% of the shares of Enigma-Bulwark Security, Inc., a Delaware corporation formed by the Company in May 2019 (“EBS”). The Company attracted key senior management talent with backgrounds in structured finance, insurance, management, and M&A. On August 8, 2019, EBS received its license to provide physical security officers from the Florida Department of Agriculture and Consumer Services, and commenced its security protection operations in southern Florida, providing security services to the hospitality industry, as well as large events and VIPs/celebrities.
As part of the development of the South African business unit, the Company, through EBRM, entered into a Joint Venture Agreement (the “JV Agreement”) on September 8, 2020, with Prime African Security, Ltd., a South African corporation (“Prime”), to provide security and risk management services in South Africa. The joint venture formed Prime Enigma Africa (Pty) Ltd., a South African corporation (the “Joint Venture”), for which Prime owns 51% of the common stock and the Company owns 49%. The JV Agreement is for an initial term of three (3) years, and automatically renews unless canceled in writing by either party.
COVID-19 Pandemic
In December 2019, an outbreak of the COVID-19 virus was reported in Wuhan, China. On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 virus a global pandemic, and on March 13, 2020, former President Donald J. Trump declared the virus a national emergency in the United States. As of the date of the filing of this Quarterly Report, the WHO reports over 757 million confirmed COVID-19 cases and over 6.8 million deaths worldwide, including over 1.1 million in the U.S. This highly contagious disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers, workforces and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn. It has caused a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis.
The COVID-19 pandemic may adversely affect the Company’s clients’ operations, its employees and its employee productivity. It may also impact the ability of the Company’s subcontractors, partners, and suppliers to operate and fulfill their contractual obligations, and result in an increase in costs, delays or disruptions in performance. These effects, and the direct effect of the virus and the disruption on the Company’s employees and operations, may negatively impact both the Company’s ability to meet customer demand and its revenue and profit margins. The Company’s employees, in many cases, are working remotely and using various technologies to perform their functions. The Company might experience delays or changes in customer demand, particularly if customer funding priorities change. Further, in reaction to the spread of COVID-19 in the United States, many businesses have instituted social distancing policies, including the closure of offices and worksites and deferring planned business activity. Additionally, the disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit the Company’s ability to access capital. Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures expand, the Company may experience a material adverse effect on its business operations, revenues and financial condition; however, its ultimate impact is highly uncertain and subject to change.
Current Business
The Company is currently structured with four wholly-owned subsidiaries: Enigma-Bulwark Risk Management, Inc., a Delaware corporation (“EBRM”), and PearTrack Systems Group, Ltd. (“PTSG”), Ecologic Products, Inc. (“EPI”), and Ecologic Car Rentals, Inc. (“ECR”), all Nevada corporations. The Company’s current business activities are diversified into two specific markets: security and risk management, and remote/mobile asset tracking products.
| Enigma-Bulwark, Ltd. Los Angeles, California | Parent Corporation Patented EnigmaLok Locking Technology |
| |
| Enigma-Bulwark Risk Management, Inc. Cape Town, South Africa | Tethered Drone System (Patent-Pending) Network-Based Video Surveillance (Patent-Pending) Security and Risk Management / Intelligence Security Guard Operations Hotels, Events, VIPs |
| |
|
| ·Enigma-Bulwark Security, Inc. Miami, Florida |
| |
|
| ·Prime-Enigma Africa Pvt. Joint Venture |
| |
| Ecologic Products, Inc. / Ecologic Car Rentals, Inc. Los Angeles, California | Environmental Transportation and Products Seeking Strategic Opportunities |
| |
Through its wholly-owned subsidiary, EBRM, the Company is operating a security and risk management business, and developing its proprietary, patent-pending and patented technology. EBRM is focused on providing security guards, both armed and unarmed, as well as security consulting and systems integration of security technology and software through the development of its patent-pending intellectual property, along with third-party Plug-N-Play products.
18
In August 2019, the Company, through EBRM’s subsidiary, Enigma-Bulwark Security, Inc. (“EBS”), a Delaware corporation, established and operates a full-service security business targeting hospitality, corporate/executives, and petroleum assets. In Miami, Florida. EBS services include security guards, both armed and unarmed, as well as CCTV and video capture technology and security consulting services. As of October 2022, EBS maintains a staff of approximately forty-five (45) employees, including over forty (40) fully licensed security personnel, serving eleven (11) luxury and boutique hotels, restaurants and resorts in the greater Miami Beach, Florida, area.
In August 2020, EBRM formed a joint venture with Prime African Security, Ltd. Pty, a Pretoria, South Africa based full-service security company, accredited under the Private Security Industry Regulation Act 56 of 2001 (PSIRA), called Prime-Enigma Africa Ltd. Pty (“Prime-Enigma”) headquartered in Pretoria, South Africa. Prime-Enigma is currently bidding on security tenders from large international corporations operating in South Africa.
The Company also intends to provide a unique solution to security issues in the intermodal shipping container marketplace, with its patented container tracking and locking system, EnigmaLok (formerly PearLoxx), the rights of which were licensed to the Company in perpetuity in 2015.
Through the subsidiaries, Ecologic Car Rentals, Inc. and Ecologic Products, Inc., the Company continues its pursuits for strategic opportunities for its shareholders, as management believes that the brands have value for companies with environmentally-friendly consumer-related products and services.
Management
Management experience and insight translates into best practices and proven strategies that will help anticipate and respond to myriad facility, operational, and safety challenges with confidence. Enigma’s management has extensive knowledge and experience in many fields requiring security and risk management protocols, such as multinational corporations, mining houses, telecommunication providers, transportation and energy companies.
Enigma’s team is at the core of its value, with decades of intelligence and military experience, as well as technology expertise and specialized experience in:
·advanced training techniques
·new and innovative technology applications
·intelligence and reconnaissance
·risk assessment and threat identification.
The Enigma team includes individuals with backgrounds from U.S. and South African Special Forces and military intelligence, and applies its experience to deliver measured and effective security management, regardless of adversary or operating environment. Additionally, Enigma is sensitive and experienced at managing low-profile, security operations in challenging environments.
The Company works with a core management team to remain flexible during times of non-engagement. With over forty years of professional military service, the Enigma team has established a large network of security professionals that can be deployed on a global basis. The Company will continue to identify diverse and skilled security personnel, and develop innovative solutions across the full spectrum of security needs.
The following summary of the Company’s financial condition and results of operations should be read in conjunction with the Company’s unaudited consolidated financial statements for the three months ending March 31, 2019, which are included herein. The financial information of Enigma-Bulwark, Ltd., and its wholly-owned subsidiaries as of March 31, 2019, PearTrack Systems Group, Ltd., Ecologic Car Rentals, Inc. and Ecologic Products, Inc. is provided below on a consolidated basis, unless otherwise indicated. All significant intercompany accounts and transactions have been eliminated.
Balance Sheet
As of March 31, 2019, the Company had total assets of $38,365 compared with total assets of $40,089 at December 31, 2018. The decrease in total assets of $1,727 is attributable to a decrease in investment in securities of $1,206, depreciation of $118, and amortization of $400.
As of March 31, 2019, the Company had total liabilities of $6,541,218 compared with total liabilities of $6,333,317 at December 31, 2018. The increase in total liabilities of $207,901 is attributable to an increase in accounts payable and accrued expenses of $70,016, an increase in related party payables of $77,885, and an increase in related party convertible notes payable of $60,000.
19
Results of Operations
Three months ended March 31, 2019, compared to three months ended March 31, 2018.
| For the three months ended |
| |||||
| March 31, 2019 |
| March 31, 2018 |
| |||
|
|
|
|
|
|
| |
General and administrative expenses | $ | 155,311 |
| $ | 151,763 |
| |
|
|
|
|
|
|
| |
Operating loss | $ | (155,311 | ) | $ | (151,763 | ) | |
|
|
|
|
|
|
| |
Interest expense | $ | (53,858 | ) | $ | (48,684 | ) | |
|
|
|
|
|
|
| |
Discount amortization | $ | –– |
| $ | (21,330 | ) | |
|
|
|
|
|
|
| |
Net loss | $ | (209,169 | ) | $ | (221,777 | ) | |
|
|
|
|
|
|
| |
Net comprehensive loss | $ | (1,206 | ) | $ | (2,412 | ) | |
|
|
|
|
|
|
| |
Net loss and comprehensive loss | $ | (210,375 | ) | $ | (224,189 | ) | |
Revenue
For the three months ended March 31, 2019 and 2018, no revenue was generated.
At March 31, 2019, the Company had not yet begun full operations, generating limited test market sales.
Cost of sales
For the three months ended March 31, 2019 and 2018, no const of sales were incurred.
At March 31, 2019, the Company had not yet begun full operations, generating limited test market sales.
General and Administrative Expenses
| For the three months ended |
|
|
| |||||
| March 31, 2019 |
| March 31, 2018 |
| Variances |
| |||
Legal and accounting fees | $ | 4,000 |
| $ | 4,000 |
| $ | –– |
|
Management fees |
| 149,885 |
|
| 148,423 |
|
| 1,462 |
|
Stock compensation/amortization of deferred compensation |
| 750 |
|
| –– |
|
| 750 |
|
Depreciation and amortization |
| 518 |
|
| 118 |
|
| 400 |
|
Office supplies and miscellaneous expenses |
| 158 |
|
| (778 | ) |
| 936 |
|
Total general and administrative expenses | $ | 155,311 |
| $ | 151,763 |
| $ | 3,548 |
|
General and administrative expenses in the amount of $155,311 for the three months ended March 31, 2019, were comprised of $4,000 of legal and accounting fees, $149,885 of management fees, $750 of stock compensation/amortization of deferred compensation, $518 of depreciation, and $158 of office overhead and other general and administrative expenses.
General and administrative expenses in the amount of $151,763 for the three months ended March 31, 2018, were comprised of $4,000 of legal and accounting fees, $148,423 of management fees, $118 of depreciation, and ($778) of office overhead and other general and administrative expenses.
General and administrative expenses of $155,311 for the three months ended March 31, 2019, as compared to $151,763 for the three-month period ended March 31, 2018, resulted in an increase in general and administrative expenses for the current period of $3,548. The increase in general and administrative expenses of $3,548 was attributable to the following items:
·an increase in management fees of $1,462 due an increase in accrued vacation; and
·an increase in amortization of stock compensation/stock options of $750, due to a stock grant in the prior year, resulting in deferred stock compensation amortization of $750; and
·an increase in depreciation and amortization expense of $400, due to the acquisition of intellectual property, resulting in amortization expense of $400; and
·an increase in other general and administrative expenses of $936, due to decreases in bank charges of $1,162, and a decrease in other general office and miscellaneous expenses of $226.
General and administrative expenses for the three months ended March 31, 2019 and 2018, were incurred primarily for the purpose of advancing the Company closer to its financing and operating goals.
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Net Loss
During the three months ended March 31, 2019, the Company incurred a net loss of $209,169, compared with a net loss of $221,777 for the three months ended March 31, 2018. The decrease in net loss of $12,608 is attributable to an increase in general and administrative expenses of $3,548, an increase in interest expense of $5,174, and a decrease in discount amortization of $21,330.
During the three months ended March 31, 2019, the Company incurred a net comprehensive loss of $1,206, compared with a net comprehensive loss of $1,206 for the three months ended March 31, 2018. The decrease in net comprehensive loss of $1,206 is attributable to a decrease in unrealized loss on securities of $1,206.
Liquidity and Capital Resources
Working Capital Deficit |
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|
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| |||
| March 31, 2019 |
| December 31, 2018 |
| Increase (decrease) |
| |||
Current assets | $ | –– |
| $ | –– |
| $ | –– |
|
Current liabilities |
| 4,097,498 |
|
| 3,889,597 |
|
| 207,901 |
|
Working capital (deficit) | $ | (4,097,498 | ) | $ | (3,889,597 | ) | $ | (207,901 | ) |
As of March 31, 2019, and December 31, 2018, the Company had no cash.
The Company had a working capital deficit of $4,097,498 as of March 31, 2019, compared to a working capital deficit of $3,889,597 at December 31, 2018. The increase in working capital deficit of $207,901 is primarily attributable to an increase in accounts payable and accrued expenses of $70,016, an increase in convertible related party promissory notes of $60,000, and a decrease in related party payable of $77,885.
Cash Flows | For the three months ended |
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| ||||
| March 31, 2019 |
| March 31, 2018 |
| Increase (decrease) |
| |||
Net cash provided by operating activities | $ | –– |
| $ | –– |
| $ | –– |
|
Net cash provided by investing activities |
| –– |
|
| –– |
|
| –– |
|
Net cash provided by financing activities |
| –– |
|
| –– |
|
| –– |
|
Net change in cash | $ | –– |
| $ | –– |
| $ | –– |
|
Cash Flows from Operating Activities
During the three months ended March 31, 2019 and 2018, the Company was provided with no cash flow from operating activities. There was a decrease in the net loss from operations of $12,608; an increase in stock compensation/stock option amortization of $750; a decrease in accruals converted to related party loans of $90,860; an increase in depreciation and amortization of $400; a decrease in discount amortization of $21,330; and increases in the changes in accounts payable and accrued expenses of $9,110, and related party payables of $89,332.
Cash Flows from Investing Activities
During the three months ended March 31, 2019 and 2018, the Company was provided with no cash flows from investing activities.
Cash Flows from Financing Activities
During the three months ended March 31, 2019 and 2018, the Company was provided with no cash flows from financing activities.
As of March 31, 2019, affiliates and related parties are due a total of $4,108,851, which is comprised of promissory notes to related parties in the amount of $3,232,705; accrued compensation in the amount of $723,440; and reimbursable expenses/cash advances to the Company in the amount of $152,706; for a net increase of $137,885. During the three months ended March 31, 2019, promissory notes to related parties increased by $60,000, and accrued compensation increased by $77,885. All outstanding promissory notes to related parties bear interest at a rate of 5 to 7 percent per annum, are due and payable within between one (1) year of written demand and by December 31, 2023, or upon certain equity funding, and are convertible into the Company’s common stock at a price of between $0.05 and $0.25 per share.
The Company’s principal sources of funds have been from sales of the Company’s common stock and loans from related parties.
Contractual Obligations
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
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Going Concern
The Company has incurred losses since inception resulting in a current period net loss of $210,375, an accumulated deficit of $17,627,203, and a working capital deficit of $4,097,498, and further losses are anticipated. The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, which may not be available at commercially reasonable terms. There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations and the Company may cease operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The unaudited consolidated financial statements included with this quarterly report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that the Company’s assets will be realized, and liabilities settled in the ordinary course of business. Accordingly, the unaudited consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s audited consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. The Company believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of the Company’s consolidated financial statements is critical to an understanding of its consolidated financial statements. The following should be read in conjunction with Note 2 to the Company’s consolidated financial statements, “Summary of Significant Accounting Policies”:
Impairment reviews
Management is required to perform tests annually, or more often if necessary, for impairment of its finite lived and indefinite lived assets, to determine if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Impairment testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters, including management’s expectations of:
·growth in EBITDA, calculated as adjusted operating profit before depreciation and amortization;
·long term growth rates; and
·the selection of discount rates to reflect the risks involved.
The Company prepares five-year projections and uses these as the basis for its impairment reviews. Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the projections, could significantly affect the Company’s impairment evaluation and, hence, results.
The Company’s review for impairment also includes the evaluation of key assumptions related to sensitivity in the projections. Included are estimates for varying levels of growth, including aggressive, median, and conservative. In the Company’s evaluation, the conservative level of growth is utilized. For additional information, see Impairment of Long-Lived Assets under Note 2, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements contained within this Quarterly Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s president, chief executive officer and chief financial officer to allow for timely decisions regarding required disclosure. In designing and evaluating the Company’s disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Company’s management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of March 31, 2019, the end of the Company’s period covered by this quarterly report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s president, chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Company’s president, chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting that occurred during the three months ended March 31, 2019, that have materially or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company knows of no material existing or pending legal proceedings against it, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of the Company’s directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to the Company.
ITEM 1A. RISK FACTORS
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no unregistered securities issued by the Registrant during the current period, including sales of reacquired securities, as well as new issues, securities issued in exchange for property, services, or other securities, and new securities resulting from the modification of outstanding securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY STANDARDS
Not Applicable
ITEM 5. OTHER INFORMATION
None
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ITEM 6. EXHIBITS
*Filed herewith.
**Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or 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.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ENIGMA-BULWARK, LTD. |
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Dated: June 8, 2023 | /s/ Clive Oosthuizen |
| Clive Oosthuizen |
| President and CEO |
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Dated: June 8, 2023 | /s/ Calli Bucci |
| Calli Bucci |
| Chief Financial Officer |
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