Company Quick10K Filing
Quick10K
Arista Financial
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-K 2017-06-30 Annual: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-K 2016-06-30 Annual: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-K 2015-06-30 Annual: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-K 2014-06-30 Annual: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-07-31 Enter Agreement, Sale of Shares, Exhibits
8-K 2019-03-28 Enter Agreement, Sale of Shares, Exhibits
8-K 2019-02-11 Enter Agreement, Sale of Shares, Exhibits
8-K 2019-01-28 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-12-03 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-10-01 Sale of Shares, Officers, Exhibits
8-K 2018-09-07 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-09-04 Sale of Shares, Amend Bylaw, Exhibits
8-K 2018-07-19 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-02-08 Amend Bylaw
8-K 2018-01-18 Amend Bylaw, Exhibits
RLMD Relmada Therapeutics 84
MMND Mastermind 45
WLB Westmoreland Coal 3
ACCA Acacia Diversified Holdings 1
EMPM Empire Post Media 0
LAKF Lake Forest Minerals 0
TXG 10x Genomics 0
BCYC Bicycle Therapeutics 0
HICT Hiclasst 0
C749 Granite Falls Energy 0
ARST 2019-06-30
Note 1 - Organization and Nature of Operations
Note 2 - Going Concern Analysis and Management Plans
Note 3 - Summary of Significant Accounting Policies
Note 3 - Financing Leases Receivable
Note 4 - Convertible Debt
Note 5 - Related Party Transactions
Note 6 - Redeemable Series A Preferred
Note 7 - Stockholders' Deficit
Note 8 - Commitments and Contincengies
Note 9 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 f10q0619ex31-1_aristafin.htm
EX-31.2 f10q0619ex31-2_aristafin.htm
EX-32.1 f10q0619ex32-1_aristafin.htm

Arista Financial Earnings 2019-06-30

ARST 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 f10q0619_aristafinancial.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

☒ 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

 

COMMISSION FILE NO. 333-169802

 

ARISTA FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

 

Nevada   27-1497347
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
51 JFK Parkway, First Floor West, Short Hills, NJ   07078
(Address of principal executive offices)   (Zip Code)

 

(973) 218-2428

(Registrant’s telephone number, including area code)

 

Former name, former address and former fiscal year, if changed since last report: Not applicable.

 

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 ☐ No

 

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

 

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

 

Large accelerated filer   Accelerated filer
Non-accelerated filer   Smaller reporting company
    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

 

Securities registered pursuant to Section 12(b) of the Act: None

 

As of August 15, 2019, the registrant had 4,502,410 shares of common stock, par value $0.0001 per share, issued and outstanding.

  

 

  

 

  

ARISTA FINANCIAL CORP.

Form 10-Q

June 30, 2019

 

INDEX

 

  Page
Part I. Financial Information 1
   
Item 1. Financial Statements 1
   
Condensed Consolidated Balance Sheets – June 30, 2019 (unaudited) and December 31, 2018 1
   
Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2019 and 2018 (unaudited) 2
   
Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Six Months Ended June 30, 2019 (unaudited) 3
   
Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three Months Ended June 30, 2019 (unaudited) 4
   
Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Six Months Ended June 30, 2018 (unaudited) 5
   
Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three Months Ended June 30, 2018 (unaudited) 6
   
Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2019 and 2018 (unaudited) 7
   
Notes to Unaudited Condensed Consolidated Financial Statements 8
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
   
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
   
Item 4. Controls and Procedures 22
   
Part II. Other Information  
   
Item 1. Legal Proceedings 23
   
Item 1A. Risk Factors 23
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
   
Item 3. Defaults Upon Senior Securities 23
   
Item 4. Mine Safety Disclosures 23
   
Item 5. Other Information 23
   
Item 6. Exhibits 23
   
Signatures 24

 

i

 

  

ARISTA FINANCIAL CORP. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30,   December 31, 
   2019   2018 
   (Unaudited)     
ASSETS        
CURRENT ASSETS:          
Cash  $1,175   $10,357 
Financing leases receivable, net   37,160    61,655 
Due from lease service provider   6,801    6,306 
Prepaid expenses   -    1,721 
           
Total Current Assets   45,136    80,039 
           
LONG-TERM ASSETS:          
Financing leases receivable, net   1,062    16,431 
           
Total Long-term Assets   1,062    16,431 
           
Total Assets  $46,198   $96,470 
           
 LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
CURRENT LIABILITIES:          
Notes payable - related parties, net  $10,000   $12,500 
Accounts payable   297,972    204,590 
Line of credit - related party   70,000    70,000 
Accrued interest payable   57,922    13,167 
Accrued interest payable - related parties   5,508    3,113 
Convertible notes payable, net   416,439    - 
Accrued expenses   211,016    153,448 
           
Total Current Liabilities   1,068,857    456,818 
           
LONG-TERM LIABILITIES:          
Convertible notes payable, net   210,835    479,174 
           
Total Long-term Liabilities   210,835    479,174 
           
Total Liabilities   1,279,692    935,992 
          
Redeemable Series A Preferred stock, $0.0001 par value; 51 shares authorized 51 and 51 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively   51,000    51,000 
           
Commitments and Contingencies (See Note 8)          
           
STOCKHOLDERS’ DEFICIT:          
Preferred stock, $0.0001 par value, 10,000,000 shares authorized;          
          
Common stock: $0.0001 par value, 200,000,000 shares authorized; 3,668,410 and 3,433,083 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively   367    343 
Additional paid-in capital   1,468,825    1,208,320 
Accumulated deficit   (2,753,686)   (2,099,185)
           
Total Stockholders’ Deficit   (1,284,494)   (890,522)
           
Total Liabilities and Stockholders’ Deficit  $46,198   $96,470 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

1

 

 

ARISTA FINANCIAL CORP. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

    For the Three Months Ended     For the Six Months Ended  
     June 30,       June 30,  
   2019    2018    2019    2018 
                         
REVENUES:                        
Interest on lease financings   $ 2,454     $ 2,781     $ 5,826     $ 6,454  
                                 
Total revenues     2,454       2,781       5,826       6,454  
                                 
OPERATING EXPENSES:                                
Compensation and benefits     94,920       101,661       238,764       202,283  
Professional fees     100,644       105,768       143,367       192,648  
Provision for lease losses     (2,650 )     (4,037 )     (3,840 )     (8,213 )
General and administrative expenses     44,657       18,974       58,821       29,937  
                                 
Total operating expenses     237,571       222,366       437,112       416,655  
                                 
LOSS FROM OPERATIONS     (235,117 )     (219,585 )     (431,286 )     (410,201 )
                                 
OTHER (INCOME) EXPENSES:                                
Interest expense     96,272       31,313       218,087       62,816  
Interest expense - related parties     2,537       8,538       5,127       18,173  
Gain on sale of equipment     -       (1,605 )     -       (1,605 )
                                 
Total other expenses     98,809       38,246       223,214       79,384  
                                 
LOSS BEFORE INCOME TAXES     (333,926 )     (257,831 )     (654,500 )     (489,585 )
                                 
PROVISION FOR INCOME TAXES     -       -       -       -  
                                 
NET LOSS   $ (333,926 )   $ (257,831 )   $ (654,500 )   $ (489,585 )
                                 
NET LOSS PER COMMON SHARE:                                
Basic and Diluted   $ (0.10 )   $ (0.25 )   $ (0.19 )   $ (0.16 )
                                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                                
Basic and Diluted     3,467,544       1,042,000       3,506,720       3,147,608  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

2

 

 

ARISTA FINANCIAL CORP. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE SIX MONTHS ENDED JUNE 30, 2019

(Unaudited)

 

                   Additional       Total 
   Preferred Stock   Common Stock   Paid-in   Accumulated   Stockholders’ 
   # of Shares   Amount   # of Shares   Amount   Capital   Deficit   Deficit 
                             
Balance, December 31, 2018   -    -    3,433,083    343    1,208,320    (2,099,185)   (890,522)
                                    
Shares issued for services   -    -    84,000    9    136,254    -    136,263 
                                    
Shares issued upon conversion of debt   -    -    151,327    15    11,685    -    11,700 
                                    
Warrants issued in connection with convertible note   -    -    -    -    16,427    -    16,427 
                                    
Beneficial conversion feature on convertible notes   -    -    -    -    96,139    -    96,139 
                                    
Net loss   -    -    -    -    -    (654,500)   (654,500)
                                    
Balance, June 30, 2019   -   $-    3,668,410   $367   $1,468,825   $(2,753,685)  $(1,284,493)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3

 

 

ARISTA FINANCIAL CORP. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED JUNE 30, 2019

(Unaudited)

 

                   Additional       Total 
   Preferred Stock   Common Stock   Paid-in   Accumulated   Stockholders’ 
   # of Shares   Amount   # of Shares   Amount   Capital   Deficit   Deficit 
                             
Balance, March 31, 2019   -    -    3,490,577    349    1,369,747    (2,419,759)   (1,049,663)
                                    
Shares issued for services   -    -    32,000    3    48,133    -    48,136 
                                    
Shares issued upon conversion of debt   -    -    145,833    15    9,185    -    9,200 
                                    
Warrants issued in connection with convertible note   -    -    -    -    2,893    -    2,893 
                                    
Beneficial conversion feature on convertible notes   -    -    -    -    38,867    -    38,867 
                                    
Net loss   -    -    -    -    -    (333,926)   (333,926)
                                    
Balance, June 30, 2019   -   $-    3,668,410   $367   $1,468,825   $(2,753,685)  $(1,284,493)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4

 

 

ARISTA FINANCIAL CORP. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

                   Additional       Total 
   Preferred Stock   Common Stock   Paid-in   Accumulated   Stockholders’ 
   # of Shares   Amount   # of Shares   Amount   Capital   Deficit   Deficit 
                             
Balance, December 31, 2017   -    -    3,088,333    309    534,353    (934,493)   (399,831)
                                    
Shares issued for services   -    -    70,000    7    145,803    -    145,810 
                                    
Shares issued upon conversion of debt   -    -    113,750    11    90,534    -    90,545 
                                    
Warrants issued in connection with convertible note   -    -    -    -    16,939    -    16,939 
                                    
Net loss   -    -    -    -    -    (489,585)   (489,585)
                                    
Balance, June 30, 2018   -   $-    3,272,083   $327   $787,629   $(1,424,078)  $(636,122)

   

See accompanying notes to consolidated financial statements.

 

5

 

 

ARISTA FINANCIAL CORP. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED JUNE 30, 2018

(Unaudited)

  

                   Additional       Total 
   Preferred Stock   Common Stock   Paid-in   Accumulated   Stockholders’ 
   # of Shares   Amount   # of Shares   Amount   Capital   Deficit   Deficit 
                             
Balance, December 31, 2017   -    -    3,148,333    315    637,751    (1,166,247)   (528,181)
                                    
Shares issued for services   -    -    10,000    1    42,404    -    42,405 
                                    
Shares issued upon conversion of debt   -    -    113,750    11    90,534    -    90,545 
                                    
Warrants issued in connection with convertible note   -    -    -    -    16,940    -    16,940 
                                    
Net loss   -    -    -    -    -    (257,831)   (257,831)
                                    
Balance, June 30, 2018   -   $-    3,272,083   $327   $787,629   $(1,424,078)  $(636,122)

  

See accompanying notes to consolidated financial statements.

 

6

 

 

ARISTA FINANCIAL CORP. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   For the Six Months Ended 
   June 30, 
   2019   2018 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(654,500)  $(489,585)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock-based compensation   136,262    117,059 
Amortization of debt discount to interest expense   159,366    53,833 
Bad debt recovery   -    (4,176)
Change in operating assets and liabilities:          
Financing leases receivable   39,864    28,679 
Due from lease service provider   (495)   1,316 
Prepaid expenses   1,721    (3,287)
Accounts payable   93,382    78,619 
Accrued interest payable   44,755    94 
Accrued interest payable - related parties   2,395    3,012 
Accrued expenses   57,568    67,329 
           
NET CASH USED IN OPERATING ACTIVITIES   (119,682)   (147,107)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Proceeds from sale of equipment held for sale   -    15,000 
           
NET CASH PROVIDED BY INVESTING ACTIVITIES   -    15,000 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from line of credit - related party   -    35,000 
Proceeds from note payable subscription receivable   -    50,000 
Proceeds from notes payable - related parties   (2,500)   - 
Proceeds from convertible notes   113,000    50,000 
           
NET CASH PROVIDED BY FINANCING ACTIVITIES   110,500    135,000 
           
NET INCREASE (DECREASE) IN CASH   (9,182)   2,893 
           
CASH, beginning of period   10,357    728 
           
CASH, end of period  $1,175   $3,621 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION          
Interest paid  $16,198   $27,096 
Income taxes paid  $-   $- 
           
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:          
Increase in debt discount for warrants  $16,427   $- 
Shares issued upon conversion of debt  $11,700   $- 
Beneficial conversion feature on convertible notes  $96,139   $- 
Issuance of common stock for services  $-   $77,000 
Reclassification of due to related party to line of credit - related party  $-   $15,000 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

7

 

 

ARISTA FINANCIAL CORP. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2019

 

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

 

Organization

 

Arista Financial Corp. (the “Company”) was incorporated in Nevada on December 15, 2009. Effective February 21, 2012, the Company filed with the State of Nevada a Certificate of Amendment to the Articles of Incorporation changing the Company’s name from Hunt for Travel, Inc. to Praco Corporation (“Praco”) and on January 2, 2018, the Company changed its name to Arista Financial Corp.

 

On April 19, 2017, the Company entered into the Share Exchange Agreement with Arista Capital Ltd. (“Arista Capital”), a Nevada corporation formed on June 10, 2014, and the Arista Capital Shareholders (the “Share Exchange Agreement”). Under generally accepted accounting principles, the acquisition by the Company of Arista Capital is considered to be a capital transaction in substance, rather than a business combination. That is, the acquisition is equivalent to the acquisition by Arista Capital of the Company with the issuance of stock by Arista Capital for the net assets of the Company. This transaction is reflected as a recapitalization and is accounted for as a change in capital structure. Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition. Under reverse merger accounting, the comparative historical financial statements of the Company, as the legal acquirer, are those of the accounting acquirer, Arista Capital. Accordingly, the Company’s financial statements prior to the closing of the reverse acquisition, reflect only the business of Arista Capital.

 

The Company is a finance company that provides financing to other small finance companies that do not have significant access to the capital markets. Typically, the Company does this by acquiring lease portfolios from such lenders at a purchase price that yields the Company an annual return and these lenders continue to service the portfolios purchased by the Company. The Company is currently focused on leases for trucks and construction equipment.

 

NOTE 2 – GOING CONCERN ANALYSIS AND MANAGEMENT PLANS

 

These condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in our accompanying condensed consolidated financial statements, for the six months ended June 30, 2019, the Company had a net loss of $654,500 and used cash in operating activities of $119,682. Additionally, the Company had an accumulated deficit of $2,753,686, a stockholders’ deficit of $1,284,494, and a working capital deficit of $1,023,721 at June 30, 2019, and minimal revenues for the six months ended June 30, 2019. Management believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. Management believes that its capital resources are not currently adequate to continue operating and maintaining its business strategy for a period of twelve months from the issuance date of this report. Although the Company has historically raised capital from the issuance of promissory notes, there is no assurance that it will be able to continue to do so. Management believes that its ability to attract debt and equity financing in the capital markets is enhanced as a public reporting company. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail or cease operations. These condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 

 

8

 

  

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The management of the Company is responsible for the selection and use of appropriate accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

 

Basis of presentation

 

The Company prepares its condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of the Company and its wholly-owned subsidiary. All intercompany balances and transactions have been eliminated upon consolidation.

 

Use of estimates

 

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States 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 condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates for the six months ended June 30, 2019 include estimates of allowances for uncollectible finance leases receivable, the useful life of property and equipment, and the fair value of non-cash equity transactions.

 

Credit risk and concentrations

 

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. At June 30, 2019 and December 31, 2018, cash in bank did not exceed federally insured limits. The Company has not experienced any losses in such accounts through June 30, 2019.

 

Financing leases receivable represent amounts due from lessees in various industries, related to equipment on direct financing leases. Currently, the Company relies on one source to acquire financing leases and to service such leases. The Company believes that other lenders are available to acquire lease portfolios if the Company cannot acquire additional financing lease receivable portfolios from its single source. Additionally, as of June 30, 2019, the Company’s portfolio of financing leases consists of seven leases. A default on or loss of any of these leases would have a material adverse effect on the Company’s results of operations and financial condition.

 

Cash and cash equivalent

 

For purposes of the statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. At June 30, 2019 and December 31, 2018, the Company did not have any cash equivalents.

 

Financing leases receivable

 

Financing leases receivable are recorded at the aggregate future minimum lease payments, estimated unguaranteed residual value of the leased equipment less unearned income. Residual values, which are reviewed periodically, represent the estimated amount the Company expects to receive at lease termination from the disposition of the leased equipment. Actual residual values realized could differ from these estimates. The unearned income is recognized in revenues in the statements of operations over the lease term, in a manner that produces a constant rate of return on the lease. Financing leases receivable due after twelve months from the balance sheet date are reflected as a long-term asset. Financing leases receivables are periodically evaluated based on individual creditworthiness of customers. Based on this evaluation, the Company records allowance for estimated losses on these receivables.

 

9

 

 

Impairment of long-lived assets

 

In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. 

 

Fair value of financial instruments and fair value measurements

 

The Company follows ASC 820-10 of the FASB Accounting Standards Codification to measure the fair value of its financial instruments and disclosures about fair value of its financial instruments. ASC 820-10 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820-10 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by ASC 820-10 are described below:

 

Level 1   Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
     
Level 2   Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
     
Level 3   Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts reported in the consolidated balance sheets for cash, financing lease receivables, due from lease service provider, accrued interest receivables, prepaid expenses, notes payable, accounts payable, accrued expenses, accrued interest payable and amounts due to related party approximate their fair market value based on the short-term maturity of these instruments. The Company does not account for any instruments at fair value using level 3 valuation.

 

ASC 825-10 “Financial Instruments, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

 

Revenue recognition

 

Income from direct financing lease transactions is reported using the financing method of accounting, in which the Company’s investment in the leased property is reported as a receivable from the lessee to be recovered through future rentals. The interest income portion of each rental payment is calculated so as to generate a constant rate of return on the net receivable outstanding. Allowances for losses on direct financing leases are typically established based on historical charge-off and collection experience and the collectability of specifically identified lessees and billed and unbilled receivables. Direct financing leases are charged off to the allowance as they are deemed uncollectible. Direct financing leases are generally placed in a nonaccrual status (i.e., no revenue is recognized) and deemed impaired when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of all direct finance lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related direct financing leases may be placed on nonaccrual status. Leases placed on nonaccrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable. Until such time, all payments received are applied only against outstanding principal balances. 

 

10

 

 

Stock-based compensation

 

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

 

Through March 31, 2018, pursuant to ASC 505-50 – “Equity-Based Payments to Non-Employees”, all share-based payments to non-employees, including grants of stock options, were recognized in the condensed consolidated financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. Using a Black-Scholes valuation model, the Company periodically reassessed the fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusted the expense recognized in the condensed consolidated financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company early adopted ASU No. 2018-07 in the second quarter of 2018, and the adoption did not have any impact on its condensed consolidated financial statements. 

 

Basic and diluted loss per share

 

Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares consist of common stock issuable for stock warrants (using the treasury stock method) and common shares issuable upon the conversion of convertible notes payable (using the as-if converted method). These common stock equivalents may be dilutive in the future.

 

All potentially dilutive common shares were excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following:

 

   June 30,
2019
   June 30,
2018
 
Stock warrants   1,395,909    1,293,749 
Stock options   300,000    300,000 
Convertible debt   703,585    200,000 
    2,399,494    1,793,749 

 

11

 

 

Related parties

 

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

  

Recent accounting pronouncements

 

In May 2014, FASB issued an update (“ASU 2014-09”) establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard, which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. The Company adopted this standard in 2018 using the modified retrospective approach, which requires applying the new standard to all existing contracts not yet completed as of the effective date and recording a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company has concluded that ASU 2014-09 did not have a material impact on the process for, timing of, and presentation and disclosure of revenue recognition from contracts with lessees.

 

In February 2016, the FASB issued ASU 2016-02, “Leases”, which aims to make leasing activities more transparent and comparable and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. This ASU is effective for all interim and annual reporting periods beginning after December 15, 2018. The adoption of ASU 2016-02 did not have a material impact on the Company’s financial statement presentation or disclosures.

 

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.

   

In June 2018, the FASB issued Accounting Standards Update 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”)”. 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 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Revenue from Contracts with Customers (Topic 606). ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted the provisions of ASU 2018-07 in the quarter beginning January 1, 2019. The adoption of ASU 2018-07 did not have a material impact on the Company’s financial statement presentation or disclosures.

 

In August 2018, the FASB issued Accounting Standards Update (ASU) 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”, which changes the fair value measurement disclosure requirements of ASC 820. This update is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. The Company does not expect the adoption of ASU 2018-13 to have a material impact on its condensed consolidated financial statements.

 

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed consolidated financial statements. 

 

12

 

 

NOTE 3 – FINANCING LEASES RECEIVABLE

  

The seller is responsible for administrating the leases, collecting all payments, and distributing funds to the Company. On a monthly basis, the Company shall pay the seller an administrative fee equal to 2% of the scheduled payment amount of each lease, 50% of all penalties or late fee charges collected, and 50% of all default interest collected. The seller shall remit the remaining amount received from the lessees to the Company. The finance leases require 36 monthly/weekly or bi-weekly payments through April 2020. Each lease is secured by ownership of the related transportation equipment.

 

At June 30, 2019 and December 31, 2018, financing leases receivable consisted of the following:

 

   June 30,
2019
   December 31,
2018
 
Total minimum financing leases receivable  $46,975   $96,505 
Unearned income   (2,298)   (8,124)
Total financing leases receivable   44,677    88,381 
Less: allowance for uncollectible financing leases receivable   (6,455)   (10,295)
Financing leases receivable, net   38,222    78,086 
Less: current portion of financing leases receivable, net   (37,160)   (61,655)
Financing leases receivable, net – long-term  $1,062   $16,431 

 

For the six months ended June 30, 2019 and 2018, activities in the Company’s allowance for uncollectible financing leases receivable were are follows:

 

   For the Six Months Ended
June 30,
 
   2019   2018 
Allowance for uncollectible financing leases receivable at beginning of period  $10,295   $25,405 
Provisions for credit losses        - 
Bad debt recovery   (3,840)   (8,213)
Allowance for uncollectible financing leases receivable at end of period  $6,455   $17,192 

 

At June 30, 2019, the aggregate amounts of future minimum gross lease payments receivable are as follows:

 

   Amount 
Year 1  $45,913 
Year 2   1,062 
Future minimum gross financing leases receivable  $46,975 

  

NOTE 4 – CONVERTIBLE DEBT

 

On January 28, 2019, the Company issued a convertible note to a third-party lender totaling $35,000 (the “January 2019 Note”). The company received cash of $31,500, original issue discounts of $2,100 and debt issuances costs of $1,400. The January 2019 Note accrues interest at 12% per annum and matures with interest and principal both due on October 28, 2019.  The January 2019 Note is convertible into the Company’s common stock at a rate of 60% discount to the Company’s common stock with a lookback of 20 trading days.

 

The conversion feature of the January 2019 Note provides for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a beneficial conversion feature (“BCF”). When the Company records a BCF the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF of $25,985. The total discounts on the note is $28,085. The total issuances costs are $1,400. The debt discount and debt issuances costs are being accreted over the life of the note to interest expense.

 

13

 

 

On February 11, 2019, the Company issued a convertible note to a third-party lender totaling $35,000 (the “February 2019 Note”). The company received cash of $31,500, original issue discounts of $2,100 and debt issuances costs of $1,400. The February 2019 Note accrues interest at 12% per annum and matures with interest and principal both due on November 6, 2019.  The February 2019 Note is convertible into the Company’s common stock at a rate of 60% discount to the Company’s common stock with a lookback of 20 trading days.

 

In addition, the Company issued a warrant to purchase 20,250 shares of Company common stock. The warrant entitles the holder to purchase the Company’s common stock at a purchase price of $2.00 per share for a period of three years from the issue date. The Company recorded a $13,534 debt discount relating to the warrants issued to the investor based on the relative fair value of each equity instrument on the dates of issuance.

 

The conversion feature of the February 2019 Note provides for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a beneficial conversion feature (“BCF”). When the Company records a BCF the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF of $31,288. The total discounts on the note is $46,922. The total issuances costs are $1,400. Due to the fact the total discounts exceeded the face value of the note $16,822 were expensed to interest expense upon issuance. The debt discount and debt issuances costs are being accreted over the life of the note to interest expense.

 

On April 1, 2019, the Company issued a convertible note to a third-party lender totaling $58,300 (the “April 2019 Note”). The company received cash of $50,000, original issue discounts of $5,300 and debt issuances costs of $3,000. The April 2019 Note accrues interest at 10% per annum and matures with interest and principal both due on March 28, 2020.  The April 2019 Note is convertible into the Company’s common stock at a rate of 60% discount to the Company’s common stock with a lookback of 25 trading days.

 

In addition, the Company issued a warrant to purchase 11,660 shares of Company common stock. The warrant entitles the holder to purchase the Company’s common stock at a purchase price of $2.00 per share for a period of three years from the issue date. The Company recorded a $2,893 debt discount relating to the warrants issued to the investor based on the relative fair value of each equity instrument on the dates of issuance.

 

The conversion feature of the April 2019 Note provides for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a beneficial conversion feature (“BCF”). When the Company records a BCF the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF of $38,867. The total discounts on the note is $ 47,059. The total issuances costs are $3,000. The debt discount and debt issuances costs are being accreted over the life of the note to interest expense.

 

During the six months ended June 30, 2019 the lenders converted $11,700 in principal into 151,327 shares of the Company’s common stock.

 

For the six months ended June 30, 2019 and 2018, amortization of debt discount related to these convertible notes amounted to $157,085 and $23,225, respectively, which has been included in interest expense on the accompanying condensed consolidated statements of operations. 

 

As of June 30, 2019 and December 31, 2018, accrued interest payable amounted to $57,922 and $34,933, respectively. The weighted average interest rate for the six months ended June 30, 2019 and December 31, 2018 was approximately 10% and 10%, respectively.

 

At June 30, 2019 and December 31, 2018, the convertible debt consisted of the following:

 

   June 30,
2019
   December 31,
2018
 
Principal amount  $744,600   $628,000 
Less: unamortized debt issuance costs   (3,519)   - 
Less: unamortized debt discount   (13,807)   (148,826)
    627,274    479,174 
Less: Current Debt   (409,688)   - 
Convertible note payable, net – long-term  $217,587   $479,174 

 

At June 30, 2019, future debt maturities are $494,600 through June 30, 2020 and $250,000 thereafter.

 

14

 

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

Notes payable – related parties

 

At June 30, 2019 and December 31, 2018, notes payable – related parties consisted of the following:

 

    June 30,
2019
    December 31,
2018
 
Principal amount   $ 10,000     $ 12,500  
Less: unamortized debt discount     -       -  
Notes payable – related parties, net   $ 10,000     $ 12,500  

 

During the six months ended the Company repaid $2,500 in principal and $733 in accrued and unpaid interest.

 

As of June 30, 2019 and December 31, 2018, accrued interest payable amounted to $501 and $544, respectively.  

 

Line of credit – related party

 

As of June 30, 2019 and December 31, 2018, the line of credit related party amounted to $70,000.

 

As of June 30, 2019 and December 31, 2018, accrued interest payable related party amounted to $5,508 and $2,842, respectively.

 

Office rent - related party

 

The Company rents its office space from a Director of the Company on a month-to-month basis for $445 per month. For the six months ended June 30, 2019 and 2018, rent expense – related party amounted to $6,750 and $ 4,500, respectively, and is included in general and administrative expenses on the accompanying statements of operations. 

 

NOTE 6 – REDEEMABLE SERIES A PREFERRED

 

Preferred Stock

 

The Company has 10,000,000 shares of preferred stock authorized. Preferred stock may be issued in one or more series. The Company’s board of directors is authorized to issue the shares of preferred stock in such series and to fix from time to time before issuance thereof the number of shares to be included in any such series and the designation, powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof, of such series.

 

On September 4, 2018, the Company filed a Certificate of Designation with the Secretary of State of Nevada (the “Certificate of Designation”) designating 51 shares of its authorized preferred stock as Series A Super Voting Preferred Stock (“Series A Preferred”). The shares of Series A Preferred have a par value of $0.0001 per share. The Series A Preferred is not entitled to receive any dividends or liquidation preference and is not convertible into shares of the Company’s common stock.

 

15

 

 

The holders of the Series A Preferred shall in the aggregate have a voting power equal to 51% of the total votes of all of the outstanding common and preferred stock of the Company entitled to vote. Accordingly, each share of Series A Preferred shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding shares of common stock and preferred stock eligible to vote on a matter (the “Numerator”) divided by (y) 0.49, minus (z) the Numerator. For example, if the total issued and outstanding shares of common stock and preferred stock equal 5,000,000 shares, then the voting rights of one share of the Series A Preferred shall be equal to 102,036 ((5,000,000 x 0.019607) / 0.49) – (5,000,000 x 0.019607). With respect to all matters upon which stockholders are entitled to vote or give consent, the holders of the outstanding shares of Series A Preferred shall vote with the holders of the common stock and any outstanding preferred stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Company’s Articles of Incorporation or Bylaws.

 

The holders of a majority of the outstanding Series A Preferred may require the Company to redeem all of the outstanding shares of Series A Preferred at any time at a redemption price of $1,000 per share. In addition, the Series A Preferred shall be automatically, and without required action by the Company or the holders thereof, be redeemed by the Company at $1,000 per share on the date that Paul Patrizio ceases, for any reason, to serve as an officer, director or consultant of the Company, it being understand that if Mr. Patrizio continues without interruption to serve in at least one such capacity, this shall not be considered a cessation of service.

 

As of June 30, 2019 and December 31, 2018 the Company had 51 shares of Series A Preferred issued and outstanding with a stated valued of $51,000.

 

NOTE 7 – STOCKHOLDERS’ DEFICIT

 

Common stock issued for services

 

On February 1, 2019 the Company entered into a three-month consulting agreement for investor relations services. In connection with the consulting agreement, the Company agreed to issued 20,000 shares of its common stock on the first of each month for the next three months. The shares were valued at their fair value of $56,500 which was the fair value on the date of grant based on the closing quoted share price on the date of grant.

 

Common stock issued for note conversion

 

During the six months ended June 30, 2019 a lender converted $11,700 in principal into 151,327 shares of the Company’s common stock.

 

Stock options

 

Stock option activities for the six months ended June 30, 2019 is summarized as follows:

 

    Number of Options     Weighted Average Exercise Price     Weighted Average Remaining Contractual Term (Years)     Aggregate Intrinsic Value  
Balance Outstanding December 31, 2018     300,000       1.00       4.76          
Granted     -       -       -          
Balance Outstanding June 30, 2019     300,000     $ 1.00       3.51     $  -  
Exercisable, June 30, 2019     100,000     $ 1.00       3.51     $      -  

 

16

 

 

Warrants

 

The Company applied fair value accounting for all share-based payments awards. The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model.

 

The assumptions used for warrants granted during the six months ended June 30, 2019 are as follows:

 

  

June 30,

2019

 
Exercise price  $2.00 
Expected dividends   -%
Expected volatility   100%
Risk free interest rate   2.31 – 2.47%
Expected life of warrant   3 years 

 

Warrant activities for the six months ended June 30, 2019 are summarized as follows:

 

   Number of
Warrants
   Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Contractual Term
(Years)
   Average
Intrinsic
Value
 
Balance Outstanding December 31, 2018   1,363,999    2.36    4.10      
Granted in connection with debt   31,910    2.00    3.00      
Balance Outstanding June 30, 2019   1,395,909    2.35    3.59   $34,500 
Exercisable, June 30, 2019   1,395,909    2.35    3.59   $34,500 

  

NOTE 8 – COMMITMENTS AND CONTINCENGIES

 

Employment agreement

 

On December 14, 2017 and effective on January 1, 2018 (the “Effective Date”), the Company entered into a new employment agreement with its CEO. For all services rendered by CEO pursuant to this Agreement, during the term of this Agreement the Company shall pay the CEO a salary at the following annual rates based upon the financial statements of the Company:

 

  (i) Upon the Effective Date, the CEO’s base compensation shall be at the annual rate of $150,000;
     
  (ii) Thereafter; upon the first $500,000 of gross proceeds in a financing raised by the Company during the term of the Agreement the CEO’s base salary compensation shall be raised to $200,000;
     
  (iii) Thereafter; upon the next $500,000 of gross proceeds in financings raised by the Company during the term of the Agreement the CEO’s base salary compensation shall be raised to $250,000;
     
  (iv) Thereafter; for each additional $1,000,000 of gross proceeds in financings raised by the Company during the term of the Agreement the CEO’s base salary compensation shall be increased by $12,000.

 

The CEO’s base salary shall be increased on each January 1st during the term of this Agreement by not less than five percent (5%) of the then annual compensation amount.

 

The Company will provide the CEO with an allowance equal to $2,000 per month for health insurance with such allowance increased on each anniversary date of this Agreement at the same rate as the CEO’s base compensation in addition to any amounts provided to employees generally.

 

The CEO will earn an annual bonus as follows: nine percent (9%) of the Company’s annual EBITDA (Earnings before interest expense, taxes, depreciation, and amortization and all other non-cash charges) up to the first $5,000,000 of EBITDA, then 5% on amounts thereafter, based on the audited consolidated results of the Company. This bonus shall be payable in cash within thirty days after the audit has been completed. In addition, the CEO was entitled to a transaction bonus in the amount of $20,000 payable in cash at the closing of the Share Exchange in addition to any amounts outstanding to him from Arista at that time.

 

17

 

 

In addition, effective January 1, 2018, the CEO was granted options to purchase 300,000 shares of the Corporation’s common stock at an exercise price of $1.00 per share which shall vest annually on a pro rata basis over the 3-year period commencing January 1, 2019.

 

Unless earlier terminated in accordance with the terms hereof, the term of the Agreement shall be for the period commencing as of the Effective Date and ending December 31, 2022; provided, however, that on each anniversary date of the Agreement, this Agreement shall automatically be extended for successive one-year periods unless the Company or the CEO shall have given the other written notice of its or his intention to terminate this Agreement at least six months prior to the anniversary date in any such year. 

 

In the event of termination of employment by the Company pursuant to the Agreement, without cause, the Company shall continue for a period equal to the greater of (A) the balance of the term of the Agreement, or (B) two (2) years, the following: (i) the CEO’s base salary at its then annual rate, and (ii) provide to the Executive the benefits.

 

In the event of termination of the CEO’s employment by the Company in the first year of the Agreement for any reason whatsoever excluding a termination with cause, the Company shall pay as severance to CEO, no later than thirty days following the date of termination, the greater of (i) 300% of the maximum allowable bonus payable to the Executive pursuant to Section 4(b); or (ii) the sum of $300,000.

 

Future minimum commitment payments under an employment agreement at June 30, 2019 are as follows:

 

Years ending December 31,  Amount 
2019 (remainder of year)  $110,250 
2020   231,525 
2021   243,101 
2023   255,256 
Total minimum commitment employment agreement payments  $840,133 

 

Consulting agreements

 

On March 1, 2018, the Company entered into a one-year consulting agreement with a third-party entity for assistance with corporate strategy, investor relations, and financial advisory and business development services. In connection with this consulting agreement, the Company paid the consultant $5,000. Upon fulfillment of the term of the agreement, the agreement shall convert to either an “at will” agreement or shall extend for an additional period of time as mutually determined by the Company and consultant.

 

Investment agreement

 

On July 19, 2018, the Company entered into an investment agreement with a third-party entity to invest up to $5,000,000 over a commitment period of three years by purchasing the Company’s common stock under Section 4(a)(2) of the Securities Act of 1933. The third-party entity’s obligation to purchase the Company’s common stock is subject to the filing and effectiveness of an S-1 registration statement by the Company.

  

NOTE 9 – SUBSEQUENT EVENTS

 

Subsequent to June 30, 2019, the Company entered into two convertible note agreements with investors. The Company received proceeds of $65,000. As additional consideration for entering in the convertible note agreements, the investors were granted warrants to purchase 75,000 shares of the Company’s common stock. In addition, on August 15, 2019, the Company issued a warrant to purchase 128,048 shares of the Company’s common stock to an investor in connection with a pre-existing securities purchase agreement.

 

Subsequent to June 30, 2019, the Company’s lenders converted a portion of the Company’s outstanding convertible notes into 862,000 shares of the Company’s common stock.

 

Subsequent to June 30, 2019, the Company was served with a summons and complaint relating to a lawsuit filed by CFO Oncall, Inc. in the Circuit Court of the Seventeenth Judicial Circuit, Broward County, Florida on June 18, 2019 against the Company alleging that the Company owes the plaintiff approximately $15,000 in connection with certain consulting services provided by the plaintiff in 2018. The Company has engaged legal counsel and intends to defend itself vigorously.

  

18

 

 

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

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the accompanying condensed consolidated financial statements and the audited consolidated financial statements and notes thereto included in our 2018 Form 10-K.

 

Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the below “Forward-Looking Statements” section of this MD&A and our 2018 Form 10-K for a discussion of these risks and uncertainties.

 

Forward-Looking Statements

 

In this report and in reports we subsequently file and have previously filed with the SEC on Forms 10-K and 10-Q and file or furnish on Form 8-K, and in related comments by our management, we use words like “anticipate,” “appears,” “approximately,” “believe,” “continue,” “could,” “designed,” “effect,” “estimate,” “evaluate,” “expect,” “forecast,” “goal,” “initiative,” “intend,” “may,” “objective,” “outlook,” “plan,” “potential,” “priorities,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” or the negative of any of those words or similar expressions to identify forward-looking statements that represent our current judgment about possible future events. In making these statements we rely on assumptions and analysis based on our experience and perception of historical trends, current conditions and expected future developments as well as other factors we consider appropriate under the circumstances. We believe these judgments are reasonable, but these statements are not guarantees of any events or financial results, and our actual results may differ materially due to a variety of important factors, both positive and negative.

 

We caution readers not to place undue reliance on forward-looking statements. We undertake no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors that affect the subject of these statements, except where we are expressly required to do so by law. 

 

Overview

 

We are a finance company that provides financing to other small finance companies that do not have significant access to the capital markets. Typically, we do this by acquiring lease portfolios from such lenders at a purchase price that yields us an annual return and these lenders continue to service the portfolios purchased by us. We are currently focused on leases for trucks and construction equipment.

 

Critical Accounting Policies

 

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2018 Annual Report. 

  

Results of Operations - Comparison of Results of Operations for the Three and Six Months Ended June 30, 2019 and 2018

 

Revenues

 

Revenues consist of interest earned on lease financings and other fee income. For the three months ended June 30, 2019, total revenues amounted to $2,454 as compared to $2,781 for the three months ended June 30, 2018, a decrease of $327, or 12%. For the six months ended June 30, 2019, total revenues amounted to $5,826 as compared to $6,454 for the six months ended June 30, 2018, a decrease of $628, or 10%. The decrease in revenues for the periods discussed were attributable to a decrease in the revenue generated by our leasing portfolio during the 2019 period as compared to the 2018 period.

 

19

 

 

Operating Expenses

 

For the three months ended June 30, 2019, operating expenses amounted to $237,571 as compared to $222,366 for the three months ended June 30, 2018, an increase of $15,205, or 7%. For the six months ended June 30, 2019, operating expenses amounted to $437,112 as compared to $416,655 for the six months ended June 30, 2018, an increase of $20,457, or 5%.

 

For the three and six months ended June 30, 2019 and 2018, operating expenses consisted of the following:

 

   Three Months Ended
June 30,
  Six Months Ended
June 30,
 
   2019   2018  2019  2018 
Compensation and benefits  $94,920   $101,661   238,764   202,283 
Professional fees   100,644    105,768   143,367   192,648 
Provision for lease losses   (2,650)   (4,037)  (3,840)  (8,213)
General and administrative expenses   44,657    18,974   58,821   29,937 
Total  $237,571   $222,366   437,112   416,655 

  

  For the three months ended June 30, 2019, compensation and benefit expense decreased by $6,741, or 7% as compared to the three months ended June 30, 2018. For the six months ended June 30, 2019, compensation and benefit expense increased by $36,481, or 18%, as compared to the six months ended June 30, 2018. This increase was attributable to an increase in compensation paid to Arista’s chief executive officer which includes stock-based compensation of $136,262 for the six months ended June 30, 2019 for stock options granted on January 1, 2018.

 

 

For the three months ended June 30, 2019, professional fees decreased by $5,124, or 5%, as compared to the three months ended June 30, 2018. This decrease was primarily attributable to a decrease in legal fees of $35,818.  For the six months ended June 30, 2019, professional fees decreased by $49,281, or 26%, as compared to the six months ended June 30, 2018. This decrease was attributable to an increase in accounting fees of $28,046 and an increase in transfer agent fees of $4,097, offset by a decrease in legal fees of $43,658 and consulting fees of $34,789.

     
  For the three months ended June 30, 2019, provision for lease losses increased by $1,387 as compared to the three months ended June 30, 2018. For the six months ended June 30, 2019, we recorded a provision for lease losses of $3,840 as compared to $8,213 for the six months ended June 30, 2018. Management periodically evaluates financing leases receivables based on the individual creditworthiness of customers. Based on this evaluation, Arista records an allowance for estimated losses on these receivables.
     
 

For the three months ended June 30, 2019, general and administrative expenses increased by $25,683 as compared to the three months ended June 30, 2018. The increase during the three-month period was primarily due to increases in insurance, postage expenses and bank charges offset by decreases in charitable contributions and investor relations expenses. For the six months ended June 30, 2019, general and administrative expenses increased by $28,884 as compared to the six months ended June 30, 2018. The increase was primarily due to increases in insurance, postage expenses and filing fees of $15,216, $11,131 and 4,573, respectively, offset by decreases in charitable contributions and investor relations expenses of $5,000 and $4,000, respectively.

 

20

 

 

Loss from Operations

 

As a result of the factors described above, for the three months ended June 30, 2019, loss from operations amounted to $235,117, as compared to $219,585 for the three months ended June 30, 2018, an increase of $15,532, or 7%. For the six months ended June 30, 2019, loss from operations amounted to $431,286, as compared to $410,201 for the six months ended June 30, 2018, an increase of $21,085, or 5%.

 

Other Expenses

 

Other expenses consist of interest expense incurred on debt owed to third parties and related parties. For the three months ended June 30, 2019, interest expense amounted to $96,272, as compared to $31,313 for the three months ended June 30, 2018, an increase of $64,959, or 207%. These increases were attributable to an increase in borrowing pursuant to convertible note instruments and the amortization of debt discount. For the six months ended June 30, 2019, interest expense amounted to $218,087, as compared to $62,816 for the six months ended June 30, 2018, an increase of $155,271, or 247%. These increases were attributable to an increase in borrowing pursuant to convertible note instruments and the amortization of debt discount.

 

Net Loss

 

As a result of the foregoing, for the three months ended June 30, 2019 and 2018, net loss amounted to $333,926, or $0.10 per common share (basic and diluted), and $257,831, or $0.08 per common share (basic and diluted), respectively. For the six months ended June 30, 2019 and 2018, net loss amounted to $654,500, or $0.19 per common share (basic and diluted), and $489,585, or $0.16 per common share (basic and diluted), respectively.

 

Due to lack of operating cash flows, from December 31, 2018 to June 30, 2019, accounts payable increased by $93,382 and accrued expenses increased by $57,568. 

 

Liquidity and Capital Resources

 

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. Arista had cash of $1,175 and $10,357 on hand as of June 30, 2019 and December 31, 2018, respectively.

 

Arista’s primary uses of cash have been for salaries, fees paid to third parties for professional services, general and administrative expenses, and the acquisition lease portfolios. All funds received have been expended in the furtherance of growing the business. Arista has received funds from the collection of lease payments, and from various financing activities such as from debt financings. The following trends are reasonably likely to result in changes in Arista’s liquidity over the near to long term:

 

We may need to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations. We estimate that based on current plans and assumptions, our available cash will not be sufficient to satisfy our cash requirements under our present operating expectations for the next 12 months from the date of this annual report. Other than revenue received from our lease portfolio, and funds received from debt financings, we presently have no other significant alternative source of working capital. We have used these funds to fund our operating expenses, pay our obligations, acquire lease portfolios, and grow our company. We need to raise significant additional capital or debt financing to acquire new properties, to acquire additional lease portfolios, and to assure we have sufficient working capital for our ongoing operations and debt obligations. 

 

Cash Flows

 

Net cash flow used in operating activities was $119,682 for the six months ended June 30, 2019, as compared to net cash used in operating activities of $147,107 for the six months ended June 30, 2018, an decrease of $27,425. Net cash used in operating activities consisted of cash used for working capital purposes for salaries, professional fees and general and administrative expenses.

 

For the six months ended June 30, 2019, we did not have any cash flows from investing activities. For the six months ended June 30, 2018, net cash flow provided by investing activities amounted to $15,000 and consisted of proceeds from the sale of assets held for sale of $15,000.

 

Net cash provided by financing activities was $110,500 for the six months ended June 30, 2019 as compared to $135,000 for the six months ended June 30, 2018. During the six months ended June 30, 2019, we received proceeds from convertible notes of $113,000. During the six months ended June 30, 2018, we received proceeds from a note payable subscription receivable of $50,000, proceeds from a related party line of credit of $35,000 and proceeds from convertible notes of $50,000.

 

21

 

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

Contractual Obligations

 

We are a smaller reporting company (as defined by Rule 12b-2 under the Securities Exchange Act of 1934) and are not required to provide the information under this item.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable to smaller reporting companies.

  

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of June 30, 2019, our disclosure controls and procedures were not effective.

 

The ineffectiveness of our disclosure controls and procedures was due to the following material weaknesses which we identified in our internal control over financial reporting:

 

  We did not maintain effective controls to identify and maintain segregation of duties between the ability to create and post manual journal entries to the general ledger system for a key accounting individual impacting the accuracy and completeness of all key accounts and disclosures. Specifically, the individual is assigned to both prepare and post journal entries, while holding responsibility for review of certain monthly reconciliations, without his entries being subject to an independent review.

 

  We did not maintain effective controls to identify accounting policies and procedures specifying the correct treatment for estimating the allowance for lease losses and the related provision for lease losses. Specifically, supporting analysis is not prepared for estimating the allowance for lease losses and the related provision for lease losses, documenting compliance with relevant GAAP and the Company’s accounting policies.

 

  We did not maintain effective controls to identify and prepare a supporting analysis for each financial statement disclosure, documenting its relevance with GAAP and the Company’s accounting and disclosure policies. Specifically, an independent review of financial statements and all related disclosures is not performed by management and/or other suitably qualified personnel for completeness, consistency, and compliance with GAAP and the Company’s accounting and disclosure policies.

 

  Sufficient information is not provided to our Board of Directors on a timely basis to allow monitoring of management’s objectives and strategies, the entity’s financial position and operating results, and terms of significant agreements.  Specifically, the Board of Directors does not receive key information such as financial statements, analysis of significant accounts or transactions, and other financial information on a timely basis to monitor our financial position and operating results.

 

Changes in Internal Control

 

There were no changes in our internal control over financial reporting during the six months ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.   

 

22

 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Subsequent to June 30, 2019, the Company was served with a summons and complaint relating to a lawsuit filed by CFO Oncall, Inc. in the Circuit Court of the Seventeenth Judicial Circuit, Broward County, Florida on June 18, 2019 against the Company alleging that the Company owes the plaintiff approximately $15,000 in connection with certain consulting services provided by the plaintiff in 2018. The Company has engaged legal counsel and intends to defend itself vigorously.

 

Item 1A. Risk Factors

 

Not required of smaller reporting companies.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

  

Item 6. Exhibits

 

Exhibit No.   Description
     
31.1*   Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
     
31.2*   Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
     
32.1*   Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
     
101.INS*   XBRL Instance Document
101.SCH*   XBRL Taxonomy Extension Schema
101.CAL*   XBRL Taxonomy Extension Calculation
101.DEF*   XBRL Taxonomy Extension Definition
101.LAB*   XBRL Taxonomy Extension Labels
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase

 

*Filed herewith.

 

23

 

 

SIGNATURES

 

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

 

 

Arista Financial Corp.

(Registrant)

   
Date: August 19, 2019 /s/ Paul Patrizio
  Paul Patrizio
  Chief Executive Officer and President
  (principal executive officer)

 

Date: August 19, 2019 /s/ Jonathan R. Tegge
 

Jonathan R. Tegge

Interim Chief Financial Officer

(principal financial officer and
principal accounting officer)

 

 

 

24