**UNITED STATES**

 

 

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q
 

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

For the quarterly period ended:  **September 30, 2017
 

or

 

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

 

For the transition period from _________to ________

 

Commission File Number:  ** ****000-54027**

 

**BRIGHTLANE CORP.
(Exact name of registrant as specified in its charter)

 

**Nevada
 

**300782905
(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

**3270 Sul Ross, Houston, Texas77098
(Address of principal executive offices) (Zip Code)

 

**(888)468-2856
(Registrant’s telephone number, including area code)

 

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

Yes [X]   No [  ]

 

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

Yes [  ]   No [X]

 

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

 

Large accelerated filer

[   ]

  Accelerated filer

[   ]

Non-accelerated filer

[   ]

  Smaller reporting company

[X]

(Do not check if a smaller reporting company)

  Emerging growth company 

[X]

 

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

Yes [   ]   No [ X ]

 

As of November 14, 2017, the registrant had 19,442,667 shares of common stock outstanding.
1

**TABLE OF CONTENTS**

 

 

Page

PART I

 

Item 1. Financial Statements

3

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

13

Item 3 Quantitative and Qualitative Disclosures About Market Risk

15

Item 4 Controls and Procedures

15

 

 

PART II

 

Item 1. Legal Proceedings

17

Item IA. Risk Factors

17

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

17

Item 3. Defaults Upon Senior Securities

17

Item 4. Mine Safety Disclosures

17

Item 5. Other Information

17

Item 6. Exhibits

17

 

 

SIGNATURES

18

 

2

**PART I**

**Item 1.  Financial Statements.**

**BRIGHTLANE CORP.**

**CONSOLIDATED BALANCE SHEETS**

***(UNAUDITED)***

 

 

 

September 30, 2017

December 31, 2016

 

 

 

ASSETS

 

 

Current Assets

 

 

Cash and cash equivalents

$231,477   
$14,615   
Accounts receivable

0   
33,687   
Accounts receivable – related party

0   
2,622   
Notes receivable – current portion

270,036   
0   
Total Current Assets

501,513   
50,924   
Investment in non-consolidated subsidiary

0   
3,085,521   
Notes receivable – long term portion

4,336,404   
0   
Real Estate Owned

20,000   
0   
Investment in real estate, net

16,308   
61,799   
Equipment, net

884   
884   
          TOTAL ASSETS

$4,875,109   
$3,199,128   
 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

LIABILITIES

 

 

Current Liabilities

 

 

Accounts payable

$20,690   
$23,518   
Accounts payable – related party

44,031   
0   
Accrued expenses

68,147   
49,253   
Accrued interest

66,366   
30,424   
Acquisition related debt

2,297,794   
0   
Demand note payable

50,000   
50,000   
Demand notes payable – related party

400,000   
0   
Total Current Liabilities

2,947,028   
153,195   
 

 

 

Convertible notes payable – related party

499,200   
499,200   
          TOTAL LIABILITIES

3,446,228   
652,395   
 

 

 

STOCKHOLDERS' EQUITY (DEFICIT)

 

 

Series A Preferred Voting Stock, $0.001 par value, 1 share authorized, 1 share issued and outstanding
0   
0   
Series B Preferred Voting Stock, $0.001 par value, 1 share authorized, 1 share issued and outstanding

0   
0   
Common stock, $0.001 par value, 250,000,000 shares authorized, 19,442,667 and 18,923,005 shares issued and outstanding at September 30, 2017 and December 31, 2016 respectively
19,443   
18,923   
Additional paid in capital

4,223,571   
4,224,091   
Accumulated deficit

(2,814,133)  
(1,696,281)  
TOTAL STOCKHOLDERS' EQUITY

1,428,881   
2,546,733   
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$4,875,109   
$3,199,128   
 

*The accompanying notes to the unaudited condensed financial statements are an integral part of these statements.*

3

**BRIGHTLANE CORP.**

**CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS**

***(UNAUDITED)***

 

 

 

Three Months Ended September 30,

Nine Months Ended September 30,

 

2017

2016

2017

2016

 

 

 

 

 

REVENUE

 

 

 

 

Interest income

$98,165  
$- 
$170,087  
$- 
Fees

11,975  
- 
28,868  
- 
Sale of real estate

52,701  
72,484 
118,778  
72,484 
Rental income

2,025  
- 
6,075  
- 
Total Revenue

164,866  
72,484 
323,808  
72,484 
 

 

 

 

 

Cost of property sold

(20,400) 
- 
(64,400) 
- 
 

 

 

 

 

Gross Profit

144,466  
72,484 
259,408  
72,484 
 

 

 

 

 

OPERATING EXPENSES

 

 

Selling, general and administrative

262,535  
122,367  
707,947  
306,973  
 

 

 

 

 

OPERATING LOSS

(118,069) 
(49,883) 
(448,539) 
(234,489) 
 

 

 

 

 

OTHER EXPENSE

 

 

 

Interest expense - related party

13,553  
10,225  
35,943  
19,501  
Interest expense - other

1,000  
1,000  
3,000  
3,061  
Loss on disposition of assets

533,199  
-  
533,199  
-  
Loss on equity interest

-  
-  
114,500  
-  
 

 

 

 

 

Loss Before Provision for Income Taxes

(665,821) 
(61,108) 
(1,135,181) 
(257,051) 
 

 

 

 

 

Provision for Income Taxes

-  
-  
-  
-  
 

 

 

 

 

Net Loss

$(665,821) 
$(61,108) 
$(1,135,181) 
$(257,051) 
 

 

 

 

 

Net Loss Per Share: Basic and Diluted

$(0.02) 
$(0.01) 
$(0.02) 
$(0.01) 
 

 

 

 

 

Weighted Average Number of Shares Outstanding: Basic and Diluted

19,352,291  
18,923,005  
19,067,673  
18,923,005  
4

**BRIGHTLANE CORP.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

***(UNAUDITED)***

 

 

 

Nine Months Ended 

September 30,

 

2017

2016

 

 

 

OPERATING ACTIVITIES

Net Loss

$(1,135,181)
$(257,051)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:

  Depreciation expense

1,490
-
  Loss on disposition of assets

533,199
-
  Loss on equity interest

114,500
-
Changes in Assets and Liabilities

  Accounts receivable

36,309
-
  Accounts payable

58,531
5,172
  Accrued expenses

18,895
-
  Accrued interest

35,943
19,287
  Investment in real estate

45,490
(117,900)
NET CASH USED IN OPERATING ACTIVITIES

(290,824)
(350,492)
 

 

 

INVESTING ACTIVITIES

  Purchase of equipment

-
(700)
  Principal payments of notes receivable

107,686
-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

107,686
(700)
 

 

 

FINANCING ACTIVITIES

  Proceeds received from related party

-
444,200
  Proceeds received for notes payable

400,000
-
  Repayment of demand note payable

-
(10,723)
NET CASH PROVIDED BY FINANCING ACTIVITIES

400,000
433,477
 

 

 

NET CHANGE IN CASH

216,862
82,285
 

 

 

Cash and Cash Equivalents - Beginning of Period

14,615

215,881

Cash and Cash Equivalents - End of Period

$231,477
$298,166
 

 

 

Supplemental disclosures:

  Cash paid for interest

3,000
3,275
  Cash paid for income taxes

-
-
 

 

* The accompanying notes to the unaudited condensed financial statements are an integral part of these statements.*

 

5

**BRIGHTLANE CORP.**

**NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2017**

 

NOTE 1 – ORGANIZATION AND BUSINESS

 

Brightlane Corp. (“we”, “our”, “us”, the “Company” or the “Registrant”) was initially incorporated under the laws of the State of Delaware in December 2006 under the name “Cold Gin Corporation.” On December 27, 2010, in connection with an Agreement and Plan of Reorganization we changed our domicile from Delaware to Nevada, our name to Bonanza Gold Corp.  In the third quarter of 2015, Brightlane Acquisition Corp. acquired a controlling interest in the Company from existing shareholders.  This change of control began the transitioning to a lease-to-own real estate company.  In connection with this transition, effective September 22, 2015 we changed our name to Brightlane Corp.

 

Our business model is oriented around acquiring single family homes and portfolios of single family homes and then providing affordable rental and homeownership opportunities utilizing various financing strategies to include rental and lease-to-own options targeting the sub-$150,000 single-family home market.  We offer our tenants the opportunity to eventually own the home if they so choose.  If tenants fulfill their obligations under a lease-to-own agreement, we will deliver the deed to the lessees.  We will actively pursue the acquisition of homes through the purchase of bank REOs, portfolios and other methods of acquisition.  

 

On December 21, 2015, we completed the agreement to acquire all of the outstanding shares of Brightlane Homes, Inc. which through its wholly owned subsidiary acquired a 99.9% limited partner interest in Brightlane RECA LP which was the beneficiary of the Brightlane RECA Trust which owns a portfolio of assets herein referred to as the Brightlane RECA portfolio.  The Brightlane RECA portfolio now consists of approximately 234 single-family homes related to 201 income-producing owner-financed and purchase money notes and 33 real estate properties owned.  The underlying homes are geographically dispersed across the Great Lakes, Upper Midwest, Ohio Valley, Midwest and Southeast regions of the U.S. and are held in a statutory trust known as Brightlane RECA Trust for which Brightlane RECA LP is the sole beneficiary. The largest concentrations are in the Southeast, particularly in South Carolina and North Carolina.  

 

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

 

On April 28, 2017, we incorporated a wholly-owned subsidiary Brightlane GP, Corp.  The partners of Brightlane RECA, LP amended their Limited Partnership Agreement to admit Brightlane GP, Corp. as a General Partner of Brightlane RECA LP and the former partner transferred all of its General Partner interests and powers to Brightlane GP, Corp. and withdrew as General Partner of Brightlane RECA LP.  This resulted in the financial operations of Brightlane Homes, Inc. and associated Brightlane RECA portfolio to be reported on a consolidated basis at April 28, 2017.

 

NOTE 2 – GOING CONCERN

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has only generated minimal revenues since inception and has an accumulated deficit of $(2,814,133) as of September 30, 2017. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  The Company’s continuation as a going concern is dependent upon, among other things, its ability to generate revenues and its ability to obtain capital from third parties.  No assurance can be given that the Company will be successful in these efforts.  Management plans to identify adequate sources of funding to acquire incoming producing homes in addition to refinancing the acquisition related debt.  Either of these situations (or both) cause immediate positive cash flow to be generated.
6

 

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

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”).  Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2017 and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Form 10-K for the year ended December 31, 2016 filed with the SEC on April 17, 2017.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Principals of Consolidation

 

The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated

 

Cash and Cash Equivalents

 

The Company accounts for cash and cash equivalents under FASB ASC 305, “*Cash and Cash Equivalents*”, and considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. 

 

Convertible Instruments

 

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

 

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

 

7

The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

 

Deferred Income Taxes and Valuation Allowance

 

The Company accounts for income taxes under ASC 740 *Income Taxes*.  Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs.  A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.  No deferred tax assets or liabilities were recognized at September 30, 2017 and December 31, 2016.

 

Financial Instruments

 

The Company’s balance sheet includes certain financial instruments: primarily accounts payable, accruals and debt obligations. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization. 

 

ASC 820, “*Fair Value Measurements and Disclosures*,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

Level 1 -Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. 

 

Level 2 -Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. 

Level 3 -Inputs that are both significant to the fair value measurement and unobservable. 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2017.  The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.  The Company does not have any assets or liabilities measured at fair value on a recurring basis.

 

Investments in non-consolidated subsidiaries

8

 

Investments in non-consolidated entities are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company's ability to exercise significant influence over the operating and financial policies of the investee. When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company's proportionate share of the investees' net income or losses after the date of investment. When net losses from an investment accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company's share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

 

Long-lived Assets

 

Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any periods presented.

 

Property and Equipment

 

The Company follows ASC 360, *Property, Plant, and Equipment,* for its fixed assets.  Equipment is stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets (3 years). 

 

Related Parties

 

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

 

Stock-Based Compensation

 

ASC 718 *“Compensation – Stock Compensation,”* prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, may be classified as either equity or liabilities. The Company determines if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity’s past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50 “*Equity – Based Payments to Non-Employees*.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date. 

 

Recently Issued Accounting Pronouncements

9

 

We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

 

NOTE 4 – BUSINESS COMBINATION

 

On April 28, 2017, we incorporated a wholly-owned subsidiary Brightlane GP, Corp.  The partners of Brightlane RECA, LP amended their Limited Partnership Agreement to admit Brightlane GP, Corp. as a General Partner of Brightlane RECA LP and the former partner transferred all of its General Partner interests and powers to Brightlane GP, Corp. and withdrew as General Partner of Brightlane RECA LP.  This resulted in the financial operations of Brightlane Homes, Inc. and the associated Brightlane RECA portfolio to be reported on a consolidated basis at April 28, 2017.

 

In accordance with ASC 850-10-25, the Company remeasured to fair value the equity interest at the date that controlling interest was acquired, and recorded a loss of $114,500.
 

NOTE 5 – ACQUISITION RELATED DEBT

 

Upon the integration of the Brightlane Home, Inc. subsidiary and the associated Brightlane RECA portfolio, the Company recognized a portfolio of notes receivable totaling $4,885,472 with associated debt due to several third parties in the amount of $2,732,866.  During the three months ended September 30, 2017, there were various routine portfolio adjustments due to paid in full properties, the conversion of income producing assets to REO status, and the return of non-performing properties to the original contributors of the portfolio.  These routine adjustments resulted in notes receivables totaling $4,606,439 with associated debt to several third parties in the amount of $2,297,794 at September 30, 2017.  This debt is guaranteed by the principals of the former general partner.  Brightlane Homes, Inc. and it subsidiaries have agreed to assist and/or facilitate the refinancing or retirement of the acquisition related debt, as soon as practicable.  
 

NOTE 6 – LINE OF CREDIT FACILITY

 

On May 19, 2017, Brightlane – CLOC Acquisitions, L.L.C., a Delaware limited liability company and a wholly owned subsidiary of the registrant entered into a $5,000,000 revolving credit facility with Colony American Finance Lender, LLC, a Delaware limited liability company.  This credit facility is for the acquisition of residential homes providing the Company an acquisition vehicle.  General provisions of this credit facility are an 18 month term at 9%, with a loan to value of 80%.  To date the Company has not utilized this credit facility.

 

NOTE 7 – NOTES PAYABLE

 

On September 30, 2015 the Company borrowed $60,723 from a third party.  The note bears interest at 8% per annum and is payable on demand. Interest is paid quarterly. The note is convertible into common stock of the Company at $0.50 per share.  On January 28, 2016, the Company made a principal payment of $10,723, bringing the outstanding principal to $50,000 on this note.  Interest expense incurred during the nine and three months ended September 30, 2017 was $3,000 and $1,000 respectively.
 

NOTE 8 – RELATED PARTY TRANSACTIONS

 

On December 9, 2015, we entered into a subscription agreement to sell one unit consisting of a $250,000 promissory note, one share of Series A Preferred Voting Stock and one share of Series B Preferred Voting Stock to a related-party in exchange for $250,000 and the investor’s agreement to utilize its best efforts to cause a capital injection of up to $3,000,000 into the Company on or before January 1, 2017 (extended to January 1, 2018).  The 
10

promissory note carries an interest rate of 6% per annum with a maturity date of December 9, 2018.  The lender may convert into shares of our common stock after one year, at $0.50 per share.  The lender has the option of accruing interest or receiving interest only payment annually.  Interest expense for this note for the nine and three months ended September 30, 2017 was $11,250 and $3,750 respectively.
 

On March 24, 2016, we received an additional $110,000 in loans from the aforementioned related party as an advance on the commitments this related party has to us.  The promissory note carries an interest rate of 6% per annum with a maturity date of March 24, 2019.  The lender may convert into shares of our common stock after one year, at $0.50 per share.  The lender has the option of accruing interest or receiving interest only payment annually.  Interest expense for this note for the nine and three months ended September 30, 2017 was $4,950 and $1,650 respectively.
 

On July 27, 2016, we received an additional $499,200 in loans from the aforementioned related party as an advance on the commitments this related party has to us.  The promissory note carries an interest rate of 6% per annum with a maturity date of July 27, 2019.  The lender may convert into shares of our common stock after one year, at $0.50 per share.  The lender has the option of accruing interest or receiving interest only payment annually.  Interest expense for this note for the nine and three months ended September 30, 2017 was $6,247 and $2,105 respectively.
 

On February 28, 2017 the Company borrowed $400,000 from a related party.  The note bears interest at 6% per annum and is payable on demand.  Interest is accrued quarterly.  Interest expense incurred during the nine and three months ended September 30, 2017 was $13,496 and $6,049 respectively.
 

NOTE 9 – SHAREHOLDERS’ EQUITY 

 

Common Stock

 

The Company has 250,000,000 authorized common shares with a par value of $0.001 per share.  Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

 

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

The Company issued 519,662 shares of its common stock on July 17, 2017.  The holder of certain warrants elected to exercise his right to convert the exercisable warrants on a cashless basis into common stock prior to their expiration dates.
 

Preferred Stock

 

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

 

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

 

*Series B Preferred Voting Stock*  With respect to all meetings of the shareholders of the Company at which the holders of the Company’s Common Stock, par value $0.001 per share, are entitled to vote and with respect to 
11

any written consents sought by the Company from the holders of the Common Stock, the holder of the share of Series B Preferred Voting Stock shall vote together with all the holders of the Common Stock and any other voting preferred stock issued and outstanding, and holders of the issued Series B Preferred Voting Stock shall be entitled to cast on such matters a number of votes equal to 20,000,000 common shares.

 

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

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

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

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

 

*Warrants issued in connection with sale of common shares*

 

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

 

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

 

 

Issue Date

Expiration Date

 

Number of Warrants

 

Remaining Life(in Years)

Amended and restated warrant certificate No. 1105

1/9/2014

1/8/2018

 

 

175,000

 

 

0.27

 

 

 

 

 

175,000

 

 

 

 

 

As of September 30, 2017, the Company had issued and outstanding 175,000 warrants that are exercisable at $1.25 per warrant for one share of common stock and remain outstanding, with a weighted average remaining life of .27 years.  The Holder of any warrant may not exercise any portion of the Warrant if such exercise will cause it to own more than 4.99 percent of the Company’s issued and outstanding common stock.

 

*Summary of warrant activities*

 

The following table summarizes information concerning outstanding and exercisable warrants as of September 30, 2017:

 

 

 

 

 

 

 

 

 

Warrants Outstanding

Warrants Exercisable

Range of exercise prices

Number outstanding

Average remaining life (in years)

Exercise price

Number outstanding

Average remaining life (in years)

Weighted average exercise price

 

 

 

 

 

 

 

$1.25

175,000

0.27

$1.25

175,000

0.27

$1.25

 

NOTE 10 – SUBSEQUENT EVENTS

 

None.  

12

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

 

*The following analysis of our financial condition and results of operations for the period January 1, 2017 through September 30, 2017 should be read in conjunction with the financial statements, including footnotes, and other information presented elsewhere in this Report on Form 10-Q and the risk factors and the financial statements for the year ended December 31, 2016 and the other information set forth in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on April 17, 2017.  In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Where possible, we have tried to identify these forward looking statements by using words such as “anticipate,” “believe,” “intends,” or similar expressions. Our actual results could differ materially from those anticipated by the forward-looking statements due to important factors and risks including, but not limited to, those set forth under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 17, 2017.*

 

***Working Capital***

 

 

 

September 30, 2017

 

 

December 31, 2016

 

Current Assets

 

$

501,513

 

 

$

50,924

 

Current Liabilities

 

$

2,947,028

 

 

$

153,195

 

Working Capital

 

$

(2,445,515

)

 

$

(102,271

)

 

***Cash Flows***

  

 

Nine Months Ended 

September 30,

 

 

 

2017

 

 

2016

 

Cash Flows Provided by (Used In) Operating Activities

 

$

(290,824

) 

 

$

(350,492

)

Cash Flows used in Investing Activities

 

$

107,686

 

 

$

(700  

)

Cash Flows Provided by Financing Activities

 

$

400,000

 

 

$

433,477

 

Net change in Cash During Period

 

$

216,862

 

 

$

82,285

 

 

**Results of Operations for the three months ended September 30, 2017 and 2016**

 

For the three months ended September 30, 2017 and 2016, total revenues were $164,866 and $72,484, respectively; and net losses were $665,821 and $61,108 respectively.

 

Total revenue for the three months ended September 30, 2017 was primarily attributable to interest and fees collected in association with the Brightlane RECA portfolio as well as rental and management fee income recognized from the operations of our Brightlife Management subsidiary and sale of real estate.  For the three months ended September 30, 2017 we had income from interest and fees collected of $107,140 associated with the Brightlane RECA portfolio, and generated an additional $5,025 in proceeds from the operations of our Brightlife Management subsidiary that were comprised of management fees and tenant income, and we sold one real estate property for net proceeds of $52,701 (after closing costs).  The real estate property sold had an initial cost basis of $20,400.  The resulting gross profit to the Company was $144,466 during the three months ended September 30, 2017.  During the three months ended September 30, 2017 and 2016, we had selling, general and administrative expenses of $262,535 and $122,367 respectively.  During the three months ended September 30, 2017 and 2016 we incurred interest expenses of $14,553 and $11,225 respectively.

 

On April 28, 2017, we completed the business combination of the Brightlane Homes, Inc subsidiary with the associated Brightlane RECA portfolio.  During the three months ended September 30, 2017, there were various routine portfolio adjustments due to paid in full properties, the conversion of income producing assets to REO status, and the return of non-performing properties to the original contributors of the portfolio.  These adjustments resulted in a reduction in notes receivables as well as a corresponding reduction in the associated debt to several third parties.  As a result, we recorded a loss on disposition of assets of $533,199 at September 30, 2017.

13

The net losses were attributable to operating expenses and other expenses that primarily consisted of expenses related to the implementation of the Company’s business model of a lease-to-own real estate business.  The operating expenses for the three months ended September 30, 2017 and 2016 were primarily general and administrative in nature and included legal fees, management and consulting fees, and audit and accounting fees.

 

**Results of Operations for the nine months ended September 30, 2017 and 2016**

 

For the nine months September 30, 2017 and 2016, total revenues were $323,808 and $72,484, respectively; and net losses were $1,135,181 and $257,051 respectively.

 

Total revenue for the nine months ended September 30, 2017 were primarily attributable to interest and fees collected in association with the Brightlane RECA portfolio, the sale of real estate holdings, as well as rental and management fee income recognized from the operations of our Brightlife Management subsidiary.  For the nine months ended September 30, 2017 we had income from interest and fees collected of $195,955 associated with the Brightlane RECA portfolio, we sold three real estate properties for net proceeds of $118,778 (after closing costs), and generated an additional $9,075 in proceeds from the operations of our Brightlife Management subsidiary that were comprised of management fees and tenant income.  The three estate properties sold had an initial cost basis of $64,400.  The resulting gross profit to the Company was $259,408 during the nine months ended September 30, 2017.  During the nine months ended September 30, 2017 and 2016, we had selling, general and administrative expenses of $707,947 and $306,973 respectively.  During the nine months ended September 30, 2017 and 2016 we incurred interest expenses of $38,943 and $22,562 respectively

 

On April 28, 2017, we completed the business combination of the Brightlane Homes, Inc subsidiary with the associated Brightlane RECA portfolio.  As a result, we recorded a loss on equity interest of $114,500 at September 30, 2017.  During the nine months ended September 30, 2017, there were various routine portfolio adjustments due to paid in full properties, the conversion of income producing assets to REO status, and the return of non-performing properties to the original contributors of the portfolio.  These adjustments resulted in a reduction in notes receivables as well as a corresponding reduction in the associated debt to several third parties.  As a result, we recorded a loss on disposition of assets of $533,199 at September 30, 2017.

 

The net losses were attributable to operating expenses and other expenses that primarily consisted of expenses related to the implementation of the Company’s business model of a lease-to-own real estate business.  The operating expenses for the nine months ended September 30, 2017 and 2016 were primarily general and administrative in nature and included legal fees, management and consulting fees, and audit and accounting fees.

 

**Liquidity and Capital Resources**

 

*Liquidity*

At September 30, 2017, we had cash and cash equivalents of $231,477. We have incurred negative cash flows from operations since we started our business.  We have spent and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our planned real estate acquisitions. 

 

For the nine months ended September 30, 2017, we recorded a net loss of $1,135,181.  We had a positive change of $36,309 due to accounts receivable, a positive change of $58,531 due to the accounts payable, a positive change of $18,895 from accrued expenses, a positive change of $35,943 due to accrue interest, a positive change of $20,400 due to investments in real estate and a positive change of $592 due to accumulated depreciation.  In total this resulted in a negative change in net cash used in operating activities of $290,824 for the nine months ended September 30, 2017.

 

For the nine months ended September 30, 2017 we realized payments on note payables due to our integration of the Brightlane Homes, Inc. operation resulting in net cash provided by investing activities of $107,686. For the nine months ended September 30, 2016, we spent $700 on the purchase of equipment, resulting in  net cash used in investing activities of $700 for the period.

14

For the nine months ended September 30, 2017, we received proceeds of $400,000 from a note payable.  As a result, we had net cash provided by financing activities of $400,000 for the nine months ended September 30, 2017.

 

For the nine months ended September 30, 2016, we received $444,200 as proceeds from a related party and repaid a demand note payable of $10,723.  As a result, we had net cash provided by financing activities of $433,477 for the nine months ended September 30, 2016.  

 

On May 19, 2017, Brightlane – CLOC Acquisitions, L.L.C., a Delaware limited liability company and a wholly owned subsidiary of the registrant entered into a $5,000,000 revolving credit facility with Colony American Finance Lender, LLC, a Delaware limited liability company.  This credit facility is for the acquisition of residential homes providing the Company an acquisition vehicle.  General provisions of this credit facility are an 18 month term at 9%, with a loan to value of 80%.  To date the Company has not utilized this credit facility.

 

The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. We have based our estimate on assumptions that may prove to be wrong. We may need to obtain additional funds sooner or in greater amounts than we currently anticipate. Potential sources of financing include strategic relationships, public or private sales of our shares or debt and other sources. We may seek to access the public or private equity markets when conditions are favorable due to our long-term capital requirements.  While we have a best efforts commitment from the aforementioned accredited investor it is uncertain when such additional funding will be available and whether the terms will be acceptable to us. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain financing when needed, we may be unable to carry out our business plan. As a result, we may have to significantly limit our operations and our business, financial condition and results of operations would be materially harmed.

 

We have no known demands or commitments and are not aware of any events or uncertainties as of September 30, 2017, other than the work commitment previously mentioned, that will result in or that are reasonably likely to materially increase or decrease our current liquidity.

 

*Capital Resources*

We had no material commitments for capital expenditures as of September 30, 2017.

 

*Off Balance Sheet Arrangements*

There are no off balance sheet arrangements.

 

**Item 3. Quantitative and Qualitative Disclosures about Market Risk.**

 

Not applicable because the Company is a smaller reporting company.

 

**Item 4. Controls and Procedures.**

 

**Evaluation of Disclosure Controls and Procedures**

 

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our Principal Executive Officer who is also our Principal Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer who is also our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). 

15

Based upon that evaluation, our Principal Executive Officer who is also our Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2017, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements.

 

**Changes in Internal Control over Financial Reporting**

 

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.

 

The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.

16

**PART II - OTHER INFORMATION**

 

**Item 1. Legal Proceedings.**

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. 

 

**Item 1A.  Risk Factors.**

 

Not applicable because the Company is a smaller reporting company.

 

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

 

1. Quarterly Issuances:

 

During the three months ended September 30, 2017, the holder of outstanding warrants elected to convert the exercisable warrants into common stock prior to their expiration dates which resulted in an issuance of 519,662 shares of common stock on July 17, 2017.

 

2. Subsequent Issuances:

 

Subsequent to the quarter, we did not issue any unregistered securities other than as previously disclosed.

 

**Item 3. Defaults upon Senior Securities.**

 

None.

 

**Item 4. Mine Safety Disclosures**

 

Not Applicable.

 

**Item 5. Other Information.**

** **

None.

 

**Item 6. Exhibits.**

 

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

   

32.1Certification pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 (1) 

 

101.INSXBRL Instance Document 

101.SCHXBRL Taxonomy Extension Schema Document 

101.CALXBRL Taxonomy Extension Calculation Linkbase Document 

101.DEFXBRL Taxonomy Extension Definition Linkbase Document 

101.LABXBRL Taxonomy Extension Label Linkbase Document 

101.PREXBR Taxonomy Extension Presentation Linkbase Document 

17

**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned.

 

 

 

**BRIGHTLANE CORP.**

 

Date:  November 14, 2017By:/s/ *Steve Helm* 

Steve Helm

President and Chief Executive Officer

(Principal Executive Officer, Principal Accounting Officer 

and Principal Financial Officer) 

18

 **************