Filing Analysis
DLT Resolution Inc. has dismissed its independent auditor, BF Borgers CPA PC, following the firm's SEC disciplinary action and appointed SRCO Professional Corporation as a replacement. Simultaneously, the company unwound previous share exchange agreements with Ciscom Corp shareholders due to Canadian regulatory issues and entered into new ownership arrangements.
🚩 Red Flags
- Auditor change triggered by SEC disciplinary action against the outgoing firm (BF Borgers).
- Multiple material events in a single filing (auditor change, asset unwinding/re-acquisition, and director appointments).
- Regulatory complications with the Ontario Securities Commission regarding previous share acquisitions.
- Complex related-party transactions involving the CEO (Drew Reid) and other insiders in the Ciscom Corp dealings.
📋 Key Facts
- Effective May 3, 2024, BF Borgers CPA PC was dismissed as the independent registered public accounting firm.
- SRCO Professional Corporation Chartered Professional Accountants was engaged as the replacement auditor on May 7, 2024.
- The SEC has issued an Order Instituting Public Administrative and Cease-and-Desist Proceedings against BF Borgers CPA PC (dated May 3, 2024).
- DLT unwound previous share exchanges with Ciscom Corp shareholders on May 3, 2024, to correct 'unintended deemed over-acquisition' under Canadian securities laws.
- New agreements were closed on May 7, 2024, resulting in DLT acquiring ~10.7% of Ciscom shares via a 1:2 share exchange ratio with 25 shareholders.
- Lino Fera and Chen Xi (Tony) Liao were appointed to the Board of Directors.
DLT Resolution Inc. entered into a definitive share purchase agreement to acquire the Global Motor Trade Group of Companies (GMTI), a group specializing in international vehicle and machinery distribution with annual gross revenues of $50.86 million. The transaction involves significant equity issuance and performance-based earn-outs.
🚩 Red Flags
- Related-party transaction: Newly appointed Director Charles Brofman is a Managing Member of two of the acquired entities (Global Motor Trade International LLC and SJ Auto Trade LLC).
- Significant dilution: The issuance of 6.02 million shares at $0.005/share represents a massive equity component relative to current market value.
- Potential conflict of interest: Brofman must abstain from voting on any future acquisitions where he might receive bonus compensation.
📋 Key Facts
- Acquisition of Global Motor Trade LLC, Global Motor Trade International LLC, SJ Auto Trade LLC, and WEC International LLC (collectively 'GMTI').
- GMTI reported combined annual gross revenue of $50,858,000.
- Consideration includes the issuance of 6,020,000 shares at a value of $0.005 per share, representing 14% of DLTI's issued and outstanding shares.
- Earn-out provisions include up to 1,111,000 and 1,666,000 additional shares based on gross profit thresholds ($4.25M and $5.25M respectively) over the next 24 months.
- Charles Brofman appointed as Director, General Counsel, and Secretary with projected compensation of $125,000 for 75% of his time.
DLT Resolution Inc. acquired an additional 22.15% stake in Ciscom Corp., increasing its total ownership to 42.05%. The acquisition was completed via the issuance of 11,421,401 restricted common shares.
🚩 Red Flags
- Significant dilution potential due to the issuance of over 11 million restricted common shares.
📋 Key Facts
- Acquired an additional 22.15% of issued capital in Ciscom Corp. on March 2, 2024.
- Total ownership stake in Ciscom Corp. increased to 42.05%.
- Consideration for the acquisition was 11,421,401 restricted common shares of DLT Resolution Inc.
- Ciscom Corp. reports unaudited gross revenues of CAD $35,000,000.
- Expected non-normalized EBITDA for Ciscom Corp. for the period ended Dec 31, 2023 is $950,000.
- Ciscom Corp. is listed on CSE (CISC) and OTCQB (CISCF).
DLT Resolution Inc. announced two significant acquisition activities: the purchase of a 19.9% stake in Ciscom Corp. and a signed term sheet to acquire 100% of Global Motor Trade Group of Companies via an all-stock transaction.
🚩 Red Flags
- Multiple material events reported in a single filing (Item 2.01 and Item 8.01).
- Significant dilution risk due to the issuance of over 24 million restricted common shares across both transactions.
- Acquisitions are heavily reliant on stock issuance rather than cash, which can be highly dilutive for micro-cap shareholders.
📋 Key Facts
- Acquired 19.9% of Ciscom Corp. (CSE:CISC / OTCQB:CISCF) on February 14, 2024.
- Issued 10,261,214 restricted common shares for the Ciscom acquisition.
- Signed a Term Sheet on February 19, 2024, to acquire 100% of Global Motor Trade LLC, Global Motor Trade International LLC, SJ Auto Trade LLC, and WEC International LLC.
- Global Motor Trade acquisition is an all-stock transaction involving approximately 14,000,000 restricted common shares.
- The Global Motor Trade deal is expected to close before the end of Q1 2024.
- Combined annual gross revenue from Global Motor Trade is estimated at $50,858,000 USD.