NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, AND 2021
NOTE 1 – ORGANIZATION
US Lighting Group, Inc. (the “Company”) was founded in
2003 in accordance with the laws of Florida and is located in Euclid, Ohio.
US Lighting Group, Inc. is a parent company comprised of four subsidiaries
— Cortes Campers, LLC, a brand of high-end molded fiberglass campers, Futuro Houses, LLC, which is focused on design and sales of
molded fiberglass homes, Fusion X Marine, LLC, a high-performance boat designer, and MIG Marine Corporation, a composite manufacturing
company that produces proprietary molded fiberglass products for our other business lines.
On January 12, 2022, we formed Futuro Houses, LLC, a Wyoming company,
to design, market and distribute molded fiberglass homes. Throughout 2022, Futuro Houses engaged in engineering and development of our
first “UFO” themed home model inspired by the original Futuro house designed by Finnish architect Matti Suuronen. As of December
31, 2022, the division had not generated revenue.
On August 5, 2022, we acquired MIG Marine Corporation (“Mig Marine”),
a fiberglass manufacturing company founded in 2003. With the acquisition of Mig Marine, we were able to streamline our manufacturing processes,
improve production cycles and scale to meet the demand of Cortes Campers generated order back-log.
We plan to expand our manufacturing footprint, enhance production techniques,
and develop more products in the RV, marine, and composite housing sectors. Current R&D efforts are directed towards future tow-behind
camper models under the Cortes Campers brand as well as prefabricated housing segment.
As of December 31, 2022, our revenue was driven by shipments of fiberglass
campers marketed under the Cortes Campers brand.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company’s consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Dollar amounts
are rounded to the nearest thousands of dollars.
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 of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates include the estimated useful lives of property and equipment. Actual results could
differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which
at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any
losses in our accounts. We believe we are not exposed to any significant credit risk in cash.
Cash equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents. There were no cash equivalents for the years ended December 31, 2022, and
December 31, 2021, respectively, held in the Company’s investment account.
Basis of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Cortes Campers, LLC and - MIG Marine Corp. All intercompany transactions and balances have
been eliminated in consolidation.
Basic and Diluted Earnings Per Share
Basic earnings per share are computed by dividing net income (loss)
available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed by
dividing the net income applicable to common shareholders by the weighted average number of common shares outstanding plus the number
of additional common shares that would have been outstanding if all dilutive potential common shares had been issued using the treasury
stock method. Potential common shares are excluded from the computation when their effect is antidilutive. The dilutive effect of potentially
dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value
of common shares during the reporting period.
As of December 31, 2022, and December 31, 2021, respectively, there
are no shares of common stock issuable under convertible note agreements.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standard
Update (“ASU”) No. 2014-09. This standard provides authoritative guidance clarifying the principles for recognizing revenue
and developing a common revenue standard for U.S. generally accepted accounting principles. The core principle of the guidance is that
an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in the exchange for those goods or services.
Under this guidance, revenue is recognized when control of promised
goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to
be entitled to in exchange for those goods or services. The Company reviews its sales transactions to identify contractual rights, performance
obligations, and transaction prices, including the allocation of prices to separate performance obligations, if applicable. Revenue and
costs of sales are recognized once performance obligations are satisfied, and control of ownership is transferred to the customer.
Accounts Receivable
The Company evaluates the collectability of its trade accounts receivable
based on a number of factors. In circumstances where the Company becomes aware of a specific customer’s inability to meet its financial
obligations to the Company, a specific reserve for bad debts is estimated and recorded, which reduces the recognized receivable to the
estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts,
bad debt charges are recorded based on the Company’s historical losses and an overall assessment of past due trade accounts receivable
outstanding.
The allowance for doubtful accounts and returns is established through
a provision reducing the carrying value of receivables. On December 31, 2022, and December 31, 2021, the Company determined that no allowance
for doubtful accounts was necessary.
Inventories
Inventories are stated at the lower of cost or net realizable value.
Cost is computed on a first-in, first-out basis.
The Company provides inventory adjustments based on excess and obsolete
inventories determined primarily by future demand forecasts. The write down amount is measured as the difference between the cost of the
inventory and market based upon assumptions about future demand and charged to the provision for inventory, which is a component of cost
of sales. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts
and circumstances do not result in the restoration or increase in that newly established cost basis.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation
and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The Company
has determined the estimated useful lives of its property and equipment, as follows:
| Building | |
| 40 years | |
| Building and improvements | |
| 7 - 15 years | |
| Vehicles | |
| 5 years | |
| Office equipment | |
| 3 years | |
| Furniture and fixtures | |
| 7 years | |
| Production molds and fixtures | |
| 5 years | |
Maintenance and repairs are charged to expense as incurred. The cost
and accumulated depreciation of assets sold or otherwise disposed of are removed from the related accounts and the resulting gain or loss
is reflected in the statements of operations.
Management assesses the carrying value of property and equipment whenever
events or changes in circumstances indicate that the carrying value may not be recoverable. If there is an indication of impairment, management
prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows
are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.
Product Development Costs
Product development costs are capitalized in the period incurred. The
costs primarily consist of prototype and testing costs. Product development costs for the years ended December 2022 and 2021, were $0
and $40,000, respectively.
Costs related to production of molds and tooling are capitalized as
construction in progress or fixed asset once put in service.
Shipping and Handling Costs
The Company’s shipping and handling costs relating to inbound
and outbound freight are reported as cost of goods sold in the consolidated Statements of Operations. The Company classifies amounts billed
to customers for shipping fees as revenues.
Income Taxes
Income tax expense is based on pretax financial accounting income.
Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of
assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that
will more likely than not be realized. The Company has not recorded a valuation allowance against its deferred tax assets as of December
31, 2022, and 2021.
The Company accounts for uncertainty in income taxes using a two-step
approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining
if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that
is more than 50 percent likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as
current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain
tax positions are recognized in the provision for income taxes.
Fair Value Measurements
The Company determines the fair value of its assets and liabilities
based on the exchange price in U.S. dollars 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. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable,
to measure fair value:
| ● | Level 1 — Quoted prices in active markets for identical
assets or liabilities. |
| ● | Level 2 — Inputs, other than Level 1, that are observable,
either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or
liabilities. |
| ● | Level 3 — Unobservable inputs that are supported by
little or no market activity and that are significant to the fair value of the assets or liabilities. |
The carrying amounts of financial instruments such as cash, accounts
receivable, inventories, accounts payable and accrued liabilities, accrued payroll liabilities, and advanced customer deposits, approximate
the related fair values due to the short-term maturities of these instruments. The carrying values of the line of credit and notes payable
approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates.
Stock-based Compensation
In June 2018, the FASB issued ASU 2018-07, Compensation –
Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 allows companies to account
for nonemployee awards in the same manner as employee awards. The guidance is effective for fiscal years beginning after December 15,
2018, and interim periods within those annual periods. We adopted this ASU on January 1, 2019.
The Company on occasion will compensate vendors by issuing stock in
lieu of a cash payment.
Recently Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic815-40)—Accounting
for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for
convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required
to be accounted for as derivatives under Topic815, Derivatives and Hedging, or that do not result insubstantial premiums accounted
for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain
conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts
in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves
the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity’s own equity.
ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding
entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including
interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December
15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but not earlier than fiscal years beginning
after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance
as of the beginning of its annual fiscal year. The Company is currently evaluating the impact this ASU will have on its consolidated
financial statements.
The Company has implemented all new applicable accounting pronouncements
that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and
the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact
on its financial position or results of operations.
NOTE 3 – LIQUIDITY
The accompanying 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.
During the year ended December 31, 2022, the Company realized net loss
of $8,990,320 and cash used in operating activities was ($1,537,657), compared to cash provided by operating activities of $2,983,000
in the prior year period. Based on current projections, we believe our available cash on-hand, our current efforts to market and sell
our products, and our ability to significantly reduce expenses, will provide sufficient cash resources to satisfy our operational needs,
for at least one year from the date these financial statements are issued. During 2022, the Company increased its production and sales
of travel campers.
At December 31, 2022, the Company had cash on hand in the amount of
$124,529. Management estimates that the current cash funds combined with accounts receivable and backorders of approximately $357,220
may not be sufficient to continue operations. No assurance can be given that any future financing will be available or, if available,
that it will be on terms that are satisfactory to the Company. Even if the Company can obtain additional financing, it may contain undue
restrictions on our operations in the case of debt financing, or cause substantial dilution for our stockholders, in the case or equity
financing.
NOTE 4 – INVESTMENT IN TRADING SECURITIES
On May 17, 2020, the Company purchased $3,800,000
of various mutual fund assets from a broker. This investment meets the criteria of level one inputs for which quoted market prices are
available in active markets for identical assets or liabilities as of the reporting date. As of September 30, 2022, these assets have
all been sold. The Company has adjusted the reported amounts for these investments to market value resulting in a realized loss and unrealized
loss of $288,281 and $18,000, respectively, as of the year ended December 31, 2022.
The Company does not intend to be an investment company and does not
intend to be engaged in the business of investing, reinvesting, owning, holding or trading in securities. As such, the Company intends
to rely on Rule 3a-2 under the Investment Company Act, which provides an exclusion from the definition of “investment company”
for issuers meeting certain criteria. The Company will endeavor to ensure that it is compliant with the conditions for relying on this
rule, within the time period permitted by Rule 3a-2. In an effort to comply with this exclusion, the Company has liquidated all securities
in Ameriprise Investments. The Company no longer owns securities having a value exceeding 40% of the value of such the Company’s
total assets on an unconsolidated basis. Such course of action has been approved and authorized by the Company’s Board of Directors
by unanimous written consent on August 17, 2021.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment for continuing operations consist of the following
at December 31, 2022, and 2021:
| | |
December 31, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| Building and improvements | |
$ | 664,183 | | |
$ | 664,000 | |
| Land | |
| 96,000 | | |
| 96,000 | |
| Vehicles | |
| 146,893 | | |
| 319,000 | |
| Office equipment | |
| 18,421 | | |
| 24,000 | |
| Furniture and fixtures | |
| 4,746 | | |
| 5,000 | |
| Production molds and fixtures | |
| 1,095,758 | | |
| 851,000 | |
| Tooling and fixtures | |
| 462,570 | | |
| 52,000 | |
| Other equipment | |
| 72,059 | | |
| — | |
| Total property and equipment cost | |
| 2,560,630 | | |
| 2,011,000 | |
| Less: accumulated depreciation and amortization | |
| (262,523 | ) | |
| (163,000 | ) |
| Property and equipment, net | |
$ | 2,298,107 | | |
$ | 1,848,000 | |
Depreciation expense for the years ended December
31, 2022, and 2021 were $166,046 and $51,000, respectively.
NOTE 6 – ACCRUED PAYROLL TO OFFICER
Beginning in January 2018, the Company’s (former) President and
CEO (Paul Spivak) voluntarily elected to defer payment of his employment compensation. The balance of the compensation owed to the Company’s
(former) President and CEO was $536,000 and $125,167 as of December 31, 2022, and 2021, respectively. Deferral of wages was halted on
August 9, 2021, when the Company’s President and CEO resigned. Please see Note 14 for a more complete discussion.
As of the date of this report, Paul Spivak is no longer an executive
officer or director of the Company.
NOTE 7 – LOANS PAYABLE TO RELATED PARTIES
Loans payable to related parties consists of the following at December
31, 2022 and 2021:
| | |
2022 | | |
2021 | |
| Loan payable to officers/shareholders (a) | |
$ | 7,054,333 | | |
$ | 407,000 | |
| Loan Payable to related party - past due (b) | |
| 126,296 | | |
| - | |
| Total loans payable to related parties | |
| 7,180,629 | | |
| 407,000 | |
| Loan payable to related party, current portion | |
| (302,296 | ) | |
| (407,000 | ) |
| Total loans payable to related parties | |
| 6,878,333 | | |
| - | |
On August 5, 2022, the Company acquired Mig Marine Corporation (“Mig
Marine”), from the Company’s former President and majority shareholder. The Company agreed to pay $6,833,333 in exchange for
all the shares of Mig Marine Corporation in a 100% seller-financed transaction. A ten percent (10%) deposit of $638,333 will be payable
on or before August 05, 2023. The balance will be by a promissory note in the amount of $6,195,000. This sixty-month note matures on August
05, 2027, requires monthly payments of $120,488, carries an interest rate of 6.25%, and is secured by the assets of Mig Marine Corporation.
The loan balance on December 31, 2022, including accrued interest, was $7,004,629. During the year ended December 31, 2022, the Company
accrued interest of $126,296 and did not make any principal and interest payments, leaving a balance outstanding of accrued interest only
of $126,296 at December 31, 2022.
| a. | On December 1, 2016, the Company acquired Intellitronix Corporation from the Company’s former President and majority shareholder.
The Company agreed to pay $4,000,000 in exchange for all the shares of Intellitronix Corporation. The sixty-month loan matures in December
2021, requires monthly payments of $74,000, carries an interest rate of 6.25%, and is secured by the assets of Intellitronix Corporation.
The loan balance on December 31, 2020, including accrued interest, was $2,130,000. During the year ended December 31, 2021, the Company
accrued interest of $89,000 and made principal and interest payments of $1,812,000, leaving a balance outstanding of accrued interest
only of $407,000 at December 31, 2021. This loan was accounted for at the holding company level and at the Intellitronix subsidiary level.
Appropriate eliminations were made as part of consolidation. The loan was paid in full in 2022. |
On August 5, 2022, The Company acquired MIG Marine and assumed
a 6.25% interest bearing note in the amount of $6,878,333; the note is payable to its majority shareholder, Paul Spivak. During the fourth
quarter of 2022, there was a loan for $100,000 from the majority shareholder and another for $76,000 from The Company’s President
& CEO, both these loans are non-interest-bearing loans.
| b. | As of December 31, 2022, The Company accrued $126,296 in interest payable to the majority shareholder, Paul Spivak; this is in relation
to the August 5, 2022, acquisition of MIG Marine. |
Loan payments to related parties were made through a combination of
direct payments to the noteholder and instructions from the noteholder to pay obligations to others on their behalf.
NOTE 8 – LOANS PAYABLE
We have the following outstanding loan as of December 31, 2022:
| | |
December 31, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| Real Estate loan (a) | |
$ | 259,450 | | |
$ | 260,000 | |
| Vehicle loans (b) | |
| 59,671 | | |
| 63,000 | |
| Working capital (c) | |
| 122,135 | | |
| 25,000 | |
| Convertible note | |
| 0 | | |
| 58,000 | |
| Total loans payable | |
| 441,256 | | |
| 426,000 | |
| Loans payable, current portion | |
| (140,905 | ) | |
| (344,000 | ) |
| Loans payable, net of current portion | |
$ | 280,000 | | |
$ | 82,000 | |
| (a) | On August 26, 2020, the Company entered into a loan agreement with Apex Commercial Capital Corp. in the principal amount of $265,339
with interest at 9.49% per annum and due on September 10, 2030. The loan requires one hundred nineteen (119) monthly payments of $2,322,
with a final balloon payment on the one hundred twentieth (120) month, or September 10, 2030, of $224,835. The loan is guaranteed by the
Company, the Company’s former Chief Executive Officer, and secured by the Company’s real estate. The loan balance on December
31, 2022, was $259,450. During the year ended December 31, 2022, the Company made principal payments of $3,084 leaving a total of $259,450
owed at December 31, 2022. |
| (b) | The Company purchases vehicles for employees and research and development activities. Generally, vehicles are sold or traded in at
the end of the vehicle loan period. The aggregate vehicle loan balance on two vehicles was $59,671 at December 31, 2022, with an original
loan period of 72 to 144 months, and interest rates of zero percent to 10.99%. |
| (c) | On November 7, 2022, the Company entered into a $150,000 term loan with Fresh Funding related to the working capital for the production
of campers. The loan requires weekly payments of $3,981 over the term of 12 months, has an interest rate of 38% per annum, and is secured
by both the majority shareholder and the current CEO. The loan balance on December 31, 2022, was $122,135. During the year ended December
31,2022, the Company made principal payments of $23,369, and interest payments of $61,497. |
The following sets forth the loan payments, including interest, for
the years ended December 31:
| 2022 | |
$ | 82,000 | |
| 2023 | |
$ | 140,905 | |
| 2024 | |
$ | 44,000 | |
| 2025 | |
$ | 44,000 | |
| 2026 | |
$ | 44,000 | |
| Thereafter | |
$ | 86,351 | |
| Total | |
$ | 441,256 | |
NOTE 9 – CONVERTIBLE SECURED NOTE PAYABLE
As of June 4, 2021, the remaining Convertible Note was no longer convertible
into shares of common stock since the conversion rights expired on June 4,2021, and the note stopped accruing interest on its maturity
date on June 5, 2021. During the year 2022, this note was reclassified to accounts payable.
NOTE 10 – SHAREHOLDERS’ EQUITY
Common shares issued for cash
During the year ended December 31, 2022, and 2021, the Company received
proceeds of $141,150 and $301,000 on the private placement of 1,439,000 and 2,012,000 shares of common stock, at an average price of $0.10
and $0.15 per share, respectively.
During the year ended December 31, 2022, the Company issued 647,090
shares of common stock for services for a total non-cash expense of $70,630.
Summary of Warrants
There were no warrants granted or exercised during 2022. Warrants for
the period ended December 31, 2022, are $0.
NOTE 11 – INCOME TAXES
At December 31, 2021, the Company had available Federal and state net
operating loss carryforwards to reduce future taxable income. The amounts available were approximately $1,500,000 for Federal and state
purposes. The carryforwards expire in various amounts through 2041. Given the Company’s history of net operating losses, management
has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the carryforwards. Accordingly,
the Company has not recognized a deferred tax assets for this benefit. Section 382 generally limits the use of NOLs and credits following
an ownership change, which occurs when one or more 5 percent shareholders increase their ownership, in aggregate, by more than 50 percentage
points over the lowest percentage of stock owned by such shareholders at any time during the “testing period” (generally three
years).
Effective January 1, 2007, the Company adopted FASB guidelines that
address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial
statements. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that
the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty
percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on de-recognition, classification,
interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. At the date of adoption, and
as of December 31, 2022, and 2021, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required
at adoption.
The Company’s policy is to record interest and penalties on uncertain
tax provisions as income tax expense. As of December 31, 2022, and 2021, the Company has not accrued interest or penalties related to
uncertain tax positions. Additionally, tax years 2018 through 2022 remain open to examination by the major taxing jurisdictions to which
the Company is subject.
Upon the attainment of taxable income by the Company, management will
assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize the appropriate deferred
tax asset at that time.
The Company’s effective income tax rate differs from the amount
computed by applying the federal statutory income tax rate to loss before income taxes as follows:
| | |
December 31, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| Income tax benefit at federal statutory rate | |
| (21.0 | )% | |
| (21.0 | )% |
| State income tax benefit, net of federal benefit | |
| (6.0 | )% | |
| (6.0 | )% |
| Change in valuation allowance | |
| 27.00 | % | |
| 27.00 | % |
| Income taxes at effective tax rate | |
| - | % | |
| - | % |
| | |
December 31, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| The components of deferred taxes consist of the following: | |
| | |
| |
| Net operating loss carryforwards | |
$ | 8,990,320 | | |
$ | 1,500,000 | |
| Deferred Tax Asset | |
| 2,427,386 | | |
| 405,000 | |
| Less: Valuation allowance | |
| (2,427,386 | ) | |
| (405,000 | ) |
| Net deferred tax assets | |
$ | - | | |
$ | - | |
NOTE 12 – LEGAL PROCEEDINGS
There were no reportable legal proceedings initiated, or material developments
in previously reported legal proceedings for the year ended December 31, 2022.
NOTE 13 – SUBSEQUENT EVENTS
On June 8, 2021, Paul Spivak, former Chief Executive Officer of the
Company was arrested for conspiracy to commit securities fraud. Upon his arrest, the Company learned that on June 7, 2021, a Criminal
Complaint was filed against Mr. Spivak in the United States District Court for the Northern District of Ohio.
On October 8, 2021, a superseding indictment was unsealed that included
additional securities fraud related charges against Mr. Spivak and Olga Smirnova (Secretary and Director, wife of Mr. Spivak), amongst
others. The Company has been advised that Mr. Spivak and Ms. Smirnova pleaded not guilty to the charges. Both have advised that they intend
to deny the charges and intend to vehemently defend themselves against these charges. The Company has not been named in the superseding
indictment and is unable to know the eventual outcome, timing and course of actions of this matter.
Subsequent to the time period of the financial statements, the Company
has launched its Futuro Houses line of molded fiberglass homes and started generating revenue.
Subsequent to the time period of the financial statements, the Company
received additional loans payable to related parties totaling $65,000.00. Each such loan is non-interest-bearing and payable on demand.