FORGE
INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
The
accompanying notes are an integral part of these unaudited condensed financial statements.
FORGE
INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
The
accompanying notes are an integral part of these unaudited condensed financial statements.
FORGE
INNOVATION DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
The
accompanying notes are an integral part of these unaudited condensed financial statements.
FORGE
INNOVATION DEVELOPMENT CORP. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY
| | |
Number of Shares | | |
Common Shares | | |
Additional Paid-in Capital | | |
Accumulated Deficit | | |
Total Equity | |
| | |
Number of Shares | | |
Common Shares | | |
Additional Paid-in Capital | | |
Accumulated Deficit | | |
Total Equity | |
| Balance, December 31, 2021 | |
| 45,621,868 | | |
$ | 4,562 | | |
$ | 1,469,678 | | |
$ | (1,531,467 | ) | |
$ | (57,227 | ) |
| Net loss | |
| - | | |
| - | | |
| - | | |
| (30,757 | ) | |
| (30,757 | ) |
| Balance, March 31, 2022 (unaudited) | |
| 45,621,868 | | |
$ | 4,562 | | |
$ | 1,469,678 | | |
$ | (1,562,224 | ) | |
$ | (87,984 | ) |
The
accompanying notes are an integral part of these unaudited condensed financial statements.
Forge
Innovation Development Corp. and Subsidiary
Notes
to the consolidated financial statements
Note
1 - Organization and Description of Business
Forge
Innovation Development Corp. (individually “Forge” and collectively with its subsidiary, the “Company”), was
initially incorporated in the State of Nevada on January 15, 2016 under the name of You-Go Enterprises, LLC (the “Company Predecessor”).
On November 3, 2016, Forge amended its Articles of Incorporation in the State of Nevada to change the Company Predecessor’s name
to Forge Innovation Development Corp. Our current principle executive office is located at 6280 Mission Blvd Unit 205, Jurupa Valley,
CA 92509. The Company’s main business focuses on real estate development, land purchasing and selling and property management.
The Company’s common stock is currently traded on OTCQB under the symbol “FGNV”.
On
August 17, 2020, the Company established a wholly owned subsidiary, Forge Network Inc, in the State of California. As of March 31, 2023,
we have not generated any income from the subsidiary due to our business strategy adjustment.
On
March 24, 2023, pursuant to an Asset Purchase Agreement between Forge and Legend Investment Management, LLC (“Legend LLC” or the “Seller”), the Company acquired
77.3% of Legend LLC’s 66% ownership of Legend International Investment, LP (“Legend LP”). Legend LP owns 100% of Mission
Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley, California.
The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area situated
on a 4.51acre site.
A relative of the President of Forge has significant influence of the Seller’s management, therefore the acquisition is being treated as a related party transaction.
The Company acquired 51% interest of Legend LP from Legend LLC in exchanged for 1,967,143 common stocks of the Company, valued at $0.70
per share for a total purchase price of $1,377,000. 51% of Legend LP approximate valued at $2,700,000 based on
(1) the Property’s valuation appraisal report dated on February 20, 2023, (2) Legend LP’s net book value as of February 28,
2023, and (3) the loan agreement to Legend LP by a third-party lender effective on March 23, 2023. Upon consummation of the acquisition,
the Company owns 51% of Legend LP and the Seller owns 15% of Legend LP.
Note
2 - Summary of Significant Accounting Policies
The
accompanying unaudited consolidated interim financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction
with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed
with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The
results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to
the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most
recent fiscal period, as reported in the Form 10-K, have been omitted.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. In
the opinion of management, all adjustments necessary in order to make the consolidated financial statements not misleading have been
included. Actual results could differ from those estimates.
Revenue
Recognition
On
January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers, using the modified retrospective approach, which
applies the new standard to contracts that are not completed as of the date of adoption. Under the new standard, revenue is recognized
upon transfer of control of promised goods and services to customers in an amount that reflects the consideration the Company expects
to receive in exchange for those goods and services.
Revenue
streams that are scoped into ASU 2014-09 include:
Property
management services: The Company deals directly with prospects and tenants for the owners of properties, which mainly includes marketing
property, collecting rent, handling maintenance, repairing issues and responding to tenant complaints. The Company recognizes revenue
as earned on a monthly basis and has concluded this is appropriate under the new standard.
Real
estate sales: The Company accounts for the sale of real estate assets and any related gain recognition in accordance with the accounting
guidance applicable to sales of real estate, which establishes standards for recognition of profit on all real estate sales transactions,
other than retail land sales. The Company recognizes the sale, and associated gain or loss from the disposition, provided that the earnings
process is complete, and the Company does not have significant continuing involvement. Subsequent to the adoption of the new standard,
the Company may recognize a gain on a real estate disposition that previously did not qualify as a sale or for full profit recognition
due to the timing of the transfer of control.
Business
Combination
We
allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired
based on their estimated fair values. The excess of the fair values of these identifiable assets and liabilities over the fair value
of purchase consideration is recorded as gain on bargain purchase included in other income on the consolidated statement of operations.
Noncontrolling
Interests
Non-controlling
interests are portions of entities included in the condensed consolidated financial statements that are not attributable to the Company.
Non-controlling interests are identified separately from the Company’s stockholders’ equity and its net income (loss). Non-controlling
interest equity balances include the non-controlling entity’s initial contribution at the date of the original acquisition, on-going
contributions, distributions, and percentage share of earnings since inception. The non-controlling interests are calculated based on
percentages of ownership.
New Accounting Standards Adopted
In June 2016, the FASB issued ASU No. 2016-13, (Topic
326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting
guidance and requires the use of the new forward-looking “expected loss” model, which requires all expected losses to be determined
based on historical experience, current conditions and reasonable and supportable forecasts, rather than the “incurred loss”
model. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and
other receivables, held-to-maturity debt securities, loans and other instruments. The Company adopted ASU No. 2016-13 on January 1, 2023,
which had no impact on the beginning balance of the Company’s balance as there was no receivable balances as of January 1, 2023.
Recently
Issued Accounting Pronouncements Not Yet Adopted
The
management does not believe that other than disclosed above, the recently issued but not yet adopted accounting pronouncements will have
a material impact on its financial position results of operations or cash flows.
Note
3 - Going Concern
The
accompanying consolidated financial statements were prepared on a going concern basis, which contemplates the realization of assets and
the satisfaction of obligations in the normal course of business. However, the Company has suffered recurring losses from operations
since inception, resulting in an accumulated deficit of $1,093,923 as of March 31, 2023. These conditions raise substantial doubt about
the ability of the Company to continue as a going concern.
In
view of these matters, continuation as a going concern is dependent upon several factors, including the availability of debt or equity
funding upon terms and conditions acceptable to the Company and ultimately achieving profitable operations. Management believes that
the Company’s business plan provides it with an opportunity to continue as a going concern. However, management cannot provide
assurance that the Company will meet its objectives and be able to continue in operation.
The
consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification
of assets or the amounts and classification of liabilities that may result from the possible inability of Forge Innovation Development
Corp. to continue as a going concern.
Note
4 – Real Estate Investments
Schedule
of Real Estate Investments
| | |
March 31, | | |
December 31, | |
| | |
2023
(Unaudited) | | |
2022 | |
| Commercial building | |
$ | 6,440,713 | | |
$ | - | |
| Tenant improvements | |
| 416,610 | | |
| - | |
| Construction in progress | |
| 504,000 | | |
| - | |
| Land | |
| 527,000 | | |
| - | |
| Total real estate investments, at cost | |
| 7,888,323 | | |
| - | |
| Less: accumulated depreciation | |
| - | | |
| - | |
| Total real estate investments, net | |
$ | 7,888,323 | | |
$ | - | |
Note
5 – Income Taxes
The
Company has not recognized an income tax benefit for its operating losses generated based on uncertainties concerning its ability to
generate taxable income in future periods. The tax benefit for the period presented is offset by a valuation allowance established against
deferred tax assets arising from the net operating losses, the realization of which could not be considered more likely than not. In
future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts
to be more likely than not.
For
the three months ended March 31, 2023 and 2022, the Company has incurred a net income before tax of $ and net loss before tax
of $, respectively. Net operation losses (“NOLs”) can be carried forever based on the 2017 Tax Cuts and Jobs Act. As
of March 31, 2023 and December 31, 2022, deferred tax assets resulted from NOLs of approximately $444,567 and $420,873, respectively,
which were fully off-set by valuation allowance reserved.
Note
6 - Related Party Transactions
During
the three months ended March 31, 2023 and 2022, Mr. Liang, the Company’s CEO, paid operating expenses on behalf of the Company
in the amount of $7,945 and $nil, respectively. As of March 31, 2023 and December 31, 2022, the Company had payable balance to Mr. Liang
in the amount of $14,370 and $8,212, respectively.
On
January 4, 2021, the Company purchased a vehicle from Patrick Liang, the President of the Company, for daily business operation, in the
amount of $22,861, which equaled to the remaining vehicle loan balance with 7.11% interest rate annum for a period of 41 months and monthly
installment of $558.
On
July 15, 2022, the Company traded its Mazda vehicle with Longo Toyota to exchange a 2022 Toyota Mirai. The total purchase price for the
2022 Toyota Mirai is $84,406.12 and the loan amount is $48,295 by deducting the value of the trade-in Mazda vehicle and the rebate from
the manufacturer. The monthly installment amount is $671 with 0% APR and a payment term of 72 months. Along with the transaction, we
received a $15,000 Hydrogen subsidy card for the compensation for the purchase of new energy automobile. We recorded the subsidy as prepaid
expense and unearned revenue to amortize on a straight-line basis over the estimate useful life of four years started on the purchase
date. As a result of the trade-in transaction, $6,874 gain on disposal was recognized during the year ended December 31, 2022. During
the three months ended March 31, 2023, the Company made loan payment of $2,012.
As
of March 31, 2023 and December 31, 2022, the Company had payable of $60,000 and $60,000, respectively, owing to Speedlight Consulting
Services Inc. for consulting services, which was owned by a previous director, appointed in November 2020 and resigned on January 11,
2023. The amount is unsecure, non-interest-bearing and due on demand.
During
the three months ended March 31, 2023 and 2022, the Company generated property management income of $45,000 and $nil from Legend LP.
Pursuant to the agreement between Legend LP and the Company, the Company manages the properties owned by Legend LP, which is called
Mission Marketplace; a grocery anchored shopping center (the “Property”) located at 6240 Mission Boulevard in Jurupa Valley,
California. The Property contains two, one-story and one, two-story buildings containing 48,722 total square foot of gross leasable area
situated on a 4.51 acre site. The original monthly service charge was $5,000 which was amended to $10,000 per month in June 2022 due
to Legend LP required additional management services for their properties. On November 17, 2022, the monthly service charge was amended
to $15,000 with one year term due to new tenants moving in and additional management services desired. On March 24, 2023, the Company
acquired 51% interest in Legend LP from Legend LLC. Legend LP became a subsidiary of the Company.
As
of March 31, 2023, Legend LP had loans payable in the total amount of $658,000, owing to three entities under the control by the Mother
of Mr. Liang, the President of the Company. The amount is unsecure, non-interest-bearing and due on demand.
Note
7 – Commercial and SBA Loans
On
July 14, 2020, the Company entered into a loan agreement with the U.S. Small Business Administration (“SBA”), pursuant to
which the Company obtained a loan in the amount of $14,000 with the term of 30 years and interest rate of 3.75%, payable monthly including
principal and interest in the amount $69. As of March 31, 2023 and December 31, 2022, the outstanding loan balances were $12,689 and
$12,689, respectively.
Upon
acquisition of Legend LP, the Company assumed loans from Legend LP which was payable to a third party in the principal amount of
$3,531,200
(the “Existing Loan”). On March 23, 2023, Legend LP used its Property and rental incomes of the Property and refinanced
with the same third party in a promissory note (the “Note”), which provided additional funds after paid off the Existing
Loan for the renovation of certain suites of the Property and reserve some interest payments, at the interest rate of “The
Wall Street Journal Prime Rate” plus 3.73%
per annum. The Note rate shall be reset
whenever The Wall Street Journal Prime Rate Changes. The Note was formally signed and completed between Legend LP and the
third-party lender on April 5, 2023.
The
Company also assumed a loan from a third party in the total amount of $386,091, which is unsecured, non-interest-bearing and due one
demand.
Note
8 – Acquisition of Legend
On
March 23, 2023, the Company acquired 51% of partnership interest of Legend LP from Legend LLC, for issuance of 1,967,143 common stocks
of the Company, with a total fair value of $1,377,000. Legend LP became a subsidiary of the Company. Legend LP owns 100% of Mission Marketplace:
a grocery anchored shopping center located at 6240 Mission Boulevard in Jurupa Valley, California. The Property contains two, one-story
and one, two-story buildings containing 48,722 total square foot of gross leasable area situated on a 4.51acre site. Legend LLC is a
related party of the President of the Company. A relative of the President of Forge has significant influence of Legend
LP, therefore the acquisition has been treated as a business combination between related parties. The assets and liabilities of Legend LP assumed
were accounted for by the Company at historical carrying value on the acquisition date.
The
following table presents the allocation of the consideration transferred to the assets acquired and liabilities assumed based on their
fair values.
Schedule
of Assets Acquired and Liabilities Fair Values
| | |
Allocation | |
| Total purchase consideration | |
$ | 1,377,000 | |
| Fair value of non-controlling interests | |
| 1,323,000 | |
| Total consideration | |
| 2,700,000 | |
| | |
| | |
| Identifiable net assets acquired: | |
| | |
| Cash | |
$ | 3,192 | |
| Account receivable | |
| 81,779 | |
| Prepaid expenses and other | |
| 49,959 | |
| Real estate investments (Note 5) | |
| 7,888,323 | |
| Accounts payable and accrued liabilities | |
| (104,256 | ) |
| Security deposits payable | |
| (121,893 | ) |
| Unearned revenue | |
| (34,125 | ) |
| Loans to related parties (Note 7) | |
| (658,000 | ) |
| Loans, current (Note 9) | |
| (3,917,291 | ) |
| Net assets acquired | |
| 3,187,688 | |
| Gain on bargain purchase | |
$ | (487,688 | ) |
Given
the nature of Legend LP’s operations, substantially all revenue and expenses incurred at the beginning of the month. Considering
the short period of 7 days from acquisition date to the quarter end, upon agreement with Legend LLC, the Company will start to consolidate
the operation results of Legend LP from April 1, 2023.
Note
9 – Contingencies
On
December 8, 2017, the Company entered into a lease agreement with Puente Hills Business Center II, L.P. (“PHBC-II”) for
a lease term of forty-eight
months, and which was scheduled to expire on January
14, 2022, at monthly rent of $4,962,
subject to increase. On or about September 29, 2020, the Company vacated the premises. On October 22, 2020, PHBC-II filed a lawsuit
against the Company and its guarantor, Mr. Liang. The Company has retained legal counsel to address the matter and the Court has
rescheduled the trial date from January 31, 2023 to April 18, 2023, and then again rescheduled to June
14, 2023. No judgment has been rendered as of March 31, 2023, and the case
is still in the pre-trial stage. As of March 31, 2023 and December 31, 2022, the Company had $83,070 and
$83,070 rent payable toward the lease agreement, respectively
Note
10 - Subsequent Event
In accordance with ASC 855, “Subsequent Events”, the
Company has evaluated subsequent events through the date of issuance of these unaudited financial statements and no subsequent events
were noted except the one disclosed under Note 7.