UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
FOR THE QUARTERLY PERIOD
ENDED:
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip code)
(Registrant’s telephone number, including area code)
Securities registered
pursuant to Section 12(b) of the Act:
Indicate
by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the 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.
Indicate
by check mark whether the registrant has submitted every Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☐ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares of registrant’s common stock outstanding
as of November 17, 2022 was
US LIGHTING GROUP, INC.
INDEX
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
US LIGHTING GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED
BALANCE SHEETS
| September 30, 2022 | December 31, 2021 | |||||||
| ASSETS | (Unaudited) | (Combined) | ||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts Receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Inventory | ||||||||
| Deposits and other assets | ||||||||
| Investment in trading securities | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Customer advance payments | ||||||||
| Accrued payroll to a former officer | ||||||||
| Convertible notes payable | ||||||||
| Loan payable– current portion | ||||||||
| Loans payable, related party | ||||||||
| Total Current Liabilities | ||||||||
| Loans payable, net of current portion, related party | ||||||||
| Loans payable, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ Equity (Deficit): | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ (Deficit) Equity | ( | ) | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
US LIGHTING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) / (Combined)
| For
the Three Months ended September 30, | For the Nine Months ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | — | |||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Product development costs | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Other income (expense), net | ( | ) | ||||||||||||||
| Extinguishment of debt - related party | — | |||||||||||||||
| Extinguishment of debt | — | — | ||||||||||||||
| Unrealized gain (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Realized gain (loss) | ( | ) | ||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense, related party | ( | ) | ( | ) | ||||||||||||
| Gain on disposal of fixed assets | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income from sale of discontinued operations | — | |||||||||||||||
| Net loss from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Basic loss per share from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic income (loss) per share from discontinued operations | $ | $ | ( | ) | $ | $ | ||||||||||
| Basic income (loss) per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Diluted income (loss) per share from discontinued operations | $ | $ | ( | ) | $ | $ | ||||||||||
| Weighted average common shares outstanding, basic | ||||||||||||||||
| Weighted average common shares outstanding, diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
US LIGHTING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(Unaudited) / (Combined)
| Preferred Stock | Common Stock | Additional Paid-In |
Accumulated | Total Stockholders’ |
||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
| Net Loss | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, March 31, 2022 | ( |
) | ||||||||||||||||||||||||||
| Net Loss | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, June 30, 2022 | ( |
) | ||||||||||||||||||||||||||
| Sale of common stock | — | |||||||||||||||||||||||||||
| Forgiveness of related party debt | — | — | ||||||||||||||||||||||||||
| Acquisition of Mig Marine | ( |
) | ( |
) | ||||||||||||||||||||||||
| Net Loss | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-In | Common Stock to | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Be Issued | Deficit | Equity | |||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Net proceeds from sale of common stock | ||||||||||||||||||||||||||||||||
| Net Loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Proceeds from sale of common stock | ||||||||||||||||||||||||||||||||
| Shares returned | ( | ) | ||||||||||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||
| Net Income | — | — | ||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | ( | ) | ||||||||||||||||||||||||||||||
| Common stock issued | — | — | ( | ) | — | ( | ) | |||||||||||||||||||||||||
| Net Income | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
US LIGHTING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) / (Combined)
For the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net loss to net cash (used) provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of debt discount | ||||||||
| Stock issued for services | ||||||||
| Realized loss from investments | ||||||||
| Unrealized gain (loss) from investments | ( | ) | ||||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Changes in Assets and Liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Customer advanced payments | ( | ) | ||||||
| Accruals | ( | ) | ||||||
| Accrued interest on convertible notes | ( | ) | ||||||
| Accrued interest on related party loans | ||||||||
| Accrued payroll to a former officer | ( | ) | ||||||
| Operating cashflow from discontinued operations | ( | ) | ||||||
| Net cash (used) provided by operating activities | ( | ) | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Investment in trading securities | ( | ) | ||||||
| Sale of fixed assets | ||||||||
| Proceeds from investments | ||||||||
| Net cash provided (used) by investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from sale of common stock | ||||||||
| Proceeds from loans payable | ||||||||
| Proceeds received from notes payable, related party | ||||||||
| Payment of loans payable | ( | ) | ( | ) | ||||
| Payments on notes payable related party | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash beginning of period | ||||||||
| Cash end of period | $ | $ | ||||||
| Supplemental Cash Flow Information: | ||||||||
| Interest paid | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
| Non-cash Financing Activities: | ||||||||
| Offset accounts receivable, related party with notes payable, related party | $ | $ | ||||||
The accompanying notes are integral part of these unaudited condensed consolidated financial statements.
4
US LIGHTING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
NOTE 1 – ORGANIZATION
US Lighting Group, Inc. (the “Company”) was founded on October 17, 2002, in accordance with the laws of Florida and is located in Euclid, Ohio.
On January 11, 2021, the Company created a new wholly owned subsidiary called Cortes Campers, LLC, domiciled in Wyoming. Cortes Campers, LLC was created to market tow behind travel trailers for the recreational vehicle market. The division was in the early stage of revenue generation as of the date of this report. The first camper was delivered on February 19, 2022.
The Company created a new wholly owned subsidiary called Fusion X Marine, LLC on April 12, 2021, domiciled in Wyoming, to sell boats and other related products to the recreational marine market. The subsidiary has had no sales as of the date of this report.
On January 12, 2022, the Company created Futuro Houses, LLC, a new wholly owned subsidiary to manufacture and sell fiberglass houses. As of September 30, 2022, Futuro Houses, LLC had no revenues.
On August 5, 2022, the Company entered into a
Stock Purchase Agreement (the “Agreement”) with Paul Spivak, a related party, (“Seller”), whereby
the Company agreed to acquire one hundred percent of the outstanding shares of common stock of Mig Marine Corp in exchange for a promissory
note of $
The Mig Marine Corp acquisition has been determined to be a combination of entities under common control that resulted in a change in the reporting entity. Accordingly, the financial results of the Company have been recast to include the financial results of Mig Marine Corp in the current and prior periods as if Mig Marine Corp had always been consolidated. The assets and liabilities of Mig Marine Corp have been recorded in the Company’s consolidated statements of financial condition at the seller’s historical carrying value. The purchase of Mig Marine Corp was accounted for as an equity transaction for the period ended September 30, 2022 (the period in which the transaction occurred). The following tables summarize the impact of the Mig Marine Corp acquisition to the Company’s unaudited condensed consolidated statement of financial condition as of December 31, 2021, and to the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021.
| December 31, 2021 | ||||||||||||
| As Previously Reported | Retrospective Adjustments | As Adjusted | ||||||||||
| Total assets: | $ | $ | $ | |||||||||
| Total liabilities | $ | $ | $ | |||||||||
| Total equity | $ | $ | ( | ) | $ | |||||||
| Total liabilities and stockholders’ deficit | $ | $ | $ | |||||||||
| For The Three Months Ended September 30, 2021 | For The Nine Months Ended September 30, 2021 | |||||||||||||||||||||||
| As Previously Reported | Retrospective Adjustments | As Adjusted | As Previously Reported | Retrospective Adjustments | As Adjusted | |||||||||||||||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net (loss) income from discontinued operations | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||
| Loss per share | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||
5
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company as of and for the nine month period ending September 30, 2022 and are not necessarily indicative of the results to be expected for the full year ending December 31, 2022. These unaudited financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
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 on 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 was $
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Intellitronix Corp., Cortes Campers, LLC, Fusion X Marine, LLC, Futuro Houses, LLC and Mig Marine. All intercompany transactions and balances have been eliminated in consolidation.
Inventories
Inventories are stated at the lower of cost or
net realizable value. Cost is computed on a first-in, first-out basis. As of September 30, 2022 and December 31, 2021, the Company has
$
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.
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 products are delivered to the customer’s control and performance obligations are satisfied.
Recently Accounting Pronouncements
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.
6
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 nine months ended September 30, 2022, the Company realized
a net loss of $
NOTE 4 – SALE OF ASSETS / DISCONTINUED OPERATIONS
On May 14,
2021, the Company and Intellitronix Corporation entered into an Asset Purchase Agreement with Ohio INTX Cooperative, a State of Ohio cooperative
association, to sell selected assets of Intellitronix Corporation. The Asset Purchase Agreement and related sale was finalized on May
14, 2021, with a sale price of $
In accordance with the provisions of ASC 205-20, we have not included the results of operations from discontinued operations in the results of continuing operations in the consolidated statements of operations. The results of operations from discontinued operations for the three and nine months ended September 30, 2021, have been reflected as discontinued operations in the unaudited consolidated statements of operations and consist of the following.
| Three Months ended September 30, 2021 | Nine Months ended September 30, 2021 | |||||||
| Sales from discontinued operations | $ | $ | ||||||
| Cost of goods sold of discontinued operations | ||||||||
| Gross profit of discontinued operations | ||||||||
| Operating expenses of discontinued operations: | ||||||||
| Selling, general and administrative expenses | ||||||||
| Product development costs | ||||||||
| Total operating expenses of discontinued operations | ||||||||
| Operating income from discontinued operations | ( | ) | ( | ) | ||||
| Other income (expense) of discontinued operations: | ||||||||
| Gain on sale of assets | ||||||||
| Gain on extinguishment of debt | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income | ||||||||
| Net Income from discontinued operations | $ | $ | ||||||
NOTE 5 – INVESTMENT IN TRADING SECURITIES
On May 17, 2020, the Company purchased $
7
The source of the $
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. In an effort to comply with this exclusion, the Company liquidated its securities as of September 30, 2022, as was approved and authorized by the Company’s Board of Directors by unanimous written consent on August 17, 2021.
As of December 31, 2021,
the account had $
NOTE 6 – PROPERTY AND EQUIPMENT
Property and equipment for continuing operations consist of the following at September 30, 2022 and December 31, 2021:
| September 30, 2022 | December 31, 2021 | |||||||
| Building and improvements | $ | $ | ||||||
| Land | ||||||||
| Vehicles | ||||||||
| Office equipment | ||||||||
| Furniture and fixtures | ||||||||
| Production molds and fixtures | ||||||||
| Tooling and fixtures | ||||||||
| Other equipment | ||||||||
| Total property and equipment cost | ||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense for the nine months ended
September 30, 2022, and 2021 was $
8
NOTE 7 – ACCRUED PAYROLL TO OFFICER
Beginning in January 2018, the Company’s former President and
CEO voluntarily elected to defer payment of his employment compensation. The balance of the compensation owed to the Company’s former
President and CEO was $
NOTE 8 – LOANS PAYABLE TO RELATED PARTIES
Loans payable to related parties consists of the following at September 30, 2022 and December 31, 2021:
| September 30, 2022 | December 31, 2021 | |||||||
| Loan payable to officers/shareholders | $ | $ | ||||||
| Loans payable to related parties, current portion | ( | ) | ( | ) | ||||
| Loans payable to related parties, net of current portion | $ | $ | ||||||
On December 1, 2016, the Company acquired Intellitronix Corporation from the Company’s former President and majority shareholder. The Company agreed to pay $
The year ended December 31, 2021, includes $
At September 30, 2022, pursuant to the terms of the Promissory Note
issued as part of the acquisition of Mig Marine, the Company owes $
NOTE 9 – LOANS PAYABLE
Loans payable for continuing operations consisted of the following as of September 30, 2022 and December 31, 2021:
September 30, 2022 | December 31, 2021 | |||||||
| PayPal Working Capital Loan, net of discount (a) | $ | $ | ||||||
| PayPal Working Capital Loan, net of discount (b) | ||||||||
| Secured promissory note (c) | ||||||||
| Vehicle loans (d) | ||||||||
| Equipment loan (e) | ||||||||
| Convertible Notes (f) | ||||||||
| Total loans payable | ||||||||
| Loans payable, current portion | ( | ) | ( | ) | ||||
| Loans payable, net of current portion | $ | $ | ||||||
| a. | On
August 12, 2019, the Company entered into a PayPal Working Capital loan. The principal amount of the loan was for $ |
| b. | On
November 25, 2019, the Company entered into a PayPal Working Capital loan. The principal amount of the loan was for $ |
9
| c. | On
August 26, 2020, the Company entered into a loan agreement with Apex Commercial Capital Corp. in the principal amount of $ |
| d. | 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. |
| e. | On
August 3, 2020, the Company entered into a $ |
| f. | The Company issued convertible secured debentures (“Convertible
Notes”) to accredited investors from December 2019 through June 2020, with interest at |
The following sets forth the loan payments, including interest, for the years ended December 31:
| 2023 | $ | |||
| 2024 | $ | |||
| 2025 | $ | |||
| 2026 | $ | |||
| 2027 | $ | |||
| Thereafter | $ | |||
| Total | $ |
NOTE 10 – COMMON STOCK
During August 2022, the Company sold
NOTE 11 – LEGAL PROCEEDINGS
There were no reportable legal proceedings initiated, or material developments in previously reported legal proceedings, during the third quarter
NOTE 12 – SUBSEQUENT EVENTS
On October
25, 2022, The Company filed an amendment to its Articles of Incorporation with the State of Florida (the “Amendment”). The
Amendment provided for an increase of the number of authorized shares of Common Stock to
10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management’s current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.
Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently known to Management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing for materials, and competition.
General Overview
US Lighting Group, Inc. (the “Company”) was originally incorporated in the State of Florida on October 17, 2003, under the name Luxurious Travel Corp., The Company acquired all of the issued and outstanding capital stock of US Lighting Group, Inc. (founded in 2013 in accordance with the laws of the State of Wyoming) on July 13, 2016, and the corporate name was changed on August 9, 2016, to the US Lighting Group, Inc. At the time the Company designed and manufactured commercial LED lighting, both for retrofits and new construction.
Through supplying Original Equipment Manufacturers (OEM’s) with electronic components the Company was introduced to the Recreational Vehicle (RV) Industry. Management identified a fast growing and underserved niche of small, tow-behind fully molded fiberglass travel trailers. The Company started developing a new business plan to create a luxury 17’ Travel Camper to appeal to young professionals working remotely as well as retirees and other consumers intrigued by the travelling lifestyle.
On May 14, 2021, the Company and Intellitronix Corporation entered into an Asset Purchase Agreement with Ohio INTX Cooperative, a State of Ohio cooperative association, to sell selected assets of Intellitronix Corporation. The Asset Purchase Agreement and related sale was finalized on May 14, 2021. In accordance with the provisions of ASC 205-20, Presentation of Financial Statements, we have separately reported the assets and liabilities, revenue and expenses related to Intellitronnix as discontinued operations.
On January 11, 2021, the Company formed Cortes Campers, LLC (“Cortes Campers”), a wholly owned subsidiary, to operate its new brand of innovative travel trailers. During the second part of 2021 the Company heavily invested in Research and Development as well as production planning for the 17’ Camper and began selling campers in early 2022.
The Company plans to increase camper sales, expand its manufacturing footprint, enhance production techniques, and develop more products in the RV, marine, composite housing, and electronics sectors.
The original Futuro house is a round,prefabricated house designed by Finnish architect Matti Suuronen, of which fewer than 100 were built during the late 1960s and early 1970s. The shape, reminiscent of a flying saucer, and the structure's airplane hatch entrance has made the houses sought after by collectors and by Airbnb renters. The Futuro was composed of fiberglass-reinforced polyester plastic, polyester-polyurethane, and poly(methyl methacrylate), measuring 4 meters (13 feet) high and 8 meters (26 feet) in diameter.
On August 5, 2022, the Company entered into a Stock Purchase Agreement with Paul Spivak, the Company’s majority stockholder and former president, acquired one hundred percent of the outstanding shares of common stock of Mig Marine Corp. Mig Marine was formed on March 4, 2003, in Ohio to design, develop and manufacture composite products for the marine and automotive industries.
During 2020 and 2021 the company developed its first model, a 17’ travel camper with all tooling fabricated in house. The company owns the tooling for the exterior shell, inner liner, and interior components, such as countertops, cabinets etc.
The innovative design defies construction techniques currently used by the RV industry. Drawing from its expertise as a boat manufacturer, the Company replaces all wood with composite alternatives or corrosion resistant materials, producing a truly durable camper designed to last a lifetime. Other innovations include axle-less independent suspension, corrosion resistant chassis and four-season insulation, with further developments in the process.
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The process has been largely developed for the manufacturing method; however, process modifications might be needed for scaling production to meet the demand. The company conducts its R&D and manufacturing at one location, outside of Cleveland, Ohio.
The Mig Marine Corp acquisition has been determined to be a combination of entities under common control that resulted in a change in the reporting entity. Accordingly, the financial results of the Company have been recast to include the financial results of Mig Marine Corp in the current and prior periods as if Mig Marine Corp had always been consolidated. The assets and liabilities of Mig Marine Corp ‘have been recorded in the Company’s consolidated statements of financial condition at the seller’s historical carrying value.
On August 5, 2022, the Company entered into a Stock Purchase Agreement with Paul Spivak, the Company’s majority stockholder and former president, and acquired one hundred percent of the outstanding shares of common stock of Mig Marine Corp. Mig Marine was formed on March 4, 2003, in Ohio to design, develop and manufacture composite products for the marine and automotive industries.
Results of Operations for the Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021
Sales
Total sales from continuing operations for the three months ended the September 30, 2022 were $516,000, compared to $21,000 for the three months ended September 30, 2021, an increase of $495,000 or more than 2,000%. The increase in sales is attributed to new sales through our Cortes Campers subsidiary. During the current period all sales revenue was from Cortes Campers subsidiary, whereas most of September 30, 2021, sales are discontinued and presented as part of discontinued operations.
Cost of Goods Sold
Cost of goods sold from continuing operations for the three months ended the September 30, 2022 were $528,000, compared to $0 for the three months ended the September 30, 2021. The September 30, 2022 cost of goods sold relates to camper sales from the Company’s Cortes Campers subsidiary, whereas most of September 30, 2021 sales are discontinued and presented as part of discontinued operations.
Operating Expenses
Selling, general and administrative expenses (“SG&A”) from continuing operations were $526,000 for the three months ended the September 30, 2022, compared to $240,000 for the three months ended the September 30, 2021, an increase of $286,000. The increase over the prior year can be primarily attributed to additional administrative staffing, auditing and professional fees.
Product development costs for the three months ended the June 30, 2022, was $78,000 compared to $2,000 for the three months ended the September 30, 2021, an increase of $76,000. The increase is due to the Company changing its focus to the RV, marine, composite housing, and electronics sectors.
Other Income / Expense
During the three months ended the September 30, 2022, we had total other expenses of $47,000, including: other expense of $4,000, recognized a realized gain of $18,000 and an unrealized loss of $32,000 from investments, interest income of $1,000 related to investments, interest expense of $40,000 and a $10,000 gain on disposal of fixed assets. During the three months ended the September 30, 2021, we had total other income of $17,000. We had other income of $2,000, a gain on extinguishment of debt of $52,000, recognized an unrealized loss of $9,000 from investments, interest expense of $17,000, related party interest expense of $19,000 and $7,000 of interest income.
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Net Loss
We had a net loss from continuing operations of $663,000 for the three months ended September 30, 2022, compared to $204,000 for the three months ended the September 30, 2021. Our overall net loss from continuing operations increased mainly due to our increase in SG&A expenses in the current period. For the three months ended September 30, 2021, we also had a $7,000 net loss from discontinued operations.
Results of Operations for the Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021
Sales
Total sales from continuing operations for the nine months ended September 30, 2022 were $641,000, compared to $23,000 for the nine months ended September 30, 2021, an increase of $618,000 or more than 2,000%. The increase in sales is attributed to new sales through our Cortes Campers subsidiary. During the current period all sales revenue was from Cortes Campers subsidiary, whereas most of September 30, 2021, sales are discontinued and presented as part of discontinued operations.
Cost of Goods Sold
Cost of goods sold from continuing operations for the nine months ended the September 30, 2022 were $754,000, compared to $3,000 for the nine months ended the September 30, 2021. The September 30, 2022 cost of goods sold relates to camper sales from the Company’s Cortes Campers subsidiary, whereas most of June 30, 2021 sales are discontinued and presented as part of discontinued operations.
Operating Expenses
Selling, general and administrative expenses (“SG&A”) from continuing operations were $1,134,000 for the nine months ended the September 30, 2022, compared to $859,000 for the nine months ended the September 30, 2021, an increase of $275,000. The increase over the prior year can be attributed to increased personnel costs associated with the Company’s Cortes Campers Subsidiary.
Product development costs for the nine months ended the September 30, 2022, were $123,000 compared to $41,000 for the nine months ended the September 30, 2021, an increase of $82,000. The increase is due to the Company changing its focus to the RV, marine, composite housing, and electronics sectors.
Other Income / Expense
During the nine months ended the September 30, 2022, we had total other expense of $275,000 including: other income of $60,000, recognized a realized loss of $18,000 and unrealized loss of $288,000 from investments, interest income of $4,000 related to investments, and interest expense of $56,000. During the nine months ended September 30, 2021, we had total other income of $174,000. We had other income, of $3,000, recognized an unrealized gain of $195,000 from investments, and interest expense, related party of $75,000 and we had $52,000 gain on extinguishment of debt.
Net Loss
We had a net loss from continuing operations of $1,645,000 for the nine months ended September 30, 2022, compared to $706,000 for the nine months ended the September 30, 2021. Our overall net loss from continuing operations increased mainly due to the unrealized loss on our investments in the current period and the increase to our SG&A expense. For the nine months ended September 30, 2021, we also had $3,915,000 of income from the sale of discontinued operations and a $158,000 net loss from discontinued operations.
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Liquidity and Capital Resources
Changes in Cash Flows
Net cash used in operating activities for the nine months ended September 30, 2022, was $1,414,000, as compared to net cash provided by operating activities of $3,240,000, for the nine months ended the September 30, 2021, which included $3,915,000 net income from the sale of discontinued operations.
Net cash provided by investing activities was $1,068,000 for the nine months ended September 30, 2022, compared to net cash used of $3,037,000 for the nine months ended September 30, 2021. In the prior period we used $3,800,000 to invest in trading securities and $529,000 to purchase property and equipment. This was offset with proceeds of $400,000 from the sale of fixed assets and $892,000 from proceeds from investments. In the current period we received $35,000 from the sale of fixed assets, $1,341,000 from proceeds from investments and we used $308,000 to purchase property and equipment.
Net cash used in financing activities for the nine months ended September 30, 2022, was $125,000 and included the repayment of $105,000 of loans payable, and repayment of $411,000 of notes payable to a related party. Net cash used in financing activities for the nine months ended September 30, 2021, was $207,000 and included proceeds of $308,000 received from the sale of common stock and $177,000 from notes payable. Cash received was offset by the repayment of $161,000 of loans payable, and repayment of $1,077,000 of notes payable to a related party.
Loans payable for continuing operations consisted of the following as of September 30, 2022:
September 30, 2022 | ||||
| Secured promissory note | 260,000 | |||
| Vehicle loans | 63,000 | |||
| Convertible Notes | 58,000 | |||
| Total loans payable | 381,000 | |||
| Loans payable, current portion | (101,000 | ) | ||
| Loans payable, net of current portion | $ | 280,000 | ||
Critical Accounting Policies and Estimates
Refer to our Form 10-K for the year ended December 31, 2021, for a full discussion of our critical accounting policies.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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Based on management’s evaluation, we concluded that our disclosure controls and procedures were not effective, as of the date of this report, and our remediation efforts continue related to each of the material weaknesses that we have identified in our internal control over financial reporting, and additional time and resources will be required in order to fully address these material weaknesses. We have not been able to complete all actions necessary and test the remediated controls in a manner that would enable us to conclude that such controls are effective. We are committed to implementing the necessary controls to remediate the material weaknesses described below as our resources permit. These material weaknesses will not be considered remediated until (1) the new processes are designed, appropriately controlled and implemented for a sufficient period of time and (2) we have sufficient evidence that the new processes and related controls are operating effectively. The following material weaknesses in our internal control over financial reporting were identified by management as September 30, 2022:
Ineffective Control Environment. The Company did not maintain an effective control environment, which is the foundation necessary for effective internal control over financial reporting. Specifically, the Company (i) did not maintain a functioning independent audit committee; (ii) had an insufficient number of personnel appropriately qualified to perform control design, execution and monitoring activities; (ii) had an insufficient number of personnel with an appropriate level of U.S. GAAP knowledge and experience and ongoing training in the application of U.S. GAAP and SEC disclosure requirements commensurate with the Company’s financial reporting requirements; (iv) had inadequate segregation of duties consistent with control objectives; and (v) lack of written documentation of the Company’s key internal control policies and procedures over financial reporting. The Company is required under Section 404 of the Sarbanes-Oxley Act to have written documentation of key internal controls over financial reporting. The Company did not formally document policies and controls to enable management and other personnel to understand and carry out their internal control responsibilities including the lack of budget-to-actual analyses, balance sheet variation analysis, and pro-forma financial statements. Additionally, the Company did not have an adequate process in place to complete its testing and assessment of the design and operating effectiveness of internal control over financial reporting in a timely manner.
Ineffective controls over financial statement close and reporting process. The Company did not maintain effective controls over its financial statement close and reporting process. Specifically, the Company: (i) had insufficient preparation and review procedures for disclosures accompanying the Company’s financial statements; and (ii) did not provide reasonable assurance that accounts were complete and accurate and agreed to detailed support and that reconciliations of accounts were properly performed, reviewed and approved; and
Insufficient segregation of duties in our finance and accounting functions due to limited personnel. We do not have sufficient segregation of duties within accounting functions. During the quarter ended September 30, 2022, we had limited personnel that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. Due to the fact that these duties were often performed by the same person, this creates a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.
Changes in internal control over financial reporting.
There were major changes in the remediation efforts as it relates effective control environment, controls over financial statement close and reporting process and the segregation of duties in our finance and accounting functions. There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
Item 1. Legal Proceedings.
There were no reportable legal proceedings initiated, or material developments in previously reported legal proceedings, during the third quarter
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the quarter ended September 30, 2022, we offered unregistered shares of our common stock in a private placement to accredited investors to fund our working capital needs. In August, we sold to investors 800,000 shares for an aggregate amount of $80,000. The issuance of shares in the private placement was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506(b) under the Securities Act.”
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| US LIGHTING GROUP, INC. | ||
| Date: November 18, 2022 | By: | /s/ Anthony Corpora |
| Anthony Corpora | ||
| Chief Executive Officer | ||
| (Principal executive officer) | ||
| Date: November 18, 2022 | By: | /s/ Donald Retreage |
| Donald Retreage | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
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